3648 Federal Register / Vol. 87, No. 16 / Tuesday, January 25, 2022 / Rules and Regulations 

(Lat. 39°40′43′′ N, long. 75°36′24′′ W) 

That airspace extending upward from the 

surface to and including 2,600 feet MSL 

within a 4.2-mile radius of the New Castle 

Airport. This Class D airspace area is 

effective during the specific dates and times 

established in advance by a Notice to 

Airmen. The effective date and time will 

thereafter be continuously published in the 

Chart Supplement. 

Paragraph 6002 Class E Surface Airspace. 

* * * * * 

AEA DE E2 Wilmington, DE [Amended] 

New Castle Airport, DE 

(Lat. 39°40′43′′ N, long. 75°36′24′′ W) 

Within a 4.2-mile radius of the New Castle 

Airport. This Class E airspace area is effective 

during the specific dates and times 

established in advance by a Notice to 

Airmen. The effective date and time will 

thereafter be continuously published in the 

Chart Supplement. 

AEA NJ E2 Millville, NJ [Amended] 

Millville Municipal Airport, NJ 

(Lat. 39°22′04′′ N, long. 75°04′20′′ W) 

That airspace extending upward from the 

surface within a 4-mile radius of the Millville 

Municipal Airport. 

Paragraph 6005 Class E Airspace Areas 

Extending Upward From 700 Feet or More 

Above the Surface of the Earth. 

* * * * * 

AEA PA E5 Philadelphia, PA [Amended] 

Philadelphia International Airport, PA 

(Lat. 39°52′20′′ N, long. 75°14′26′′ W) 

Chester County G.O. Carlson Airport, PA 

(Lat. 39°58′44′′ N, long. 75°51′56′′ W) 

New Castle Airport, DE 

(Lat. 39°40′43′′ N, long. 75°36′24′′ W) 

Summit Airport, DE 

(Lat. 39°31′16′′ N, long. 75°43′25′′ W) 

Millville Municipal Airport, NJ 

(Lat. 39°22′04′′ N, long. 75°04′20′′ W) 

That airspace extending upward from 700 

feet above the surface within a 31-mile radius 

of Philadelphia International Airport 

extending clockwise from a 225° bearing to 

a 307° bearing from the airport and within a 

37-mile radius of Philadelphia International 

Airport extending from a 307° bearing to a 

053° bearing from the airport and within a 

33-mile radius of Philadelphia International 

Airport extending from a 053° bearing to a 

173° bearing from the airport and within a 

16-mile radius of Philadelphia International 

Airport extending from a 173° bearing from 

the airport to a 225° bearing from the airport, 

and within a 7-mile radius of Chester County 

G.O. Carlson Airport, and within a 6.7-mile 

radius of New Castle Airport, and within an 

8-mile radius of Summit Airport and within 

a 6.5-mile radius of Millville Municipal 

Airport. 

Issued in College Park, Georgia, on January 

19, 2022. 

Andreese C. Davis, 

Manager, Airspace & Procedures Team South, 

Eastern Service Center, Air Traffic 

Organization. 

[FR Doc. 2022–01281 Filed 1–24–22; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9960] 

RIN 1545–BP79 

Guidance Under Section 958 on 

Determining Stock Ownership 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations. 

SUMMARY: This document contains final 

regulations regarding the treatment of 

domestic partnerships for purposes of 

determining amounts included in the 

gross income of their partners with 

respect to foreign corporations. The 

final regulations affect United States 

persons that own stock of foreign 

corporations through domestic 

partnerships and domestic partnerships 

that are United States shareholders of 

foreign corporations. 

DATES: 

Effective date: These regulations are 

effective on January 25, 2022. 

Applicability dates: For dates of 

applicability, see §§ 1.956–1(g)(4) and 

1.958–1(d)(4). 

FOR FURTHER INFORMATION CONTACT: 

Edward J. Tracy at (202) 317–6934 (not 

a toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

On October 10, 2018, the Department 

of the Treasury (‘‘Treasury 

Department’’) and the IRS published 

proposed regulations (REG–104390–18) 

under sections 951, 951A, 1502, and 

6038 in the Federal Register (83 FR 

51072) that included guidance with 

respect to the treatment of domestic 

partnerships that own stock in 

controlled foreign corporations, as 

defined in section 957 (‘‘CFCs’’), for 

purposes of section 951A (the ‘‘2018 

proposed regulations’’). The 2018 

proposed regulations set forth a ‘‘hybrid 

approach’’ that generally treated a 

domestic partnership that is a United 

States shareholder, as defined in section 

951(b) (‘‘U.S. shareholder’’), with 

respect to a CFC (‘‘U.S. shareholder 

partnership’’) as an entity with respect 

to its partners that are not U.S. 

shareholders (‘‘non-U.S. shareholder 

partners’’) but as an aggregate of its 

partners with respect to its partners that 

are U.S. shareholders (‘‘U.S. shareholder 

partners’’). 

On June 21, 2019, the Treasury 

Department and the IRS published final 

regulations (TD 9866) in the Federal 

Register (84 FR 29288, as corrected at 84 

FR 44223, 84 FR 44693, and 84 FR 

53052) under sections 951, 951A, 1502, 

and 6038 that include guidance with 

respect to the treatment of domestic 

partnerships that own stock in CFCs for 

purposes of section 951A (the ‘‘final 

section 951A regulations’’). Instead of 

the ‘‘hybrid approach’’ described in the 

2018 proposed regulations, the final 

section 951A regulations generally treat 

a domestic partnership as an aggregate 

of all of its partners for purposes of 

computing income inclusions under 

section 951A (and other provisions that 

apply by reference to section 951A). 

§ 1.951A–1(e)(1). That is, under the final 

section 951A regulations, partners do 

not take into account a distributive 

share of the partnership’s section 951A 

inclusion with respect to the 

partnership-owned CFCs but instead are 

treated as proportionately owning the 

stock of the partnership-owned CFCs. 

See id. Thus, as in the case of foreign 

partnerships, income inclusions under 

section 951A are determined directly by 

U.S. shareholder partners of a domestic 

partnership that owns CFCs. The final 

section 951A regulations apply to 

taxable years of foreign corporations 

beginning after December 31, 2017, and 

to taxable years of U.S. shareholders in 

which or with which those taxable years 

of foreign corporations end. § 1.951A–7. 

Concurrent with the issuance of the 

final section 951A regulations, the 

Treasury Department and the IRS 

published proposed regulations (REG– 

101828–19) under sections 951, 951A, 

954, 956, 958, and 1502 in the Federal 

Register (84 FR 29114, as corrected at 84 

FR 37807) (the ‘‘2019 proposed 

regulations’’). Consistent with the 

approach adopted in the final section 

951A regulations, the 2019 proposed 

regulations generally extended the 

treatment of domestic partnerships as 

aggregates of their partners for purposes 

of determining income inclusions under 

section 951 and for purposes of 

provisions that apply by reference to 

section 951. Proposed § 1.958–1(d). 

On August 22, 2019, the Treasury 

Department and the IRS published 

Notice 2019–46, 2019–37 I.R.B. 695, 

which announced the intent to issue 

regulations that would permit, in certain 

cases, the ‘‘hybrid approach’’ described 


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Federal Register / Vol. 87, No. 16 / Tuesday, January 25, 2022 / Rules and Regulations 3649 

in the 2018 proposed regulations to be 

applied to domestic partnerships or S 

corporations for taxable years ending 

before June 22, 2019. 

On July 23, 2020, the Treasury 

Department and the IRS published final 

regulations (TD 9902) in the Federal 

Register (85 FR 44620, as corrected at 85 

FR 64040 and 85 FR 79853) related to 

the portion of the 2019 proposed 

regulations under sections 951A and 

954 addressing the treatment of income 

subject to a high rate of foreign tax. 

