Treasury and the IRS have released proposed regulations (the Proposed Regulations) under Sections 78, 861, 901, 904, 954, 960, and 965. The Proposed Regulations, released November 28, are the first form of administrative guidance with respect to the foreign tax credit (FTC) regime following the enactment of the 2017 Tax Reform Act (the Act).
Of relevance to the Proposed Regulations, the Act limited the FTC for US corporate taxpayers by repealing the indirect credit under Section 902, amended the deemed-paid credit under Section 960, introduced two new FTC limitation baskets under Section 904, and modified the sourcing rules related to inventory and interest expense.
The Proposed Regulations provide needed guidance related to the mechanics of determining the FTC limitation under Section 904 (including the allocation and apportionment of expenses), the scope of the new foreign branch basket, and the extent of deemed paid FTCs with respect to subpart F and global intangible low-taxed income (GILTI) inclusions.
While PwC is in the process of reviewing the Proposed Regulations in detail, you can read some of the key highlights we have identified thus far below. In addition, we will discuss the Proposed Regulations in an upcoming Tax Reform Readiness series webcast on Monday, December 16.