Internal Revenue Code · 26 U.S.C.
§ 1297. Passive foreign investment company
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. § 1297
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
- December 22, 2017 by Pub. L. 115–97
- Amendments
- 7 dated changes in the source credit
- Length
- 6 subsections · 1,501 words · about 7 min to read
- Defines
- 9 terms
- Cross-references
- cites 5; cited by 12 Code sections and 27 other regulations
- Regulations
- 6 issued under this section
Except as provided in paragraph (2), the term “passive income” means any income which is of a kind which would be foreign personal holding company income as defined in section 954(c).
For purposes of this part, a corporation shall not be treated with respect to a shareholder as a passive foreign investment company during the qualified portion of such shareholder’s holding period with respect to stock in such corporation.
Except as provided in subparagraph (B), if the qualified portion of a shareholder’s holding period with respect to any stock ends after December 31, 1997, solely for purposes of this part, the shareholder’s holding period with respect to such stock shall be treated as beginning as of the first day following such period.
Subparagraph (A) shall not apply if such stock was, with respect to such shareholder, stock in a passive foreign investment company at any time before the qualified portion of the shareholder’s holding period with respect to such stock and no election under section 1298(b)(1) is made.
Paragraph (1) shall not apply to stock treated as owned by a person by reason of section 1298(a)(4) (relating to the treatment of a person that has an option to acquire stock as owning such stock) unless such person establishes that such stock is owned (within the meaning of section 958(a)) by a United States shareholder (as defined in section 951(b)) who is not exempt from tax under this chapter.
The term “applicable insurance regulatory body” means, with respect to any insurance business, the entity established by law to license, authorize, or regulate such business and to which the statement described in subparagraph (A) is provided.
(Added Pub. L. 99–514, title XII, § 1235(a), Oct. 22, 1986, 100 Stat. 2572, § 1296; amended Pub. L. 100–647, title I, §§ 1012(p)(2), (5), (16), (26), (27), 1018(u)(40), Nov. 10, 1988, 102 Stat. 3515, 3518–3520, 3592; Pub. L. 103–66, title XIII, § 13231(d)(1), (3), Aug. 10, 1993, 107 Stat. 499; Pub. L. 104–188, title I, § 1704(r)(1), Aug. 20, 1996, 110 Stat. 1887; renumbered § 1297 and amended Pub. L. 105–34, title XI, §§ 1121, 1122(a), (d)(4), 1123, Aug. 5, 1997, 111 Stat. 971, 972, 977; Pub. L. 105–206, title VI, § 6011(b)(1), (d), July 22, 1998, 112 Stat. 817, 818; Pub. L. 110–172, § 11(a)(24)(A), (g)(18), Dec. 29, 2007, 121 Stat. 2486, 2491; Pub. L. 115–97, title I, § 14501(a), (b), Dec. 22, 2017, 131 Stat. 2234.)
Terms defined here
Where the text says “the term … means”. Select a term to jump to its definition.
- applicable financial statement § 1297(f)(4)(A)
- applicable insurance liabilities § 1297(f)(3)(A)
- applicable insurance regulatory body § 1297(f)(4)(B)
- passive foreign investment company § 1297(a)
- passive income § 1297(b)(1)
- passive income § 1297(b)(2)
- qualified portion § 1297(d)(2)
- qualifying insurance corporation § 1297(f)(1)
- related person § 1297(b)(2)(D)
Regulations under this section
Treasury regulations (26 CFR) issued under § 1297
- § 1.1297-0 Table of contents.
- § 1.1297-1 Definition of passive foreign investment company.
- § 1.1297-2 Special rules regarding look-through subsidiaries and look-through partnerships.
- § 1.1297-3 Deemed sale or deemed dividend election by a U.S. person that is a shareholder of a section 1297(e) PFIC.
- § 1.1297-4 Qualifying insurance corporation.
- § 1.1297-6 Exception from the definition of passive income for active insurance income.
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 5 other sections
- § 954(c) Foreign base company income
- § 971 Definitions
- § 951(b) Amounts included in gross income of United States shareholders
- § 1298(b)(1) Special rules
- § 958(a) Rules for determining stock ownership
Cited by 12 Code sections
- § 1(h)(11)(C)(iii)(I) Tax imposed
- § 163(e)(3)(B)(i) Interest
- § 245A(b)(2) Deduction for foreign source-portion of dividends received by domestic corporations from specified 10-percent owned foreign corporations
- § 267(a)(3)(B)(i) Losses, expenses, and interest with respect to transactions between related taxpayers
- § 532(b)(3) Corporations subject to accumulated earnings tax
- § 672(f)(3)(B) Definitions and rules
- § 904(d)(2)(E)(i)(II) Limitation on credit
- § 951B(d)(2) Amounts included in gross income of foreign controlled United States shareholders
- § 965(e)(3) Treatment of deferred foreign income upon transition to participation exemption system of taxation
- § 1260(c)(2)(G) Gains from constructive ownership transactions
- § 1298(a)(2)(B) Special rules
- § 6241(12)(B) Definitions and special rules
Cited in 27 regulations not issued under it
- § 1.163(j)-4 General rules applicable to C corporations (including REITs, RICs, and members of consolidated groups) and tax-exempt corporations.