A notice of proposed rulemaking 

published in the Proposed Rules section 

of this issue of the Federal Register 

(REG–118250–20) provides guidance on 

the treatment of domestic partnerships 

and S corporations that own passive 

foreign investment companies (as 

defined in section 1297(a)) (‘‘PFICs’’) 

and their domestic partners and 

shareholders, as well as on other PFIC 

and CFC-related issues (the ‘‘2022 

proposed PFIC regulations’’). 

This rulemaking finalizes the portion 

of the 2019 proposed regulations that 

generally treat domestic partnerships as 

aggregates of their partners for purposes 

of determining income inclusions under 

section 951 and for purposes of 

provisions that apply specifically by 

reference to section 951 (the ‘‘final 

regulations’’). 

In the 2019 proposed regulations, the 

Treasury Department and the IRS 

requested comments on the other 

provisions in the Internal Revenue Code 

(‘‘Code’’) that apply by reference to 

ownership within the meaning of 

section 958(a) for which aggregate 

treatment for domestic partnerships 

would be appropriate. The 2019 

proposed regulations also requested 

comments on the aggregate treatment of 

domestic partnerships in specific areas, 

including for purposes of determining 

the controlling domestic shareholders of 

a CFC and for purposes of applying the 

PFIC regime. The Treasury Department 

and the IRS received three comments in 

response to the 2019 proposed 

regulations, each of which were 

considered in these final regulations. No 

public hearing on the 2019 proposed 

regulations was held because there were 

no requests to speak. 

Summary of Comments and 

Explanation of Revisions 

Comments outside the scope of this 

rulemaking are generally not addressed 

but may be considered in connection 

with future guidance projects. All 

written comments received in response 

to the proposed regulations that are 

being finalized in this rulemaking are 

available at www.regulations.gov or 

upon request. 

I. Application of Section 956 

Subject to certain exceptions, the 

2019 proposed regulations treated 

domestic partnerships as aggregates of 

their partners for purposes of sections 

951 and 951A and for purposes of any 

other provision that applies by reference 

to section 951 or section 951A. 

Proposed § 1.958–1(d)(1) and (2). 

Although section 951(a)(1)(B) requires a 

U.S. shareholder of a CFC to include in 

gross income the amount determined 

under section 956 with respect to the 

U.S. shareholder (to the extent not 

excluded from gross income under 

section 959(a)(2)), section 956 itself does 

not specifically apply by reference to 

section 951 (or section 951A). 

Accordingly, the final regulations clarify 

that aggregate treatment of domestic 

partnerships applies for purposes of 

section 956(a) and any provisions that 

specifically apply by reference to 

section 956(a) (such as § 1.956–1(a)(2)) 

to ensure that a U.S shareholder partner 

determines a section 956 amount with 

respect to CFCs owned through a 

domestic partnership as part of the U.S. 

shareholder partner’s section 951(a) 

inclusion. § 1.958–1(d)(1) and (d)(3)(iii). 

Aggregate treatment does not apply, 

however, for purposes of section 956(c) 

or (d) (or provisions that apply by 

reference to these sections) because 

treating a domestic partnership as an 

entity separate from its partners is more 

appropriate to carry out the purposes of 

these provisions. See, e.g., § 1.956–4(e) 

(providing rules concerning the 

application of section 956 to, for 

example, obligations of partnerships). 

As discussed in the preamble to the 

2019 proposed regulations, the 

treatment of a partnership as an entity 

or an aggregate is determined in part 

based on the policies underlying the 

specific provision at issue. See 84 FR 

29115–29116. 

To avoid similar confusion regarding 

the scope of § 1.958–1(d), the final 

regulations replace the language ‘‘any 

other provision that applies by 

reference’’ to section 951 or section 

951A in proposed § 1.958–1(d)(1) with 

‘‘any provision that specifically applies 

by reference’’ to section 951, section 

951A, or section 956(a). The addition of 

the word ‘‘specifically’’ is intended to 

clarify that the rule in § 1.958–1(d) 

applies only to the particular provision 

within a Code section or regulation that 

applies specifically by reference to 

section 951, section 951A, or section 

956(a) rather than the section or 

regulation in its entirety. Additionally, 

the final regulations clarify that the rule 

in § 1.958–1(d)(1) applies for purposes 

of any provision that specifically 

applies by reference to regulations 

issued under or relating to the sections 

identified in § 1.958–1(d)(1). 

Corresponding revisions are made to the 

cross references to § 1.958–1(d) 

provided in §§ 1.951–1(a)(4) and 

1.951A–1(e). 

Certain existing final regulations treat 

domestic partnerships as entities 

separate from their partners for 

purposes of section 956. § 1.956– 

1(a)(2)(i) and (iii) and (a)(3)(iv). Because 

this treatment is inconsistent with the 

aggregate approach, the 2019 proposed 

regulations modified the applicability 

date of these provisions so they would 

cease to apply once the 2019 proposed 

regulations were finalized. Proposed 

§ 1.956–1(g)(4). Rather than modifying 

the applicability dates as was done in 

the 2019 proposed regulations, however, 

the final regulations simply remove 

these provisions. Accordingly, because 

those provisions are being removed as 

part of the final regulations, the 

proposed applicability date provisions 

under section 956 are no longer relevant 

and are not being finalized. 

II. Passive Foreign Investment 

Companies 

The preamble to the 2019 proposed 

regulations requested comments with 

respect to the application of the PFIC 

regime to domestic partnerships that 

directly or indirectly own PFIC stock, 

particularly with respect to whether 

elections and income inclusions are 

more appropriate at the level of the 

domestic partnership or at the level of 

its partners. 84 FR 29120. Comments 

were received regarding PFIC elections 

and inclusions, the CFC overlap rule in 

section 1297(d), and other PFIC-related 

issues involving domestic partnerships. 

These comments are addressed in the 

2022 proposed PFIC regulations in order 

to provide taxpayers additional 

opportunity to comment. 

III. Related Person Insurance Income 

Section 952(a) provides that subpart F 

income includes insurance income, as 

defined in section 953. Under section 

953(c)(2), related person insurance 

income (‘‘RPII’’) is any insurance 

income (as defined in section 953(a)) 

attributable to a policy of insurance or 

reinsurance that directly or indirectly 

insures a United States shareholder (as 

defined in section 953(c)(1)(A)) of the 

controlled foreign corporation (as 

defined in section 953(c)(1)(B)), or a 

person related to the United States 

shareholder. 

A comment requested that aggregate 

treatment be applied for purposes of 

determining RPII such that there would 

only be RPII to the extent of the 


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domestic partnership’s domestic 

partners, which is the same result as for 

foreign partnerships. The Treasury 

Department and the IRS agree that 

aggregate principles should apply for 

purposes of section 953(c). However, in 

order to provide taxpayers an additional 

opportunity to comment, this comment 

is addressed in the 2022 proposed PFIC 

regulations. 

IV. Controlling Domestic Shareholders 

The ‘‘controlling domestic 

shareholders’’ of a CFC make certain 

elections with respect to the CFC, such 

as electing the method of calculating the 

CFC’s earnings and profits under section 

964(a) and electing to exclude tentative 

gross tested income items from gross 

tested income under section 

951A(c)(2)(A)(i)(III). See §§ 1.964–1(c)(3) 

and 1.951A–2(c)(7)(viii). Under § 1.964– 

1(c)(5)(i), the controlling domestic 

shareholders of a CFC are the U.S. 

shareholders that, in the aggregate, own 

(within the meaning of section 958(a)) 

more than 50 percent of the total 

combined voting power of all classes of 

stock of the CFC entitled to vote and 

that undertake to act on the CFC’s 

behalf. If the ownership requirement is 

not satisfied, the controlling domestic 

shareholders of the CFC are all of the 

U.S. shareholders that own (within the 

meaning of section 958(a)) stock of the 

CFC. Id. 

