8993 Instructions for Form 8993

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Instructions for Form 8993

Department of the Treasury
Internal Revenue Service

(Rev. December 2018)

Section 250 Deduction for Foreign-Derived Intangible Income (FDII) and Global
Intangible Low-Taxed Income (GILTI)

DRAFT AS OF
October 19, 2018

Section references are to the Internal Revenue
Code unless otherwise noted.

Future Developments

For the latest information about
developments related to Form 8993 and
its instructions, such as legislation
enacted after they were published, go to
IRS.gov/Form8993.
Additional guidance may be issued
subsequent to this publication. Please
review any additional information on the
website mentioned above prior to
completing Form 8993.

Important Reminders
Domestic corporation’s deduction. For
taxable years 2018–2025, certain
domestic corporations are allowed a
deduction equal to 37.5% of FDII and 50%
of GILTI.
Deduction limitation. The deduction
under section 250 is subject to further
limitation if the sum of FDII and GILTI
exceeds taxable income.

General Instructions
Purpose of Form

The Tax Cuts and Jobs Act of 2017
enacted section 250 (P.L. 115-97) for the
allowance of a deduction for the eligible
percentage of Foreign-Derived Intangible
Income (FDII) and Global Intangible
Low-Taxed Income (GILTI).
Please see Form 8992 and its
instructions for more information on GILTI.

Use Form 8993 to figure the amount of
the eligible deduction for FDII and GILTI
under section 250.

Who Must File

All domestic corporations must use Form
8993 to determine the allowable deduction
under section 250.

The deduction is allowed only to
domestic corporations (not including real
estate investment trusts (REITs),
regulated investment companies (RICs))
and S corporations.

When and Where To File
Attach Form 8993 to your income tax
return and file both by the due date
(including extensions) for that return.
Oct 18, 2018

Definitions and Overview
Steps for Computing the
Deduction under Section 250

1. Deduction Eligible Income (DEI) is
determined.
2. Deemed Tangible Income Return
(DTIR) is determined.
3. Deemed Intangible Income (DII) is
determined.
4. Foreign-Derived Deduction Eligible
Income (FDDEI) is determined.
5. Foreign-Derived Ratio (FDR) is
determined.
6. Foreign-Derived Intangible Income
(FDII) is determined.
7. The FDII reduction and the GILTI
reduction are determined.
8. The eligible deduction under
section 250 is determined.

Foreign-Derived Deduction
Eligible Income (FDDEI)

Foreign-Derived Deduction Eligible
Income (FDDEI) means, with respect to a
taxpayer for its taxable year, any
deduction eligible income of the taxpayer
that is derived in connection with:
1. Property that is sold by the
taxpayer to any person who is not a United
States person and that the taxpayer
establishes to the satisfaction of the
Secretary is for a foreign use, or
2. Services provided by the taxpayer
that the taxpayer establishes to the
satisfaction of the Secretary are provided
to any person, or with respect to property,
not located within the United States.
Special rules for determining foreign
use apply to transactions that involve
property or services provided to domestic
intermediaries or related parties.

Sale

The terms “sold,” “sells,” and “sale”
include any lease, license, exchange, or
other disposition of property.

Foreign Use

“Foreign use” is defined to mean “any use,
consumption, or disposition which is not
within the United States.” For the latest
guidance about foreign use, go to
IRS.gov/Form8993.

Cat. No. 33706N

Section 250 Deduction
Limitation

If the sum of FDII and GILTI exceeds
taxable income, the deduction under
section 250 is subject to limitation.
See the instructions for Part IV, lines 6
and 7, below for additional information.

Corrections to Form 8993

If you file a Form 8993 that you later
determine is incomplete or incorrect, file a
corrected Form 8993 with an amended tax
return, using the amended return
instructions for the return with which you
originally filed Form 8993. Write
“Corrected” at the top of the corrected
Form 8993.

Computer-Generated Form
8993

Generally, all computer-generated forms
must receive prior approval from the IRS
and are subject to an annual review.
Requests for approval may be submitted
electronically to [email protected],
or requests may be mailed to: Internal
Revenue Service, Attention: Substitute
Forms Program, SE:W:CAR:MP:P:TP,
5000 Ellin Road, C6-440, Lanham, MD
20706.

Specific Instructions
Part I. Determining
Deduction Eligible Income
(DEI)
Deduction Eligible Income (DEI) means,
with respect to any domestic corporation,
the excess (if any) of the gross income of
the corporation, less exclusions, over
deductions (including taxes) properly
allocable to such gross income.

Line 1. Gross Income

For purposes of this form, the following
items of income are excluded from gross
income.

Line 2. Exclusions

The following items of income are
excluded from gross income.
1. Any amount included in the gross
income of such corporation under section
951(a)(1).
2. Any amount included in the gross
income of such corporation under section
951A.

3. Any financial services income (as
defined under section 904(d)(2)(D)) of
such corporation.
4. Any dividend received from a
controlled foreign corporation (CFC) with
respect to which the corporation is a U.S.
shareholder as defined under section 951.
5. Any domestic oil and gas extraction
income. The term “domestic oil and gas
extraction income” means income
described in section 907(c)(1) determined
by substituting “within the United States”
for “without the United States.”
6. Any foreign branch income (as
defined in section 904(d)(2)(J)).

Part III. Determining
Foreign-Derived Ratio

The Foreign-Derived Ratio (FDR) is
determined by computing the ratio of
Foreign-Derived Deduction Eligible
Income (FDDEI) over Deduction Eligible
Income (DEI). See Definitions and
Overview for discussion of FDDEI.