- § 1.245A(d)-1 Disallowance of foreign tax credit or deduction.
- § 1.338-8 Asset and stock consistency.
- § 1.338-9 International aspects of section 338.
- § 1.362-3 Basis of importation property acquired in loss importation transaction.
- § 1.367(a)-3 Treatment of transfers of stock or securities to foreign corporations.
- § 1.672(f)-2 Certain foreign corporations.
- § 1.672(f)-4 Recharacterization of purported gifts.
- § 1.932-1 Coordination of United States and Virgin Islands income taxes.
- § 1.935-1 Coordination of individual income taxes with Guam and the Northern Mariana Islands.
- § 1.965-1 Overview, general rules, and definitions.
- § 1.1061-4 Section 1061 computations.
- § 1.1291-1 Taxation of U.S. persons that are shareholders of section 1291 funds.
- § 1.1291-9 Deemed dividend election.
- § 1.1295-1 Qualified electing funds.
- § 1.1295-3 Retroactive elections.
- § 1.1296-1 Mark to market election for marketable stock.
- § 1.1296-2 Definition of marketable stock.
- § 1.1298-2 Rules for certain corporations changing businesses.
- § 1.1298-3 Deemed sale or deemed dividend election by a U.S. person that is a shareholder of a former PFIC.
- § 1.1298-4 Rules for certain foreign corporations owning stock in 25-percent-owned domestic corporations.
- § 1.1411-1 General rules.
- § 1.1411-10 Controlled foreign corporations and passive foreign investment companies.
- § 1.6042-2 Returns of information as to dividends paid.
Amendment history
From the source credit and the official notes, newest first.
- Amended by Pub. L. 115–97Parts changed in 2017: (b)(2)(B) (f)
- Amended by Pub. L. 110–172Parts changed in 2007: (b)(2)(D) (d)
- Amended by Pub. L. 105–206Parts changed in 1998: (e) (e)(4) (f)
- Amended by Pub. L. 105–34Parts changed in 1997: (a) (a)(2) (b)(3) (e)
- Amended by Pub. L. 104–188Parts changed in 1996: (b)(2)(D)
- Amended by Pub. L. 103–66Parts changed in 1993: (a) (b)(3)
- Amended by Pub. L. 100–647Parts changed in 1988: (a) (b)(1) (b)(2) (b)(2)(B) (b)(2)(C) (c)
- Added by Pub. L. 99–514
Where it sits in the Code
- Subtitle A Income Taxes
- Chapter 1 NORMAL TAXES AND SURTAXES
- Subchapter P Capital Gains and Losses
- Part VI TREATMENT OF CERTAIN PASSIVE FOREIGN INVESTMENT COMPANIES
- Subpart D General Provisions
Nearby sections
- § 1297 Passive foreign investment company
- § 1298 Special rules
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
References in Text
Section 11A of the Securities and Exchange Act of 1934, referred to in subsec. (e)(3)(A), is classified to section 78k–1 of Title 15, Commerce and Trade.
Prior Provisions
A prior section 1297 was renumbered section 1298 of this title.
Amendments
2017—Subsec. (b)(2)(B). Pub. L. 115–97, § 14501(a), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “derived in the active conduct of an insurance business by a corporation which is predominantly engaged in an insurance business and which would be subject to tax under subchapter L if it were a domestic corporation,”.
Subsec. (f). Pub. L. 115–97, § 14501(b), added subsec. (f).
2007—Subsec. (b)(2)(D). Pub. L. 110–172, § 11(g)(18), which directed amendment of subpar. (D) by striking out “foreign trade income of a FSC or”, was executed by striking out “foreign trade income of an FSC or” before “export trade income” to reflect the probable intent of Congress.
Subsecs. (d) to (f). Pub. L. 110–172, § 11(a)(24)(A), redesignated subsecs. (e) and (f) as (d) and (e), respectively, and struck out heading and text of former subsec. (d). Text read as follows: “For purposes of this part, the term ‘passive foreign investment company’ does not include any foreign investment company to which section 1247 applies.”
