Recharacterization of overall domestic loss

For purposes of this subpart and section 936, 1 in the case of any taxpayer who sustains an overall domestic loss for any taxable year beginning after December 31, 2006 , that portion of the taxpayer’s taxable income from sources within the United States for each succeeding taxable year which is equal to the lesser of—

(A) the amount of such loss (to the extent not used under this paragraph in prior taxable years), or

(B) 50 percent of the taxpayer’s taxable income from sources within the United States for such succeeding taxable year,

shall be treated as income from sources without the United States (and not as income from sources within the United States).

For purposes of this subsection—

(A) In general The term “overall domestic loss” means— (i) with respect to any qualified taxable year, the domestic loss for such taxable year to the extent such loss offsets taxable income from sources without the United States for the taxable year or for any preceding qualified taxable year by reason of a carryback, and (ii) with respect to any other taxable year, the domestic loss for such taxable year to the extent such loss offsets taxable income from sources without the United States for any preceding qualified taxable year by reason of a carryback.

(B) Domestic loss For purposes of subparagraph (A), the term “domestic loss” means the amount by which the gross income for the taxable year from sources within the United States is exceeded by the sum of the deductions properly apportioned or allocated thereto (determined without regard to any carryback from a subsequent taxable year).

(C) Qualified taxable year For purposes of subparagraph (A), the term “qualified taxable year” means any taxable year for which the taxpayer chose the benefits of this subpart.

(A) In general Any income from sources within the United States that is treated as income from sources without the United States under paragraph (1) shall be allocated among and increase the income categories in proportion to the loss from sources within the United States previously allocated to those income categories.

(B) Income category For purposes of this paragraph, the term “income category” has the meaning given such term by subsection (f)(5)(E)(i).

(A) In general If any pre-2018 unused overall domestic loss is taken into account under paragraph (1) for any applicable taxable year, the taxpayer may elect to have such paragraph applied to such loss by substituting a percentage greater than 50 percent (but not greater than 100 percent) for 50 percent in subparagraph (B) thereof.

(B) Pre-2018 unused overall domestic loss For purposes of this paragraph, the term “pre-2018 unused overall domestic loss” means any overall domestic loss which— (i) arises in a qualified taxable year beginning before January 1, 2018 , and (ii) has not been used under paragraph (1) for any taxable year beginning before such date.

(C) Applicable taxable year For purposes of this paragraph, the term “applicable taxable year” means any taxable year of the taxpayer beginning after December 31, 2017 , and before January 1, 2028 .