While writing about new section 245A of the Internal Revenue Code, my colleague exclaimed, “Eureka!” upon recognizing that the term “United States shareholder” (U.S. shareholder) in section 245A, though not expressly defined for the purposes of section 245A, is within the scope of the amended definition in section 951(b). Indeed, Pub. L. No. 115-97 (2017 tax act), which was enacted on December 22, 2017, expanded application of that definition to all of title 26 of the U.S. Code (i.e., the Internal Revenue Code) rather than being limited to subpart F, i.e., subpart F of subtitle A, chapter 1, subchapter N, part III of title 26. I agree with my colleague’s reading, and this short note summarizes our shared rationale.
The definition of a U.S. shareholder is contained in section 951(b). Before amendment by the 2017 tax act, the definition of U.S. shareholder started with the phrase, “For purposes of this subpart, the term ‘United States shareholder’ means…” Thus, its application was limited to subpart F of subtitle A, chapter 1, subchapter N, part III of the Internal Revenue Code. Section 951(b) itself is in subpart F (i.e., sections 951 through 965 of the Internal Revenue Code). Under section 951(b) as amended, a U.S. shareholder is generally a U.S. person who owns, or is considered as owning, 10% or more of the total combined voting power of all classes of stock entitled to vote of a foreign corporation or 10% or more of the total value of shares of all classes of stock of a foreign corporation. Before the 2017 amendment, U.S. shareholder status was determined solely based on voting power.
The 2017 tax act substituted the phrase “for purposes of this title” for the phrase “for purposes of this subpart” in section 951(b). Some Internal Revenue Code provisions that refer to U.S. shareholders do so by explicitly cross-referencing section 951(b). For example, section 958(b) provides in part: “the effect is to treat any United States person as a United States shareholder within the meaning of section 951(b)” (emphasis added). That specificity was arguably unnecessary before the 2017 amendment to section 951(b) because the section 951(b) definition applied for purposes of subpart F, and section 958, like section 951, occurs in subpart F. The 2017 tax act did not amend that language in section 958(b), and it seems no more necessary now than it did before the enactment of the 2017 tax act. The current section 951(b) definition applies for purposes of title 26, which obviously includes both sections 951 and 958.
An explicit cross-reference to the section 951(b) definition might, however, be welcome in other parts of title 26. The 2017 tax act introduced several new provisions outside of subpart F that use the term U.S. shareholder (e.g., sections 91, 245A, 246(c)(5), and 267A), but none of those include a cross-reference to section 951(b). This inconsistency may seem confusing, but the phrase “for purposes of this title” in section 951(b) is unequivocal, and having found it, the amended definition of U.S. shareholder ought to be interpreted to apply to all of the Internal Revenue Code.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)