Title 26 — Internal Revenue CodeRelease 119-73
§951A Net CFC tested income included in gross income of United States shareholders
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 III— - INCOME FROM SOURCES WITHOUT THE UNITED STATES › Subpart Subpart F— - Controlled Foreign Corporations › § 951A
Summary
U.S. shareholders of a controlled foreign corporation must add their share of that company’s "net CFC tested income" to their U.S. taxable income for the year. Net CFC tested income is the amount by which a shareholder’s pro rata share of tested income from all CFCs they own is more than their pro rata share of tested losses from those CFCs. Tested income for a CFC is its gross income after removing certain types of income that other rules already treat differently (for example, subpart F items, some dividends from related parties, and certain foreign oil and gas income), minus the deductions that can be linked to that income. A tested loss happens when those deductions exceed the income. A person is a U.S. shareholder only if they owned stock in the foreign company on any day of the year, and a foreign company is a CFC if it was a CFC at any time in the year. The included amount is treated the same as similar CFC income for other tax rules, and the Treasury will give rules when special treatment at the corporation level is needed. If the total included amount must be split among CFCs, a CFC with no tested income gets nothing, and CFCs with tested income get their share based on the shareholder’s pro rata tested income.
Full Legal Text
Title 26, §951A
Internal Revenue Code — Source: USLM XML via OLRC
(a)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)For purposes of this section—
(1)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)For purposes of this section—
(A)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)(i)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)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)For purposes of this section—
(1)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)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)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)(1)(A)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 section 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)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)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.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Amendments
2025—Pub. L. 119–21, § 70323(a)(3)(E)(i), substituted “Net CFC tested income” for “Global intangible low-taxed income” in section catchline. Subsec. (a). Pub. L. 119–21, § 70323(a)(1), substituted “net CFC tested income” for “global intangible low-taxed income”. Subsec. (b). Pub. L. 119–21, § 70323(a)(2), redesignated subsec. (c) as (b) and struck out former subsec. (b) defining “global intangible low-taxed income” and “net deemed tangible income return”. Subsec. (b)(1)(A). Pub. L. 119–21, § 70354(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”. Subsec. (b)(1)(B). Pub. L. 119–21, § 70354(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. Subsec. (c). Pub. L. 119–21, § 70323(a)(2), redesignated subsec. (e) as (c). Former subsec. (c) redesignated (b). Subsec. (c)(1). Pub. L. 119–21, § 70354(b)(2)(A), 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)”. Subsec. (c)(2). Pub. L. 119–21, § 70354(b)(2)(B), 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”. Subsec. (d). Pub. L. 119–21, § 70323(a)(3)(C)(i), 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. Subsec. (d)(2)(B)(ii). Pub. L. 119–21, § 70323(a)(3)(C)(ii), substituted “subsection (b)(1)(A)” for “subsection (c)(1)(A)”. Subsec. (e). Pub. L. 119–21, § 70323(a)(2), redesignated subsec. (e) as (c). Subsec. (f). Pub. L. 119–21, § 70323(a)(2), redesignated subsec. (f) as (d). Subsec. (f)(1)(A). Pub. L. 119–21, § 70311(b)(3), substituted “904(h)” for “904(h)(1)”.
Statutory Notes and Related Subsidiaries
Effective Date
of 2025 AmendmentAmendment by section 70311(b)(3) of Pub. L. 119–21 applicable to taxable years beginning after Dec. 31, 2025, see section 70311(c) of Pub. L. 119–21, set out as a note under section 904 of this title. Amendment by section 70323(a)(1), (2), (3)(B), (C), (E)(i) of Pub. L. 119–21 applicable to taxable years beginning after Dec. 31, 2025, see section 70323(c) of Pub. L. 119–21, set out as a note under section 172 of this title. Amendment by section 70354(b) of Pub. L. 119–21 applicable to taxable years of foreign corporations beginning after Dec. 31, 2025, see section 70354(c) of Pub. L. 119–21, set out as a note under section 951 of this title.
Effective Date
Section applicable to taxable years of foreign corporations beginning after Dec. 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end, see section 14201(d) of Pub. L. 115–97, set out as an
Effective Date
of 2017 Amendment note under section 904 of this title.
Reference
Citations & Metadata
Citation
26 U.S.C. § 951A
Title 26 — Internal Revenue Code
Last Updated
Apr 6, 2026
Release point: 119-73