(a) In general. An individual United States shareholder may, in accordance with § 1.962-2, elect to have the provisions of section 962 apply for his taxable year. In such case-
(1) The tax imposed under chapter 1 of the
Internal Revenue Code on all amounts which are included in his gross income for
such taxable year under section 951(a) shall (in lieu of the tax determined
under section 1) be an amount equal to the tax which would be imposed under
section 11 if such amounts were received by a domestic corporation (determined
in accordance with paragraph (b)(1) of this section), and
(2) For purposes of applying sections 960(a)
and 960(d) (relating to foreign tax credit) such amounts shall be treated as if
received by a domestic corporation (as provided in paragraph (b)(2) of this
section).
(3) Thus, an individual
United States shareholder may elect to be subject to tax at corporate rates on
amounts included in his gross income under section 951(a) and to have the
benefit of a credit for certain foreign taxes paid with respect to the earnings
and profits attributable to such amounts. Section 962 also provides rules for
the treatment of an actual distribution of earnings and profits previously
taxed in accordance with an election of the benefits of this section. See
§
1.962-3.
(b) Rules of application. For purposes of this section-
(1)
Application of section 11. For purposes of applying section 11
for a taxable year as provided in paragraph (a)(1) of this section in the case
of an electing United States shareholder-(i)
Determination of taxable income. The term taxable
income means the excess of-(A) The
sum of- (1) All amounts required to be
included in his gross income under section 951(a) for the taxable year with
respect to a foreign corporation of which he is a United States shareholder
including- (i) His section 965(a) inclusion
amounts (as defined in §
1.965-1(f)(38))
and
(ii) His domestic pass-through
owner shares (as defined in §
1.965-1(f)(21))
of section 965(a) inclusion amounts with respect to deferred foreign income
corporations (as defined in §
1.965-1(f)(17))
of which he is a United States shareholder; plus
(2) His GILTI inclusion amount (as defined in
§
1.951A-1(c)(1))
for the taxable year; plus
(3) All
amounts which would be required to be included in his gross income under
section 78 for the taxable year with respect to the amounts referred to in
paragraph (b)(1)(i)(A)(1) and (2) of this
section if the shareholder were a domestic corporation; over
(B) The sum of the following
deductions, but no other deductions or amounts-
(1) His section 965(c) deduction amount (as
defined in §
1.965-1(f)(42))
for the taxable year;
(2) His
domestic pass-through owner shares of section 965(c) deduction amounts
corresponding to the amounts referred to in paragraph
(b)(1)(i)(A)(1)(ii) of this section
and
(3) The portion of the
deduction under section 250 and §
1.250(a)-1 that
would be allowed to a domestic corporation equal to the percentage applicable
to global intangible low-taxed income for the taxable year under section
250(a)(1)(B) (including as modified by section 250(a)(3)(B)) multiplied by the
sum of the amount described in paragraph (b)(1)(i)(A)(2) of
this section and the amount described in paragraph
(b)(1)(i)(A)(3) of this section that is attributable to the
amount described in paragraph (b)(1)(i)(A)(2) of this
section.
(ii)
[Reserved]
(2)
Allowance of foreign tax credit -
(i)
In general. Subject to
the applicable limitation of section 904 and to the provisions of this
paragraph (b)(2), there shall be allowed as a credit against the United States
tax on the amounts described in paragraph (b)(1)(i) of this section the foreign
income, war profits, and excess profits taxes deemed paid under section 960(a)
or section 960(d) by the electing United States shareholder with respect to
such amounts.
(ii)
Application of sections 960(a) and 960(d). In applying
sections 960(a) and 960(d) for purposes of this paragraph (b)(2) in the case of
an electing United States shareholder, the term "domestic corporation" as used
in sections 960(a), 960(d), and 78, and the term "corporation" as used in
sections 901 and 960(d)(2)(A) and (B), are treated as referring to such
shareholder with respect to the amounts described in paragraph (b)(1)(i) of
this section.
(iii)
Carryback and carryover of excess tax deemed paid. For
purposes of this paragraph (b)(2), other than with respect to section 951A
category income (as defined in §
1.904-4(g))
(including section 951A category income that is reassigned to a separate
category for income resourced under a treaty), any amount by which the foreign
income, war profits, and excess profits taxes deemed paid by the electing
United States shareholder for any taxable year under section 960 exceed the
limitation determined under paragraph (b)(2)(iv)(A) of this section is treated
as a carryback and carryover of excess tax paid under section 904(c), except
that in no case will excess tax paid be deemed paid in another taxable year
under section 904(c) if an election under section 962 by the shareholder does
not apply for such taxable year. Such carrybacks and carryovers are applied
only against the United States tax on amounts described in paragraph (b)(1)(i)
of this section.
(iv)
Limitation on credit. For purposes of determining the
limitation under section 904 on the amount of the credit for foreign income
war profits, and excess profits taxes- (A)
Deemed paid with respect to amounts described in subparagraph (1)(i) of this
paragraph, the electing United States shareholder's taxable income shall be
considered to consist only of the amounts described in such subparagraph
(1)(i), and
(B) Paid with respect
to amounts other than amounts described in subparagraph (1)(i) of this
paragraph, the electing United States shareholder's taxable income shall be
considered to consist only of amounts other than the amounts described in such
subparagraph (1)(i).
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