How does Atamatax decide a fund is a PFIC?

By the statutory tests in IRC §1297: a foreign corporation is a PFIC if 75%+ of its gross income is passive (the income test) or 50%+ of its assets produce passive income (the asset test). A pooled investment fund organised outside the US — every UCITS ETF and non-US mutual fund — meets these by design, so it is a PFIC for any US person who holds it, regardless of the underlying holdings.

Why is a US-stock fund like an S&P 500 UCITS ETF still a PFIC?

PFIC status turns on the fund's own structure and foreign domicile, not on what it invests in. An Ireland-domiciled S&P 500 UCITS ETF is a foreign corporation earning passive income, so it satisfies §1297 even though its holdings are US equities.

Is Atamatax giving tax advice?

No. Atamatax is software that applies the Internal Revenue Code and IRS form instructions to the data you enter and confirm, and generates the resulting forms. It is not a CPA firm, enrolled agent, tax attorney, or financial advisor, and the classifications it computes are not individualised advice.

Methodology & editorial standards

How we determine PFIC status and compute Form 8621.

Atamatax makes tax-law determinations, so it should be transparent about how. This page sets out the authorities we apply, where our data comes from, how often we review it, and the boundary between software and advice. Every classification the product computes traces back to the statute and the IRS form instructions described here.

The authority we apply

PFIC treatment is defined in the Internal Revenue Code, Subpart D (§§1291–1298). We apply it directly:

IRC §1297 — what a PFIC is. A foreign corporation is a Passive Foreign Investment Company if it meets the income test (≥75% of gross income is passive) or the asset test (≥50% of assets produce, or are held to produce, passive income). A non-US pooled fund satisfies these by construction.
IRC §1298 — attribution and special rules. Governs indirect ownership through other entities and the look-through rules we respect when a holding is itself held via a fund or partnership.
IRC §1291 — the default regime.With no election, “excess distributions” and gains are taxed at the highest ordinary rate for each year they are allocated to, plus an interest charge running back to the years you held the fund. This is the punitive default Form 8621 exists to administer.
IRC §1295 — the QEF election.A Qualified Electing Fund election taxes your share of the fund's ordinary earnings and net capital gain annually, avoiding §1291 — available only when the fund supplies a PFIC Annual Information Statement.
IRC §1296 — the mark-to-market election. Available for marketable PFIC stock; you recognise the annual change in fair market value as ordinary income (or limited loss).

Our sources

The Internal Revenue Code (Title 26) sections above, as the controlling law.
The current IRS Form 8621 and its official instructions for the per-fund election mechanics and reporting thresholds.
The fund's own legal domicile (encoded in its ISIN prefix — e.g. IE = Ireland, LU = Luxembourg), which is what makes it a foreign corporation for §1297.
IRS guidance on FBAR (FinCEN Form 114), Form 8938 (FATCA), Form 1116 (Foreign Tax Credit), and the Streamlined Foreign Offshore Procedures for the surrounding return.

How often we review it

We re-verify the inflation-adjusted figures, thresholds, and form revisions against the IRS each filing season, and update the engine and the fund classifications when the IRS publishes new forms or guidance. This page was last reviewed on 2026-06-23.

Software, not advice

Atamatax is a software preparer. It applies the law above to the data you enter and confirm and generates the resulting IRS forms. It is not a CPA firm, enrolled agent, tax attorney, or financial advisor, and nothing it computes is individualised tax, legal, or investment advice. You remain responsible for the figures and the final filing. For a position that turns on facts specific to you, consult a licensed professional.

Frequently asked

How does Atamatax decide a fund is a PFIC?: By the statutory tests in IRC §1297: a foreign corporation is a PFIC if 75%+ of its gross income is passive (the income test) or 50%+ of its assets produce passive income (the asset test). A pooled investment fund organised outside the US — every UCITS ETF and non-US mutual fund — meets these by design, so it is a PFIC for any US person who holds it, regardless of the underlying holdings.
Why is a US-stock fund like an S&P 500 UCITS ETF still a PFIC?: PFIC status turns on the fund's own structure and foreign domicile, not on what it invests in. An Ireland-domiciled S&P 500 UCITS ETF is a foreign corporation earning passive income, so it satisfies §1297 even though its holdings are US equities.
Is Atamatax giving tax advice?: No. Atamatax is software that applies the Internal Revenue Code and IRS form instructions to the data you enter and confirm, and generates the resulting forms. It is not a CPA firm, enrolled agent, tax attorney, or financial advisor, and the classifications it computes are not individualised advice.

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