Title 26 — Internal Revenue CodeRelease 119-73
§78 Gross up for deemed paid foreign tax credit
Title 26 › Subtitle Subtitle A— - Income Taxes › Chapter CHAPTER 1— - NORMAL TAXES AND SURTAXES › Subchapter Subchapter B— - Computation of Taxable Income › Part PART II— - ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME › § 78
Summary
A U.S. corporation that chooses to use the foreign tax credit rules under subpart A of part III of subchapter N for a tax year must treat, as a dividend from the foreign corporation, the amount equal to the taxes it is treated as having paid under section 960(a) and 960(d), calculated without applying the phrase "90 percent of" in section 960(d)(1). This dividend treatment applies for all purposes of the tax code except sections 245 and 245A.
Full Legal Text
Title 26, §78
Internal Revenue Code — Source: USLM XML via OLRC
If a domestic corporation chooses to have the benefits of subpart A of part III of subchapter N (relating to foreign tax credit) for any taxable year, an amount equal to the taxes deemed to be paid by such corporation under subsections (a) and (d) of section 960 (determined without regard to the phrase “90 percent of” in subsection (d)(1) thereof) for such taxable year shall be treated for purposes of this title (other than section 245 and 245A) as a dividend received by such domestic corporation from the foreign corporation.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Amendments
2025—Pub. L. 119–21 substituted “subsections (a) and (d)” for “subsections (a), (b), and (d)” and “90 percent” for “80 percent”. 2017—Pub. L. 115–97 amended section generally. Prior to amendment, text read as follows: “If a domestic corporation chooses to have the benefits of subpart A of part III of subchapter N (relating to foreign tax credit) for any taxable year, an amount equal to the taxes deemed to be paid by such corporation under section 902(a) (relating to credit for corporate stockholder in foreign corporation) or under section 960(a)(1) (relating to taxes paid by foreign corporation) for such taxable year shall be treated for purposes of this title (other than section 245) as a dividend received by such domestic corporation from the foreign corporation.” 1976—Pub. L. 94–455 substituted “section 902(a)” for “section 902(a)(1)” and “section 960(a)(1)” for “section 960(a)(1)(C)”.
Statutory Notes and Related Subsidiaries
Effective Date
of 2025 Amendment Pub. L. 119–21, title VII, § 70312(c), July 4, 2025, 139 Stat. 203, provided that: “(1) In general.—The
Amendments
made by subsection (a) [amending this section and section 960 of this title] shall apply to taxable years beginning after
December 31, 2025. “(2) Disallowance.—The amendment made by subsection (b) [amending section 960 of this title] shall apply to foreign income taxes paid or accrued (or deemed paid under section 960(b)(1) of the Internal Revenue Code of 1986) with respect to any amount excluded from gross income under section 959(a) of such Code by reason of an inclusion in gross income under section 951A(a) of such Code after
June 28, 2025.”
Effective Date
of 2017 Amendment Pub. L. 115–97, title I, § 14301(d), Dec. 22, 2017, 131 Stat. 2225, provided that: “The
Amendments
made by this section [amending this section and section 245, 535, 545, 814, 865, 901, 904 to 909, 958 to 960, 1291, 1293, and 6038 of this title and repealing section 902 of this title] shall apply to taxable years of foreign corporations beginning after December 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.”
Effective Date
of 1976 AmendmentAmendment by Pub. L. 94–455 applicable on different dates depending on the date the distributions were received, see section 1033(c) of Pub. L. 94–455, set out as a note under section 960 of this title.
Effective Date
Pub. L. 87–834, § 9(e), Oct. 16, 1962, 76 Stat. 1001, provided that: “The
Amendments
made by this section [enacting this section and amending section 535, 545, 861, 901, and 902 of this title] shall apply—“(1) in respect of any distribution received by a domestic corporation after
December 31, 1964, and “(2) in respect of any distribution received by a domestic corporation before
January 1, 1965, in a taxable year of such corporation beginning after
December 31, 1962, but only to the extent that such distribution is made out of the accumulated profits of a foreign corporation for a taxable year (of such foreign corporation) beginning after
December 31, 1962. For purposes of paragraph (2), a distribution made by a foreign corporation out of its profits which are attributable to a distribution received from a foreign subsidiary to which [former] section 902(b) applies shall be treated as made out of the accumulated profits of a foreign corporation for a taxable year beginning before
January 1, 1963, to the extent that such distribution was paid out of the accumulated profits of such foreign subsidiary for a taxable year beginning before
January 1, 1963.”
Reference
Citations & Metadata
Citation
26 U.S.C. § 78
Title 26 — Internal Revenue Code
Last Updated
Apr 6, 2026
Release point: 119-73