Year in which credit taken
The credits provided in this subpart may, at the option of the taxpayer and irrespective of the method of accounting employed in keeping his books, be taken in the year in which the taxes of the foreign country or the possession of the United States accrued, subject, however, to the conditions prescribed in subsection (c). If the taxpayer elects to take such credits in the year in which the taxes of the foreign country or the possession of the United States accrued, the credits for all subsequent years shall be taken on the same basis, and no portion of any such taxes shall be allowed as a deduction in the same or any succeeding year.
Proof of credits
Adjustments to accrued taxes
In general
Special rule for taxes not paid within 2 years
In general
Except as provided in subparagraph (B), in making the redetermination under paragraph (1), no credit shall be allowed for accrued taxes not paid before the date referred to in subparagraph (B) of paragraph (1).
Taxes subsequently paid
Adjustments
The amount of tax (if any) due on any redetermination under paragraph (1) shall be paid by the taxpayer on notice and demand by the Secretary, and the amount of tax overpaid (if any) shall be credited or refunded to the taxpayer in accordance with subchapter B of chapter 66 (section 6511 et seq.).
Bond requirements
In the case of any tax accrued but not paid, the Secretary, as a condition precedent to the allowance of the credit provided in this subpart, may require the taxpayer to give a bond, with sureties satisfactory to and approved by the Secretary, in such sum as the Secretary may require, conditioned on the payment by the taxpayer of any amount of tax found due on any such redetermination. Any such bond shall contain such further conditions as the Secretary may require.
Other special rules
In any redetermination under paragraph (1) by the Secretary of the amount of tax due from the taxpayer for the year or years affected by a refund, the amount of the taxes refunded for which credit has been allowed under this section shall be reduced by the amount of any tax described in section 901 imposed by the foreign country or possession of the United States with respect to such refund; but no credit under this subpart, or deduction under section 164, shall be allowed for any taxable year with respect to any such tax imposed on the refund. No interest shall be assessed or collected on any amount of tax due on any redetermination by the Secretary, resulting from a refund to the taxpayer, for any period before the receipt of such refund, except to the extent interest was paid by the foreign country or possession of the United States on such refund for such period.
Aug. 16, 1954, ch. 73668A Stat. 288Pub. L. 85–866, title I, § 103(b)72 Stat. 1675Pub. L. 94–455, title XIX90 Stat. 1784Pub. L. 96–603, § 2(c)(1)94 Stat. 3509Pub. L. 97–248, title III, § 343(a)96 Stat. 635Pub. L. 105–34, title XI, § 1102(a)(2)111 Stat. 964Pub. L. 115–97, title I, § 14301(c)(20)131 Stat. 2223(, ; , , ; , §§ 1901(a)(114), 1906(b)(13)(A), , , 1834; , , ; , , ; , , ; , (21), , .)
Editorial Notes
Amendments
Pub. L. 115–97, § 14301(c)(20)2017—Subsec. (c)(1). , struck out “The Secretary may prescribe adjustments to the pools of post-1986 foreign income taxes and the pools of post-1986 undistributed earnings under sections 902 and 960 in lieu of the redetermination under the preceding sentence.” at end of concluding provisions.
Pub. L. 115–97, § 14301(c)(21)Subsec. (c)(2)(B)(i). , amended cl. (i) generally. Prior to amendment, cl. (i) read as follows: “shall be taken into account—
“(I) in the case of taxes deemed paid under section 902 or section 960, for the taxable year in which paid (and no redetermination shall be made under this section by reason of such payment), and
“(II) in any other case, for the taxable year to which such taxes relate, and”.
