The IRS on May 15 issued correcting amendments to the final and proposed foreign tax credit (FTC) regulations released last December. While primarily addressing clerical issues (such as updating incorrect cross references), the amendments make important corrections with respect to the waiver of the five-year binding rule regarding the method for allocating and apportioning R&E expense and the pre-effective date application scope of the proposed regulations.
In particular, the IRS updated Treas. Reg. sec. 1.861-17(e)(3) (the Final Regulations Correction) and the preamble pre-effective date reliance language in the proposed FTC regulations (Proposed Regulations Correction). The corrections clarify that the waiver election to the five-year binding rule can be made as long as it applies to all tax years beginning after December 31, 2017 and before January 1, 2020, or solely to the tax year that begins before January 1, 2020. Furthermore, the corrections clarify that the waiver election can be made on an amended return.