26 U.S.C. § 1298
For purposes of this part-
This subsection-
If 50 percent or more in value of the stock of a corporation is owned, directly or indirectly, by or for any person, such person shall be considered as owning the stock owned directly or indirectly by or for such corporation in that proportion which the value of the stock which such person so owns bears to the value of all stock in the corporation.
For purposes of determining whether a shareholder of a passive foreign investment company is treated as owning stock owned directly or indirectly by or for such company, subparagraph (A) shall be applied without regard to the 50-percent limitation contained therein. Section 1297(d) shall not apply in determining whether a corporation is a passive foreign investment company for purposes of this subparagraph.
Stock owned, directly or indirectly, by or for a partnership, estate, or trust shall be considered as being owned proportionately by its partners or beneficiaries.
To the extent provided in regulations, if any person has an option to acquire stock, such stock shall be considered as owned by such person. For purposes of this paragraph, an option to acquire such an option, and each one of a series of such options, shall be considered as an option to acquire such stock.
Stock considered to be owned by a person by reason of the application of paragraph (2), (3), or (4) shall, for purposes of applying such paragraphs, be considered as actually owned by such person.
For purposes of this part-
Stock held by a taxpayer shall be treated as stock in a passive foreign investment company if, at any time during the holding period of the taxpayer with respect to such stock, such corporation (or any predecessor) was a passive foreign investment company which was not a qualified electing fund. The preceding sentence shall not apply if the taxpayer elects to recognize gain (as of the last day of the last taxable year for which the company was a passive foreign investment company (determined without regard to the preceding sentence)) under rules similar to the rules of section 1291(d)(2).
A corporation shall not be treated as a passive foreign investment company for the first taxable year such corporation has gross income (hereinafter in this paragraph referred to as the "start-up year") if-
A corporation shall not be treated as a passive foreign investment company for any taxable year if-
Under regulations prescribed by the Secretary, where necessary to carry out the purposes of this part, separate classes of stock (or other interests) in a corporation shall be treated as interests in separate corporations.
Under regulations, in any case in which a United States person is treated as owning stock in a passive foreign investment company by reason of subsection (a)-
shall be treated as a disposition by, or distribution to, the United States person with respect to the stock in the passive foreign investment company.
Rules similar to the rules of section 959(b) shall apply to any amount described in subparagraph (A) and to any amount included in gross income under section 1293(a) (or which would have been so included but for section 951(c)) in respect of stock which the taxpayer is treated as owning under subsection (a).
Except as provided in regulations, if a taxpayer uses any stock in a passive foreign investment company as security for a loan, the taxpayer shall be treated as having disposed of such stock.
If-
for purposes of determining whether such foreign corporation is a passive foreign investment company, any qualified stock held by such domestic corporation shall be treated as an asset which does not produce passive income (and is not held for the production of passive income) and any amount included in gross income with respect to such stock shall not be treated as passive income.
For purposes of subparagraph (A), the term "qualified stock" means any stock in a C corporation which is a domestic corporation and which is not a regulated investment company or real estate investment trust.
Any amount included in gross income under section 951(a)(1)(B) shall be treated as a distribution received with respect to the stock.
If stock in a passive foreign investment company is owned (or treated as owned under subsection (a)) by a pooled income fund (as defined in section 642(c)(5)) and no portion of any gain from a disposition of such stock may be allocated to income under the terms of the governing instrument of such fund-
For purposes of this part-
Any tangible personal property with respect to which a foreign corporation is the lessee under a lease with a term of at least 12 months shall be treated as an asset actually held by such corporation.
The amount taken into account under section 1297(a)(2) with respect to any asset to which paragraph (1) applies shall be the unamortized portion (as determined under regulations prescribed by the Secretary) of the present value of the payments under the lease for the use of such property.
