Title 26 — Internal Revenue CodeRelease 119-73
§958 Rules for Determining Stock Ownership
Title 26 › Subtitle Subtitle A— Income Taxes › Chapter 1— NORMAL TAXES AND SURTAXES › Subchapter N— Tax Based on Income From Sources Within or Without the United States › Part III— INCOME FROM SOURCES WITHOUT THE UNITED STATES › Subpart F— Controlled Foreign Corporations › § 958
Summary
These rules decide who is treated as owning stock in a foreign corporation, which controls whether the company counts as a "controlled foreign corporation" and who must pay U.S. tax on its income. You are treated as owning not just stock you hold directly, but also your proportionate share of stock held by a foreign corporation, foreign partnership, or foreign trust or estate you have an interest in. On top of that, the constructive ownership rules of section 318 apply, with adjustments. Stock owned by a nonresident alien is not attributed to a U.S. citizen or resident, and an entity that owns more than 50 percent of a corporation's voting power is treated as owning all of its voting stock; a 10 percent threshold replaces the usual 50 percent test for attribution from corporations. A rule blocking attribution of foreign-owned stock downward to U.S. persons was restored by a 2025 law and applies to foreign corporations' tax years beginning after December 31, 2025.
Full Legal Text
Title 26, §958
Internal Revenue Code — Source: USLM XML via OLRC
(A)stock owned directly, and
(B)stock owned with the application of paragraph (2).
(2)For purposes of subparagraph (B) of paragraph (1), stock owned, directly or indirectly, by or for a foreign corporation, foreign partnership, or foreign trust or foreign estate (within the meaning of section 7701(a)(31)) shall be considered as being owned proportionately by its shareholders, partners, or beneficiaries. Stock considered to be owned by a person by reason of the application of the preceding sentence shall, for purposes of applying such sentence, be treated as actually owned by such person.
(3)For purposes of applying paragraph (1) in the case of a foreign mutual insurance company, the term “stock” shall include any certificate entitling the holder to voting power in the corporation.
(b)For purposes of section 951(b), 954(d)(3), 956(c)(2), and 957, section 318(a) (relating to constructive ownership of stock) shall apply to the extent that the effect is to treat any United States person as a United States shareholder within the meaning of section 951(b), to treat a person as a related person within the meaning of section 954(d)(3), to treat the stock of a domestic corporation as owned by a United States shareholder of the controlled foreign corporation for purposes of section 956(c)(2), or to treat a foreign corporation as a controlled foreign corporation under section 957, except that—
(1)In applying paragraph (1)(A) of section 318(a), stock owned by a nonresident alien individual (other than a foreign trust or foreign estate) shall not be considered as owned by a citizen or by a resident alien individual.
(2)In applying subparagraphs (A), (B), and (C) of section 318(a)(2), if a partnership, estate, trust, or corporation owns, directly or indirectly, more than 50 percent of the total combined voting power of all classes of stock entitled to vote of a corporation, it shall be considered as owning all the stock entitled to vote.
(3)In applying subparagraph (C) of section 318(a)(2), the phrase “10 percent” shall be substituted for the phrase “50 percent” used in subparagraph (C).
