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26 U.S.C. § 1297 — Passive foreign investment company
Federal law — U.S. Code and appendices · legal_authorities
**(a) In general** For purposes of this part, except as otherwise provided in this subpart, the term “passive foreign investment company” means any foreign corporation if—
(1) 75 percent or more of the gross income of such corporation for the taxable year is passive income, or
(2) the average percentage of assets (as determined in accordance with subsection (e)) held by such corporation during the taxable year which produce passive income or which are held for the production of passive income is at least 50 percent.
**(b) Passive income** For purposes of this section—
(1) **In general** — 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).
(2) **Exceptions** — Except as provided in regulations, the term “passive income” does not include any income—
(A) derived in the active conduct of a banking business by an institution licensed to do business as a bank in the United States (or, to the extent provided in regulations, by any other corporation),
(B) derived in the active conduct of an insurance business by a qualifying insurance corporation (as defined in subsection (f)),
(C) which is interest, a dividend, or a rent or royalty, which is received or accrued from a related person (within the meaning of section 954(d)(3)) to the extent such amount is properly allocable (under regulations prescribed by the Secretary) to income of such related person which is not passive income, or
(D) which is export trade income of an export trade corporation (as defined in section 971).
For purposes of subparagraph (C), the term “related person” has the meaning given such term by section 954(d)(3) determined by substituting “foreign corporat
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**(a) In general** For purposes of this part, except as otherwise provided in this subpart, the term “passive foreign investment company” means any foreign corporation if—
(1) 75 percent or more of the gross income of such corporation for the taxable year is passive income, or
(2) the average percentage of assets (as determined in accordance with subsection (e)) held by such corporation during the taxable year which produce passive income or which are held for the production of passive income is at least 50 percent.
**(b) Passive income** For purposes of this section—
(1) **In general** — 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).
(2) **Exceptions** — Except as provided in regulations, the term “passive income” does not include any income—
(A) derived in the active conduct of a banking business by an institution licensed to do business as a bank in the United States (or, to the extent provided in regulations, by any other corporation),
(B) derived in the active conduct of an insurance business by a qualifying insurance corporation (as defined in subsection (f)),
(C) which is interest, a dividend, or a rent or royalty, which is received or accrued from a related person (within the meaning of section 954(d)(3)) to the extent such amount is properly allocable (under regulations prescribed by the Secretary) to income of such related person which is not passive income, or
(D) which is export trade income of an export trade corporation (as defined in section 971).
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).
**(c) Look-thru in the case of 25-percent owned corporations** 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—
(1) held its proportionate share of the assets of such other corporation, and
(2) received directly its proportionate share of the income of such other corporation.
**(d) Exception for United States shareholders of controlled foreign corporations**
(1) **In general** — 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.
(2) **Qualified portion** — For purposes of this subsection, the term “qualified portion” means the portion of the shareholder’s holding period—
(A) which is after December 31, 1997, and
(B) during which the shareholder is a United States shareholder (as defined in section 951(b)) of the corporation and the corporation is a controlled foreign corporation.
(3) **New holding period if qualified portion ends**
(A) *In general* — 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.
(B) *Exception* — 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.
(4) **Treatment of holders of options** — 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.
**(e) Methods for measuring assets**
(1) **Determination using value** — The determination under subsection (a)(2) shall be made on the basis of the value of the assets of a foreign corporation if—
(A) such corporation is a publicly traded corporation for the taxable year, or
(B) paragraph (2) does not apply to such corporation for the taxable year.
(2) **Determination using adjusted bases** — 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—
(A) is a controlled foreign corporation, or
(B) elects the application of this paragraph.
An election under subparagraph (B), once made, may be revoked only with the consent of the Secretary.
(3) **Publicly traded corporation** — 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—
(A) a national securities exchange which is registered with the Securities and Exchange Commission or the national market system established pursuant to section 11A of the Securities and Exchange Act of 1934, or
(B) any exchange or other market which the Secretary determines has rules adequate to carry out the purposes of this subsection.
