26 U.S.C. § 951A | Net CFC tested income included in gross income of United States shareholders

(a)

In general

Each person who is a United States shareholder of any controlled foreign corporation for any taxable year of such United States shareholder shall include in gross income such shareholder’s net CFC tested income for such taxable year.

(b)

Net CFC tested income

For purposes of this section—

(1)

In general

The term “net CFC tested income” means, with respect to any United States shareholder for any taxable year of such United States shareholder, the excess (if any) of—

(A)

the aggregate of such shareholder’s pro rata share of the tested income of each controlled foreign corporation with respect to which such shareholder is a United States shareholder for such taxable year of such United States shareholder, over

(B)

the aggregate of such shareholder’s pro rata share of the tested loss of each controlled foreign corporation with respect to which such shareholder is a United States shareholder for such taxable year of such United States shareholder.

(2)

Tested income; tested loss

For purposes of this section—

(A)

Tested income

The term “tested income” means, with respect to any controlled foreign corporation for any taxable year of such controlled foreign corporation, the excess (if any) of—

(i)

the gross income of such corporation determined without regard to—

(I)

any item of income described in section 952(b),

(II)

any gross income taken into account in determining the subpart F income of such corporation,

(III)

any gross income excluded from the foreign base company income (as defined in section 954) and the insurance income (as defined in section 953) of such corporation by reason of section 954(b)(4),

(IV)

any dividend received from a related person (as defined in section 954(d)(3)), and

(V)

any foreign oil and gas extraction income (as defined in section 907(c)(1)) of such corporation, over

(ii)

the deductions (including taxes) properly allocable to such gross income under rules similar to the rules of section 954(b)(5) (or to which such deductions would be allocable if there were such gross income).

(B)

Tested loss

(i)

In general

The term “tested loss” means, with respect to any controlled foreign corporation for any taxable year of such controlled foreign corporation, the excess (if any) of the amount described in subparagraph (A)(ii) over the amount described in subparagraph (A)(i).

(ii)

Coordination with subpart F to deny double benefit of losses

Section 952(c)(1)(A) shall be applied by increasing the earnings and profits of the controlled foreign corporation by the tested loss of such corporation.

(c)

Determination of pro rata share, etc.

For purposes of this section—

(1)

In general

The pro rata shares referred to in subsections (b)(1)(A) and (b)(1)(B), respectively, shall be determined under the rules of section 951(a)(2) in the same manner as such section applies to subpart F income and shall be taken into account in the taxable year of the United States shareholder determined under section 951(a)(3).

(2)

Treatment as United States shareholder

A person shall be treated as a United States shareholder of a controlled foreign corporation for any taxable year of such person only if such person owns (within the meaning of section 958(a)) stock in such foreign corporation on any day in such taxable year.

(3)

Treatment as controlled foreign corporation

A foreign corporation shall be treated as a controlled foreign corporation for any taxable year if such foreign corporation is a controlled foreign corporation at any time during such taxable year.

(d)

Treatment as subpart F income for certain purposes

(1)

In general

(A)

Application

Except as provided in subparagraph (B), any net CFC tested income included in gross income under subsection (a) shall be treated in the same manner as an amount included under section 951(a)(1)(A) for purposes of applying sections 168(h)(2)(B), 535(b)(10), 851(b), 904(h), 959, 961, 962, 993(a)(1)(E), 996(f)(1), 1248(b)(1), 1248(d)(1), 6501(e)(1)(C), 6654(d)(2)(D), and 6655(e)(4).

(B)

Exception

The Secretary shall provide rules for the application of subparagraph (A) to other provisions of this title in any case in which the determination of subpart F income is required to be made at the level of the controlled foreign corporation.

(2)

Allocation of net CFC tested income to controlled foreign corporations

For purposes of the sections referred to in paragraph (1), with respect to any controlled foreign corporation any pro rata amount from which is taken into account in determining the net CFC tested income included in gross income of a United States shareholder under subsection (a), the portion of such net CFC tested income which is treated as being with respect to such controlled foreign corporation is—

(A)

in the case of a controlled foreign corporation with no tested income, zero, and

(B)

in the case of a controlled foreign corporation with tested income, the portion of such net CFC tested income which bears the same ratio to such net CFC tested income as—

(i)

such United States shareholder’s pro rata amount of the tested income of such controlled foreign corporation, bears to

(ii)

the aggregate amount described in subsection (b)(1)(A) with respect to such United States shareholder.

