1120-F Instructions for Form 1120-F

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2021

Department of the Treasury
Internal Revenue Service

Instructions for
Form 1120-F

DRAFT AS OF
December 14, 2021
U.S. Income Tax Return of a Foreign Corporation
Section references are to the Internal Revenue
Code unless otherwise noted.

Contents
Photographs of Missing Children
The Taxpayer Advocate Service .
How To Get Forms and
Publications . . . . . . . . . . .
General Instructions . . . . . . . . .
Purpose of Form . . . . . . . .
Who Must File . . . . . . . . .
Special Returns for Certain
Organizations . . . . . . . .
Claim for Refund or Credit . .
Paid Preparer Authorization .
Other Forms, Schedules,
and Statements That May
Be Required . . . . . . . . .
Assembling the Return . . . .
Accounting Methods . . . . .
Accounting Period . . . . . . .
Rounding Off to Whole
Dollars . . . . . . . . . . . .
Recordkeeping . . . . . . . . .
Payment of Tax Due . . . . .
Estimated Tax Payments . .
Interest and Penalties . . . . .
Special Rules for Foreign
Corporations . . . . . . . .
Specific Instructions . . . . . . . . .
Period Covered . . . . . . . .
Address . . . . . . . . . . . . .
Employer Identification
Number (EIN) . . . . . . . .
Computation of Tax Due or
Overpayment . . . . . . . .
Section I—Income From
U.S. Sources Not
Effectively Connected
With the Conduct of a
Trade or Business in the
United States . . . . . . . .
Section II—Income
Effectively Connected
With the Conduct of a
Trade or Business in the
United States . . . . . . . .
Income . . . . . . . . . . . . . .
Deductions . . . . . . . . . . .
Schedule C—Dividends and
Special Deductions . . . .
Schedule J—Tax
Computation . . . . . . . .
Section III—Branch Profits
Tax and Tax on Excess
Interest . . . . . . . . . . . .
Schedule L—Balance
Sheets per Books . . . . .
Schedules M-1 and M-3 . . .
Dec 11, 2021

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Contents
Page
Schedule W . . . . . . . . . . . . . . 33

Future Developments

For the latest information about
developments related to Form 1120-F and
its instructions, such as legislation
enacted after they were published, go to
IRS.gov/Form1120F.

What’s New
Credit for qualified sick and family
leave wages. The American Rescue
Plan Act of 2021 (the ARP) provided
credits for qualified sick and family leave
wages similar to the credits that were
previously enacted under the Families
First Coronavirus Response Act (FFCRA)
and amended and extended by the
COVID-related Tax Relief Act of 2020.
See the Instructions for Form 941.
Employee retention credit. Recent
legislation modified the applicability of the
employee retention credit. The credit now
applies to qualified wages paid before
October 1, 2021 (or, in the case of wages
paid by an eligible employer which is a
recovery startup business, before January
1, 2022).

Photographs of Missing
Children

The Internal Revenue Service is a proud
partner with the National Center for
Missing & Exploited Children® (NCMEC).
Photographs of missing children selected
by the Center may appear in instructions
on pages that would otherwise be blank.
You can help bring these children home
by looking at the photographs and calling
1-800-THE-LOST (1-800-843-5678) if you
recognize a child.

The Taxpayer Advocate
Service

The Taxpayer Advocate Service (TAS) is
an independent organization within the
Internal Revenue Service that helps
taxpayers and protects taxpayer rights.
TAS's job is to ensure that every taxpayer
is treated fairly and knows and
understands their rights under the
Taxpayer Bill of Rights.

Cat. No. 11475L

As a taxpayer, the corporation has
rights that the IRS must abide by in its
dealings with the corporation. TAS can
help the corporation if:
• A problem is causing financial difficulty
for the business;
• The business is facing an immediate
threat of adverse action; and
• The corporation has tried repeatedly to
contact the IRS but no one has
responded, or the IRS hasn't responded
by the date promised.
TAS has offices in every state, the
District of Columbia, and Puerto Rico.
Local advocates' numbers are in their
local directories and at
TaxpayerAdvocate.IRS.gov. The
corporation can also call TAS at
1-877-777-4778.

TAS also works to resolve large-scale
or systemic problems that affect many
taxpayers. If the corporation knows of one
of these broad issues, please report it to
TAS through the Systemic Advocacy
Management System at IRS.gov/SAMS.
For more information, go to IRS.gov/
Advocate.

How To Get Forms and
Publications
Internet. You can access the IRS website
24 hours a day, 7 days a week, at IRS.gov
to:
• Download forms, instructions, and
publications;
• Order IRS products online;
• Research your tax questions online;
• Search publications online by topic or
keyword;
• View Internal Revenue Bulletins (IRBs)
published in recent years; and
• Sign up to receive local and national tax
news by email.
Tax forms and publications. The
corporation can download or print all of the
forms and publications it may need on
IRS.gov/FormsPubs. Otherwise, the
corporation can go to IRS.gov/
OrderForms to place an order and have
forms mailed to it. The IRS will process
your order for forms and publications as
soon as possible.

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General Instructions
Purpose of Form

Use Form 1120-F to report the income,
gains, losses, deductions, credits, and to
figure the U.S. income tax liability of a
foreign corporation. Also, use Form
1120-F to claim any refund that is due, to
transmit Form 8833, Treaty-Based Return
Position Disclosure Under Section 6114 or
7701(b), or to calculate and pay a foreign
corporation's branch profits tax liability
and tax on excess interest, if any, under
section 884.

company elects to exclude the branch's
income and expenses from its own gross
income.
• A receiver, assignee, or trustee in
dissolution or bankruptcy, if that person
has or holds title to virtually all of a foreign
corporation's property or business. Form
1120-F is due whether or not the property
or business is being operated (see
Who Must Sign, later, for additional
information).
• An agent in the United States, if the
foreign corporation has no office or place
of business in the United States when the
return is due.

the foreign corporation should follow the
instructions for filing a protective return to
safeguard its right to receive the benefit of
the deductions and credits attributable to
that gross income under Regulations
section 1.882-4(a)(3)(vi) in the event that it
is subsequently determined that the
original determination was incorrect. A
foreign corporation should also file a
protective return if it determines initially
that it has no U.S. tax liability under the
provisions of an applicable income tax
treaty (for example, because its income is
not attributable to a permanent
establishment in the United States). See
Protective Return Filers, later. A foreign
corporation that does not file a return will
lose the right to take deductions and
credits against effectively connected
income (ECI). See Other Filing
Requirements, later.

DRAFT AS OF
December 14, 2021
Who Must File

Unless one of the exceptions under
Exceptions From Filing below applies or a
special return is required (see Special
Returns for Certain Organizations, later), a
foreign corporation must file Form 1120-F
if, during the tax year, the corporation:
• Was engaged in a trade or business in
the United States, whether or not it had
U.S. source income from that trade or
business, and whether or not income from
such trade or business is exempt from
U.S. tax under a tax treaty (see also
Protective Return Filers, later);
• Had income, gains, or losses treated as
if they were effectively connected with the
conduct of a U.S. trade or business (see
Section II, later);or
• Was not engaged in a trade or business
in the United States, but had income from
any U.S. source, if its tax liability has not
been fully satisfied by the withholding of
tax at source under Chapter 3 of the Code.
• Was, or had a branch that was, a QDD.
This form is also required to be filed by:
• A foreign corporation making a claim for
the refund of an overpayment of tax for the
tax year. See Simplified Procedure for
Claiming a Refund of U.S. Tax Withheld at
Source, later.
• A foreign corporation claiming the
benefit of any deductions or credits. See
Other Filing Requirements, later.
• A foreign corporation making a claim
that an income treaty overruled or
modified any provision of the Internal
Revenue Code with respect to income
derived by the foreign corporation at any
time during the tax year, and such position
is required to be disclosed on Form 8833.
See the instructions for Form 8833 for who
must file Form 8833, and who is exempt
from filing by reason of a waiver provided
under section 6114 and the regulations
thereunder. If Form 8833 is required,
complete item W(1) on page 2 of the form.
Others that must file Form 1120-F
include the following.
• A Mexican or Canadian branch of a
U.S. mutual life insurance company. The
branch must file Form 1120-F on the same
basis as a foreign corporation if the U.S.

Treaty or Code exemption. If the
corporation does not have any gross
income for the tax year because it is
claiming a treaty or Code exemption, it
must still file Form 1120-F to show that the
income was exempted by treaty or Code.
In this case, the corporation should only
complete the identifying information
(including items A through G) at the top of
page 1 of Form 1120-F and a statement
that indicates the nature and amount of
the exclusions claimed. In the case of a
treaty exemption, the corporation may
complete item W(1) on page 2 of Form
1120-F, which includes completing and
attaching Form 8833, if required in lieu of
attaching a statement. In the case of a
Code exemption under section 883, the
corporation must attach Schedule S (Form
1120-F) in lieu of attaching a statement.
Note. If the corporation does not have
any gross income for the tax year because
it is claiming a treaty or Code exemption,
and there was withholding at source, the
corporation must complete the
Computation of Tax Due or Overpayment
section at the bottom of page 1 of Form
1120-F (in addition to the information
specified in the previous paragraph) to
claim a refund of the amounts withheld.

Entities electing to be taxed as foreign
corporations. A foreign eligible entity
that elected to be classified as a
corporation must file Form 1120-F under
the same circumstances as a per se
corporation and an entity that defaults into
corporate status unless it is required to file
a special return listed under Special
Returns for Certain Organizations, later.
The entity must also have filed Form 8832,
Entity Classification Election. A foreign
corporation filing Form 1120-F for the year
of the election must attach a copy of Form
8832 to its Form 1120-F. See Form 8832,
later, for additional information.
Protective return. If a foreign
corporation conducts limited activities in
the United States in a tax year that the
foreign corporation determines does not
give rise to gross income which is
effectively connected with the conduct of a
trade or business within the United States,
-2-

Qualified opportunity fund. To be
certified as a qualified opportunity fund
(QOF), a foreign corporation organized in
a U.S. possession must file Form 1120-F
and attach Form 8996, even if the
corporation had no income or expenses to
report. See Item II on page 3 of Form
1120-F. Also, see the Instructions for
Form 8996.

Qualified opportunity investment. If a
foreign corporation is required to file Form
8977 because it held a qualified
investment in a QOF at any time during
the year, the corporation must file Form
1120-F and attach Form 8997, Initial and
Annual Statement of Qualified Opportunity
Fund Investments. See the instructions for
Form 8997.

Exceptions From Filing

A foreign corporation does not have to file
Form 1120-F if neither the foreign
corporation nor any of its branches was a
QDD and any of the following apply.
• It did not engage in a U.S. trade or
business during the year, and its full U.S.
tax was withheld at source.
• Its only U.S. source income is exempt
from U.S. taxation under section 881(c) or
(d).
• It is a beneficiary of an estate or trust
engaged in a U.S. trade or business, but
would itself otherwise not need to file.

Special Returns for
Certain Organizations

Instead of filing Form 1120-F, certain
foreign organizations must file special
returns.
• Form 1120-L, U.S. Life Insurance
Company Income Tax Return, as a foreign
life insurance company.
• Form 1120-PC, U.S. Property and
Casualty Insurance Company Income Tax
Return, as a foreign nonlife insurance
company.

Instructions for Form 1120-F (2021)

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• Form 1120-FSC, U.S. Income Tax
Return of a Foreign Sales Corporation, if
the corporation elected to be treated as a
FSC and the election is still in effect.
Consolidated returns. A foreign
corporation, regardless of whether it files a
special return, may not belong to an
affiliated group of corporations that files a
consolidated return. However, a Canadian
or Mexican corporation described in
section 1504(d), maintained solely for
complying with the laws of Canada or
Mexico for title and operation of property,
may elect to be treated as a domestic
corporation and thereby file as part of an
affiliated group.

refunds and credits permitted in such
cases.

Simplified Procedure for
Claiming a Refund of U.S. Tax
Withheld at Source
To make a claim for a refund, complete
Form 1120-F as follows.

and portfolio dividends subject to tax at
15%, a statement must be attached for
Section I, line 2a, to show the amount of
dividend and tax liability for each
respective rate).
Enter on line 11 the total U.S. tax
liability for the reported income.
Enter on line 12 the total U.S. tax
actually withheld from such income.
Check the appropriate box on line 13. A
fiscally transparent entity is one that is not
itself generally subject to income tax but
one whose tax attributes flow through to
its owners.

DRAFT AS OF
December 14, 2021
Electronic Filing

Corporations can generally electronically
file (e-file) Form 1120-F, related forms,
schedules, and attachments, Form 7004
(automatic extension of time to file), and
Forms 940, 941, and 944 (employment tax
returns). If there is a balance due, the
corporation can authorize an electronic
funds withdrawal while e-filing. Form 1099
and other information returns can also be
electronically filed. The option to e-file
does not, however, apply to certain
returns.

Certain corporations with total assets of
$10 million or more that file at least 250
returns a year are required to e-file Form
1120-F. See Regulations section
301.6011-5. However, these corporations
can request a waiver of the electronic filing
requirements. See Notice 2010-13,
2010-4 I.R.B. 327, available at
IRS.gov/irb/2010–04_IRB#NOT-2010–13.
For more information, visit IRS.gov/efile
for business and self-employed taxpayers
https://www.irs.gov/e-file-providers/
e-file-for-business-and-self-employed-tax
payers

Claim for Refund or Credit

If the corporation is filing Form 1120-F
only as a claim for refund or credit of tax
paid or withheld at source, the simplified
procedure described below may be used.
This simplified procedure may not be used
by a corporation that was a QDD or had a
branch that was a QDD.
Note. You cannot claim a refund based
on a reduced rate of, or exemption from,
U.S tax withheld from a substitute
dividend payment made in connection
with a securities lending or similar
transaction if the tax was withheld by a
withholding agent other than the
withholding agent from which you received
the payment (amounts are reported in
box 8 of Form 1042-S). See Notice
2010-46, 2010-24 I.R.B. 757, available at
IRS.gov/irb/2010–24_IRB#NOT-2010–46,
for further information on limitations on

Instructions for Form 1120-F (2021)

Page 1. Enter the complete name,
address, and employer identification
number (EIN) of the corporation. Check
the applicable box to indicate the type of
filing. Provide all the information required
in items A through G.

Refund amount. Enter on lines 1 and
4, page 1, the amount from line 11,
page 3. Enter on lines 5i and 5j the
amount from line 12, page 3. Enter the
excess of line 5j over line 4 on lines 8a
and 9. This is the amount to be refunded
to you.

Signature. An authorized officer of the
corporation must sign and date the return.
Pages 2 and 3. Additional information.
Complete all items on pages 2 and 3 of
Form 1120-F that apply to the corporation.
Page 3. Section I. Enter in column (b)
the gross amount of each type of income
received that is required to be reported in
Section I (see Section I, later, for details).
Include income from foreign sources that
was subject to backup withholding. Do not
include income from which no U.S. tax
was withheld. If the corporation is subject
to backup withholding on gross proceeds
from sales of securities or transactions in
regulated futures contracts, enter the
gross proceeds on line 10.
Enter in columns (c) and (d),
respectively, the correct rate and amount
of U.S. income tax liability for each type of
income reported in column (b). If the
corporation is claiming a refund of U.S. tax
withheld in excess of the rate provided in a
tax treaty with the United States, enter the
applicable treaty rate in column (c) and
figure the correct U.S. income tax liability
on the gross income reported in column
(b).
Enter in column (e) the U.S. tax actually
withheld at source (and not refunded by
the payer or the withholding agent) from
each type of income reported. This should
be the amount reported to you in box 10,
Total withholding credit, of Form(s)
1042-S, which includes the total amount of
federal tax withheld at source less any
amount that was repaid to you by the
withholding agent. If multiple rates of tax
are applicable to a type of income, attach
a statement showing the gross amounts of
income, applicable rate, and amount of
liability and withholding imposed for the
respective amounts at each tax rate (for
example, if a corporation receives
subsidiary dividends subject to tax at 5%
-3-

Additional Documentation
Required

The corporation must attach to Form
1120-F the following.
1. Proof of the withholding (for
example, Form 1042-S).
2. A statement that describes the
basis for the claim for refund.
3. Any required tax certifications (for
example, Form W-8BEN-E).
4. Any additional documentation to
support the claim.

Refund of backup withholding tax. If
the corporation is claiming a refund of
backup withholding tax based on its status
as a non-U.S. resident, it must:
• Provide a copy of the Form 1099 that
shows the amount of reportable payment
and backup withholding, and
• Attach a statement signed under
penalties of perjury that the corporation is
exempt from backup withholding because
it is not a U.S. corporation or other U.S.
resident (for example, Form W-8BEN-E).
Refunds of U.S. withholding. If any of
the following apply, attach the information
requested in addition to the additional
documentation described earlier.
• If you are claiming a refund of U.S. tax
withheld under Chapter 4, you must
provide a statement explaining the basis
for the claim and must provide the other
information requested in this section to
establish a reduced rate, or exemption
from, tax under section 881. See
Regulations section 1.1474-5 for the
requirements for claiming a credit or
refund of tax withheld under Chapter 4.
• If claiming a refund of U.S. tax withheld
from portfolio interest, include a
description of the relevant debt obligation,
including the name of the issuer, CUSIP
number (if any), interest rate, scheduled
maturity date, and the date the debt was
issued. Also, include a statement, signed
under penalties of perjury, that the
corporation is the beneficial owner of the
interest income and not a U.S. corporation
or other U.S. resident (for example, Form
W-8BEN-E).

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• If claiming a reduced rate of, or
exemption from, tax based on a tax treaty,
provide a certificate of entitlement to treaty
benefits (for example, Form W-8BEN-E).
A separate statement should be provided
that contains any additional
representations necessary to explain the
basis for the claim. The corporation may
complete item W(1) on page 2 of the form
(which includes completing and attaching
Form 8833, if required) in lieu of attaching
a statement.

year ending anytime in June will be
treated as if the short year ended on June
30, and must file by the 15th day of the 3rd
month after the end of its tax year.
Extension of time to file. The
corporation must file Form 7004,
Application for Automatic Extension of
Time To File Certain Business Income
Tax, Information, and Other Returns, by
the return due date specified in the
previous two paragraphs to request an
extension of time to file. However, there is
an exception that applies under
Regulations section 1.6081-5. See the
Instructions for Form 7004 for additional
information.

4. U.S. income tax paid or withheld at
source (page 1, line 5i).
See Regulations section 1.882-4 for
details.

Private Delivery Services

Corporations can use certain private
delivery services (PDS) designated by the
IRS to meet the “timely mailing as timely
filing” rule for tax returns. Go to
www.irs.gov/pds.

DRAFT AS OF
December 14, 2021
Note. To claim a reduced rate of, or
exemption from, tax based on a tax treaty,
the corporation must generally be a
resident of the particular treaty country
within the meaning of the treaty and satisfy
the limitation on benefits article, if any, in
the treaty with that country.
• If claiming a refund for overwithholding
on a distribution from a U.S. corporation
with respect to its stock because the
corporation has insufficient earnings and
profits to support ordinary dividend
treatment, provide a statement that
identifies the distributing corporation and
provides the basis for the claim.
• If claiming a refund for overwithholding
on a distribution from a mutual fund or a
real estate investment trust (REIT) with
respect to its stock because the
distribution was designated as long-term
capital gain or a return of capital, provide a
statement that identifies the mutual fund or
REIT and provide the basis for the claim.
• If claiming a refund for overwithholding
on a distribution from a U.S. corporation
with respect to its stock because, in the
foreign corporation's particular
circumstances, the transaction qualifies as
a redemption of stock under section 302,
provide a statement that describes the
transaction and presents the facts
necessary to establish that the payment
was (a) a complete redemption, (b) a
disproportionate redemption, or (c) not
essentially equivalent to a dividend.

When To File
Foreign Corporation With an
Office or Place of Business in
the United States

A foreign corporation that maintains an
office or place of business in the United
States must generally file Form 1120-F by
the 15th day of the 4th month after the end
of its tax year. A new corporation filing a
short-period return must generally file by
the 15th day of the 4th month after the
short period ends. A corporation that has
dissolved must generally file by the 15th
day of the 4th month after the date it
dissolved.
However, a corporation with a fiscal tax
year ending June 30 must file by the 15th
day of the 3rd month after the end of its
tax year. A corporation with a short tax

Foreign Corporation With No
Office or Place of Business in
the United States

A foreign corporation that does not
maintain an office or place of business in
the United States must generally file Form
1120-F by the 15th day of the 6th month
after the end of its tax year.
Extension of time to file. File Form
7004 by the 15th day of the 6th month
after the end of the tax year to request an
extension of time to file. See the
Instructions for Form 7004 for additional
information.

Other Filing Requirements
• If the due date of any filing falls on a

Saturday, Sunday, or legal holiday, the
corporation may file on the next business
day.
• Form 1120-F must be filed on a timely
basis and in a true and accurate manner in
order for a foreign corporation to take
deductions and credits against its ECI. For
these purposes, Form 1120-F is generally
considered to be timely filed if it is filed no
later than 18 months after the due date of
the current year's return. An exception
may apply to foreign corporations that
have yet to file Form 1120-F for the
preceding tax year. These filing deadlines
may be waived in limited situations based
on the facts and circumstances, where the
foreign corporation establishes to the
satisfaction of the Commissioner that the
foreign corporation acted reasonably and
in good faith in failing to file Form 1120-F.
See Regulations section 1.882-4(a)(3)(ii)
for more information about the waiver.
A foreign corporation is allowed the
following deductions and credits
regardless of whether Form 1120-F is
timely filed.
1. The charitable contributions
deduction (page 4, Section II, line 19).
2. The credit from Form 2439 (page 1,
line 5f).
3. The credit for federal tax on fuels
(page 1, line 5g).
-4-

The PDS can tell you how to get written
proof of the mailing date.
For the IRS mailing address to use if
you're using a PDS, go to
IRS.gov/PDSStreetAddresses.

Private delivery services cannot
deliver items to P.O. boxes. You
CAUTION must use the U.S. Postal Service
to mail any item to an IRS P.O. box
address.

!

Where To File

File Form 1120-F with the Internal
Revenue Service Center, P.O. Box
409101, Ogden, UT 84409.

Who Must Sign

The return must be signed and dated by:
• The president, vice president, treasurer,
assistant treasurer, chief accounting
officer; or
• Any other corporate officer (such as tax
officer) authorized to sign.
If a return is filed on behalf of a
corporation by a receiver, trustee, or
assignee, the fiduciary must sign the
return, instead of the corporate officer.
Returns and forms signed by a receiver or
trustee in bankruptcy on behalf of a
corporation must be accompanied by a
copy of the order or instructions of the
court authorizing signing of the return or
form.
If an employee of the corporation
completes Form 1120-F, the paid preparer
space should remain blank. Anyone who
prepares Form 1120-F but does not
charge the corporation should not
complete that section. Generally, anyone
who is paid to prepare the return must sign
it and fill in the “Paid Preparer Use Only”
area.
The paid preparer must complete the
required preparer information and:
• Sign the return in the space provided
for the preparer's signature, and
• Give a copy of the return to the
taxpayer.
A paid preparer may sign original

TIP or amended returns by rubber

stamp, mechanical device, or
computer software program.

Instructions for Form 1120-F (2021)

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Paid Preparer
Authorization

If the corporation wants to allow the IRS to
discuss its 2021 tax return with the paid
preparer who signed it, check the “Yes”
box in the signature area of the return.
This authorization applies only to the
individual whose signature appears in the
“Paid Preparer Use Only” section of the
return. It does not apply to the firm, if any,
shown in that section.

report to the IRS summary information for
each employer and to transmit Forms
1095-C to the IRS. Form 1095-C is used
to report information about each
employee. In addition, Forms 1094-C and
1095-C are used in determining whether
an employer owes payments under the
employer shared responsibility provisions
under section 4980H. For more
information, see the Instructions for Forms
1094-C and 1095-C. Also, for more
information related to the Affordable Care
Act, visit IRS.gov/ACA.

