US Code

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

26 U.S.C. § 957

Controlled foreign corporations; United States persons

(a)

General rule

For purposes of this title, the term “controlled foreign corporation” means any foreign corporation if more than 50 percent of—
(1)
the total combined voting power of all classes of stock of such corporation entitled to vote, or
(2)
the total value of the stock of such corporation,
is owned (within the meaning of section 958(a)), or is considered as owned by applying the rules of ownership of section 958(b), by United States shareholders on any day during the taxable year of such foreign corporation.
(b)

Special rule for insurance

For purposes only of taking into account income described in section 953(a) (relating to insurance income), the term “controlled foreign corporation” includes not only a foreign corporation as defined by subsection (a) but also one of which more than 25 percent of the total combined voting power of all classes of stock (or more than 25 percent of the total value of stock) is owned (within the meaning of section 958(a)), or is considered as owned by applying the rules of ownership of section 958(b), by United States shareholders on any day during the taxable year of such corporation, if the gross amount of premiums or other consideration in respect of the reinsurance or the issuing of insurance or annuity contracts not described in section 953(e)(2) exceeds 75 percent of the gross amount of all premiums or other consideration in respect of all risks.

(c)

United States person

For purposes of this subpart, the term “United States person” has the meaning assigned to it by section 7701(a)(30) except that—
(1)
with respect to a corporation organized under the laws of the Commonwealth of Puerto Rico, such term does not include an individual who is a bona fide resident of Puerto Rico, if a dividend received by such individual during the taxable year from such corporation would, for purposes of section 933(1), be treated as income derived from sources within Puerto Rico, and
(2)
with respect to a corporation organized under the laws of Guam, American Samoa, or the Northern Mariana Islands—
(A)
80 percent or more of the gross income of which for the 3-year period ending at the close of the taxable year (or for such part of such period as such corporation or any predecessor has been in existence) was derived from sources within such a possession or was effectively connected with the conduct of a trade or business in such a possession, and
(B)
50 percent or more of the gross income of which for such period (or part) was derived from the active conduct of a trade or business within such a possession,
such term does not include an individual who is a bona fide resident of Guam, American Samoa, or the Northern Mariana Islands.
For purposes of subparagraphs (A) and (B) of paragraph (2), the determination as to whether income was derived from the active conduct of a trade or business within a possession shall be made under regulations prescribed by the Secretary.

Pub. L. 87–834, § 12(a)76 Stat. 1017Pub. L. 94–455, title XIX, § 1906(b)(13)(A)90 Stat. 1834Pub. L. 99–514, title XII100 Stat. 2553Pub. L. 108–357, title VIII, § 908(c)(5)118 Stat. 1656Pub. L. 115–97, title I, § 14101(e)(2)131 Stat. 2192Pub. L. 115–141, div. U, title IV, § 401(a)(164)132 Stat. 1192(Added , , ; amended , , ; , §§ 1221(b)(3)(C), 1222(a), 1224(a), 1273(a), , , 2556, 2558, 2595; , , ; , , ; , , .)

Editorial Notes

Amendments

Pub. L. 115–1412018—Subsec. (b). substituted “contracts not described in section 953(e)(2)” for “contracts described in section 953(a)(1)”.

Pub. L. 115–972017—Subsec. (a). substituted “title” for “subpart” in introductory provisions.

Pub. L. 108–357, § 908(c)(5)(B)2004—Subsec. (c). , struck out “derived from sources within a possession, was effectively connected with the conduct of a trade or business within a possession, or” after “whether income was” in concluding provisions.

Pub. L. 108–357, § 908(c)(5)(A)Subsec. (c)(2)(B). , substituted “active conduct of a” for “conduct of an active”.

Pub. L. 99–514, § 1222(a)(1)1986—Subsec. (a). , amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: “For purposes of this subpart, the term ‘controlled foreign corporation’ means any foreign corporation of which more than 50 percent of the total combined voting power of all classes of stock entitled to vote is owned (within the meaning of section 958(a)), or is considered as owned by applying the rules of ownership of section 958(b), by United States shareholders on any day during the taxable year of such foreign corporation.”

