US IRS publishes proposed tax regs on allocation and apportionment of deductions and foreign taxes, financial services income, other topics

The US today published proposed tax regulations related to the allocation and apportionment of deductions and creditable foreign taxes, the definition of financial services income, foreign tax redeterminations, availability of foreign tax credits under the transition tax, and the application of the foreign tax credit limitation to consolidated groups.

Specifically, the regulations address:

• The allocation and apportionment of deductions under sections 861 through 865, including new rules on the allocation and apportionment of R&E expenditures and certain deductions of life insurance companies;
• the definition of financial services income under section 904(d)(2)(D);
• the allocation and apportionment of creditable foreign taxes;
• the interaction of the branch loss and dual consolidated loss recapture rules with sections 904(f) and (g);
• the effect of foreign tax redeterminations of foreign corporations on the application of the high-tax exception described in section 954(b)(4) (including for purposes of determining tested income under section 951A(c)(2)(A)(i)(III)), and required notifications under section 905(c) to the IRS of foreign tax redeterminations and related penalty provisions;
• the definition of foreign personal holding company income under section 954;
• the application of the foreign tax credit disallowance under section 965(g); and
• the application of the foreign tax credit limitation to consolidated groups.

Comments and requests for a public hearing on the proposal must be received by February 18, 2020.