Sec.
901. Taxes of foreign
countries and of possessions
of United States
26
U.S.C. § 901
(a)
Allowance of credit
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
sections 902 and 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).
(b)
Amount allowed
Subject
to the limitation of
section 904, the following
amounts shall be allowed
as the credit under
subsection (a):
(1)
Citizens and domestic
corporations
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
(2)
Resident of the United
States or Puerto Rico
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
(3)
Alien resident of the
United States or Puerto
Rico
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
(4)
Nonresident alien individuals
and foreign corporations
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
(5)
Partnerships and estates
In
the case of any individual
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.
(c)
Similar credit required
for certain alien residents
Whenever
the President finds
that--
(1)
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),
(2)
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
(3)
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,
the
President shall proclaim
that, for taxable years
beginning while the
proclamation remains
in effect, the credit
under subsection (b)(3)
shall be allowed to
citizens or subjects
of such foreign country
only if such foreign
country, in imposing
income, war profits,
and excess profits
taxes, allows to citizens
of the United States
residing in such foreign
country such a similar
credit.
(d)
Treatment of dividends
from a DISC or former
DISC
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.
(e)
Foreign taxes on mineral
income
(1)
Reduction in amount
allowed
Notwithstanding
subsection (b), the
amount of any income,
war profits, and excess
profits taxes paid
or accrued during the
taxable year to any
foreign country or
possession of the United
States with respect
to foreign mineral
income from sources
within such country
or possession which
would (but for this
paragraph) be allowed
under such subsection
shall be reduced by
the amount (if any)
by which--
(A)
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
(B)
the amount of the tax
computed under this
chapter with respect
to such income.
(2)
Foreign mineral income
defined
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--
(A)
dividends received
from a foreign corporation
in respect of which
taxes are deemed paid
by the taxpayer under
section 902, to the
extent such dividends
are attributable to
foreign mineral income,
and
(B)
that portion of the
taxpayer's distributive
share of the income
of partnerships attributable
to foreign mineral
income.
(f)
Certain payments for
oil or gas not considered
as taxes
Notwithstanding
subsection (b) and
sections 902 and 960,
the amount of any income,
or profits, and excess
profits taxes paid
or accrued during the
taxable year to any
foreign country in
connection with the
purchase and sale of
oil or gas extracted
in such country is
not to be considered
as tax for purposes
of section 275(a) and
this section if--
(1)
the taxpayer has no
economic interest in
the oil or gas to which
section 611(a) applies,
and
(2)
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.
(g)
Certain taxes paid
with respect to distributions
from possessions corporations
(1)
In general
For
purposes of this chapter,
any tax of a foreign
country or possession
of the United States
which is paid or accrued
with respect to any
distribution from a
corporation--
(A)
to the extent that
such distribution is
attributable to periods
during which such corporation
is a possessions corporation,
and
(B)
(i)
if a dividends received
deduction is allowable
with respect to such
distribution under
part VIII of subchapter
B, or
(ii)
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,
shall
not be treated as income,
war profits, or excess
profits taxes paid
or accrued to a foreign
country or possession
of the United States,
and no deduction shall
be allowed under this
title with respect
to any amount so paid
or accrued.
(2)
Possessions corporation
For
purposes of paragraph
(1), a corporation
shall be treated as
a possessions corporation
for any period during
which an election under
section 936 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.
(h)
Taxes paid with respect
to foreign trade income
No
credit shall be allowed
under this section
for any income, war
profits, and excess
profits taxes paid
or accrued with respect
to the foreign trade
income (within the
meaning of section
923(b)) of a FSC, other
than section 923(a)(2)
non-exempt income (within
the meaning of section
927(d)(6)).
(i)
Taxes used to provide
subsidies
Any
income, war profits,
or excess profits tax
shall not be treated
as a tax for purposes
of this title to the
extent--
(1)
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
(2)
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.
(j)
Denial of foreign tax
credit, etc., with
respect to certain
foreign countries
(1)
In general
Notwithstanding
any other provision
of this part--
(A)
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
902 or 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
(B)
subsections (a), (b),
and (c) of section
904 and sections 902
and 960 shall be applied
separately with respect
to income attributable
to such a period from
sources within such
country.
(2)
Countries to which
subsection applies
(A)
In general
This
subsection shall apply
to any foreign country--
(i)
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,
(ii)
with respect to which
the United States has
severed diplomatic
relations,
(iii)
with respect to which
the United States has
not severed diplomatic
relations but does
not conduct such relations,
or
(iv)
which the Secretary
of State has, pursuant
to section 6(j) of
the Export Administration
Act of 1979, as amended,
designated as a foreign
country which repeatedly
provides support for
acts of international
terrorisms.
(B)
Period for which subsection
applies
This
subsection shall apply
to any foreign country
described in subparagraph
(A) during the period--
(i)
beginning on the later
of--
(I)
January 1, 1987, or
(II)
6 months after such
country becomes a country
described in subparagraph
(A), and
(ii)
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).
(3)
Taxes allowed as a
deduction, etc.
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.
(4)
Regulations
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.
(k)
Minimum holding period
for certain taxes-
(1)
Withholding taxes-
(A)
In general-
In
no event shall a credit
be allowed under subsection
(a) for any withholding
tax on a dividend with
respect to stock in
a corporation if--
(i)
such stock is held
by the recipient of
the dividend for 15
days or less during
the 30-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
(ii)
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.
(B)
Withholding tax-
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.
(2)
Deemed paid taxes-
In
the case of income,
war profits, or excess
profits taxes deemed
paid under section
853, 902, or 960 through
a chain of ownership
of stock in 1 or more
corporations, no credit
shall be allowed under
subsection (a) for
such taxes if--
(A)
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
(B)
the corporation holding
the stock is under
an obligation referred
to in paragraph (1)(A)(ii).
(3)
45-DAY RULE IN THE
CASE OF CERTAIN PREFERENCE
DIVIDENDS-
In
the case of stock having
preference in dividends
and dividends with
respect to such stock
which are attributable
to a period or periods
aggregating in excess
of 366 days, paragraph
(1)(A)(i) shall be
applied--
(A)
by substituting `45
days' for `15 days'
each place it appears,
and
(B)
by substituting `90-day
period' for `30-day
period'.
(4)
Exception for certain
taxes paid by securities
dealers-
(A)
In general-
Paragraphs
(1) and (2) shall not
apply to any qualified
tax with respect to
any security held in
the active conduct
in a foreign country
of a securities business
of any person--
(i)
who is registered as
a securities broker
or dealer under section
15(a) of the Securities
Exchange Act of 1934,
(ii)
who is registered as
a Government securities
broker or dealer under
section 15C(a) of such
Act, or
(iii)
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.
(B)
Qualified tax-
For
purposes of subparagraph
(A), the term `qualified
tax' means a tax paid
to a foreign country
(other than the foreign
country referred to
in subparagraph (A))
if--
(i)
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
(ii)
such country allows
a credit against its
net basis tax for the
full amount of the
tax paid to such other
foreign country.
(C)
Regulations-
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.
(5)
Certain rules to apply-
For
purposes of this subsection,
the rules of paragraphs
(3) and (4) of section
246(c) shall apply.
(6)
Treatment of bona fide
sales-
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
902 or 960 shall be
made as of the date
such contract is entered
into.
(7)
Taxes allowed as deduction,
etc-
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.
(l)
Cross reference
(1)
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.
(2)
For right of each partner
to make election under
this section, see section
703(b).
(3)
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).
(4)
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.
