Internal Revenue Code:Sec. 883. Exclusions from gross income

From TaxAlmanac

Location in Internal Revenue Code

     TITLE 26 - INTERNAL REVENUE CODE
      Subtitle A - Income Taxes
       CHAPTER 1 - NORMAL TAXES AND SURTAXES
        Subchapter N - Tax Based on Income From Sources Within or Without
              the United States
          PART II - NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
           Subpart B - Foreign Corporations
         

Statute

    Sec. 883. Exclusions from gross income
 
    (a) Income of foreign corporations from ships and aircraft
      The following items shall not be included in gross income of a
    foreign corporation, and shall be exempt from taxation under this
    subtitle:
      (1) Ships operated by certain foreign corporations
        Gross income derived by a corporation organized in a foreign
      country from the international operation of a ship or ships if
      such foreign country grants an equivalent exemption to
      corporations organized in the United States.
      (2) Aircraft operated by certain foreign corporations
        Gross income derived by a corporation organized in a foreign
      country from the international operation of aircraft if such
      foreign country grants an equivalent exemption to corporations
      organized in the United States.
      (3) Railroad rolling stock of foreign corporations
        Earnings derived from payments by a common carrier for the use
      on a temporary basis (not expected to exceed a total of 90 days
      in any taxable year) of railroad rolling stock owned by a
      corporation of a foreign country which grants an equivalent
      exemption to corporations organized in the United States.
      (4) Special rules
        The rules of paragraphs (6), (7), and (8) of section 872(b)
      shall apply for purposes of this subsection.
      (5) Special rule for countries which tax on residence basis
        For purposes of this subsection, there shall not be taken into
      account any failure of a foreign country to grant an exemption to
      a corporation organized in the United States if such corporation
      is subject to tax by such foreign country on a residence basis
      pursuant to provisions of foreign law which meets such standards
      (if any) as the Secretary may prescribe.
    (b) Earnings derived from communications satellite system
      The earnings derived from the ownership or operation of a
    communications satellite system by a foreign entity designated by a
    foreign government to participate in such ownership or operation
    shall be exempt from taxation under this subtitle, if the United
    States, through its designated entity, participates in such system
    pursuant to the Communications Satellite Act of 1962 (47 U.S.C. 701
    and following).
    (c) Treatment of certain foreign corporations
      (1) In general
        Paragraph (1) or (2) of subsection (a) (as the case may be)
      shall not apply to any foreign corporation if 50 percent or more
      of the value of the stock of such corporation is owned by
      individuals who are not residents of such foreign country or
      another foreign country meeting the requirements of such
      paragraph.
      (2) Treatment of controlled foreign corporations
        Paragraph (1) shall not apply to any foreign corporation which
      is a controlled foreign corporation (as defined in section
      957(a)).
      (3) Special rules for publicly traded corporations
        (A) Exception
          Paragraph (1) shall not apply to any corporation which is
        organized in a foreign country meeting the requirements of
        paragraph (1) or (2) of subsection (a) (as the case may be) and
        the stock of which is primarily and regularly traded on an
        established securities market in such foreign country, another
        foreign country meeting the requirements of such paragraph, or
        the United States.
        (B) Treatment of stock owned by publicly traded corporation
          Any stock in another corporation which is owned (directly or
        indirectly) by a corporation meeting the requirements of
        subparagraph (A) shall be treated as owned by individuals who
        are residents of the foreign country in which the corporation
        meeting the requirements of subparagraph (A) is organized.
      (4) Stock ownership through entities
        For purposes of paragraph (1), stock owned (directly or
      indirectly) by or for a corporation, partnership, trust, or
      estate shall be treated as being owned proportionately by its
      shareholders, partners, or beneficiaries.  Stock considered to be
      owned by a person by reason of the application of the preceding
      sentence shall, for purposes of applying such sentence, be
      treated as actually owned by such person.
 

Sources

    (Aug. 16, 1954, ch. 736, 68A Stat. 283; Pub. L. 90-622, Sec. 1(a),
    Oct. 22, 1968, 82 Stat. 1311; Pub. L. 94-164, Sec. 6(a), Dec. 23,
    1975, 89 Stat. 975; Pub. L. 99-514, title XII, Sec. 1212(c)(3)-(5),
    Oct. 22, 1986, 100 Stat. 2538; Pub. L. 100-647, title I, Sec.
    1012(e)(1), (2)(A), (5), Nov. 10, 1988, 102 Stat. 3499, 3500; Pub.
    L. 101-239, title VII, Sec. 7811(i)(8)(D), (10), Dec. 19, 1989, 103
    Stat. 2411.)
 

References in Text

                             REFERENCES IN TEXT

    Pub. L. 108-357 Sec. 423. DELAY IN EFFECTIVE DATE OF FINAL REGULATIONS 
    GOVERNING EXCLUSION OF INCOME FROM INTERNATIONAL OPERATION OF SHIPS OR 
    AIRCRAFT.
    Notwithstanding the provisions of Treasury regulation Sec. 1.883-5, 
    the final regulations issued by the Secretary of the Treasury relating 
    to income derived by foreign corporations from the international 
    operation of ships or aircraft (Treasury regulations Sec. 1.883-1 
    through Sec. 1.883-5) shall apply to taxable years of a foreign 
    corporation seeking qualified foreign corporation status beginning after 
    September 24, 2004.

