Proposed Foreign Tax Credit Regs: the Good, the Bad and the (Sort of) Ugly

    View Authors December 2018

    The US Treasury and the Internal Revenue Service (IRS) have released proposed regulations on foreign tax credit (FTC) issues related to the global intangible low-taxed income (GILTI) regime and other changes made by last year’s tax reform legislation. The Tax Cuts and Jobs Act repealed the Section 902 indirect FTC, in light of the enactment of new Section 245A, which provides a 100% dividends-received deduction for foreign-source dividends from 10%-owned foreign corporations. The TCJA also created two new separate-limitation baskets – one each for GILTI and foreign branch income. These changes gave rise to a need for transition rules and guidance on a number of issues, particularly in relation to the taxation of GILTI inclusions. Treasury and the IRS have requested comments on a number of issues raised by the proposed regulations.