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TITLE 26-INTERNAL REVENUE CODE (A) tangible property located in the United States; (B) stock of a domestic corporation; (C) an obligation of a United States person; or (D) any right to the use in the United States of- (i) a patent or copyright, (ii) an invention, model, or design (whether or not patented), (iii) a secret formula or process, or (iv) any other similar right, which is acquired or developed by the con- trolled foreign corporation for use in the United States. (2) Exceptions For purposes of subsection (a), the term "United States property" does not include- (A) obligations of the United States, money, or deposits with persons carrying on the banking business; (B) property located in the United States which is purchased in the United States for export to, or use in, foreign countries; (C) any obligation of a United States person arising in connection with the sale or processing of property if the amount of such obligation outstanding at no time during the taxable year exceeds the amount which would be ordinary and necessary to carry on the trade or business of both the other party to the sale or processing trans- action and the United States person had the sale or processing transaction been made between unrelated persons; (D) any aircraft, railroad rolling stock, vessel, motor vehicle, or container used in the transportation of persons or property in foreign commerce and used predominantly outside the United States; (E) an amount of assets of an insurance company equivalent to the unearned premi- ums or reserves ordinary and necessary for the proper conduct of its insurance business attributable to contracts which are not con- tracts described in section 953(a)(1); (F) the stock or obligations of a domestic corporation 'vhich is neither a United States shareholder (as defined in section 951(b)) of the controlled foreign corpora- tion, nor a domestic corporation, 25 percent or more of the total combined voting power of which, immediately after the acquisition of any stock in such domestic corporation by the controlled foreign corporation, is owned, or is considered as being owned, by such United States shareholders in the ag- gregate; (0) any movable property (other than a vessel or aircraft) which is used for the pur- pose of exploring for, developing, removing, or transporting resources from ocean waters or under such waters when used on the Continental Shelf of the United States; and (H) an amount of assets of the controlled foreign corporation equal to the earnings and profits accumulated after December 31, 1962, and excluded from subpart F income under section 952(b). (c) Pledges and guarantees For purposes of subsection (a), a controlled foreign corporation shall, under regulations prescribed by the Secretary, be considered as holding an obligation of a United States person if such controlled foreign corporation is a pled- gor or guarantor of such obligations. (Added Pub. L. 87-834, § 12(a), Oct. 16, 1962, 76 Stat. 1015, and amended Pub. L. 94-455, title X, § 1021(a), title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1618, 1834.) AMENDMENTS 1976-Subsec. (b)(2)(F). Pub. L. 94-i'5, §1021(a), added subpar. (F). Former subpar. (F) was redesignat- ed (H). Subsec. (b)(2)(G). Pub. L. 94-455, § 1021(a), added subpar. (0). Subsec. (b)(2)(H). Pub. L. 94-455, § 1021(a), redesig- nated former subpar. (F) as (H). Subsec. (c). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". EFFECTIVE DATE OF 1976 AMENDMENT Section 1021(c) of Pub. L. 94-455 provided that: "The amendments made by this section [amending subsec. (b)(2)(E) to (H) of this section and section 958(b) of this title] shall apply to taxable years of for- eign corporations beginning after December 31, 1975, and to taxable years of United States shareholders (within the meaning of section 951(b) of the Internal Revenue Code of 1954 [section 951(b) of this title]) within which or with which such taxable years of such foreign corporations end. In determining for purposes of any taxable year referred to in the preceding sen- tence the amount referred to In section 956(a)(2)(A) of the Internal Revenue Code of 1954 [subsec. (a)(2)(A) of this section] for the last taxable year of a corpora- tion beginning before January 1, 1976, the amend- ments made by this section shall be deemed also to apply to such last ta cable year." SECTION REFRseiM TO IN OTHER SECTIONS This section is referred to in sections 902, 951, 955, 958, 964, 4916 of this title. § 957. Controlled foreign corporations; United States persons (a) General rule For purposes of this subpart, the term "con- trolled foreign corporation" means any foreign corporation of which more than 50 percent of the total combined voting power of all classes of stock entitled to vote is owned (within the meaning of section 958(a)), or is considered as owned by applying the rules of ownership of section 958(b), by United States shareholders on any day during the taxable year of such for- eign corporation. (b) Special rule for insurance For purposes only of taking into account income described in section 953(a) (relating to income derived from insurance of United States risks), the term "controlled foreign corpora- tion" includes not only a foreign corporation as defined by subsection (a) but also one of which more than 25 percent of the total combined voting power of all classes of stock is owned (within the meaning of section 958(a)), or is considered as owned by applying the rules of ownership of section 958(b), by United States shareholders on any day during the taxable year of such corporation, if the gross amount of premiums or other consideration in respect of Page 609