26 U.S.C. § 957 — Controlled foreign corporations; United States persons

(a) General rule. For this title, “controlled foreign corporation^*” means a foreign corporation if, on any day during its tax year, United States shareholders^* own more than 50 percent of either:
(1) The total combined voting power of all voting classes of its stock^*; or
(2) The total value of its stock.
Ownership is measured under section 958(a), or is treated as ownership under the ownership rules in section 958(b).

(b) Special insurance rule. Only for taking into account income described in section 953(a), which concerns insurance income, “controlled foreign corporation” also includes a foreign corporation meeting either ownership test in subsection (a) at more than 25 percent instead of more than 50 percent, if the gross premiums or other consideration for reinsurance or for issuing insurance or annuity contracts not described in section 953(e)(2) are more than 75 percent of the gross premiums or other consideration for all risks. Ownership must be measured under section 958(a) or treated as ownership under section 958(b), and must exist on any day during the corporation's tax year.

(c) United States person. For this subpart, “United States person” has the meaning given in section 7701(a)(30), except as follows.
(1) For a corporation organized under Puerto Rico law, the term does not include an individual who is a bona fide resident of Puerto Rico if a dividend that individual receives from the corporation during the tax year would, under section 933(1), be treated as income from sources within Puerto Rico.
(2) For a corporation organized under the laws of Guam, American Samoa, or the Northern Mariana Islands, the term does not include an individual who is a bona fide resident of Guam, American Samoa, or the Northern Mariana Islands if both conditions apply:
(A) At least 80 percent of the corporation's gross income for the 3-year period ending at the close of the tax year, or for the part of that period during which the corporation or a predecessor existed, came from sources within that possession or was effectively connected with conducting a trade or business^* there; and
(B) At least 50 percent of the corporation's gross income for that period or part came from actively conducting a trade or business in that possession.
For subparagraphs (A) and (B), the Secretary's regulations determine whether income came from actively conducting a trade or business in a possession. This section does not define “United States shareholder^*,” “bona fide resident,” “gross income,” “effectively connected,” or “active conduct.”