Subpart F

Subpart F is a section of U.S. tax law that applies to certain U.S. companies with foreign operations. It requires these companies to report and pay taxes on selected types of passive income (like dividends, interest, and royalties) earned through their foreign affiliates, even if that income has not been brought back to the U.S. Yet, some income is exempt if the foreign affiliate is actively engaged in business. The goal is to prevent companies from shifting profits offshore to avoid U.S. taxes and ensure they pay their fair share on income generated abroad.