26 C.F.R. § 1.904-4T Separate application of section 904 with respect to certain categories of income (temporary).
Title 26 - Internal Revenue
(a) through (b) [Reserved] For further guidance, see §1.904–4(a) through (b). (c)(1) [Reserved] For further guidance, see §1.904–4(c)(1). (2) Grouping of items of income in order to determine whether passive income is high-taxed income—(i) Effective dates. For purposes of determining whether passive income is high-taxed income, the grouping rules of paragraphs (c)(3) and (c)(4) of this section apply to taxable years beginning after December 31, 2002. For corresponding rules applicable to taxable years beginning before January 1, 2003, see 26 CFR §1.904–4(c)(2)(i) (revised as of April 1, 2006). (c)(2)(ii) [Reserved] For further guidance, see §1.904–4(c)(2)(ii). (3) Amounts received or accrued by United States persons. Except as otherwise provided in §1.904–4(c)(5), all passive income received by a United States person shall be subject to the rules of this paragraph (c)(3). However, subpart F inclusions that are passive income, dividends from a controlled foreign corporation or noncontrolled section 902 corporation that are passive income, and income that is earned by a United States person through a foreign qualified business unit (foreign QBU) that is passive income shall be subject to the rules of this paragraph only to the extent provided in paragraph (c)(4) of this section. For purposes of this section, a foreign QBU is a QBU (as defined in section 989(a)), other than a controlled foreign corporation or noncontrolled section 902 corporation, that has its principal place of business outside the United States. These rules shall apply whether the income is received from a controlled foreign corporation of which the United States person is a United States shareholder, from a noncontrolled section 902 corporation of which the United States person is a domestic corporation meeting the stock ownership requirements of section 902(a), or from any other person. For purposes of determining whether passive income is high-taxed income, the following rules apply: (i) All passive income received during the taxable year that is subject to a withholding tax of fifteen percent or greater shall be treated as one item of income. (ii) All passive income received during the taxable year that is subject to a withholding tax of less than fifteen percent (but greater than zero) shall be treated as one item of income. (iii) All passive income received during the taxable year that is subject to no withholding tax or other foreign tax shall be treated as one item of income. (iv) All passive income received during the taxable year that is subject to no withholding tax but is subject to a foreign tax other than a withholding tax shall be treated as one item of income. (4) Dividends and inclusions from controlled foreign corporations, dividends from noncontrolled section 902 corporations, and income of foreign QBUs. Except as provided in paragraph (c)(5) of this section, all dividends and all amounts included in gross income of a United States shareholder under section 951(a)(1) with respect to the foreign corporation that (after application of the look-through rules of section 904(d)(3) and §1.904–5) are attributable to passive income received or accrued by a controlled foreign corporation, all dividends from a noncontrolled section 902 corporation that are received or accrued by a domestic corporate shareholder meeting the stock ownership requirements of section 902(a) that (after application of the look-through rules of section 904(d)(4) and §1.904–5) are treated as passive income, and all amounts of passive income received or accrued by a United States person through a foreign QBU shall be subject to the rules of this paragraph (c)(4). This paragraph (c)(4) shall be applied separately to dividends and inclusions with respect to each controlled foreign corporation of which the taxpayer is a United States shareholder and to dividends with respect to each noncontrolled section 902 corporation of which the taxpayer is a domestic corporate shareholder meeting the stock ownership requirements of section 902(a). This paragraph (c)(4) also shall be applied separately to income attributable to each QBU of a controlled foreign corporation, noncontrolled section 902 corporation, or any other look-through entity as defined in §1.904–5(i), except that if the entity subject to the look-through rules is a United States person, then this paragraph (c)(4) shall be applied separately only to each foreign QBU of that United States person. (c)(4)(i) through (m) [Reserved] For further guidance, see §1.904–4(c)(4)(i) through (m). [T.D. 9260, 71 FR 24530, Apr. 25, 2006]
Title 26: Internal Revenue
PART 1—INCOME TAXES
foreign tax credit
§ 1.904-4T Separate application of section 904 with respect to certain categories of income (temporary).
