26 U.S.C. § 901: Taxes of foreign countries and of possessions of United States

If the taxpayer chooses to have the benefits of this subpart, the tax imposed by this chapter shall, subject to the limitation of section 904, be credited with the amounts provided in the applicable paragraph of subsection (b) plus, in the case of a corporation, the taxes deemed to have been paid under section 960. Such choice for any taxable year may be made or changed at any time before the expiration of the period prescribed for making a claim for credit or refund of the tax imposed by this chapter for such taxable year. The credit shall not be allowed against any tax treated as a tax not imposed by this chapter under section 26(b). In the case of a citizen of the United States and of a domestic corporation, the amount of any income, war profits, and excess profits taxes paid or accrued during the taxable year to any foreign country or to any possession of the United States; and In the case of a resident of the United States and in the case of an individual who is a bona fide resident of Puerto Rico during the entire taxable year, the amount of any such taxes paid or accrued during the taxable year to any possession of the United States; and In the case of an alien resident of the United States and in the case of an alien individual who is a bona fide resident of Puerto Rico during the entire taxable year, the amount of any such taxes paid or accrued during the taxable year to any foreign country; and In the case of any nonresident alien individual not described in section 876 and in the case of any foreign corporation, the amount determined pursuant to section 906; and In the case of any person described in paragraph (1), (2), (3), or (4), who is a member of a partnership or a beneficiary of an estate or trust, the amount of his proportionate share of the taxes (described in such paragraph) of the partnership or the estate or trust paid or accrued during the taxable year to a foreign country or to any possession of the United States, as the case may be. Under rules or regulations prescribed by the Secretary, in the case of any foreign trust of which the settlor or another person would be treated as owner of any portion of the trust under subpart E but for section 672(f), the allocable amount of any income, war profits, and excess profits taxes imposed by any foreign country or possession of the United States on the settlor or such other person in respect of trust income. a foreign country, in imposing income, war profits, and excess profits taxes, does not allow to citizens of the United States residing in such foreign country a credit for any such taxes paid or accrued to the United States or any foreign country, as the case may be, similar to the credit allowed under subsection (b)(3), such foreign country, when requested by the United States to do so, has not acted to provide such a similar credit to citizens of the United States residing in such foreign country, and it is in the public interest to allow the credit under subsection (b)(3) to citizens or subjects of such foreign country only if it allows such a similar credit to citizens of the United States residing in such foreign country, For purposes of this subpart, dividends from a DISC or former DISC (as defined in section 992(a)) shall be treated as dividends from a foreign corporation to the extent such dividends are treated under part I as income from sources without the United States. the amount of such taxes (or, if smaller, the amount of the tax which would be computed under this chapter with respect to such income determined without the deduction allowed under section 613), exceeds the amount of the tax computed under this chapter with respect to such income. For purposes of paragraph (1), the term “foreign mineral income” means income derived from the extraction of minerals from mines, wells, or other natural deposits, the processing of such minerals into their primary products, and the transportation, distribution, or sale of such minerals or primary products. Such term includes, but is not limited to 1 that portion of the taxpayer’s distributive share of the income of partnerships attributable to foreign mineral income. 1 So in original. Probably should be followed by a comma. the taxpayer has no economic interest in the oil or gas to which section 611(a) applies, and either such purchase or sale is at a price which differs from the fair market value for such oil or gas at the time of such purchase or sale. to the extent that such distribution is attributable to periods during which such corporation is a possessions corporation, and if a dividends received deduction is allowable with respect to such distribution under part VIII of subchapter B, or to the extent that such distribution is received in connection with a liquidation or other transaction with respect to which gain or loss is not recognized, For purposes of paragraph (1), a corporation shall be treated as a possessions corporation for any period during which an election under section 936 (as in effect on the day before the date of the enactment of the Tax Technical Corrections Act of 2018) applied to such corporation, during which section 931 (as in effect on the day before the date of the enactment of the Tax Reform Act of 1976) applied to such corporation, or during which section 957(c) (as in effect on the day before the date of the enactment of the Tax Reform Act of 1986) applied to such corporation. the amount of such tax is used (directly or indirectly) by the country imposing such tax to provide a subsidy by any means to the taxpayer, a related