The Internal Revenue Service is granting 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.
Among other specifics and procedures, Notice 2023-55 details the relief for foreign taxes paid during tax years 2022 and 2023. Taxpayers can apply:
- Former Sec. 1.901-2(a) and (b), before it was amended by Treasury Decision 9959 but substituting the seventh and eighth sentences of former Sec. 1.901-2(b)(4)(i), which describe the “nonconfiscatory gross basis tax rule,” 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);” and,
- Existing Sec. 1.903-1 without the attribution requirement.
Treasury and the IRS are also considering amending the 2022 FTC final regulations and whether to extend the relief past tax year 2023.
The relief is being offered after businesses complained that the new regulations were burdensome so companies will be able to use the previous rules for tax years between Dec. 28, 2021 and Dec. 31, 2023.
Notice 2023-55 will be in Internal Revenue Bulletin 2023-32 Aug. 7.
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