SEC. 70351. Permanent extension of look-thru rule for related controlled foreign corporations.
(a) In general.—Section 954(c)(6)(C) is amended by striking “and before January 1, 2026,”.
(b) Effective date.—The amendment made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2025.
SEC. 70352. Repeal of election for 1-month deferral in determination of taxable year of specified foreign corporations.
(a) In general.—Section 898(c) is amended by striking paragraph (2) and redesignating paragraph (3) as paragraph (2).
(b) Effective date.—The amendments made by this section shall apply to taxable years of specified foreign corporations beginning after November 30, 2025.
(c) Transition rule.—
(1) IN GENERAL.—In the case of a corporation that is a specified foreign corporation as of November 30, 2025, such corporation’s first taxable year beginning after such date shall end at the same time as the first required year (within the meaning of section 898(c)(1) of the Internal Revenue Code of 1986) ending after such date. If any specified foreign corporation is required by the amendments made by this section to change its taxable year for its first taxable year beginning after November 30, 2025—
(A) such change shall be treated as initiated by such corporation,
(B) such change shall be treated as having been made with the consent of the Secretary, and
(C) the Secretary shall issue regulations or other guidance for allocating foreign taxes that are paid or accrued in such first taxable year and the succeeding taxable year among such taxable years in the manner the Secretary determines appropriate to carry out the purposes of this section.
(2) SECRETARY.—For purposes of this subsection, the term “Secretary” means the Secretary of the Treasury or the Secretary’s delegate.
SEC. 70353. Restoration of limitation on downward attribution of stock ownership in applying constructive ownership rules.
(a) In general.—Section 958(b) is amended—
(1) by inserting after paragraph (3) the following:
“(4) Subparagraphs (A), (B), and (C) of section 318(a)(3) shall not be applied so as to consider a United States person as owning stock which is owned by a person who is not a United States person.”, and
(2) by striking “Paragraph (1)” in the last sentence and inserting “Paragraphs (1) and (4)”.
(b) Foreign controlled United States shareholders.—Subpart F of part III of subchapter N of chapter 1 is amended by inserting after section 951A the following new section:
“SEC. 951B. Amounts included in gross income of foreign controlled United States shareholders.
“(a) In general.—In the case of any foreign controlled United States shareholder of a foreign controlled foreign corporation—
“(1) this subpart (other than sections 951A, 951(b), and 957) shall be applied with respect to such shareholder (separately from, and in addition to, the application of this subpart without regard to this section)—
“(A) by substituting ‘foreign controlled United States shareholder’ for ‘United States shareholder’ each place it appears therein, and
“(B) by substituting ‘foreign controlled foreign corporation’ for ‘controlled foreign corporation’ each place it appears therein, and
“(2) section 951A (and such other provisions of this subpart as provided by the Secretary) shall be applied with respect to such shareholder—
“(A) by treating each reference to ‘United States shareholder’ in such section as including a reference to such shareholder, and
“(B) by treating each reference to ‘controlled foreign corporation’ in such section as including a reference to such foreign controlled foreign corporation.
“(b) Foreign controlled United States shareholder.—For purposes of this section, the term ‘foreign controlled United States shareholder’ means, with respect to any foreign corporation, any United States person which would be a United States shareholder with respect to such foreign corporation if—
“(1) section 951(b) were applied by substituting ‘more than 50 percent’ for ‘10 percent or more’, and
“(2) section 958(b) were applied without regard to paragraph (4) thereof.
“(c) Foreign controlled foreign corporation.—For purposes of this section, the term ‘foreign controlled foreign corporation’ means a foreign corporation, other than a controlled foreign corporation, which would be a controlled foreign corporation if section 957(a) were applied—
“(1) by substituting ‘foreign controlled United States shareholders’ for ‘United States shareholders’, and
“(2) by substituting ‘section 958(b) (other than paragraph (4) thereof)’ for ‘section 958(b)’.
“(d) Regulations.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance—
“(1) to treat a foreign controlled United States shareholder or a foreign controlled foreign corporation as a United States shareholder or as a controlled foreign corporation, respectively, for purposes of provisions of this title other than this subpart (including any reporting requirement), and
“(2) with respect to the treatment of foreign controlled foreign corporations that are passive foreign investment companies (as defined in section 1297).”.
(c) Clerical amendment.—The table of sections for subpart F of part III of subchapter N of chapter 1 is amended by inserting after the item relating to section 951A the following new item:
“Sec. 951B. Amounts included in gross income of foreign controlled United States shareholders.”.
(d) Effective date.—The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2025.