person (within the meaning of section 482), or any party to the transaction or to a related transaction, and such subsidy is determined (directly or indirectly) by reference to the amount of such tax, or the base used to compute the amount of such tax. no credit shall be allowed under subsection (a) for any income, war profits, or excess profits taxes paid or accrued (or deemed paid under section 960) to any country if such taxes are with respect to income attributable to a period during which this subsection applies to such country, and subsections (a), (b), and (c) of section 904 and section 960 shall be applied separately with respect to income attributable to such a period from sources within such country. the government of which the United States does not recognize, unless such government is otherwise eligible to purchase defense articles or services under the Arms Export Control Act, with respect to which the United States has severed diplomatic relations, with respect to which the United States has not severed diplomatic relations but does not conduct such relations, or which the Secretary of State has, pursuant to section 6(j) 2 of the Export Administration Act of 1979, as amended, designated as a foreign country which repeatedly provides support for acts of international terrorisms. 2 See References in Text note below. January 1, 1987 , or 6 months after such country becomes a country described in subparagraph (A), and ending on the date the Secretary of State certifies to the Secretary of the Treasury that such country is no longer described in subparagraph (A). Sections 275 and 78 shall not apply to any tax which is not allowable as a credit under subsection (a) by reason of this subsection. The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection, including regulations which treat income paid through 1 or more entities as derived from a foreign country to which this subsection applies if such income was, without regard to such entities, derived from such country. determines that a waiver of the application of such paragraph is in the national interest of the United States and will expand trade and investment opportunities for United States companies in such country; and reports such waiver under subparagraph (B). the intention to grant such waiver; and the reason for the determination under subparagraph (A)(i). such stock is held by the recipient of the dividend for 15 days or less during the 31-day period beginning on the date which is 15 days before the date on which such share becomes ex-dividend with respect to such dividend, or to the extent that the recipient of the dividend is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. For purposes of this paragraph, the term “withholding tax” includes any tax determined on a gross basis; but does not include any tax which is in the nature of a prepayment of a tax imposed on a net basis. any stock of any corporation in such chain (the ownership of which is required to obtain credit under subsection (a) for such taxes) is held for less than the period described in paragraph (1)(A)(i), or the corporation holding the stock is under an obligation referred to in paragraph (1)(A)(ii). by substituting “45 days” for “15 days” each place it appears, and by substituting “91-day period” for “31-day period”. who is registered as a securities broker or dealer under section 15(a) of the Securities Exchange Act of 1934, who is registered as a Government securities broker or dealer under section 15C(a) of such Act, or who is licensed or authorized in such foreign country to conduct securities activities in such country and is subject to bona fide regulation by a securities regulating authority of such country. the dividend to which such tax is attributable is subject to taxation on a net basis by the country referred to in subparagraph (A), and such country allows a credit against its net basis tax for the full amount of the tax paid to such other foreign country. The Secretary may prescribe such regulations as may be appropriate to carry out this paragraph, including regulations to prevent the abuse of the exception provided by this paragraph and to treat other taxes as qualified taxes. For purposes of this subsection, the rules of paragraphs (3) and (4) of section 246(c) shall apply. If a person’s holding period is reduced by reason of the application of the rules of section 246(c)(4) to any contract for the bona fide sale of stock, the determination of whether such person’s holding period meets the requirements of paragraph (2) with respect to taxes deemed paid under section 960 shall be made as of the date such contract is entered into. Sections 275 and 78 shall not apply to any tax which is not allowable as a credit under subsection (a) by reason of this subsection. such property is held by the recipient of the item for 15 days or less during the 31-day period beginning on the date which is 15 days before the date on which the right to receive payment of such item arises, or to the extent that the recipient of the item is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. Paragraph (1) shall not apply to any qualified tax with respect to any property held in the active conduct in a foreign country of a business as a dealer in such property. the item to which such tax is attributable is subject to taxation on a net basis by the country referred to in subparagraph (A), and such country allows a credit against its net basis tax for the full amount of the tax paid to such other foreign country. with respect to a security, any person to whom paragraphs (1) and (2) of subsection (k) would not apply by reason