**(f) Qualifying insurance corporation** For purposes of subsection (b)(2)(B)—
(1) **In general** — The term “qualifying insurance corporation” means, with respect to any taxable year, a foreign corporation—
(A) which would be subject to tax under subchapter L if such corporation were a domestic corporation, and
(B) the applicable insurance liabilities of which constitute more than 25 percent of its total assets, determined on the basis of such liabilities and assets as reported on the corporation’s applicable financial statement for the last year ending with or within the taxable year.
(2) **Alternative facts and circumstances test for certain corporations** — 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—
(A) the percentage so determined for the corporation is at least 10 percent, and
(B) under regulations provided by the Secretary, based on the applicable facts and circumstances—
(i) the corporation is predominantly engaged in an insurance business, and
(ii) such failure is due solely to runoff-related or rating-related circumstances involving such insurance business.
(3) **Applicable insurance liabilities** — For purposes of this subsection—
(A) *In general* — The term “applicable insurance liabilities” means, with respect to any life or property and casualty insurance business—
(i) loss and loss adjustment expenses, and
(ii) reserves (other than deficiency, contingency, or unearned premium reserves) for life and health insurance risks and life and health insurance claims with respect to contracts providing coverage for mortality or morbidity risks.
(B) *Limitations on amount of liabilities* — Any amount determined under clause (i) or (ii) of subparagraph (A) shall not exceed the lesser of such amount—
(i) as reported to the applicable insurance regulatory body in the applicable financial statement described in paragraph (4)(A) (or, if less, the amount required by applicable law or regulation), or
(ii) as determined under regulations prescribed by the Secretary.
(4) **Other definitions and rules** — For purposes of this subsection—
(A) *Applicable financial statement* — The term “applicable financial statement” means a statement for financial reporting purposes which—
(i) is made on the basis of generally accepted accounting principles,
(ii) is made on the basis of international financial reporting standards, but only if there is no statement that meets the requirement of clause (i), or
(iii) except as otherwise provided by the Secretary in regulations, is the annual statement which is required to be filed with the applicable insurance regulatory body, but only if there is no statement which meets the requirements of clause (i) or (ii).
(B) *Applicable insurance regulatory body* — 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.
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** The accumulated earnings tax imposed by section 531 shall apply to every corporation (other than those described in subsection (b)) formed or availed of for the purpose of avoiding the income tax with respect to its shareholders or the shareholders of any other corporation, by permitting earnings and profits to accumulate instead of being divided or distributed.
**(b) Exceptions** The accumulated earnings tax imposed by section 531 shall not apply to—
(1) a personal holding company (as defined in section 542),
(2) a corporation exempt from tax under subchapter F (section 501 and following), or
(3) a passive foreign investment company (as defined in section 1297).
**(c) Application determined without regard to number of shareholders** The application of this part to a corporation shall be determined without regard to the number of shareholders of such corporation.
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 532
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** In the case of marketable stock in a passive foreign investment company which is owned (or treated under subsection (g) as owned) by a United States person at the close of any taxable year of such person, at the election of such person—
(1) If the fair market value of such stock as of the close of such taxable year exceeds its adjusted basis, such United States person shall include in gross income for such taxable year an amount equal to the amount of such excess.
(2) If the adjusted basis of such stock exceeds the fair market value of such stock as of the close of such taxable year, such United States person shall be allowed a deduction for such taxable year equal to the lesser of—
(A) the amount of such excess, or
(B) the unreversed inclusions with respect to such stock.
**(b) Basis adjustments**
(1) **In general** — The adjusted basis of stock in a passive foreign investment company—
(A) shall be increased by the amount included in the gross income of the United States person under subsection (a)(1) with respect to such stock, and
(B) shall be decreased by the amount allowed as a deduction to the United States person under subsection (a)(2) with respect to such stock.
