26 U.S.C. § 960: Deemed paid credit for subpart F inclusions

For purposes of subpart A of this part, if there is included in the gross income of a domestic corporation any item of income under section 951(a)(1) with respect to any controlled foreign corporation with respect to which such domestic corporation is a United States shareholder, such domestic corporation shall be deemed to have paid so much of such foreign corporation’s foreign income taxes as are properly attributable to such item of income. are properly attributable to such portion, and have not been deemed to have to 1 been paid by such domestic corporation under this section for the taxable year or any prior taxable year. 1 So in original. are properly attributable to such portion, and have not been deemed to have been paid by a domestic corporation under this section for the taxable year or any prior taxable year. either (i) chose to have the benefits of subpart A of this part for a taxable year beginning after September 30, 1993 , in which he was required under section 951(a) to include any amount in his gross income, or (ii) did not pay or accrue for such taxable year any income, war profits, or excess profits taxes to any foreign country or to any possession of the United States, chooses to have the benefits of subpart A of this part for any taxable year in which he receives 1 or more distributions or amounts which are excludable from gross income under section 959(a) and which are attributable to amounts included in his gross income for taxable years referred to in subparagraph (A), and for the taxable year in which such distributions or amounts are received, pays, or is deemed to have paid, or accrues income, war profits, or excess profits taxes to a foreign country or to any possession of the United States with respect to such distributions or amounts, Each taxpayer meeting the requirements of paragraph (1)(A) shall establish an excess limitation account. The opening balance of such account shall be zero. the amount by which the limitation under section 904(a) for such taxable year was increased by reason of the total amount of the inclusions in gross income under section 951(a) for such taxable year, over the amount of any income, war profits, and excess profits taxes paid, or deemed paid, or accrued to any foreign country or possession of the United States which were allowable as a credit under section 901 for such taxable year and which would not have been allowable but for the inclusions in gross income described in clause (i). For each taxable year beginning after September 30, 1993 , for which the limitation under section 904 was increased under paragraph (1), the taxpayer shall reduce the amount in the excess limitation account by the amount of such increase. If the taxpayer receives a distribution or amount in a taxable year beginning after September 30, 1993 , which is excluded from gross income under section 959(a) and is attributable to any amount included in gross income under section 951(a) for a taxable year beginning before October 1, 1993 , the limitation under section 904 for the taxable year in which such amount or distribution is received shall be increased by the amount determined under this subsection as in effect on the day before the date of the enactment of the Revenue Reconcilation 2 Act of 1993. 2 So in original. Probably should be “Reconciliation”. chose to have the benefits of subpart A of this part for a taxable year in which he was required under section 951(a) to include in his gross income an amount in respect of a controlled foreign corporation, and does not choose to have the benefits of subpart A of this part for the taxable year in which he receives a distribution or amount which is excluded from gross income under section 959(a) and which is attributable to earnings and profits of the controlled foreign corporation which was included in his gross income for the taxable year referred to in subparagraph (A), If an increase in the limitation under this subsection exceeds the tax imposed by this chapter for such year, the amount of such excess shall be deemed an overpayment of tax for such year. such domestic corporation’s inclusion percentage, multiplied by the aggregate tested foreign income taxes paid or accrued by controlled foreign corporations. such corporation’s net CFC tested income (as defined in section 951A(b)), divided by the aggregate amount described in section 951A(b)(1)(A) with respect to such corporation. For purposes of paragraph (1), the term “tested foreign income taxes” means, with respect to any domestic corporation which is a United States shareholder of a controlled foreign corporation, the foreign income taxes paid or accrued by such foreign corporation which are properly attributable to the tested income of such foreign corporation taken into account by such domestic corporation under section 951A. No credit shall be allowed under section 901 for 10 percent of any foreign income taxes paid or accrued (or deemed paid under subsection (b)(1)) with respect to any amount excluded from gross income under section 959(a) by reason of an inclusion in gross income under section 951A(a). The term “foreign income taxes” means any income, war profits, or excess profits taxes paid or accrued to any foreign country or possession of the United States. The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section. The amendments made by this section [amending this section and section 902 of this title ] shall apply to taxes of foreign corporations for taxable years of such corporations beginning after the date of enactment of this Act [ Aug. 5, 1997 ]. In the case of any chain of foreign corporations described in clauses (i) and (ii) of [former] section 902(b)(2)(B) of the Internal Revenue Code of 1986 (as amended by this section), no liquidation, reorganization, or similar transaction in a taxable year beginning after the date of the enactment of this Act shall have the effect of permitting taxes to be taken into account under section 902 of the Internal Revenue Code of 1986 which could not have been taken into account under such section but for such transaction.” in respect of any distribution received by a domestic corporation after December 31, 1977 , and in respect of any distribution received by a domestic corporation before January 1, 1978 , in a taxable year of such corporation beginning after December 31, 1975 , but only to the extent that such distribution is made out of the accumulated profits of a foreign corporation for a taxable year (of such foreign corporation) beginning after December 31, 1975 .