Definition
For purposes of this subtitle, the term “accumulated taxable income” means the taxable income, adjusted in the manner provided in subsection (b), minus the sum of the dividends paid deduction (as defined in section 561) and the accumulated earnings credit (as defined in subsection (c)).
Adjustments to taxable income
Taxes
There shall be allowed as a deduction Federal income and excess profits taxes and income, war profits, and excess profits taxes of foreign countries and possessions of the United States (to the extent not allowable as a deduction under section 275(a)(4)), accrued during the taxable year or deemed to be paid by a domestic corporation under section 960 for the taxable year, but not including the accumulated earnings tax imposed by section 531 or the personal holding company tax imposed by section 541.
Charitable contributions
The deduction for charitable contributions provided under section 170 shall be allowed without regard to section 170(b)(2).
Special deductions disallowed
The special deductions for corporations provided in part VIII (except section 248) of subchapter B (section 241 and following, relating to the deduction for dividends received by corporations, etc.) shall not be allowed.
Net operating loss
The net operating loss deduction provided in section 172 shall not be allowed.
Capital losses
In general
Except as provided in subparagraph (B), there shall be allowed as a deduction an amount equal to the net capital loss for the taxable year (determined without regard to paragraph (7)(A)).
Recapture of previous deductions for capital gains
Nonrecaptured capital gains deductions
Net capital gains
In general
Attributable taxes
Capital loss carryovers
Unlimited carryforward
The net capital loss for any taxable year shall be treated as a short-term capital loss in the next taxable year.
Section 1212 inapplicable
No allowance shall be made for the capital loss carryback or carryforward provided in section 1212.
Special rules for mere holding or investment companies
Capital loss deduction, etc., not allowed
Paragraphs (5) and (7)(A) shall not apply.
Deduction for certain offsets
There shall be allowed as a deduction the net short-term capital gain for the taxable year to the extent such gain does not exceed the amount of any capital loss carryover to such taxable year under section 1212 (determined without regard to paragraph (7)(B)).
Earnings and profits
For purposes of subchapter C, the accumulated earnings and profits at any time shall not be less than they would be if this subsection had applied to the computation of earnings and profits for all taxable years beginning after .
Special rule for capital gains and losses of foreign corporations
In the case of a foreign corporation, paragraph (6) shall be applied by taking into account only gains and losses which are effectively connected with the conduct of a trade or business within the United States and are not exempt from tax under treaty.
Controlled foreign corporations
There shall be allowed as a deduction the amount of the corporation’s income for the taxable year which is included in the gross income of a United States shareholder under section 951(a). In the case of any corporation the accumulated taxable income of which would (but for this sentence) be determined without allowance of any deductions, the deduction under this paragraph shall be allowed and shall be appropriately adjusted to take into account any deductions which reduced such inclusion.
Accumulated earnings credit
General rule
For purposes of subsection (a), in the case of a corporation other than a mere holding or investment company the accumulated earnings credit is (A) an amount equal to such part of the earnings and profits for the taxable year as are retained for the reasonable needs of the business, minus (B) the deduction allowed by subsection (b)(6). For purposes of this paragraph, the amount of the earnings and profits for the taxable year which are retained is the amount by which the earnings and profits for the taxable year exceed the dividends paid deduction (as defined in section 561) for such year.
Minimum credit
In general
The credit allowable under paragraph (1) shall in no case be less than the amount by which $250,000 exceeds the accumulated earnings and profits of the corporation at the close of the preceding taxable year.
Certain service corporations
In the case of a corporation the principal function of which is the performance of services in the field of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting, subparagraph (A) shall be applied by substituting “$150,000” for “$250,000”.
Holding and investment companies
In the case of a corporation which is a mere holding or investment company, the accumulated earnings credit is the amount (if any) by which $250,000 exceeds the accumulated earnings and profits of the corporation at the close of the preceding taxable year.
