What Is CFC Subpart F Income?
CFC Subpart F Income is a United States tax category of mostly passive or mobile controlled foreign corporation income, which United States shareholders include currently.
Also known as: Subpart F Income, Section 952 Income.
How CFC Subpart F Income works
CFC Subpart F Income arises when a foreign corporation more than 50 percent owned by United States shareholders earns categories listed in Internal Revenue Code section 952, and each United States shareholder owning at least 10 percent then includes a pro rata share in gross income for the year, whether or not the corporation distributes cash. The main component is foreign base company income, made up of foreign personal holding company income, foreign base company sales income and foreign base company services income, alongside insurance income and several smaller categories. Section 954 treats no income as foreign base company or insurance income where the combined amount is below the lesser of 5 percent of gross income or 1,000,000 dollars, and excludes income shown to bear foreign tax at an effective rate above 90 percent of the top corporate rate in section 11. These rules reflect the statute as published in the 2024 edition of the United States Code and remain subject to later amendments and Treasury regulations.
CFC Subpart F Income vs Global Intangible Low-Taxed Income (GILTI)
Unlike Global Intangible Low-Taxed Income, which reaches a broad residual of controlled foreign corporation earnings, CFC Subpart F Income covers only specifically listed categories, mainly foreign base company income and insurance income.
Example
Illustrative example: A United States citizen living in Country A owns all shares of a Country B company which earns consulting fees from clients and interest on surplus cash. The company is a controlled foreign corporation because a United States shareholder owns more than 50 percent. The interest may be foreign personal holding company income and therefore CFC Subpart F Income, included in the citizen's gross income for the year without any dividend, unless the de minimis or high-tax exception applies; classification of the consulting fees depends on the services income rules and the facts.
Common misconception
Myth: Profits of a foreign company stay outside US tax until the American owner pays a dividend.
Reality: Under sections 951 and 952, a United States shareholder of a controlled foreign corporation generally includes a pro rata share of CFC Subpart F Income currently, whether or not profits are distributed.
Frequently asked questions
What is Subpart F income?
CFC Subpart F Income is income of a controlled foreign corporation listed in Internal Revenue Code section 952, mainly foreign base company income and insurance income, which United States shareholders owning at least 10 percent include in gross income currently.
Who has to include Subpart F income?
A United States shareholder, meaning a United States person owning at least 10 percent of a controlled foreign corporation's voting power or value, generally includes a pro rata share of CFC Subpart F Income in gross income.
Related terms
- Global Intangible Low-Taxed Income (GILTI) — Separate US inclusion often confused with Subpart F
- Controlled Foreign Corporation — Entity whose income Subpart F classifies
- CFC Income — Generic term for income attributed under CFC regimes
- CFC Rules — Umbrella concept of which Subpart F is one version
- Form 5471 — US information return for controlled foreign corporations
Related guides
- Global tax reform and US digital nomads — US international tax context for owners abroad
- Incorporation options for location-independent entrepreneurs — Foreign company choices which Subpart F may affect
Sources
- 26 U.S. Code section 951 (govinfo, 2024 edition)
- 26 U.S. Code section 952 (govinfo, 2023 edition)
- 26 U.S. Code section 954 (govinfo, 2024 edition)
Last verified: 2026-10-08. This entry is general information, not tax or legal advice; rules vary by country and change over time.
