Internal Revenue Code · 26 U.S.C.
§ 959. Exclusion from gross income of previously taxed earnings and profits
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. § 959
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Added
- October 16, 1962 by Pub. L. 87–834
- Last amended
- December 22, 2017 by Pub. L. 115–97
- Amendments
- 7 dated changes in the source credit
- Length
- 6 subsections · 883 words · about 4 min to read
- Cross-references
- cites 5; cited by 14 Code sections and 65 other regulations
- Regulations
- 4 issued under this section
For purposes of section 951(a), the earnings and profits of a controlled foreign corporation attributable to amounts which are, or have been, included in the gross income of a United States shareholder under section 951(a), shall not, when distributed through a chain of ownership described under section 958(a), be also included in the gross income of another controlled foreign corporation in such chain for purposes of the application of section 951(a) to such other controlled foreign corporation with respect to such United States shareholder (or to any other United States shareholder who acquires from any person any portion of the interest of such United States shareholder in the controlled foreign corporation, but only to the extent of such portion, and subject to such proof of identity of such interest as the Secretary may prescribe by regulations).
Any distribution excluded from gross income under subsection (a) shall be treated, for purposes of this chapter, as a distribution which is not a dividend; except that such distributions shall immediately reduce earnings and profits.
For purposes of this section and section 960(c), any amount included in the gross income of any person as a dividend by reason of subsection (a) or (f) of section 1248 shall be treated as an amount included in the gross income of such person (or, in any case to which section 1248(e) applies, of the domestic corporation referred to in section 1248(e)(2)) under section 951(a)(1)(A).
For purposes of this section, amounts that would be included under subparagraph (B) of section 951(a)(1) (determined without regard to this section) shall be treated as attributable first to earnings described in subsection (c)(2), and then to earnings described in subsection (c)(3).
In applying this section, actual distributions shall be taken into account before amounts that would be included under section 951(a)(1)(B) (determined without regard to this section).
(Added Pub. L. 87–834, § 12(a), Oct. 16, 1962, 76 Stat. 1019; amended Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 98–369, div. A, title I, § 133(b)(1), July 18, 1984, 98 Stat. 668; Pub. L. 99–514, title XII, § 1226(b), Oct. 22, 1986, 100 Stat. 2560; Pub. L. 100–647, title I, § 1012(bb)(7)(A), Nov. 10, 1988, 102 Stat. 3536; Pub. L. 103–66, title XIII, § 13231(c)(1), (2), (4)(A), (B), Aug. 10, 1993, 107 Stat. 497, 498; Pub. L. 104–188, title I, § 1501(b)(4)–(8), Aug. 20, 1996, 110 Stat. 1826; Pub. L. 115–97, title I, § 14301(c)(32), (33), Dec. 22, 2017, 131 Stat. 2224.)
Regulations under this section
Treasury regulations (26 CFR) issued under § 959
- § 1.959-1 Exclusion from gross income of United States persons of previously taxed earnings and profits.
- § 1.959-2 Exclusion from gross income of controlled foreign corporations of previously taxed earnings and profits.
- § 1.959-3 Allocation of distributions to earnings and profits of foreign corporations.
- § 1.959-4 Distributions to United States persons not counting as dividends.
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 5 other sections
- § 951(a) Amounts included in gross income of United States shareholders
- § 958(a) Rules for determining stock ownership
- § 316(a) Dividend defined
- § 1248 Gain from certain sales or exchanges of stock in certain foreign corporations
- § 960(c) Deemed paid credit for subpart F inclusions
Cited by 14 Code sections
- § 304(b)(6) Redemption through use of related corporations
- § 851(b)(3)(B)(iii) Definition of regulated investment company
- § 951(a)(1)(B) Amounts included in gross income of United States shareholders
- § 951A(d)(1)(A) Net CFC tested income included in gross income of United States shareholders
- § 956(a)(1)(B) Investment of earnings in United States property
- § 960(b)(1) Deemed paid credit for subpart F inclusions
- § 961(b)(1) Adjustments to basis of stock in controlled foreign corporations and of other property
- § 962(d) Election by individuals to be subject to tax at corporate rates
- § 965(b)(4)(A) Treatment of deferred foreign income upon transition to participation exemption system of taxation
- § 986(c)(1) Determination of foreign taxes and foreign corporation’s earnings and profits
- § 1248(d)(1) Gain from certain sales or exchanges of stock in certain foreign corporations
- § 1291(b)(3)(F) Interest on tax deferral
- § 1293(c) Current taxation of income from qualified electing funds
- § 1298(b)(5)(B) Special rules
Cited in 65 regulations not issued under it
- § 1.245A-5 Limitation of section 245A deduction and section 954(c)(6) exception.