Accumulated earnings and profits
For purposes of paragraphs (2) and (3), the accumulated earnings and profits at the close of the preceding taxable year shall be reduced by the dividends which under section 563(a) (relating to dividends paid after the close of the taxable year) are considered as paid during such taxable year.
Cross reference
For limitation on credit provided in paragraph (2) or (3) in the case of certain controlled corporations, see section 1561.
Income distributed to United States-owned foreign corporation retains United States connection
In general
United States-owned foreign corporation
The term “United States-owned foreign corporation” has the meaning given to such term by section 904(h)(6).
Aug. 16, 1954, ch. 73668A Stat. 180Pub. L. 85–866, title I, § 3172 Stat. 1631Pub. L. 87–403, § 3(b)76 Stat. 6Pub. L. 87–834, § 9(d)(2)76 Stat. 1001Pub. L. 88–272, title II, § 207(b)(4)78 Stat. 42Pub. L. 91–172, title IV, § 401(b)(2)(C)83 Stat. 602Pub. L. 94–12, title III, § 304(a)89 Stat. 45Pub. L. 94–455, title X, § 1033(b)(3)90 Stat. 1628Pub. L. 97–34, title II, § 232(a)95 Stat. 250Pub. L. 98–369, div. A, title I98 Stat. 575Pub. L. 99–514, title XII, § 1225(a)100 Stat. 2558Pub. L. 101–508, title XI, § 11801(c)(18)104 Stat. 1388–528Pub. L. 108–357, title IV, § 402(b)(1)118 Stat. 1492Pub. L. 109–135, title IV, § 403(n)(2)119 Stat. 2626Pub. L. 113–295, div. A, title II, § 221(a)(64)128 Stat. 4048Pub. L. 115–97, title I131 Stat. 2098(, ; , title II, § 205(a), , , 1680; , , ; , , ; , , ; , title V, § 512(f)(5), (6), , , 641; , , ; , title XIX, §§ 1901(a)(74), (b)(20)(A), (32)(C), (33)(D), 1906(b)(13)(A), , , 1777, 1797, 1800, 1801, 1834; , (b)(1), , ; , §§ 58(b), 125(a), , , 647; , title XVIII, § 1899A(17), , , 2959; , , ; , , ; , , ; , , ; , §§ 13001(b)(5)(B), 14301(c)(4), , , 2222.)
Editorial Notes
Amendments
Pub. L. 115–97, § 14301(c)(4)2017—Subsec. (b)(1). , substituted “section 960” for “section 902(a) or 960(a)(1)”.
Pub. L. 115–97, § 13001(b)(5)(B)Subsec. (c)(5). , amended par. (5) generally. Prior to amendment, text read as follows: “For denial of credit provided in paragraph (2) or (3) where multiple corporations are formed to avoid tax, see section 1551, and for limitation on such credit in the case of certain controlled corporations, see section 1561.”
Pub. L. 113–2952014—Subsec. (b)(1). substituted “section 531 or the personal holding company tax imposed by section 541.” for “section 531, the personal holding company tax imposed by section 541, or the taxes imposed by corresponding sections of a prior income tax law.”
Pub. L. 109–1352005—Subsec. (b)(10). added par. (10).
Pub. L. 108–3572004—Subsec. (d)(2). substituted “section 904(h)(6)” for “section 904(g)(6)”.
Pub. L. 101–5081990—Subsec. (c)(5). substituted “section 1561” for “sections 1561 and 1564”.
Pub. L. 99–514, § 1899A(17)1986—Subsec. (b)(5)(C)(i), (8)(C). , substituted “” for “the date of the enactment of the Tax Reform Act of 1984”.
Pub. L. 99–514, § 1225(a)Subsec. (b)(9). , added par. (9).
Pub. L. 98–369, § 58(b)1984—Subsec. (b)(5). , designated existing provisions as subpar. (A), substituted “Except as provided in subparagraph (B), there shall be allowed as a deduction an amount equal to the net capital loss for the taxable year (determined without regard to paragraph (7)(A)” for “There shall be allowed as deductions losses from sales or exchanges of capital assets during the taxable year which are disallowed as deductions under section 1211(a)” in subpar. (A) as so redesignated, and added subpars. (B) and (C).
