Effective August 12, 2010 H.R. 1586 adopted several rules tightening the rules allowing the use of foreign tax credits. The limitations aim to more closely align the credit use with the reporting of the associated tax, to reduce the amount of foreign income taken into account for credit purposes when an asset acquisition abroad results in a basis differential under domestic and foreign rules, and applies yet another limitation on section 304 in the foreign context. Also the so called 80/20 rule is terminated.
The changes are highly complex, as we have come to expect in the foreign context, but our Advisory gives a succinct summary. Click here to view the Advisory.