With respect to U.S. shareholder 

partnerships, the 2019 proposed 

regulations did not apply aggregate 

treatment for purposes of determining a 

CFC’s controlling domestic 

shareholders, and a domestic 

partnership could qualify as a 

controlling domestic shareholder of the 

CFC. Proposed § 1.958–1(d)(2). The 

preamble to the 2019 proposed 

regulations requested comments on 

whether aggregate treatment should 

apply in this context so that some or all 

of the U.S. shareholder partners, rather 

than the partnership, would make 

elections applicable to the CFC for 

purposes of sections 951 and 951A. 84 

FR 29119. One comment was received 

that recommended, on balance, that 

aggregate treatment should not apply for 

purposes of determining the controlling 

domestic shareholders of CFCs under 

§ 1.964–1(c)(5)(i). 

The final regulations do not extend 

aggregate treatment for determining the 

controlling domestic shareholders of a 

CFC under § 1.964–1(c)(5)(i). However, 

the Treasury Department and the IRS 

believe that aggregate treatment should 

apply to domestic partnerships for 

purposes of determining the controlling 

domestic shareholders of a CFC under 

§ 1.964–1(c)(5). Thus, the 2022 proposed 

PFIC regulations revise § 1.958–1(d)(2) 

to provide that aggregate treatment 

applies for purposes of determining the 

controlling domestic shareholders of a 

CFC. This change is included in the 

2022 proposed PFIC regulations to give 

taxpayers an additional opportunity to 

comment. 

V. Previously Taxed Earnings and 

Profits and Basis Adjustments 

The preamble to the 2019 proposed 

regulations noted that, historically, 

domestic partnerships had been treated 

as owning stock within the meaning of 

section 958(a) for purposes of 

determining their section 951 

inclusions, and, thus, previously taxed 

earnings and profits (‘‘PTEP’’) accounts 

under section 959 were maintained, and 

related basis adjustments under section 

961 were made, at the partnership level. 

84 FR 29119. As a result, comments 

were requested on appropriate rules, 

such as necessary adjustments to PTEP 

and related basis amounts, for the 

transition to the aggregate approach to 

domestic partnerships described in the 

2019 proposed regulations once those 

regulations were finalized. 84 FR 

29119–20. These issues, and the 

comments received, are beyond the 

scope of this rulemaking and therefore 

are not addressed herein; however, the 

Treasury Department and the IRS intend 

to address these comments in a separate 

guidance project involving PTEP (the 

‘‘proposed PTEP regulations’’). The 

proposed PTEP regulations will provide 

guidance on a broad range of issues, 

such as the maintenance of PTEP 

accounts under section 959, the 

treatment of PTEP distributions, and 

basis adjustments under section 961, 

including with respect to CFCs held by 

partnerships. 

VI. Application of Section 1248 

The preamble to the 2019 proposed 

regulations stated that, subject to certain 

exceptions, aggregate treatment of 

domestic partnerships applied only 

with respect to sections 951 and 951A, 

and any provision that applies by 

reference to sections 951 and 951A, and, 

therefore, did not apply for any other 

purpose of the Code, including section 

1248. 84 FR 29119. Comments were 

received regarding section 1248, 

including with respect to dispositions 

by domestic partnerships of CFC stock, 

dispositions of interests in domestic 

partnerships that own CFC stock, and 

the interaction between section 1248 

and section 751. 

The final regulations do not address 

these comments, which are beyond the 

scope of this rulemaking. The Treasury 

Department and the IRS recognize, 

however, that section 1248 applies in 

part by reference to section 951 and 

section 951A (in the latter case, as a 

result of section 951A(f)(1)(A)). See 

section 1248(b)(1)(A) and (d)(1). 

Therefore, the final regulations clarify 

that the aggregate approach set forth in 

§ 1.958–1(d)(1) does not apply for 

purposes of section 1248, which is 

consistent with the intended scope of 

the rules as described in the preamble 

to the 2019 proposed regulations. 

§ 1.958–1(d)(2)(iv). The final regulations 

do not affect the application of 

§ 1.1248–1(a)(4). Future guidance, 

including the proposed PTEP 

regulations, may address the application 

of section 1248(b)(1)(A) and (d)(1) to 

transactions involving a domestic 

partnership’s sale of a CFC, such as the 

transaction described in Rev. Rul. 69– 

124, 1969–1 C.B. 203. 

VII. Non-Grantor Trusts and Estates 

The preamble to the 2019 proposed 

regulations requested comments on 

whether aggregate treatment should be 

extended to other pass-through entities 

such as certain trusts or estates. In 

response to this request, one comment 

recommended that aggregate treatment 

not be extended to domestic non-grantor 

trusts and domestic estates, noting that 

there is no corollary authority to section 

7701(a)(4) (authorizing the treatment of 

domestic partnerships as not domestic 

when the context requires) which would 

permit the Treasury Department and the 

IRS to treat domestic non-grantor trusts 

and domestic estates as not domestic. 

The comment further noted that if the 

domestic non-grantor trust or domestic 

estate had a section 951(a) or section 

951A inclusion but did not distribute 

the income to its beneficiaries, the trust 

or estate itself would be liable for tax on 

that income (unlike a partnership); thus, 

two separate taxing regimes could be 

necessary if an aggregate approach were 

limited to distributed income. Finally, 

the comment suggested that identifying 

U.S. shareholders of a CFC the stock of 

which is owned by a domestic nongrantor trust or a domestic estate would 

be complex if the trust or estate had 

discretionary beneficiaries. 

Although aggregate treatment of 

domestic partnerships for purposes of 

sections 951 and 951A (and provisions 

that specifically apply by reference to 

those sections) is not based on the grant 

of authority under section 7701(a)(4), 

the Treasury Department and the IRS 

nevertheless agree, for the other reasons 

stated in the comment, that aggregate 

treatment should not be extended to 

domestic non-grantor trusts and 

domestic estates. 


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1A U.S. shareholder partner’s liability could 

differ under an aggregate or entity approach if, for 

example, the partner is a U.S. shareholder partner 

Continued 

VIII. Other Changes 

The final section 951A regulations 

generally adopted aggregate treatment of 

domestic partnerships for purposes of 

section 951A. § 1.951A–1(e). The 

preamble to the 2019 proposed 

regulations noted that once those 

regulations were finalized, § 1.951A– 

1(e) would be unnecessary because that 

rule would be subsumed by § 1.958– 

1(d). 84 FR 29119. The preamble to the 

2019 proposed regulations further noted 

that § 1.951–1(h), which treated certain 

controlled domestic partnerships as 

foreign partnerships for purposes of 

determining the stock of a CFC owned 

(within the meaning of section 958(a)) 

by a U.S. person, would similarly be 

unnecessary. Id. No comments 

addressed those proposed regulations. 

As a result, § 1.951A–1(e) is amended to 

remove paragraphs (e)(1) through (3) 

and include a general cross-reference to 

§ 1.958–1(d) in § 1.951A–1(e) for the 

treatment of domestic partnerships for 

purposes of section 951A. The final 

regulations also remove paragraph (h) of 

§ 1.951–1. 