- § 1.245A-7 Coordination rules for simple cases.
- § 1.245A-8 Coordination rules for complex cases.
- § 1.245A-10 Examples.
- § 1.245A(d)-1 Disallowance of foreign tax credit or deduction.
- § 1.245A(e)-1 Special rules for hybrid dividends.
- § 1.367(b)-3 Repatriation of foreign corporate assets in certain nonrecognition transactions.
- § 1.367(b)-10 Acquisition of parent stock or securities for property in triangular reorganizations.
- § 1.562-1 Dividends for which the dividends paid deduction is allowable.
- § 1.851-2 Limitations.
- § 1.861-8 Computation of taxable income from sources within the United States and from other sources and activities.
- § 1.861-12 Characterization rules and adjustments for certain assets.
- § 1.861-20 Allocation and apportionment of foreign income taxes.
- § 1.865-2 Loss with respect to stock.
- § 1.902-1 Credit for domestic corporate shareholder of a foreign corporation for foreign income taxes paid by the foreign corporation.
- § 1.904-4 Separate application of section 904 with respect to certain categories of income.
- § 1.904-5 Look-through rules as applied to controlled foreign corporations and other entities.
- § 1.904-6 Allocation and apportionment of foreign income taxes.
- § 1.904-7 Transition rules.
- § 1.905-3 Adjustments to U.S. tax liability and to current earnings and profits as a result of a foreign tax redetermination.
- § 1.907(c)-2 Section 907(c)(3) items (for taxable years beginning after December 31, 1982).
- § 1.907(c)-3 FOGEI and FORI taxes (for taxable years beginning after December 31, 1982).
- § 1.909-6 Pre-2011 foreign tax credit splitting events.
- § 1.921-1T Temporary regulations providing transition rules for DISCs and FSCs.
Show 41 more
- § 1.951-1 Amounts included in gross income of United States shareholders.
- § 1.951-3 Coordination of subpart F with foreign personal holding company provisions.
- § 1.952-1 Subpart F income defined.
- § 1.954-2 Foreign personal holding company income.
- § 1.954-6 Foreign base company shipping income.
- § 1.955-1 Shareholder's pro rata share of amount of previously excluded subpart F income withdrawn from investment in less developed countries.
- § 1.955A-1 Shareholder's pro rata share of amount of previously excluded subpart F income withdrawn from investment in foreign base company shipping operations.
- § 1.956-1 Shareholder's pro rata share of the average of the amounts of United States property held by a controlled foreign corporation.
- § 1.956-2 Definition of United States property.
- § 1.960-1 Overview, definitions, and computational rules for determining foreign income taxes deemed paid under section 960(a), (b), and (d).
- § 1.960-3 Foreign income taxes deemed paid under section 960(b).
- § 1.960-4 Additional foreign tax credit in year of receipt of previously taxed earnings and profits.
- § 1.960-5 Credit for taxable year of inclusion binding for taxable year of exclusion.
- § 1.960-6 Overpayments resulting from increase in limitation for taxable year of exclusion.
- § 1.961-2 Reduction in basis of stock in foreign corporations and of other property.
- § 1.962-3 Treatment of actual distributions.
- § 1.963-3 Distributions counting toward a minimum distribution.
- § 1.963-6 Deficiency distribution.
- § 1.964-2 Treatment of blocked earnings and profits.
- § 1.964-4 Verification of certain classes of income.
- § 1.965-0 Outline of section 965 regulations.
- § 1.965-1 Overview, general rules, and definitions.
- § 1.965-2 Adjustments to earnings and profits and basis.
- § 1.965-4 Disregard of certain transactions.
- § 1.965-5 Allowance of credit or deduction for foreign income taxes.
- § 1.965-6 Computation of foreign income taxes deemed paid and allocation and apportionment of deductions.
- § 1.970-1 Export trade corporations.
- § 1.985-7 Adjustments required in connection with a change to DASTM.
- § 1.1248-2 Earnings and profits attributable to a block of stock in simple cases.
- § 1.1248-3 Earnings and profits attributable to stock in complex cases.
- § 1.1291-0 Treatment of shareholders of certain passive foreign investment companies; table of contents.
