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On 28 December 2021, the US Treasury and the IRS released final regulations addressing various aspects of the foreign tax credit (FTC) regime.

The 2021 Final Regulations finalize, among other provisions, the proposed FTC regulations released on 29 September 2020 (the ‘2020 Proposed Regulations’), including guidance with respect to the disallowance of a credit or deduction for foreign income taxes with respect to dividends eligible for a dividends-received deduction; the allocation and apportionment of interest expense, foreign income tax expense, and certain deductions of life insurance companies; the definition of a foreign income tax and a tax in lieu of an income tax; transition rules relating to the impact on loss accounts of net operating loss carrybacks; the definition of foreign branch category income; and the time at which foreign taxes accrue and can be claimed as a credit.

Taxpayers should consider how they might be impacted by the 2021 Final Regulations and consider commenting on issues that they would like Treasury to address.