1998—Subsec. (e). Pub. L. 105–206, § 6011(d), redesignated subsec. (e), relating to methods for measuring assets, as (f).
Subsec. (e)(4). Pub. L. 105–206, § 6011(b)(1), added par. (4).
Subsec. (f). Pub. L. 105–206, § 6011(d), redesignated subsec. (e), relating to methods for measuring assets, as (f).
1997—Pub. L. 105–34, § 1122(a), renumbered section 1296 of this title as this section.
Subsec. (a). Pub. L. 105–34, § 1123(b)(2), struck out concluding provisions which read as follows: “In the case of a controlled foreign corporation (or any other foreign corporation if such corporation so elects), the determination under paragraph (2) shall be based on the adjusted bases (as determined for purposes of computing earnings and profits) of its assets in lieu of their value. Such an election, once made, may be revoked only with the consent of the Secretary.”
Subsec. (a)(2). Pub. L. 105–34, § 1123(b)(1), substituted “(as determined in accordance with subsection (e))” for “(by value)”.
Subsec. (b)(3). Pub. L. 105–34, § 1122(d)(4), struck out par. (3) which consisted of subpars. (A) to (C) relating to treatment of certain dealers in securities.
Subsec. (e). Pub. L. 105–34, § 1123(a), added subsec. (e) relating to methods for measuring assets.
Pub. L. 105–34, § 1121, added subsec. (e) relating to exception for United States shareholders of controlled foreign corporations.
1996—Subsec. (b)(2)(D). Pub. L. 104–188 added subpar. (D).
1993—Subsec. (a). Pub. L. 103–66, § 13231(d)(1), substituted in closing provisions “In the case of a controlled foreign corporation (or any other foreign corporation if such corporation so elects), the determination under paragraph (2) shall be based on the adjusted bases (as determined for purposes of computing earnings and profits) of its assets in lieu of their value. Such an election, once made, may be revoked only with the consent of the Secretary.” for “A foreign corporation may elect to have the determination under paragraph (2) based on the adjusted bases of its assets in lieu of their value. Such an election, once made, may be revoked only with the consent of the Secretary.”
Subsec. (b)(3). Pub. L. 103–66, § 13231(d)(3), added par. (3).
1988—Subsec. (a). Pub. L. 100–647, § 1018(u)(40), inserted a comma after “subpart”.
Pub. L. 100–647, § 1012(p)(27), inserted at end “A foreign corporation may elect to have the determination under paragraph (2) based on the adjusted bases of its assets in lieu of their value. Such an election, once made, may be revoked only with the consent of the Secretary.”
Subsec. (b)(1). Pub. L. 100–647, § 1012(p)(5), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “Except as provided in paragraph (2), the term ‘passive income’ has the meaning given such term by section 904(d)(2)(A) without regard to the exceptions contained in clause (iii) thereof.”
Subsec. (b)(2). Pub. L. 100–647, § 1012(p)(26), substituted “Exceptions” for “Exception for certain banks and insurance companies” in heading, and inserted sentence at end defining “related person”.
Subsec. (b)(2)(B). Pub. L. 100–647, § 1012(p)(16), inserted “is predominantly engaged in an insurance business and which” after “a corporation which”.
Subsec. (b)(2)(C). Pub. L. 100–647, § 1012(p)(26)(A), added subpar. (C).
Subsec. (c). Pub. L. 100–647, § 1012(p)(2), inserted “(directly or indirectly)” after “foreign corporation owns”.
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Pub. L. 115–97, title I, § 14501(c), Dec. 22, 2017, 131 Stat. 2235, provided that: “The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2017.”
Effective Date of 1998 Amendment
Amendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title.
Effective Date of 1997 Amendment
Amendment by Pub. L. 105–34 applicable to taxable years of United States persons beginning after Dec. 31, 1997, and to taxable years of foreign corporations ending with or within such taxable years of United States persons, see section 1124 of Pub. L. 105–34, set out as a note under section 532 of this title.
Effective Date of 1996 Amendment
Pub. L. 104–188, title I, § 1704(r)(2), Aug. 20, 1996, 110 Stat. 1887, provided that: “The amendments made by paragraph (1) [amending this section] shall take effect as if included in the amendments made by section 1235 of the Tax Reform Act of 1986 [Pub. L. 99–514].”
Effective Date of 1993 Amendment
Amendment by Pub. L. 103–66 applicable to taxable years of foreign corporations beginning after Sept. 30, 1993, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end, see section 13231(e) of Pub. L. 103–66, set out as a note under section 951 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.