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Title 26, Internal Revenue CodeRelease 119-110

§962 Election by Individuals to Be Subject to Tax at Corporate Rates

Title 26 › 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 › § 962

Last updated Sep 23, 2026|Official source

Summary

A U.S. individual shareholder may choose to have amounts included under section 951(a) taxed as if a U.S. corporation got them. If chosen, those amounts are taxed under the corporate tax rules of section 11 instead of individual rates, and they count as corporate receipts for the foreign tax credit rules in section 960. The choice must be made when and how the Secretary’s rules require and can’t be revoked without permission. Each corporate tax bracket is prorated based on the shareholder’s share of the controlled foreign corporations’ earnings and profits. If those earnings are later distributed, they are taxed to the extent the distribution exceeds the tax paid on the elected amounts (see section 959(a)(1)).

Full Legal Text

Title 26, §962

Internal Revenue Code, Source: USLM XML via OLRC

(a)General rule
Under regulations prescribed by the Secretary, in the case of a United States shareholder who is an individual and who elects to have the provisions of this section apply for the taxable year—
(1)the tax imposed under this chapter on amounts which are included in his gross income under section 951(a) shall (in lieu of the tax determined under section 1 and 55) be an amount equal to the tax which would be imposed under section 11 if such amounts were received by a domestic corporation, and
(2)for purposes of applying the provisions of section 960 (relating to foreign tax credit) such amounts shall be treated as if they were received by a domestic corporation.
(b)Election
An election to have the provisions of this section apply for any taxable year shall be made by a United States shareholder at such time and in such manner as the Secretary shall prescribe by regulations. An election made for any taxable year may not be revoked except with the consent of the Secretary.
(c)Pro ration of each section 11 bracket amount
For purposes of applying subsection (a)(1), the amount in each taxable income bracket in the tax table in section 11(b) shall not exceed an amount which bears the same ratio to such bracket amount as the amount included in the gross income of the United States shareholder under section 951(a) for the taxable year bears to such shareholder’s pro rata share of the earnings and profits for the taxable year of all controlled foreign corporations with respect to which such shareholder includes any amount in gross income under section 951(a).
(d)Special rule for actual distributions
The earnings and profits of a foreign corporation attributable to amounts which were included in the gross income of a United States shareholder under section 951(a) and with respect to which an election under this section applied shall, when such earnings and profits are distributed, notwithstanding the provisions of section 959(a)(1), be included in gross income to the extent that such earnings and profits so distributed exceed the amount of tax paid under this chapter on the amounts to which such election applied.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

References in Text

section 960, referred to in subsec. (a)(2), was amended extensively by Pub. L. 115–97, and, as so amended, relates to deemed paid credit for subpart F inclusions.

Amendments

2017—Subsec. (a)(1). Pub. L. 115–97 substituted “section 11” for “section 11 and 55”. 1988—Subsec. (a)(1). Pub. L. 100–647 substituted “section 1 and 55” and “section 11 and 55” for “section 1” and “section 11”, respectively. 1978—Subsec. (c). Pub. L. 95–600 substituted provisions relating to the pro ration of each section 11 bracket amount for provisions relating to the surtax exemption. 1976—Subsecs. (a), (b). Pub. L. 94–455 struck out “or his delegate” after “Secretary” wherever appearing. 1975—Subsec. (c). Pub. L. 94–164 substituted “same ratio to the surtax exemption” for “same ratio to $25,000” in subsec. (c) as such subsec. (c) is in effect for taxable years ending after Dec. 31, 1975. Pub. L. 94–12 substituted “$50,000” for “$25,000”.

Statutory Notes and Related Subsidiaries

Effective Date

of 2017 AmendmentAmendment by Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 12001(c) of Pub. L. 115–97, set out as a note under section 11 of this title.

Effective Date

of 1988 AmendmentAmendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Effective Date

of 1978 AmendmentAmendment by Pub. L. 95–600 applicable to taxable years beginning after Dec. 31, 1978, see section 301(c) of Pub. L. 95–600, set out as a note under section 11 of this title. Effective and Termination Dates of 1975

Amendments

Amendment by Pub. L. 94–164 applicable to taxable years beginning after Dec. 31, 1975, see section 4(e) of Pub. L. 94–164, set out as a note under section 11 of this title. Amendment by Pub. L. 94–12 applicable to taxable years ending after Dec. 31, 1974, but to cease to apply for taxable years ending after Dec. 31, 1975, see section 305(b)(1) of Pub. L. 94–12, set out as a note under section 11 of this title.

Reference

Citations & Metadata

Citation

26 U.S.C. § 962

Title 26, Internal Revenue Code

Last Updated

Sep 23, 2026

Release point: 119-110