New collection (Request for a new OMB Control Number)
No
Regular
01/04/2022
Requested
Previously Approved
36 Months From Approved
11,400
0
22,800
0
0
0
Sections 901 and 905 allow a taxpayer to claim a foreign tax credit for foreign income taxes paid or accrued in a taxable year, depending on taxpayer’s method of accounting for such taxes. However, regardless of the year in which the credit is allowed based on taxpayer’s method of accounting, the foreign tax credit is allowed only to the extent the foreign income taxes are ultimately both owed and actually remitted to the foreign country. For accrual method taxpayers, section 461(f) (flush language), §1.461-2(a)(2)(i), and §1.905-1(d)(3) provide that a foreign income tax liability that is contested does not accrue and is not creditable until the contest is resolved. For cash method taxpayers, a foreign income tax liability that is contested is not a reasonable approximation of the taxpayer’s final foreign income tax liability and, thus, under §1.901-2(e)(2)(i), is not considered an amount of tax paid for purposes of section 901 until the contest is resolved.
However, §§1.905-1(c)(3) and 1.905-1(d)(4) allow taxpayers to make an election to claim a provisional foreign tax credit for a contested foreign income tax liability to the extent that the taxpayer has remitted the contested tax to the foreign country. As a condition for making this election, the taxpayer must enter into a provisional foreign tax credit agreement, in which the taxpayer gives the IRS information regarding the contested foreign income tax liability and agrees to comply with the conditions of the election, including agreeing to not to assert the statute of limitations on assessment as a defense to assessment of taxes and interest by the IRS with respect to the contested tax for a period of three years from the year in which taxpayer notifies the IRS of the resolution of the contest. See §1.905-1(d)(4)(ii).
The likely respondents are: U.S. persons who pay or accrue foreign income taxes.
US Code:
26 USC 461
Name of Law: General rule for taxable year of deduction
US Code:
26 USC 901
Name of Law: Taxes of foreign countries and of possessions of United States
This is a request for a new OMB control number for collections of information in new regulations that are not on existing IRS forms. The number of potentially affected taxpayers increased relative to the burden estimate in the proposed regulations because the final regulations expand the availability of the election to taxpayers claiming foreign tax credits on the cash basis.
$0
No
Yes
No
No
No
No
No
Tianlin Shi 202 317-6987 tianlin.shi@irscounsel.treas.gov
No
On behalf of this Federal agency, I certify that the collection of information encompassed by this request complies with 5 CFR 1320.9 and the related provisions of 5 CFR 1320.8(b)(3).
The following is a summary of the topics, regarding the proposed collection of information, that the certification covers:
(i) Why the information is being collected;
(ii) Use of information;
(iii) Burden estimate;
(iv) Nature of response (voluntary, required for a benefit, or mandatory);
(v) Nature and extent of confidentiality; and
(vi) Need to display currently valid OMB control number;
If you are unable to certify compliance with any of these provisions, identify the item by leaving the box unchecked and explain the reason in the Supporting Statement.
1545-2296 Supporting Statement 2022-01-04.docx
Provisional Foreign Tax Credit Agreement