Foreign Oil and Gas Tax Carryback and Carryover

§ 907. Special rules in case of foreign oil and gas income(a) Reduction in amount allowed as foreign tax under section 901In applying section 901, the amount of any foreign oil and gas taxes paid or accrued (or deemed to have been paid) during the taxable year which would (but for this subsection) be taken into account for purposes of section 901 shall be reduced by the amount (if any) by which the amount of such taxes exceeds the product of—(1) the amount of the combined foreign oil and gas income for the taxable year, (2) multiplied by—(A) in the case of a corporation, the percentage which is equal to the highest rate of tax specified under section 11(b), or (B) in the case of an individual, a fraction the numerator of which is the tax against which the credit under section 901(a) is taken and the denominator of which is the taxpayer’s entire taxable income. (b) Combined foreign oil and gas income; foreign oil and gas taxesFor purposes of this section—(1) Combined foreign oil and gas incomeThe term “combined foreign oil and gas income” means, with respect to any taxable year, the sum of—(A) foreign oil and gas extraction income, and (B) foreign oil related income. (2) Foreign oil and gas taxesThe term “foreign oil and gas taxes” means, with respect to any taxable year, the sum of—(A) oil and gas extraction taxes, and (B) any income, war profits, and excess profits taxes paid or accrued (or deemed to have been paid or accrued under section 960) during the taxable year with respect to foreign oil related income (determined without regard to subsection (c)(4)) or loss which would be taken into account for purposes of section 901 without regard to this section. (c) Foreign income definitions and special rulesFor purposes of this section—(1) Foreign oil and gas extraction incomeThe term “foreign oil and gas extraction income” means the taxable income derived from sources without the United States and its possessions from—(A) the extraction (by the taxpayer or any other person) of minerals from oil or gas wells, or (B) the sale or exchange of assets used by the taxpayer in the trade or business described in subparagraph (A). Such term does not include any dividend or interest income which is passive income (as defined in section 904(d)(2)(A)). (2) Foreign oil related incomeThe term “foreign oil related income” means the taxable income derived from sources outside the United States and its possessions from—(A) the processing of minerals extracted (by the taxpayer or by any other person) from oil or gas wells into their primary products, (B) the transportation of such minerals or primary products, (C) the distribution or sale of such minerals or primary products, (D) the disposition of assets used by the taxpayer in the trade or business described in subparagraph (A), (B), or (C), or (E) the performance of any other related service.