Sec. 4001. Deduction for dividends received by domestic corporations from certain foreign corporations
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Part VIII of subchapter B of chapter 1 is amended by inserting after section 245 the following new section: In the case of any dividend received from a specified 10-percent owned foreign corporation by a domestic corporation which is a United States shareholder with respect to such foreign corporation, there shall be allowed as a deduction an amount equal to 95 percent of the foreign-source portion of such dividend. For purposes of this section, the term specified 10-percent owned foreign corporation means any foreign corporation if any domestic corporation owns directly, or indirectly through a chain of ownership described under section 958(a), 10 percent or more of the voting stock of such foreign corporation.
For purposes of this section— The foreign-source portion of any dividend is an amount which bears the same ratio to such dividends as— the post-1986 undistributed foreign earnings, bears to the total post-1986 undistributed earnings. The term post-1986 undistributed earnings means the amount of the earnings and profits of the specified 10-percent owned foreign corporation (computed in accordance with sections 964(a) and 986) accumulated in taxable years beginning after December 31, 1986— as of the close of the taxable year of the specified 10-percent owned foreign corporation in which the dividend is distributed, and without diminution by reason of dividends distributed during such taxable year.
The term post-1986 undistributed foreign earnings means the portion of the post-1986 undistributed earnings which is attributable to neither— income described in subparagraph
(A)of section 245(a)(5), nor dividends described in subparagraph
(B)of such section (determined without regard to section 245(a)(12)). In the case of any dividend paid out of earnings and profits of the specified 10-percent owned foreign corporation (computed in accordance with sections 964(a) and 986) accumulated in taxable years beginning before January 1, 1987— paragraphs (1), (2), and
(3)shall be applied without regard to the phrase post-1986 each place it appears, and paragraph
(2)shall be applied without regard to the phrase in taxable years beginning after December 31, 1986 . Dividends shall be treated as paid out of post-1986 undistributed earnings to the extent thereof. No credit shall be allowed under section 901 for any taxes paid or accrued (or treated as paid or accrued) with respect to any dividend for which a deduction is allowed under this section. No deduction shall be allowed under this chapter for any tax for which credit is not allowable under section 901 by reason of paragraph
(1)(determined by treating the taxpayer as having elected the benefits of subpart A of part III of subchapter N). The Secretary may prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section. . Subsection
(c)of section 246 is amended— by striking or 245 in paragraph
(1)and inserting 245, or 245A , and by adding at the end the following new paragraph: For purposes of section 245A— paragraph (1)(A) shall be applied— by substituting 180 days for 45 days each place it appears, and by substituting 361-day period for 91-day period , and paragraph
(2)shall not apply. For purposes of section 245A, the holding period requirement of this subsection shall be treated as met only if— the specified 10-percent owned corporation referred to in section 245A(a) is a specified 10-percent owned corporation at all times during such period, and the taxpayer is a United States shareholder with respect to such specified 10-percent owned corporation at all times during such period. . Paragraph
(1)of section 246(a) is amended by striking and 245 and inserting 245, and 245A . Paragraph
(3)of section 864(e) is amended by striking or 245(a) and inserting , 245(a), or 245A . Subparagraph
(B)of section 1059(b)(2) is amended by striking or 245 and inserting 245, or 245A . Subsection
(b)of section 904, as amended by the preceding provisions of this Act, is amended by redesignating paragraph
(2)as paragraph
(1)and by adding at the end the following new paragraph: For purposes of subsection (a), in the case of a domestic corporation which is a United States shareholder with respect to a specified 10-percent owned foreign corporation, such domestic corporation’s taxable income from sources without the United States shall be determined without regard to— the foreign-source portion of any dividend received from such foreign corporation, and any deductions properly allocable to such portion. Any term which is used in section 245A and in this paragraph shall have the same meaning for purposes of this paragraph as when used in such section. . Paragraph
(4)of section 245(a) is amended by striking section 902(c)(1) and inserting section 245A(c)(2) . Subsection
(b)of section 951 is amended by striking subpart and inserting title . Subsection
(a)of section 957 is amended by striking subpart in the matter preceding paragraph
(1)and inserting title . The table of sections for part VIII of subchapter B of chapter 1 is amended by inserting after the item relating to section 245 the following new item: Sec. 245A. Dividends received by domestic corporations from certain foreign corporations. . The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2014, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.