IRS Offers Foreign Tax Credit Relief
The IRS recently issued Notice 2023-55, announcing temporary relief for taxpayers in determining whether a foreign tax is eligible for the Foreign Tax Credit under Internal Revenue Code Sections 901 and 903.
The new notice details relief for foreign taxes paid during tax years between Dec. 28, 2021, and Dec. 31, 2023. Taxpayers may apply former Sec. 1.901-2(a) and (b) before it was amended by Treasury Decision 9959, except that the seventh and eighth sentences of former Sec. 1.901-2(b)(4)(i), which describe the "nonconfiscatory gross basis tax rule," are deleted and replaced with: "No foreign tax whose base is gross receipts or gross income satisfies the net income requirement, except in the case of a foreign tax whose base consists solely of investment income that is not derived from a trade or business, or wage income (or both).” Taxpayers may also apply existing Sec. 1.903-1 without the attribution requirement.
The Treasury and the IRS are also considering amending the 2022 FTC final regulations and whether to extend the relief past tax year 2023.