Section 931 Corporation

Summary of Section 931 Corporation

It was a corporation operating in various U.S. possessions that, under certain circumstances, might accrue significant tax benefits. So named for Section 931 of the Internal Revenue Code, a firm might be exempt from Federal income tax on U.S. possessions income (so long as the dividends were not distributed in the United States) if (1) 80 percent or more of its gross income was derived from U.S. possessions sources during the previous three-year period; and (2) 50 percent or more of the gross income was the product of active trade within a U.S. possession. This opportunity was effectively eliminated by the Tax Reform Act of 1976.

(Main Author: William J. Miller)