(4)Subparagraphs (A), (B), and (C) of section 318(a)(3) shall not be applied so as to consider a United States person as owning stock which is owned by a person who is not a United States person.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Amendments
2025—Subsec. (b). Pub. L. 119–21, § 70353(a)(2), substituted “Paragraphs (1) and (4)” for “Paragraph (1)” in concluding provisions. Subsec. (b)(4). Pub. L. 119–21, § 70353(a)(1), added par. (4). 2017—Subsec. (a)(1). Pub. L. 115–97, § 14301(c)(31), substituted “960” for “960(a)(1)” in introductory provisions. Subsec. (b). Pub. L. 115–97, § 14213(a)(2), substituted “Paragraph (1)” for “Paragraphs (1) and (4)” in concluding provisions. Subsec. (b)(4). Pub. L. 115–97, § 14213(a)(1), struck out par. (4) which read as follows: “Subparagraphs (A), (B), and (C) of section 318(a)(3) shall not be applied so as to consider a United States person as owning stock which is owned by a person who is not a United States person.” 1996—Subsec. (a)(1). Pub. L. 104–188, § 1704(t)(7), substituted “section 960(a)(1)” for “section 955(b)(1)(A) and (B), 955(c)(2)(A)(ii), and 960(a)(1)” in introductory provisions. Subsec. (b). Pub. L. 104–188, § 1703(i)(4), substituted “956(c)(2)” for “956(b)(2)” wherever appearing in introductory and closing provisions. 1976—Subsec. (b). Pub. L. 94–455 inserted “956(b)(2)” after “purposes of section 951(b), 954(d)(3),”, “to treat the stock of a domestic corporation as owned by a United States shareholder of the controlled foreign corporation for purposes of section 956(b)(2)” after “meaning of section 954(d)(3)” and “Paragraphs (1) and (4) shall not apply for purposes of section 956(b)(2) to treat stock of a domestic corporation as not owned by a United States shareholder” following subpar. (4). 1964—Subsec. (b). Pub. L. 88–554 redesignated pars. (4) and (5) as (3) and (4), respectively, struck out former par. (3) which related to ownership of stock by a partnership, estate, trust, or corporation for purposes of applying first sentence of subpars. (A) and (B), and subpar. (C)(i) of section 318(a)(2) of this title, and made
Amendments
throughout subsec. (b) to conform to changes made in section 318 of this title by Pub. L. 88–554.
Statutory Notes and Related Subsidiaries
Effective Date
of 2025 AmendmentAmendment by Pub. L. 119–21 applicable to taxable years of foreign corporations beginning after Dec. 31, 2025, see section 70353(d) of Pub. L. 119–21, set out as an
Effective Date
note under section 951B of this title.
Effective Date
of 2017 Amendment Pub. L. 115–97, title I, § 14213(b), Dec. 22, 2017, 131 Stat. 2217, provided that: “The
Amendments
made by this section [amending this section] shall apply to— “(1) the last taxable year of foreign corporations beginning before January 1, 2018, and each subsequent taxable year of such foreign corporations, and “(2) taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.” Amendment by section 14301(c)(31) of Pub. L. 115–97 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 14301(d) of Pub. L. 115–97, set out as a note under section 78 of this title.
Effective Date
of 1996 AmendmentAmendment by section 1703(i)(4) of Pub. L. 104–188 effective as if included in the provision of the Revenue Reconciliation Act of 1993, Pub. L. 103–66, §§ 13001–13444, to which such amendment relates, see section 1703(o) of Pub. L. 104–188, set out as a note under section 39 of this title.
Effective Date
of 1976 AmendmentAmendment by Pub. L. 94–455 applicable to taxable years of foreign corporations beginning after Dec. 31, 1975, and to taxable years of United States shareholders within which or with which such taxable years of such corporations end, see section 1021(c) of Pub. L. 94–455, set out as a note under section 956 of this title.
Effective Date
of 1964 AmendmentAmendment by Pub. L. 88–554 effective Aug. 31, 1964, except that for purposes of section 302 and 304 of this title, such
Amendments
shall not apply to distributions in payment for stock acquisitions or redemptions, if such acquisitions or redemptions occurred before Aug. 31, 1964, see section 4(c) of Pub. L. 88–554, set out as a note under section 318 of this title.
Construction
Amendment by Pub. L. 119–21 not to be construed to create any inference with respect to the proper application of any provision of this title with respect to taxable years beginning before the taxable years to which such amendment applies, see section 70353(f) of Pub. L. 119–21, set out as a note under section 951B of this title.
Reference
Citations & Metadata
Citation
26 U.S.C. § 958
Title 26 — Internal Revenue Code
Last Updated
Apr 6, 2026
Release point: 119-73