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TITLE 26-INTERNAL REVENUE CODE (A) the sum of the deficits in earnings and profits for prior taxable years beginning after December 31, 1962, plus (B) the sum of the deficits in earpings and profits for taxable years beginning after Le- cember 31, 1959, and before January 1, 1963 (reduced by the sum of the earnings and profits for such taxable years); exceeds (2) an amount equal to the sum of the earn- ings and profits for prior taxable years begin- ning after December 31, 1962, allocated to other earnings and profits under section 959(c)(3). For purposes of the preceding sentence, any deficit in earnings and profits for any prior tax- able year shall be taken into account under paragraph (1) for any taxable year only to. the extent it has not been taken into account under such paragaph for any preceding taxable year to reduce earnings and profits of such preced- ing year. (d) Special rule in case of Indirect ownership For purposes of subsection (c), if- (1) a United States shareholder owns (within the meaning of section 958(a)) stock of a foreign corporation, and by reason of such ownership owns (within the meaning of such section) stock of any other foreign cor- poration, and (2) any of such foreign corporations has a deficit in earnings and profits for the taxable year, then the earnings and profits for the taxable year of each such foreign corporation which is a controlled foreign corporation shall, with re- spect to such United States shareholder, be properly reduced to take into account any defi- cit described in paragraph (2) in such manner as the Secretary shall prescribe by regulations. (Added Pub. L. 87-834, § 12(a), Oct. 16, 1962, 76 Stat. 1008, and amended Pub. L. 89-809, title I, § 104(j), Nov. 13, 1966, 80 Stat. 1562; Pub. L. 94- 455, title X, §§ 1062(a), 1065(a)(1), title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1650, 1653, 1834.) AMENDMENTS 1976--Subsec. (a)(3). Pub. L. 94-455, § 1062(a), added par. (3). Subsec. (a)(4). Pub. L. 94-455, § 1065(a)(1), added par. (4). Subsec. d). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". 1966-Subsec. (b). Pub. L. 89-809 substituted "In the case of a controlled foreign corporation, subpart F income does not include any item of income from sources within the United States which is effectively connected with the conduct by such corporation of a trade or business within the United States unless such item is exempt from taxation (or is subject to a re- duced rate of tax) pursuant to a treaty obligation of the United States" for "Subpart F income does not in- clude any item includible in gross Income under this chapter (other than this supbart) as income derived from sources within the United States of a foreign cor- poration engaged in trade or business in the United States". EFFECTIVE DATE OF 1976 AMENDMENT Amendment of subsec. (a)(3) by section 1062 of Pub. L. 94-455 applicable to participation in or cooperation with an international boycott more than 30 days after Oct. 4, 1976, see section 1066(a) of Pub. L. 94-455, set out as an Effective Date of 1976 Amendment note under section 908 of this title. Section 1066(b) of Pub. L. 94-455 provided that: "The amendments made by section 1065 [amending subsecs. (a)(2) to (4) of this section and sections 995(b)()(D)(Iii) and 964(a) of this title] apply to pay- ments described in section 162(c) of the Internal Rev- enue Code of 1954 made more than 30 days after the date of enactment of this Act [Oct. 4, 1976]." EFFECTiVE DATE OF 1966 AMENDMENT Amendment by Pub. L. 89-809 applicable with re- spect to taxable years beginning after Dec. 31, 1966, see section 104(n) of Pub. L. 89-809, set out as an Ef- fective Date of 1966 Amendnent note under section 11 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 864, 953, 954, 956, 964, 999 of this title. § 953. Income from insurance of United States risks (a) General rule For purposes of section 952(a)(1), the term "income derived from the insurance of United States risks" means that income which- (1) is attributable to the reinsurance or the issuing of any insurance or annuity contract- (A) in connection with property in, or li- ability arising out of activity in, or in con- nection with the lives or health of residents of, the United States, or (B) in connection with risks not included in subparagraph (A) as the result of any ar- rangement whereby another corporation re- ceives a substantially equal amount of pre- miums or other consideration in respect to any reinsurance or the issuing of any insur- ance or annuity contract in connection with property in, or liability arising out of activ- Ity in, or in connection with the lives or health of residents of, the United States, and (2) would (subject to the modifications pro- vided by paragraphs (1), (2), and (3) of subsec- tion (b)) be taxed under subchapter L of this chapter if such income were the income of a domestic insurance corporation. This section shall apply only in the case of a controlled foreign corporation which receives, during any taxable year, premiums or other consideration in respect of the reinsurance, and the issuing, of insurance and annuity contracts described in paragraph (1) in excess of 5 per- cent of the total of premiums and other consid- eration received during such taxable year in re- spect of all reinsurance and issuing of insurance and annuity contracts. (b) Special rules For purposes of subsection (a)- (1) In the application of part I of sub- chapter L, life insurance company taxable income is the gain from operations as defined in section 809(b). (2) A corporation which would, if it were a domestic insurance corporation, be taxable under part II of subchapter L shall apply sub- section (a) as if it were taxable under part III of subchapter L. (3) The following provisions of subchapter L shall not apply: Page 603 § 953