IX. Applicability Dates 

A. Application Before Finalization Date 

Proposed § 1.958–1(d)(4) provided 

that the regulations under section 958 

would apply to taxable years of foreign 

corporations beginning on or after the 

date the final regulations are published 

in the Federal Register (the 

‘‘finalization date’’) and to taxable years 

of U.S. persons in which or with which 

such taxable years of the foreign 

corporations end (the ‘‘general 

applicability rule’’). However, domestic 

partnerships could apply the 

regulations, when finalized, to taxable 

years of a foreign corporation beginning 

after December 31, 2017, and to taxable 

years of the domestic partnership in 

which or with which such taxable years 

of the foreign corporation end, subject to 

the requirement that the partnership, its 

U.S. shareholder partners, and other 

related domestic partnerships and their 

U.S. shareholder partners consistently 

apply the regulations with respect to all 

foreign corporations the partnerships 

own (within the meaning of section 

958(a), determined without regard to 

proposed § 1.958–1(d)(1)) (the ‘‘prefinalization applicability option’’). 

Proposed § 1.958–1(d)(4). The 2019 

proposed regulations also permitted 

domestic partnerships, their U.S. 

shareholder partners, and related 

domestic partnerships and their U.S. 

shareholder partners to rely on 

proposed § 1.958–1(d)(4), subject to the 

same consistency requirement (the 

‘‘reliance option’’). See 84 FR 29119. 

One comment made several 

recommendations with respect to the 

applicability date of proposed § 1.958– 

1(d). First, the comment suggested that 

the reference to a ‘‘domestic 

partnership’’ in the pre-finalization 

applicability option was inconsistent 

with the reference to ‘‘U.S. persons’’ in 

the general applicability rule and 

recommended that the final regulations 

be revised to reference ‘‘U.S. person’’ in 

both places. With respect to the 

consistency requirements (including 

consistency between years), the 

comment suggested that U.S. persons 

owning stock of a foreign corporation 

through a domestic partnership be 

allowed to take individual positions as 

to whether to apply the pre-finalization 

applicability option, subject to all 

related partners taking the same 

position. The comment noted that an 

individualized approach would allow 

non-U.S. shareholder partners to decide 

whether to be subject to section 951 

inclusions or potentially to be subject to 

the PFIC regime during the period 

before the finalization date and would 

not materially impact U.S. shareholder 

partners. 

The reference to ‘‘domestic 

partnerships’’ and their U.S. 

shareholder partners in the prefinalization applicability option was 

intentional. Although the general 

applicability rule applies to all affected 

U.S. persons, certain persons may 

choose to apply the regulations before 

the finalization date. By limiting this 

group of persons to domestic 

partnerships and their U.S. shareholder 

partners (and related domestic 

partnerships), the rule aims to strike a 

balance between identifying a small 

group of persons who may be able to 

coordinate with respect to the decision 

to apply the pre-finalization 

applicability option versus all persons 

that may be affected by that decision. 

Accordingly, the suggested revision to 

reference ‘‘U.S. persons’’ in the prefinalization applicability option is not 

adopted. 

In addition, the suggested revision 

would allow partners to take 

individualized positions with respect to 

the pre-finalization applicability option 

and could cause significant 

administrative, partnership accounting, 

and reporting difficulties. For example, 

if each partner were allowed to take an 

individual position on the applicability 

date of the regulations, partners 

following the general applicability rule 

(regardless of the extent of their 

ownership) might receive a distributive 

share of the partnership’s section 951 

inclusions while U.S. shareholder 

partners applying the pre-finalization 

applicability option have direct section 

951 inclusions. The Treasury 

Department and the IRS believe that 

consistency among all affected parties in 

applying the pre-finalization 

applicability option is important for 

proper administration of the regulations. 

As a result, the Treasury Department 

and the IRS have determined that the 

difficulty posed by an individualized 

approach outweighs the potential 

benefit the approach would provide to 

a partner, and this comment is not 

adopted. The Treasury Department and 

the IRS are aware that, given the 

potential scope of the consistency 

requirement, it may be difficult to meet 

in more widely held partnership 

structures, and thus application of the 

pre-finalization applicability option 

may be limited. 

The comment recommended that if 

the individualized approach is not 

adopted, the final regulations should 

require a formal election in order to 

apply the pre-finalization applicability 

option instead of the consistency 

requirement. The election would be 

made only by a domestic partnership 

and all related domestic partnerships 

and would be binding on all domestic 

partners. The comment asserted that 

this approach would clarify the 

application of the pre-finalization 

applicability option by avoiding 

potential uncertainty as to whether all 

U.S. shareholder partners took a 

consistent position. The comment 

further suggested that a partnershiponly election to apply the prefinalization applicability option would 

prevent U.S. shareholder partners from 

refusing, without justification, to act in 

accordance with the partnership’s 

election. 

The Treasury Department and the IRS 

have determined that, although the 

consistency requirement among all 

related domestic partnerships and their 

U.S. shareholder partners may be 

difficult to meet in certain cases, 

requiring consistency among all persons 

required to apply the pre-finalization 

applicability option is important for 

proper administration of the rules. 

Absent this requirement, U.S. 

shareholder partners could choose not 

to amend their returns, and therefore 

continue to report under the entity 

approach, even though the partnership 

and other partners amended their 

returns and reported under the aggregate 

approach pursuant to the prefinalization applicability option.1 In 


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with respect to some, but not all, of the CFCs that 

are owned by the domestic partnership. 

addition, maintaining the U.S. 

shareholder consistency requirement 

minimizes administrative, partnership 

accounting, and reporting difficulties 

(for example, in connection with PTEP 

accounts) that could arise if a 

partnership-only election were adopted 

and one or more U.S. shareholder 

partners chose not to amend their 

returns in accordance with the 

partnership’s election. The consistency 

requirement is also expected to enhance 

compliance and administration at the 

U.S. shareholder partner-level with 

respect to amended returns (or 

administrative adjustment requests) 

because it requires more coordination 

between the partnership and its partners 

than a partnership-only election would 

require. Under either approach, if a 

partnership chooses the pre-finalization 

applicability option on an amended 

return (or by initiating an administrative 

adjustment request), any U.S. 

shareholder partner would receive 

updated information that it no longer 

has a distributive share of the 

partnership’s section 951 inclusions but 

would still need to take into account 

section 951 inclusions directly under 

the aggregate approach. Further, the 

Treasury Department and the IRS are 

concerned that the lack of coordination 

involved in a partnership-only election, 

as opposed to the consistency 

requirement, may create uncertainty at 

the U.S. shareholder partner level as to 

whether the partner merely accounts for 

the reduction in the distributive share 

from the partnership or must also 

directly take into account income 

inclusions. Accordingly, this comment 

is not adopted. 

The comment also requested that the 

final regulations clarify whether the prefinalization applicability option is 

available if all required parties file 

amended returns. The Treasury 

Department and the IRS confirm that, 

subject to the consistency requirement, 

a domestic partnership may apply the 

regulations on an amended return or 

through initiating an administrative 

adjustment request under section 6227. 

In instances where a domestic 

partnership files an amended return 

(that is, in the case of partnerships not 

subject to sections 6221 through 6241), 

its partners (both U.S. shareholder 

partners and non-U.S. shareholder 

partners) will likely need to also file 

amended returns in order to satisfy the 

consistency requirement. 

Finally, the comment expressed 

concern for cases in which a domestic 

partnership filed its income tax return 

for calendar year 2018 before the 

issuance of the 2019 proposed 

regulations reporting section 951 

inclusions by the partnership in 

accordance with then current law 

(including issuing Schedules K–1 to its 

partners) but subsequently filed a 

superseding original or amended return 

for such taxable year relying on the 2019 

proposed regulations. In that case, the 

comment recommended that the ability 

to rely on the 2019 proposed regulations 

should not be contingent upon all U.S. 

shareholder partners filing superseding 

or amended returns on the same basis 

and that all partners should be 

permitted to decide separately whether 

to file a superseding or amended return 

to rely on the proposed regulations. The 

comment further recommended that, if 

a non-U.S. shareholder partner decides 

to rely on the proposed regulations and 

the foreign corporation is also a PFIC, 

the mechanism for the non-U.S. 

shareholder partner to make a QEF or 

mark-to-market election under section 

1295 or section 1296, respectively, 

should be simplified and that purging 

elections should not be required solely 

due to the status of the CFC/PFIC during 

the period before the general 

applicability rule applies. The comment 

analogized these recommendations to 

relief provided in Notice 2019–46, 

which permitted domestic partnerships 

and partners to file returns for 2018 

applying the hybrid approach in the 

2018 proposed regulations rather than 

the aggregate approach adopted by the 

final section 951A regulations. 

