BTAX OnPoint: Computing the Primary Foreign Tax Credit Limit

The IRS and Treasury Department issued new rules to help taxpayers working on foreign tax credit calculations, both for 2023 and going forward, continuing to add options and flexibility to foreign tax credit rules it issued in early 2022 (T.D. 9959). Corporations and other taxpayers that claim foreign tax credits (FTCs) need to layer in the impact of the §904 limit when evaluating the options now available.

The §904 limit method has become a series of calculations, requiring corporations to first separate multiple types of foreign income into categories. Expenses then need to be allocated to each category of income. ...