PUBLIC LAWS-CH. 289-MAY 28, 1938 4nte, p. 504 . Taxes of foreign subsidiary. Proportion of for- eign tax on dividends received deemed to have been paid. Proviso. Limitation on credit. "Accumulated prof- its" defined. Determination of, by Commissioner. Accounting period for foreign corpora- tion. "Year" construed. Corporations treated as foreign. Corporations receiv- ing income from U. S . possessions. Post, p. 632 . China Trade Act corporations. Post, p . 633. Returns and pay- ment of tax. Consolidated re- turns of railroad cor- porations. By affiliated group in lieu of separate returns. Condition. Commissioner (1) the total amount of income derived from sources without the United States, determined as provided in section 119, (2) the amount of income derived from each country, the tax paid or accrued to which is claimed as a credit under this section, such amount to be determined under rules and regulations prescribed by the Commissioner with the approval of the Secretary, and (3) all other information necessary for the verification and computation of such credits. (f) TAXES OF FOREIGN SUBSIDmAR.- For the purposes of this sec- tion a domestic corporation which owns a majority of the voting stock of a foreign corporation from which it receives dividends in any taxable year shall be deemed to have paid the same proportion of any income, war-profits, or excess-profits taxes paid by such for- eign corporation to any foreign country or to any possession of the United States, upon or with respect to the accumulated profits of such foreign corporation from which such dividends were paid, which the amount of such dividends bears to the amount of such accumulated profits: Provided,That the amount of tax deemed to have been paid under this subsection shall in no case exceed the same proportion of the tax against which credit is taken which the amount of such dividends bears to the amount of the entire net income of the domes- tic corporation in which such dividends are included. The term "accumulated profits" when used in this subsection in reference to a foreign corporation, means the amount of its gains, profits, or income in excess of the income, war-profits, and excess-profits taxes imposed upon or with respect to such profits or income; and the Commissioner with the approval of the Secretary shall have full power to determine from the accumulated profits of what year or years such dividends were paid; treating dividends paid in the first sixty days of any year as having been paid from the accumulated profits of the preceding year or years (unless to his satisfaction shown otherwise), and in other respects treating dividends as having been paid from the most recently accumulated gains, profits, or earn- ings. In the case of a foreign corporation, the income, war-profits, and excess-profits taxes of which are determined on the basis of an accounting period of less than one year, the word "year" as used in this subsection shall be construed to mean such accounting period. (g) CORPoRATIONS TREATED AS FOREIGN. - For the purposes of this section the following corporations shall be treated as foreign cor- porations: (1) A corporation entitled to the benefits of section 251, by reason of receiving a large percentage of its gross income from sources within a possession of the United States; (2) A corporation organized under the China Trade Act, 1922, and entitled to the credit provided for in section 262. Supplement D-Returns and Payment of Tax [Supplementary to Subtitle B, Part V] SEC. 141. CONSOLIDATED RETURNS OF RAILROAD CORPORATIONS. (a) PRIVILEGE TO FILE CONSOLIDATED RETURNS. -An affiliated group of corporations shall, subject to the provisions of this section, have the privilege of making a consolidated return for the taxable year in lieu of separate returns. The making of a consolidated return shall be upon the condition that all the corporations which have been members of the affiliated group at any time during the tax- able year for which the return is made consent to all the regulations under subsection (b) (or, in case such regulations are not prescribed 508 [52 STAT.
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