• An entity that elected to be a
disregarded entity,
• A foreign entity that elected to be a
partnership but does not itself have a
Form 1065 filing requirement, and
• A foreign corporation that owns a
foreign entity that elected to be a
disregarded entity.
The corporation does not need to
attach the Form 8832 for an entity in which
it has an indirect interest if an entity in
which it has an interest is already
attaching a copy of the Form 8832 with its
return. See Regulations section
301.7701-3(c)(1)(ii).

DRAFT AS OF
December 14, 2021
If the “Yes” box is checked, the
corporation is authorizing the IRS to call
the paid preparer to answer any questions
that may arise during the processing of its
return. The corporation is also authorizing
the paid preparer to:
• Give the IRS any information that is
missing from the return;
• Call the IRS for information about the
processing of the return or the status of
any related refund or payment(s); and
• Respond to certain IRS notices about
math errors, offsets, and return
preparation.

The corporation is not authorizing the
paid preparer to receive any refund check,
bind the corporation to anything (including
any additional tax liability), or otherwise
represent the corporation before the IRS.
The authorization will automatically end
no later than the due date (excluding
extensions) for filing the corporation's
2022 tax return. If the corporation wants to
expand the paid preparer's authorization
or revoke the authorization before it ends,
see Pub. 947, Practice Before the IRS and
Power of Attorney.

Other Forms, Schedules,
and Statements That May
Be Required
Forms

A foreign corporation may have to file
some of the following forms and
schedules. See the form or schedule for
more information.
For a list of additional forms the
corporation may need to file (most
notably, forms pertaining to the reporting
of various types of income, and any
related withholding, to U.S. persons,
foreign persons, and the IRS), see Pub.
542, Corporations.
Form 1094-C, Transmittal of Employer
Health Coverage Statements, and Form
1095-C, Employer-Provided Health
Coverage Statement. Employers with 50
or more full-time employees (including
full-time equivalent employees) use Forms
1094-C and 1095-C to report the
information required under sections 6055
and 6056 about offers of health coverage
and enrollment in health coverage for their
employees. Form 1094-C must be used to
Instructions for Form 1120-F (2021)

Form 5472, Information Return of a 25%
Foreign-Owned U.S. Corporation or a
Foreign Corporation Engaged in a U.S.
Trade or Business. This form is filed by or
for a foreign corporation engaged in a U.S.
trade or business that had certain
reportable transactions with a related
party. See the Instructions for Form 5472
for filing instructions and information for
failure to file and maintain records.
Form 8275, Disclosure Statement, and
Form 8275-R, Regulation Disclosure
Statement. Use these forms to disclose
items or positions taken on a tax return
that are not otherwise adequately
disclosed on a tax return or that are
contrary to Treasury regulations (to avoid
parts of the accuracy-related penalty or
certain preparer penalties).
Form 8300, Report of Cash Payments
Over $10,000 Received in a Trade or
Business. Use this form to report the
receipt of more than $10,000 in cash or
foreign currency in one transaction or a
series of related transactions.
Form 8302, Electronic Deposit of Tax
Refund of $1 Million or More. The form
must be filed to request an electronic
deposit of a tax refund of $1 million or
more.
Form 8832, Entity Classification Election.
This form is filed by an eligible entity to
elect how it will be classified for federal tax
purposes. If the corporation filed Form
8832 to make an initial classification
election to be a corporation or to change
its classification to be a corporation
effective during the current tax year, the
corporation must attach a copy of the
Form 8832 to its Form 1120-F. If the
corporation owns a direct or indirect
interest in an entity that is not required to
file a return, but for which a Form 8832
was filed to make a change in the
classification of the entity that is effective
during the current tax year, the
corporation must attach a copy of the
Form 8832 with respect to that entity
to its Form 1120-F for the current tax
year. Examples of when the corporation
must attach a copy of the Form 8832 for
an entity in which it has an interest include
the corporation's ownership of:

-5-

Form 8833, Treaty-Based Return
Position Disclosure Under Section 6114 or
7701(b). Use this form to make the
treaty-based return position disclosure
required by section 6114.

Form 8848, Consent To Extend the Time
To Assess the Branch Profits Tax Under
Regulations Sections 1.884-2(a) and (c).
Use this form to execute a waiver of period
of limitations in regard to a termination or
incorporation of a U.S. trade or business
or liquidation or reorganization of a foreign
corporation or its domestic subsidiary.
See the instructions for Section III, Part I,
of Form 1120-F.
Form 8886, Reportable Transaction
Disclosure Statement. Use this form to
disclose information for each reportable
transaction in which the corporation
participated. Form 8886 must be filed for
each tax year that the federal income tax
liability of the corporation is affected by its
participation in the transaction. The
following are reportable transactions.
1. Any listed transaction, which is a
transaction that is the same as or
substantially similar to one of the types of
transactions that the IRS has determined
to be a tax avoidance transaction and
identified by notice, regulation, or other
published guidance as a listed
transaction.
2. Any transaction offered under
conditions of confidentiality for which the
corporation (or a related party) paid an
advisor a fee of at least $250,000.
3. Certain transactions for which the
corporation (or a related party) has
contractual protection against
disallowance of the tax benefits.
4. Certain transactions resulting in a
loss of at least $10 million in any single
year or $20 million in any combination of
years.
5. Any transaction identified by the
IRS by notice, regulation, or other
published guidance as a “transaction of
interest.”
For more information, see Regulations
section 1.6011-4. Also, see the
Instructions for Form 8886.

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Penalties. The corporation may have
to pay a penalty if it is required to disclose
a reportable transaction under section
6011 and fails to properly complete and
file Form 8886. Penalties may also apply
under section 6707A if the corporation
fails to file Form 8886 with its corporate
return, fails to provide a copy of Form
8886 to the Office of Tax Shelter Analysis
(OTSA), or files a form that fails to include
all the information required (or includes
incorrect information). Other penalties,
such as an accuracy-related penalty under
section 6662A, may also apply. See the
Instructions for Form 8886 for details on
these and other penalties.

Instructions for Schedule P (Form 1120-F)
for the reconciliation of ECI and
distributive share of expenses reported on
Schedules K-3. Do not file Schedule P if
the corporation has no partnership
interests that give rise to ECI that is
included in the income reported to the
corporation on Schedules K-3.

include the statement required by
Regulations section 1.355-5(b) on or with
its return for the year of the receipt. If the
distributing or distributee corporation is a
controlled foreign corporation, each U.S.
shareholder (within the meaning of section
951(b)) must include the statement on or
with its return.

Note. If the corporation has received
Form 8805, Foreign Partner's Information
Statement of Section 1446 Withholding
Tax, it will have ECI includible in its
Schedule K-3 that is required to be
reported on Schedule P.

Election to reduce basis under section
362(e)(2)(C). If property is transferred to
a corporation subject to section 362(e)(2),
the transferor and the acquiring
corporation may elect, under section
362(e)(2)(C), to reduce the transferor's
basis in the stock received instead of
reducing the acquiring corporation's basis
in the property transferred. Once made,
the election is irrevocable. For more
information, see section 362(e)(2) and
Regulations section 1.362-4. If an election
is made, a statement must be filed in
accordance with Regulations section
1.362-4(d)(3).

DRAFT AS OF
December 14, 2021
Reportable transactions by material
advisors. Material advisors to any
reportable transaction must disclose
certain information about the reportable
transaction by filing Form 8918, Material
Advisor Disclosure Statement, with the
IRS. For details, see the Instructions for
Form 8918.

Schedules
Schedule H, Deductions Allocated to
Effectively Connected Income Under
Regulations Section 1.861-8. This
schedule is required to be attached to
report certain deductions of the
corporation that are allocable to ECI. If the
corporation has any deductions reportable
on Form 1120-F, Section II, lines 12
through 27, then Schedule H is required to
be attached. See the separate Instructions
for Schedule H for details.
Note. Line 20 of Schedule H is reportable
on Form 1120-F, Section II, line 26.
Schedule I, Interest Expense Allocation Under Regulations Section
1.882-5. This schedule is required to be
attached to report any interest expense
allocable to ECI under Regulations section
1.882-5. The schedule must be attached
whether or not such allocable interest is
deductible against ECI in the current year.
See the separate Instructions for
Schedule I (Form 1120-F) for identification
of elective allocation methods and
computation of the allocable and
deductible amounts of interest expense.
Note. Line 25 of Schedule I is reportable
on Form 1120-F, Section II, line 18.
Schedule P, List of Foreign Partner Interests in Partnerships. This schedule
is required to be attached to report all ECI
included in Schedules K-3 the foreign
corporation receives for each of its directly
held partnership interests. Schedule P is
also required to report the corporation's
adjusted outside basis in its directly held
partnership interest and the amount of the
outside basis of each such interest
apportioned to ECI under Regulations
section 1.884-1(d)(3). See the separate

Schedule S, Exclusion of Income From
the International Operation of Ships or
Aircraft Under Section 883. This
schedule is required to be attached to
claim a Code exemption under section
883. This schedule incorporates the
information required under Regulations
sections 1.883-1 through 1.883-4. See the
separate Instructions for Schedule S
(Form 1120-F) for details.
Schedule V, List of Vessels or Aircraft,
Operators, and Owners. This schedule
is required to be attached if the
corporation is required to report gross
transportation income in Section I, line 9,
column (b). See the separate Instructions
for Schedule V (Form 1120-F) for details.

Statements
Transfers to a corporation controlled
by the transferor. Every significant
transferor (as defined in Regulations
section 1.351-3(d)) that receives stock of
a corporation in exchange for property in a
nonrecognition event must include the
statement required by Regulations section
1.351-3(a) on or with the transferor's tax
return for the tax year of the exchange.
The transferee corporation must include
the statement required by Regulations
section 1.351-3(b) on or with its return for
the tax year of the exchange, unless all the
required information is included in any
statement(s) provided by a significant
transferor that is attached to the same
return for the same section 351 exchange.
If the transferor or transferee corporation
is a controlled foreign corporation, each
U.S. shareholder (within the meaning of
section 951(b)) must include the required
statement on or with its return.
Distributions under section 355. Every
corporation that makes a distribution of
stock or securities of a controlled
corporation, as described in section 355
(or so much of section 356 as relates to
section 355), must include the statement
required by Regulations section
1.355-5(a) on or with its return for the year
of the distribution. A significant distributee
(as defined in Regulations section
1.355-5(c)) that receives stock or
securities of a controlled corporation must
-6-

Foreign corporation with income excluded from gross income. If the
foreign corporation has income excluded
from gross income for the tax year, do not
complete the Form 1120-F schedules.
Instead, attach a statement to the return
showing the types and amounts of income
excluded from gross income. See Treaty
or Code exemption, earlier, for more
information.
Election to reduce liabilities under
Regulations section 1.884-1(e)(3). If a
taxpayer has a dividend equivalent
amount that is subject to the branch profits
tax under section 884(a), it may elect to
reduce its U.S. liabilities under the branch
profits tax regulations to treat its effectively
connected earnings and profits as
reinvested rather than remitted. A
taxpayer may elect to reduce the amount
of its liabilities by an amount that does not
exceed the lesser of the amount of U.S.
liabilities or the amount of U.S. liability
reduction needed to reduce a dividend
equivalent amount to zero. The election is
made by attaching a statement to a timely
filed tax return (including the extension
due date) indicating the amount of U.S.
liabilities reduced for branch profits tax
purposes and the corresponding amount
also reduced from U.S.-connected
liabilities for interest expense allocation
purposes. See Regulations section
1.884-1(e)(3).

Assembling the Return

To ensure that the corporation's tax return
is correctly processed, attach all
schedules and other forms after page 8 of
Form 1120-F, in the following order.
1. Schedule D (Form 1120).
2. Form 8949.
3. Form 8996.
4. Form 4136.
Instructions for Form 1120-F (2021)

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5. Form 8978.
6. Form 8941.
7. Form 3800.
8. Additional schedules in
alphabetical order.
9. Additional forms in numerical order.
10. Supporting statements and
attachments.

(b) is not a tax shelter (as defined in
section 448(d)(3)).
A small business taxpayer can adopt or
change its accounting method to account
for inventories (a) in the same manner it
would use to adopt or change its method
of accounting for non-incidental material
and supplies, or (b) to conform to its
treatment of inventories in an applicable
financial statement (as defined in section
451(b)(3)). If it does not have an
applicable financial statement, it can use
the method of accounting used in its
books and records prepared according to
its accounting procedures.

service corporations, however, must use a
calendar year unless they meet one of the
exceptions discussed under Personal
Service Corporation, later. Furthermore,
special rules apply to specified foreign
corporations. See Specified Foreign
Corporations below.
Change of tax year. Generally, a
corporation, including a personal service
corporation, must get the consent of the
IRS before changing its tax year by filing
Form 1128, Application To Adopt,
Change, or Retain a Tax Year. However,
exceptions may apply. See the
Instructions for Form 1128 and Pub. 538
for more information.

DRAFT AS OF
December 14, 2021
Complete every applicable entry space
on Form 1120-F. Do not enter “See
Attached” or “Available Upon Request”
instead of completing the entry spaces. If
more space is needed on the forms or
schedules, attach separate sheets using
the same size and format as the printed
forms.
If there are supporting statements and
attachments, arrange them in the same
order as the schedules or forms they
support and attach them last. Show the
totals on the printed forms. Enter the
corporation's name and EIN on each
supporting statement or attachment.

Accounting Methods

In general, figure taxable income using the
method of accounting regularly used in
keeping the corporation's books and
records. In all cases, the method used
must clearly show taxable income.
Permissible overall methods of accounting
include cash, accrual, or any other method
authorized by the Internal Revenue Code.
Generally, the following rules apply. For
more information, see Pub. 538,
Accounting Periods and Methods.
• A corporation cannot use the cash
method of accounting unless it is a small
business taxpayer (defined later). A tax
shelter (defined in section 448(d)(3)) may
never use the cash method. See sections
448(a)(1) through (a)(3). However, see
Nonaccrual experience method for service
providers in the instructions for Section II,
line 1a, later.
• Unless it is a small business taxpayer
(defined below), a corporation must use
an accrual method for sales and
purchases of inventory items. See the
instructions for Form 1125-A.
• A corporation engaged in farming must
use an accrual method. For exceptions,
see section 447 and Pub. 225.
• Special rules apply to long-term
contracts. See section 460.
• Dealers in securities must use the
mark-to-market accounting method.
Dealers in commodities and traders in
securities and commodities may elect to
use the mark-to-market accounting
method. See section 475.
Small business taxpayer. For tax years
beginning in 2021, a corporation qualifies
as a small business taxpayer if (a) it has
average annual gross receipts of $26
million or less for the 3 prior tax years, and
Instructions for Form 1120-F (2021)

Change in accounting method.
Generally, the corporation must get IRS
consent to change either an overall
method of accounting or the accounting
treatment of any material item for income
tax purposes. To obtain consent, the
corporation must generally file Form 3115,
Application for Change in Accounting
Method, during the tax year for which the
change is requested. See the Instructions
for Form 3115 and Pub. 538 for more
information and exceptions. Also, see
Rev. Proc. 2021-34 for additional
procedures that may apply for obtaining
automatic consent to change certain
methods of accounting.

Section 481(a) adjustment. If the
corporation's taxable income for the
current tax year is figured under a method
of accounting different from the method
used in the preceding tax year, the
corporation may have to make an
adjustment under section 481(a) to
prevent amounts of income or expense
from being duplicated or omitted. The
section 481(a) adjustment period is
generally 1 year for a net negative
adjustment and 4 years for a net positive
adjustment.
In some cases, a corporation can elect
to modify the section 481(a) adjustment
period. The corporation may have to
complete the appropriate lines of Form
3115 to make an election. See the
Instructions for Form 3115 for more
information and exceptions.
If the net section 481(a) adjustment is
positive, report the ratable portion on Form
1120-F, Section II, line 10, as other
income. If the net section 481(a)
adjustment is negative, report the ratable
portion on line 27 of Section II as a
deduction.

Accounting Period

A corporation must figure its taxable
income on the basis of a tax year. A tax
year is the annual accounting period a
corporation uses to keep its records and
report its income and expenses.
Generally, corporations may use a
calendar year or a fiscal year. Personal
-7-

Specified Foreign Corporations

The annual accounting period of a
specified foreign corporation (defined
below) is generally required to be the tax
year of its majority U.S. shareholder. If
there is more than one majority
shareholder, the required tax year will be
the tax year that results in the least
aggregate deferral of income to all U.S.
shareholders of the foreign corporation.
For more information, see section 898;
Rev. Proc. 2006-45, 2006-2 C.B. 851,
available at IRS.gov/irb/
2006-45_IRB#RP-2006-45; and Rev.
Proc. 2002-39, 2002-1 C.B. 1046,
available at IRS.gov/pub/irs-irbs/irb02-22,
as modified by Notice 2002-72, 2002-2
C.B. 843, available at
IRS.gov/pub/irs-irbs/irb02-46.

Specified foreign corporation. A
specified foreign corporation (as defined
in section 898) is any foreign corporation
that is treated as a controlled foreign
corporation (CFC) under subpart F
(sections 951 through 964) and with
respect to which more than 50% of the
total voting power or value of all classes of
stock of the corporation is treated as
owned by a U.S. shareholder.

Rounding Off to Whole
Dollars

The corporation may enter decimal points
and cents when completing its return.
However, the corporation should round off
cents to whole dollars on its return, forms,
and schedules to make completing its
return easier. The corporation must either
round off all amounts on its return to whole
dollars or use cents for all amounts. To
round, drop amounts under 50 cents and
increase amounts from 50 to 99 cents to
the next dollar. For example, $8.40 rounds
to $8 and $8.50 rounds to $9.
If two or more amounts must be added
to figure the amount to enter on a line,
include cents when adding the amounts
and round off only the total.

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Recordkeeping

Keep the corporation's records for as long
as they may be needed for the
administration of any provision of the
Internal Revenue Code. Usually, records
that support an item of income, deduction,
or credit on the return must be kept for 3
years from the date the return is due or
filed, whichever is later. Keep records that
verify the corporation's basis in property
for as long as they are needed to figure
the basis of the original or replacement
property. QDDs should see the Qualified
Intermediary Agreement for additional
requirements.

this due date. However, see Regulations
section 1.6081-5 for an exception. Also,
see the instructions for line 7, later. If the
foreign corporation files Form 1120-F
electronically, it may pay the tax due by
initiating an electronic funds withdrawal
(direct debit). It does so by checking the
box on line 6c of Form 8453-I. If the
foreign corporation does not file Form
1120-F electronically, or if it files Form
1120-F electronically and does not choose
the direct debit option, the tax may be paid
as follows. The foreign corporation may
pay the tax using EFTPS or it can arrange
for its tax professional, financial institution,
payroll service, or other trusted third party
to make deposits on its behalf. In addition,
the foreign corporation also has the option
to arrange for its financial institution to
initiate a same-day payment.

regarding availability, deadlines, and
costs. Financial institutions may charge a
fee for payments made this way. To learn
more about the information the
corporation will need to provide to its
financial institution to make a same-day
wire payment, go to IRS.gov/
SameDayWire.

DRAFT AS OF
December 14, 2021
The corporation should keep copies of
all filed returns. They help in preparing
future and amended returns and in the
calculation of earnings and profits.

Payment of Tax Due

The requirements for payment of tax
depend on whether the foreign
corporation has an office or place of
business in the United States.
Foreign corporations that do not
maintain an office or place of business in
the United States must generally pay any
tax due (page 1, line 7) in full no later than
the 15th day of the 6th month after the end
of the tax year. However, see the
instructions for line 7, later. If the foreign
corporation files Form 1120-F
electronically, it may pay the tax due by
initiating an electronic funds withdrawal
(direct debit). It does so by checking the
box on line 6c of Form 8453-I, Foreign
Corporation Income Tax Declaration for an
IRS e-file Return. If the foreign corporation
does not file Form 1120-F electronically,
or if it files Form 1120-F electronically and
does not choose the direct debit option,
the foreign corporation may use the
Electronic Federal Tax Payment System
(EFTPS) to pay the tax due if it has a U.S.
bank account. If the foreign corporation
does not have a U.S. bank account, it may
arrange for its financial institution to initiate
a same-day payment on its behalf or it can
arrange for either a qualified intermediary,
tax professional, payroll service, or other
trusted third party to make a deposit on its
behalf using a master account. In addition,
the foreign corporation still has the option
to pay by check or money order, payable
to “United States Treasury.” To help
ensure proper crediting, write the
corporation's EIN, “Form 1120-F,” and the
tax period to which the payment applies
on the check or money order. Enclose the
payment when the corporation files Form
1120-F.
Foreign corporations that do maintain
an office or place of business in the United
States must generally pay any tax due
(page 1, line 7) in full no later than the due
date for filing Form 1120-F (not including
extensions). See When To File, earlier, for

Estimated Tax Payments

Depositing on time. For any deposit
made by EFTPS to be on time, the
corporation must submit the deposit by 8
p.m. Eastern time the day before the date
the deposit is due. If the corporation uses
a third party to make deposits on its
behalf, they may have different cutoff
times.

Generally, the following rules apply to a
foreign corporation's payments of
estimated tax.
• The corporation must make installment
payments of estimated tax if it expects its
total tax for the year (less applicable
credits) to be $500 or more.
• The installments are due by the 15th
day of the 4th, 6th, 9th, and 12th months
of the tax year. If any date falls on a
Saturday, Sunday, or legal holiday, the
installment is due on the next regular
business day.
• Use Form 1120-W, Estimated Tax for
Corporations, as a worksheet to compute
estimated tax. See the Instructions for
Form 1120-W.
• If the foreign corporation maintains an
office or place of business in the United
States, it must use electronic funds
transfer to make installment payments of
estimated tax.
• If the foreign corporation does not
maintain an office or place of business in
the United States, it may pay the
estimated tax by EFTPS, providing it has a
U.S. bank account. The foreign
corporation may also arrange for its
financial institution to submit a same-day
payment on its behalf or can arrange for
its qualified intermediary, tax professional,
payroll service, or other trusted third party
to make a deposit on its behalf using a
master account. In addition, the foreign
corporation still has the option to pay the
estimated tax due by check or money
order. See the Instructions for Form
1120-W for additional payment
information.
• Penalties may apply if the corporation
does not make required estimated tax
payment deposits. See Estimated tax
penalty below.
• If the corporation overpaid estimated
tax, it may be able to get a quick refund by
filing Form 4466, Corporation Application
for Quick Refund of Overpayment of
Estimated Tax. See the instructions for
line 5c, later.

Same-day wire payment option. If the
corporation fails to submit a deposit
transaction on EFTPS by 8 p.m. Eastern
time the day before the date a deposit is
due, it can still make the deposit on time
by using the Federal Tax Collection
Service (FTCS). To use the same-day
wire payment method, the corporation will
need to make arrangements with its
financial institution ahead of time

Estimated tax penalty. A corporation
that does not make estimated tax
payments when due may be subject to an
underpayment penalty for the period of
underpayment. Generally, a corporation is
subject to the penalty if its tax liability is
$500 or more and it did not timely pay at
least the smaller of:
• Its tax liability for the current year, or
• Its prior year's tax.

Note. If the due date falls on a Saturday,
Sunday, or legal holiday, the payment is
due on the next day that isn't a Saturday,
Sunday, or legal holiday.