Pub. L. 99–514, § 1222(a)(2)Subsec. (b). , inserted “(or more than 25 percent of the total value of stock)”.

Pub. L. 99–514, § 1221(b)(3)(C), substituted “insurance income” for “income derived from insurance of United States risks”.

Pub. L. 99–514, § 1273(a)Subsec. (c). , added par. (2) and concluding provisions and struck out former pars. (2) and (3) which read as follows:

48 U.S.C. 1642“(2) with respect to a corporation organized under the laws of the Virgin Islands, such term does not include an individual who is a bona fide resident of the Virgin Islands and whose income tax obligation under this subtitle for the taxable year is satisfied pursuant to section 28(a) of the Revised Organic Act of the Virgin Islands, approved (), by paying tax on income derived from all sources both within and outside the Virgin Islands into the treasury of the Virgin Islands, and

“(3) with respect to a corporation organized under the laws of any other possession of the United States, such term does not include an individual who is a bona fide resident of any such other possession and whose income derived from sources within possessions of the United States is not, by reason of section 931(a), includible in gross income under this subtitle for the taxable year.”

Pub. L. 99–514, § 1224(a), redesignated subsec. (d) as (c) and struck out former subsec. (c) which provided circumstances under which for purposes of this subpart, the term “controlled foreign corporation” would not include certain corporations created or organized in Puerto Rico or a possession of the United States or under the laws of Puerto Rico or a possession of the United States.

Pub. L. 99–514, § 1224(a)Subsec. (d). , redesignated subsec. (d) as (c).

Pub. L. 94–4551976—Subsec. (c) struck out “or his delegate” after “Secretary”.

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Pub. L. 115–97section 14101(f) of Pub. L. 115–97section 245A of this titleAmendment by applicable to distributions made after , see , set out as an Effective Date note under .

Effective Date of 2004 Amendment

Pub. L. 108–357section 908(d)(1) of Pub. L. 108–357section 937 of this titleAmendment by applicable to taxable years ending after , see , set out as an Effective Date note under .

Effective Date of 1986 Amendment

section 1221(b)(3)(C) of Pub. L. 99–514section 1221(g) of Pub. L. 99–514section 954 of this titleAmendment by applicable to taxable years of foreign corporations beginning after , except as otherwise provided, see , set out as a note under .

Pub. L. 99–514, title XII, § 1222(c)100 Stat. 2557

“(1)

In general .—

section 552 of this titleThe amendments made by this section [amending this section and ] shall apply to taxable years of foreign corporations beginning after ; except that for purposes of applying sections 951(a)(1)(B) and 956 of the Internal Revenue Code of 1986, such amendments shall take effect on .
“(2)

Transitional rule .—

In the case of any corporation treated as a controlled foreign corporation by reason of the amendments made by this section, property acquired before , shall not be taken into account under section 956(b) of the Internal Revenue Code of 1986.
“(3)

Special rule for beneficiary of trust .—

In the case of an individual—
“(A)
who is a beneficiary of a trust which was established on , under the laws of a foreign jurisdiction, and
“(B)
who was not a citizen or resident of the United States on the date the trust was established,
amounts which are included in the gross income of such beneficiary under section 951(a) of the Internal Revenue Code of 1986 with respect to stock held by the trust (and treated as distributed to the trust) shall be treated as the first amounts which are distributed by the trust to such beneficiary and as amounts to which section 959(a) of such Code applies.”
, , , provided that:

Pub. L. 99–514, title XII, § 1224(b)100 Stat. 2558

“(1)

In general .—

The amendment made by subsection (a) [amending this section] shall apply to taxable years of foreign corporations beginning after ; except that for purposes of applying sections 951(a)(1)(B) and 956 of the Internal Revenue Code of 1986, such amendments shall take effect on .
“(2)

Transitional rule .—

In the case of any corporation treated as a controlled foreign corporation by reason of the amendment made by subsection (a), property acquired before , shall not be taken into account under section 956(b) of the Internal Revenue Code of 1986.”
, , , provided that:

section 1273(a) of Pub. L. 99–514section 1277 of Pub. L. 99–514section 931 of this titleAmendment by applicable to taxable years beginning after , with certain exceptions and qualifications, see , set out as a note under .