(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).