Electronic deposit requirement.
Foreign corporations with an office or
place of business in the United States
must use electronic funds transfer to make
all federal tax deposits (such as deposits
of employment, excise, and corporate
income tax). Generally, electronic funds
transfers are made using EFTPS.
However, if the corporation does not want
to use EFTPS, it can arrange for its tax
professional, financial institution, payroll
service, or other trusted third party to
make deposits on its behalf. Also, it may
arrange for its financial institution to
submit a same-day payment (discussed
below) on its behalf. EFTPS is a free
service provided by the Department of the
Treasury. Services provided by a tax
professional, financial institution, payroll
service, or other third party may have a
fee.
To get more information about EFTPS
or to enroll in EFTPS, visit EFTPS.gov or
call 1-800-555-4477 (TTY/TDD
1-800-733-4829).

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Instructions for Form 1120-F (2021)

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No estimated tax payments are
required with respect to a foreign
corporation's liability for the branch profits
tax. See Regulations section 1.884-1(a).
Use Form 2220, Underpayment of
Estimated Tax by Corporations, to see if
the corporation owes a penalty and to
figure the amount of the penalty. If Form
2220 is completed, enter the penalty on
Form 1120-F, page 1, line 6. See the
instructions for line 6, estimated tax
penalty, later.

• Form 941, Employer's QUARTERLY
Federal Tax Return;
• Form 943, Employer's Annual Federal
Tax Return for Agricultural Employees;
• Form 944, Employer's ANNUAL
Federal Tax Return; or
• Form 945, Annual Return of Withheld
Federal Income Tax.
The trust fund recovery penalty may be
imposed on all persons who are
determined by the IRS to have been
responsible for collecting, accounting for,
or paying over these taxes, and who acted
willfully in not doing so. The penalty is
equal to the full amount of the unpaid trust
fund tax. See the Instructions for Form
720; Pub. 15 (Circular E), Employer's Tax
Guide; or Pub. 51 (Circular A), Agricultural
Employer's Tax Guide, for details,
including the definition of responsible
persons.

Exceptions. The following types of
interest income are treated as foreign
source income.
• Interest income received from foreign
branches of U.S. banks and savings and
loan associations.
• In the case of a foreign partnership that
is predominantly engaged in the active
conduct of a trade or business outside the
United States, any interest not paid by a
trade or business engaged in by the
partnership in the United States and not
allocable to income that is effectively
connected (or treated as effectively
connected) with the conduct of a U.S.
trade or business.
The following types of interest income
are treated as domestic source income
even though paid by a foreign corporation.
• For a foreign corporation engaged in a
U.S. trade or business, interest paid by the
U.S. trade or business (branch interest) is
treated as if paid by a domestic
corporation to the actual recipient of the
interest. See section 884(f)(1)(A) and the
regulations thereunder. Interest paid from
a U.S. trade or business is only treated as
branch interest to the extent the interest is
allocable to ECI under the interest
expense allocation rules in Regulations
section 1.882-5. Amounts paid but not
allocable to ECI are not branch interest.
See Regulations section 1.884-4(b)(6).
• If the foreign corporation has allocable
interest in excess of branch interest
(excess interest), the foreign corporation
must treat that interest as if paid by a
wholly owned domestic corporation to the
foreign corporation. See section 884(f)(1)
(B) and the instructions for Section III, Part
II, later.

DRAFT AS OF
December 14, 2021
Interest and Penalties

Interest. Interest is charged on taxes
paid late even if an extension of time to file
is granted. Interest is also charged on
penalties imposed for failure to file,
negligence, fraud, substantial valuation
misstatements, substantial
understatements of tax, and reportable
transaction understatements from the due
date (including extensions) to the date of
payment. The interest charge is figured at
a rate determined under section 6621.

Penalty for late filing of return. A
corporation that does not file its tax return
by the due date, including extensions,
may be penalized 5% of the unpaid tax for
each month or part of a month the return is
late, up to a maximum of 25% of the
unpaid tax. The minimum penalty for a
return that is more than 60 days late is the
smaller of the tax due or $435. The
penalty will not be imposed if the
corporation can show that the failure to file
on time was due to reasonable cause.
If you believe that reasonable
cause exists, do not attach an
CAUTION explanation when you file Form
1120-F. Instead, if the corporation
receives a penalty notice after the return is
filed, send an explanation to the IRS at
that time and the IRS will determine if the
corporation meets reasonable-cause
criteria.

!

Penalty for late payment of tax. A
corporation that does not pay the tax when
due generally may be penalized 1/2 of 1%
of the unpaid tax for each month or part of
a month the tax is not paid, up to a
maximum of 25% of the unpaid tax. The
penalty will not be imposed if the
corporation can show that the failure to
pay on time was due to reasonable cause.
See Caution above.
Trust fund recovery penalty. This
penalty may apply if certain excise,
income, social security, and Medicare
taxes that must be collected or withheld
are not collected or withheld, or these
taxes are not paid. These taxes are
generally reported on:
• Form 720, Quarterly Federal Excise
Tax Return;

Instructions for Form 1120-F (2021)

Note. The trust fund recovery penalty will
not apply to any amount of trust fund taxes
an employer holds back in anticipation of
the credit for qualified sick and family
leave wages or the employee retention
credit that they are entitled to. See Pub. 15
or Pub. 51 for more information.
Other penalties. Other penalties may be
imposed for negligence, substantial
understatement of tax, reportable
transaction understatements, and fraud.
See sections 6662, 6662A, and 6663.

Special Rules for Foreign
Corporations
Source of Income Rules

The source of income is important in
determining the extent to which income is
taxable to foreign corporations. Each type
of income has its own sourcing rules.

Interest Income
The source of interest income is usually
determined by the residence of the
obligor.
For example, interest paid by an obligor
who is a resident of the United States is
U.S. source income, and interest paid by
an obligor who is a resident of a country
other than the United States is foreign
source income. Interest paid by a foreign
partnership that is predominantly engaged
in the active conduct of a trade or
business outside the United States is
treated as U.S.-source income only if the
interest is paid by a U.S. trade or business
conducted by the partnership or is
allocable to income that is treated as
effectively connected with the conduct of a
U.S. trade or business. See section 861(a)
(1)(B).

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Dividend Income
The source of dividend income is usually
determined by the residence of the payer.
For example, dividends paid by a
corporation that was incorporated in the
United States are generally U.S. source
income and dividends paid by a
corporation that was incorporated in a
foreign country are generally foreign
source income.
Exceptions:
• Dividends paid by a U.S. corporation
are foreign source income:
1. If the U.S. corporation has made a
valid election under section 936 (or
section 30A), relating to certain U.S.
corporations operating in a U.S.
possession; or
2. To the extent the dividends are
from qualified export receipts described in
section 993(a)(1) (other than interest and
gains described in section 995(b)(1)).
• Dividends paid by a foreign corporation
are U.S. source income:

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1. If the dividend is treated under
section 243(e) as a distribution from the
accumulated profits of a predecessor U.S.
corporation; or
2. To the extent the foreign
corporation's effectively connected gross
income for the testing period (defined
below) bears to all of the foreign
corporation's gross income for the testing
period, but only if 25% or more of the
foreign corporation's gross income during
the testing period was effectively
connected with the conduct of a U.S. trade
or business.
The testing period is generally the 3
tax years of the foreign corporation payer
preceding the tax year during which it
declared the dividend. If the foreign
corporation existed for fewer than 3 years
before the tax year of declaration, the
testing period is the term of the foreign
corporation's existence before the current
year. If the foreign corporation declared
the dividend in its first tax year, that year is
the testing period. Regardless of source,
however, there is no tax imposed on any
dividends paid by a foreign corporation out
of earnings and profits for a tax year in
which the foreign corporation was subject
to the branch profits tax (determined after
application of any income tax treaty). See
Regulations section 1.1441-1(b)(4)(vii).

under section 861(a)(6) as U.S. source if
the property is purchased without the
United States and sold within the United
States and under section 862(a)(6) as
foreign source if the property is purchased
within the United States and sold without
the United States. See also U.S. source
treatment of inventory sales attributable to
a U.S. office or fixed place of business
under section 865(e)(2).
• Income from the production and sale of
inventory property is generally sourced
solely on place-of-production activities
under section 863(b).
• Income from the sale of depreciable
property is generally sourced as mixed
U.S. and foreign source under section
865(c).
• Income from certain sales of intangibles
is generally subject to the source rules
applicable to royalties, found in section
861(a)(4). See section 865(d).

Other Special Rules
Basis of Property and Inventory
Costs for Property Imported by a
Related Person
If property is imported into the United
States by a related person in a transaction
and the property has a customs value, the
basis or inventory cost to the importer may
not exceed the customs value. See
section 1059A.

DRAFT AS OF
December 14, 2021
Dividend Equivalents
A dividend equivalent generally is treated
as a dividend from sources within the
United States.

Rent and Royalty Income
The source of rent and royalty income for
the use of property is determined based
on where the property is located.

Income From the Sale or Exchange
of Real Estate
Gain from the disposition of a U.S. real
property interest (a USRPI) is U.S. source.
A USRPI includes, but is not limited to,
real property situated in the United States,
an interest in real property other than
solely as a creditor (such as a contingent
interest in real property), and an interest in
a United States real property holding
corporation (USRPHC). See section 897
and the regulations thereunder.

Income From the Sale or Exchange
of Personal Property
Income from the sale of personal property
by a foreign corporation is generally
treated as foreign source under section
865(a). However, special rules may apply
to source such income as follows.
• Income from the purchase and sale of
inventory property is generally sourced

Foreign corporations with an office or
fixed place of business in the United
States. Income from the sale of personal
property attributable to an office or fixed
place of business is U.S. source income
regardless of any of the above rules
relating to the source of income from the
sale or exchange of personal property,
except that this source rule is not
applicable for purposes of defining an
export trade corporation (see sections
865(e)(2)(A) and 971).
Exception. Income from the sale of
inventory property is foreign source
income if the goods were sold for use,
disposition, or consumption outside the
United States and a foreign office of the
corporation materially participated in the
sale.

Income on Guarantees
With respect to guarantees issued after
September 27, 2010:
• The following income is U.S. source:
Amounts received directly or indirectly
from (1) a noncorporate resident or
domestic corporation for the provision of a
guarantee of any indebtedness of such
resident or corporation, or (2) any foreign
person for the provision of a guarantee of
any indebtedness of such person, if such
amount is connected with income which is
effectively connected (or treated as
effectively connected) with the conduct of
a trade or business in the United States.
See section 861(a)(9).
• The following income is foreign source:
Amounts received, directly or indirectly,
from a foreign person for the provision of a
guarantee of indebtedness of such person
other than amounts which are derived
from sources within the United States as
provided in section 861(a)(9). See section
862(a)(9).

-10-

Income of Foreign Governments
and International Organizations

Income of foreign governments and
international organizations from the
following sources is generally not subject
to tax or withholding under Chapter 3 or 4
of the Code.
• Investments in the United States in
stocks, bonds, or other domestic
securities owned by such foreign
government or international organization.
• Interest on deposits in banks in the
United States of money belonging to such
foreign government or international
organization.
• Investments in the United States in
financial instruments held (by a foreign
government) in executing governmental
financial or monetary policy.
Exception. The income described in
section 892(a)(2) that is received directly
or indirectly from commercial activities is
subject to both tax and withholding under
Chapter 3 or 4 of the Code.

Specific Instructions
Period Covered

File the 2021 return for calendar year 2021
and fiscal years that begin in 2021 and
end in 2022. For a fiscal or short tax year
return, fill in the tax year space at the top
of the form.

The 2021 Form 1120-F may also be
used if:
• The corporation has a tax year of less
than 12 months that begins and ends in
2022, and
• The 2022 Form 1120-F is not available
at the time the corporation is required to
file its return.
The corporation must show its 2022 tax
year on the 2021 Form 1120-F and take
into account any tax law changes that are
effective for tax years beginning after
December 31, 2021.

Address

Include the room, suite, or other unit
number after the street address. If the post
office does not deliver mail to the street
address and the corporation has a P.O.
box, show the box number instead.
Instructions for Form 1120-F (2021)

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If the corporation receives its mail in
care of a third party (such as an
accountant or an attorney), enter “C/O” on
the street address line followed by the
third party's name and street address or
P.O. box.
If the corporation has a foreign
address, include the city or town, state or
province, country, and foreign postal
code. Do not abbreviate the country
name. Follow the country's practice for
entering the name of the state or province
and postal code.

filed, use Form 8822-B, Change of
Address or Responsible Party —
Business, to notify the IRS. See the
instructions for Form 8822-B for details.
First post-merger return. Check the
“First post-merger return” box if, due to a
corporate merger, the foreign corporation
has acquired a new EIN. Check the “First
post-merger return” box if the foreign
corporation has merged with a foreign or
domestic corporation with U.S. operations.
Do not check the “First post-merger
return” box if the foreign corporation has
merged with another foreign corporation
and the merger has no effect on the filer's
U.S. operations.

Note. If the corporation is filing Form
1120-F to claim a refund for
overwithholding reported in Section I on
page 3, the return may also assert
protective return status for the right to
claim deductions and credits attributable
to ECI by also checking the “Protective
return” box at the top of page 1.

DRAFT AS OF
December 14, 2021
Employer Identification
Number (EIN)

Enter the corporation's EIN. If the
corporation does not have an EIN, it must
apply for one. An EIN may be applied for:
• Online—Go to IRS.gov/EIN. The EIN is
issued immediately once the application
information is validated.
• By faxing or mailing Form SS-4,
Application for Employer Identification
Number.

While a corporation that was a QDD or
had a branch that was a QDD is generally
required to use an EIN, if the only reason
the corporation is filing a Form 1120-F is
because it or its branch was a QDD, it may
use its QI-EIN instead.
Corporations located in the United
States or U.S. possessions can
CAUTION use the online application. Foreign
corporations should call 1-267-941-1099
(not a toll-free number) for more
information on obtaining an EIN. See the
Instructions for Form SS-4.

!

EIN applied for, but not received. If the
corporation has not received its EIN by the
time the return is due, enter “Applied For”
and the date the corporation applied in the
space for the EIN. However, if the
corporation is filing its return electronically,
an EIN is required at the time the return is
filed.
For more information, see the
Instructions for Form SS-4.

Initial Return, Name or
Address Change, Final
Return, First Post-Merger
Return, Amended Return,
Schedule M-3 Attached,
Protective Return
Check all of the applicable box(es).

Address change. If the corporation has
changed its address since it last filed Form
1120-F (including a change to an “in care
of” address), check the box for “Name or
address change.”
Note. If a change in address or
responsible party occurs after the return is
Instructions for Form 1120-F (2021)

Schedule M-3 attached. A corporation
with total assets reportable on Form
1120-F, Schedule L, of $10 million or more
on the last day of the tax year must file
Schedule M-3 (Form 1120-F), Net Income
(Loss) Reconcilation for Foreign
Corporations With Reportable Assets of
$10 Million or More, instead of
Schedule M-1. A foreign corporation filing
Form 1120-F that is not required to file
Schedule M-3 (Form 1120-F) may
voluntarily file Schedule M-3 (Form
1120-F) instead of Schedule M-1.
Corporations that (a) are required to file
Schedule M-3 (Form 1120-F) and have
less than $50 million total assets at the
end of the tax year, or (b) are not required
to file Schedule M-3 (Form 1120-F) and
voluntarily file Schedule M-3 (Form
1120-F), must either (i) complete
Schedule M-3 (Form 1120-F) entirely, or
(ii) complete Schedule M-3 (Form 1120-F)
through Part I, and complete
Schedule M-1, instead of completing Parts
II and III of Schedule M-3 (Form 1120-F). If
the corporation chooses to complete
Schedule M-1 instead of completing Parts
II and III of Schedule M-3 (Form 1120-F),
the amount on Schedule M-1, line 1, must
equal the amount on Schedule M-3 (Form
1120-F), Part I, line 11. See the
instructions for Schedule M-1 (Form
1120-F) and the Instructions for
Schedule M-3 (Form 1120-F) for more
details.
If you are filing Schedule M-3, check
the “Schedule M-3 attached” box at the
top of page 1 of Form 1120-F.
Protective return filers. Check the
"Protective return" box if the foreign
corporation is filing a protective return.
See Protective return, earlier, for
information concerning who should file a
protective return.
If the corporation is filing a protective
return, complete Form 1120-F as follows.
Page 1. Enter the complete name,
address, and EIN of the corporation.
Check the “Protective return” box. Provide
all the information required in items A
through G.
-11-

Refund amount. Enter on lines 1 and
4, page 1, the amount from line 11,
page 3. Enter on lines 5i and 5j the
amount from line 12, page 3. Enter the
excess of line 5j over line 4 on lines 8a
and 9. This is the amount to be refunded
to you.

Signature. An authorized officer of the
corporation must sign and date the return.
If the protective return is being filed
pursuant to an income tax treaty
exemption, attach a completed Form 8833
to the return.
Page 2. Provide all the information
required in items N, O, Q, T, V, W(1),
W(2), X, Y, AA, BB, and any other
applicable questions. With respect to item
Y, it is not necessary for the corporation to
file Schedule P, even if the answer to item
Y(1) is “Yes.” However, a corporation that
files a protective tax return may voluntarily
file Schedules I and P to preserve certain
timely elections.
Page 3. Complete all applicable
portions of Section I, Income From U.S.
Sources Not Effectively Connected With
the Conduct of a Trade or Business in the
United States.

Identifying Information
Requested at Top of Page
1 of Form

Complete items A though G.

Item A. Enter the foreign corporation’s
country of incorporation or organization. If
the corporation is incorporated or
organized in more than one country, list all
countries.
Item B. Enter the foreign country or
countries under whose laws the income
reported on Form 1120-F is also subject to
tax. This may include the country where
the corporation is managed and
controlled, as well as the country or
countries in which the corporation is
incorporated or organized.
Item F. See the list of Principal Business
Activity Codes at the end of these
instructions. Using the list of codes and
activities, determine from which activity
the corporation derives the highest
percentage of its total receipts. Enter on
lines F(1), F(2), and F(3) the principal
business activity code number, the
corporation's principal business activity,
and a description of the principal product
or service of the corporation.

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Computation of Tax Due or
Overpayment
Line 5b. Estimated Tax
Payments

Enter any estimated tax payments the
corporation made for the tax year.

with the conduct of a trade or business in
the United States). The amount included
on line 5i should be the total amount of
federal tax withheld reported to you on the
applicable Form(s) 1042-S less any
amount that was repaid to you by the
withholding agent. See the instructions
below the title of Section I on page 3 of the
form for information pertaining to when
amounts should be reported on line 12.
• Form 8805 pertaining to amounts
reported on page 4, Section II, that relate
to ECI from a partnership under section
1446.
• Form 1042-S pertaining to amounts
reported on page 4, Section II, that relate
to ECI from a publicly traded partnership
under section 1446.
• Form 8288-A pertaining to amounts
reported on page 4, Section II, that relate
to income from dispositions of U.S. real
property interests under section 1445 and
income from dispositions of interests in
partnerships that are engaged in the
conduct of a trade or business in the
United States under section 1446(f).

corporation can apply for an installment
agreement online if:
• It cannot pay the full amount shown on
line 7,
• The total amount owed is $25,000 or
less, and
• The corporation can pay the liability in
full in 24 months.
To apply using the Online Payment
Agreement Application, go to IRS.gov/
OPA.

You must attach any Forms 8288-A,
8805, and 1042-S to substantiate amounts
withheld or paid that are reported on
line 5i.

Line 8b

DRAFT AS OF
December 14, 2021
Beneficiaries of trusts. If the
corporation is the beneficiary of a trust,
and the trust makes a section 643(g)
election to credit its estimated tax
payments to its beneficiaries, include the
corporation's share of the payment in the
total for line 5b. Enter “T” and the amount
on the dotted line next to the entry space.

Line 5c. 2021 Refund Applied
for on Form 4466

If the corporation overpaid estimated tax, it
may be able to get a quick refund by filing
Form 4466. The overpayment must be at
least 10% of the corporation's expected
income tax liability and at least $500. File
Form 4466 after the end of the
corporation's tax year, and no later than
the due date for filing the corporation's tax
return (not including extensions). Form
4466 must be filed before the corporation
files its tax return. See the instructions for
Form 4466.

Line 5f. Credit for Tax Paid on
Undistributed Capital Gains

Enter any credit from Form 2439, Notice to
Shareholder of Undistributed Long-Term
Capital Gains, for the corporation's share
of the tax paid by a regulated investment
company (RIC) or a real estate investment
trust (REIT) on undistributed long-term
capital gains included in the corporation's
income. Attach Form 2439.

Line 5g. Credit for Federal Tax
on Fuels

Enter the total income tax credit claimed
on Form 4136, Credit for Federal Tax Paid
on Fuels. Attach Form 4136.

Credit for tax on ozone-depleting
chemicals. Include on line 5g any credit
the corporation is claiming under section
4682(g)(2) for tax on ozone-depleting
chemicals. Enter “ODC” on the dotted line
to the left of the entry space.

Line 5h. Refundable Credit
From Form 8827

Enter on line 5h the amounts from Form
8827, line 5c.

Line 5i. U.S. Income Tax Paid or
Withheld at Source
Enter on line 5i U.S. income tax amounts
paid or withheld at source and reported
on:
• Form 1042-S pertaining to amounts
reported on page 3, line 12 (income from
U.S. sources not effectively connected

Include on line 5i only amounts
withheld under Chapter 3 or 4 of
CAUTION the Code. Do not include other
amounts, such as backup withholding, on
line 5i. Enter backup withholding on line 5j
(see below).

!

Line 5j. Total Payments
Backup withholding. If the corporation
had income tax withheld from any
payments it received due to backup
withholding, include the amount withheld
in the total for line 5j. Enter the amount
withheld and the words “Backup
Withholding” in the blank space in the
right-hand column between lines 4 and 5j.

Line 6. Estimated Tax Penalty

Generally, the corporation does not have
to file Form 2220 because the IRS can
figure the penalty amount, if any, and bill
the corporation. However, even if the
corporation does not owe the penalty, it
must complete and attach Form 2220 if:
• The annualized income or adjusted
method is used, or
• The corporation is a large corporation
(as defined in the Instructions for Form
2220) computing its first required
installment based on the prior year's tax.
If Form 2220 is attached, check the box
on line 6, and enter any penalty on this
line.

Line 7. Amount Owed

Under an installment agreement, the
corporation can pay what it owes in
monthly installments. There are certain
conditions that must be met to enter into
and maintain an installment agreement,
such as paying the liability within 24
months and making all required deposits
and timely filing tax returns during the
length of the agreement.

If the installment agreement is
accepted, the corporation will be charged
a fee and it will be subject to penalties and
interest on the amount of tax not paid by
the due date of the return.
Enter on line 8b the amount of
overpayment on line 8a resulting from tax
deducted and withheld under Chapters 3
and 4. This amount is computed by
completing Schedule W on page 8 of
Form 1120-F.

Line 9

Enter the portion of line 8a you want
credited to your 2022 estimated tax and
the portion of line 8a you want refunded.
Note. The election to apply some or all of
the overpayment amount to the
corporation's 2022 estimated tax cannot
be changed at a later date.
Note. You can credit any or all of the
line 8a overpayment to your 2022
estimated tax, even those amounts on
line 8b resulting from tax deducted and
withheld under Chapters 3 and 4.
Note. Refunds of certain overpayments
(for example, those which pertain to tax
withheld and reported on Forms 1042-S,
8805, and 8288-A) may require additional
time to be processed. Therefore, please
allow up to 6 months for these refunds to
be issued.
Electronic deposit of refund. If the
corporation has a refund of $1 million or
more and wants it electronically deposited
into its checking or savings account at any
U.S. bank or other financial institution
instead of having a check sent to the
corporation, complete Form 8302 and
attach it to Form 1120-F.