Pub. L. 105–341997—Subsec. (c). amended heading and text of subsec. (c) generally. Prior to amendment, subsec. (c) read as follows: “If accrued taxes when paid differ from the amounts claimed as credits by the taxpayer, or if any tax paid is refunded in whole or in part, the taxpayer shall notify the Secretary, who shall redetermine the amount of the tax for the year or years affected. The amount of tax due on such redetermination, if any, shall be paid by the taxpayer on notice and demand by the Secretary, or the amount of tax overpaid, if any, shall be credited or refunded to the taxpayer in accordance with subchapter B of chapter 66 (sec. 6511 and following). In the case of such a tax accrued but not paid, the Secretary, as a condition precedent to the allowance of this credit, may require the taxpayer to give a bond, with sureties satisfactory to and to be approved by the Secretary, in such sum as the Secretary may require, conditioned on the payment by the taxpayer of any amount of tax found due on any such redetermination; and the bond herein prescribed shall contain such further conditions as the Secretary may require. In such redetermination by the Secretary of the amount of tax due from the taxpayer for the year or years affected by a refund, the amount of the taxes refunded for which credit has been allowed under this section shall be reduced by the amount of any tax described in section 901 imposed by the foreign country or possession of the United States with respect to such refund; but no credit under this subpart, and no deduction under section 164 (relating to deduction for taxes) shall be allowed for any taxable year with respect to such tax imposed on the refund. No interest shall be assessed or collected on any amount of tax due on any redetermination by the Secretary, resulting from a refund to the taxpayer, for any period before the receipt of such refund, except to the extent interest was paid by the foreign country or possession of the United States on such refund for such period.”
Pub. L. 97–248, § 343(a)1982—Subsec. (c). , struck out provision that, although no interest can be assessed or collected on any amount of tax due on any redetermination by the Secretary, resulting from a refund to the taxpayer, for any period before the receipt of such refund, except to the extent interest has been paid by the foreign country or possession of the United States on such refund for such period, that prohibition does not apply (with respect to any period after the refund or adjustment in the foreign taxes) if the taxpayer fails to notify the Secretary (on or before the date prescribed by regulations for giving such notice) unless it is shown that such failure is due to reasonable cause and not due to willful neglect.
Pub. L. 96–6031980—Subsec. (c). inserted provision that the preceding sentence not apply, with respect to any period after the refund or adjustment in the foreign taxes, if the taxpayer fails to notify the Secretary, on or before the date prescribed by regulations for giving such notice, unless it is shown that such failure is due to reasonable cause and not due to willful neglect.
Pub. L. 94–4551976—Subsec. (b). , §§ 1901(a)(114), 1906(b)(13)(A), struck out provision allowing credits to be taken for tax on royalties paid, accrued and derived from sources within the United Kingdom of Britain and Northern Ireland and struck out “or his delegate” after “Secretary”, in two places.
Pub. L. 94–455, § 1906(b)(13)(A)Subsec. (c). , struck out “or his delegate” after “Secretary” in eight places.
Pub. L. 85–8661958—Subsec. (b). inserted sentence deeming recipient of a royalty or other amount for use of copyright, patent, and other like property derived from sources within United Kingdom, to have paid or accrued taxes paid or accrued to United Kingdom with respect to royalty if recipient elects to include in its gross income the amount of such United Kingdom tax.
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 1997 Amendment
Pub. L. 105–34, title XI, § 1102(c)(2)111 Stat. 966
Effective Date of 1982 Amendment
Pub. L. 97–248, title III, § 343(b)96 Stat. 635
Effective Date of 1980 Amendment
Pub. L. 96–603section 2(e) of Pub. L. 96–603section 404A of this titleAmendment by applicable with respect to employer contributions or accruals for taxable years beginning after , election to apply amendments retroactively with respect to foreign subsidiaries, allowance or prior deductions in case of certain funded branch plans, and time and manner for making elections, see , set out as an Effective Date note under .
Effective Date of 1976 Amendment
section 1901(a)(114) of Pub. L. 94–455section 1901(d) of Pub. L. 94–455section 2 of this titleAmendment by applicable with respect to taxable years beginning after , see , set out as a note under .
Effective Date of 1958 Amendment
Pub. L. 85–866, title I, § 103(c)72 Stat. 1675