Final regulations: Amount determined under section 956 for corporate U.S. shareholders

Section 956, corporate U.S. shareholders

The U.S. Treasury Department and IRS today released for publication in the Federal Register final regulations (T.D. 9859) concerning the amount determined under section 956 for corporate U.S. shareholders. The 2017 tax law (Pub. L. No. 115-97) added a participation exemption system for the taxation of certain foreign income. These final regulations are intended to provide that the application of section 956 is consistent with the new participation exemption system.


Today’s final regulations [PDF 301 KB] finalize November 2018 proposed regulations. Read TaxNewsFlash.

The final regulations affect certain domestic corporations that own (or are treated as owning) stock in foreign corporations.


On November 5, 2018, Treasury and the IRS published proposed regulations (REG-114540-18) under section 956. No public hearing was requested or held, and no substantive comments were received with respect to the proposed regulations. The final regulations adopt the proposed regulations, with changes (as described in the preamble):

  • Allocation of hypothetical distribution
  • Domestic partnerships and their partners
  • Revisions to existing examples

Applicability date

The final regulations apply to tax years of a controlled foreign corporation (CFC) beginning on or after the date of publication in the Federal Register (scheduled May 23, 2019). 


The purpose of this report is to provide text of the final regulations.

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