26 U.S.C. § 907 : US Code - Section 907: Special rules in case of foreign oil and gas income

Search 26 U.S.C. § 907 : US Code - Section 907: Special rules in case of foreign oil and gas income

(a) Reduction in amount allowed as foreign tax under section 901
In applying section 901, the amount of any oil and gas extraction
taxes paid or accrued (or deemed to have been paid) during the
taxable year which would (but for this subsection) be taken into
account for purposes of section 901 shall be reduced by the amount
(if any) by which the amount of such taxes exceeds the product of -

(1) the amount of the foreign oil and gas extraction income for
the taxable year,
(2) multiplied by -
(A) in the case of a corporation, the percentage which is
equal to the highest rate of tax specified under section 11(b),
or
(B) in the case of an individual, a fraction the numerator of
which is the tax against which the credit under section 901(a)
is taken and the denominator of which is the taxpayer's entire
taxable income.
(b) Foreign taxes on foreign oil related income
For purposes of this subtitle, in the case of taxes paid or
accrued to any foreign country with respect to foreign oil related
income, the term "income, war profits, and excess profits taxes"
shall not include any amount paid or accrued after December 31,
1982, to the extent that the Secretary determines that the foreign
law imposing such amount of tax is structured, or in fact operates,
so that the amount of tax imposed with respect to foreign oil
related income will generally be materially greater, over a
reasonable period of time, than the amount generally imposed on
income that is neither foreign oil related income nor foreign oil
and gas extraction income. In computing the amount not treated as
tax under this subsection, such amount shall be treated as a
deduction under the foreign law.
(c) Foreign income definitions and special rules
For purposes of this section -
(1) Foreign oil and gas extraction income
The term "foreign oil and gas extraction income" means the
taxable income derived from sources without the United States and
its possessions from -
(A) the extraction (by the taxpayer or any other person) of
minerals from oil or gas wells, or
(B) the sale or exchange of assets used by the taxpayer in
the trade or business described in subparagraph (A).
Such term does not include any dividend or interest income which
is passive income (as defined in section 904(d)(2)(A)).
(2) Foreign oil related income
The term "foreign oil related income" means the taxable income
derived from sources outside the United States and its
possessions from -
(A) the processing of minerals extracted (by the taxpayer or
by any other person) from oil or gas wells into their primary
products,
(B) the transportation of such minerals or primary products,
(C) the distribution or sale of such minerals or primary
products,
(D) the disposition of assets used by the taxpayer in the
trade or business described in subparagraph (A), (B), or (C),
or
(E) the performance of any other related service.
Such term does not include any dividend or interest income which
is passive income (as defined in section 904(d)(2)(A)).
(3) Dividends, interest, partnership distribution, etc.
The term "foreign oil and gas extraction income" and the term
"foreign oil related income" include -
(A) dividends and interest from a foreign corporation in
respect of which taxes are deemed paid by the taxpayer under
section 902,
(B) amounts with respect to which taxes are deemed paid under
section 960(a), and
(C) the taxpayer's distributive share of the income of
partnerships.(!1)
to the extent such dividends, interest, amounts, or distributive
share is attributable to foreign oil and gas extraction income,
or to foreign oil related income, as the case may be; except that
interest described in subparagraph (A) shall not be taken into
account in computing foreign oil and gas extraction income but
shall be taken into account in computing foreign oil-related
income.
(4) Recapture of foreign oil and gas extraction losses by
recharacterizing later extraction income
(A) In general
That portion of the income of the taxpayer for the taxable
year which (but for this paragraph) would be treated as foreign
oil and gas extraction income shall be treated as income (from
sources without the United States) which is not foreign oil and
gas extraction income to the extent of the excess of -
(i) the aggregate amount of foreign oil extraction losses
for preceding taxable years beginning after December 31,
1982, over
(ii) so much of such aggregate amount as was
recharacterized under this subparagraph for preceding taxable
years beginning after December 31, 1982.
(B) Foreign oil extraction loss defined
(i) In general
For purposes of this paragraph, the term "foreign oil
extraction loss" means the amount by which -
