Baker McKenzie's North America Tax Practice Group has prepared a Tax News and Developments Client Alert on the proposed regulations relating to foreign tax credits that were released on 28 November 2018. The proposed regulations cover a wide range of topics and attempt to implement the changes from the Tax Cuts & Jobs Act (TCJA) with respect to a number of Code provisions, including sections 78, 861, 904, and 960. The proposed rules address: allocating expenses to the new global intangible low-tax income (GILTI) basket; allocating and apportioning interest expense, research and experimental expenditures, and foreign income taxes; transitional rules for FTC carrybacks and carryforwards; new CFC netting rules; allocating income to the new foreign branch income basket; basketing the section 78 gross-up; and the application of the new “properly attributable to” standard in revised section 960 for purposes of determining a US shareholder’s deemed paid FTCs for subpart F inclusions, GILTI inclusions, and distributions of previously taxed earnings and profits. Our Client Alert provides an in-depth analysis of how the proposed regulations will impact taxpayers.
Please do not hesitate to contact the indicated authors of the alert or any member of our North America Tax Practice Group if you would like additional information or for further discussion of the issues addressed.