The Internal Revenue Service provides temporary relief to taxpayers in determining whether a foreign tax is eligible for the foreign tax credit under sections 901 and 903 of the Internal Revenue Code.
Among other specifications and procedures, Note 2023-55 Details of benefits for foreign taxes paid in 2022 and 2023. Taxpayers can apply for:
- Former Sec. 1.901-2(a) and (b), before it was amended Treasury Decision 9959 But changing the seventh and eighth sentences of former Sec. 1.901-2(b)(4)(i), which describes the “nonconfiscating gross basis tax rule”: “No foreign tax with a basis in gross income or gross income satisfies the net income requirement, except in the case of a foreign tax whose basis consists solely of investment income (or both non-trading income); and,
- The existing Sec. 1.903-1 without requiring attribution.
Treasury and the IRS are also considering whether to amend the 2022 FTC final regulations and whether to extend the exemption past the 2023 tax year.
The relief was offered after businesses complained that the new rules were onerous, so companies will be able to use the previous rules for tax years from December 28, 2021 to December 31, 2023.
Notice will be 2023-55 Internal Revenue Bulletin 2023-32 August 7.