      The Communications Satellite Act of 1962, referred to in subsec.
    (b), is Pub. L. 87-624, Aug. 31, 1962, 76 Stat. 419, as amended,
    which is classified generally to chapter 6 (Sec. 701 et seq.) of
    Title 47, Telegraphs, Telephones, and Radiotelegraphs. For complete
    classification of this Act to the Code, see Short Title note set
    out under section 701 of Title 47 and Tables.
 

Miscellaneous

                                 AMENDMENTS
      2004 - Subsec.419(b),Pub.L.108-357, amended Sec.883(a)(4)
    by striking ``(5), (6), and (7)'' and inserting ``(6), (7), and  
    (8)''.
      1989 - Subsec. (a)(4). Pub. L. 101-239, Sec. 7811(i)(8)(D),
    substituted ''(5), (6), and (7)'' for ''(5) and (6)''.
      Subsec. (a)(5). Pub. L. 101-239, Sec. 7811(i)(10), added par.
    (5).
      1988 - Subsec. (a)(1), (2). Pub. L. 100-647, Sec. 1012(e)(2)(A),
    (5), struck out ''to citizens of the United States and'' after
    ''exemption'' and substituted ''international operation'' for
    ''operation''.
      Subsec. (c)(1). Pub. L. 100-647, Sec. 1012(e)(1)(B), substituted
    ''Paragraph (1) or (2) of subsection (a) (as the case may be)'' for
    ''Paragraphs (1) and (2) of subsection (a)'' and ''such paragraph''
    for ''such paragraphs (1) and (2)''.
      Subsec. (c)(3). Pub. L. 100-647, Sec. 1012(e)(1)(A), substituted
    ''Special rules'' for ''Exception'' in heading and amended text
    generally.  Prior to amendment, text read as follows: ''Paragraph
    (1) shall not apply to any foreign corporation -
        ''(A) the stock of which is primarily and regularly traded on
      an established securities market in the foreign country in which
      such corporation is organized, or
        ''(B) which is wholly owned (either directly or indirectly) by
      another corporation meeting the requirements of subparagraph (A)
      and is organized in the same foreign country as such other
      corporation.''
      1986 - Subsec. (a)(1). Pub. L. 99-514, Sec. 1212(c)(3), added
    par. (1) and struck out former par. (1), ships under foreign flag,
    which read as follows: ''Earnings derived from the operation of a
    ship or ships documented under the laws of a foreign country which
    grants an equivalent exemption to citizens of the United States and
    to corporations organized in the United States.''
      Subsec. (a)(2). Pub. L. 99-514, Sec. 1212(c)(3), added par. (2)
    and struck out former par. (2), aircraft of foreign registry, which
    read as follows: ''Earnings derived from the operation of aircraft
    registered under the laws of a foreign country which grants an
    equivalent exemption to citizens of the United States and to
    corporations organized in the United States.''
      Subsec. (a)(4). Pub. L. 99-514, Sec. 1212(c)(4), added par. (4).
      Subsec. (c). Pub. L. 99-514, Sec. 1212(c)(5), added subsec. (c).
      1975 - Subsec. (a)(3). Pub. L. 94-164 added par. (3).
      1968 - Pub. L. 90-622 designated existing provisions as subsec.
    (a), added subsec. (a) heading, and added subsec. (b).
                      EFFECTIVE DATE OF 1989 AMENDMENT
      Amendment by Pub. L. 101-239 effective, except as otherwise
    provided, as if included in the provision of the Technical and
    Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such
    amendment relates, see section 7817 of Pub. L. 101-239, set out as
    a note under section 1 of this title.
                      EFFECTIVE DATE OF 1988 AMENDMENT
      Amendment by Pub. L. 100-647 effective, except as otherwise
    provided, as if included in the provision of the Tax Reform Act of
    1986, Pub. L. 99-514, to which such amendment relates, see section
    1019(a) of Pub. L. 100-647, set out as a note under section 1 of
    this title.
                      EFFECTIVE DATE OF 1986 AMENDMENT
      Amendment by Pub. L. 99-514 applicable to taxable years beginning
    after Dec. 31, 1986, see section 1212(f) of Pub. L. 99-514, set out
    as a note under section 863 of this title.
                      EFFECTIVE DATE OF 1975 AMENDMENT
      Section 6(b) of Pub. L. 94-164 provided that: ''The amendment
    made by this section (amending this section) shall apply to
    payments made after November 18, 1974.''
                      EFFECTIVE DATE OF 1968 AMENDMENT
      Section 1(b) of Pub. L. 90-622 provided that: ''The amendment
    made by subsection (a) (amending this section) shall apply with
    respect to taxable years beginning after December 31, 1966.''
     APPLICABILITY OF CERTAIN AMENDMENTS BY PUB. L. 99-514 IN RELATION
                   TO TREATY OBLIGATIONS OF UNITED STATES
      For nonapplication of amendment by section 1212(c)(3)-(5) of Pub.
    L. 99-514 to the extent application of such amendment would be
    contrary to any treaty obligation of the United States in effect on
    Oct. 22, 1986, with provision that for such purposes any amendment
    by title I of Pub. L. 100-647 be treated as if it had been included
    in the provision of Pub. L. 99-514 to which such amendment relates,
    see section 1012(aa)(3), (4) of Pub. L. 100-647, set out as a note
    under section 861 of this title.
 

References

                   SECTION REFERRED TO IN OTHER SECTIONS
      This section is referred to in sections 884, 887, 953 of this
    title.