If the corporation cannot pay the full
amount of tax owed, it can apply for an
installment agreement online. The
-12-

Instructions for Form 1120-F (2021)

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Additional Information
Requested on Pages 2 and
3 of Form

Complete items H through II.

Item K(1)

If the foreign corporation was not engaged
in a U.S. trade or business at any time
during the tax year, or was engaged in a
U.S. trade or business but did not derive
any gross income effectively connected to
such trade or business, answer “No” to
item K(1).

• The last day of the calendar year in
which the first tax year began.
Principal activity. The principal activity
of a corporation is considered to be the
performance of personal services if,
during the testing period, the corporation's
compensation costs for the performance
of personal services (defined below) are
more than 50% of its total compensation
costs.

the statement described in Temporary
Regulations section 301.9100-12T.
Generally, once made, the election is
irrevocable. See Special rules for farming
loss NOLs, later.
If the corporation timely filed its return
for the loss year without making the
election, it can make the election on an
amended return filed within 6 months of
the due date of the loss year return
(excluding extensions). Attach the election
to the amended return and write "Filed
pursuant to section 301.9100-2" on the
election statement. See the Instructions
for Form 1139.

DRAFT AS OF
December 14, 2021
If the foreign corporation had gross
income effectively connected with or
treated as effectively connected with the
conduct of a trade or business in the
United States, answer “Yes” to item K(1).

Item L

Skip item L (leave blank) if the foreign
corporation is a resident of a country that
does not have an income tax treaty with
the United States. If the foreign
corporation is a resident of a country that
has an income tax treaty with the United
States:
• Answer “Yes” if the corporation had a
permanent establishment in the United
States at any time during the tax year or in
any prior tax year to which income was
attributable, and enter the name of the
country of residence of the foreign
corporation.
• Answer “No” if the corporation does not
have a permanent establishment in the
United States.
If the answer to item L is “No” and the
answer to item K(1) is “Yes,” complete
item W(1) on page 2 of the form and
attach a completed Form 8833 to the
return, including a statement indicating the
nature and amount (or reasonable
estimate thereof) of gross receipts of the
foreign corporation exempt by reason of
not having a permanent establishment in
the United States.

Item M

See Form 5472, earlier.

Item O—Personal Service
Corporation

A personal service corporation is a
corporation whose principal activity
(defined below) for the testing period for
the tax year is the performance of
personal services. The services must be
substantially performed by
employee-owners.

Testing period. Generally, the testing
period for a tax year is the prior tax year.
However, the testing period for a new
corporation starts with the first day of its
first tax year and ends on the earlier of:
• The last day of its first tax year, or
Instructions for Form 1120-F (2021)

Performance of personal services.
The term “performance of personal
services” includes any activity involving
the performance of personal services in
the fields of health, law, engineering,
architecture, accounting, actuarial
science, performing arts, or consulting.

Accounting period. A personal service
corporation must use a calendar tax year
unless:
• It elects to use a 52-53-week tax year
that ends with reference to the calendar
year or tax year elected under section
444;
• It can establish a business purpose for
a different tax year and obtains the
approval of the IRS (see the Instructions
for Form 1128 and Pub. 538); or
• It elects under section 444 to have a tax
year other than a calendar year. To make
the election, use Form 8716, Election To
Have a Tax Year Other Than a Required
Tax Year.
If a corporation makes the section 444
election, its deduction for certain amounts
paid to employee-owners may be limited.
See Schedule H (Form 1120), Section
280H Limitations for a Personal Service
Corporation (PSC), to figure the maximum
deduction.
If a section 444 election is terminated
and the termination results in a short tax
year, type or print at the top of the first
page of Form 1120-F for the short tax year
“SECTION 444 ELECTION
TERMINATED.”
Other rules. For other rules that apply to
personal service corporations, see
Passive activity limitations, later.

Item P

Enter any tax-exempt interest received or
accrued. Include any exempt-interest
dividends received as a shareholder in a
mutual fund or other RIC. Also, if required,
include the same amount on
Schedule M-1, line 7a, or Schedule M-3,
Part II, line 4a.

Item R

If the corporation has a net operating loss
(NOL) for 2021, it can generally elect to
waive the entire carryback period for the
NOL and instead carry the NOL forward to
future tax years. To do so, check the box
in item R and file Form 1120-F by its due
date, including extensions. Do not attach
-13-

Item S

Enter the amount of the NOL carryover to
the tax year from prior years, even if some
of the loss is used to offset income on this
return. The amount to enter is the total of
all NOLs generated in prior years but not
used to offset income (either as a
carryback or carryover) to a tax year prior
to 2021. Do not reduce the amount by any
NOL deduction reported on Section II,
line 30a.

Item T

Check the “Yes” box for item T if the
corporation is a subsidiary in a
parent-subsidiary controlled group. This
applies even if the corporation is a
subsidiary member of one group and the
parent corporation of another. For a
definition of a parent-subsidiary controlled
group, see the Instructions for Schedule O
(Form 1120).
Note. If the corporation is an “excluded
member” of a controlled group (see
definition in the Instructions for
Schedule O (Form 1120)), it is still
considered a member of a controlled
group for this purpose.

Item W(1)

If a foreign corporation claims that a treaty
overrules or modifies any provision of the
Internal Revenue Code and thereby
effects a reduction of any tax with respect
to an item reported on this Form 1120-F,
check the “Yes” box. Check the “Yes” box,
for example, if a treaty benefit has been
claimed based on:
• The nondiscrimination provision of a
treaty.
• The business profits article of a treaty, if
expenses are claimed in determining the
business profits of the foreign corporation,
notwithstanding an inconsistent provision
of the Code.
• The gains article, if a treaty benefit is
claimed relating to gain or loss on the
disposition of a U.S. real property interest.
• The branch profits tax article (or portion
of the dividends article relating to the
branch profits tax) and tax on excess
interest.

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• A waiver of insurance excise tax under
section 4371 (if the foreign corporation
has not entered into a closing agreement
with the IRS and has not filed an annual
Form 720).
• The interest, dividends, or royalty
article, if a refund of withholding tax is due.

Item W(2)

Pricing Guidelines, then such treaty-based
position should be disclosed on Form
8275-R, in addition to the treaty disclosure
required on Form 8833.

Item AA

A corporation filing Form 1120-F must file
Schedule UTP (Form 1120), Uncertain
Tax Position Statement, with its 2021
income tax return if:
• For 2021, the corporation's total assets
equal or exceed $10 million. The assets of
a corporation filing a Form 1120-F equal or
exceed $10 million if the higher of the
beginning or end of year total worldwide
assets of the corporation reported on
Form 1120-F, Schedule L, line 17, would
be at least $10 million if the corporation
were to prepare a Schedule L on a
worldwide basis;
• The corporation or a related party
issued audited financial statements
reporting all or a portion of the
corporation's operations for all or a portion
of the corporation's tax year; and
• The corporation has one or more tax
positions that must be reported on
Schedule UTP.

Item EE

Section 267A disallows a deduction for
certain interest or royalty paid or accrued
pursuant to a hybrid arrangement, to the
extent that, under the foreign tax law,
there is not a corresponding income
inclusion (including long-term deferral).
Report in Item EE the total amount of
interest and royalty paid or accrued by a
U.S. taxable branch (which includes a
U.S. permanent establishment) of the
foreign corporation for which a deduction
is disallowed under section 267A.

DRAFT AS OF
December 14, 2021
Check the "Yes" box if the foreign
corporation is claiming tax treaty benefits
pursuant to a Competent Authority
determination or Advance Pricing
Agreement that it qualifies for the treaty
benefits being claimed. You must attach a
copy of the Competent Authority
determination letter or Advance Pricing
Agreement to the return.

Item Y(1)

For more information regarding a
corporation's distributive share of income
from a directly owned partnership interest
that is ECI or treated as ECI by the
partnership or the corporation (partner),
see Who Must Complete Schedule P in
the separate Instructions for Schedule P
(Form 1120-F).

Item Y(2)

If the corporation owned at least a 10%
interest, directly or indirectly, in any
foreign partnership, attach a statement
listing the following information for each
foreign partnership. For this purpose, a
foreign partnership includes an entity
treated as a foreign partnership under
Regulations section 301.7701-2 or
301.7701-3.
• Name and EIN (if any) of the foreign
partnership.
• Identify which, if any, of the following
forms the foreign partnership filed for its
tax year ending with or within the
corporation's tax year: Form 1042, 1065,
or 8804.
• Name of tax matters partner (if any).
• Beginning and ending dates of the
foreign partnership's tax year.
In addition, report any ECI included on
Schedule K-3 reported by the foreign
partnership to the corporation, and the ECI
apportionment of the corporation's outside
basis in the foreign partnership as
required in Schedule P.

Item Z(2)

If the answer to item Z(2) is “Yes,” attach a
statement explaining whether the
interbranch transactions are recognized
under Proposed Regulations section
1.863-3(h) (Global Dealing Regulations) or
some other proposed regulation. If
interbranch transactions are recognized
pursuant to a U.S. income tax treaty other
than one that, in its text or accompanying
documents (including an exchange of
notes), allows for such recognition by
explicitly incorporating an arm's-length
method applying the OECD Transfer

Attach Schedule UTP to the
corporation's income tax return. Do not file
it separately. A taxpayer that files a
protective Form 1120-F must also file
Schedule UTP if it satisfies the
requirements set forth above.
For details, see the Instructions for
Schedule UTP.

Item BB

If the foreign corporation made any
payment(s) in 2021, that would require the
foreign corporation to file any Forms 1042
and 1042-S, check the “Yes” box. See the
Instructions for Form 1042 and the
Instructions for Form 1042-S for
information regarding who is required to
file Forms 1042 and 1042-S and what
types of payments are subject to reporting
on Forms 1042 and 1042-S.

Item CC

If the corporation or any branch of the
corporation was a QDD, check the “Yes”
box, enter the QI-EIN, and attach a
Schedule Q (Form 1120-F) for each QDD.
You must complete and attach
Schedule Q (Form 1120-F) even if the
QDD has zero tax liability.

Item DD

If the corporation had gross receipts of at
least $500 million in any one of the 3
preceding tax years, complete and attach
Form 8991. For this purpose, the
corporation's gross receipts include the
gross receipts of all persons aggregated
with the corporation as specified in section
59A(e)(3). See the Instructions for Form
8991 to determine if the corporation is
subject to the base erosion minimum tax.
-14-

Payments to which section 267A applies. Interest or royalty considered paid
or accrued by a U.S. taxable branch of the
foreign corporation is subject to section
267A. See Regulations section
1.267A-5(b)(3) for rules regarding U.S.
taxable branch payments, including
interest or royalties considered paid or
accrued by a U.S. taxable branch. Section
267A generally applies to interest or
royalties paid or accrued pursuant to a
hybrid arrangement (such as, for example,
a payment pursuant to a hybrid
instrument, or a payment to a reverse
hybrid), provided that the payment or
accrual is to a related party (or pursuant to
a structured arrangement). In addition,
pursuant to an imported mismatch rule,
section 267A generally applies to interest
or royalties paid or accrued pursuant to a
non-hybrid arrangement where the income
attributable to that payment or accrual is
directly or indirectly offset by certain
deductions involving hybridity incurred by
a related party or pursuant to a structured
arrangement. However, section 267A
does not apply if a de minimis exception is
satisfied. See Regulations section
1.267A-1(c). For purposes of section
267A, interest and royalties are defined
broadly. For additional information about
arrangements subject to section 267A,
see Regulations sections 1.267A-2 and
1.267A-4. Also see the anti-avoidance rule
under Regulations section 1.267A-5(b)(6).
Extent to which deduction is disallowed. When section 267A applies to
interest or royalties paid or accrued
pursuant to a hybrid arrangement, it
generally disallows a deduction for the
amount to the extent that, under the
foreign tax law, there is not a
corresponding income inclusion (including
long-term deferral). However, the
deduction is not disallowed to the extent
the amount is directly or indirectly included
in income in the United States, such as if
the amount is taken into account with
respect to a U.S. shareholder under
section 951(a) or section 951A. For
additional information, see Regulations
sections 1.267A-2 through 1.267A-4. For
examples illustrating the application of
section 267A, see Regulations section
1.267A-7.

Instructions for Form 1120-F (2021)

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Item FF

The limitation on business interest
expense applies to every taxpayer with a
trade or business, unless the taxpayer
meets certain specified exceptions. A
taxpayer may elect out of the limitation for
certain businesses otherwise subject to
the business interest expense limitation.

• An electing farming business, or
• Certain utility businesses.
Small business taxpayer. A small
business taxpayer is not subject to the
business interest expense limitation and is
not required to file Form 8990. A small
business taxpayer is a taxpayer that (a) is
not a tax shelter (as defined in section
448(d)(3), and (b) meets the gross
receipts test of section 448(c) discussed
next.

corporation had no income or expenses to
report. If the corporation is attaching Form
8996, check the “Yes” box for Item II. On
the line following the dollar sign, enter the
amount from Form 8996, line 15.
The penalty reported on this line from
Form 8996, line 15, is not due with the
filing of this form. The IRS will separately
send to you a notice setting forth the due
date for the penalty payment and where
that payment should be sent.

DRAFT AS OF
December 14, 2021
Certain real property trades or
businesses and farming businesses
qualify to make an election not to limit
business interest expense. This is an
irrevocable election. If you make this
election, you are required to use the
alternative depreciation system to
depreciate any nonresidential real
property, residential rental property, and
qualified improvement property for an
electing real property trade or business,
and any property with a recovery period of
10 years or more for an electing farming
business. See section 168(g)(1)(F). Also,
you are not entitled to the special
depreciation allowance for that property.
For a taxpayer with more than one
qualifying business, the election is made
with respect to each business.
Additionally, see Rev. Proc. 2020-22,
2020-18 I.R.B. 745, available at
IRS.gov/irb/2020–18_IRB#REVProc-2020-22, which provides an
automatic extension of time for certain
taxpayers to file a real property trade or
business election or a farming business
election for tax years 2018, 2019, or 2020.
Rev. Proc. 2020-22 also provides an
opportunity for certain taxpayers to
withdraw a prior election. Rev. Proc.
2020-22 does not apply to utility trades or
businesses.

Check "Yes" if the corporation has an
election in effect to exclude a real property
trade or business or a farming business
from section 163(j). For more information,
see section 163(j) and the Instructions for
Form 8990. Also see the instructions for
Schedule I (Form 1120-F).

Item GG

Generally, a taxpayer with a trade or
business must file Form 8990 to claim a
deduction for business interest. In
addition, Form 8990 must be filed by any
taxpayer that owns an interest in a
partnership with current year, or prior year
carryover, excess business interest
expense allocated from the partnership.
Exclusions from filing. A taxpayer is
not required to file Form 8990 if the
taxpayer is a small business taxpayer
(defined below) and does not have excess
business interest expense from a
partnership. A taxpayer is also not
required to file Form 8990 if the taxpayer
only has business interest expense from
these excepted trades or businesses:
• An electing real property trade or
business,
Instructions for Form 1120-F (2021)

Gross receipts test. A taxpayer meets
the gross receipts test if the taxpayer has
average annual gross receipts of $26
million or less for the 3 prior tax years. A
taxpayer’s average annual gross receipts
for the 3 prior tax years is determined by
adding the gross receipts for the 3 prior
tax years and dividing the total by 3. Gross
receipts include the aggregate gross
receipts from all persons treated as a
single employer, such as a controlled
group of corporations, commonly
controlled partnerships, or proprietorships,
and affiliated service groups. See section
448(c) and the Instructions for Form 8990
for additional information.
Note. A foreign corporation is required to
complete Schedule I (Form 1120-F) to
compute its interest expense deduction
under Regulations section 1.882-5. If the
foreign corporation is required to complete
and file Form 8990, attach Form 8990 to
Schedule I (Form 1120-F), which is
attached to Form 1120-F.

Item HH

In general, if a foreign corporation owns,
directly or indirectly, an interest in a
partnership that is engaged in a U.S. trade
or business, gain or loss on the sale or
exchange of all (or any portion of) such
interest is treated as effectively connected
with the conduct of such trade or business
to the extent effectively connected gain or
loss would have flowed through the
partnership to the foreign corporation had
the partnership sold all of its assets at fair
market value (FMV) as of the date of the
sale or exchange. See section 864(c)(8)
for more details. Also, see the Proposed
Regulations under section 864(c)(8)
(REG-113604-18) for additional guidance
concerning gain or loss of foreign persons
from the sale or exchange of certain
partnership interests.

Item II

If a foreign corporation is organized in a
U.S. possession, it may be a Qualified
Opportunity Fund (QOF) only if it is
organized for the purpose of investing in
qualified opportunity zone property that
relates to a trade or business operated in
the U.S. possession in which the
corporation is organized. To be certified
as a QOF, the corporation must file Form
1120-F and attach Form 8996, even if the
-15-

Section I—Income From
U.S. Sources Not
Effectively Connected
With the Conduct of a
Trade or Business in the
United States

Note. Complete Section I only if you
derived U.S. source income not effectively
connected with the conduct of a trade or
business in the United States and either
your withholding tax liability was not
correctly withheld at source or not
correctly reported on Form 1042-S, you
have a QDD tax liability (see section 3.09
of the Qualified Intermediary Agreement),
or you are claiming a credit or refund of an
amount withheld at source. You must
attach any Forms 1042-S (and any
supporting documentation) related to
amounts for which you are claiming a
credit or refund for overwithholding (see
the instructions for line 5i). The amount
reported in column (e) is the amount that
was actually withheld at source (and not
repaid to you by the withholding agent), as
reported to you in box 10 of the Form(s)
1042-S issued by the withholding
agent(s). See Claim for Refund or Credit,
earlier, for additional documentation
requirements.
Only report amounts on these lines if:
• The amount received is fixed or
determinable, annual or periodic (FDAP)
(see definition below).
• The amount received is includible in the
gross income of the foreign corporation.
Therefore, receipts that are excluded from
income (for example, interest income
received on state and local bonds that is
excluded under section 103) would not be
included as income in Section I.
• The amount received is from U.S.
sources (see Source of Income Rules,
earlier).
• The amount received is not effectively
connected with the conduct of a U.S. trade
or business (see Section II, later).
• The amount received is not exempt (by
Code) from taxation. For example, interest
on deposits that are exempted by section
881(d) would not be included as income in
Section I. In addition, certain portfolio
interest is not taxable for obligations
issued after July 18, 1984. See section
881(c) for more details.

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• If you are a QDD, report all QDD tax
liabilities (see Qualified Intermediary
Agreement), whether or not the amounts
are subject to withholding or correctly
withheld.
Such income (except as indicated
below) will generally be subject to tax at a
30% rate. See section 881(a).

under section 881(a) at a rate of 10% with
respect to such dividends received during
the tax year in the circumstances outlined
in section 881(b)(2).

Line 9. Gross Transportation
Income

A 4% tax is imposed on a foreign
corporation's U.S. source gross
transportation income for the tax year.
U.S. source gross transportation income
generally is any gross income that is
transportation income if such income is
treated as from U.S. sources.

derivatives dealer capacity, include a
statement detailing each type of income.
In addition, if the foreign corporation
received a specified federal procurement
payment (as defined in section 5000C(b))
that was not fully withheld upon at source,
enter the payment in Section I, line 10,
column (b); enter a 2% rate of tax in
column (c); enter the tax liability in column
(d); and enter any withholding in column
(e).

DRAFT AS OF
December 14, 2021
Amounts fixed or determinable,
annual or periodic include the following.
1. Interest (other than original issue
discount (OID) as defined in section
1273), dividends, rents, royalties, salaries,
wages, premiums, annuities,
compensation, and other FDAP gains,
profits, and income.
Note. Item 1 above includes dividend
equivalents described in section 871(m);
however, dividends and dividend
equivalents received in calendar years
2019 through 2022 by a QDD in its equity
derivatives dealer capacity are excluded.
2. Gains described in section 631(b)
or (c), relating to disposal of timber, coal,
or domestic iron ore with a retained
economic interest.
3. On a sale or exchange of an OID
obligation, the amount of the OID accruing
while the obligation was held by the
foreign corporation, unless this amount
was taken into account on a payment.
4. On a payment received on an OID
obligation, the amount of the OID accruing
while the obligation was held by the
foreign corporation, if such OID was not
previously taken into account and if the tax
imposed on the OID does not exceed the
payment received less the tax imposed on
any interest included in the payment
received. This rule applies to payments
received for OID obligations issued after
March 31, 1972.
Certain OID is not taxable for OID
obligations issued after July 18, 1984. See
section 881(c) for more details.
For rules that apply to other OID
obligations, see Pub. 515.
5. Gains from the sale or exchange of
patents, copyrights, and other intangible
property if the gains are from payments
that are contingent on the productivity,
use, or disposition of the property or
interest sold or exchanged.
For more information, see section
881(a) and Regulations section 1.881-2.
Note. For purposes of determining
whether its income is taxable under
section 881(a), a corporation created or
organized in Guam, American Samoa, the
Northern Mariana Islands, or the U.S.
Virgin Islands will not be treated as a
foreign corporation if it meets the rules of
section 881(b). For dividends paid after
October 22, 2004, a corporation created
or organized in Puerto Rico will be taxed

Transportation income is any income
from or connected with:
• The use (or hiring or leasing for use) of
a vessel or aircraft, or
• The performance of services directly
related to the use of a vessel or aircraft.
For this purpose, the term “vessel or
aircraft” includes any container used in
connection with a vessel or aircraft.

Generally, 50% of all transportation
income that is attributable to
transportation that either begins or ends in
the United States is treated as from U.S.
sources. See section 863(c)(2)(B) for a
special rule for personal service income.
Exceptions. U.S. source gross
transportation income does not include
income that is:
• Effectively connected with the conduct
of a U.S. trade or business, or
• Taxable in a possession of the United
States under the provisions of the Internal
Revenue Code as applied to that
possession.
Transportation income of the
corporation will not be treated as ECI
unless:
• The corporation has a fixed place of
business in the United States involved in
the earning of transportation income, and
• Substantially all of the corporation's
U.S. source gross transportation income
(determined without regard to the rule that
such income does not include ECI) is
attributable to regularly scheduled
transportation (or, in the case of income
from the leasing of a vessel or aircraft, is
attributable to a fixed place of business in
the United States).
For more information, see section 887.
Enter the foreign corporation's U.S.
source gross transportation income on
line 9, column (b). Also, attach Schedule V
(Form 1120-F).
See Exclusion from gross income for
certain income from ships and aircraft,
later.

Line 10. Other Items of Income

Include on line 10 all other income not
reportable on lines 1 through 9. For any
amounts received by a QDD in its equity
-16-

Increase or decrease in tax attributable to partner's additional reporting
year tax. If the taxpayer is a foreign
corporate partner and received a Form
8986 from a partnership that has elected
to have each reviewed partner take into
account the partner's share of the
adjustments, as finally determined,
instead of paying the imputed
underpayment, the foreign corporate
partner (taxpayer) will have to complete
Form 8978 to report adjustments shown
on the Form 8986 they received from the
partnership. The foreign corporate partner
(taxpayer) must complete a separate Form
8978 to report adjustments pertaining to
income that is effectively connected with
the conduct of a trade or business in the
United States under section 882 (an “ECI
Form 8978”) and a separate Form 8978 to
report adjustments pertaining to income
from U.S. sources not effectively
connected with the conduct of a trade or
business in the United States under
section 881 (an “FDAP Form 8978”).
Include any increase or decrease in taxes
due from the FDAP Form 8978, line 14
that was not fully withheld upon at source,
on a separate line on Form 1120-F,
Section I, line 10. Enter “From Form 8978”
in column (a) and skip (leave blank)
columns (b) and (c) . Enter in column (d)
the amount of the increase or decrease
from the FDAP Form 8978, line 14. Enter
any withholding in column (e). Attach the
FDAP Form 8978 to Form 1120-F.
Note. The taxpayer will generally skip
lines 3a, 3b, 4, 7, 9a, 9b, and 10 of the
FDAP Form 8978.

