Indirect Foreign Tax Credits (Portfolio 6040)
This Portfolio contains a detailed analysis of the indirect foreign tax credit system as in effect both before the enactment of the Tax Cuts and Jobs Act (TCJA) (Pub. L. No. 115-97) in 2017. This Portfolio is divided into eleven parts.
Part II contains a detailed analysis of former §902, under which a domestic corporation may have been deemed to have paid, for purposes of the §901 foreign tax credit, foreign income taxes paid by a foreign corporation from which the domestic corporate shareholder received a dividend.
Part III comprehensively addresses the threshold requirements to be met to apply §960, under which a domestic corporation that is taxed on earnings and profits of a controlled foreign corporation under §951 or §951A may be deemed to have paid foreign income taxes paid by the foreign corporation. The TCJA repealed the indirect foreign tax credit under former §902, and significantly amended the deemed paid credit under §960; both changes were effective with respect to taxable years of foreign corporations beginning after 2017.
Part IV examines the annual election provided by §962, which allows a non-corporate domestic shareholder to claim a foreign tax credit through §960 (and former §902) when including an amount in gross income under §951 or §951A.
Part X of the Portfolio also examines the rules of §78, which require a U.S. shareholder to gross-up a dividend or §951 or §951A inclusion from a foreign corporation by the amount of foreign taxes deemed paid.
Finally, Part XI of the Portfolio examines several collateral issues that arise, including the effect on indirect foreign tax credits of §482 adjustments and refunds or redeterminations of foreign tax.
This Portfolio may be cited as Sotos, Collins, Kriengwatana, and Gibson, 6040 T.M., Indirect Foreign Tax Credits.
Table of Contents
I. Overview of Indirect Foreign Tax Credits
II. Indirect Credit Under Former §902
III. Indirect Credit Under §960
IV. Section 960 Credit for Individuals: Section 962
V. Indirect Credit Under §1248
VI. Indirect Credit Under §367(b)
VII. Indirect Credit for Passive Foreign Investment Company (PFIC) Taxes
VIII. Indirect Credits for Export Subsidiaries
IX. Coordination of Indirect Credits with §904
X. Dividend Gross-Up Under §78
XI. Collateral Issues
Principal, National Tax Services
International Tax Director
Sr. Director, Tax Planning
CBRE | Global Tax