Definition
For purposes of this part, the term “undistributed personal holding company income” means the taxable income of a personal holding company adjusted in the manner provided in subsections (b), (c), and (d), minus the dividends paid deduction as defined in section 561. In the case of a personal holding company which is a foreign corporation, not more than 10 percent in value of the outstanding stock of which is owned (within the meaning of section 958(a)) during the last half of the taxable year by United States persons, the term “undistributed personal holding company income” means the amount determined by multiplying the undistributed personal holding company income (determined without regard to this sentence) by the percentage in value of its outstanding stock which is the greatest percentage in value of its outstanding stock so owned by United States persons on any one day during such period.
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, but in computing such deduction the limitations in section 170(b)(1)(A), (B), (D), and (E) shall apply, and section 170(b)(2) and (d)(1) shall not apply. For purposes of this paragraph, the term “contribution base” when used in section 170(b)(1) means the taxable income computed with the adjustments (other than the 10-percent limitation) provided in section 170(b)(2) and (d)(1) and without deduction of the amount disallowed under paragraph (6) of this subsection.
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, but there shall be allowed as a deduction the amount of the net operating loss (as defined in section 172(c)) for the preceding taxable year computed without the deductions provided in part VIII (except section 248) of subchapter B.
Net capital gains
Expenses and depreciation applicable to property of the taxpayer
Special rule for capital gains and losses of foreign corporations
In the case of a foreign corporation, paragraph (5) 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.
Certain foreign corporations
In the case of a foreign corporation all of the outstanding stock of which during the last half of the taxable year is owned by nonresident alien individuals (whether directly or indirectly through foreign estates, foreign trusts, foreign partnerships, or other foreign corporations), the taxable income for purposes of subsection (a) shall be the income which constitutes personal holding company income under section 543(a)(7), reduced by the deductions attributable to such income, and adjusted, with respect to such income, in the manner provided in subsection (b).
Aug. 16, 1954, ch. 73668A Stat. 189Pub. L. 85–866, title I, § 32(a)72 Stat. 1631Pub. L. 87–403, § 3(d)76 Stat. 7Pub. L. 87–834, § 9(d)(2)76 Stat. 1001Pub. L. 88–272, title II78 Stat. 42Pub. L. 89–719, title I, § 101(b)(2)80 Stat. 1132Pub. L. 89–809, title I, § 104(h)(3)80 Stat. 1560Pub. L. 91–172, title II, § 201(a)(2)(B)83 Stat. 558Pub. L. 94–455, title X, § 1033(b)(4)90 Stat. 1628Pub. L. 97–448, title I, § 102(m)(2)96 Stat. 2374Pub. L. 99–514, title XII, § 1225(b)100 Stat. 2559Pub. L. 101–508, title XI, § 11801(a)(24)104 Stat. 1388–521Pub. L. 109–280, title XII, § 1206(b)(2)120 Stat. 1070Pub. L. 113–295, div. A, title II, § 221(a)(64)128 Stat. 4048Pub. L. 115–97, title I, § 14301(c)(4)131 Stat. 2222(, ; , (b), , ; , , ; , , ; , §§ 207(b)(5), 209(c)(2), 225(i)(1), (2), , , 46, 90; , , ; , , ; , , ; , title XIX, §§ 1901(a)(77), (b)(20)(B), (32)(E), (33)(D), 1906(b)(13)(A), 1951(b)(9)(A), , , 1777, 1797, 1800, 1801, 1834, 1839; , , ; , , ; , (c)(10)(B), , , 1388–527; , , ; , , ; , , .)
Editorial Notes
Amendments
Pub. L. 115–972017—Subsec. (b)(1). substituted “section 960” for “section 902(a) or 960(a)(1)”.
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. 109–2802006—Subsec. (b)(2). , which directed the substitution of “(D), and (E)” for “and (D)” in section 545(b)(2), without specifying the act to be amended, was executed by making the substitution in subsec. (b)(2) of this section, which is section 545 of the Internal Revenue Code of 1986, to reflect the probable intent of Congress.