Line 13

Check the “Yes” box if you received an
item of income during the tax year with
respect to which you are treated as fiscally
transparent under the laws where you are
organized. In such a case, you may not
claim a reduced rate of tax under a treaty
with respect to that item. See Regulations
section 1.894-1(d)(1).
If the item of income has been withheld
upon, your interest holders may, however,
be able to claim treaty benefits, but only if
the tax jurisdiction in which your interest
holders qualify for treaty benefits treats
you as fiscally transparent and the interest
holders are not fiscally transparent with
respect to that item of income. An interest
Instructions for Form 1120-F (2021)

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holder claiming a benefit should file a
separate Form 1120-F, if appropriate. See
Regulations section 1.894-1(d)(3) for the
definition of fiscally transparent and
Regulations section 1.894-1(d)(5) for
examples.

Section II—Income
Effectively Connected
With the Conduct of a
Trade or Business in the
United States

Business-activities test. The activities
of the U.S. trade or business were a
material factor in the realization of the
FDAP items.

Foreign Source Effectively
Connected Income

rules for foreign source income is
excluded if:
• It is foreign source dividends, interest,
or royalties paid by a foreign corporation in
which the taxpayer owns or is considered
to own (within the meaning of section 958)
more than 50% of the total combined
voting power of all classes of stock
entitled to vote; or
• The taxpayer is a CFC (as defined in
section 957) and the foreign source
income is subpart F income (as defined in
section 952).
For more information, see section
864(c)(4)(D) and Regulations section
1.864-5(d).

DRAFT AS OF
December 14, 2021
Foreign Corporations Engaged
in a U.S. Trade or Business

These corporations are taxed on their ECI
at the same 21% tax rate that applies to
domestic corporations. ECI can be U.S.
source or foreign source income as
explained below.

U.S. Source Effectively Connected
Income
U.S. source income derived by a foreign
corporation engaged in a U.S. trade or
business other than FDAP and capital
gains is ECI. See Regulations section
1.864-4(b).
Note. For purposes of the preceding
paragraph, U.S. source income includes
income with respect to activities related to
the exploration and exploitation of natural
resources in continental shelf areas (see
section 638).
FDAP items are generally ECI (and are
therefore includible in Section II) if the
asset-use test, the business-activities test,
or both tests (explained below) are met.
If neither test is met, FDAP items are
generally not ECI (and are therefore
includible in Section I instead of
Section II). For more information, see
section 864(c)(2) and Regulations section
1.864-4(c).
Finance business. See Regulations
section 1.864-4(c)(5) for special rules
relating to banking, financing, or similar
business activities. Such rules apply to
certain stocks and securities of a banking,
financing, or similar business in lieu of the
asset-use and business-activities tests.
Asset-use test. The FDAP items are
from assets used in, or held for use in, the
conduct of U.S. trade or business. For
example, the following items are ECI.
• Income earned on a trade or note
receivable acquired in the conduct of the
U.S. trade or business.
• Interest income earned from the
temporary investment of funds needed in
the foreign corporation's U.S. trade or
business.

Instructions for Form 1120-F (2021)

Foreign source income is generally not
ECI. However, if the foreign corporation
has an office or other fixed place of
business in the United States, the
following types of foreign source income it
receives from that U.S. office are ECI.
• Rents or royalties received for the use
outside the United States of intangible
personal property described in section
862(a)(4) if derived from the active
conduct of a U.S. trade or business.
• Gains or losses on the sale or
exchange of intangible personal property
located outside the United States or from
any interest in such property, if such gains
or losses are derived in the active conduct
of the trade or business in the United
States.
• Dividends, interest, amounts received
for the provision of a guarantee of
indebtedness, issued after September 27,
2010, if derived from the active conduct of
a U.S. banking, financing, or similar
business or if the principal business of the
foreign corporation is trading in stocks or
securities for its own account.
• Income from the sale or exchange of
inventory outside the United States
through the U.S. office, unless the
property is sold or exchanged for use,
consumption, or disposition outside the
United States and an office of the foreign
corporation in a foreign country materially
participated in the sale.
• Any income or gain that is equivalent to
any item of income or gain listed above
must be treated in the same manner as
such item for purposes of determining
whether that income is foreign source ECI.
See section 864(c)(5)(A) and
Regulations section 1.864-7 for the
definition of office or other fixed place of
business in the United States. See
sections 864(c)(5)(B) and (C) and
Regulations section 1.864-6 for special
rules for determining when foreign source
income received by a foreign corporation
is from an office or other fixed place of
business in the United States.
Foreign insurance companies. Foreign
source income of a foreign insurance
company that is attributable to its U.S.
trade or business is ECI. See section
864(c)(4)(C) and Regulations section
1.864-5(c).
Excluded foreign source income.
Foreign source income that would
otherwise be ECI under any of the above

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Foreign Corporations Not
Engaged in a U.S. Trade or
Business

If a foreign corporation is not engaged in a
U.S. trade or business during the tax year,
it will complete Section II only if such
corporation:
• Had current year income or gain from a
sale or exchange of property or from
performing services (or any other
transaction) in any other tax year that
would have been ECI in that other tax year
(see section 864(c)(6));
• Had current year income or gain from a
disposition of property that is no longer
used or held for use in conducting a U.S.
trade or business within the 10-year period
before the disposition that would have
been ECI immediately before such
cessation (see section 864(c)(7));
• Elected to treat real property income as
ECI (see below);
• Was created or organized and was
conducting a banking business in a U.S.
possession, and received interest on U.S.
obligations that is not portfolio interest
(see section 882(e)); or
• Had gain or loss from disposing of a
U.S. real property interest (see Disposition
of U.S. Real Property Interest by a Foreign
Corporation, later).

Election To Treat Real Property
Income as Effectively
Connected Income

A foreign corporation that derives, during
the tax year, any income from real
property located in the United States, or
from any interest in such real property,
may elect, for the tax year, to treat all such
income as ECI. See section 871(d).
Income to which this election applies
includes:
• Gains from the sale or exchange of real
property or an interest therein;
• Rents or royalties from mines, wells, or
other natural deposits; and
• Gains described in section 631(b) or
(c).
The election may be made whether or
not the corporation is engaged in a U.S.

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trade or business during the tax year for
which the election is made or whether or
not the corporation has income from real
property that, for the tax year, is effectively
connected with the conduct of a U.S. trade
or business.
To make the election, attach a
statement that includes the information
required in Regulations section
1.871-10(d)(1)(ii) to Form 1120-F for the
first tax year for which the election is to
apply. Use Section II to figure the tax on
this income.

corporation, see the Instructions for Form
3115.
Exclusion from gross income for
certain income from ships and aircraft.
A foreign corporation engaged in the
international operation of ships or aircraft
and organized in a qualified foreign
country may exclude qualified income
from its gross income, provided that the
corporation can satisfy certain ownership
requirements. See Schedule S (Form
1120-F) and its separate instructions for
additional information.

For sales of timeshares and residential
lots reported under the installment
method, if the corporation elects to pay
interest under section 453(I)(3), the
corporation's income tax is increased by
the interest payable under section 453(l)
(3). Report this addition to the tax on
Schedule J, line 8, and be sure to check
the “Other” box.

DRAFT AS OF
December 14, 2021
Disposition of U.S. Real
Property Interest by a Foreign
Corporation

A foreign corporation that disposes of a
U.S. real property interest (as defined in
section 897(c)) must treat the gain or loss
from the disposition as ECI, even if the
corporation is not engaged in a U.S. trade
or business. Figure this gain or loss on
Schedule D (Form 1120), Capital Gains
and Losses. Carry the result to Section II,
line 8, on page 4 of Form 1120-F.
A foreign corporation may elect to be
treated as a domestic corporation for
purposes of sections 897 and 1445. See
section 897(i).
See Temporary Regulations section
1.897-5T for the applicability of section
897 to reorganizations and liquidations.
If the corporation had income tax
withheld on Form 8288-A, include the
amount withheld on line 5i, page 1.

Income
Line 1. Gross Receipts or Sales
Line 1a. Enter gross income effectively
connected with the conduct of a U.S. trade
or business (except for those income
items that must be reported on lines 4
through 10). Include on line 1a effectively
connected gross receipts or sales.
Special rules apply to certain income,
as discussed below.
Advance payments. In general,
advance payments are reported in the
year of receipt. For exceptions to this
general rule for corporations that use the
accrual method of accounting, see the
following.
• To report income from long-term
contracts, see section 460.
• For rules that allow a limited deferral of
advance payments beyond the current tax
year, see section 451(c). Also see
Regulations section 1.451-8(c) and (d).
For applicability dates, see Regulations
section 1.451-8(h).
• For information on adopting or
changing to a permissible method for
reporting advance payments for services
and certain goods by an accrual method

Income from qualifying shipping
activities (tonnage tax). The
corporation's gross income does not
include income from qualifying shipping
activities (as defined in section 1356) if the
corporation makes an election under
section 1354 to be taxed on its notional
shipping income (as defined in section
1353) at the highest corporate tax rate. If
the election is made, the corporation may
generally not claim any loss, deduction, or
credit with respect to qualifying shipping
activities. A corporation making this
election may also elect to defer gain on
certain dispositions of qualifying vessels
under section 1359.
Use Form 8902, Alternative Tax on
Qualifying Shipping Activities, to figure the
tax. Include the alternative tax from Form
8902, line 30, on Schedule J, line 8, and
be sure to check the “Form 8902” box on
that line.
Installment sales. Generally, the
installment method may not be used for
dealer dispositions of property. A “dealer
disposition” is any disposition of (a)
personal property by a person who
regularly sells or otherwise disposes of
personal property of the same type on the
installment plan, or (b) real property held
for sale to customers in the ordinary
course of the taxpayer's trade or business.
The restrictions on using the
installment method do not apply to the
following.
• Dispositions of property used or
produced in the trade or business of
farming.
• Certain dispositions of timeshares and
residential lots reported under the
installment method for which the
corporation elects to pay interest under
section 453(l)(3).
Enter on line 1a (and carry to line 3) the
gross profit on collections from these
installment sales. Attach a statement
showing the following information for the
current and the 3 preceding years: (a)
gross sales, (b) cost of goods sold, (c)
gross profits, (d) percentage of gross
profits to gross sales, (e) amount
collected, and (f) gross profit on the
amount collected.
-18-

Nonaccrual experience method for
service providers. Accrual method
corporations are not required to accrue
certain amounts to be received from the
performance of services that, based on
their experience, will not be collected, if:
• The services are in the fields of health,
law, engineering, architecture, accounting,
actuarial science, performing arts, or
consulting; or
• The corporation meets the definition of
a small business taxpayer (discussed
earlier).
This provision does not apply to any
amount if interest is required to be paid on
the amount or if there is any penalty for
failure to timely pay the amount. See
Regulations section 1.448-2(e) and
Regulations section 1.448-1T(e) for more
information on the nonaccrual experience
method, including information on safe
harbor methods.
For information on a book safe harbor
method of accounting for corporations that
use the nonaccrual experience method of
accounting, see Rev. Proc. 2011-46,
2011-42 I.R.B. 518, available at
IRS.gov/irb/2011-42_IRB#RP-2011-46, as
modified by Rev. Proc. 2016-29, 2016-21
I.R.B. 880, available at IRS.gov/irb/
2016-21_IRB#RP-2016-29. Also, see the
Instructions for Form 3115 for procedures
to obtain automatic consent to change to
this method or make certain changes
within this method.
Corporations that qualify to use the
nonaccrual experience method should
attach a statement showing total gross
receipts, the amount not accrued because
of the application of section 448(d)(5), and
the net amount accrued. Enter the net
amount on line 1a.
Line 1b. Returns and Allowances.
Enter cash and credit refunds the
corporation made to customers for
returned merchandise, rebates, and other
allowances made on gross receipts or
sales.

Line 2. Cost of Goods Sold
Complete and attach Form 1125-A, Cost
of Goods Sold, if applicable. Enter on
Form 1120-F, line 2, the amount from
Form 1125-A, line 8. See Form 1125-A
and its instructions.

Instructions for Form 1120-F (2021)

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Line 4. Dividends
See the instructions for Schedule C, later.
Complete Schedule C and enter on line 4
the amount from Schedule C, line 13.

Line 5. Interest
Enter taxable interest on U.S. obligations
and on loans, notes, mortgages, bonds,
bank deposits, corporate bonds, tax
refunds, etc. Do not offset interest
expense against interest income. Special
rules apply to interest income from certain
below-market-rate loans. See section
7872 for details.

line 27. Show the partnership's name,
address, and EIN on Schedule P (Form
1120-F). If the amount entered is from
more than one partnership, identify the
amount from each partnership on
Schedule P.
• The ratable portion of any net positive
section 481(a) adjustment. See Section
481(a) adjustment, earlier.
• Part or all of the proceeds received
from certain corporate-owned life
insurance contracts issued after August
17, 2006. Corporations that own one or
more employer-owned life insurance
contracts issued after this date must file
Form 8925, Report of Employer-Owned
Life Insurance Contracts. See section
101(j) for details.
• Net income from notional principal
contracts.
• Interest and dividend equivalents (for
example, confirmation and acceptance
letter of credit fees and other guarantee
fees).
• Income from cancellation of debt (COD)
from the repurchase of a debt instrument
for less than its adjusted issue price.
• The amount of payroll tax credit taken
by an employer on its employment tax
returns (Forms 941, 943, and 944) for
qualified paid sick and qualified paid
family leave under FFCRA and ARP (both
the nonrefundable and refundable
portions). These amounts must be
included in gross income for the tax year
that includes the last day of the calendar
quarter in which the credit is allowed.

to ECI. The amount on Schedule H, Part II,
line 20, is reportable on Form 1120-F,
Section II, line 26.
Note. The allocation and apportionment
of bad debt deductions is not included on
Schedule H but is reported only on Form
1120-F, Section II, line 15.

DRAFT AS OF
December 14, 2021
Note. Report tax-exempt interest on Form
1120-F, page 2, item P. Also, if required,
include the same amount on
Schedule M-1, line 7a, or Schedule M-3,
Part II, line 4a.

Line 6. Gross Rents
Enter the gross amount received for the
rental of property. Deduct expenses such
as repairs, interest, taxes, and
depreciation on the proper lines for
deductions. A rental activity held by a
closely held corporation or a personal
service corporation may be subject to the
passive activity loss rules. See Passive
activity limitations, later.

Line 8. Capital Gain Net Income
Every effectively connected sale or
exchange of a capital asset must be
reported in detail on Schedule D (Form
1120), even if there is no gain or loss.

Line 10. Other Income
Enter any other taxable income not
reported on lines 1 through 9. List the type
and amount of income on an attached
statement. If the corporation has only one
item of other income, describe it in
parentheses on line 10.
Examples of other income to report on
line 10 include the following.
• Recoveries of bad debts deducted in
prior years under the specific charge-off
method.
• The amount included in income from
Form 6478, Biofuel Producer Credit.
• The amount included in income from
Form 8864, Biodiesel and Renewable
Diesel Fuels Credit.
• Refunds of taxes deducted in prior
years to the extent they reduced the
amount of tax imposed. See section 111
and the related regulations. Do not offset
current year taxes against tax refunds.
• Ordinary income from trade or business
activities of a partnership (from
Schedule K-3 (Form 1065)). Do not offset
ordinary losses against ordinary income.
Instead, include the losses on Section II,
Instructions for Form 1120-F (2021)

Limitations on Deductions

Uniform capitalization rules. The
uniform capitalization rules of section
263A require corporations to capitalize
certain costs to inventory or other
property.
Corporations subject to the section
263A uniform capitalization rules are
required to capitalize:
1. Direct costs of assets produced or
acquired for resale, and
2. Certain indirect costs (including
taxes) that are properly allocable to
property produced or property acquired for
resale.

Apportionment of Expenses

The corporation cannot deduct the
costs required to be capitalized under
section 263A until it sells, uses, or
otherwise disposes of the property (to
which the costs relate). The corporation
recovers these costs through
depreciation, amortization, or costs of
goods sold.
A small business taxpayer (defined in
Accounting Methods, earlier) is not
required to capitalize costs under section
263A. A small business taxpayer that
wants to discontinue capitalizing costs
under section 263A must change its
method of accounting. See section
263A(i) and Regulations section
1.263A-1(j). Also, see Change in
accounting method, earlier
For more information on the uniform
capitalization rules, see Pub. 538. Also,
see Regulations sections 1.263A-1
through 1.263A-3. See section 263A(d),
Regulations section 1.263A-4, and Pub.
225 for rules for property produced in a
farming business.

In general, expenses that are definitely
related to a class of gross income
(including tax-exempt income) must be
allocated to that class of gross income.
Expenses not definitely related to a class
of gross income should be allocated to all
classes of income based on the ratio of
gross income in each class of income to
total gross income, or some other ratio
that clearly relates to the classes of
income. See Regulations section 1.861-8
and Temporary Regulations section
1.861-8T for more information.

Transactions between related taxpayers. Generally, an accrual basis taxpayer
may only deduct business expenses and
interest owed to a related party in the year
the payment is included in the income of
the related party. See sections 163(e)(3)
and 267(a)(2) for limitations on deductions
for unpaid interest and expenses. See the
instructions for Schedule I (Form 1120-F),
lines 24b and 24e, for limitations under
these sections of the interest expense
allocable under Regulations section
1.882-5.

Attach Schedule H (Form 1120-F) to
show the definitely related and indirect
allocation and apportionment of expenses

Limitations on business interest expense. Business interest expense may
be limited. See section 163(j) and Form
8990, Limitation on Business Interest

Deductions

Important. In computing the taxable
income of a foreign corporation engaged
in a U.S. trade or business, deductions are
allowed only if they are connected with
income effectively connected with the
conduct of a trade or business in the
United States. Charitable contributions,
however, may be deducted whether or not
they are so connected. See section 882(c)
and Regulations section 1.882-4(b) for
more information.

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Expense Under Section 163(j). Also, see
Limitation on Deduction in the instructions
for line 19 and the instructions for item FF
and item GG, earlier.
Section 291 limitations. Corporations
may be required to adjust deductions for
depletion of iron ore and coal, intangible
drilling and exploration and development
costs, certain deductions for financial
institutions, and the amortizable basis of
pollution control facilities. See section 291
to determine the amount of the
adjustment.

that begins during the current tax year,
complete and attach Form 4562,
Depreciation and Amortization.
Passive activity limitations. Limitations
on passive activity losses and credits
under section 469 apply to personal
service corporations (for definition, see
item O, Personal Service Corporation,
earlier) and closely held corporations (see
definition below).
Generally, the two kinds of passive
activities are:
• Trade or business activities in which the
corporation did not materially participate
for the tax year; and
• Rental activities, regardless of its
participation.
For exceptions, see Form 8810,
Corporate Passive Activity Loss and
Credit Limitations.
Corporations subject to the passive
activity limitations must complete Form
8810 to compute their allowable passive
activity loss and credit. Before completing
Form 8810, see Temporary Regulations
section 1.163-8T, which provides rules for
allocating interest expense among
activities. If a passive activity is also
subject to the at-risk rules of section 465
or the tax-exempt use loss rules of section
470, those rules apply before the passive
loss rules.
For more information, see section 469,
the related regulations, and Pub. 925,
Passive Activity and At-Risk Rules.

• Credit for employer social security and
Medicare taxes paid on certain employee
tips (Form 8846).
• Credit for small employer pension plan
start-up costs (Form 8881).
• Credit for employer-provided childcare
facilities and services (Form 8882).
• Low sulfur diesel fuel production credit
(Form 8896).
• Mine rescue team training credit (Form
8923).
• Credit for employer differential wage
payments (Form 8932).
• Credit for small employer health
insurance premiums (Form 8941).
• Employer credit for paid family and
medical leave (Form 8994).
If the corporation has any of the credits
listed above, figure the current year credit
before figuring the deduction for expenses
on which the credit is based. If the
corporation capitalized any costs on which
it figured the credit, it may need to reduce
the amount capitalized by the credit
attributable to these costs.
See the instructions for the form used
to figure the applicable credit for more
details.

DRAFT AS OF
December 14, 2021
Election to deduct business start-up
and organizational costs. A corporation
can elect to deduct a limited amount of
start-up and organizational costs it paid or
incurred. Any remaining costs must
generally be amortized over a 180-month
period. See sections 195 and 248 and the
related regulations.

Time for making an election. The
corporation generally elects to deduct
start-up or organizational costs by
claiming the deduction on its income tax
return filed by the due date (including
extensions) for the tax year in which the
active trade or business begins. However,
for start-up or organizational costs paid or
incurred before September 9, 2008, the
corporation is required to attach a
statement to its return to elect to deduct
such costs.
For more details, including special
rules for costs paid or incurred before
September 9, 2008, see the Instructions
for Form 4562. Also, see Pub. 535,
Business Expenses.
If the corporation timely filed its return
for the year without making an election, it
can still make an election by filing an
amended return within 6 months of the
due date of the return (excluding
extensions). Clearly indicate the election
on the amended return and write “Filed
pursuant to section 301.9100-2” at the top
of the amended return. File the amended
return at the same address the corporation
filed its original return. The election
applies when figuring taxable income for
the current tax year and all subsequent
years.
The corporation can choose to forgo
the elections above by affirmatively
electing to capitalize its start-up or
organizational costs on its income tax
return filed by the due date (including
extensions) for the tax year in which the
active trade or business begins.
Note. The election to either amortize or
capitalize start-up costs is irrevocable and
applies to all start-up costs that are related
to the trade or business.
Report the deductible amount of
start-up and organizational costs and any
amortization on line 27. For amortization

Closely held corporations. A
corporation is a closely held corporation if:
• At any time during the last half of the tax
year, more than 50% in value of its
outstanding stock is directly or indirectly
owned by or for not more than five
individuals; and
• The corporation is not a personal
service corporation.
Certain organizations are treated as
individuals for purposes of this test. See
section 542(a)(2). For rules for
determining stock ownership, see section
544 (as modified by section 465(a)(3)).
Reducing certain expenses for which
credits are allowable. If the corporation
claims certain credits, it may need to
reduce the otherwise allowable
deductions for expenses used to figure the
credit. This applies to credits such as the
following.
• Work opportunity credit (Form 5884).
• Employee retention credit for employers
affected by qualified disasters (Form
5884-A), if applicable.
• Credit for increasing research activities
(Form 6765).
• Orphan drug credit (Form 8820).
• Disabled access credit (Form 8826).
• Empowerment zone employment credit
(Form 8844).
• Indian employment credit (Form 8845).
-20-

Limitations on deductions related to
property leased to tax-exempt entities.
If a corporation leases property to a
governmental or other tax-exempt entity,
the corporation cannot claim deductions
related to the property to the extent that
they exceed the corporation's income from
the lease payments. This disallowed
tax-exempt use loss may be carried over
to the next tax year and treated as a
deduction with respect to the property for
that tax year. See section 470(d) for
exceptions.
Contributions. See the instructions for
line 19, later, for limitations that apply to
contributions.

Line 12. Compensation of Officers
Enter deductible officers' compensation
on line 12. Do not include compensation
deductible elsewhere on the return, such
as amounts included in cost of goods sold,
elective contributions to a section 401(k)
cash or deferred arrangement, or amounts
contributed under a salary reduction SEP
agreement or a SIMPLE IRA plan.
If the corporation's total receipts
(line 1a, plus lines 4 through 10) are
$500,000 or more, complete Form
1125-E, Compensation of Officers. Enter
on Form 1120-F, line 12, the amount from
Form 1125-E, line 4.

