§552. Definition of foreign personal holding company

(a) General rule

For purposes of this subtitle, the term "foreign personal holding company" means any foreign corporation if-

(1) Gross income requirement

At least 60 percent of its gross income (as defined in section 555(a)) for the taxable year is foreign personal holding company income as defined in section 553; but if the corporation is a foreign personal holding company with respect to any taxable year ending after August 26, 1937, then, for each subsequent taxable year, the minimum percentage shall be 50 percent in lieu of 60 percent, until a taxable year during the whole of which the stock ownership required by paragraph (2) does not exist, or until the expiration of three consecutive taxable years in each of which less than 50 percent of the gross income is foreign personal holding company income. For purposes of this paragraph, there shall be included in the gross income the amount includible therein as a dividend by reason of the application of section 555(c)(2); and

(2) Stock ownership requirement

At any time during the taxable year more than 50 percent of-

(A) the total combined voting power of all classes of stock of such corporation entitled to vote, or

(B) the total value of the stock of such corporation,

is owned (directly or indirectly) by or for not more than 5 individuals who are citizens or residents of the United States (hereinafter in this part referred to as the "United States group").

(b) Exceptions

The term "foreign personal holding company" does not include-

(1) a corporation exempt from tax under subchapter F (sec. 501 and following); and

(2) a corporation organized and doing business under the banking and credit laws of a foreign country if it is established (annually or at other periodic intervals) to the satisfaction of the Secretary that such corporation is not formed or availed of for the purpose of evading or avoiding United States income taxes which would otherwise be imposed upon its shareholders. If the Secretary is satisfied that such corporation is not so formed or availed of, he shall issue to such corporation annually or at other periodic intervals a certification that the corporation is not a foreign personal holding company.

Each United States shareholder of a foreign corporation which would, except for the provisions of paragraph (2), be a foreign personal holding company, shall attach to and file with his income tax return for the taxable year a copy of the certification by the Secretary made pursuant to paragraph (2). Such copy shall be filed with the taxpayer's return for the taxable year if he has been a shareholder of such corporation for any part of such year.

(c) Look-thru for certain dividends and interest

(1) In general

For purposes of this part, any related person dividend or interest shall be treated as foreign personal holding company income only to the extent such dividend or interest is attributable (determined under rules similar to the rules of subparagraphs (C) and (D) of section 904(d)(3)) to income of the related person which would be foreign personal holding company income.

(2) Related person dividend or interest

For purposes of paragraph (1), the term "related person dividend or interest" means any dividend or interest which-

(A) is described in subparagraph (A) of section 954(c)(3), and

(B) is received from a related person which is not a foreign personal holding company (determined without regard to this subsection).

For purposes of the preceding sentence, the term "related person" has the meaning given such term by section 954(d)(3) (determined by substituting "foreign personal holding company" for "controlled foreign corporation" each place it appears).

(Aug. 16, 1954, ch. 736, 68A Stat. 195 ; Oct. 4, 1976, Pub. L. 94–455, title XIX, §1906(b)(13)(A), 90 Stat. 1834 ; July 18, 1984, Pub. L. 98–369, div. A, title I, §132(c)(2), 98 Stat. 666 ; Oct. 22, 1986, Pub. L. 99–514, title XII, §1222(b), title XVIII, §1810(h)(1), 100 Stat. 2557 , 2829; Nov. 10, 1988, Pub. L. 100–647, title I, §1012(bb)(1)(C), 102 Stat. 3533 .)

Amendments

1988-Subsec. (c). Pub. L. 100–647 substituted "Look-thru for certain dividends and interest" for "Certain dividends and interest not taken into account" in heading and amended text generally. Prior to amendment, text read as follows: "For purposes of subsection (a)(1) and section 553(a)(1), gross income and foreign personal holding company income shall not include any dividends and interest which-

"(1) are described in subparagraph (A) of section 954(c)(4), and

"(2) are received from a related person which is not a foreign personal holding company (determined without regard to this subsection).

For purposes of the preceding sentence, the term 'related person' has the meaning given such term by section 954(d)(3) (determined by substituting 'foreign personal holding company' for 'controlled foreign corporation' each place it appears)."

1986-Subsec. (a)(2). Pub. L. 99–514, §1222(b), amended par. (2) generally. Prior to amendment, par. (2) read as follows: "At any time during the taxable year more than 50 percent in value of its outstanding stock is owned, directly or indirectly, by or for not more than five individuals who are citizens or residents of the United States, hereinafter called 'United States group'."

Subsec. (c). Pub. L. 99–514, §1810(h)(1), inserted provision relating to meaning of "related person" as given by section 954(d)(3).

1984-Subsec. (c). Pub. L. 98–369 added subsec. (c).

1976-Subsec. (b). Pub. L. 94–455 struck out "or his delegate" after "Secretary" in three places.

Effective Date of 1988 Amendment

Amendment by Pub. L. 100–647 applicable to taxable years of foreign corporations beginning after Dec. 31, 1986, see section 1012(bb)(1)(D) of Pub. L. 100–647, set out as a note under section 551 of this title.

Effective Date of 1986 Amendment

Section 1222(c) of Pub. L. 99–514 provided that:

"(1) In general.-The amendments made by this section [amending this section and section 957 of this title] shall apply to taxable years of foreign corporations beginning after December 31, 1986; except that for purposes of applying sections 951(a)(1)(B) and 956 of the Internal Revenue Code of 1986, such amendments shall take effect on August 16, 1986.

"(2) Transitional rule.-In the case of any corporation treated as a controlled foreign corporation by reason of the amendments made by this section, property acquired before August 16, 1986, shall not be taken into account under section 956(b) of the Internal Revenue Code of 1986.

"(3) Special rule for beneficiary of trust.-In the case of an individual-

"(A) who is a beneficiary of a trust which was established on December 7, 1979, under the laws of a foreign jurisdiction, and

"(B) who was not a citizen or resident of the United States on the date the trust was established,

amounts which are included in the gross income of such beneficiary under section 951(a) of the Internal Revenue Code of 1986 with respect to stock held by the trust (and treated as distributed to the trust) shall be treated as the first amounts which are distributed by the trust to such beneficiary and as amounts to which section 959(a) of such Code applies."

Amendment by section 1810(h)(1) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.

Effective Date of 1984 Amendment

Section 132(d)(2)(B) of Pub. L. 98–369 provided that: "The amendment made by paragraph (2) of subsection (c) [amending this section] shall apply to taxable years of foreign corporations beginning after March 15, 1984."

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.

Cross References

Accumulated earnings tax as inapplicable to foreign personal holding company defined in this section, see section 532 of this title.

Election as to taxable and partially taxable bonds under provisions respecting amortizable bond premium in case of bonds held by foreign personal holding company as defined in this section, see section 171 of this title.

Personal holding company as excluding foreign personal holding company, see section 542 of this title.

Returns of officers, directors, and shareholders of foreign personal holding companies, see section 6035 of this title.

Section Referred to in Other Sections

This section is referred to in sections 171, 312, 465, 532, 542, 551, 553, 554, 555, 562, 898, 1212, 6035, 6103 of this title.