For purposes of subparagraph (A), the present value of payments described in subparagraph (A) shall be determined in the manner provided in regulations prescribed by the Secretary-
This subsection shall not apply in any case where-
For purposes of this part-
The adjusted basis of the total assets of a controlled foreign corporation shall be increased by the research or experimental expenditures (within the meaning of section 174) paid or incurred by such foreign corporation during the taxable year and the preceding 2 taxable years. Any expenditure otherwise taken into account under the preceding sentence shall be reduced by the amount of any reimbursement received by the controlled foreign corporation with respect to such expenditure.
In the case of any intangible property (as defined in section 367(d)(4)) with respect to which a controlled foreign corporation is a licensee and which is used by such foreign corporation in the active conduct of a trade or business, the adjusted basis of the total assets of such foreign corporation shall be increased by an amount equal to 300 percent of the payments made during the taxable year by such foreign corporation for the use of such intangible property.
Subparagraph (A) shall not apply to-
For purposes of this subsection, the term "controlled foreign corporation" has the meaning given such term by section 957(a).
Except as otherwise provided by the Secretary, each United States person who is a shareholder of a passive foreign investment company shall file an annual report containing such information as the Secretary may require.
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this part.
26 U.S.C. § 1298
EDITORIAL NOTES
AMENDMENTS2018-Subsec. (b)(5)(B). Pub. L. 115-141, §401(a) (184), substituted "section 951(c)" for "section 951(f)". Subsec. (d)(2)(A). Pub. L. 115-141, §401(a) (185), substituted "section 1297(a)(2)" for "section 1296(a)(2)".Subsec. (e)(2)(A). Pub. L. 115-141, §401(d)(1)(D) (viii)(III), substituted "section 367(d)(4)" for "section 936(h)(3)(B)".Subsec. (e)(2)(B)(ii). Pub. L. 115-141, §401(a) (186), substituted "provisions" for "provisons".2010-Subsecs. (f), (g). Pub. L. 111-147 added subsec. (f) and redesignated former subsec. (f) as (g). 2007-Subsec. (a)(2)(B). Pub. L. 110-172, §11(a) (24)(C), substituted "Section 1297(d)" for "Section 1297(e)".Subsec. (b)(7) to (9). Pub. L. 110-172, §11(f)(2), redesignated pars. (8) and (9) as (7) and (8), respectively, and struck out former par. (7) which read as follows: "Section 1246 shall not apply to earnings and profits of any company for any taxable year beginning after December 31, 1986, if such company is a passive foreign investment company for such taxable year."1998-Subsec. (a)(2)(B). Pub. L. 105-206 inserted at end "Section 1297(e) shall not apply in determining whether a corporation is a passive foreign investment company for purposes of this subparagraph."1997- Pub. L. 105-34, §1122(a), renumbered section 1297 of this title as this section.Subsec. (b)(1). Pub. L. 105-34, §1122(e), inserted "(determined without regard to the preceding sentence)" after "investment company" in last sentence. 1996-Subsec. (b)(9). Pub. L. 104-188, §1501(b) (10), substituted "section 951(a)(1)(B)" for "subparagraph (B) or (C) of section 951(a)(1)".Subsec. (d)(2). Pub. L. 104-188, §1703(i)(5)(B), in heading substituted "Amount taken into account" for "Determination of adjusted basis".Subsec. (d)(2)(A). Pub. L. 104-188, §1703(i)(5)(A), substituted "The amount taken into account under section 1296(a)(2) with respect to any asset" for "The adjusted basis of any asset".Subsec. (d)(3)(B). Pub. L. 104-188, §1501(b) (11), struck out "or section 956A" after "this part". Subsec. (e). Pub. L. 104-188, §1703(i)(6), inserted "For purposes of this part-" after heading.Subsec. (e)(2)(B)(ii). Pub. L. 104-188, §1501(b) (11), struck out "or section 956A" after "this part".1993-Subsec. (b)(9). Pub. L. 103-66, §13231(d)(2), added par. (9).Subsecs. (d) to (f). Pub. L. 103-66, §13231(d)(4), added subsecs. (d) and (e) and redesignated former subsec. (d) as (f).1989-Subsec. (b)(5). Pub. L. 101-239, §7811(i)(4)(A), substituted "where stock held" for "where held" in heading.Subsec. (b)(5)(A). Pub. L. 101-239, §7811(i)(4)(C), substituted "treated as a disposition by, or distribution to" for "treated as a disposition to" in concluding provisions. Subsec. (b)(5)(A)(ii). Pub. L. 101-239, §7811(i)(4)(B), substituted "any distribution of" for "any disposition of". 