Line 13. Salaries and Wages
Enter the total salaries and wages paid for
the tax year. Do not include salaries and
wages deductible elsewhere on the return,
such as amounts included in officers'
Instructions for Form 1120-F (2021)

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compensation, cost of goods sold,
elective contributions to a section 401(k)
cash or deferred arrangement, or amounts
contributed under a salary reduction SEP
agreement or a SIMPLE IRA plan.
If the corporation provided taxable
fringe benefits to its employees, such as
personal use of a car, do not deduct as
wages the amount allocated for
depreciation and other expenses claimed
on lines 20 and 27.

Specific charge-off method. Attach to
the return a list of each debtor and the
amount of the bad debt deduction where
the amount of the loans charged off (or
treated as charged off under Regulations
section 1.166-2) for that debtor total in
excess of $500,000 in the tax year.

disposition of property (these taxes must
be treated as a part of the cost of the
acquired property or, in the case of a
disposition, as a reduction in the amount
realized on the disposition).
• Taxes assessed against local benefits
that increase the value of the property
assessed (such as for paving, etc.).
• Taxes deducted elsewhere on the
return, such as those reflected in cost of
goods sold.

DRAFT AS OF
December 14, 2021
If the corporation claims a credit
for any wages paid or incurred, it
CAUTION may need to reduce any
corresponding deduction for officers'
compensation and salaries and wages.
See Reducing certain expenses for which
credits are allowable, earlier.

!

Also, reduce the amounts
deducted as compensation of
CAUTION officers and salaries and wages
by the nonrefundable and refundable
portions of the CARES Act employee
retention credit claimed on the
corporation's employment tax return(s).

!

Line 14. Repairs and Maintenance
Enter the cost of repairs and maintenance
not claimed elsewhere on the return, such
as labor and supplies, that are not
payments to produce or improve tangible
or real property. See Regulations
1.263(a)-1. For example, amounts are
paid for improvements if they are for
betterments to the property, restorations
of the property (such as the replacements
of major components or substantial
structural parts), or if they adapt the
property to a new or different use.
Amounts paid to produce or improve
property must be capitalized. See
Regulations sections 1.263(a)-2 and -3.
The corporation can deduct repair and
maintenance expenses only to the extent
they relate to a trade or business activity.
See Regulations section 1.162-4. The
corporation may elect to capitalize certain
repair and maintenance costs consistent
with its books and records. See
Regulations section 1.263(a)-3(n) for
information on how to make the election.

Line 15. Bad Debts
Enter the total debts that became
worthless in whole or in part during the tax
year. A small bank or thrift institution using
the reserve method of section 585 should
attach a statement showing how it figured
the current year's provision. A corporation
that uses the cash method of accounting
cannot claim a bad debt deduction unless
the amount was previously included in
income.

Instructions for Form 1120-F (2021)

Line 16. Rents

If the corporation rented or leased a
vehicle, enter the total annual rent or lease
expense paid or incurred during the year.
Also, complete Part V of Form 4562. If the
corporation leased a vehicle for a term of
30 days or more, the deduction for vehicle
lease expense may have to be reduced by
an amount includible in income called the
inclusion amount. The corporation may
have an inclusion amount if:
The lease term
began:

And the vehicle's FMV
on the first day of the
lease exceeded:

Cars (excluding
trucks and vans)
After 12/31/20 but
before 1/1/22

$51,000

After 12/31/17 but
before 1/1/21

$50,000

After 12/31/12 but
before 1/1/18

$19,000

After 12/31/07 but before 1/1/13

$18,500

Trucks and vans
After 12/31/20 but
before 1/1/22

$51,000

After 12/31/17 but
before 1/1/21

$50,000

After 12/31/13 but
before 1/1/18

$19,500

After 12/31/09 but before 1/1/14

$19,000

After 12/31/08 but before 1/1/10

$18,500

After 12/31/07 but before 1/1/09

$19,000

See Pub. 463, Travel, Gift, and Car
Expenses, for instructions on figuring the
inclusion amount.
Note. The inclusion amount for lease
terms beginning in 2022 will be published
in the Internal Revenue Bulletin in early
2022.

Line 17. Taxes and Licenses
Enter taxes paid or accrued during the tax
year, but do not include the following.
• Federal income taxes.
• Foreign or U.S. possession income
taxes if a foreign tax credit is claimed.
• Taxes not imposed on the corporation.
• Taxes, including state or local sales
taxes, that are paid or incurred in
connection with an acquisition or
-21-

See section 164(d) for information on
apportionment of taxes on real property
between seller and purchaser.

Do not reduce the corporation's
deduction for social security and
CAUTION Medicare taxes by the following
amounts claimed on its employment tax
returns: (1) the nonrefundable and
refundable portions of the CARES Act
employee retention credit and (2) the
nonrefundable and refundable portions of
the FFCRA and ARP credits for qualified
sick and family leave wages. Instead, item
(1) reduces the deductions for
compensation of officers and salaries and
wages on Section II, lines 12 and 13, and
item (2) must be reported as income on
Section II, line 10.

!

See section 906(b)(1) for rules
concerning certain foreign taxes imposed
on income from U.S. sources that may not
be deducted or credited.

Line 18. Interest Expense From
Schedule I, Line 25
Enter the interest expense from
Schedule I (Form 1120-F), line 25. Attach
Schedule I to the Form 1120-F. See
Schedule I and its separate instructions for
additional information relating to the
allocation of interest expense to ECI and
the amount that may be claimed as a
deduction on Form 1120-F, Section II,
line 18.
Treaty-based interest expense allocation methods. The three-step formula
under Regulations section 1.882-5
provides the exclusive rules for
determining the interest expense
attributable to the business profits of a
permanent establishment under a U.S.
income tax treaty, other than treaties that
expressly permit attribution of business
profits to a U.S. permanent establishment
under application of the OECD Transfer
Pricing Guidelines, by analogy.
Protective elections under section
1.882-5. A taxpayer that files a protective
tax return under Regulations section
1.882-4(a)(3)(vi) may voluntarily file
Schedule I with the protective return to
preserve timely elections under
Regulations section 1.882-5(a)(7). If a
taxpayer uses the provisions of an

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applicable treaty to allocate interest
expense rather than Regulations section
1.882-5, it remains subject to the time,
place, and manner provisions of
Regulations section 1.882-5(a)(7) for
making its interest expense allocation
elections for any subsequent year that it
chooses to use the three-step allocation
formula of the regulations instead of the
treaty. Protective interest expense
allocation elections under Regulations
section 1.882-5(a)(7) may be made for a
year in which a treaty method is used in
lieu of the rules of Regulations section
1.882-5 by completing and filing
Schedule I on a timely filed income tax
return for any year that the election would
be required to be made under the rules of
Regulations section 1.882-5. If a
corporation uses an applicable treaty,
rather than the rules of Regulations
section 1.882-5, to allocate interest
expense and does not file Schedule I, then
the taxpayer has forfeited its right to make
the Regulations section 1.882-5 method
elections for such applicable year or
years. In this case, under certain
circumstances, the Director of Field
Operations may make any or all of the
binding elections provided under
Regulations section 1.882-5 in
accordance with Regulations section
1.882-5(a)(7)(ii) (and may make the
binding partnership basis apportionments
election under Regulations section
1.884-1(d)(3)(v)) on behalf of the
corporation.

resolution was adopted. See section
170(a)(2)(B).
Limitation on deduction. Generally, the
total amount claimed may not exceed 10%
of taxable income (line 31) computed
without regard to the following.
• Any deduction for contributions.
• The special deductions on line 30b.
• The limitation under section 249 on the
deduction for bond premium.
• Any NOL carryback to the tax year
under section 172.
• Any capital loss carryback to the tax
year under section 1212(a)(1).
• Deduction for income attributable to
domestic production activities of specified
agricultural or horticultural cooperatives.

than certain private foundations described
in section 509(a)(3) or donor-advised
funds described in section 4966(d)(2)).
The total amount of the contribution
claimed cannot exceed 25% of the excess
of the corporation's taxable income (as
computed above substituting “25%” for
“10%”) over all other allowable charitable
contributions. Contributions over the 25%
limitation cannot be deducted for the tax
year, but can be carried over to the next 5
tax years.

DRAFT AS OF
December 14, 2021

Line 19. Charitable Contributions
Note. This deduction is allowed for all
contributions, whether or not connected
with income that is effectively connected
with the conduct of a trade or business in
the United States. See section 882(c)(1)
(B).
Enter contributions or gifts actually paid
within the tax year to or for the use of
charitable and governmental
organizations described in section 170(c)
and any unused contributions carried over
from prior years. Special rules and limits
apply to contributions to organizations
conducting lobbying activities. See section
170(f)(9).
Corporations reporting taxable income
on the accrual method may elect to treat
as paid during the tax year any
contributions paid by the due date for filing
Form 1120-F (not including extensions), if
the contributions were authorized by the
board of directors during the tax year.
Attach a declaration to the return stating
that the resolution authorizing the
contributions was adopted by the board of
directors during the tax year. The
declaration must include the date the

Carryover. Charitable contributions over
the 10% limitation (or the 25% limitation, if
elected, see Temporary suspension of
limitations on certain contributions, later)
cannot be deducted for the tax year but
may be carried over to the next 5 tax
years. See the exception below for
farmers and ranchers.
Special rules apply if the corporation
has an NOL carryover to the tax year. In
figuring the charitable contributions
deduction for the current tax year, the 10%
limit is applied using the corporation’s
taxable income after taking into account
any deduction for the NOL.
To figure the amount of any remaining
NOL carryover to later years, taxable
income must be modified (see section
172(b)). To the extent that contributions
are used to reduce taxable income for this
purpose and increase an NOL carryover, a
contributions carryover is not allowed. See
section 170(d)(2)(B).

Suspension of 10% limitation for farmers and ranchers. A qualified farmer or
rancher (as defined in section 170(b)(1)(E)
(v)) that does not have publicly traded
stock may deduct contributions of
qualified conservation property without
regard to the general 10% limit.
The total amount of the contribution
claimed for the qualified conservation
property cannot exceed 100% of the
excess of the corporation's taxable
income (as computed above, substituting
"100%" for "10%") over all other allowable
charitable contributions. Any excess
qualified conservation contributions can
be carried over to the next 15 years,
subject to the 100% limitation. See
sections 170(b)(2)(B) and (C).
Temporary suspension of limitations
on certain contributions. The CARES
Act allows a corporation to elect to deduct
qualified cash contributions without regard
to the 10% taxable income limit. For 2021,
qualified contributions are charitable
contributions that were made during
calendar year 2021 to an organization
described in section 170(b)(1)(A) (other
-22-

Temporary suspension of 10% limitation for certain disaster-related contributions. A corporation may elect to
deduct qualified cash contributions
without regard to the 10% taxable income
limit. For 2021, qualified contributions are
any charitable contributions that were
made before February 26, 2021, to an
organization described in section 170(b)
(1)(A) (other than certain private
foundations described in section 509(a)(3)
or donor-advised funds described in
section 4966(d)(2)) for relief efforts in one
or more qualified disaster areas. The
corporation must obtain contemporaneous
written acknowledgment (within the
meaning of section 170(f)(8)) from the
qualified charitable organization that the
contribution was used or is to be used for
disaster relief efforts.
The total amount of the contribution
claimed for disaster relief efforts cannot
exceed 100% of the excess of the
corporation's taxable income (as
computed above substituting "100%" for
"10%" ) over all other allowable charitable
contributions. Any excess qualified
contributions are carried over to the next 5
years.
Cash contributions. For contributions of
cash, check, or other monetary gifts
(regardless of the amount), the
corporation must maintain a bank record,
or a receipt, letter, or other written
communication from the donee
organization indicating the name of the
organization, the date of the contribution,
and the amount of the contribution.
Contributions of $250 or more. A
corporation can deduct a contribution of
$250 or more only if it gets a written
acknowledgment from the donee
organization that shows the amount of
cash contributed, describes any property
contributed (but not its value), and either
gives a description and a good faith
estimate of the value of any goods or
services provided in return for the
contribution or states that no goods or
services were provided in return for the
contribution. The acknowledgment must
be obtained by the due date (including
extensions) of the corporation's return, or,
if earlier, the date the return is filed. Do not
attach the acknowledgment to the tax

Instructions for Form 1120-F (2021)

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return, but keep it with the corporation's
records.
Contributions of property other than
cash. If a corporation (other than a
closely held or personal service
corporation) contributes property other
than cash and claims a deduction of more
than $500 for the property, it must attach a
statement to the return describing the kind
of property contributed and the method
used to determine its FMV. Closely held
corporations and personal service
corporations must complete Form 8283,
Noncash Charitable Contributions, and
attach it to their returns. All other
corporations must generally complete and
attach Form 8283 to their returns for
contributions of property (other than
money) if the total claimed deduction for
all property contributed was more than
$5,000. Special rules apply to the
contribution of certain property. See the
Instructions for Form 8283.

Line 20. Depreciation
Include on line 20 depreciation and the
cost of certain property that the
corporation elected to expense under
section 179. Enter the amount from Form
4562, but include on line 20 only amounts
not claimed on Form 1125-A or elsewhere
on the return. See Form 4562 and the
Instructions for Form 4562.

Form 5500-EZ, Annual Return of
One-Participant (Owners/Partners and
Their Spouses) Retirement Plan or a
Foreign Plan. File this form for a plan that
only covers the owner (or the owner and
his or her spouse) or a foreign plan that is
required to file an annual return and does
not file the annual return electronically on
Form 5500-SF. See the Instructions for
Form 5500-EZ.

DRAFT AS OF
December 14, 2021
Qualified conservation
contributions. Special rules apply to
qualified conservation contributions,
including contributions of certain
easements on buildings located in a
registered historic district. See section
170(h) and Pub. 526, Charitable
Contributions.
Other special rules. The corporation
must reduce its deduction for contributions
of certain capital gain property. See
sections 170(e)(1) and 170(e)(5).
A larger deduction is allowed for certain
contributions including:
• Inventory and other property to certain
organizations for use in the care of the ill,
needy, or infants (see section 170(e)(3)),
including qualified contributions of
“apparently wholesome food” (discussed
below); and
• Scientific equipment used for research
to institutions of higher learning or to
certain scientific research organizations
(other than by personal holding
companies and service organizations).
See section 170(e)(4).
Increase in limits on contributions
of food inventory. For any charitable
contribution of food during 2021 to which
section 170(e)(3)(C) applies, a corporation
can deduct qualified contributions of up to
25% of its aggregate net income from all
trades or businesses from which the
contributions were made or up to 25% of
its taxable income.
For more information on charitable
contributions, including substantiation and
recordkeeping requirements, see section
170 and the related regulations, and Pub.
526. For other special rules that apply to
corporations, see Pub. 542.

Instructions for Form 1120-F (2021)

Line 21. Depletion

See sections 613 and 613A for
percentage depletion rates applicable to
natural deposits. Also, see section 291 for
the limitation on the depletion deduction
for iron ore and coal (including lignite).
Attach Form T (Timber), Forest
Activities Schedule, if a deduction for
depletion of timber is claimed.

Foreign intangible drilling costs and
foreign exploration and development costs
must either be added to the corporation's
basis for cost depletion purposes or be
deducted ratably over a 10-year period.
See sections 263(i), 616, and 617 for
details.
See Pub. 535 for more information on
depletion.

Line 23. Pension, Profit-Sharing,
etc., Plans
Enter the deduction for contributions to
qualified pension, profit-sharing, or other
funded deferred compensation plans.
Employers who maintain such a plan must
generally file one of the forms listed below
unless exempt from filing under
regulations or other applicable guidance,
even if the plan is not a qualified plan
under the Internal Revenue Code. The
filing requirement applies even if the
corporation does not claim a deduction for
the current tax year. There are penalties
for failure to file these forms on time and
for overstating the pension plan deduction.
See sections 6652(e) and 6662(f). Also,
see the instructions for the applicable
form.
Form 5500, Annual Return/Report of
Employee Benefit Plan.
Form 5500-SF, Short Form Annual
Return/Report of Small Employee Benefit
Plan. File this form instead of Form 5500
generally if there were under 100
participants at the beginning of the plan
year.
Note. Form 5500 and Form 5500-SF
must be filed electronically under the
computerized ERISA Filing Acceptance
System (EFAST2). For more information,
see the EFAST2 website at
Efast.dol.gov.
-23-

Line 24. Employee Benefit
Programs

Enter contributions to employee benefit
programs not claimed elsewhere on the
return (for example, insurance or health
and welfare programs) that are not an
incidental part of a pension, profit-sharing,
etc., plan included on line 23.

Line 26. Deductions Allocated and
Apportioned to ECI From
Schedule H, Line 20
Enter the total home office deductions
allocated and apportioned to ECI from
Schedule H (Form 1120-F), line 20. See
Schedule H and its separate instructions
for additional information. Attach
Schedule H to the Form 1120-F.

Deductions definitely related and
indirectly allocated and apportioned to ECI
that are not includible on Form 1120-F,
Section II, lines 12 through 14, 16 and 17,
19 through 25, and 27 are reported on
Schedule H, line 20 and on Form 1120-F,
line 26. Deductions that are includible on
Form 1120-F, Section II, lines 12 through
14, 16 and 17, 19 through 24, and 27 are
those derived from set(s) of books and
records required to be reported on Form
1120-F, Schedule L.
Note. The books and records of a U.S.
office where a trade or business is carried
on do not necessarily constitute all of the
books and records required to be reported
on Schedule L. See the instructions for
Schedule L, later. Deductions that are
reported on Form 1120-F, Section II, lines
12 through 14, lines 16 and 17, lines 19
through 24, and line 27 are also reconciled
to ECI on Schedule H (Form 1120-F), Part
IV, lines 38 through 41.

Line 27. Other Deductions
Attach a statement, listing by type and
amount, all allowable deductions that are
not deductible elsewhere on Form 1120-F.
Enter the total on line 27.
Examples of other deductions include
the following. See Pub. 535 for details on
other deductions that may apply to
corporations.
• Amortization. See Part VI of Form 4562.

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• Certain costs of a qualified film,
television, or live theatrical production
commencing before January 1, 2026 (after
December 31, 2015, and before January
1, 2026, for a live theatrical production).
This deduction does not apply to any
portion of the aggregate cost of the
production above $15 million. There is a
higher allowance for production in certain
areas. See section 181 and the related
regulations.
Note. Certain film, television, or live
theatrical productions acquired and
placed in service after September 27,
2017 (for which a deduction would have
been allowable under section 181 without
regard to the dollar limitation), are
qualified property eligible for the special
depreciation allowance under section
168(k). See the Instructions for Form
4562.
• Certain business start-up and
organizational costs (discussed earlier,
under Limitations on Deductions).
• Reforestation costs. The corporation
may elect to deduct up to $10,000 of
qualifying reforestation expenses for each
qualified timber property. The corporation
may elect to amortize over 84 months any
amount not deducted. See Pub. 535.
• Insurance premiums.
• Legal and professional fees.
• Supplies used and consumed in the
business.
• Travel, meals, and entertainment
expenses. Special rules apply (discussed
later).
• Utilities.
• Ordinary losses from trade or business
activities of a partnership (from
Schedule K-3 (Form 1065)). Do not offset
ordinary income against ordinary losses.
Instead, include the income on line 10.
Show the partnership's name, address,
and EIN on Schedule P (Form 1120-F). If
the amount is from more than one
partnership, identify the amount from each
partnership on Schedule P.
• Any net negative section 481(a)
adjustment. See Section 481(a)
adjustment, earlier.
• Any applicable deduction under section
179D for costs of energy efficient
commercial building property.
• Dividends paid in cash on stock held by
an employee stock ownership plan.
However, a deduction may be taken for
these dividends only if, according to the
plan, the dividends are:
1. Paid in cash directly to the plan
participants or beneficiaries;
2. Paid to the plan, which distributes
them in cash to the plan participants or
their beneficiaries no later than 90 days
after the end of the plan year in which the
dividends are paid;
3. At the election of such participants
or their beneficiaries (a) payable as

provided under (1) or (2) above, or (b)
paid to the plan and reinvested in
qualifying employer securities; or
4. Used to make payments on a loan
described in section 404(a)(9).
See section 404(k) for more details and
the limitation on certain dividends.

deductible. In addition (subject to
exceptions under section 274(k)(2)):
• Meals must not be lavish or
extravagant, and
• An employee of the corporation must
be present at the meal.
See section 274(n)(3) for a special rule
that applies to expenses for meals
consumed by individuals subject to the
hours of service limits of the Department
of Transportation.

DRAFT AS OF
December 14, 2021
Do not deduct expenses such as the
following.
• Amounts paid or incurred to, or at the
direction of, a government or
governmental entity for the violation, or
investigation or inquiry into the potential
violation, of a law. However, see Fines or
similar penalties, later.
• Any amount that is allocable to a class
of exempt income. See section 265(b) for
exceptions.
• Lobbying expenses. However, see
exceptions (discussed later).
• Amounts paid or incurred for any
settlement, payout, or attorney fees
related to sexual harassment or sexual
abuse, if such payments are subject to a
nondisclosure agreement. See section
162(q).

Travel, meals, and entertainment.
Subject to limitations and restrictions
discussed below, a corporation may
deduct ordinary and necessary travel,
meal, and non-entertainment expenses
paid or incurred in its trade or business.
Generally, entertainment expenses,
membership dues, and facilities used in
connection with these activities cannot be
deducted. In addition, no deduction is
generally allowed for qualified
transportation fringe benefits. Special
rules apply to deductions for gifts, luxury
water travel, and convention expenses.
See section 274, Pub. 463, and Pub. 535
for details.
Travel. The corporation cannot deduct
travel expenses of any individual
accompanying a corporate officer or
employee, including a spouse or
dependent of the officer or employee,
unless:
• That individual is an employee of the
corporation, and
• His or her travel is for a bona fide
business purpose and would otherwise be
deductible by that individual.
Meals. Generally, the corporation can
deduct only 50% of the amount otherwise
allowable for non-entertainment related
meal expenses paid or incurred in its trade
or business. However, the corporation can
deduct 100% of business meal expenses
if the meals are food and beverages
provided by a restaurant. This applies only
to amounts paid or incurred after
December 31, 2020, and before January
1, 2023.
Meals not separately stated from
entertainment are generally not
-24-

Qualified transportation fringes
(QTFs). Generally, no deduction is
allowed under section 274(a)(4) for QTFs
provided by employers to their employees.
QTFs are defined in section 132(f)(1) and
include:
• Transportation in a commuter highway
vehicle between the employee’s residence
and place of employment,
• Any transit pass, and
• Qualified parking.
See section 274, Pub. 15-B and Pub.
535 for details.
Membership dues. The corporation
can deduct amounts paid or incurred for
membership dues in civic or public service
organizations, professional organizations
(such as bar and medical associations),
business leagues, trade associations,
chambers of commerce, boards of trade,
and real estate boards. However, no
deduction is allowed if a principal purpose
of the organization is to entertain or
provide entertainment facilities for
members or their guests. In addition,
corporations cannot deduct membership
dues in any club organized for business,
pleasure, recreation, or other social
purpose. This includes country clubs, golf
and athletic clubs, airline and hotel clubs,
and clubs operated to provide meals
under conditions favorable to business
discussion.
Entertainment facilities. Generally,
the corporation cannot deduct an expense
paid or incurred for a facility (such as a
yacht or hunting lodge) used for an activity
usually considered entertainment,
amusement, or recreation.
Amounts treated as compensation.
Generally, the corporation may be able to
deduct otherwise nondeductible
entertainment, amusement, or recreation
expenses if the amounts are treated as
compensation to the recipient and
reported on Form W-2 for an employee or
on Form 1099-NEC for an independent
contractor.
However, if the recipient is an officer,
director, beneficial owner (directly or
indirectly), or other “specified individual”
(as defined in section 274(e)(2)(B) and
Regulations section 1.274-9(b)), special
rules apply. See section 274(e)(2) and

Instructions for Form 1120-F (2021)

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Regulations sections 1.274-9 and
1.274-10.
Fines or similar penalties.
Generally, no deduction is allowed for
fines or similar penalties paid or incurred
to, or at the direction of, a government or
governmental entity for violating any law,
or for the investigation or inquiry into the
potential violation of a law, except:
• Amounts that constitute restitution or
remediation of property,
• Amounts paid to come into compliance
with the law,
• Amounts paid or incurred as the result
of orders or agreements in which no
government or governmental entity is a
party, and
• Amounts paid or incurred for taxes due.
No deduction is allowed unless the
amounts are specifically identified in the
order or agreement and the corporation
establishes that the amounts were paid for
that purpose. Also, any amount paid or
incurred as reimbursement to the
government for the costs of any
investigation or litigation are not eligible for
the exceptions and are nondeductible.
See section 162(f).

