§962 Assistant
Internal Revenue Code §962
Be taxed as a corporation on your CFC income.
A §962 election lets an individual U.S. shareholder apply corporate tax rules to GILTI / NCTI and Subpart F inclusions — unlocking the §250 deduction and deemed-paid foreign tax credits. The §962 Assistant turns that election into a complete, ready-to-file package in minutes.
Generates the election statement plus Forms 8992 · 8993 · 1118
individual rate
pre-credit rate
- Enacted
- Revenue Act of 1962 · P.L. 87-834
- Applies to
- Individual U.S. shareholders of a CFC
- Income
- Subpart F · GILTI / NCTI
- Statute
- 26 U.S.C. §962
- Election
- Annual · Treas. Reg. §1.962-2
Overview
A way for individuals to claim corporate-only benefits
U.S. shareholders of a controlled foreign corporation must include their share of the CFC’s Subpart F income and GILTI / NCTI each year — whether or not any cash is distributed. By default, an individual pays tax on that income at ordinary rates and gets none of the relief a corporation would.
Who is a U.S. shareholder? Generally a U.S. person who owns 10% or more of the vote or value of a foreign corporation. A CFC is a foreign corporation more than 50% owned (by vote or value) by such U.S. shareholders.
A §962 election lets an individual U.S. shareholder (and certain trusts and estates) elect to be taxed at corporate rates on Subpart F and GILTI / NCTI inclusions — as if the income passed through a hypothetical domestic C corporation.
That fiction is what unlocks the value: the electing individual can claim the §250 deduction against GILTI / NCTI and a deemed-paid (indirect) foreign tax credit under §960 for the income taxes the CFC already paid abroad — credits that are otherwise unavailable to an individual filing directly.
One legal fiction, carried through to the end
The election treats your CFC income as if a domestic C corporation stood between you and the foreign company. That single assumption drives everything — including a trade-off you accept when the cash finally comes home.
Insert a hypothetical corporation
Your Subpart F and GILTI / NCTI inclusions are computed as if earned by a domestic C corporation you notionally own.
Apply corporate rates & the §250 deduction
The income is taxed at 21%, reduced by the §250 deduction on GILTI / NCTI — roughly halving the base.
Credit the foreign taxes already paid
Under §960, the CFC’s foreign income taxes flow through as a deemed-paid credit — often wiping out the residual U.S. tax.
Settle up on distribution
When the earnings are later actually distributed, the amount above the U.S. tax already paid is taxed again as a dividend under §962(d).
Real benefits, real trade-offs
A §962 election is not automatically the right move. It is a model-it-out decision that turns on foreign tax rates and what happens when the money is distributed.
Why shareholders elect
- Lower current rate. Corporate 21% in place of individual rates up to 37%.
- The §250 deduction. Cuts the GILTI / NCTI base by 50% (2025) or 40% (2026+).
- Indirect foreign tax credit. The CFC’s foreign taxes become creditable under §960 — otherwise lost.
- Often a near-zero U.S. tax on the inclusion when the CFC is taxed abroad at a reasonable rate.
- No need to actually form a U.S. corporation to get corporate treatment.
What to watch for
- A second tax on distribution. Earnings above the U.S. tax already paid are taxed again as a dividend.
- Added complexity. Corporate-style computations and extra forms each year.
- State conformity varies. Many states don’t follow the federal §962 result.
- Currency translation. Foreign taxes and E&P must be translated under §986.
- It’s annual. The analysis has to be revisited every year.
How it came to be
From a 1962 fairness rule to a modern planning tool
Section 962 has been in the Code since the Kennedy administration. For most of its life it sat unused — then two tax reforms, six decades apart, brought it back into daily practice.
Born with Subpart F
Congress enacts §962 in the Revenue Act of 1962, alongside the original Subpart F regime that first taxed U.S. shareholders on undistributed CFC earnings. At the time the top individual rate reached 91% and corporations paid 52% — and individuals could not claim the indirect foreign tax credits available to corporations.
·76
The intent on the record
Treasury issues the §962 regulations. The legislative history is explicit: the purpose is to ensure an individual’s tax on foreign earnings they have not received is “no heavier than they would have been had they invested in an American corporation doing business abroad.” Parity — not a loophole — was the goal.
–2017
Decades of obscurity
With the corporate rate (35%) and the top individual rate (39.6%) close together, the election rarely paid off. Most practitioners never used it, and many had never heard of it.
Tax reform revives it
The Tax Cuts and Jobs Act cuts the corporate rate to 21% and creates GILTI under §951A, a new current tax on most CFC income. Suddenly an individual taxed at up to 37% on GILTI — with no §250 deduction and no indirect credit — has a powerful reason to elect corporate treatment.
Confirmed for GILTI
Proposed regulations confirm that individuals making a §962 election may apply it to GILTI inclusions and take the §250 deduction — settling the question and cementing the election’s revival.
GILTI becomes NCTI
The One Big Beautiful Bill Act renames GILTI to net CFC tested income (NCTI) for tax years beginning after December 31, 2025. It trims the §250 deduction to a permanent 40%, raises the deemed-paid credit to 90%, and removes the QBAI carve-out — reshaping, but not retiring, the §962 calculation.
