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TITLE 26-INTERNAL REVENUE CODE (d) Distributions excluded from gross income not to be treated as dividends Except as provided in section 960(a)(3), any distribution excluded from gross income under subsection (a) shall be treated, for purposes of this chapter, as a distribution which is not a dividend. (Added Pub. L. 87-834, § 12(a), Oct. 16, 1962, 76 Stat. 1019, and amended Pub. L. 94-455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.) AMENDMENTS 1976-Subsecs. (a). (b). Pub. L. 94-455 struck out "or his delegate" following "Secretary". SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 951, 952, 956, 960, 961, 962, 1246, 1248 of this title. § 960. Special rules for foreign tax credit (a) Taxes paid by a foreign corporation (1) General rule For purposes of subpart A of this part, if there is included, under section 951(a), in the gross income of a domestic corporation any amount attributable to earnings and profits- (A) of a foreign corporation (hereafter in this subsection referred to as the "first for- eign corporation") at least 10 percent of the voting stock of which is owned by such do- mestic corporation, or (B) of a second foreign corporation (her- einafter in this subsection referred to as the "second foreign corporation") at least 10 percent of the voting stock of which is owned by the first foreign corporation, or (C) of a third foreign corporation (herein- after in this subsection referred to as the "third foreign corporation") at least 10 per- cent of the voting stock of which is ownta by the second foreign corporation, then, under regulations prescribed by the Secretary, such domestic corporation shall be deemed to have paid the same proportion of the total income, war profits, and excess prof- its taxes paid (or deemed paid) by such for- eign corporation to a foreign country or pos- session of the United States for the taxable year on or with respect to the earnings and profits of such foreign corporation which the amount of earnings and profits of such for- eign corporation so included in gross income of the domestic corporation bears to the entire amount of the earnings and profits of such corporation for such taxable year. This paragraph shall not apply with respect to any amount included in the gross income of such domestic corporation attributable to earnings and profits of the second foreign corporation or of the third foreign corporation unless, in the case of the second foreign corporation, the percentage-of-voting-stock requirement of section 902(b)(3)(A) is satisfied, and in the case of the third foreign corporation, the per- centage-of-voting-stock requirement of sec- tion 902(b)(3)(B) is satisfied. (2) Taxes previously deemed paid by domestic cor- poration If a domestic corporation receives a distri- bution from a foreign corporation, any por- tion of which is excluded from gross income under section 959, the income, war profits, and excess profits taxes paid or deemed paid by such foreign corporation to any foreign country or to any possession of the United States in connection with the earnings and profits of such foreign corporation from which such distribution is made shall not be taken into account for purposes of section 902, to the extent such taxes were deemed paid by a domestic corporation under para- graph (1) for any prior taxable year. (3) Taxes paid by foreign corporation and not pre- viously deemed paid by domestic corporation Any portion of a distribution from . foreign corporation received by a domestic corpora- tion which is excluded from gross income under section 959(a) shall be treated by the domestic corporation as a dividend, solely for purposes of taking into account under section 902 any income, war profits, or excess profits taxes paid to any foreign country or to any possession of the United States, on or with re- spect to the accumulated profits of such for- eign corporation from which such distribu- tion is made, which were not deemed paid by the domestic corporation under paragraph (1) for any prior taxable year., (b) Special rules for foreign tax credit In year of re- ceipt of previously taxed earnings and profits (1) Increase in section 904 limitation In the case of any taxpayer who- (A) either (i) chose to have the benefits of subpart A of this part for a taxable year in which he was required under section 951(a) to include in his gross income an amount in respect of a controlled foreign corporation, or (ii) did not pay or accrue for such taxable year any income, war profits, or excess prof- its taxes to any foreign country or to any possession of the United States, and (B) chooses to have the benefits of sub- part A of this part for the taxable year in which he receives a distribution or amount which is excluded from gross income under section 959(a) and which is attributable to earnings and profits of the controlled for- eign corporation which was included in his gross income for the taxable year referred to in subparagraph (A), and (C) for the taxable year in which such dis- tribution or amount Is received, pays, or Is deemed to have paid, or accrues income, war profits, or excess profits taxes to a for- eign country or to any possession of the United States with respect to such distribu- tion or amount, the limitation under section 904 for the tax- able year in which such distribution or amount is received shall be increased as pro- vided in paragraph (2), but such increase shall not exceed the amount of such taxes paid, or deemed paid, or accrued with respect to such distribution or amount. (2) Amount of increase The amount of increase of the limitation under section 904(a) for the taxable year in which the distribution or amount referred to in paragraph (1)(B) is received shall be an amount equal to- § 960 Page 612