However, the at-risk rules do apply to
the holding of mineral property.
If the at-risk rules apply, adjust the
amount on this line for any section 465(d)
losses. These losses are limited to the
amount for which the corporation is at risk
for each separate activity at the close of
the tax year. If the corporation is involved
in one or more activities, any of which
incurs a loss for the year, report the losses
for each activity separately. Attach Form
6198, At-Risk Limitations, showing the
amount at risk and gross income and
deductions for the activities with the
losses.
If the corporation sells or otherwise
disposes of an asset or its interest (either
total or partial) in an activity to which the
at-risk rules apply, determine the net profit
or loss from the activity by combining the
gain or loss on the sale or disposition with
the profit or loss from the activity. If the
corporation has a net loss, it may be
limited because of the at-risk rules.
Treat any loss from an activity not
allowed for the tax year as a deduction
allocable to the activity in the next tax
year.

For guidance in applying section 382 to
loss corporations whose instruments were
acquired by Treasury under certain
programs under the Emergency Economic
Stabilization Act of 2008, see Notice
2010-2, 2010-2 I.R.B. 251, available at
IRS.gov/irb/2010–02_IRB#NOT-2010-2.
• If a corporation acquires control of
another corporation (or acquires its assets
in a reorganization), the amount of
pre-acquisition losses that may offset
recognized built-in gain may be limited
(see section 384).
• If a corporation elects the alternative tax
on qualifying shipping activities under
section 1354, no deduction is allowed for
an NOL attributable to the qualifying
shipping activities to the extent that the
loss is carried forward from a tax year
preceding the first tax year for which the
alternative tax election was made. See
section 1358(b)(2).

DRAFT AS OF
December 14, 2021
Lobbying expenses. Generally,
lobbying expenses are not deductible.
These expenses include:
• Amounts paid or incurred in connection
with influencing federal, state, or local
legislation; or
• Amounts paid or incurred in connection
with any communication with certain
federal executive branch officials in an
attempt to influence the official actions or
positions of the officials. See Regulations
section 1.162-29 for the definition of
“influencing legislation.”
Dues and other similar amounts paid to
certain tax-exempt organizations may not
be deductible.
If certain in-house lobbying
expenditures do not exceed $2,000, they
are deductible.

Line 29. Taxable Income Before
NOL Deduction and Special
Deductions
At-risk rules. Generally, special at-risk
rules under section 465 apply to closely
held corporations (see Passive activity
limitations, earlier) engaged in any activity
as a trade or business or for the
production of income. These corporations
may have to adjust the amount on line 29
(see below).
The at-risk rules do not apply to:
• Holding real property placed in service
by the taxpayer before 1987;
• Equipment leasing under sections
465(c)(4), (5), and (6); or
• Any qualifying business of a qualified
corporation under section 465(c)(7).
Instructions for Form 1120-F (2021)

Line 30a. Net Operating Loss
Deduction
A corporation may use the NOL incurred
in one tax year to reduce its taxable
income in another tax year. Enter on
line 30a the total NOL carryovers from
other tax years, but do not enter more than
the corporation's taxable income (after
special deductions). Attach a statement
showing the computation of the NOL
deduction. Also, complete item S on
page 2 of the form.
The following special rules apply.

• If an ownership change (described in

section 382(g)) occurs, the amount of the
taxable income of a loss corporation that
may be offset by the pre-change NOL
carryovers may be limited. See section
382 and the related regulations. A loss
corporation must include the information
statement as provided in Regulations
section 1.382-11(a) with its income tax
return for each tax year that it is a loss
corporation in which an ownership shift,
equity structure shift, or other transaction
described in Temporary Regulations
section 1.382-2T(a)(2)(i) occurs. If the
corporation makes the
closing-of-the-books election, see
Regulations section 1.382-6(b).
The limitations under section 382 do
not apply to certain ownership changes
after February 17, 2009, made pursuant to
a restructuring plan under the Emergency
Economic Stabilization Act of 2008. See
section 382(n).

-25-

For more details on the NOL deduction,
see section 172 and the Instructions for
Form 1139.

Line 30b. Special Deductions
See the instructions for Schedule C, later.

Line 31. Taxable Income or (Loss)
Net operating loss (NOL). If line 31 is
zero or less, the corporation may have an
NOL that may be carried back or forward
as a deduction to other tax years.
For losses incurred in tax years
beginning after December 31, 2020, only
farming losses and losses of an insurance
company (other than a life insurance
company) can be carried back. The
carryback period for these losses is 2
years. For NOLs that can be carried back,
the corporation can elect to waive the
carryback period and instead carry the
NOL forward to future tax years.
See the instructions for item R, earlier,
for information on making the election to
waive the entire carryback period for
2021. See the Instructions for Form 1139
for other special rules and elections.
For tax years beginning in 2021, the
NOL deduction for the year cannot exceed
the aggregate amount of NOLs arising in
tax years beginning before January 1,
2018, carried to such year plus the lesser
of:
1. The aggregate amount of NOLs
rising in tax years beginning after
December 31, 2017, carried to such tax
year; or
2. 80% of the excess, if any, of
taxable income determined without any
NOL deduction or section 199A
deduction, over any NOL carryover to the
tax year from tax years beginning before
January 1, 2018.

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An exception applies for NOLs from
insurance companies other than life
insurance companies. The 80% taxable
income limit does not apply for these
entities. See sections 172(b) and (f).

Schedule C—Dividends and
Special Deductions

For purposes of the 20% ownership test
on lines 1 through 7, the percentage of
stock owned by the corporation is based
on voting power and value of the stock.

that the corporation acquired by incurring
a debt (for example, it borrowed money to
buy the stock).
• Dividends received from a RIC on
debt-financed stock. The amount of
dividends eligible for the
dividends-received deduction is limited by
section 854(b). The corporation should
receive a notice from the RIC specifying
the amount of dividends that qualify for the
deduction.

and that qualify for the 65% deduction
under sections 243 and 245(a).

Line 8, Column (c)
Limitation on dividends-received deduction. Generally, line 8, column (c),
cannot exceed the amount from the
Worksheet for Schedule C, Line 8.
However, in a year in which an NOL
occurs, this limitation does not apply, even
if the loss is created by the
dividends-received deduction. See
sections 172(d) and 246(b).

DRAFT AS OF
December 14, 2021
Line 1, Column (a)

Enter dividends (except those received on
certain debt-financed stock acquired after
July 18, 1984—see section 246A) that:
• Are received from
less-than-20%-owned domestic
corporations subject to income tax, and
• Qualify for the 50% deduction under
section 243(a)(1).
Also, include on line 1 the following.

• Taxable distributions from an IC-DISC

or former DISC that are designated as
eligible for the 50% deduction and certain
dividends of Federal Home Loan Banks.
See section 246(a)(2).
• Dividends (except those received on
certain debt-financed stock acquired after
July 18, 1984) from a RIC. The amount of
dividends eligible for the
dividends-received deduction under
section 243 is limited by section 854(b).
The corporation should receive a notice
from the RIC specifying the amount of
dividends that qualify for the deduction.
Report so-called dividends or earnings
received from mutual savings banks, etc.,
as interest. Do not treat them as
dividends.

Line 2, Column (a)
Enter on line 2:
• Dividends (except those received on
certain debt-financed stock acquired after
July 18, 1984) that are received from
20%-or-more-owned domestic
corporations subject to income tax and
that are subject to the 65% deduction
under section 243(c), and
• Taxable distributions from an IC-DISC
or former DISC that are considered
eligible for the 65% deduction.

Line 3, Column (a)
Enter the following.
• Dividends received on certain
debt-financed stock acquired after July 18,
1984, from domestic and foreign
corporations subject to income tax that
would otherwise be subject to the
dividends-received deduction under
section 243(a)(1), 243(c), or 245(a).
Generally, debt-financed stock is stock

Line 3, Columns (b) and (c)

Dividends received on certain
debt-financed stock acquired after July 18,
1984, are not entitled to the full 50% or
65% dividends-received deduction under
section 243 or 245(a). The 50% or 65%
deduction is reduced by a percentage that
is related to the amount of debt incurred to
acquire the stock. See section 246A. Also,
see section 245(a) before making this
computation for an additional limitation
that applies to certain dividends received
from foreign corporations. Attach a
statement to Form 1120-F showing how
the amount on line 3, column (c), was
computed.

Line 4, Column (a)
Enter dividends received on preferred
stock of a less-than-20%-owned public
utility that is subject to income tax and is
allowed the 23.3% deduction provided in
sections 244 and 247 (as affected by
P.L.113-295, Div. A, section 221(a)(41)
(A), Dec. 19, 2014, 128 Stat. 4043) for
dividends paid.

Line 5, Column (a)
Enter dividends received on preferred
stock of a 20%-or-more-owned public
utility that is subject to income tax and is
allowed the 26.7% deduction provided in
sections 244 and 247 (as affected by
P.L.113-295, Div. A, section 221(a)(41)
(A), Dec. 19, 2014, 128 Stat. 4043) for
dividends paid.

Line 6, Column (a)
Enter the U.S.-source portion of dividends
that:
• Are received from
less-than-20%-owned foreign
corporations, and
• Qualify for the 50% deduction under
section 245(a). To qualify for the 50%
deduction, the corporation must own at
least 10% of the stock of the foreign
corporation by vote and value.

Line 7, Column (a)
Enter the U.S.-source portion of dividends
that are received from
20%-or-more-owned foreign corporations
-26-

Line 9, Column (a)

Enter the foreign dividends not reportable
on line 3, 6, or 7 of column (a).
Attach a statement identifying the
amount of each dividend reported on
line 9 and the provision pursuant to which
a deduction is not allowed with respect to
such dividend.

Line 10, Column (a)
Enter taxable distributions from an
IC-DISC or former DISC that are
designated as not eligible for a
dividends-received deduction.
No deduction is allowed under section
243 for a dividend from an IC-DISC or
former DISC (as defined in section 992(a))
to the extent the dividend:
• Is paid out of the corporation's
accumulated IC-DISC income or
previously taxed income, or
• Is a deemed distribution under section
995(b)(1).

Line 11, Column (a)
Include the following.
• Dividends (other than capital gain
distributions reported on Schedule D
(Form 1120) and exempt-interest
dividends) that are received from RICs
and that are not subject to the 50%
deduction.
• Dividends from tax-exempt
organizations.
• Dividends (other than capital gain
distributions) received from a REIT that
qualifies, for the tax year of the trust in
which the dividends are paid, under
sections 856 through 860.
• Dividends not eligible for a dividendsreceived deduction, which include the
following.
1. Dividends received on any share of
stock held for less than 46 days during the
91-day period beginning 45 days before
the ex-dividend date. When counting the
number of days the corporation held the
stock, you cannot count certain days
during which the corporation's risk of loss
was diminished. See section 246(c)(4)
Instructions for Form 1120-F (2021)

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Keep for Your Records

Worksheet for Schedule C, Line 8
1. Refigure Section II, line 29, without any adjustment under section 1059, and without any capital loss carryback to
the tax year under section 1212(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.

2. Multiply line 1 by 65% (0.65) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.

3. Add lines 2, 5, and 7, column (c), and the part of the deduction on line 3, column (c), that is attributable to
dividends from 20%-or-more-owned corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.

4. Enter the smaller of line 2 or line 3. If line 3 is greater than line 2, stop here; enter the amount from line 4 on line 8,
column (c), and do not complete the rest of this worksheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.

5. Enter the total amount of dividends from 20%-or-more-owned corporations that are included on lines 2, 3, 5, and
7, column (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.

6. Subtract line 5 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.

7. Multiply line 6 by 50% (0.50) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.

8. Subtract line 3 above from line 8, column (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.

9. Enter the smaller of line 7 or line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9.

10. Dividends-received deduction after limitation (section 246(b)). Add lines 4 and 9. Enter the result here and
on line 8, column (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.

DRAFT AS OF
December 14, 2021
and Regulations section 1.246-5 for more
details.
2. Dividends received on any share of
preferred stock which are attributable to
periods totaling more than 366 days if
such stock was held for less than 91 days
during the 181-day period that began 90
days before the ex-dividend date. When
counting the number of days the
corporation held the stock, you cannot
count certain days during which the
corporation's risk of loss was diminished.
See section 246(c)(4) and Regulations
section 1.246-5 for more details. Preferred
dividends attributable to periods totaling
less than 367 days are subject to the
46-day holding period rule discussed
above.
3. Dividends on any share of stock to
the extent the corporation is under an
obligation (including a short sale) to make
related payments with respect to positions
in substantially similar or related property.
• Any other taxable dividend income not
properly reported elsewhere on
Schedule C.
If patronage dividends or per-unit retain
allocations are included on line 11, identify
the total of these amounts in a statement
and attach it to Form 1120-F.

Line 12, Column (c)
Section 247 (as affected by P.L.113-295,
Div. A, section 221(a)(41)(A), Dec. 19,
2014, 128 Stat. 4043) allows public
utilities a deduction of 40% of the smaller
of:
• Dividends paid on their preferred stock
during the tax year, or
• Taxable income computed without
regard to this deduction.
In a year in which an NOL occurs,
compute the deduction without regard to
section 247(a)(1)(B).
Instructions for Form 1120-F (2021)

Schedule J—Tax Computation
Line 1
If the corporation is a member of a
controlled group, check the box on line 1
and complete and attach Schedule O
(Form 1120), Consent Plan and
Apportionment Schedule for a Controlled
Group. Component members of a
controlled group must use Schedule O to
report the apportionment of certain tax
benefits between the members of the
group. See Schedule O and the
Instructions for Schedule O for more
information.

Line 2. Income Tax
Multiply taxable income (page 4,
Section II, line 31) by 21%. Enter this
amount on line 2.
Increase in tax attributable to partner’s
additional reporting year tax. If the
taxpayer is a foreign corporate partner and
received a Form 8986 from a partnership
that has elected to have each reviewed
year partner take into account the
partner's share of the adjustments, as
finally determined, instead of paying the
imputed underpayment, the foreign
corporate partner (taxpayer) will have to
complete Form 8978 to report adjustments
shown on the Form 8986 they received
from the partnership. The foreign
corporate partner (taxpayer) must
complete a separate Form 8978 to report
adjustments pertaining to income that is
effectively connected with the conduct of a
trade or business in the United States
under section 882 (an “ECI Form 8978”)
and a separate Form 8978 to report
adjustments pertaining to income from
U.S. sources not effectively connected
with the conduct of a trade or business in
the United States under section 881 (an
“FDAP Form 8978”). Include any increase
-27-

in taxes due from the ECI Form 8978,
line 14 in the total for Form 1120-F,
Section II, Schedule J, line 2. On the
dotted line next to line 2, enter “FROM
FORM 8978” and the amount. Attach the
ECI Form 8978 to Form 1120-F. If the ECI
Form 8978, line 14, shows a decrease in
tax, see the instructions for Schedule J,
line 6.
Additional tax under section 197(f). A
corporation that elects to recognize gain
and pay tax on the sale of a section 197
intangible under the related person
exception to the anti-churning rules should
include any additional tax due in the total
for line 2. On the dotted line next to line 2,
enter “Section 197” and the amount. See
section 197(f)(9)(B)(ii).

Line 3. Base Erosion Minimum Tax
Amount
If the corporation had gross receipts of at
least $500 million in any 1 of the 3 tax
years preceding the current tax year,
complete and attach Form 8991. Enter on
line 3 the base erosion minimum tax
amount from Form 8991, Part IV, line 5e.
See section 59A and the Instructions for
Form 8991. Also, see the instructions for
item DD, earlier.

Line 5a. Foreign Tax Credit
A foreign corporation engaged in a U.S.
trade or business during the tax year may
take a credit for income, war profits, and
excess profits taxes paid, accrued, or
deemed paid to any foreign country or
U.S. possession for income effectively
connected with the conduct of a trade or
business in the United States. See section
906 and Form 1118, Foreign Tax
Credit—Corporations.

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Line 5b. General Business Credit
Include on line 5b the corporation's
allowable credit from Form 3800, Part II,
line 38.
The corporation is required to file Form
3800, General Business Credit, to claim
any of the business credits. See the
Instructions for Form 3800 for exceptions.
For a list of allowable credits, see Form
3800. Also, see the applicable credit form
and its instructions.

amount. Attach the ECI Form 8978 to
Form 1120-F. If the ECI Form 8978,
line 14, shows an increase in tax, see the
instructions for Schedule J, line 2.

Line 8. Other Taxes
Include any of the following taxes and
interest. Check the appropriate box(es) for
the form, if any, used to compute the tax
or interest.

each item included in the total for line 8
and identify the applicable Code section
and the type of tax or interest.
• Recapture of Indian employment credit.
Generally, if an employer terminates the
employment of a qualified employee less
than 1 year after the date of initial
employment, any Indian employment
credit allowed for a prior tax year because
of wages paid or incurred to that employee
must be recaptured. For details, see Form
8845 and section 45A.
• Recapture of new markets credit (see
Form 8874, New Markets Credit, and
Form 8874-B, Notice of Recapture Event
for New Markets Credit).
• Recapture of employer-provided
childcare facilities and services credit (see
Form 8882).
• Interest on deferred tax attributable to
certain nondealer installment obligations
(section 453A(c)) and dealer installment
obligations (section 453(l)).
• Interest due on deferred gain (section
1260(b)).

DRAFT AS OF
December 14, 2021
Also, include on line 5b the amount of
any qualified electric vehicle passive
activity credits from prior years allowed for
the current tax year from Form 8834,
Qualified Electric Vehicle Credit, line 7.
Attach Form 8834.

Line 5c. Credit for Prior Year
Minimum Tax

Enter any allowable credit from Form
8827, Credit for Prior Year Minimum
Tax—Corporations. Complete and attach
Form 8827.

Line 5d. Bond Credits From Form
8912
Enter the allowable credits from Form
8912, Credit to Holders of Tax Credit
Bonds, line 12.

Line 6. Total credits
Add lines 5a through 5d. Enter the total on
line 6.
Decrease attributable to partner’s additional reporting year tax. If the
taxpayer is a foreign corporate partner and
received a Form 8986 from a partnership
that has elected to have each reviewed
year partner take into account the
partner's share of the adjustments, as
finally determined, instead of paying the
imputed underpayment, the foreign
corporate partner (taxpayer) will have to
complete Form 8978 to report adjustments
shown on the Form 8986 they received
from the partnership. The foreign
corporate partner (taxpayer) must
complete a separate Form 8978 to report
adjustments pertaining to income that is
effectively connected with the conduct of a
trade or business in the United States
under section 882 (an “ECI Form 8978”)
and a separate Form 8978 to report
adjustments pertaining to income from
U.S. sources not effectively connected
with the conduct of a trade or business in
the United States under section 881 (an
“FDAP Form 8978”). Include any decrease
in taxes due (negative amount) from the
ECI Form 8978, line 14, in the total for
Form 1120-F, Section II, Schedule J,
line 6. On the dotted line next to line 6,
enter “FROM FORM 8978” and the

Recapture of investment credit. If the
corporation disposed of investment credit
property or changed its use before the end
of its useful life or recovery period, or is
required to recapture a qualifying
therapeutic discovery project grant, enter
the increase in tax from Form 4255,
Recapture of Investment Credit. See the
Instructions for Form 4255.
Recapture of low-income housing
credit. If the corporation disposed of
property (or there was a reduction in the
qualified basis of the property) for which it
took the low-income housing credit, and
the corporation did not follow the
procedures that would have prevented
recapture of the credit, it may owe a tax.
See Form 8611, Recapture of
Low-Income Housing Credit.

Interest due under the look-back method for completed long-term contracts.
If the corporation used the
percentage-of-completion method under
section 460(b) for certain long-term
contracts, figure any interest due or to be
refunded using the look-back method
described in section 460(b)(2). Use Form
8697, Interest Computation Under the
Look-Back Method for Completed
Long-Term Contracts, to figure any
interest due or to be refunded. See the
Instructions for Form 8697. Check the box
for Form 8697 and include any interest
due on line 8.
Interest due under the look-back method for property depreciated under the
income forecast method. If the
corporation used the income forecast
method to depreciate property, it must
figure any interest due or to be refunded
using the look-back method described in
section 167(g)(2). Use Form 8866,
Interest Computation Under the
Look-Back Method for Property
Depreciated Under the Income Forecast
Method, to figure any interest due or to be
refunded. See the Instructions for Form
8866. Check the box for Form 8866 and
include any interest due on line 8.
Alternative tax on qualifying shipping
activities. Enter any alternative tax on
qualifying shipping activities from Form
8902. Check the box for Form 8902.
Other. Include on line 8 additional taxes
and interest such as the following. Attach
a statement showing the computation of
-28-

Section III—Branch Profits
Tax and Tax on Excess
Interest
Part I—Branch Profits Tax

Section 884(a) imposes a 30% branch
profits tax on the after-tax earnings of a
foreign corporation's U.S. trade or
business (that is, effectively connected
earnings and profits (ECEP)) that are not
reinvested in a U.S. trade or business by
the close of the tax year, or are
disinvested in a later tax year. Changes in
the value of the equity of the foreign
corporation's U.S. trade or business (that
is, U.S. net equity) are used as a measure
of whether earnings have been reinvested
in, or disinvested from, a U.S. trade or
business. An increase in U.S. net equity
during the tax year is generally treated as
a reinvestment of earnings for the current
tax year. A decrease in U.S. net equity is
generally treated as a disinvestment of
prior year's earnings that have not
previously been subject to the branch
profits tax.
The amount subject to the branch
profits tax for the tax year is the dividend
equivalent amount. See Regulations
section 1.884-1(b).

Other entities subject to the branch
profits tax.
• A foreign corporate partner of a
partnership engaged in a U.S. trade or
business is subject to the branch profits
tax on its ECEP attributable to its
distributive share of ECI.
• A foreign government is subject to both
the branch profits tax and the branch-level
interest tax. However, no branch profits
tax or branch-level interest tax will be
imposed on ECEP and interest accrued
Instructions for Form 1120-F (2021)

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prior to September 11, 1992. See
Regulations section 1.884-0.

the interest is treated as ECI under section
882(e) and is not otherwise ECI.

Line 2

Note. Deductions and other adjustments
attributable (under the principles of
Regulations section 1.861-8) to the types
of income not includible in ECEP listed
above do not reduce ECEP.

