The US IRS and Treasury today issued key proposed regulations addressing the foreign tax credit for both businesses and individuals.
The 312-page regulations provide guidance on issues arising from changes made to the foreign tax credit in the 2017 Tax Cuts and Jobs Act (TCJA) as well as other foreign tax credit issues.
The TCJA, passed in December 2017, significantly altered the US international tax regime which had an impact on the credit.
The proposed regulations cover:
- The allocation and apportionment of deductions under sections 861 through 865 and adjustments to the foreign tax credit limitation under section 904(b)(4).
- Transition rules for overall foreign loss, separate limitation loss, and overall domestic loss accounts under section 904(f) and (g), and for the carryover and carryback of unused foreign taxes under section 904(c).
- The addition of separate categories under section 904(d) and other necessary updates to the regulations under section 904, including revisions to the look-through rules and other updates to reflect pre-Act statutory amendments.
- The calculation of the exception from subpart F income for high-taxed income under section 954(b)(4).
- The determination of deemed paid credits under section 960 and the gross up under section 78.
- The application of the election under section 965(n).
Treasury and IRS request public comments on the proposed regulations.
MNE Tax expects to publish an in-depth analysis of this important development authored by leading US international tax practitioner shortly.
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