US Code

Public Law 119-73 (01/23/2026)

26 U.S.C. § 668

Interest charge on accumulation distributions from foreign trusts

(a)

General rule

For purposes of the tax determined under section 667(a)—
(1)

Interest determined using underpayment rates

The interest charge determined under this section with respect to any distribution is the amount of interest which would be determined on the partial tax computed under section 667(b) for the period described in paragraph (2) using the rates and the method under section 6621 applicable to underpayments of tax.

(2)

Period

For purposes of paragraph (1), the period described in this paragraph is the period which begins on the date which is the applicable number of years before the date of the distribution and which ends on the date of the distribution.

(3)

Applicable number of years

For purposes of paragraph (2)—
(A)

In general

The applicable number of years with respect to a distribution is the number determined by dividing—
(i)
the sum of the products described in subparagraph (B) with respect to each undistributed income year, by
(ii)
the aggregate undistributed net income.
The quotient determined under the preceding sentence shall be rounded under procedures prescribed by the Secretary.
(B)

Product described

For purposes of subparagraph (A), the product described in this subparagraph with respect to any undistributed income year is the product of—
(i)
the undistributed net income for such year, and
(ii)
the sum of the number of taxable years between such year and the taxable year of the distribution (counting in each case the undistributed income year but not counting the taxable year of the distribution).
(4)

Undistributed income year

For purposes of this subsection, the term “undistributed income year” means any prior taxable year of the trust for which there is undistributed net income, other than a taxable year during all of which the beneficiary receiving the distribution was not a citizen or resident of the United States.

(5)

Determination of undistributed net income

Notwithstanding section 666, for purposes of this subsection, an accumulation distribution from the trust shall be treated as reducing proportionately the undistributed net income for undistributed income years.

(6)

Periods before 1996

Interest for the portion of the period described in paragraph (2) which occurs before , shall be determined—
(A)
by using an interest rate of 6 percent, and
(B)
without compounding until .
(b)

Limitation

The total amount of the interest charge shall not, when added to the total partial tax computed under section 667(b), exceed the amount of the accumulation distribution (other than the amount of tax deemed distributed by section 666(b) or (c)) in respect of which such partial tax was determined.

(c)

Interest charge not deductible

The interest charge determined under this section shall not be allowed as a deduction for purposes of any tax imposed by this title.

Pub. L. 94–455, title X, § 1014(b)90 Stat. 1617Pub. L. 101–508, title XI, § 11802(f)(3)104 Stat. 1388–530Pub. L. 104–188, title I, § 1906(a)110 Stat. 1914(Added , , ; amended , , ; , , .)

Editorial Notes

Prior Provisions

Aug. 16, 1954, ch. 73668A Stat. 225Pub. L. 87–834, § 7(d)76 Stat. 986Pub. L. 91–172, title III, § 331(a)83 Stat. 594Pub. L. 94–455, title VII, § 701(a)(3)90 Stat. 1577section 667 of this titleA prior section 668, acts , ; , , ; , , , related to treatment of amounts deemed distributed in preceding years, prior to repeal by , , . See .

Amendments

Pub. L. 104–1881996—Subsec. (a). reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “For purposes of the tax determined under section 667(a), the interest charge is an amount equal to 6 percent of the partial tax computed under section 667(b) multiplied by a fraction—

“(1) the numerator of which is the sum of the number of taxable years between each taxable year to which the distribution is allocated under section 666(a) and the taxable year of the distribution (counting in each case the taxable year to which the distribution is allocated but not counting the taxable year of the distribution), and

“(2) the denominator of which is the number of taxable years to which the distribution is allocated under section 666(a).”

Pub. L. 101–5081990—Subsec. (c). substituted heading for one which read “Special rules” and amended text generally, restating provisions of former par. (1) as entire subsection and striking out former par. (2) which provided that for purposes of this section, undistributed net income existing in a trust as of , would be treated as allocated under section 666(a) to the first taxable year beginning after .

Statutory Notes and Related Subsidiaries

Effective Date of 1996 Amendment

Pub. L. 104–188, title I, § 1906(d)(1)110 Stat. 1916

“The amendment made by subsection (a) [amending this section] shall apply to distributions after the date of the enactment of this Act [].”
, , , provided that:

Effective Date

Pub. L. 94–455, title X, § 1014(d)90 Stat. 1617

section 667 of this title“The amendments made by this section [enacting this section and amending ] shall apply to taxable years beginning after .”
, , , provided that:

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 .