Pub. L. 115–97, title I, § 14201(a)Dec. 22, 2017131 Stat. 2208 Pub. L. 119–21, title VIIJuly 4, 2025139 Stat. 203(Added , , ; amended , §§ 70311(b)(3), 70323(a)(1), (2), (3)(B), (C), (E)(i), 70354(b), , , 205, 211.)

Editorial Notes

Amendments

Pub. L. 119–21, § 70323(a)(3)(E)(i)2025—, substituted “Net CFC tested income” for “Global intangible low-taxed income” in section catchline.

Pub. L. 119–21, § 70323(a)(1)Subsec. (a). , substituted “net CFC tested income” for “global intangible low-taxed income”.

Pub. L. 119–21, § 70323(a)(2)Subsec. (b). , redesignated subsec. (c) as (b) and struck out former subsec. (b) defining “global intangible low-taxed income” and “net deemed tangible income return”.

Pub. L. 119–21, § 70354(b)(1)(A)Subsec. (b)(1)(A). , struck out “(determined for each taxable year of such controlled foreign corporation which ends in or with such taxable year of such United States shareholder)” after “such United States shareholder”.

Pub. L. 119–21, § 70354(b)(1)(B)Subsec. (b)(1)(B). , struck out “(determined for each taxable year of such controlled foreign corporation which ends in or with such taxable year of such United States shareholder)” before period at end.

Pub. L. 119–21, § 70323(a)(2)Subsec. (c). , redesignated subsec. (e) as (c). Former subsec. (c) redesignated (b).

Pub. L. 119–21, § 70354(b)(2)(A)Subsec. (c)(1). , substituted “determined under section 951(a)(3)” for “in which or with which the taxable year of the controlled foreign corporation ends”.

Pub. L. 119–21, § 70323(a)(3)(B), substituted “subsections (b)(1)(A) and (b)(1)(B)” for “subsections (b), (c)(1)(A), and (c)(1)(B)”.

Pub. L. 119–21, § 70354(b)(2)(B)Subsec. (c)(2). , substituted “any day in such taxable year” for “the last day in the taxable year of such foreign corporation on which such foreign corporation is a controlled foreign corporation”.

Pub. L. 119–21, § 70323(a)(3)(C)(i)Subsec. (d). , substituted “net CFC tested income” for “global intangible low-taxed income” wherever appearing. Substitution was also made in heading of par. (2) of subsec. (d) to reflect the probable intent of Congress.

Pub. L. 119–21, § 70323(a)(2), redesignated subsec. (f) as (d) and struck out former subsec. (d) which related to qualified business asset investment.

Pub. L. 119–21, § 70323(a)(3)(C)(ii)Subsec. (d)(2)(B)(ii). , substituted “subsection (b)(1)(A)” for “subsection (c)(1)(A)”.

Pub. L. 119–21, § 70323(a)(2)Subsec. (e). , redesignated subsec. (e) as (c).

Pub. L. 119–21, § 70323(a)(2)Subsec. (f). , redesignated subsec. (f) as (d).

Pub. L. 119–21, § 70311(b)(3)Subsec. (f)(1)(A). , substituted “904(h)” for “904(h)(1)”.

Statutory Notes and Related Subsidiaries

Effective Date of 2025 Amendment

section 70311(b)(3) of Pub. L. 119–21Dec. 31, 2025section 70311(c) of Pub. L. 119–21 section 904 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .

Pub. L. 119–21Dec. 31, 2025section 70323(c) of Pub. L. 119–21 section 172 of this titleAmendment by section 70323(a)(1), (2), (3)(B), (C), (E)(i) of applicable to taxable years beginning after , see , set out as a note under .

section 70354(b) of Pub. L. 119–21Dec. 31, 2025section 70354(c) of Pub. L. 119–21 section 951 of this titleAmendment by applicable to taxable years of foreign corporations beginning after , see , set out as a note under .

Effective Date

Dec. 31, 2017section 14201(d) of Pub. L. 115–97 section 904 of this titleSection 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 an Effective Date of 2017 Amendment note under .