26 U.S.C. § 908 — Reduction of credit for participation in or

Page 2149 TITLE 26—INTERNAL REVENUE CODE § 908 into account (or not taken into account) in deter- mining foreign oil related income (as defined in old section 907(c)(2)). ‘‘(ii) An ‘old’ section is such section as in effect on the day before the date of the enactment of this Act [Sept. 3, 1982].’’ EFFECTIVE DATE OF 1978 AMENDMENT Amendment by section 301(b)(14) of Pub. L. 95–600 ap- plicable to taxable years beginning after Dec. 31, 1978, see section 301(c) of Pub. L. 95–600, set out as a note under section 11 of this title. Pub. L. 95–600, title VII, § 701(u)(8)(D), Nov. 6, 1978, 92 Stat. 2916, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘(i) The amendments made by this paragraph [amending this section and section 904 of this title] shall apply, in the case of individuals, to taxable years ending after December 31, 1974, and, in the case of cor- porations, to taxable years ending after December 31, 1976. ‘‘(ii) In the case of any taxable year ending after De- cember 31, 1975, with respect to foreign oil related in- come (within the meaning of section 907(c) of the Inter- nal Revenue Code of 1986 [formerly I.R.C. 1954]), the overall limitation provided by section 904(a)(2) of such Code shall apply and the per-country limitation pro- vided by section 904(a)(1) of such Code shall not apply.’’ EFFECTIVE DATE OF 1976 AMENDMENT Amendment by section 1031(b)(6)(A) of Pub. L. 94–455 applicable to taxable years beginning after Dec. 31, 1975, with exceptions for certain mining operations, in- come from possessions, and carryback and carryover in the case of mining operations and income from a pos- session, see section 1031(c) of Pub. L. 94–455, set out as a note under section 904 of this title. Amendment by section 1032(b)(1) of Pub. L. 94–455 ap- plicable to taxable years beginning after Dec. 31, 1975, and amendment by section 1032(b)(2) of Pub. L. 94–455 applicable to losses sustained in taxable years begin- ning after Dec. 31, 1975, see section 1032(c) of Pub. L. 94–455, set out as a note under section 904 of this title. Pub. L. 94–455, title X, § 1035(e), Oct. 4, 1976, 90 Stat. 1633, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘(1) The amendment made by subsection (a) [amend- ing this section] shall apply to taxable years ending after December 31, 1976. ‘‘(2) The amendment made by subsection (b) [amend- ing this section] shall apply to taxable years ending after December 31, 1974; except that the last sentence of section 907(b) of the Internal Revenue Code of 1986 [for- merly I.R.C. 1954] shall only apply to taxable years end- ing after December 31, 1975. ‘‘(3) The amendment made by subsection (c) [enacting provisions set out below] shall apply to taxable years beginning after June 29, 1976. ‘‘(4) The amendments made by subsection (d) [amend- ing this section] shall apply to taxes paid or accrued during taxable years ending after the date of the enact- ment of this Act [Oct. 4, 1976].’’ Amendment by section 1052(c)(4) of Pub. L. 94–455 ef- fective with respect to taxable years beginning after December 31, 1979, see section 1052(d) of Pub. L. 94–455, set out as a note under section 170 of this title. EFFECTIVE DATE Pub. L. 94–12, title VI, § 601(d), Mar. 29, 1975, 89 Stat. 58, provided that: ‘‘The amendments made by this sec- tion [enacting this section and amending section 901 of this title] shall apply to taxable years ending after De- cember 31, 1974; except that— ‘‘(1) the second sentence of section 907(b) shall apply to taxable years ending after December 31, 1975, and ‘‘(2) the provisions of section 907(f) shall apply to losses sustained in taxable years ending after Decem- ber 31, 1975.’’ SAVINGS PROVISION For provisions that nothing in amendment by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liabil- ity for tax for periods ending after Nov. 5, 1990, see sec- tion 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title. TAX CREDIT FOR PRODUCTION-SHARING CONTRACTS Pub. L. 94–455, title X, § 1035(c), Oct. 4, 1976, 90 Stat. 1631, as amended by Pub. L. 95–600, title VII, §§ 701(u)(9), 703(h)(1), Nov. 6, 1978, 92 Stat. 2916, 2940; Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘(1) For purposes of section 901 of the Internal Rev- enue Code of 1986 [formerly I.R.C. 1954], there shall be treated as income, war profits, and excess profits taxes to be taken into account under section 907(a) of such Code amounts designated as income taxes of a foreign government by such government (which otherwise would not be treated as taxes for purposes of section 901 of such Code) with respect to production-sharing con- tracts for the extraction of foreign oil or gas. ‘‘(2) The amounts specified in paragraph (1) shall not exceed the lessor of— ‘‘(A) the product of the foreign oil and gas extrac- tion income (as defined in section 907(c) of such Code) with respect to all such production-sharing contracts multiplied by the sum of the normal tax rate and the surtax rate for the taxable year specified in section 11 of such Code, or ‘‘(B) the excess of the total amount of foreign oil and gas extraction income (as so defined) for the tax- able year multiplied by the sum of the normal tax rate and the surtax rate for the taxable year specified in section 11 of such Code over the amount of any in- come, war profits, and excess profits taxes paid or ac- crued (or deemed to have been paid) without regard to paragraph (1) during the taxable year with respect to foreign oil and gas extraction income. ‘‘(3) The production-sharing contracts taken into ac- count for purposes of paragraph (1) shall be those con- tracts which were entered into before April 8, 1976, for the sharing of foreign oil and gas production with a for- eign government (or an entity owned by such govern- ment) with respect to which amounts claimed as taxes paid or accrued to such foreign government for taxable years beginning before June 30, 1976, will not be dis- allowed as taxes. A contract described in the preceding sentence shall be taken into account under paragraph (1) only with respect to amounts (A) paid or accrued to the foreign government before January 1, 1978, and (B) attributable to income earned before such date.’’ § 908. Reduction of credit for participation in or cooperation with an international boycott (a) In general If a person, or a member of a controlled group (within the meaning of section 993(a)(3)) which includes such person, participates in or cooper- ates with an international boycott during the taxable year (within the meaning of section 999(b)), the amount of the credit allowable under section 901 to such person, or under section 960 to United States shareholders of such person, for foreign taxes paid during the taxable year shall be reduced by an amount equal to the product of— (1) the amount of the credit which, but for this section, would be allowed under section 901 for the taxable year, multiplied by (2) the international boycott factor (deter- mined under section 999). Page 2150 TITLE 26—INTERNAL REVENUE CODE § 909 (b) Application with sections 275(a)(4) and 78 Section 275(a)(4) and section 78 shall not apply to any amount of taxes denied credit under sub- section (a). (Added Pub. L. 94–455, title X, § 1061(a), Oct. 4, 1976, 90 Stat. 1649; amended Pub. L. 115–97, title I, § 14301(c)(28), Dec. 22, 2017, 131 Stat. 2224.) Editorial Notes AMENDMENTS 2017—Subsec. (a). Pub. L. 115–97 struck out ‘‘902 or’’ after ‘‘or under section’’ in introductory provisions. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2017 AMENDMENT Amendment by Pub. L. 115–97 applicable to taxable years of foreign corporations beginning after Dec. 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end, see section 14301(d) of Pub. L. 115–97, set out as a note under section 78 of this title. EFFECTIVE DATE Pub. L. 94–455, title X, § 1066(a), Oct. 4, 1976, 90 Stat. 1654, provided that: ‘‘(1) GENERAL RULE.—The amendments made by this part (other than by section 1065) [enacting this section and section 999 of this title and amending sections 952 and 995 of this title] apply to participation in or co- operation with an international boycott more than 30 days after the date of enactment of this Act [Oct. 4, 1976]. ‘‘(2) EXISTING CONTRACTS.—In the case of operations which constitute participation in or cooperation with an international boycott and which are carried out in accordance with the terms of a binding contract en- tered into before September 2, 1976, the amendments made by this part (other than by section 1065) apply to such participation or cooperation after December 31, 1977.’’ § 909. Suspension of taxes and credits until re- lated income taken into account (a) In general If there is a foreign tax credit splitting event with respect to a foreign income tax paid or ac- crued by the taxpayer, such tax shall not be taken into account for purposes of this title be- fore the taxable year in which the related in- come is taken into account under this chapter by the taxpayer. (b) Special rules with respect to specified 10-per- cent owned foreign corporations If there is a foreign tax credit splitting event with respect to a foreign income tax paid or ac- crued by a specified 10-percent owned foreign corporation (as defined in section 245A(b) with- out regard to paragraph (2) thereof), such tax shall not be taken into account— (1) for purposes of section 960, or (2) for purposes of determining earnings and profits under section 964(a), before the taxable year in which the related in- come is taken into account under this chapter by such specified 10-percent owned foreign cor- poration or a domestic corporation which is a United States shareholder with respect to such specified 10-percent owned foreign corporation. (c) Special rules For purposes of this section— (1) Application to partnerships, etc. In the case of a partnership, subsections (a) and (b) shall be applied at the partner level. Except as otherwise provided by the Secretary, a rule similar to the rule of the preceding sentence shall apply in the case of any S corporation or trust. (2) Treatment of foreign taxes after suspension In the case of any foreign income tax not taken into account by reason of subsection (a) or (b), except as otherwise provided by the Secretary, such tax shall be so taken into ac- count in the taxable year referred to in such subsection (other than for purposes of section 986(a)) as a foreign income tax paid or accrued in such taxable year. (d) Definitions For purposes of this section— (1) Foreign tax credit splitting event There is a foreign tax credit splitting event with respect to a foreign income tax if the re- lated income is (or will be) taken into account under this chapter by a covered person. (2) Foreign income tax 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. (3) Related income The term ‘‘related income’’ means, with re- spect to any portion of any foreign income tax, the income (or, as appropriate, earnings and profits) to which such portion of foreign income tax relates. (4) Covered person The term ‘‘covered person’’ means, with re- spect to any person who pays or accrues a for- eign income tax (hereafter in this paragraph referred to as the ‘‘payor’’)— (A) any entity in which the payor holds, directly or indirectly, at least a 10 percent ownership interest (determined by vote or value), (B) any person which holds, directly or in- directly, at least a 10 percent ownership in- terest (determined by vote or value) in the payor, (C) any person which bears a relationship to the payor described in section 267(b) or 707(b), and (D) any other person specified by the Sec- retary for purposes of this paragraph. (e) Regulations The Secretary may issue such regulations or other guidance as is necessary or appropriate to carry out the purposes of this section, including regulations or other guidance which provides— (1) appropriate exceptions from the provi- sions of this section, and (2) for the proper application of this section with respect to hybrid instruments. (Added Pub. L. 111–226, title II, § 211(a), Aug. 10, 2010, 124 Stat. 2394; amended Pub. L. 115–97, title I, § 14301(c)(29), (30), Dec. 22, 2017, 131 Stat. 2224.)