Pub. L. 98–369, § 58(b)Subsec. (b)(6). , divided existing par. (6) into subpars. (A) and (B) and substituted references to the application of paragraph (7) for references to capital loss carryback and carryover provided in section 1212.
Pub. L. 98–369, § 58(b)Subsec. (b)(7). , substituted “Capital loss carryovers” for “Capital loss” in heading, redesignated existing provisions as subpar. (B), and added subpar. (A).
Pub. L. 98–369, § 58(b)Subsec. (b)(8). , added par. (8).
Pub. L. 98–369, § 125(a)Subsec. (d). , added subsec. (d).
Pub. L. 97–34, § 232(a)1981—Subsec. (c)(2). , designated existing provisions as subpar. (A), substituted “$250,000” for “$150,000”, and added subpar. (B).
Pub. L. 97–34, § 232(b)(1)Subsec. (c)(3). , substituted “$250,000” for “$150,000”.
Pub. L. 94–4551976—Subsec. (b)(1). , §§ 1033(b)(3), 1901(a)(74), struck out “(other than the excess profits tax imposed by subchapter E of chapter 2 of the Internal Revenue Code of 1939 for taxable years beginning after )” after “income and excess profits taxes”, and substituted “section 902(a) or 960(a)(1)” for “section 902(a)(1) or 960(a)(1)(C)” after “domestic corporation under”.
Pub. L. 94–455, § 1901(b)(33)(D)Subsec. (b)(6). , substituted “Net” for “Long-term” after “(6)”.
Pub. L. 94–455, § 1901(b)(20)(A)Subsec. (b)(8). , struck out par. (8) relating to allowance of deduction by bank affiliates.
Pub. L. 94–455, § 1901(b)(32)(C)Subsec. (b)(9), (10). , struck out par. (9) relating to allowance of deduction for distributions of divested stock, and struck out par. (10) relating to special adjustment on disposition of antitrust stock received as a dividend.
Pub. L. 94–121975—Subsec. (c)(2), (3). substituted “$150,000” for “$100,000”.
Pub. L. 91–172, § 512(f)(5)1969—Subsec. (b)(6). , substituted “capital loss carryback or carryover” for “capital loss carryover” and “capital loss carryback and carryover” for “capital loss carryover” in subpar. (B).
Pub. L. 91–172, § 512(f)(6)Subsec. (b)(7). , substituted “Capital loss” for “Capital loss carryover” in heading and “capital loss carryback or carryover” for “capital loss carryover” in text.
Pub. L. 91–172, § 401(b)(2)(C)Subsec. (c)(5). , substituted “section 1551, and for limitation on such credit in the case of certain controlled corporations, see sections 1561 and 1564” for “section 1551”.
Pub. L. 88–2721964—Subsec. (b)(1). substituted “section 275(a)(4)” for “section 164(b)(6)”.
Pub. L. 87–8341962—Subsec. (b)(1). substituted “accrued during the taxable year or deemed to be paid by a domestic corporation under section 902(a)(1) or 960(a)(1)(C) for the taxable year” for “accrued during the taxable year”.
Pub. L. 87–403Subsec. (b)(9), (10). added pars. (9) and (10).
Pub. L. 85–866, § 31(a)1958—Subsec. (b)(2). , struck out “the limitation in” after “without regard to”.
Pub. L. 85–866, § 31(a)Subsec. (b)(6)(B). , substituted “in taxable income the excess of the net long-term capital gain for the taxable year over the net short-term capital loss for such year (determined without regard to the capital loss carryover provided in section 1212)” for “such excess in taxable income”.
Pub. L. 85–866, § 205(a)Subsec. (c)(2), (3). , substituted “$100,000” for “$60,000”.
