Internal Revenue Code · 26 U.S.C.

§ 1294. Election to extend time for payment of tax on undistributed earnings

In force Text current through Public Law 119-121 (October 9, 2026) release point 119-121

Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).

Cite as 26 U.S.C. § 1294

At a glance

Read from the text, the source credit and the official notes. Not part of the law.

Status: In force
Added: October 22, 1986 by Pub. L. 99–514
Last amended: October 22, 2004 by Pub. L. 108–357
Amendments: 2 dated changes in the source credit
Length: 7 subsections · 703 words · about 3 min to read
Defines: 2 terms
Cross-references: cites 4; cited by 1 Code section and 4 other regulations
Regulations: 2 issued under this section

¶(a) Extension allowed by election

¶(1) In general

At the election of the taxpayer, the time for payment of any undistributed PFIC earnings tax liability of the taxpayer for the taxable year shall be extended to the extent and subject to the limitations provided in this section.

¶(2) Election not permitted where amounts otherwise includible under section 951

The taxpayer may not make an election under paragraph (1) with respect to the undistributed PFIC earnings tax liability attributable to a qualified electing fund for the taxable year if any amount is includible in the gross income of the taxpayer under section 951 with respect to such fund for such taxable year.

¶(b) Definitions For purposes of this section—

¶(1) Undistributed PFIC earnings tax liability The term “undistributed PFIC earnings tax liability” means, in the case of any taxpayer, the excess of—

¶(A) the tax imposed by this chapter for the taxable year, over

¶(B) the tax which would be imposed by this chapter for such year without regard to the inclusion in gross income under section 1293 of the undistributed earnings of a qualified electing fund.

¶(2) Undistributed earnings The term “undistributed earnings” means, with respect to any qualified electing fund, the excess (if any) of—

¶(A) the amount includible in gross income by reason of section 1293(a) for the taxable year, over

¶(B) the amount not includible in gross income by reason of section 1293(c) for such taxable year.

¶(c) Termination of extension

¶(1) Distributions

¶(A) In general

If a distribution is not includible in gross income for the taxable year by reason of section 1293(c), then the extension under subsection (a) for payment of the undistributed PFIC earnings tax liability with respect to the earnings to which such distribution is attributable shall expire on the last date prescribed by law (determined without regard to extensions) for filing the return of tax for such taxable year.

¶(B) Ordering rule

For purposes of subparagraph (A), a distribution shall be treated as made from the most recently accumulated earnings and profits.

¶(2) Transfers, etc. If—

¶(A) stock in a passive foreign investment company is transferred during the taxable year, or

¶(B) a passive foreign investment company ceases to be a qualified electing fund,

all extensions under subsection (a) for payment of undistributed PFIC earnings tax liability attributable to such stock (or, in the case of such a cessation, attributable to any stock in such company) which had not expired before the date of such transfer or cessation shall expire on the last date prescribed by law (determined without regard to extensions) for filing the return of tax for the taxable year in which such transfer or cessation occurs. To the extent provided in regulations, the preceding sentence shall not apply in the case of a transfer in a transaction with respect to which gain or loss is not recognized (in whole or in part), and the transferee in such transaction shall succeed to the treatment under this section of the transferor.

¶(3) Jeopardy

If the Secretary believes that collection of an amount to which an extension under this section relates is in jeopardy, the Secretary shall immediately terminate such extension with respect to such amount, and notice and demand shall be made by him for payment of such amount.

¶(d) Election

The election under subsection (a) shall be made not later than the time prescribed by law (including extensions) for filing the return of tax imposed by this chapter for the taxable year.

¶(e) Authority to require bond

Section 6165 shall apply to any extension under this section as though the Secretary were extending the time for payment of the tax.

¶(f) Treatment of loans to shareholder

For purposes of this section and section 1293, any loan by a qualified electing fund (directly or indirectly) to a shareholder of such fund shall be treated as a distribution to such shareholder.

¶(g) Cross reference

For provisions providing for interest for the period of the extension under this section, see section 6601.

(Added Pub. L. 99–514, title XII, § 1235(a), Oct. 22, 1986, 100 Stat. 2570; amended Pub. L. 100–647, title I, § 1012(p)(4), (8), (25), (34), Nov. 10, 1988, 102 Stat. 3515, 3517, 3519, 3522; Pub. L. 108–357, title IV, § 413(c)(25), Oct. 22, 2004, 118 Stat. 1509.)

Terms defined here

Where the text says “the term … means”. Select a term to jump to its definition.

undistributed earnings § 1294(b)(2)
undistributed PFIC earnings tax liability § 1294(b)(1)

Regulations under this section

Treasury regulations (26 CFR) issued under § 1294

Cross-references

Computed from the citations in the text of Title 26 and 26 CFR.

This section cites 4 other sections

Cited by 1 Code section

§ 6503(i) Suspension of running of period of limitation

Cited in 4 regulations not issued under it

Amendment history

From the source credit and the official notes, newest first.

October 22, 2004Amended by Pub. L. 108–357Parts changed in 2004: (a)(2)
November 10, 1988Amended by Pub. L. 100–647Parts changed in 1988: (c)(2) (f) (g)
October 22, 1986Added by Pub. L. 99–514

Where it sits in the Code

Nearby sections

§ 1293 Current taxation of income from qualified electing funds
§ 1294 Election to extend time for payment of tax on undistributed earnings
§ 1295 Qualified electing fund

Official notes

Show the Law Revision Counsel's notes (amendments, effective dates)

Editorial Notes

Amendments

2004—Subsec. (a)(2). Pub. L. 108–357 amended heading and text of par. (2) generally. Prior to amendment, text read as follows: “The taxpayer may not make an election under paragraph (1) with respect to the undistributed PFIC earnings tax liability attributable to a qualified electing fund for the taxable year if—

“(A) any amount is includible in the gross income of the taxpayer under section 551 with respect to such fund for such taxable year, or

“(B) any amount is includible in the gross income of the taxpayer under section 951 with respect to such fund for such taxable year.”

1988—Subsec. (c)(2). Pub. L. 100–647, § 1012(p)(4), (34), substituted “Transfers” for “Dispositions” in heading and “is transferred” for “is disposed of” in subpar. (A), and in closing provisions substituted “such transfer” for “such disposition” in two places and inserted at end “To the extent provided in regulations, the preceding sentence shall not apply in the case of a transfer in a transaction with respect to which gain or loss is not recognized (in whole or in part), and the transferee in such transaction shall succeed to the treatment under this section of the transferor.”

Subsec. (f). Pub. L. 100–647, § 1012(p)(25), added subsec. (f).

Subsec. (g). Pub. L. 100–647, § 1012(p)(8), added subsec. (g).

Effective Date of 2004 Amendment

Amendment by Pub. L. 108–357 applicable to taxable years of foreign corporations beginning after Dec. 31, 2004, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end, see section 413(d)(1) of Pub. L. 108–357, set out as an Effective and Termination Dates of 2004 Amendments note under section 1 of this title.

Effective Date of 1988 Amendment

Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Effective Date

Section applicable to taxable years of foreign corporations beginning after Dec. 31, 1986, see section 1235(h) of Pub. L. 99–514, set out as a note under section 1291 of this title.