Title: The New Foreign Tax Credit Proposed Regulations… | Fenwick & West LLP
Headings: The New Foreign Tax Credit Proposed Regulations – An Executive Summary
The New Foreign Tax Credit Proposed Regulations – An Executive Summary
Expense Allocation
Allocation of Expenses to GILTI
Rules for Assigning CFC Stock to Multiple Baskets
Special Allocation Rule When CFCs Have non-GILTI, non-Subpart F Income
Other Changes to the Expense Allocation Rules
More Guidance Forthcoming?
Rules on the New Foreign Branch Basket:
Definition of a “Foreign Branch”
Attribution of Income to a Branch – General Rules
Treatment of Disregarded Transactions
Other New Rules Concerning the Section 904 Limitation
Section 78 Gross-Up on GILTI
Basket Rules for Section 986 (c) Currency Gain or Loss
Transition rules for FTC Carryovers and Carrybacks and Overall Foreign Loss and Similar Accounts
(Partial) Retention of the Section 904 (d) Look-Through Rules
Other Guidance on the New Baskets of Income
Income Resourced by a Treaty
The Base Differences Rule
Rules on the Indirect Credit under § 960
Section 78 Gross-Up as a “Dividend”
The Indirect Credit
The High-Taxed Exception
Section 960 (b) Taxes on Distributions of PTI
Appendix

Content: Thus, all of the rules can be expected to apply for calendar 2018. More Guidance Forthcoming? Finally, the preamble to the proposed regulations states that many of the existing expense allocation rules have not been significantly modified since 1988, and for taxable years beginning after December 31, 2020, groups will be able to elect worldwide interest expense apportionment under § 864 (f). Therefore, Treasury and the IRS expect to reexamine the existing approaches to the expense allocation rules, including in particular the apportionment of interest, R&D, stewardship and G&A expenses, as well as the CFC netting rule in Treas. Reg. § 1.861-10. Treasury and the IRS request comments in this regard. Rules on the New Foreign Branch Basket: Definition of a “Foreign Branch”
The proposed regulations provide that foreign branch income means the gross income of a United States person (other than a pass-through entity) that is “attributable to” foreign branches held directly or indirectly through disregarded entities by the United States person. Foreign branch category income under the proposed regulations also includes a United States person’s (other than a pass-through entity’s) distributive share of partnership income that is attributable to a foreign branch held by the partnership.