Pub. L. 101–5081990—Subsecs. (c), (d). redesignated subsec. (d) as (c) and struck out former subsec. (c) which related to a special adjustment to taxable income for amounts used or set aside to pay or retire qualified indebtedness.
Pub. L. 99–5141986—Subsec. (b)(7). added par. (7).
Pub. L. 97–4481983—Subsec. (b)(2). substituted “10-percent” for “5-percent”.
Pub. L. 94–4551976—Subsec. (b)(1). , §§ 1033(b)(4), 1901(a)(77)(A), struck out “(other than excess profits tax imposed by subchapter E of chapter 2 of the Internal Revenue Code of 1939 for taxable years beginning after )” after “Federal income and excess profits taxes”; substituted “902(a) or 960(a)(1)” for “902(a)(1) or 960(a)(1)(C)” after “corporation under section”; and struck out provisions after “prior income tax law” relating to election by taxpayer who paid Federal income and excess profits taxes to deduct payments, when made, for purposes of computing subchapter A net income or, for a taxable year ending after , to deduct such taxes when accrued, such election being irrevocable and applied to taxable year for which election was made and to all subsequent taxable years.
Pub. L. 94–455, § 1901(b)(20)(B)(ii)Subsec. (b)(2). , substituted “paragraph (6)” for “paragraph (8)” after “amount disallowed under”.
Pub. L. 94–455, § 1901(b)(33)(D)Subsec. (b)(5). , substituted “Net” for “Long-term” after “(5)”.
Pub. L. 94–455Subsec. (b)(6). , §§ 1901(b)(20)(B)(i), 1906(b)(13)(A), struck out par. (6) relating to deduction allowed to bank affiliates, redesignated former par. (8) as (6) and, as redesignated, struck out “or his delegate” in two places after “Secretary”.
Pub. L. 94–455, § 1901(a)(77)(B)Subsec. (b)(7). , struck out par. (7) relating to payment of indebtedness incurred prior to .
Pub. L. 94–455, § 1901(b)(20)(B)(i)Subsec. (b)(8). , redesignated par. (8) as (6).
Pub. L. 94–455, § 1951(b)(9)(A)Subsec. (b)(9). , struck out par. (9) relating to the deduction of the amount of a lien in favor of the United States.
Pub. L. 94–455, § 1901(b)(32)(E)Subsec. (b)(10), (11). , struck out par. (10) relating to deduction for distributions of divested stock, and struck out par. (11) relating to special adjustment on the disposition of antitrust stock received as a dividend.
Pub. L. 94–455, § 1901(a)(77)(C)Subsec. (c)(2)(A). , substituted “” for “the date of enactment of this subsection” after “years ending before”.
Pub. L. 94–455, § 1906(b)(13)(A)Subsec. (c)(4). , struck out “or his delegate” after “Secretary”.
Pub. L. 94–455, § 1901(b)(20)(B)(iii)Subsec. (c)(5). , substituted “subsection (b)(6)” for “subsection (b)(8)” after “company income under”.
Pub. L. 91–1721969—Subsec. (b)(2). substituted “section 170(b)(1)(A), (B), and (D)”, “section 170(b)(2) and (d)(1)” for “section 170(b)(1)(A) and (B)” and “section 170(b)(2) and (5)”, respectively, in provisions of first sentence setting out the sections appropriate to the computation of the deduction, and in provisions of second sentence describing applicability of terms for purposes of this paragraph, substituted “contribution base” and “section 170(b)(2) and (d)(1)” for “adjusted gross income” and “the first sentence of section 170(b)(2) and (5),” respectively.
Pub. L. 89–809, § 104(h)(3)(A)1966—Subsec. (a). , substituted “in the manner provided in subsections (b), (c), and (d)” for “in the manner provided in subsection (b) and (c)” and inserted provisions governing the case of a personal holding company which is a foreign corporation, not more than 10 percent in value of the outstanding stock of which is owned (within the meaning of section 958(a)) during the last half of the taxable year by United States persons.