- § 1.1291-9 Deemed dividend election.
- § 1.1297-0 Table of contents.
- § 1.1297-3 Deemed sale or deemed dividend election by a U.S. person that is a shareholder of a section 1297(e) PFIC.
- § 1.1298-0 Passive foreign investment company—table of contents.
- § 1.1298-3 Deemed sale or deemed dividend election by a U.S. person that is a shareholder of a former PFIC.
- § 1.1411-10 Controlled foreign corporations and passive foreign investment companies.
- § 1.1502-32 Investment adjustments.
- § 1.1502-80 Applicability of other provisions of law.
- § 1.6038-2 Information returns required of United States persons with respect to annual accounting periods of certain foreign corporations.
- § 4.954-2 Foreign personal holding company income; taxable years beginning after December 31, 1986.
Amendment history
From the source credit and the official notes, newest first.
- Amended by Pub. L. 115–97Parts changed in 2017: (d) (e)
- Amended by Pub. L. 104–188Parts changed in 1996: (a) (c) (f)(1) (f)(2)
- Amended by Pub. L. 103–66Parts changed in 1993: (a) (a)(3) (b) (c)(1) (c)(2) (f)
- Amended by Pub. L. 100–647Parts changed in 1988: (e)
- Amended by Pub. L. 99–514Parts changed in 1986: (d)
- Amended by Pub. L. 98–369Parts changed in 1984: (e)
- Amended by Pub. L. 94–455Parts changed in 1976: (a)
- Added by Pub. L. 87–834
Where it sits in the Code
- Subtitle A Income Taxes
- Chapter 1 NORMAL TAXES AND SURTAXES
- Subchapter N Tax Based on Income From Sources Within or Without the United States
- Part III INCOME FROM SOURCES WITHOUT THE UNITED STATES
- Subpart F Controlled Foreign Corporations
Nearby sections
- § 956 Investment of earnings in United States property
- § 956A Repealed
- § 957 Controlled foreign corporations; United States persons
- § 958 Rules for determining stock ownership
- § 959 Exclusion from gross income of previously taxed earnings and profits
- § 960 Deemed paid credit for subpart F inclusions
- § 961 Adjustments to basis of stock in controlled foreign corporations and of other property
- § 962 Election by individuals to be subject to tax at corporate rates
- § 963 Repealed
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
References in Text
The date of the enactment of the Small Business Job Protection Act of 1996, referred to in subsec. (c), is the date of enactment of Pub. L. 104–188, which was approved Aug. 20, 1996.
Amendments
2017—Subsec. (d). Pub. L. 115–97, § 14301(c)(32), substituted “Any” for “Except as provided in section 960(a)(3), any”.
Subsec. (e). Pub. L. 115–97, § 14301(c)(33), substituted “section 960(c)” for “section 960(b)”.
1996—Subsec. (a). Pub. L. 104–188, § 1501(b)(4), (5), substituted “paragraph (2)” for “paragraphs (2) and (3)” in closing provisions, inserted “or” at end of par. (1), struck out “or” at end of par. (2), and struck out par. (3) which read as follows: “such amounts would, but for this subsection, be included under section 951(a)(1)(C) in the gross income of,”.
Subsec. (c). Pub. L. 104–188, § 1501(b)(6), inserted at end “References in this subsection to section 951(a)(1)(C) and subsection (a)(3) shall be treated as references to such provisions as in effect on the day before the date of the enactment of the Small Business Job Protection Act of 1996.”
Subsec. (f)(1). Pub. L. 104–188, § 1501(b)(7), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “For purposes of this section—
“(A) amounts that would be included under subparagraph (B) of section 951(a)(1) (determined without regard to this section) shall be treated as attributable first to earnings described in subsection (c)(2), and then to earnings described in subsection (c)(3), and
“(B) amounts that would be included under subparagraph (C) of section 951(a)(1) (determined without regard to this section) shall be treated as attributable first to earnings described in subsection (c)(2) to the extent the earnings so described were accumulated in taxable years beginning after September 30, 1993, and then to earnings described in subsection (c)(3).”
Subsec. (f)(2). Pub. L. 104–188, § 1501(b)(8), substituted “section 951(a)(1)(B)” for “subparagraphs (B) and (C) of section 951(a)(1)”.