(e) Special rule.—
(1) IN GENERAL.—Except to the extent provided by the Secretary of the Treasury (or the Secretary’s delegate), the effective date of any amendment to the Internal Revenue Code of 1986 shall be applied by treating references to United States shareholders as including references to foreign controlled United States shareholders, and by treating references to controlled foreign corporations as including references to foreign controlled foreign corporations.
(2) DEFINITIONS.—Any term used in paragraph (1) which is used in subpart F of part III of subchapter N of chapter 1 of the Internal Revenue Code of 1986 (as amended by this section) shall have the meaning given such term in such subpart.
(f) No inference.—The amendments made by this section shall not be construed to create any inference with respect to the proper application of any provision of the Internal Revenue Code of 1986 with respect to taxable years beginning before the taxable years to which such amendments apply.
SEC. 70354. Modifications to pro rata share rules.
(a) In general.—Subsection (a) of section 951 is amended to read as follows:
“(a) Amounts included.—
“(1) IN GENERAL.—If a foreign corporation is a controlled foreign corporation at any time during a taxable year of the foreign corporation (in this subsection referred to as the ‘CFC year’)—
“(A) each United States shareholder which owns (within the meaning of section 958(a)) stock in such corporation on any day during the CFC year shall include in gross income such shareholder’s pro rata share (determined under paragraph (2)) of the corporation’s subpart F income for the CFC year, and
“(B) each United States shareholder which owns (within the meaning of section 958(a)) stock in such corporation on the last day, in the CFC year, on which such corporation is a controlled foreign corporation shall include in gross income the amount determined under section 956 with respect to such shareholder for the CFC year (but only to the extent not excluded from gross income under section 959(a)(2)).
“(2) PRO RATA SHARE OF SUBPART F INCOME.—A United States shareholder’s pro rata share of a controlled foreign corporation’s subpart F income for a CFC year shall be the portion of such income which is attributable to—
“(A) the stock of such corporation owned (within the meaning of section 958(a)) by such shareholder, and
“(B) any period of the CFC year during which—
“(i) such shareholder owned (within the meaning of section 958(a)) such stock,
“(ii) such shareholder was a United States shareholder of such corporation, and
“(iii) such corporation was a controlled foreign corporation.
“(3) TAXABLE YEAR OF INCLUSION.—Any amount required to be included in gross income by a United States shareholder under paragraph (1) with respect to a CFC year shall be included in gross income for the shareholder’s taxable year which includes the last day on which the shareholder owns (within the meaning of section 958(a)) stock in the controlled foreign corporation during such CFC year.
“(4) REGULATORY AUTHORITY.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance allowing taxpayers to elect, or requiring taxpayers, to close the taxable year of a controlled foreign corporation upon a direct or indirect disposition of stock of such corporation.”.
(b) Coordination with section 951A.—
(1) TESTED INCOME.—Section 951A(b), as redesignated by section 70323(a)(2), is amended—
(A) in paragraph (1)(A), by striking “(determined for each taxable year of such controlled foreign corporation which ends in or with such taxable year of such United States shareholder)”, and
(B) in paragraph (1)(B), by striking “(determined for each taxable year of such controlled foreign corporation which ends in or with such taxable year of such United States shareholder)”.
(2) PRO RATA SHARE.—Section 951A(c), as redesignated by section 70323(a)(2), is amended—
(A) in paragraph (1), by striking “in which or with which the taxable year of the controlled foreign corporation ends” and inserting “determined under section 951(a)(3)”, and
(B) in paragraph (2), by striking “the last day in the taxable year of such foreign corporation on which such foreign corporation is a controlled foreign corporation” and inserting “any day in such taxable year”.
(c) Effective dates.—
(1) IN GENERAL.—The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2025.
(2) TRANSITION RULE FOR DIVIDENDS.—Except to the extent provided by the Secretary of the Treasury (or the Secretary’s delegate), a dividend paid (or deemed paid) by a controlled foreign corporation shall not be treated as a dividend for purposes of applying section 951(a)(2)(B) of the Internal Revenue Code of 1986 (as in effect before the amendments made by this section) if—
(A) such dividend—
(i) was paid (or deemed paid) on or before June 28, 2025, during the taxable year of such controlled foreign corporation which includes such date and the United States shareholder described in section 951(a)(1) of such Code (as so in effect) did not own (within the meaning of section 958(a) of such Code) the stock of such controlled foreign corporation during the portion of such taxable year on or before June 28, 2025, or
(ii) was paid (or deemed paid) after June 28, 2025, and before such controlled foreign corporation’s first taxable year beginning after December 31, 2025, and
(B) such dividend does not increase the taxable income of a United States person that is subject to Federal income tax for the taxable year (including by reason of a dividends received deduction, an exclusion from gross income, or an exclusion from subpart F income).