GAO reviewed the Internal Revenue Service’s new rule on Department of the Treasury, Internal Revenue Service: Foreign Tax Credit Guidance Related to the Tax Cuts and Jobs Act, Overall Foreign Loss Recapture, and Foreign Tax Redeterminations. GAO found the the final rule specifies the methodologies and approaches necessary to conform the existing regulations to changes specified in the Tax Cuts and Jobs Act (TCJA). IRS stated that the final rule provides guidance for taxpayers to determine the amount of their foreign tax credits (FTC) and how to compute their FTC limitation.
In addition, IRS stated that the final rule addresses how FTC carryovers are allocated across the new separate categories created by TCJA. According to IRS, the final rule also addresses certain potentially abusive borrowing arrangements and clarifies the regulatory environment by updating inoperative language in parts of the regulations that have not previously been updated to reflect changes made in 1978. IRS stated that the final rule eases transitional administrative burdens associated with the implementation of TCJA. In addition, this rule finalizes proposed regulations on overall foreign losses and a U.S. taxpayer’s obligation to notify IRS of a foreign tax redetermination.