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
section 13001(b)(5)(B) of Pub. L. 115–97section 13001(c)(1) of Pub. L. 115–97section 11 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .
section 14301(c)(4) of Pub. L. 115–97section 14301(d) of Pub. L. 115–97section 78 of this titleAmendment by applicable to taxable years of foreign corporations beginning after , and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end, see , set out as a note under .
Effective Date of 2014 Amendment
Pub. L. 113–295section 221(b) of Pub. L. 113–295section 1 of this titleAmendment by effective , subject to a savings provision, see , set out as a note under .
Effective Date of 2005 Amendment
Pub. L. 109–135Pub. L. 108–357section 403(nn) of Pub. L. 109–135section 26 of this titleAmendment by effective as if included in the provision of the American Jobs Creation Act of 2004, , to which such amendment relates, see , set out as a note under .
Effective Date of 2004 Amendment
Pub. L. 108–357, title IV, § 402(c)118 Stat. 1492
Effective Date of 1986 Amendment
Pub. L. 99–514, title XII, § 1225(c)100 Stat. 2559Pub. L. 100–647, title I, § 1012(k)102 Stat. 3513
Effective Date of 1984 Amendment
section 58(b) of Pub. L. 98–369section 58(c) of Pub. L. 98–369section 532 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .
Pub. L. 98–369, div. A, title I, § 125(b)98 Stat. 647Pub. L. 99–514, § 2100 Stat. 2095
In general .—
Corporations in existence on .—
Effective Date of 1981 Amendment
Pub. L. 97–34, title II, § 232(c)95 Stat. 250
Effective Date of 1976 Amendment
section 1033(b)(3) of Pub. L. 94–455section 1033(c) of Pub. L. 94–455section 960 of this titleFor effective date of amendment by , see , set out as a note under .
Pub. L. 94–455section 1901(d) of Pub. L. 94–455section 2 of this titleAmendment by section 1901(a)(74), (b)(20)(A), (32)(C), (33)(D) of applicable with respect to taxable years beginning after , see , set out as a note under .
Effective Date of 1975 Amendment
Pub. L. 94–12, title III, § 305(c)89 Stat. 45
Effective Date of 1969 Amendment
section 401(b)(2)(C) of Pub. L. 91–172section 401(h)(2) of Pub. L. 91–172section 1561 of this titleAmendment by applicable with respect to taxable years beginning after , see , set out as a note under .
Pub. L. 91–172section 512(g) of Pub. L. 91–172section 1212 of this titleAmendment by section 512(f)(5), (6) of applicable with respect to net capital losses sustained in taxable years beginning after , see , set out as a note under .
Effective Date of 1964 Amendment
Pub. L. 88–272section 207(c) of Pub. L. 88–272section 164 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .
Effective Date of 1962 Amendments
Pub. L. 87–834section 9(e) of Pub. L. 87–834section 78 of this titleAmendment by applicable in respect of any distribution received by a domestic corporation after , and in respect of any distribution received by a domestic corporation before , in a taxable year of such corporation beginning after , 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 , see , set out as an Effective Date note under .
Pub. L. 87–403section 3(g) of Pub. L. 87–403section 312 of this titleAmendment by applicable only with respect to distributions made after , see , set out as a note under .
Effective Date of 1958 Amendment
section 31 of Pub. L. 85–866section 1(c)(1) of Pub. L. 85–866section 165 of this titleAmendment by applicable to taxable years beginning after , and ending after , see , set out as a note under .
Pub. L. 85–866, title II, § 205(b)72 Stat. 1680
Savings Provision
Pub. L. 101–508section 11821(b) of Pub. L. 101–508section 45K of this titleFor provisions that nothing in amendment by be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to , for purposes of determining liability for tax for periods ending after , see , set out as a note under .
Plan Amendments Not Required Until January 1, 1989
Pub. L. 99–514section 1140 of Pub. L. 99–514section 401 of this titleFor provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after , see , as amended, set out as a note under .