The Treasury Department and the IRS 

believe that, in all cases, proper 

administration of the regulations before 

the general applicability rule requires 

the satisfaction of the consistency 

requirement in § 1.958–1(d)(4)(i) and 

precludes the ability of non-U.S. 

shareholder partners to unilaterally 

apply the regulations. Therefore, the 

final regulations do not adopt more 

permissive rules because a domestic 

partnership filed a tax return and issued 

Schedule K–1s to its partners before the 

issuance of the 2019 proposed 

regulations. Furthermore, the Treasury 

Department and the IRS find this 

situation sufficiently different from the 

relief provided in Notice 2019–46 for 

domestic partnerships that had already 

reported a different position on a 

Schedule K–1 based on the 2018 

proposed regulations. Although the final 

section 951A regulations applied 

retroactively and superseded the 2018 

proposed regulations, the notice 

provided flexibility to apply the 2018 

proposed regulations due to the 

compliance burdens associated with the 

change from the hybrid approach in the 

2018 proposed regulations to the 

aggregate approach in the final section 

951A regulations and the relatively 

short period until the extended filing 

deadline for calendar-year partnerships. 

This same concern does not exist here 

because, before the prospective 

application of the regulations under the 

general applicability rule, taxpayers 

were permitted to rely on the 2019 

proposed regulations (in accordance 

with proposed § 1.958–1(d)(4)) or to 

continue to apply prior law. 

Accordingly, the final regulations do not 

adopt these comments. 

B. Different Taxable Years of the 

Partnership, Partners, and CFC 

Proposed § 1.958–1(d)(4) provided 

that § 1.958–1(d), when finalized, would 

apply to taxable years of foreign 

corporations beginning on or after the 

finalization date and to taxable years of 

U.S. persons in which or with which the 

taxable years of the foreign corporations 

end. A comment noted that, under this 

rule, in certain circumstances where a 

fiscal year U.S. shareholder partnership 

with U.S. shareholder partners has a 

different taxable year than its CFC and 

U.S. shareholder partners, the 

applicability date could cause the U.S. 

shareholder partners to have two years 

of section 951 inclusions in the same 

taxable year with respect to the same 

CFC—that is, a distributive share of the 

partnership’s section 951 inclusion from 

the CFC’s last taxable year before the 

application of the final regulations, and 

a direct section 951 inclusion with 

respect to the first taxable tax year of the 

CFC subject to the final regulations. For 

example, if a U.S. shareholder 

partnership has a June 30 taxable year 

and both the CFC it owns and its U.S. 

shareholder partners have a calendar 

taxable year, the final regulations 

would, under the general applicability 

rule, first apply to the CFC’s taxable 

year ending December 31, 2022. 

Accordingly, for its taxable year ending 

December 31, 2022, the U.S. shareholder 

partners would have a distributive share 

of the partnership’s section 951 

inclusion for the CFC’s taxable year 

ending December 31, 2021 (for the U.S. 

shareholder partnership’s taxable year 

ending June 30, 2022) and would also 

have a direct section 951 inclusion for 

the CFC’s taxable year ending December 

31, 2022. The comment suggested that if 

the result in the example is intended, 

the Treasury Department and the IRS 

should consider treating the transition 

to aggregate treatment as a change in 

method of accounting with an 

accompanying spread in reporting the 

second inclusion under section 481. 


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2 In the first taxable year to which the aggregate 

approach applies, the U.S. shareholder partner 

could in certain cases have two section 951 

inclusions: (1) Its distributive share of the 

partnership’s section 951 inclusion for the CFC’s 

last taxable year that begins before January 25, 2022, 

and (2) its own section 951 inclusion for the CFC’s 

first taxable year beginning on or after January 25, 

2022. However, these inclusions represent subpart 

F income with respect to two different taxable years 

of the CFC. Therefore, there is no duplication or 

omission of the CFC’s subpart F income to the U.S. 

shareholder partner. 

3 Data are from IRS’s Research, Applied 

Analytics, and Statistics division based on data 

available in the Compliance Data Warehouse. 

Category 4 filer includes a U.S. person who had 

control of a foreign corporation during the annual 

accounting period of the foreign corporation. 

Category 5 includes a U.S. shareholder who owns 

stock in a foreign corporation that is a CFC and who 

owned that stock on the last day in the tax year of 

the foreign corporation in that year in which it was 

a CFC. For full definitions, see https://www.irs.gov/ 

pub/irs-pdf/i5471.pdf. 

The result described by the comment 

(the possibility of a U.S. shareholder 

partner having, in one of its taxable 

years, a distributive share of a 

partnership’s section 951(a) inclusion 

with respect to a CFC for one taxable 

year of the CFC as well as the U.S. 

shareholder partner’s own section 

951(a) inclusion with respect to the CFC 

for the CFC’s subsequent taxable year) is 

intended. In situations where a 

partnership and a partner have different 

taxable years, the partner can generally 

achieve deferral on its share of the 

partnership’s income to the extent of the 

difference between its taxable year and 

the partnership’s required taxable year. 

However, under the final regulations, 

because a domestic partnership is not 

treated as owning stock of a CFC within 

the meaning of section 958(a) for 

purposes of computing income 

inclusions with respect to a CFC under 

section 951 and section 951A, the 

applicable taxable year for income 

inclusions arising as a result of a 

domestic partnership’s ownership of the 

CFC is the U.S. shareholder partner’s 

taxable year, not the partnership’s 

taxable year. As a result, the final 

regulations eliminate any deferral of 

income inclusions under section 951 

and section 951A for a U.S. shareholder 

partner with respect to any CFC owned 

by the U.S. shareholder partnership. 

This elimination of a U.S. shareholder 

partner’s deferral with respect to income 

of any CFC owned by the U.S. 

shareholder partnership, combined with 

the partner’s existing deferral of section 

951 income inclusions before the 

application of the final regulations, 

causes the U.S. shareholder partner to 

recognize two years of section 951 

income inclusions with respect to any 

CFC owned by the U.S. shareholder 

partnership in this transition taxable 

year. 

The Treasury Department and the IRS 

considered whether the adoption of the 

aggregate approach should be viewed as 

a change in method of accounting under 

section 446 and, if so, whether an 

adjustment should be imposed under 

section 481. The Treasury Department 

and the IRS determined that the 

adoption of the aggregate approach is 

not a change in method of accounting. 

Accordingly, no adjustment under 

section 481 should be imposed. 

Further, even if the adoption of the 

aggregate approach were considered to 

be a change in accounting method, the 

Treasury Department and the IRS do not 

believe imposing an adjustment under 

section 481 would be appropriate as 

part of such change. Section 481(a) 

adjustments are intended to prevent the 

permanent duplication or omission of 

income or expense that would otherwise 

arise as a result of a change in 

accounting method. However, the 

change to the aggregate approach under 

section 958 does not give rise to an 

omission or duplication of any item of 

income or expense. Under the prior 

entity approach, the domestic 

partnership would be treated as the 

foreign corporation’s owner under 

section 958(a) and would take into 

account its applicable section 951 

inclusion in its taxable year in which or 

with which such foreign corporation’s 

taxable year ends. The partnership’s 

section 951 inclusion would, in turn, be 

included in each partner’s distributive 

share and would be recognized by each 

partner in the partner’s taxable year in 

which or with which the partnership’s 

taxable year ends. 

