# § 959. Exclusion from gross income of previously taxed earnings and profits
**(a)** **Exclusion from gross income of United States persons** For purposes of this chapter, the earnings and profits of a foreign corporation attributable to amounts which are, or have been, included in the gross income of a United States shareholder under section 951(a) shall not, when—
such shareholder (or any other United States person who acquires from any person any portion of the interest of such United States shareholder in such foreign corporation, but only to the extent of such portion, and subject to such proof of the identity of such interest as the Secretary may by regulations prescribe) directly or indirectly through a chain of ownership described under section 958(a), be again included in the gross income of such United States shareholder (or of such other United States person). The rules of subsection (c) shall apply for purposes of paragraph (1) of this subsection and the rules of subsection (f) shall apply for purposes of paragraph (2) of this subsection.
**(1)** such amounts are distributed to, or
**(2)** such amounts would, but for this subsection, be included under section 951(a)(1)(B) in the gross income of,
**(b)** **Exclusion from gross income of certain foreign subsidiaries** For purposes of section 951(a), the earnings and profits of a controlled foreign corporation attributable to amounts which are, or have been, included in the gross income of a United States shareholder under section 951(a), shall not, when distributed through a chain of ownership described under section 958(a), be also included in the gross income of another controlled foreign corporation in such chain for purposes of the application of section 951(a) to such other controlled foreign corporation with respect to such United States shareholder (or to any other United States shareholder who acquires from any person any portion of the interest of such United States shareholder in the controlled foreign corporation, but only to the extent of such portion, and subject to such proof of identity of such interest as the Secretary may prescribe by regulations).
**(c)** **Allocation of distributions** For purposes of subsections (a) and (b), section 316(a) shall be applied by applying paragraph (2) thereof, and then paragraph (1) thereof—
References in this subsection to section 951(a)(1)(C) and subsection (a)(3) shall be treated as references to such provisions as in effect on the day before the date of the enactment of the Small Business Job Protection Act of 1996.
**(1)** first to the aggregate of—
with any distribution being allocated between earnings and profits described in subparagraph (A) and earnings and profits described in subparagraph (B) proportionately on the basis of the respective amounts of such earnings and profits,
**(A)** earnings and profits attributable to amounts included in gross income under section 951(a)(1)(B) (or which would have been included except for subsection (a)(2) of this section), and
**(B)** earnings and profits attributable to amounts included in gross income under section 951(a)(1)(C) (or which would have been included except for subsection (a)(3) of this section),
**(2)** then to earnings and profits attributable to amounts included in gross income under section 951(a)(1)(A) (but reduced by amounts not included under subparagraph (B) or (C) of section 951(a)(1) because of the exclusions in paragraphs (2) and (3) of subsection (a) of this section), and
**(3)** then to other earnings and profits.
**(d)** **Distributions excluded from gross income not to be treated as dividends** Any distribution excluded from gross income under subsection (a) shall be treated, for purposes of this chapter, as a distribution which is not a dividend; except that such distributions shall immediately reduce earnings and profits.
**(e)** **Coordination with amounts previously taxed under section 1248** For purposes of this section and section 960(c), any amount included in the gross income of any person as a dividend by reason of subsection (a) or (f) of section 1248 shall be treated as an amount included in the gross income of such person (or, in any case to which section 1248(e) applies, of the domestic corporation referred to in section 1248(e)(2)) under section 951(a)(1)(A).
**(f)** **Allocation rules for certain inclusions**
**(1)** **In general** For purposes of this section, amounts that would be included under subparagraph (B) of section 951(a)(1) (determined without regard to this section) shall be treated as attributable first to earnings described in subsection (c)(2), and then to earnings described in subsection (c)(3).
**(2)** **Treatment of distributions** In applying this section, actual distributions shall be taken into account before amounts that would be included under section 951(a)(1)(B) (determined without regard to this section).
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**Source Credit**: (Added Pub. L. 87–834, § 12(a), Oct. 16, 1962, 76 Stat. 1019; amended Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 98–369, div. A, title I, § 133(b)(1), July 18, 1984, 98 Stat. 668; Pub. L. 99–514, title XII, § 1226(b), Oct. 22, 1986, 100 Stat. 2560; Pub. L. 100–647, title I, § 1012(bb)(7)(A), Nov. 10, 1988, 102 Stat. 3536; Pub. L. 103–66, title XIII, § 13231(c)(1), (2), (4)(A), (B), Aug. 10, 1993, 107 Stat. 497, 498; Pub. L. 104–188, title I, § 1501(b)(4)–(8), Aug. 20, 1996, 110 Stat. 1826; Pub. L. 115–97, title I, § 14301(c)(32), (33), Dec. 22, 2017, 131 Stat. 2224.)
## Editorial Notes
### References in Text
The date of the enactment of the Small Business Job Protection Act of 1996, referred to in subsec. (c), is the date of enactment of , which was approved .
### Amendments
2017—Subsec. (d). , substituted “Any” for “Except as provided in section 960(a)(3), any”.