The numbers
What the election does to the rate
The headline benefit is rate, deduction, and credit working together. The figures shifted for tax years beginning after 2025 under the OBBBA — here is the before-and-after on GILTI / NCTI.
| On GILTI / NCTI income | No electionindividual | §962 — TY 2025GILTI | §962 — TY 2026+NCTI · OBBBA |
|---|---|---|---|
| Tax rate applied | up to 37% | 21% | 21% |
| §250 deduction | none | 50% | 40% |
| Effective rate before credits | up to 37% | 10.5% | 12.6% |
| On GILTI / NCTI income | No electionindividual | §962 — TY 2025GILTI | §962 — TY 2026+NCTI · OBBBA |
|---|---|---|---|
| Deemed-paid foreign tax credit | none | 80% | 90% |
| QBAI carve-out | — | 10% | eliminated |
| Foreign rate to zero out U.S. tax | — | ≈ 13.1% | ≈ 14% |
| On GILTI / NCTI income | No electionindividual | §962 — TY 2025GILTI | §962 — TY 2026+NCTI · OBBBA |
|---|---|---|---|
| Tax rate applied | up to 37% | 21% | 21% |
| §250 deduction | none | 50% | 40% |
| Effective rate before credits | up to 37% | 10.5% | 12.6% |
| Deemed-paid foreign tax credit | none | 80% | 90% |
| QBAI carve-out | — | 10% | eliminated |
| Foreign rate to zero out U.S. tax | — | ≈ 13.1% | ≈ 14% |
Individual rates also may carry the 3.8% net investment income tax. Figures are general; the actual result depends on the CFC’s country, its foreign effective rate, and expected distributions.
The paperwork
A statement, plus three forms
A §962 election is more than a checkbox. It is a written statement attached to the return, backed by the calculations the IRS expects to see. The §962 Assistant produces all of it.
U.S. Shareholder Calculation of GILTI
Computes your net CFC tested income inclusion — the starting point for the whole election.
Section 250 Deduction
Calculates the deduction that reduces the GILTI / NCTI base to its effective rate.
Foreign Tax Credit — Corporations
Claims the deemed-paid credit under §960 — the corporate FTC form, used because you’ve elected corporate treatment.
The election statement
The election statement itself is attached to your Form 1040. CFC ownership is reported separately on Form 5471.
Questions
§962 election, answered
The Basics
What is a Section 962 election?
It lets an individual U.S. shareholder (and certain trusts and estates) of a CFC choose to be taxed at corporate rates on Subpart F and GILTI / NCTI inclusions. The income is treated as if it passed through a hypothetical domestic C corporation, which lets the individual claim the §250 deduction and a deemed-paid foreign tax credit under §960 — benefits otherwise reserved for corporate shareholders.
Who can make the election?
Any individual who is a U.S. shareholder of a CFC — generally a U.S. person owning 10% or more of the vote or value of the foreign corporation — with a Subpart F or GILTI / NCTI inclusion. Trusts and estates may elect as well. It cannot be made by a corporation.
How does it actually lower my tax?
Without it, GILTI / NCTI and Subpart F are taxed at individual rates up to 37%, with no §250 deduction and no indirect credit. With it, the income is taxed at 21%, reduced by the §250 deduction (50% through 2025; 40% from 2026), and offset by deemed-paid foreign tax credits (80% through 2025; 90% from 2026). When the CFC is taxed abroad at a reasonable rate, the residual U.S. tax is frequently small or zero.
Filing
What forms do I need to file?
A written §962 election statement attached to your return, plus Form 8992 (GILTI / NCTI), Form 8993 (the §250 deduction), and Form 1118 (the foreign tax credit). The §962 Assistant generates the statement and all three forms. CFC ownership is reported separately on Form 5471.
Is the election permanent or annual?
Annual. Under Treasury Regulation §1.962-2, you make it each year on a timely filed return by attaching the required statement. It can be made (or not) year by year as the facts change.
History & Changes
Why was §962 created in 1962?
It was enacted in the Revenue Act of 1962 (P.L. 87-834) with the original Subpart F rules. With individual rates then as high as 91% and no indirect foreign tax credit for individuals, Congress added §962 so an individual’s tax on undistributed CFC earnings would be no heavier than if they had invested through a U.S. corporation doing business abroad. The aim was parity.
What changed under the OBBBA for 2026?
For tax years beginning after December 31, 2025, GILTI is renamed net CFC tested income (NCTI). The §250 deduction drops from 50% to a permanent 40% (raising the pre-credit effective corporate rate from 10.5% to 12.6%), the §960 deemed-paid credit rises from 80% to 90%, and the QBAI / net deemed tangible income return carve-out is eliminated so all CFC tested income is captured.
Distributions
What’s the catch on distributions?
Under §962(d), when the previously taxed earnings are later actually distributed, the portion exceeding the U.S. tax already paid on the original inclusion is included in income again as a dividend. That second layer is the main reason the election is a model-it-out decision rather than an automatic yes.
Official & authoritative sources
The §962 Assistant
Skip the formatting. Keep the accuracy.
Enter income and foreign-tax data through a guided flow. The Assistant runs the GILTI / NCTI, §250, and §960 calculations and assembles a polished, IRS-compliant election package — done for you.
- Guided entry for CFC income & foreign taxes
- Automatic calculations — GILTI / NCTI, §250, §960
- Complete package — statement + 8992, 8993, 1118
- Accurate & compliant, ready to file
- Minutes, not hours — and far fewer errors