By contrast, under the new aggregate 

approach, each U.S. shareholder partner 

of the partnership will be treated as an 

owner of the foreign corporation under 

section 958(a). As a result, each partner 

will have its own section 951 inclusion 

for the foreign corporation’s taxable 

years beginning on or after January 25, 

2022 and will recognize the section 951 

inclusion in its taxable year in which or 

with which the foreign corporation’s 

taxable year ends.2 Therefore, the 

partners would not have a permanent 

duplication or omission of income or 

expense that would otherwise arise as a 

result of a change in accounting method 

and require a section 481(a) adjustment. 

Special Analyses 

I. Regulatory Planning and Review— 

Economic Analysis 

These regulations are not subject to 

review under section 6(b) of Executive 

Order 12866 pursuant to the 

Memorandum of Agreement (April 11, 

2018) between the Treasury Department 

and the Office of Management and 

Budget regarding review of tax 

regulations. 

II. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3520) (‘‘PRA’’) 

generally requires that a federal agency 

obtain the approval of the OMB before 

collecting information from the public, 

whether such collection of information 

is mandatory, voluntary, or required to 

obtain or retain a benefit. 

There are no information collection 

requirements associated with these final 

regulations. 

III. Regulatory Flexibility Act 

It is hereby certified that these final 

regulations will not have a significant 

economic impact on a substantial 

number of small entities within the 

meaning of section 601(6) of the 

Regulatory Flexibility Act (5 U.S.C. 

chapter 6). 

The final regulations may affect a 

substantial number of small entities, but 

the economic impact is not likely to be 

significant. These regulations treat 

domestic partnerships as an aggregate of 

their partners for purposes of section 

951, which reduces the burden on 

taxpayer partners that are not U.S. 

shareholders of a CFC owned by a 

partnership because these partners are 

no longer subject to section 951 

inclusions with respect to CFCs held by 

the partnership. The regulations may 

also reduce burden on domestic 

partnerships that hold CFCs because 

these partnerships are no longer 

required to calculate their partners’ 

distributive share of the partnerships’ 

section 951 inclusions, which will 

likely lower their compliance costs. In 

addition, the regulations do not impose 

a collection of information burden on 

any person, including small entities. 

The Treasury Department and the IRS 

estimate that approximately 7,500 U.S. 

partnerships that own CFCs e-filed at 

least one Form 5471 as Category 4 or 5 

filers in 2018.3 These partnerships had 

approximately 1.75 million domestic 

and foreign partners. To estimate the 

impact of the final regulations related to 

domestic partnerships on small entities, 

the Treasury Department and the IRS 

reviewed the percentage of filers that 

own CFCs by class size based on gross 

receipts. For 2018, the smaller size 

classes constituted a relatively small 

fraction of filers that own CFCs, 

suggesting that many domestic small 

business entities would be unaffected by 

these regulations. Further, domestic 

partnerships should only constitute a 


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portion of the smaller size classes of 

filers that own CFCs. 

Consequently, the Treasury 

Department and the IRS have 

determined that the final regulations 

will not have a significant economic 

impact on a substantial number of small 

entities. Accordingly, it is hereby 

certified that these regulations will not 

have a significant economic impact on 

a substantial number of small entities. 

IV. Section 7805(f) 

Pursuant to section 7805(f), the 

proposed regulations preceding the final 

regulations (the 2019 proposed 

regulations) were submitted to the Chief 

Counsel for Advocacy of the Small 

Business Administration for comment 

on their impact on small business. No 

comments were received. 

V. Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 requires 

that agencies assess anticipated costs 

and benefits and take certain other 

actions before issuing a final rule that 

includes any Federal mandate that may 

result in expenditures in any one year 

by a state, local, or tribal government, in 

the aggregate, or by the private sector, of 

$100 million in 1995 dollars, updated 

annually for inflation. These regulations 

do not include any Federal mandate that 

may result in expenditures by state, 

local, or tribal governments, or by the 

private sector in excess of that 

threshold. 

VI. Executive Order 13132: Federalism 

Executive Order 13132 (entitled 

‘‘Federalism’’) prohibits an agency from 

publishing any rule that has federalism 

implications if the rule either imposes 

substantial, direct compliance costs on 

state and local governments, and is not 

required by statute, or preempts state 

law, unless the agency meets the 

consultation and funding requirements 

of section 6 of the Executive order. 

These regulations do not have 

federalism implications and do not 

impose substantial direct compliance 

costs on state and local governments or 

preempt state law within the meaning of 

the Executive order. 

Drafting Information 

The principal author of these 

regulations is Edward J. Tracy of the 

Office of Associate Chief Counsel 

(International). However, other 

personnel from the Treasury 

Department and the IRS participated in 

their development. 

Statement of Availability of IRS 

Documents 

IRS Revenue Procedures, Revenue 

Rulings, Notices, and other guidance 

cited in this document are published in 

the Internal Revenue Bulletin and are 

available from the Superintendent of 

Documents, U.S. Government 

Publishing Office, Washington, DC 

20402, or by visiting the IRS website at 

https://www.irs.gov. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

Adoption of Amendments to the 

Regulations 

Accordingly, 26 CFR part 1 is 

amended as follows: 

PART 1—INCOME TAXES 

■ Paragraph 1. The authority citation 

for part 1 continues to read in part as 

follows: 

Authority: 26 U.S.C. 7805. 

* * * * * 

■ Par. 2. Section 1.951–1 is amended 

by: 

■ 1. Adding paragraph (a)(4); 

■ 2. Removing paragraph (h); 

■ 3. Redesignating paragraph (i) as 

paragraph (h); and 

■ 4. Removing the last sentence of 

newly redesignated paragraph (h). 

The addition reads as follows: 

§ 1.951–1 Amounts included in gross 

income of United States shareholders. 

(a) * * * 

(4) See § 1.958–1(d) for rules 

regarding the ownership of stock of a 

foreign corporation through a domestic 

partnership for purposes of section 951 

and for purposes of any provision that 

specifically applies by reference to 

section 951 or the regulations in this 

part under section 951. 

* * * * * 

■ Par. 3. Section 1.951A–1 is amended 

by revising paragraph (e) to read as 

follows: 

§ 1.951A–1 General provisions. 

* * * * * 

(e) Stock owned through domestic 

partnerships. See § 1.958–1(d) for rules 

regarding the ownership of stock of a 

foreign corporation through a domestic 

partnership for purposes of section 

951A and for purposes of any provision 

that specifically applies by reference to 

section 951A or the section 951A 

regulations. 

* * * * * 

■ Par. 4. Section 1.956–1 is amended 

by: 

■ 1. Adding a sentence at the end of 

paragraph (a)(1); 

■ 2. Removing the last sentence of 

paragraph (a)(2)(i); 

■ 3. Removing paragraphs (a)(2)(iii) and 

(a)(3)(iv); 

■ 4. Redesignating paragraph (a)(3)(v) as 

paragraph (a)(3)(iv); 

■ 5. Revising the newly redesignated 

paragraph (a)(3)(iv) heading; and 

■ 6. Adding a sentence at the end of 

paragraph (g)(4). 

The additions and revision read as 

follows: 

§ 1.956–1 Shareholder’s pro rata share of 

the average of the amounts of United States 

property held by a controlled foreign 

corporation. 

(a) * * * (1) * * * See § 1.958–1(d) 

for rules regarding the ownership of 

stock of a foreign corporation through a 

domestic partnership for purposes of 

section 956(a) and for purposes of any 

provision that specifically applies by 

reference to section 956(a) or the 

regulations in this part under section 

956 that relate to section 956(a). 