Pub. L. 89–719Subsec. (b)(9). substituted “section 6323(f)” for “section 6323(a)(1), (2), or (3)”.
Pub. L. 89–809, § 104(h)(3)(B)Subsec. (d). , added subsec. (d).
Pub. L. 88–272, § 225(i)(1)1964—Subsec. (a). , inserted reference to subsection (c).
Pub. L. 88–272Subsec. (b)(1), (2). , §§ 207(b)(5), 209(c)(2), substituted “section 275(a)(4)” for “section 164(b)(6)” in par. (1), and inserted reference to section 170(b)(5) in par. (2).
Pub. L. 88–272, § 225(i)(2)Subsec. (c). , added subsec. (c).
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)(10), (11). added pars. (10) and (11).
Pub. L. 85–866, § 32(a)1958—Subsec. (b)(2). , substituted in first sentence “, but in computing such deduction the limitations in section 170(b)(1)(A) and (B) shall apply, and section 170(b) shall not apply” for “but with the limitations in section 170(b)(1)(A) and (B) (in lieu of the limitation in section 170(b)(2)”, and inserted in second sentence “(other than the 5-percent limitation)” and “the first sentence” after “with the adjustments” and “provided in”, respectively.
Pub. L. 85–866, § 32(b)Subsec. (b)(4). , inserted “computed without the deductions provided in part VIII (except section 248) of subchapter B”.
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
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 2006 Amendment
Pub. L. 109–280section 1206(c) of Pub. L. 109–280section 170 of this titleAmendment by applicable to contributions made in taxable years beginning after , see , set out as a note under .
Effective Date of 1986 Amendment
Pub. L. 99–514section 1225(c) of Pub. L. 99–514section 535 of this titleAmendment by applicable to gains and losses realized on or after , see , as amended, set out as a note under .
Effective Date of 1983 Amendment
Pub. L. 97–448Pub. L. 97–34section 109 of Pub. L. 97–448section 1 of this titleAmendment by effective, except as otherwise provided, as if it had been included in the provision of the Economic Recovery Tax Act of 1981, , to which such amendment relates, see , set out as a note under .
Effective Date of 1976 Amendment
section 1033(b)(4) 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)(77), (b)(20)(B), (32)(E), (33)(D) of applicable with respect to taxable years beginning after , see , set out as a note under .
section 1951(b)(9)(A) of Pub. L. 94–455section 1951(d) of Pub. L. 94–455section 72 of this titleAmendment by applicable with respect to taxable years beginning after , see set out as a note under .
Effective Date of 1969 Amendment
Pub. L. 91–172section 201(g) of Pub. L. 91–172section 170 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .
Effective Date of 1966 Amendments
Pub. L. 89–809section 104(n) of Pub. L. 89–809section 11 of this titleAmendment by applicable with respect to taxable years beginning after , see , set out as a note under .
Pub. L. 89–719Pub. L. 89–719section 6323 of this titleAmendment by applicable after , regardless of when the title or lien of the United States arose or when the lien or interest of another person was acquired, except in a case in which a lien or title derived from enforcement of a lien held by the United States has been enforced by a civil action or suit which has become final by judgment, sale, or agreement before , or in a case in which the amendment would impair a priority held by any person other than the United States holding a lien or interest prior to , operate to increase the liability of such person, or shorten the time for bringing suit with respect to transactions occurring before , see section 114(a)–(e) of , set out as a note under .
Effective Date of 1964 Amendment
section 207(b)(5) of 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 .
section 209(c)(2) of Pub. L. 88–272section 209(f)(1) of Pub. L. 88–272section 170 of this titleAmendment by applicable to contributions paid in taxable years beginning after , see , set out as a note under .
Pub. L. 88–272lPub. L. 88–272section 316 of this titleAmendment by section 225(i)(1), (2) of applicable to taxable years beginning after , see section 225()(1) of 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 32(a) 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 I, § 32(c)72 Stat. 1632Pub. L. 99–514, § 2100 Stat. 2095
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 .
Pub. L. 94–455, title XIX, § 1951(b)(9)(B)90 Stat. 1839