(2) **Special rule for stock constructively owned** — In the case of stock in a passive foreign investment company which the United States person is treated as owning under subsection (g)—
(A) the adjustments under paragraph (1) shall apply to such stock in the hands of the person actually holding such stock but only for purposes of determining the subsequent treatment under this chapter of the United States person with respect to such stock, and
(B) similar adjustments shall be made to the adjusted basis of the property by reason of which the United States pe
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1296
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Treatment of distributions and stock dispositions**
(1) **Distributions** — If a United States person receives an excess distribution in respect of stock in a passive foreign investment company, then—
(A) the amount of the excess distribution shall be allocated ratably to each day in the taxpayer’s holding period for the stock,
(B) with respect to such excess distribution, the taxpayer’s gross income for the current year shall include (as ordinary income) only the amounts allocated under subparagraph (A) to—
(i) the current year, or
(ii) any period in the taxpayer’s holding period before the 1st day of the 1st taxable year of the company which begins after December 31, 1986, and for which it was a passive foreign investment company, and
(C) the tax imposed by this chapter for the current year shall be increased by the deferred tax amount (determined under subsection (c)).
(2) **Dispositions** — If the taxpayer disposes of stock in a passive foreign investment company, then the rules of paragraph (1) shall apply to any gain recognized on such disposition in the same manner as if such gain were an excess distribution.
(3) **Definitions** — For purposes of this section—
(A) *Holding period* — The taxpayer’s holding period shall be determined under section 1223; except that—
(i) for purposes of applying this section to an excess distribution, such holding period shall be treated as ending on the date of such distribution, and
(ii) if section 1296 applied to such stock with respect to the taxpayer for any prior taxable year, such holding period shall be treated as beginning on the first day of the first taxable year beginning after the last taxable year for which section 1296 so applied.
(B) *Current year* — The term “current year”
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1291
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Married individuals filing joint returns and surviving spouses** There is hereby imposed on the taxable income of—
(1) every married individual (as defined in section 7703) who makes a single return jointly with his spouse under section 6013, and
(2) every surviving spouse (as defined in section 2(a)),
a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $36,90015% of taxable income. Over $36,900 but not over $89,150$5,535, plus 28% of the excess over $36,900. Over $89,150 but not over $140,000$20,165, plus 31% of the excess over $89,150. Over $140,000 but not over $250,000$35,928.50, plus 36% of the excess over $140,000. Over $250,000$75,528.50, plus 39.6% of the excess over $250,000.
**(b) Heads of households** There is hereby imposed on the taxable income of every head of a household (as defined in section 2(b)) a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $29,60015% of taxable income. Over $29,600 but not over $76,400$4,440, plus 28% of the excess over $29,600. Over $76,400 but not over $127,500$17,544, plus 31% of the excess over $76,400. Over $127,500 but not over $250,000$33,385, plus 36% of the excess over $127,500. Over $250,000$77,485, plus 39.6% of the excess over $250,000.
**(c) Unmarried individuals (other than surviving spouses and heads of households)** There is hereby imposed on the taxable income of every individual (other than a surviving spouse as defined in section 2(a) or the head of a household as defined in section 2(b)) who is not a married individual (as defined in section 7703) a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $22,10015% of taxable income. Over $22,100 but not over $53,50
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Congressional findings; facilitating establishment of national market system for securities; designation of qualified securities**
(1) The Congress finds that—
(A) The securities markets are an important national asset which must be preserved and strengthened.
(B) New data processing and communications techniques create the opportunity for more efficient and effective market operations.
(C) It is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure—
(i) economically efficient execution of securities transactions;
(ii) fair competition among brokers and dealers, among exchange markets, and between exchange markets and markets other than exchange markets;
(iii) the availability to brokers, dealers, and investors of information with respect to quotations for and transactions in securities;
(iv) the practicability of brokers executing investors’ orders in the best market; and
(v) an opportunity, consistent with the provisions of clauses (i) and (iv) of this subparagraph, for investors’ orders to be executed without the participation of a dealer.
