The IRS has announced that it will issue proposed regs addressing how certain Code provisions, including the foreign tax credit rules and the dual consolidated loss rules, apply to certain types of taxes described in the Global Anit-Base Erosion Model Rules (Pillar Two) or GloBE model rules. (Notice 2023-80, 2023-52 IRB)
Notice 2023-80, also extends the temporary relief period in Notice 2023-55, allowing taxpayers to defer application of the 2022 final foreign tax credit regs and to continue to treat foreign taxes that were creditable under the prior regs as such through the end of 2023. In addition, the Notice addresses the application of the temporary relief in Notice 2023-55 to partnerships and their partners.
Proposed regs. The IRS anticipates that the proposed regs will be consistent with the guidance in Notice 2023-80, Sec. 2 and Notice 2023-80, Sec. 3.
Section 2 describes rules and examples that would address how the foreign tax credit rules interact with certain GloBE rules, including the:
- Income Inclusion Rule (IIR),
- Qualified Domestic Minimum Top-up Tax (QDMTT), and
- Under Taxed Profits Rule (UTPR).
Section 3 describes rules and examples that would address how the dual consolidated loss rules interact with the GloBE rules.
Reliance. Taxpayers may rely on the guidance described in section 3 of Notice 2023-80 until proposed regs are published in the Federal Register.
Comments requested. The IRS is requesting comments on the rules described in sections 2 and 3 of Notice 2023-80. Specifically, the IRS would like comments on the interaction of the DCL rules with the GloBE Model Rules, including Article 3.2.7 of the GloBE Model Rules (relating to Intragroup Financing Arrangements).
Comments should be submitted by February 9, 2024, via the Federal eRulemaking Portal at www.regulations.gov (type IRS-2023-0060 in the search field on the regulations.gov homepage to find this notice and submit comments).
For more information about creditable foreign income taxes, see Checkpoint’s Federal Tax Coordinator ¶ O-4201.
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