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Dance to the Music: The Proposed Foreign Tax Credit Regulations

December 13, 2022

Not again! Treasury has issued proposed regulations concerning the foreign tax credit (again) that address the cost recovery, attribution for royalty payment withholding tax, and defining a reattribution asset for purposes of allocating and apportioning foreign taxes. 87 Fed. Reg. 71,271 (Nov. 22, 2022). Applicability dates vary, but in all events the regulationss provide taxpayers the option to apply the proposed regulations, once finalized, to all foreign taxes that were subject to the modified provisions of the regulations that were finalized on January 4, 2022 (see 87 Fed. Reg. 276 (Jan. 4, 2022)).

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  • Foreign Tax Credits: Fundamentals
    Learn more about the foreign tax credit (FTC) which was added to the Internal Revenue Code to eliminate double taxation that can occur because U.S. citizens and residents compute their U.S. taxes based on their worldwide income.  The FTC allows taxpayers to take a dollar-for-dollar reduction in the amount of U.S. tax owed. Alternatively, U.S. taxpayers can also take a deduction for their foreign taxes paid. 

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    • Business Entities. IRS obsoletes and replaces existing Revenue Procedure 94-69 and prescribes special procedures for certain eligible LB&I taxpayers who are subject to nearly annual examinations to file a qualified amended return shortly after the opening of an audit.  Proc. 2022-39.
    • Practice, Procedure and Controversy. IRS Advisory Council issues annual report for 2022 (Publ. 5316, Rev. 11-2022), including recommendations to the IRS on new and continuing issues in tax administration. IR-2022-200.  
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