(D) The linking of all markets for qualified securities through communication and data processing facilities will foster efficiency, enhance competition, increase the information available to brokers, dealers, and investors, facilitate the offsetting of investors’ orders, and contribute to best execution of such orders.
(2) The Commission is directed, therefore, having due regard for the public interest, the protection of investors, and the maintenance of fair and orderly markets, to use its authority under this chapter to facilitate the establishment of a national market system for securities (which may include s
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Attribution of ownership** For purposes of this part—
(1) **Attribution to United States persons** — This subsection—
(A) shall apply to the extent that the effect is to treat stock of a passive foreign investment company as owned by a United States person, and
(B) except to the extent provided in regulations, shall not apply to treat stock owned (or treated as owned under this subsection) by a United States person as owned by any other person.
(2) **Corporations**
(A) *In general* — 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.
(B) *50-percent limitation not to apply to PFIC* — 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.
(3) **Partnerships, etc.** — 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.
(4) **Options** — 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 cons
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1298
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Amounts included**
(1) **In general** — If a foreign corporation is a controlled foreign corporation at any time during a taxable year of the foreign corporation (in this subsection referred to as the “CFC year”)—
(A) each United States shareholder which owns (within the meaning of section 958(a)) stock in such corporation on any day during the CFC year shall include in gross income such shareholder’s pro rata share (determined under paragraph (2)) of the corporation’s subpart F income for the CFC year, and
(B) each United States shareholder which owns (within the meaning of section 958(a)) stock in such corporation on the last day, in the CFC year, on which such corporation is a controlled foreign corporation shall include in gross income the amount determined under section 956 with respect to such shareholder for the CFC year (but only to the extent not excluded from gross income under section 959(a)(2)).
(2) **Pro rata share of subpart F income** — A United States shareholder’s pro rata share of a controlled foreign corporation’s subpart F income for a CFC year shall be the portion of such income which is attributable to—
(A) the stock of such corporation owned (within the meaning of section 958(a)) by such shareholder, and
(B) any period of the CFC year during which—
(i) such shareholder owned (within the meaning of section 958(a)) such stock,
(ii) such shareholder was a United States shareholder of such corporation, and
(iii) such corporation was a controlled foreign corporation.
(3) **Taxable year of inclusion** — Any amount required to be included in gross income by a United States shareholder under paragraph (1) with respect to a CFC year shall be included in gross income for the shareholder’s taxable year which includes the l
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 951
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Federal law — U.S. Code and appendices · legal_authorities
Page 2417
TITLE 26—INTERNAL REVENUE CODE
§ 1297
2009, except as otherwise provided, see section 301(e) of
Pub. L. 111–312, set out as an Effective and Termination
Dates of 2010 Amendment note under section 121 of this
title.
EFFECTIVE DATE OF 2001 AMENDMENT
Amendment by Pub. L. 107–16 applicable to estates of
decedents dying after Dec. 31, 2009, see section 542(f)(1)
of Pub. L. 107–16, set out as a note under section 121 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
Section 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 an Effective Date of
1997 Amendment note under section 532 of this title.
SUBPART D—GENERAL PROVISIONS
Sec.
1297.
Passive foreign investment company.
1298.
Special rules.
Editorial Notes
AMENDMENTS
1997—Pub. L. 105–34, title XI, § 1122(a), (d)(5), Aug. 5,
1997, 111 Stat. 972, 977, redesignated subpart C of this
part as this subpart and amended table of sections gen-
erally, renumbering items 1296 and 1297 as 1297 and 1298,
respectively.
§ 1297. Passive foreign investment company
(a) In general
For purposes of this part, except as otherwise
provided in this subpart, the term ‘‘passive for-
eign investment company’’ means any foreign
corporation if—
(1) 75 percent or more of the gross income of
such corporation for the taxable year is pas-
si
Source: Supplied 2024 U.S. Code historical extraction · 26 U.S.C. § 1297
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