26 U.S.C. § 1297
For purposes of this part, except as otherwise provided in this subpart, the term "passive foreign investment company" means any foreign corporation if-
For purposes of this section-
Except as provided in paragraph (2), the term "passive income" means any income which is of a kind which would be foreign personal holding company income as defined in section 954(c).
Except as provided in regulations, the term "passive income" does not include any income-
For purposes of subparagraph (C), the term "related person" has the meaning given such term by section 954(d)(3) determined by substituting "foreign corporation" for "controlled foreign corporation" each place it appears in section 954(d)(3).
If a foreign corporation owns (directly or indirectly) at least 25 percent (by value) of the stock of another corporation, for purposes of determining whether such foreign corporation is a passive foreign investment company, such foreign corporation shall be treated as if it-
For purposes of this part, a corporation shall not be treated with respect to a shareholder as a passive foreign investment company during the qualified portion of such shareholder's holding period with respect to stock in such corporation.
For purposes of this subsection, the term "qualified portion" means the portion of the shareholder's holding period-
Except as provided in subparagraph (B), if the qualified portion of a shareholder's holding period with respect to any stock ends after December 31, 1997, solely for purposes of this part, the shareholder's holding period with respect to such stock shall be treated as beginning as of the first day following such period.
Subparagraph (A) shall not apply if such stock was, with respect to such shareholder, stock in a passive foreign investment company at any time before the qualified portion of the shareholder's holding period with respect to such stock and no election under section 1298(b)(1) is made.
Paragraph (1) shall not apply to stock treated as owned by a person by reason of section 1298(a)(4) (relating to the treatment of a person that has an option to acquire stock as owning such stock) unless such person establishes that such stock is owned (within the meaning of section 958(a)) by a United States shareholder (as defined in section 951(b)) who is not exempt from tax under this chapter.
The determination under subsection (a)(2) shall be made on the basis of the value of the assets of a foreign corporation if-
The determination under subsection (a)(2) shall be based on the adjusted bases (as determined for the purposes of computing earnings and profits) of the assets of a foreign corporation if such corporation is not described in paragraph (1)(A) and such corporation-
An election under subparagraph (B), once made, may be revoked only with the consent of the Secretary.
For purposes of this subsection, a foreign corporation shall be treated as a publicly traded corporation if the stock in the corporation is regularly traded on-
For purposes of subsection (b)(2)(B)-
The term "qualifying insurance corporation" means, with respect to any taxable year, a foreign corporation-
If a corporation fails to qualify as a qualified insurance corporation under paragraph (1) solely because the percentage determined under paragraph (1)(B) is 25 percent or less, a United States person that owns stock in such corporation may elect to treat such stock as stock of a qualifying insurance corporation if-
For purposes of this subsection-
The term "applicable insurance liabilities" means, with respect to any life or property and casualty insurance business-
Any amount determined under clause (i) or (ii) of subparagraph (A) shall not exceed the lesser of such amount-
For purposes of this subsection-
The term "applicable financial statement" means a statement for financial reporting purposes which-
The term "applicable insurance regulatory body" means, with respect to any insurance business, the entity established by law to license, authorize, or regulate such business and to which the statement described in subparagraph (A) is provided.
26 U.S.C. § 1297
EDITORIAL NOTES
REFERENCES IN TEXTSection 11A of the Securities and Exchange Act of 1934, referred to in subsec. (e)(3)(A), is classified to section 78k-1 of Title 15, Commerce and Trade.
PRIOR PROVISIONSA prior section 1297 was renumbered section 1298 of this title.
