26 U.S.C. § 999 — Reports by taxpayers; determinations

(a)(1) A person, or a member of that person’s controlled group, with operations in or related to a country on the Secretary’s list, or in another country where the person knows or should know that joining or cooperating with an international boycott is required to do business, must report those operations to the Secretary as and when required. If the person is a foreign corporation, only its United States shareholder must report. (2) A taxpayer must report whether the taxpayer, a foreign corporation of which the taxpayer is a United States shareholder, or a controlled-group member participated in, cooperated with, or was asked to participate in or cooperate with a boycott during the tax year, and must describe the related operation. (3) At least quarterly, the Secretary must publish a current list of countries that require or may require such participation or cooperation. (b)(1) If a person or controlled-group member participates or cooperates, all operations in that country and in other countries imposing the boycott as a condition of business are treated as connected with the participation, unless the person clearly proves that a particular operation was separate and identifiable and involved no such participation. (2)(A) A clearly separate and identifiable operation is not treated as part of boycott operations if the person clearly proves no participation in connection with it. (B) A taxpayer may show that operations in one country, or in different countries, are clearly separate and identifiable. (3) A person participates or cooperates if, as a business condition, the person agrees: (A)(i) not to do business with the boycotted country or its government, companies, or nationals; (ii) not to do business with a United States person trading there; (iii) not to do business with a company whose ownership or management includes people of a particular nationality, race, or religion, or to remove or not select directors of that group; (iv) not to employ people of that group; or (B) as a condition of selling a product to that country’s government, company, or national, not to ship or insure it on a carrier owned, leased, or operated by someone who does not participate or cooperate. (4) This section does not apply to agreements to meet a foreign boycott requirement when United States law, regulations, or an Executive Order sanctions participation or cooperation; to obey a ban on importing goods made wholly or partly in the boycotted country; or to obey a country’s ban on exporting products obtained there to the boycotted country. (c)(1) For sections 908(a), 952(a)(3), and 995(b)(1)(F)(ii), the international boycott factor is a regulatory fraction. Its numerator reflects a person’s or controlled group’s worldwide operations in or related to countries associated with a boycott in which the person or group participated or cooperated during the year. Its denominator reflects all worldwide operations. (2) If the taxpayer clearly proves that foreign taxes paid and income earned are attributable to specific operations, use those specific amounts instead of the factor to determine the credit disallowed under section 908(a), the subpart F income addition under section 952(a)(3), and any deemed distribution under section 995(b)(1)(F)(ii). (3) “Worldwide operations” means operations in or related to countries other than the United States. (d) At a taxpayer’s request, the Secretary must decide whether a particular operation is participation or cooperation. The Secretary may decide in advance when that is possible and appropriate. If requested before the operation or before the tax year ends, the Secretary may wait until after the year ends. (e) If a person controls a corporation under section 304(c), boycott participation or cooperation by the corporation is presumed to be by the person, and participation or cooperation by the person is presumed to be by the corporation. (f) A person required to report who willfully fails to do so may, in addition to other penalties, be fined up to $25,000, imprisoned up to one year, or both.