26 U.S.C. § 960 : US Code - Section 960: Special rules for foreign tax credit

Search 26 U.S.C. § 960 : US Code - Section 960: Special rules for foreign tax credit

(a) Taxes paid by a foreign corporation
(1) Deemed paid credit
For purposes of subpart A of this part, if there is included
under section 951(a) in the gross income of a domestic
corporation any amount attributable to earnings and profits of a
foreign corporation which is a member of a qualified group (as
defined in section 902(b)) with respect to the domestic
corporation, then, except to the extent provided in regulations,
section 902 shall be applied as if the amount so included were a
dividend paid by such foreign corporation (determined by applying
section 902(c) in accordance with section 904(d)(3)(B)).
(2) Taxes previously deemed paid by domestic corporation
If a domestic corporation receives a distribution from a
foreign corporation, any portion of which is excluded from gross
income under section 959, the income, war profits, and excess
profits taxes paid or deemed paid by such foreign corporation to
any foreign country or to any possession of the United States in
connection with the earnings and profits of such foreign
corporation from which such distribution is made shall not be
taken into account for purposes of section 902, to the extent
such taxes were deemed paid by a domestic corporation under
paragraph (1) for any prior taxable year.
(3) Taxes paid by foreign corporation and not previously deemed
paid by domestic corporation
Any portion of a distribution from a foreign corporation
received by a domestic corporation which is excluded from gross
income under section 959(a) shall be treated by the domestic
corporation as a dividend, solely for purposes of taking into
account under section 902 any income, war profits, or excess
profits taxes paid to any foreign country or to any possession of
the United States, on or with respect to the accumulated profits
of such foreign corporation from which such distribution is made,
which were not deemed paid by the domestic corporation under
paragraph (1) for any prior taxable year.
(b) Special rules for foreign tax credit in year of receipt of
previously taxed earnings and profits
(1) Increase in section 904 limitation
In the case of any taxpayer who -
(A) either (i) chose to have the benefits of subpart A of
this part for a taxable year beginning after September 30,
1993, in which he was required under section 951(a) to include
any amount in his gross income, or (ii) did not pay or accrue
for such taxable year any income, war profits, or excess
profits taxes to any foreign country or to any possession of
the United States,
(B) chooses to have the benefits of subpart A of this part
for any taxable year in which he receives 1 or more
distributions or amounts which are excludable from gross income
under section 959(a) and which are attributable to amounts
included in his gross income for taxable years referred to in
subparagraph (A), and
(C) for the taxable year in which such distributions or
amounts are received, pays, or is deemed to have paid, or
accrues income, war profits, or excess profits taxes to a
foreign country or to any possession of the United States with
respect to such distributions or amounts,
the limitation under section 904 for the taxable year in which
such distributions or amounts are received shall be increased by
the lesser of the amount of such taxes paid, or deemed paid, or
accrued with respect to such distributions or amounts or the
amount in the excess limitation account as of the beginning of
such taxable year.
(2) Excess limitation account
(A) Establishment of account
Each taxpayer meeting the requirements of paragraph (1)(A)
shall establish an excess limitation account. The opening
balance of such account shall be zero.
(B) Increases in account
For each taxable year beginning after September 30, 1993, the
taxpayer shall increase the amount in the excess limitation
account by the excess (if any) of -
(i) the amount by which the limitation under section 904(a)
for such taxable year was increased by reason of the total
amount of the inclusions in gross income under section 951(a)
for such taxable year, over
(ii) the amount of any income, war profits, and excess
profits taxes paid, or deemed paid, or accrued to any foreign
country or possession of the United States which were
allowable as a credit under section 901 for such taxable year
and which would not have been allowable but for the
inclusions in gross income described in clause (i).
Proper reductions in the amount added to the account under the
preceding sentence for any taxable year shall be made for any
increase in the credit allowable under section 901 for such
taxable year by reason of a carryback if such increase would
not have been allowable but for the inclusions in gross income
described in clause (i).
(C) Decreases in account
For each taxable year beginning after September 30, 1993, for
which the limitation under section 904 was increased under
paragraph (1), the taxpayer shall reduce the amount in the
excess limitation account by the amount of such increase.
(3) Distributions of income previously taxed in years beginning
before October 1, 1993
If the taxpayer receives a distribution or amount in a taxable
year beginning after September 30, 1993, which is excluded from
gross income under section 959(a) and is attributable to any
amount included in gross income under section 951(a) for a
taxable year beginning before October 1, 1993, the limitation
under section 904 for the taxable year in which such amount or
distribution is received shall be increased by the amount
determined under this subsection as in effect on the day before
the date of the enactment of the Revenue Reconcilation (!1) Act
of 1993.
(4) Cases in which taxes not to be allowed as deduction
In the case of any taxpayer who -
(A) chose to have the benefits of subpart A of this part for
a taxable year in which he was required under section 951(a) to
include in his gross income an amount in respect of a
controlled foreign corporation, and
(B) does not choose to have the benefits of subpart A of this
part for the taxable year in which he receives a distribution
or amount which is excluded from gross income under section
959(a) and which is attributable to earnings and profits of the
controlled foreign corporation which was included in his gross
income for the taxable year referred to in subparagraph (A),
no deduction shall be allowed under section 164 for the taxable
year in which such distribution or amount is received for any
income, war profits, or excess profits taxes paid or accrued to
any foreign country or to any possession of the United States on
or with respect to such distribution or amount.
(5) Insufficient taxable income
If an increase in the limitation under this subsection exceeds
the tax imposed by this chapter for such year, the amount of such
excess shall be deemed an overpayment of tax for such year.