Subsec. (e). , substituted “section 960(c)” for “section 960(b)”.
1996—Subsec. (a). , (5), substituted “paragraph (2)” for “paragraphs (2) and (3)” in closing provisions, inserted “or” at end of par. (1), struck out “or” at end of par. (2), and struck out par. (3) which read as follows: “such amounts would, but for this subsection, be included under section 951(a)(1)(C) in the gross income of,”.
Subsec. (c). , inserted at end “References in this subsection to section 951(a)(1)(C) and subsection (a)(3) shall be treated as references to such provisions as in effect on the day before the date of the enactment of the Small Business Job Protection Act of 1996.”
Subsec. (f)(1). , reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “For purposes of this section—
“(A) amounts that would be included under subparagraph (B) of section 951(a)(1) (determined without regard to this section) shall be treated as attributable first to earnings described in subsection (c)(2), and then to earnings described in subsection (c)(3), and
“(B) amounts that would be included under subparagraph (C) of section 951(a)(1) (determined without regard to this section) shall be treated as attributable first to earnings described in subsection (c)(2) to the extent the earnings so described were accumulated in taxable years beginning after , and then to earnings described in subsection (c)(3).”
Subsec. (f)(2). , substituted “section 951(a)(1)(B)” for “subparagraphs (B) and (C) of section 951(a)(1)”.
1993—Subsec. (a). , (4)(A), substituted in introductory provisions “earnings and profits” for “earnings and profits for taxable year” and inserted at end of closing provisions “The rules of subsection (c) shall apply for purposes of paragraph (1) of this subsection and the rules of subsection (f) shall apply for purposes of paragraphs (2) and (3) of this subsection.”
Subsec. (a)(3). , added par. (3).
Subsec. (b). , substituted “earnings and profits” for “earnings and profits for a taxable year”.
Subsec. (c)(1). , amended par. (1) generally. Prior to amendment, par. (1) read as follows: “first to earnings and profits attributable to amounts included in gross income under section 951(a)(1)(B) (or which would have been included except for subsection (a)(2) of this section),”.
Subsec. (c)(2). , amended par. (2) generally. Prior to amendment, par. (2) read as follows: “then to earnings and profits attributable to amounts included in gross income under section 951(a)(1)(A) (but reduced by amounts not included under section 951(a)(1)(B) because of the exclusion in subsection (a)(2) of this section), and”.
Subsec. (f). , added subsec. (f).
1988—Subsec. (e). substituted “such person (or, in any case to which section 1248(e) applies, of the domestic corporation referred to in section 1248(e)(2)) under” for “such person under”.
1986—Subsec. (d). inserted “; except that such distributions shall immediately reduce earnings and profits”.
1984—Subsec. (e). added subsec. (e).
1976—Subsecs. (a), (b). struck out “or his delegate” after “Secretary”.
## Statutory Notes and Related Subsidiaries
### Effective Date of 2017 Amendment
Amendment 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 1996 Amendment
Amendment by applicable to taxable years of foreign corporations beginning after , and to taxable years of United States shareholders within which or with which such taxable years of foreign corporations end, see , set out as a note under .
### Effective Date of 1993 Amendment
Amendment 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 1988 Amendment
> “The amendment made by subparagraph (A) [amending this section] shall apply in the case of transactions to which section 1248(e) of the 1986 Code applies and which occur after
>
> .”
, , , provided that:
### Effective Date of 1986 Amendment
> “The amendment made by subsection (b) [amending this section] shall apply to distributions after the date of the enactment of this Act [
>
> ].”
, , , provided that:
### Effective Date of 1984 Amendment
> **“(2)** **Subsections (b) and (c).—** Except as provided in paragraph (3), the amendments made by subsections (b) and (c) [amending this section and section 1248 of this title] shall apply with respect to transactions to which subsection (a) or (f) of section 1248 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] applies occurring after the date of the enactment of this Act [July 18, 1984].
>
> **“(3)** **Election of earlier date for certain transactions.—**
>
> **“(A)** **In general.—** If the appropriate election is made under subparagraph (B), the amendments made by subsection (b) [amending this section and section 1248 of this title] shall apply with respect to transactions to which subsection (a) or (f) of section 1248 of such Code applies occurring after October 9, 1975.
>
> **“(B)** **Election.—**
>
> **“(i)** Subparagraph (A) shall apply with respect to transactions to which subsection (a) of section 1248 of such Code applies if the foreign corporation described in such subsection (or its successor in interest) so elects.
>
> **“(ii)** Subparagraph (A) shall apply with respect to transactions to which subsection (f) of section 1248 of such Code applies if the domestic corporation described in section 1248(f)(1) of such Code (or its successor) so elects.
>
> **“(iii)** Any election under clause (i) or (ii) shall be made not later than the date which is 1 year after the date of the enactment of the Tax Reform Act of 1986 [Oct. 22, 1986] and shall be made in such manner as the Secretary of the Treasury or his delegate shall prescribe.”
, (3), , , as amended by , title XVIII, § 1810(i)(2), , , 2829; , , , provided that: