
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC552]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
   Subchapter G--Corporations Used to Avoid Income Tax on Shareholders
 
              PART III--FOREIGN PERSONAL HOLDING COMPANIES
 
Sec. 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; Pub. L. 94-455, title XIX, 
Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 98-369, div. 
A, title I, Sec. 132(c)(2), July 18, 1984, 98 Stat. 666; Pub. L. 99-514, 
title XII, Sec. 1222(b), title XVIII, Sec. 1810(h)(1), Oct. 22, 1986, 
100 Stat. 2557, 2829; Pub. L. 100-647, title I, Sec. 1012(bb)(1)(C), 
Nov. 10, 1988, 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, Sec. 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, Sec. 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 [Secs. 1101-1147 and 1171-1177] or title XVIII 
[Secs. 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.

                  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.