(I) the gross income for the taxable year from sources
without the United States and its possessions (whether or
not the taxpayer chooses the benefits of this subpart for
such taxable year) taken into account in determining the
foreign oil and gas extraction income for such year, is
exceeded by
(II) the sum of the deductions properly apportioned or
allocated thereto.
(ii) Net operating loss deduction not taken into account
For purposes of clause (i), the net operating loss
deduction allowable for the taxable year under section 172(a)
shall not be taken into account.
(iii) Expropriation and casualty losses not taken into
account
For purposes of clause (i), there shall not be taken into
account -
(I) any foreign expropriation loss (as defined in section
172(h) (as in effect on the day before the date of the
enactment of the Revenue Reconciliation Act of 1990)) for
the taxable year, or
(II) any loss for the taxable year which arises from
fire, storm, shipwreck, or other casualty, or from theft,
to the extent such loss is not compensated for by insurance
or otherwise.
(5) Oil and gas extraction taxes
The term "oil and gas extraction taxes" means any income, war
profits, and excess profits tax paid or accrued (or deemed to
have been paid under section 902 or 960) during the taxable year
with respect to foreign oil and gas extraction income (determined
without regard to paragraph (4)) or loss which would be taken
into account for purposes of section 901 without regard to this
section.
(d) Disregard of certain posted prices, etc.
For purposes of this chapter, in determining the amount of
taxable income in the case of foreign oil and gas extraction
income, if the oil or gas is disposed of, or is acquired other than
from the government of a foreign country, at a posted price (or
other pricing arrangement) which differs from the fair market value
for such oil or gas, such fair market value shall be used in lieu
of such posted price (or other pricing arrangement).
[(e) Repealed. Pub. L. 101-508, title XI, Sec. 11801(a)(32), Nov.
5, 1990, 104 Stat. 1388-521]
(f) Carryback and carryover of disallowed credits
(1) In general
If the amount of the oil and gas extraction taxes paid or
accrued during any taxable year exceeds the limitation provided
by subsection (a) for such taxable year (hereinafter in this
subsection referred to as the "unused credit year"), such excess
shall be deemed to be oil and gas extraction taxes paid or
accrued in the first preceding taxable year and in any of the
first 10 succeeding taxable year,(!2) in that order and to the
extent not deemed tax paid or accrued in a prior taxable year by
reason of the limitation imposed by paragraph (2). Such amount
deemed paid or accrued in any taxable year may be availed of only
as a tax credit and not as a deduction and only if the taxpayer
for such year chooses to have the benefits of this subpart as to
taxes paid or accrued for that year to foreign countries or
possessions.
(2) Limitation
The amount of the unused oil and gas extraction taxes which
under paragraph (1) may be deemed paid or accrued in any
preceding or succeeding taxable year shall not exceed the lesser
of -
(A) the amount by which the limitation provided by subsection
(a) for such taxable year exceeds the sum of -
(i) the oil and gas extraction taxes paid or accrued during
such taxable year, plus
(ii) the amounts of the oil and gas extraction taxes which
by reason of this subsection are deemed paid or accrued in
such taxable year and are attributable to taxable years
preceding the unused credit year; or
(B) the amount by which the limitation provided by section
904 for such taxable year exceeds the sum of -
(i) the taxes paid or accrued (or deemed to have been paid
under section 902 or 960) to all foreign countries and
possessions of the United States during such taxable year,
(ii) the amount of such taxes which were deemed paid or
accrued in such taxable year under section 904(c) and which
are attributable to taxable years preceding the unused credit
year, plus
(iii) the amount of the oil and gas extraction taxes which
by reason of this subsection are deemed paid or accrued in
such taxable year and are attributable to taxable years
preceding the unused credit year.
(3) Special rules
(A) In the case of any taxable year which is an unused credit
year under this subsection and which is an unused credit year
under section 904(c), the provisions of this subsection shall be
applied before section 904(c).
(B) For purposes of determining the amount of taxes paid or
accrued in any taxable year which may be deemed paid or accrued
in a preceding or succeeding taxable year under section 904(c),
any tax deemed paid or accrued in such preceding or succeeding
taxable year under this subsection shall be considered to be tax
paid or accrued in such preceding or succeeding taxable year.