§ 951A. Net CFC tested income included in gross income of United States shareholders

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(a)In general Each person who is a United States shareholder of any controlled foreign corporation for any taxable year of such United States shareholder shall include in gross income such shareholder’s net CFC tested income for such taxable year.

(b)Net CFC tested income For purposes of this section—

(1)In general The term “net CFC tested income” means, with respect to any United States shareholder for any taxable year of such United States shareholder, the excess (if any) of—

(A)the aggregate of such shareholder’s pro rata share of the tested income of each controlled foreign corporation with respect to which such shareholder is a United States shareholder for such taxable year of such United States shareholder, over

(B)the aggregate of such shareholder’s pro rata share of the tested loss of each controlled foreign corporation with respect to which such shareholder is a United States shareholder for such taxable year of such United States shareholder.

(2)Tested income; tested loss For purposes of this section—

(A)Tested income The term “tested income” means, with respect to any controlled foreign corporation for any taxable year of such controlled foreign corporation, the excess (if any) of—

(i)the gross income of such corporation determined without regard to—

(I)any item of income described in section 952(b),

(II)any gross income taken into account in determining the subpart F income of such corporation,

(III)any gross income excluded from the foreign base company income (as defined in section 954) and the insurance income (as defined in section 953) of such corporation by reason of section 954(b)(4),

(IV)any dividend received from a related person (as defined in section 954(d)(3)), and

(V)any foreign oil and gas extraction income (as defined in section 907(c)(1)) of such corporation, over

(ii)the deductions (including taxes) properly allocable to such gross income under rules similar to the rules of section 954(b)(5) (or to which such deductions would be allocable if there were such gross income).

(B)Tested loss

(i)In general The term “tested loss” means, with respect to any controlled foreign corporation for any taxable year of such controlled foreign corporation, the excess (if any) of the amount described in subparagraph (A)(ii) over the amount described in subparagraph (A)(i).

(ii)Coordination with subpart F to deny double benefit of losses Section 952(c)(1)(A) shall be applied by increasing the earnings and profits of the controlled foreign corporation by the tested loss of such corporation.

(c)Determination of pro rata share, etc. For purposes of this section—

(1)In general The pro rata shares referred to in subsections (b)(1)(A) and (b)(1)(B), respectively, shall be determined under the rules of section 951(a)(2) in the same manner as such section applies to subpart F income and shall be taken into account in the taxable year of the United States shareholder determined under section 951(a)(3).

(2)Treatment as United States shareholder A person shall be treated as a United States shareholder of a controlled foreign corporation for any taxable year of such person only if such person owns (within the meaning of section 958(a)) stock in such foreign corporation on any day in such taxable year.

(3)Treatment as controlled foreign corporation A foreign corporation shall be treated as a controlled foreign corporation for any taxable year if such foreign corporation is a controlled foreign corporation at any time during such taxable year.

(d)Treatment as subpart F income for certain purposes

(1)In general

(A)Application Except as provided in subparagraph (B), any net CFC tested income included in gross income under subsection

(a)shall be treated in the same manner as an amount included under section 951(a)(1)(A) for purposes of applying sections 168(h)(2)(B), 535(b)(10), 851(b), 904(h), 959, 961, 962, 993(a)(1)(E), 996(f)(1), 1248(b)(1), 1248(d)(1), 6501(e)(1)(C), 6654(d)(2)(D), and 6655(e)(4).

(B)Exception The Secretary shall provide rules for the application of subparagraph

(A)to other provisions of this title in any case in which the determination of subpart F income is required to be made at the level of the controlled foreign corporation.

(2)Allocation of net CFC tested income to controlled foreign corporations For purposes of the sections referred to in paragraph (1), with respect to any controlled foreign corporation any pro rata amount from which is taken into account in determining the net CFC tested income included in gross income of a United States shareholder under subsection (a), the portion of such net CFC tested income which is treated as being with respect to such controlled foreign corporation is—

(A)in the case of a controlled foreign corporation with no tested income, zero, and

(B)in the case of a controlled foreign corporation with tested income, the portion of such net CFC tested income which bears the same ratio to such net CFC tested income as—

(i)such United States shareholder’s pro rata amount of the tested income of such controlled foreign corporation, bears to

(ii)the aggregate amount described in subsection (b)(1)(A) with respect to such United States shareholder.

(Added Pub. L. 115–97, title I, § 14201(a), Dec. 22, 2017, 131 Stat. 2208; amended Pub. L. 119–21, title VII, §§ 70311(b)(3), 70323(a)(1), (2), (3)(B), (C), (E)(i), 70354(b), July 4, 2025, 139 Stat. 203, 205, 211.)

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