AMENDMENTS2017-Subsec. (b)(2)(B). Pub. L. 115-97, §14501(a), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: "derived in the active conduct of an insurance business by a corporation which is predominantly engaged in an insurance business and which would be subject to tax under subchapter L if it were a domestic corporation,". Subsec. (f). Pub. L. 115-97, §14501(b), added subsec. (f).2007-Subsec. (b)(2)(D). Pub. L. 110-172, §11(g) (18), which directed amendment of subpar. (D) by striking out "foreign trade income of a FSC or", was executed by striking out "foreign trade income of an FSC or" before "export trade income" to reflect the probable intent of Congress.Subsecs. (d) to (f). Pub. L. 110-172, §11(a) (24)(A), redesignated subsecs. (e) and (f) as (d) and (e), respectively, and struck out heading and text of former subsec. (d). Text read as follows: "For purposes of this part, the term 'passive foreign investment company' does not include any foreign investment company to which section 1247 applies."1998-Subsec. (e). Pub. L. 105-206, §6011(d), redesignated subsec. (e), relating to methods for measuring assets, as (f).Subsec. (e)(4). Pub. L. 105-206, §6011(b)(1), added par. (4).Subsec. (f). Pub. L. 105-206, §6011(d), redesignated subsec. (e), relating to methods for measuring assets, as (f).1997- Pub. L. 105-34, §1122(a), renumbered section 1296 of this title as this section. Subsec. (a). Pub. L. 105-34, §1123(b)(2), struck out concluding provisions which read as follows: "In the case of a controlled foreign corporation (or any other foreign corporation if such corporation so elects), the determination under paragraph (2) shall be based on the adjusted bases (as determined for purposes of computing earnings and profits) of its assets in lieu of their value. Such an election, once made, may be revoked only with the consent of the Secretary."Subsec. (a)(2). Pub. L. 105-34, §1123(b)(1), substituted "(as determined in accordance with subsection (e))" for "(by value)".Subsec. (b)(3). Pub. L. 105-34, §1122(d)(4), struck out par. (3) which consisted of subpars. (A) to (C) relating to treatment of certain dealers in securities. Subsec. (e). Pub. L. 105-34, §1123(a), added subsec. (e) relating to methods for measuring assets. Pub. L. 105-34, §1121, added subsec. (e) relating to exception for United States shareholders of controlled foreign corporations.1996-Subsec. (b)(2)(D). Pub. L. 104-188 added subpar. (D). 1993-Subsec. (a). Pub. L. 103-66, §13231(d)(1), substituted in closing provisions "In the case of a controlled foreign corporation (or any other foreign corporation if such corporation so elects), the determination under paragraph (2) shall be based on the adjusted bases (as determined for purposes of computing earnings and profits) of its assets in lieu of their value. Such an election, once made, may be revoked only with the consent of the Secretary." for "A foreign corporation may elect to have the determination under paragraph (2) based on the adjusted bases of its assets in lieu of their value. Such an election, once made, may be revoked only with the consent of the Secretary."Subsec. (b)(3). Pub. L. 103-66, §13231(d)(3), added par. (3).1988-Subsec. (a). Pub. L. 100-647, §1018(u)(40), inserted a comma after "subpart".Pub. L. 100-647, §1012(p)(27), inserted at end "A foreign corporation may elect to have the determination under paragraph (2) based on the adjusted bases of its assets in lieu of their value. Such an election, once made, may be revoked only with the consent of the Secretary."Subsec. (b)(1). Pub. L. 100-647, §1012(p)(5), amended par. (1) generally. Prior to amendment, par. (1) read as follows: "Except as provided in paragraph (2), the term 'passive income' has the meaning given such term by section 904(d)(2)(A) without regard to the exceptions contained in clause (iii) thereof."Subsec. (b)(2). Pub. L. 100-647, §1012(p)(26), substituted "Exceptions" for "Exception for certain banks and insurance companies" in heading, and inserted sentence at end defining "related person".Subsec. (b)(2)(B). Pub. L. 100-647, §1012(p)(16), inserted "is predominantly engaged in an insurance business and which" after "a corporation which". Subsec. (b)(2)(C). Pub. L. 100-647, §1012(p)(26)(A), added subpar. (C).Subsec. (c). Pub. L. 100-647, §1012(p)(2), inserted "(directly or indirectly)" after "foreign corporation owns".
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 2017 AMENDMENT Pub. L. 115-97, §14501(c), Dec. 22, 2017, 131 Stat. 2235, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2017."
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 Pub. L. 104-188, §1704(r)(2), Aug. 20, 1996, 110 Stat. 1887, provided that: "The amendments made by paragraph (1) [amending this section] shall take effect as if included in the amendments made by section 1235 of the Tax Reform Act of 1986 [Pub. L. 99-514]."
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 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.
- 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.