1988-Subsec. (a)(4). Pub. L. 100-647, §1012(p)(10)(A), added par. (4). Former par. (4) redesignated (5).Subsec. (a)(5). Pub. L. 100-647, §1012(p)(10), redesignated par. (4) as (5) and substituted "paragraph (2), (3), or (4)" for "paragraph (2) or (3)".Subsec. (b)(1). Pub. L. 100-647, §1012(p)(36), substituted "investment company which" for "investment corporation which".Subsec. (b)(3)(A). Pub. L. 100-647, §1012(p)(22), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: "such corporation (and any predecessor) was not a passive foreign investment corporation for any prior taxable year,". Subsec. (b)(5). Pub. L. 100-647, §1012(p)(17), substituted "part where held" for "section where stock held" in heading, and amended text generally. Prior to amendment, text read as follows: "Under regulations, in any case in which a United States person is treated as holding stock in a passive foreign investment company by reason of subsection (a), any disposition by the United States person or the person holding such stock which results in the United States person being treated as no longer holding such stock, shall be treated as a disposition by the United States person with respect to stock in the passive foreign investment company."Subsec. (b)(6). Pub. L. 100-647, §1012(p)(20), substituted "Except as provided in regulations, if a" for "If a".Subsec. (b)(8). Pub. L. 100-647, §1012(p)(24), added par. (8).Subsecs. (c), (d). Pub. L. 100-647, §1012(p)(35), added subsec. (c) and redesignated former subsec. (c) as (d).
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 2007 AMENDMENT Amendment by section 11(f)(2) of Pub. L. 110-172 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108-357, to which such amendment relates, see section 11(f)(4) of Pub. L. 110-172, set out as a note under section 904 of this title.
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 Amendment by section 1501(b)(10), (11) of 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. Amendment by section 1703(i)(5), (6) of Pub. L. 104-188 effective as if included in the provision of the Revenue Reconciliation Act of 1993, Pub. L. 103-66, §§13001 -13444, to which such amendment relates, see section 1703(o) of Pub. L. 104-188, set out as a note under section 39 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 1989 AMENDMENT Amendment by Pub. L. 101-239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such amendment relates, see section 7817 of Pub. L. 101-239, set out as a 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 DATESection 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.
SAVINGS PROVISIONFor provisions that nothing in amendment by section 401(d)(1)(D)(viii)(III) of Pub. L. 115-141 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Mar. 23, 2018, for purposes of determining liability for tax for periods ending after Mar. 23, 2018, see section 401(e) of Pub. L. 115-141, set out as a note under section 23 of this title.
- Secretary
- The term "Secretary" means the Secretary of the Treasury or his delegate.
- United States person
- The term "United States person" means-(A) a citizen or resident of the United States,(B) a domestic partnership,(C) a domestic corporation,(D) any estate (other than a foreign estate, within the meaning of paragraph (31)), and(E) any trust if-(i) a court within the United States is able to exercise primary supervision over the administration of the trust, and(ii) one or more United States persons have the authority to control all substantial decisions of the trust.
- corporation
- The term "corporation" includes associations, joint-stock companies, and insurance companies.
- person
- The term "person" shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation.
- shareholder
- The term "shareholder" includes a member in an association, joint-stock company, or insurance company.
- stock
- The term "stock" includes shares in an association, joint-stock company, or insurance company.
- taxable year
- The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the taxable income is computed under subtitle A. "Taxable year" means, in the case of a return made for a fractional part of a year under the provisions of subtitle A or under regulations prescribed by the Secretary, the period for which such return is made.
- taxpayer
- The term "taxpayer" means any person subject to any internal revenue tax.
- trade or business
- The term "trade or business" includes the performance of the functions of a public office.