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New IRS Foreign Tax Credit Regulations: IRC 904 Limitation, Allocation/Apportionment Rules and Transition Guidance

Additional Income Buckets, Carryover and Carryback Rules, GILTI Application

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Tuesday, February 12, 2019

Recorded event now available

This course will provide tax advisers with a critical first look at new IRS proposed guidance on calculating foreign tax credit (FTC) limitations under Section 904. The panel will outline which additional "buckets" for foreign income grouping the new regulations create, discuss new rules regarding the allocation and apportionment of deductions and adjustments to the FTC limitation under Section 904(b)(4), and detail the transition rules for overall foreign loss, separate limitation loss, and carryover and carryback of unused foreign taxes under Section 904(c).

Description

On Nov. 28, 2018, the IRS issued a vast set of proposed regulations on FTCs, outlining the Service's initial interpretation of the impact of changes brought about by the 2017 tax reform law. Over 312 pages, the new regs address the application of the new GILTI regime to FTC calculations and also makes substantial changes to existing FTC rules for purposes of determining available credits. These rules are to be applied retroactively, to the 2018 tax year, which presents significant and immediate complications for tax advisers.

The most significant element of the new guidance relates to the apportionment of interest expenses, which modifies existing Section 861 principles. Notably, Treasury declined to follow practitioners' requests to provide a complete exemption from expense allocation to GILTI calculations. The proposed regulations also offer extensive guidance on the new FTC limitation provisions in Section 904, including additional income categories or "buckets."

While the new guidance provides some long-awaited answers, they are complex and, in many aspects, disadvantageous to many taxpayers. Because the new regulations are effective immediately, they will likely be especially burdensome for taxpayers faced with year-end calculations.

Listen as our experienced panel provides a critical first look at the practical implications of the Service's recently proposed FTC regulations.

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Outline

  1. Legacy foreign tax credit (FTC) rules
  2. Issues the 2017 tax law presented to FTC determination and calculations
  3. Section 904 new limitations
  4. New income categories/buckets
  5. Impact of newly proposed regulations on GILTI for FTC purposes
  6. Carryover/carryback rules
  7. New ordering rules for deemed taxes paid under Section 960

Benefits

The panel will discuss these and other critical questions:

  • Applying new Section 904 limitations and income categories to the current year tax situation
  • How the proposed regulations treated GILTI for purposes of determining exemption of interest and other expenses
  • Modifications the proposed regulations make to legacy FTC rules
  • Treatment of GILTI "gross-up" for FTC purposes

Faculty

Love, Ariel
Ariel Love
Attorney
Fenwick & West

Ms. Love focuses her practice on a broad variety of domestic and international tax planning and tax controversy...  |  Read More

Samtoy, John
John Samtoy
Tax Partner
Holthouse Carlin & Van Trigt

Mr. Samtoy’s practice specializes in international tax compliance and consulting services, with a focus on...  |  Read More

Skinner, William
William R. Skinner
Partner
Fenwick & West

Mr. Skinner focuses his practice on U.S. international taxation, with a particular emphasis on tax planning and...  |  Read More