Title 26 — Internal Revenue CodeRelease 119-73
§898 Taxable year of certain foreign corporations
Title 26 › Subtitle Subtitle A— - Income Taxes › Chapter CHAPTER 1— - NORMAL TAXES AND SURTAXES › Subchapter Subchapter N— - Tax Based on Income From Sources Within or Without the United States › Part PART II— - NONRESIDENT ALIENS AND FOREIGN CORPORATIONS › Subpart Subpart D— - Miscellaneous Provisions › § 898
Summary
The tax year for certain foreign companies must be the "required year" set in part (c). Those companies are foreign corporations that are treated as controlled foreign corporations and that meet an ownership test. The ownership test means a United States shareholder must own, on each testing day, more than 50% of either the voting power or the value of the stock. Section 958 rules decide how to count ownership. "United States shareholder" usually means what section 951(b) says, but for related-person insurance income the Secretary may treat someone as a U.S. shareholder if section 953(c)(1) says so. The required year is the majority U.S. shareholder year if one exists. If there is no such year, the tax year is whatever the Treasury sets by regulation. The majority U.S. shareholder year is a taxable year that, on each testing day, was the taxable year of every U.S. shareholder who meets the ownership test and of any U.S. shareholder whose stock was treated as owned under section 958 by one of those shareholders. Testing days are either the first day of the corporation’s taxable year (before this rule) or other days the Secretary requires during a representative period.
Full Legal Text
Title 26, §898
Internal Revenue Code — Source: USLM XML via OLRC
(a)For purposes of this title, the taxable year of any specified foreign corporation shall be the required year determined under subsection (c).
(b)For purposes of this section—
(1)The term “specified foreign corporation” means any foreign corporation—
(A)which is treated as a controlled foreign corporation for any purpose under subpart F of part III of this subchapter, and
(B)with respect to which the ownership requirements of paragraph (2) are met.
(2)(A)The ownership requirements of this paragraph are met with respect to any foreign corporation if a United States shareholder owns, on each testing day, more than 50 percent of—
(i)the total voting power of all classes of stock of such corporation entitled to vote, or
(ii)the total value of all classes of stock of such corporation.
(B)For purposes of subparagraph (A), the rules of subsections (a) and (b) of section 958 shall apply in determining ownership.
(3)The term “United States shareholder” has the meaning given to such term by section 951(b), except that, in the case of a foreign corporation having related person insurance income (as defined in section 953(c)(2)), the Secretary may treat any person as a United States shareholder for purposes of this section if such person is treated as a United States shareholder under section 953(c)(1).
(c)(1)The required year is—
(A)the majority U.S. shareholder year, or
(B)if there is no majority U.S. shareholder year, the taxable year prescribed under regulations.
(2)(A)For purposes of this subsection, the term “majority U.S. shareholder year” means the taxable year (if any) which, on each testing day, constituted the taxable year of—
(i)each United States shareholder described in subsection (b)(2)(A), and
(ii)each United States shareholder not described in clause (i) whose stock was treated as owned under subsection (b)(2)(B) by any shareholder described in such clause.
(B)The testing days shall be—
(i)the first day of the corporation’s taxable year (determined without regard to this section), or
(ii)the days during such representative period as the Secretary may prescribe.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Amendments
2025—Subsec. (c)(2), (3). Pub. L. 119–21 redesignated par. (3) as (2) and struck out former par. (2). Prior to amendment, text of par. (2) read as follows: “A specified foreign corporation may elect, in lieu of the taxable year under paragraph (1)(A), a taxable year beginning 1 month earlier than the majority U.S. shareholder year.” 2004—Subsec. (b)(1)(A). Pub. L. 108–357, § 413(c)(13)(A), amended subpar. (A) generally. Prior to amendment, subpar (A) read as follows: “(A) which is— “(i) treated as a controlled foreign corporation for any purpose under subpart F of part III of this subchapter, or “(ii) a foreign personal holding company (as defined in section 552), and”. Subsec. (b)(2)(B). Pub. L. 108–357, § 413(c)(13)(B), struck out “and section 551(f) and 554, whichever are applicable,” after “section 958”. Subsec. (b)(3). Pub. L. 108–357, § 413(c)(13)(C), reenacted heading without change, struck out “(A) In general” before “The term”, and struck out heading and text of subpar. (B). Text read as follows: “In the case of any foreign personal holding company (as defined in section 552) which is not a specified foreign corporation by reason of paragraph (1)(A)(i), the term ‘United States shareholder’ means any person who is treated as a United States shareholder under section 551.” Subsec. (c). Pub. L. 108–357, § 413(c)(13)(D), reenacted heading without change and amended text of subsec. (c) generally, substituting provisions stating general rule and relating to 1-month deferral and majority U.S. shareholder year, consisting of pars. (1) to (3), for provisions stating general rule and relating to 1-month deferral and majority U.S. shareholder year, consisting of par. (1), and provisions relating to required year in the case of a foreign personal holding company, consisting of par. (2).
Statutory Notes and Related Subsidiaries
Effective Date
of 2025 Amendment Pub. L. 119–21, title VII, § 70352(b), (c), July 4, 2025, 139 Stat. 208, provided that: “(b)
Effective Date
.—The
Amendments
made by this section [amending this section] shall apply to taxable years of specified foreign corporations beginning after
November 30, 2025. “(c) Transition Rule.—“(1) In general.—In the case of a corporation that is a specified foreign corporation as of
November 30, 2025, such corporation’s first taxable year beginning after such date shall end at the same time as the first required year (within the meaning of section 898(c)(1) of the Internal Revenue Code of 1986) ending after such date. If any specified foreign corporation is required by the
Amendments
made by this section to change its taxable year for its first taxable year beginning after November 30, 2025—“(A) such change shall be treated as initiated by such corporation, “(B) such change shall be treated as having been made with the consent of the Secretary, and “(C) the Secretary shall issue
Regulations
or other guidance for allocating foreign taxes that are paid or accrued in such first taxable year and the succeeding taxable year among such taxable years in the manner the Secretary determines appropriate to carry out the purposes of this section. “(2) Secretary.—For purposes of this subsection, the term ‘Secretary’ means the Secretary of the Treasury or the Secretary’s delegate.”
Effective Date
of 2004 AmendmentAmendment by Pub. L. 108–357 applicable to taxable years of foreign corporations beginning after Dec. 31, 2004, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end, see section 413(d)(1) of Pub. L. 108–357, set out as an Effective and Termination Dates of 2004
Amendments
note under section 1 of this title.
Effective Date
Pub. L. 101–239, title VII, § 7401(d), Dec. 19, 1989, 103 Stat. 2357, provided that: “(1) In general.—The
Amendments
made by this section [enacting this section and amending section 563 of this title] shall apply to taxable years of foreign corporations beginning after July 10, 1989. “(2) Special rules.—If any foreign corporation is required by the
Amendments
made by this section to change its taxable year for its first taxable year beginning after July 10, 1989—“(A) such change shall be treated as initiated by the taxpayer, “(B) such change shall be treated as having been made with the consent of the Secretary of the Treasury or his delegate, and “(C) if, by reason of such change, any United States person is required to include in gross income for 1 taxable year amounts attributable to 2 taxable years of such foreign corporation, the amount which would otherwise be required to be included in gross income for such 1 taxable year by reason of the short taxable year of the foreign corporation resulting from such change shall be included in gross income ratably over the 4-taxable-year period beginning with such 1 taxable year.”
Reference
Citations & Metadata
Citation
26 U.S.C. § 898
Title 26 — Internal Revenue Code
Last Updated
Apr 6, 2026
Release point: 119-73