* * * * * 

(3) * * * 

(iv) Example 4. * * * 

* * * * * 

(g) * * * 

(4) * * * For taxable years of 

controlled foreign corporations 

beginning before January 25, 2022, and 

taxable years of United States 

shareholders in which or with which 

such taxable years of foreign 

corporations end, see § 1.956–1(a)(2)(i) 

and (iii) and (a)(3)(iv) as in effect and 

contained in 26 CFR part 1, as revised 

April 1, 2021. 

* * * * * 

■ Par. 5. Section 1.958–1 is amended 

by: 

■ 1. Redesignating paragraph (d) as 

paragraph (f); and 

■ 2. Adding a new paragraph (d) and 

reserved paragraph (e). 

The additions read as follows: 

§ 1.958–1 Direct and indirect ownership of 

stock. 

* * * * * 

(d) Stock of foreign corporations 

owned through domestic partnerships— 

(1) In general. Except as otherwise 

provided in paragraph (d)(2) of this 

section, for purposes of sections 951, 

951A, and 956(a), and for purposes of 

any provision that specifically applies 

by reference to any of such sections or 

the regulations in this part under 

section 951, 951A, or 956 (but only as 

the regulations in this part under 

section 956 relate to section 956(a)), a 

domestic partnership is not treated as 

owning stock of a foreign corporation 


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within the meaning of section 958(a). 

For purposes of determining the persons 

that own stock of the foreign 

corporation within the meaning of 

section 958(a) when the preceding 

sentence applies, stock of a foreign 

corporation owned by a domestic 

partnership is treated in the same 

manner as stock of a foreign corporation 

owned by a foreign partnership under 

section 958(a)(2) and paragraph (b) of 

this section. 

(2) Non-application for certain 

purposes. Paragraph (d)(1) of this 

section does not apply for purposes of— 

(i) Determining whether any United 

States person is a United States 

shareholder (as defined in section 

951(b)); 

(ii) Determining whether any foreign 

corporation is a controlled foreign 

corporation (CFC) (as defined in section 

957(a)); 

(iii) Applying section 956(c) and (d); 

(iv) Applying section 1248; or 

(v) Determining whether any United 

States shareholder is a controlling 

domestic shareholder (as defined in 

§ 1.964–1(c)(5)). 

(3) Examples. The following examples 

illustrate the application of this 

paragraph (d). 

(i) Example 1—(A) Facts. USP, a 

domestic corporation, and Individual A, 

a United States citizen unrelated to 

USP, own 95% and 5%, respectively, of 

PRS, a domestic partnership. PRS owns 

100% of the single class of stock of FC, 

a foreign corporation. 

(B) Analysis—(1) United States 

shareholder and CFC determinations. 

Under paragraphs (d)(2)(i) and (ii) of 

this section, respectively, the 

determination of whether PRS, USP, 

and Individual A (each a United States 

person) are United States shareholders 

of FC, and whether FC is a controlled 

foreign corporation, is made without 

regard to paragraph (d)(1) of this 

section. PRS, a United States person, 

owns 100% of the total combined voting 

power or value of the FC stock within 

the meaning of section 958(a). 

Accordingly, PRS is a United States 

shareholder under section 951(b), and 

FC is a controlled foreign corporation 

under section 957(a). USP is also a 

United States shareholder of FC because 

it owns 95% of the total combined 

voting power or value of the FC stock 

under sections 958(b) and 318(a)(2)(A). 

Individual A, however, is not a United 

States shareholder of FC because 

Individual A owns only 5% of the total 

combined voting power or value of the 

FC stock under sections 958(b) and 

318(a)(2)(A). 

(2) Application of sections 951 and 

951A. Under paragraph (d)(1) of this 

section, for purposes of sections 951 and 

951A, PRS is not treated as owning 

(within the meaning of section 958(a)) 

the FC stock; instead, for purposes of 

determining the persons that own the 

FC stock within the meaning of section 

958(a), the FC stock is treated as if it 

were owned by a foreign partnership 

under paragraph (b) of this section. 

Therefore, for purposes of sections 951 

and 951A, USP is treated as owning 

95% of the FC stock under section 

958(a), and Individual A is treated as 

owning 5% of the FC stock under 

section 958(a). USP is a United States 

shareholder of FC, and therefore USP 

determines its income inclusions under 

sections 951 and 951A directly with 

respect to FC based on its ownership of 

FC stock under section 958(a). However, 

because Individual A is not a United 

States shareholder of FC, Individual A 

does not have an income inclusion 

under section 951 with respect to FC or 

a pro rata share of any amount of FC for 

purposes of section 951A. This is the 

case even though PRS is a United States 

shareholder of FC. 

(ii) Example 2—(A) Facts. USP, a 

domestic corporation, and Individual A, 

a United States citizen, own 90% and 

10%, respectively, of PRS1, a domestic 

partnership. PRS1 and Individual B, a 

nonresident alien individual, own 90% 

and 10%, respectively, of PRS2, a 

domestic partnership. PRS2 owns 100% 

of the single class of stock of FC, a 

foreign corporation. USP, Individual A, 

and Individual B are unrelated to each 

other. 

(B) Analysis—(1) United States 

shareholder and CFC determinations. 

Under paragraphs (d)(2)(i) and (ii) of 

this section, the determination of 

whether PRS1, PRS2, USP, and 

Individual A (each a United States 

person) are United States shareholders 

of FC, and whether FC is a controlled 

foreign corporation, is made without 

regard to paragraph (d)(1) of this 

section. PRS2 owns 100% of the total 

combined voting power or value of the 

FC stock within the meaning of section 

958(a). Accordingly, PRS2 is a United 

States shareholder under section 951(b), 

and FC is a controlled foreign 

corporation under section 957(a). Under 

sections 958(b) and 318(a)(2)(A), PRS1 

is treated as owning 90% of the FC stock 

owned by PRS2. Accordingly, PRS1 is 

also a United States shareholder under 

section 951(b). Further, under section 

958(b)(2), PRS1 is treated as owning 

100% of the FC stock for purposes of 

determining the FC stock treated as 

owned by USP and Individual A under 

section 318(a)(2)(A). Therefore, USP is 

treated as owning 90% of the FC stock 

under section 958(b) (100% × 100% × 

90%), and Individual A is treated as 

owning 10% of the FC stock under 

section 958(b) (100% × 100% × 10%). 

Accordingly, both USP and Individual 

A are also United States shareholders of 

FC under section 951(b). 

(2) Application of sections 951 and 

951A. Under paragraph (d)(1) of this 

section, for purposes of sections 951 and 

951A, PRS1 and PRS2 are not treated as 

owning (within the meaning of section 

958(a)) the FC stock; instead, for 

purposes of determining the persons 

that own the FC stock within the 

meaning of section 958(a), as the FC 

stock is treated as if it were owned by 

foreign partnerships under paragraph (b) 

of this section. Therefore, for purposes 

of determining the amount included in 

gross income under sections 951 and 

951A, under section 958(a) USP is 

treated as owning 81% (100% × 90% × 

90%) of the FC stock, and Individual A 

is treated as owning 9% (100% × 90% 

× 10%) of the FC stock. Because USP 

and Individual A are both United States 

shareholders of FC, USP and Individual 

A determine their respective inclusions 

under sections 951 and 951A directly 

with respect to FC based on their 

ownership of FC stock under section 

958(a). This is the case even though 

PRS2 is a United States shareholder of 

FC. 