Line 5. Excess Foreign-Derived
Intangible Income (FDII) and
Global Intangible Low-Taxed
Income (GILTI) Over Taxable
Income
Subtract line 4 from line 3c (FDII and
GILTI).

DRAFT AS OF
October 19, 2018

Line 5. Deductions Properly
Allocable to the Amount on
Line 4

Allocable deductions include all
deductions (including taxes) properly
allocable to gross income less total
exclusions on line 4.

Part II. Determining
Deemed Intangible Income
(DII)
Deemed Intangible Income (DII) is the
excess (if any) of the corporation’s
deduction eligible income over 10% of its
qualified business asset investment.

A domestic corporation’s Qualified
Business Asset Investment (QBAI) is the
average of the aggregate of its adjusted
bases, determined as of the close of each
quarter of the taxable year, in specified
tangible property used in its trade or
business and of a type with respect to
which a deduction is allowable under
section 167.
Specified tangible property means any
tangible property used in the production of
the gross income included in deduction
eligible income. If such property was used
in the production of deduction eligible
income and income that is not deduction
eligible income (such as dual-use
property), the property is treated as
specified tangible property in the same
proportion that the amount of the gross
income included in deduction eligible
income produced with respect to the
property bears to the total amount of gross
income produced with respect to the
property.

Line 2. Deemed Tangible
Income Return (10% of QBAI)

The calculations for Part II, line 2, are as
follows.
• First, compute QBAI (defined above).
• Then, multiply QBAI by 10%.
• Finally, enter this result on Form 8993,
Part II, line 2.

Line 1a. Deduction Eligible
Income (DEI) Derived from
Sales, Leases, Exchanges, or
Other Dispositions (but not
Licenses) of Property to a
Foreign Person for a Foreign
Use

Include DEI derived from the sale, lease,
exchange, or other disposition (other than
license) of property to any person who is
not a United States person which is
established to the satisfaction of the
Secretary is for a foreign use (as
described under Definitions and
Overview).

Line 1b. Deduction Eligible
Income (DEI) Derived from a
License of Property to a
Foreign Person for a Foreign
Use

If the result reported on line 5 is zero or
negative, then the deduction under section
250 is not subject to further limitation.
If the result reported on line 5 is a
positive number, then the FDII and GILTI
applied in computing the deduction under
section 250 are reduced proportionately.

Line 6. Foreign-Derived
Intangible Income (FDII)
Reduction

The reduction in FDII for which a
deduction is allowed equals such excess
multiplied by a percentage equal to the
corporation’s FDII divided by the sum of its
FDII and GILTI.
Use the Worksheet to compute the FDII
reduction.

Part IV, Line 6 Worksheet
Line A

Enter the
amount
from Part
IV, line 5. If
zero or
less,
enter -0- on
line E of
this
worksheet
and stop.

Line B

Include DEI derived from services that are
established to the satisfaction of the
Secretary are provided to any person, or
with respect to property, not located within
the United States.

Enter the
amount
from Part
IV, line 3a.

Line C

Part IV. Determining FDII
and/or GILTI Deduction

Enter the
amount
from Part
IV, line 3c.

Line D

Line 3b. Global Intangible
Low-Taxed Income (GILTI)

Divide line
B by line C.

Line E

Multiply line
A by line D.
Enter this
line E
amount on
Form 8993,
Part IV,
line 6.

Include DEI derived from the license of
property to any person who is not a United
States person and which is established to
the satisfaction of the Secretary is for a
foreign use (as described under
Definitions and Overview).

Line 1c. Deduction Eligible
Income (DEI) Derived from
Services Provided to a Person
or with Respect to Property
Located Outside of the United
States

Additional guidance may be issued after
the publication of these instructions.
Please review any additional information
on IRS.gov/Form8993 prior to completing
Form 8993.

Line 4. Taxable Income

Enter the taxable income of the domestic
corporation (determined without regard to
section 250).
-2-

Line 7. Global Intangible
Low-Taxed Income (GILTI)
Reduction

The reduction in GILTI is determined by
the excess amount less the FDII
reduction.
Use the Worksheet to compute the FDII
reduction.

Line 8. Foreign-Derived
Intangible Income (FDII)
Deduction

To calculate the FDII deduction, subtract
the amount from Part IV, line 6, from the
amount on Part IV, line 3a.
Multiply FDII by 37.5% and enter this
FDII deduction amount on line 8.

1545-0123 and is included in the
estimates shown in the instructions for
their business income tax return.
If you have comments concerning the
accuracy of these time estimates or
suggestions for making this form simpler,
we would be happy to hear from you. See
the instructions for the tax return with
which this form is filed.

DRAFT AS OF
October 19, 2018

Part IV, Line 7 Worksheet
Line F

Enter the
amount
from Part
IV, line 5. If
zero or
less, enter
zero on line
H of this
worksheet
and stop.

Line G

Enter the
amount
from line E
in the
worksheet
above, as
reported on
Part IV,
line 6, of
Form 8993.

Line H

Subtract
line G from
line F.
Enter this
line H
amount on
Form 8993,
Part IV,
line 7.

Line 9. Global Intangible
Low-Taxed Income (GILTI)
Deduction

To calculate the GILTI deduction, subtract
the amount from Part IV, line 7, from the
amount on Part IV, line 3b.
Multiply GILTI by 50% and enter this
GILTI deduction amount on line 9.

Enter the sum of lines 8 and 9 on Form
1120, Schedule C, or on the comparable
schedules of other corporate returns.

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