Foreign Tax Credit Limitations Under Section 904: New IRS Regulations and Guidance for Tax Counsel

Neel Modha, International Tax Principal
May 14, 2019

The IRS issued a set of proposed regulations on foreign tax credits (FTCs) outlining the impact of the 2017 tax reform law. The new regulations address the sweeping changes to the existing FTC rules in determining available credits and the application of GILTI in calculating FTCs. These rules are to be applied retroactively to the 2018 tax year, and tax counsel must be aware of the implications to taxpayers.

The most significant changes in the 2017 tax reform law related to the FTC provisions of the Code were modifications to the deemed paid foreign tax provisions under Section 960 and new additional income categories and limitation provisions under Section 904. In addition to guidance under Sections 904 and 960, the new regulations provide a discussion on the apportionment of interest expenses, which modifies existing Section 861 principles.

Tax counsel must recognize the urgency of grasping key concepts and applicability of the FTC rules in light of the new regulations and provisions of the 2017 tax reform law.

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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