of paragraph (4) thereof, and with respect to any other property, any person with respect to whom such property is described in section 1221(a)(1). The Secretary may prescribe such regulations as may be appropriate to carry out this paragraph, including regulations to prevent the abuse of the exception provided by this paragraph and to treat other taxes as qualified taxes. The Secretary may by regulation provide that paragraph (1) shall not apply to property where the Secretary determines that the application of paragraph (1) to such property is not necessary to carry out the purposes of this subsection. Rules similar to the rules of paragraphs (5), (6), and (7) of subsection (k) shall apply for purposes of this subsection. Holding periods shall be determined for purposes of this subsection without regard to section 1235 or any similar rule. shall not be taken into account in determining the credit allowed under subsection (a), and in the case of a foreign income tax paid by a foreign corporation, shall not be taken into account for purposes of section 960. a qualified stock purchase (as defined in section 338(d)(3)) to which section 338(a) applies, is treated as an acquisition of assets for purposes of this chapter, and is treated as the acquisition of stock of a corporation (or is disregarded) for purposes of the foreign income taxes of the relevant jurisdiction, any acquisition of an interest in a partnership which has an election in effect under section 754, and to the extent provided by the Secretary, any other similar transaction. the aggregate basis differences (but not below zero) allocable to such taxable year under subparagraph (B) with respect to all relevant foreign assets, divided by the income on which the foreign income tax referred to in paragraph (1) is determined (or, if the taxpayer fails to substantiate such income to the satisfaction of the Secretary, such income shall be determined by dividing the amount of such foreign income tax by the highest marginal tax rate applicable to such income in the relevant jurisdiction). The basis difference with respect to any relevant foreign asset shall be allocated to taxable years using the applicable cost recovery method under this chapter. the basis difference allocated to the taxable year which includes the date of such disposition shall be the excess of the basis difference with respect to such asset over the aggregate basis difference with respect to such asset which has been allocated under clause (i) to all prior taxable years, and no basis difference with respect to such asset shall be allocated under clause (i) to any taxable year thereafter. the adjusted basis of such asset immediately after the covered asset acquisition, over the adjusted basis of such asset immediately before the covered asset acquisition. In the case of a relevant foreign asset with respect to which the amount described in clause (i)(II) exceeds the amount described in clause (i)(I), such excess shall be taken into account under this subsection as a basis difference of a negative amount. In the case of a covered asset acquisition described in paragraph (2)(A), the covered asset acquisition shall be treated for purposes of this subparagraph as occurring at the close of the acquisition date (as defined in section 338(h)(2)). For purposes of this section, the term “relevant foreign asset” means, with respect to any covered asset acquisition, any asset (including any goodwill, going concern value, or other intangible) with respect to such acquisition if income, deduction, gain, or loss attributable to such asset is taken into account in determining the foreign income tax referred to in paragraph (1). For purposes of this section, the term “foreign income tax” means any income, war profits, or excess profits tax paid or accrued to any foreign country or to any possession of the United States. Sections 275 and 78 shall not apply to any tax which is not allowable as a credit under subsection (a) by reason of this subsection. The Secretary may issue such regulations or other guidance as is necessary or appropriate to carry out the purposes of this subsection, including to exempt from the application of this subsection certain covered asset acquisitions, and relevant foreign assets with respect to which the basis difference is de minimis. For deductions of income, war profits, and excess profits taxes paid to a foreign country or a possession of the United States, see sections 164 and 275. For right of each partner to make election under this section, see section 703(b). For right of estate or trust to the credit for taxes imposed by foreign countries and possessions of the United States under this section, see section 642(a). For reduction of credit for failure of a United States person to furnish certain information with respect to a foreign corporation or partnership controlled by him, see section 6038. Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to covered asset acquisitions (as defined in section 901(m)(2) of the Internal Revenue Code of 1986, as added by this section) after December 31, 2010 . made pursuant to a written agreement which was binding on January 1, 2011 , and at all times thereafter, described in a ruling request submitted to the Internal Revenue Service on or before July 29, 2010 , or described on or before January 1, 2011 , in a public announcement or in a filing with the Securities and Exchange Commission. For purposes of this subsection, a person shall be treated as related to another person if the relationship between such persons is described in section 267 or 707(b) of the Internal Revenue Code of 1986.”