1993—Subsec. (a). Pub. L. 103–66, § 13231(c)(2)(A), (4)(A), substituted in introductory provisions “earnings and profits” for “earnings and profits for taxable year” and inserted at end of closing provisions “The rules of subsection (c) shall apply for purposes of paragraph (1) of this subsection and the rules of subsection (f) shall apply for purposes of paragraphs (2) and (3) of this subsection.”
Subsec. (a)(3). Pub. L. 103–66, § 13231(c)(1), added par. (3).
Subsec. (b). Pub. L. 103–66, § 13231(c)(4)(A), substituted “earnings and profits” for “earnings and profits for a taxable year”.
Subsec. (c)(1). Pub. L. 103–66, § 13231(c)(2)(C), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “first to earnings and profits attributable to amounts included in gross income under section 951(a)(1)(B) (or which would have been included except for subsection (a)(2) of this section),”.
Subsec. (c)(2). Pub. L. 103–66, § 13231(c)(4)(B), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “then to earnings and profits attributable to amounts included in gross income under section 951(a)(1)(A) (but reduced by amounts not included under section 951(a)(1)(B) because of the exclusion in subsection (a)(2) of this section), and”.
Subsec. (f). Pub. L. 103–66, § 13231(c)(2)(B), added subsec. (f).
1988—Subsec. (e). Pub. L. 100–647 substituted “such person (or, in any case to which section 1248(e) applies, of the domestic corporation referred to in section 1248(e)(2)) under” for “such person under”.
1986—Subsec. (d). Pub. L. 99–514 inserted “; except that such distributions shall immediately reduce earnings and profits”.
1984—Subsec. (e). Pub. L. 98–369 added subsec. (e).
1976—Subsecs. (a), (b). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Amendment by Pub. L. 115–97 applicable to taxable years of foreign corporations beginning after Dec. 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end, see section 14301(d) of Pub. L. 115–97, set out as a note under section 78 of this title.
Effective Date of 1996 Amendment
Amendment by Pub. L. 104–188 applicable to taxable years of foreign corporations beginning after Dec. 31, 1996, and to taxable years of United States shareholders within which or with which such taxable years of foreign corporations end, see section 1501(d) of Pub. L. 104–188, set out as a note under section 904 of this title.
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
Pub. L. 100–647, title I, § 1012(bb)(7)(B), Nov. 10, 1988, 102 Stat. 3536, provided that: “The amendment made by subparagraph (A) [amending this section] shall apply in the case of transactions to which section 1248(e) of the 1986 Code applies and which occur after December 31, 1986.”
Effective Date of 1986 Amendment
Pub. L. 99–514, title XII, § 1226(c)(2), Oct. 22, 1986, 100 Stat. 2560, provided that: “The amendment made by subsection (b) [amending this section] shall apply to distributions after the date of the enactment of this Act [Oct. 22, 1986].”
Effective Date of 1984 Amendment
Pub. L. 98–369, div. A, title I, § 133(d)(2), (3), July 18, 1984, 98 Stat. 668, as amended by Pub. L. 99–514, § 2, title XVIII, § 1810(i)(2), Oct. 22, 1986, 100 Stat. 2095, 2829; Pub. L. 100–647, title I, § 1018(g)(2), Nov. 10, 1988, 102 Stat. 3582, provided that:
“(2) Subsections (b) and (c).— Except as provided in paragraph (3), the amendments made by subsections (b) and (c) [amending this section and section 1248 of this title] shall apply with respect to transactions to which subsection (a) or (f) of section 1248 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] applies occurring after the date of the enactment of this Act [July 18, 1984].“(3) Election of earlier date for certain transactions.—“(A) In general.— If the appropriate election is made under subparagraph (B), the amendments made by subsection (b) [amending this section and section 1248 of this title] shall apply with respect to transactions to which subsection (a) or (f) of section 1248 of such Code applies occurring after October 9, 1975.“(B) Election.—“(i) Subparagraph (A) shall apply with respect to transactions to which subsection (a) of section 1248 of such Code applies if the foreign corporation described in such subsection (or its successor in interest) so elects.“(ii) Subparagraph (A) shall apply with respect to transactions to which subsection (f) of section 1248 of such Code applies if the domestic corporation described in section 1248(f)(1) of such Code (or its successor) so elects.“(iii) Any election under clause (i) or (ii) shall be made not later than the date which is 1 year after the date of the enactment of the Tax Reform Act of 1986 [Oct. 22, 1986] and shall be made in such manner as the Secretary of the Treasury or his delegate shall prescribe.”