(iii) Example 3—(A) Facts. Individual 

A, a United States citizen, Individual B, 

a United States citizen unrelated to 

Individual A, and Individual C, a 

foreign person unrelated to both 

Individuals A and B, own 10%, 5%, and 

85%, respectively, of PRS, a domestic 

partnership. PRS owns 100% of the 

single class of stock of FC, a foreign 

corporation. FC holds an account 

receivable from PRS that constitutes an 

obligation of a United States person 

within the meaning of section 

956(c)(1)(C) and § 1.956–2(a)(1)(iii). 

(B) Analysis—(1) United States 

shareholder and CFC determinations. 

Under paragraphs (d)(2)(i) and (ii) of 

this section, respectively, the 

determination of whether PRS, 

Individual A, and Individual B (each a 

United States person) are United States 

shareholders of FC, and whether FC is 

a controlled foreign corporation, is 

made without regard to paragraph (d)(1) 

of this section. PRS, a United States 

person, owns 100% of the total 

combined voting power or value of the 

FC stock within the meaning of section 

958(a). Accordingly, PRS is a United 

States shareholder under section 951(b), 

and FC is a controlled foreign 

corporation under section 957(a). 

Individual A is also a United States 

shareholder of FC because it owns 10% 

of the total combined voting power or 


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3656 Federal Register / Vol. 87, No. 16 / Tuesday, January 25, 2022 / Rules and Regulations 

value of the FC stock under sections 

958(b) and 318(a)(2)(A). Individual B, 

however, is not a United States 

shareholder of FC because Individual B 

owns only 5% of the total combined 

voting power or value of the FC stock 

under sections 958(b) and 318(a)(2)(A). 

(2) Application of section 956(a). 

Under paragraph (d)(1) of this section, 

for purposes of section 956(a), PRS is 

not treated as owning (within the 

meaning of section 958(a)) the FC stock; 

instead, for purposes of determining the 

persons that own the FC stock within 

the meaning of section 958(a), as the FC 

stock is treated as if it were owned by 

a foreign partnership under paragraph 

(b) of this section. Therefore, for 

purposes of section 956(a), under 

section 958(a) Individual A is treated as 

owning 10% of the FC stock, and 

Individual B is treated as owning 5% of 

the FC stock. Individual A is a United 

States shareholder of FC, and therefore 

Individual A determines the amount it 

must include in gross income under 

section 951(a)(1)(B) by reason of the PRS 

obligation held by FC based on its 

ownership of FC stock under section 

958(a) as determined under paragraph 

(d)(1) of this section. However, because 

Individual B is not a United States 

shareholder of FC, Individual B does not 

have an amount to include in income 

under sections 956(a) and 951(a)(1)(B). 

(3) Application of section 956(c) and 

(d). Under paragraph (d)(2)(iii) of this 

section, for purposes of section 956(c) 

and (d), the determination of whether 

FC holds United States property is made 

without regard to paragraph (d)(1) of 

this section. Therefore, PRS is treated as 

owning stock of FC within the meaning 

of section 958(a) for purposes of 

determining the amount of United 

States property held by FC arising from 

its note receivable from PRS. 

(4) Applicability dates—(i) 

Paragraphs (d)(1) through (3) of this 

section. Paragraphs (d)(1) through (3) of 

this section apply to taxable years of 

foreign corporations beginning on or 

after January 25, 2022, and to taxable 

years of United States persons in which 

or with which such taxable years of 

foreign corporations end. For taxable 

years of a foreign corporation that 

precede the taxable years described in 

the preceding sentence, a domestic 

partnership may apply paragraphs (d)(1) 

through (3) of this section in their 

entirety to taxable years of a foreign 

corporation beginning after December 

31, 2017, and to taxable years of the 

domestic partnership in which or with 

which such taxable years of the foreign 

corporation end, provided that the 

partnership, its partners that are United 

States shareholders of the foreign 

corporation, and other domestic 

partnerships that bear relationships 

described in section 267(b) or 707(b) to 

the partnership (and their United States 

shareholder partners) consistently apply 

paragraphs (d)(1) through (3) of this 

section with respect to all foreign 

corporations whose stock the domestic 

partnerships own within the meaning of 

section 958(a) (determined without 

regard to paragraph (d)(1) of this 

section). 

(ii) Rules applicable before January 

25, 2022. For taxable years of foreign 

corporations beginning before January 

25, 2022, and to taxable years of United 

States persons in which or with which 

such taxable years of foreign 

corporations end, see §§ 1.951–1(h) and 

1.951A–1(e) as in effect and contained 

in 26 CFR part 1, as revised April 1, 

2021. 

(e) [Reserved] 

* * * * * 

■ Par. 6. Section 1.1502–51 is amended 

by revising the last sentence in 

paragraph (b) to read as follows: 

§ 1.1502–51 Consolidated section 951A. 

* * * * * 

(b) * * * In addition, see § 1.951A– 

1(e) (cross-referencing § 1.958–1(d)). 

* * * * * 

Douglas W. O’Donnell, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: December 8, 2021. 

Lily Batchelder, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 2022–00066 Filed 1–24–22; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[Docket Number USCG–2022–0031] 

RIN 1625–AA00 

Safety Zone; Potomac River, Between 

Charles County, MD, and King George 

County, VA 

AGENCY: Coast Guard, DHS. 

ACTION: Temporary final rule. 

SUMMARY: The Coast Guard is 

establishing a temporary safety zone for 

certain waters of the Potomac River. 

This action is necessary to provide for 

the safety of persons, and the marine 

environment from the potential safety 

hazards associated with construction 

operations at the new Governor Harry 

W. Nice/Senator Thomas ‘‘Mac’’ 

Middleton Memorial (US–301) Bridge, 

which will occur from 8 p.m. on January 

22, 2022, through 8 p.m. on February 4, 

2022. This rule will prohibit persons 

and vessels from being in the safety 

zone unless authorized by the Captain 

of the Port, Maryland-National Capital 

Region or a designated representative. 

DATES: This rule is effective without 

actual notice from January 25, 2022, 

through 8 p.m. on February 4, 2022. For 

the purposes of enforcement, actual 

notice will be issued from 8 p.m. on 

January 22, 2022, until January 25, 2022. 

ADDRESSES: To view documents 

mentioned in this preamble as being 

available in the docket, go to https://

www.regulations.gov, type USCG–2022– 

0031 in the search box and click 

‘‘Search.’’ Next, in the Document Type 

column, select ‘‘Supporting & Related 

Material.’’ 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this rule, call or 

email Mr. Ron Houck, Sector MarylandNCR, Waterways Management Division, 

U.S. Coast Guard: telephone 410–576– 

2674, email Ronald.L.Houck@uscg.mil. 

SUPPLEMENTARY INFORMATION: 

I. Table of Abbreviations 

CFR Code of Federal Regulations 

COTP Captain of the Port 

DHS Department of Homeland Security 

FR Federal Register 

§ Section 

TFR Temporary Final Rule 

U.S.C. United States Code 

II. Background Information and 

Regulatory History 

On January 14, 2022, SkanskaCorman-McLean, Joint Venture notified 

the Coast Guard that the company will 

be setting structural steel sections across 

the federal navigation channel at the 

new Governor Harry W. Nice/Senator 

Thomas ‘‘Mac’’ Middleton Memorial 

(US–301) Bridge. The bridge contractor 

stated the work required to set structural 

steel across the channel, originally 

scheduled to occur in November 2021, 

then rescheduled to December 2021, 

and again rescheduled to January 3–15, 

2022, was scheduled to occur January 

11–22, 2022. However, unexpected 

mechanical issues on the large crane 

required to perform the work halted 

operations and caused additional 

delays. The work is now scheduled to 

occur from January 22, 2022, through 

February 4, 2022. 

The work described by the contractor 

requires the movement in and anchoring 

at multiple points of a large crane barge 

within the federal navigation channel. 


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