AICPA comments to IRS on proposed foreign tax credit regulations

April 25, 2019

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The American Institute of CPAs (AICPA) has made recommendations to the Internal Revenue Service (IRS) about its proposed regulations Guidance Related to the Foreign Tax Credit, Including Guidance Implementing Changes Made by the Tax Cuts and Jobs Act (TCJA) (REG-105600-18).

The focus of the AICPA recommendations is to clarify in which foreign tax credit basket various categories of income and expenses should be properly assigned as a result of changes made by the TCJA.

The AICPA made recommendations about the proposed regulations in the following six areas:

  • Determination of stock basis in connection with Internal Revenue Code section 965(b);
  • Allocation and apportionment of research and experimentation expenses;
  • Characterizing the stock of a noncontrolled 10-percent corporation;
  • Attributing current year taxes to a Controlled Foreign Corporation’s earnings and profits described in section 959(c)(3);
  • Modify the definition of an “exempt asset” as it relates to assets that generate foreign-derived intangible income; and
  • Clarify when a withholding tax imposed on a disregarded dividend is related to a Subpart F or Tested Income Group.