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The US Treasury on 26 July 2022, released corrections (2022-15867 and 2022-15868) to the final foreign tax credit (FTC) regulations that were published on 4 January 2022 in the Federal Register (2021 regulations). The 2022-15867 corrections address ‘substantive issues’ under Sections 245A, 338, 367, 861, 901, 904, 905, 951A, and 960 including clarifying the cost recovery requirement of the definition of a foreign income tax. The 2022-15868 corrections address ‘drafting issues’ in the preambles addressing regulations under Section 861, 901, and 903.

While these corrections are effective on 27 July 2022, the date of publication in the Federal Register, the 2022-15868 corrections are applicable on or after 4 January 2022, and certain provisions of the 2022-15867 corrections are applicable to periods beginning before that date. The various applicability dates are summarized in the table at the end of this document.

The takeaway: While the corrections clarify narrow portions of the 2021 regulations, the corrections do not make sweeping changes to the regulations or their structure. Treasury has indicated additional changes will be forthcoming, including proposed relief from the attribution requirement for certain royalty withholding taxes.