Attach a statement showing the following
adjustments (based on the principles of
section 312) to the corporation's line 1
effectively connected taxable income
(ECTI) (before the NOL deduction and
special deductions) to get ECEP.
• Positive adjustments for certain ECI
items that are excluded from ECTI but that
must be included in computing ECEP
(such as tax-exempt interest income).
• Positive adjustments for certain items
deducted in computing ECTI but that may
not be deducted in computing ECEP.
Include adjustments for certain deductions
claimed in computing ECTI, such as:
1. Excess of percentage depletion
over cost depletion,
2. Excess of accelerated depreciation
over straight line depreciation (but only if
20% or more of the foreign corporation's
gross income from all sources is U.S.
source), and
3. Capital loss carrybacks and
carryovers.
• Negative adjustments for certain
deductible items (that are allocable to ECI)
that may not be deducted in computing
ECTI but that must be deducted in
computing ECEP (for example, federal
income taxes, capital losses in excess of
capital gains, and interest and expenses
that are not deductible under section 265).

equivalent amount to obtain treaty benefits
for the branch profits tax. It must also meet
the requirements of any limitation on
benefits article in the treaty. However, a
foreign corporation is not required to be a
qualified resident if it meets the
requirements of a limitation on benefits
article of an income tax treaty that entered
into force after December 31, 1986.
Treaties other than income tax treaties do
not exempt a foreign corporation from the
branch profits tax.

DRAFT AS OF
December 14, 2021

Note. Do not reduce ECEP by any
dividends or other distributions made by
the foreign corporation to its shareholders
during the year.
See Temporary Regulations section
1.884-2T for any adjustments to ECEP
due to a reorganization, liquidation, or
incorporation.
Exceptions. Do not include the following
types of income when computing ECEP.
• Income from the operation of ships or
aircraft exempt from taxation under
section 883(a)(1) or (2).
• FSC income and distributions treated
as ECI under section 921(d) or 926(b), as
in effect before their repeal, that are not
otherwise ECI.
• Gain on the disposition of an interest in
a domestic corporation that is a U.S. real
property interest under section 897(c)(1)
(A)(ii) if the gain is not otherwise ECI.
• Related person insurance company
income that a taxpayer elects to treat as
ECI under section 953(c)(3)(C) if the
income is not otherwise ECI.
• Income that is exempt from tax under
section 892.
• Interest income derived by a
possession bank from U.S. obligations if

Instructions for Form 1120-F (2021)

Lines 4a and 4b. U.S. Net Equity

U.S. net equity is U.S. assets reduced by
U.S. liabilities. U.S. net equity may be less
than zero. See Temporary Regulations
section 1.884-2T for specific rules
regarding the computation of the foreign
corporation's U.S. net equity due to a
reorganization, liquidation, or
incorporation.

U.S. assets. In general, property is a U.S.
asset if all income from its use and all gain
from its disposition (if used or sold on the
last day of the tax year) are or would be
ECI. The amount of property taken into
account as a U.S. asset is the adjusted
basis (for purposes of computing earnings
and profits) of the property. Special rules
exist for specific types of property, such as
depreciable property, inventory, and
installment obligations. Special rules also
exist to determine the amount of a
partnership interest that is treated as a
U.S. asset. See Regulations section
1.884-1(d).

U.S. liabilities. In general, U.S. liabilities
are U.S.-connected liabilities of a foreign
corporation (determined under
Regulations section 1.882-5), computed
as of the end of the tax year, rather than
as an average, as required under
Regulations section 1.882-5. Special rules
may apply to foreign insurance
companies. For more details, see
Regulations section 1.884-1(e).
If the corporation is electing to reduce
liabilities under Regulations section
1.884-1(e)(3), attach a statement that it is
making the election and indicate the
amount of the reduction of U.S. liabilities
and the corresponding reduction in
interest expense. The aggregate amount
of the corporation's liability reduction
elections is also required to be reported on
Schedule I (Form 1120-F), line 7b.
Reporting requirements. In the
statements required for lines 4a and 4b,
report U.S. assets according to the
categories of U.S. assets in Regulations
section 1.884-1(d). For U.S. liabilities,
show the formula used to calculate the
U.S. liabilities figure.

Line 6. Branch Profits Tax
Qualification for treaty benefits. In
general, a foreign corporation must be a
qualified resident (see definition later) in
the tax year in which it has a dividend
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Foreign corporations that meet the requirements of the limitation on benefits article of an income tax treaty that
entered into force after December 31,
1986. Most limitation on benefits articles
of treaties that entered into force after
December 31, 1986, include a series of
objective tests including ownership tests
(generally describing the circumstances
under which individuals, publicly traded
corporations, subsidiaries of publicly
traded corporations, etc., will be treated as
qualified residents under a treaty), a base
erosion test, and a trade or business test.
These tests are self-executing. A person
that does not meet these objective tests
may still be granted benefits under the
treaty (and may be treated as a qualified
resident for branch profits tax purposes) at
the discretion of the Competent Authority.
See Rev. Proc. 2015-40, 2015-35 I.R.B.
236, available at IRS.gov/irb/
2015-35_IRB#RP-2015-40, or its
successor.
Foreign corporations that do not meet
the requirements of a limitation on
benefits article of an income tax treaty
that entered into force after December
31, 1986. A foreign corporation that does
not meet the requirements of a limitation
on benefits article of an income tax treaty
that entered into force after December 31,
1986, is a qualified resident of a country
if it meets one of the three tests explained
in the regulations under section 1.884-5.
See these regulations for details on these
tests and certain circumstances in which a
foreign corporation that does not meet
these tests may request a ruling to be
treated as a qualified resident.
Rate of tax. If treaty benefits apply, the
rate of tax is the rate on branch profits
specified in the treaty. If the treaty does
not specify a rate for branch profits, the
rate of tax is the rate specified in the treaty
for dividends paid by a wholly owned
domestic corporation to the foreign
corporation. See Regulations section
1.884-1(g) for applicable rates of tax.
Benefits other than a rate reduction may
be available under certain treaties, such
as the Canadian income tax treaty.
Note. Many treaties listed in Regulations
section 1.884-1(g)(3) and (g)(4) are no
longer in force and have been replaced by

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more recently ratified treaty agreements.
The corporation should use the applicable
rate of tax specified in the treaty
agreement currently in force with the
United States.
Effect of complete termination. If the
foreign corporation has completely
terminated its U.S. trade or business
(within the meaning of Temporary
Regulations section 1.884-2T(a)) during
the tax year, enter zero on line 6, and
complete line 11 at the bottom of page 6 of
Form 1120-F.
In general, a foreign corporation has
terminated its U.S. trade or business if it
no longer has any U.S. assets, except
those retained to pay off liabilities. The
foreign corporation (or a related
corporation) may not use assets from the
terminated U.S. trade or business or the
proceeds from their sale in a U.S. trade or
business within 3 years after the complete
termination. The foreign corporation must
also attach Form 8848 extending the
period for assessment for the year of
complete termination to a date not earlier
than the close of the 6th year following the
close of that tax year.

assets for purposes of Regulations section
1.882-5, it is subject to the tax on excess
interest.
Excess interest is the interest
apportioned to ECI of the foreign
corporation (including capitalized and
nondeductible interest) under Regulations
section 1.882-5, less branch interest.
Branch interest is the interest paid by the
U.S. trade or business of the foreign
corporation (including capitalized and
other nondeductible interest).

sum of these two amounts is the amount
of book interest expense paid or accrued
on U.S. booked liabilities defined in
Regulations section 1.882-5(d)(2).
Definition of branch interest. The term
“branch interest” means interest that is:
1. Paid by a foreign corporation with
respect to a liability that is (a) a U.S.
booked liability within the meaning of
Regulations section 1.882-5(d)(2) (other
than a U.S. booked liability of a partner
within the meaning of Regulations section
1.882-5(d)(2)(vii)), or (b) described in
Regulations section 1.884-1(e)(2) (relating
to insurance liabilities on U.S. business
and liabilities giving rise to interest
expense that is directly allocated to
income from a U.S. asset); or
2. In the case of a foreign corporation
other than a bank (as defined in section
585(a)(2)(B) without regard to the second
sentence thereof), a liability specifically
identified as a liability of a U.S. trade or
business of the foreign corporation on or
before the earlier of the date on which the
first payment of interest is made with
respect to the liability or the due date
(including extensions) of the foreign
corporation's income tax return for the tax
year provided that (a) the amount of such
interest does not exceed 85% of the
amount of interest of the foreign
corporation that would be excess interest
before taking into account interest treated
as branch interest; (b) certain recipient
notification requirements are satisfied; and
(c) the liability was not incurred in the
ordinary course of a foreign business or
secured by foreign assets, or is not a U.S.
booked liability, or is not an insurance
liability on a U.S. business, or is not a
liability giving rise to interest expense that
is directly allocated to income from a U.S.
asset. See Regulations section
1.884-4(b).

DRAFT AS OF
December 14, 2021
Effect of complete liquidation or reorganization. If a foreign corporation
transfers its U.S. assets in a liquidation or
reorganization described in section
381(a), see Temporary Regulations
section 1.884-2T(c). If the transferee is a
domestic corporation, the foreign
corporation must also file Form 8848. See
Temporary Regulations section
1.884-2T(c) and Regulations section
1.884-2(c)(2)(iii).
Effect of incorporation under section
351. If a foreign corporation transfers all
or a part of its U.S. assets to a domestic
corporation in a transaction that qualifies
under section 351, see Temporary
Regulations section 1.884-2T(d) for the
rules for determining the foreign
corporation's branch profits tax liability in
the year of the transfer, and other rules
applicable to the domestic transferee
corporation. If a foreign corporation
transfers its U.S. assets to another foreign
corporation, the foreign corporation must
compute its branch profits tax liability
under Regulations section 1.884-1.
Coordination with withholding tax. If a
foreign corporation is subject to the
branch profits tax in a tax year, it will not
be subject to withholding at source
(section 871(a), 881(a), 1441, or 1442) on
dividends paid out of earnings and profits
for the tax year.

Part II—Tax on Excess
Interest

If a foreign corporation is engaged in a
U.S. trade or business, has effectively
connected gross income, or has U.S.

Important. See the instructions for
line 10, Tax on Excess Interest, later, to
determine if the foreign corporation is
exempt from the tax on excess interest. If
it is exempt from the tax, and not simply
subject to a reduced rate of tax, do not
complete Part II of Section III. However, be
sure to complete item W(1) on page 2 of
Form 1120-F.

Line 7a

Enter the amount of interest expense
deduction allocable to ECI under
Regulations section 1.882-5, from
Section II, line 18.

Lines 7b and 7c

Lines 7b and 7c reconcile the deduction
claimed in Section II, line 18, with the
amount of interest expense allocable to
ECI under Regulations section 1.882-5.
Amounts that increase or decrease the
amount allocable to ECI are reported on
line 7b from Schedule I (Form 1120-F),
line 24g. Line 7c reconciles to the amount
of interest expense reported on Schedule I
(Form 1120-F), line 23. Lines 7b and 7c
are completed as follows.
Line 7b. Enter the inverse of the
amount reported on Schedule I (Form
1120-F), line 24g. For example, if line 24g
is negative, enter as a positive number. If
line 24g is positive, enter as a negative
number. This is the total amount of interest
expense included in the amount allocable
under Regulations section 1.882-5 that is
deferred, capitalized, and disallowed
under other sections after application of
the interest expense allocation rules.
Line 7c. Combine lines 7a and 7b.
The combined amount is the amount of
interest expense allocable to ECI for the
year under Regulations section 1.882-5.
The amount on line 7c must equal the
amount on Schedule I (Form 1120-F),
line 23.

Line 8. Branch Interest
Foreign banks. Enter from Schedule I
(Form 1120-F), the sum of line 9, column
(c), and line 22, which is the amount of
interest expense included on books that
give rise to U.S. booked liabilities and that
which is directly allocable to ECI under
Regulations section 1.882-5(a)(1)(ii). The
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All other foreign corporations. In
general, branch interest of foreign
corporations (other than banks) includes:
1. Interest on liabilities shown on the
books and records of the U.S. trade or
business for purposes of Regulations
section 1.882-5(d)(2),
2. Interest on liabilities that are
secured predominantly by U.S. assets or
that cause certain nondeductible interest
(such as capitalized interest) related to
U.S. assets, and
3. Interest on liabilities identified as
liabilities of the U.S. trade or business on
or before the earlier of the date on which
the first interest payment is made or the
due date (including extensions) of the
foreign corporation's income tax return for
the tax year.
However, a liability may not be
identified under 3 above if the liability is
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incurred in the ordinary course of the
foreign corporation's trade or business, or
if the liability is secured predominantly by
assets that are not U.S. assets. The
interest on liabilities identified in 3 above
that will be treated as interest paid by the
U.S. trade or business is capped at 85%
of the interest of the foreign corporation
that would be excess interest before
considering interest on liabilities identified
in 3 above. See Regulations section
1.884-4.

domestic corporation is zero and the
foreign corporation qualifies for treaty
benefits.

Schedule L—Balance
Sheets per Books
Balance Sheet per Books

circumstances pertaining to materiality of
the ECI activities reflected on the set(s) of
books in accordance with the
requirements of the interest expense
allocation regulations. See Regulations
section 1.882-5(d)(6), example 5. This
standard is used to determine U.S.
booked liability qualification regardless of
whether the foreign corporation uses the
Adjusted U.S. Booked Liabilities Method
or the Separate Currency Pools Method to
allocate interest expense under
Regulations section 1.882-5.

DRAFT AS OF
December 14, 2021
Interbranch interest. Any interest paid
for interbranch liabilities is disregarded in
computing branch interest of any
corporation.

80% rule. If 80% or more of a foreign
corporation's assets are U.S. assets, the
foreign corporation's branch interest will
generally equal the interest reported on
line 7c. However, any interest included on
line 7c that has accrued but has not been
paid will not be treated as branch interest
on line 8 unless an election is made under
Regulations section 1.884-4(c)(1) to treat
such interest as paid in that year for all
purposes of the Code.
If this 80% rule applies, check the box
on line 8.
Note. Branch interest of a foreign
corporation is treated as if paid by a
domestic corporation. A foreign
corporation is thus required to withhold on
interest paid by its U.S. trade or business
to foreign persons (unless the interest is
exempt from withholding under a treaty or
the Code) and is required to file Forms
1042 and 1042-S for the payments.
Special treaty shopping rules apply if
the recipient of the interest paid by the
U.S. trade or business is a foreign
corporation.

Line 9b

A foreign bank may treat a percentage of
its excess interest as if it were interest on
deposits and thus exempt from tax.
Multiply the amount on line 9a by the
greater of 85% (0.85) or the ratio of the
foreign bank's worldwide interest-bearing
deposits to its worldwide interest-bearing
liabilities as of the close of the tax year.

Line 10. Tax on Excess Interest

The rate of tax on excess interest is the
same rate that would apply to interest paid
to the foreign corporation by a wholly
owned domestic corporation. The tax on
excess interest is not prohibited by any
provision in any treaty to which the United
States is a party. The corporation may
qualify for treaty benefits if it meets certain
requirements. See line 6, Branch Profits
Tax, earlier. The corporation is exempt
from the tax on excess interest if the rate
of tax that would apply to interest paid to
the foreign corporation by a wholly owned

Instructions for Form 1120-F (2021)

The balance sheet assets, liabilities, and
equity amounts required to be reported on
Schedule L are either the worldwide
assets, liabilities, and equity of the
corporation, or, at the taxpayer's election,
the set(s) of books that contains assets
located in the United States and other
assets used in the trade or business
conducted in the United States. See
Regulations section 1.6012-2(g)(1)(iii). If a
corporation (including a foreign bank)
chooses worldwide reporting on
Schedule L, the profit and loss results
from the same set(s) of books must be
used to report the adjusted worldwide net
income (loss) results in Part I, line 11, of
Schedule M-3 (Form 1120-F).

Set(s) of books based on Regulations
section 1.882-5(d)(2). If the corporation
chooses to limit the Schedule L reporting
to the books that gives rise to ECI from
assets located in the United States and
other assets used in the trade or business
conducted in the United States, the total
assets, liabilities, and equity on the set(s)
of books that contain these characteristics
must be reported on Schedule L. These
are the total assets, liabilities, and equity
amounts reflected on the same set(s) of
books that gives rise to U.S. ECI and U.S.
booked liabilities (as defined in
Regulations sections 1.882-5(d)(2)(ii)(A)
(foreign corporations other than banks)
and 1.882-5(d)(2)(iii) (foreign banking
corporations)).
The set(s) of books required to be
reported on Schedule L by a foreign bank
are the same set(s) of books the foreign
bank must use to derive the net book
income on Schedule M-3 (Form 1120-F),
Part I, line 11. The total assets and
liabilities required to be reported include
the interbranch assets and liabilities and
the noneffectively connected assets
reflected on such books. The set(s) of
books that gives rise to U.S. booked
liabilities under Regulations section
1.882-5(d)(2) will generally be the set(s) of
books maintained within the United States
by the corporation's U.S. trade or
business. However, one or more sets of
books required to be reported on
Schedule L do not have to be maintained
within the United States so long as the
totality of the books reflects a substantial
ECI activity that gives rise to inclusion of
the books' third-party liabilities as U.S.
booked liabilities under Regulations
section 1.882-5(d)(2). This determination
is made under the facts and
-31-

A Schedule L set of books does not
include a book whose only assets are
those that give rise to ECI under section
864(c)(6) or (c)(7). A set of books that has
only ECI assets under section 864(c)(6)
and (c)(7) is not a set of books that gives
rise to U.S. booked liabilities under the
applicable test for a bank or a corporation
other than a bank in Regulations section
1.882-5(d)(2). Books and records of this
type are generally books maintained in a
foreign location that include assets either
originated through the material activities of
the U.S. trade or business or assets
formerly held in connection with a U.S.
trade or business that are no longer held
or used for that purpose. Transferred
assets from a set of books of the U.S.
trade or business will generally reflect
assets described in section 864(c)(6) or
(c)(7). See Regulations section 1.884-1(d)
(2)(xi), example 5. Securities that are
attributable to a U.S. office of a banking,
financing, or similar business that are
transferred to a foreign location of a
continuing U.S. banking office remain
attributable to such U.S. office under
Regulations section 1.864-4(c)(5)(iii) and
do not constitute assets described in
section 864(c)(6) or (c)(7). However, a
foreign set of books and records that
reflects securities of a banking, financing,
or similar business that gives rise to ECI,
may or may not constitute books that give
rise to U.S. booked liabilities under the
facts and circumstances. Generally, a
relatively small number of securities
reflected on the books and records of the
home office of a foreign bank that reflects
predominantly noneffectively connected
assets of the same type will not cause the
foreign book to give rise to U.S. booked
liabilities under Regulations section
1.882-5(d)(2)(iii).

If the foreign corporation has more than
one set of books and records that give rise
to U.S. booked liabilities under
Regulations section 1.882-5(d)(2), it must
report the combined amounts shown on all
such books and records on Schedule L.
For example, the books and records of a
foreign insurance company required to file
Form 1120-F include, but are not limited
to, amounts reported on statements (for
example, NAIC statements) filed with a
domestic state insurance authority. If a

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foreign bank maintains a consolidation of
two or more sets of books that collectively
give rise to U.S. booked liabilities, the
corporation may report the financial
consolidation of such set of books on
Schedule L. See Regulations section
1.882-5(d)(6), example 5. However, if the
foreign corporation has a set of books
from a disregarded entity that is not
included in a U.S. trade or business
consolidation and such other set of books
gives rise to U.S. booked liabilities under
Regulations section 1.882-5(d)(2), then
such set of books must be included in the
consolidation of books reported on
Schedule L. Combined books reported on
Schedule L must be adjusted to eliminate
transactions recorded between the
reportable books. However, amounts
recorded between the set(s) of books and
other divisions of the foreign corporation
or disregarded entities whose books do
not give rise to U.S. booked liabilities, are
not eliminated unless the taxpayer
chooses worldwide reporting under the
general rule in Regulations section
1.6012-2(g)(1)(iii).

dealing assets held for customers
including amounts recorded on the books
of a global dealing operation that are
allocated between ECI and non-ECI under
Proposed Regulations section 1.863-3(h)
and Proposed Regulations section
1.864-4(c)(2)(iv).
Line 9. Other loans and investments.
On line 9a, enter the amount of other
non-U.S. asset loans and investments to
third parties (whether related or unrelated
parties). Non-U.S. assets in this category
are loans and investments that give rise to
non-effectively connected income. If a
taxpayer has investments that give rise to
ECI in part and non-ECI in part, enter the
proportionate amount of the investment
asset that gives rise to non-ECI on line 9a.
Do not include interbranch amounts on
line 9a. On line 9b, report the U.S. asset
loans and investments to third parties
(whether related or unrelated parties).
U.S. asset loans and investments are
assets that give rise to ECI. If an
investment asset gives rise to ECI in part
and non-ECI in part, enter the
proportionate amount of the investment
asset that gives rise to ECI on line 9b. See
Regulations section 1.884-1(d)(2)(vii).
Attach a statement indicating the amount
for each category of loans and investment
assets held by the corporation that give
rise to non-ECI (line 9a) and ECI (line 9b)
(for example, loans to customers,
securities described in Regulations
section 1.864-4(c)(5)(ii)(b)(3)).

Schedule L books that are payable in less
than one year to books of the corporation
that are not reportable on Schedule L
(including books of disregarded entities
that are not reportable on Schedule L).
Report only interbranch liabilities that
accrue or pay interest on the Schedule L
books and records to other books of the
corporation in accordance with the
corporation's internal accounting
practices. Attach a statement indicating
the amount for each category of
interbranch liabilities (for example, money
market deposit liabilities, other short-term
liabilities, etc.). On line 19b, enter liabilities
on the Schedule L books that are payable
in less than one year to third parties
(whether related or unrelated). Attach a
statement indicating the amount for each
category of liability owed to third parties
(for example, money market deposit
liabilities, other short-term borrowings,
Vostro accounts, etc.).

DRAFT AS OF
December 14, 2021
Line 1. Cash. Corporations other than
banks include certificates of deposit as
cash on line 1. Foreign banks include
certificates of deposit as current or
non-current assets, as the case may be, in
their appropriate interbranch, U.S. asset or
non-U.S. asset categories.
Line 5. Tax-exempt securities. Include:
• State and local government obligations,
the interest on which is excludable from
gross income under section 103(a); and
• Stock in a mutual fund or other RIC that
distributed exempt-interest dividends
during the tax year of the corporation.
Line 6. Current assets. On line 6a, enter
all current interbranch assets (in
accordance with the corporation's
accounting practices) reflected on the
combined sets of books that are
transacted with other books of the
corporation that are not reportable on
Schedule L (including books of
disregarded entities, if applicable). On
line 6b, enter the current non-U.S. assets
on the sets of books reportable on
Schedule L. Non-U.S. assets are
third-party assets (whether with related or
unrelated parties) that give rise only to
noneffectively connected income. On
line 6c, enter the current U.S. assets on
the Schedule L reportable books. U.S.
assets are assets that give rise to ECI and
constitute U.S. assets in whole or in part
under Regulations section 1.884-1(d).
Enter assets held for trading or dealing to
customers in the applicable category on
line 6. Attach a statement to indicate the
amount for each category of current
assets included in line 6, such as money
market deposits of banks, trading assets
held for the taxpayer's own account, and

Line 15. Other non-current interbranch
assets. Include on line 15 non-current
interbranch amounts on the Schedule L
books recorded with other non-Schedule L
books of the corporation (including
disregarded entities whose books are not
reportable on Schedule L). Non-current
assets are determined in accordance with
the accounting practices of the
corporation on its books and records.
Line 16. Other non-current third-party
assets. Report on line 16a, other
non-current, non-U.S. assets on the
Schedule L books with third parties
(whether related or unrelated parties).
Non-U.S. assets are those that give rise to
noneffectively connected income. Attach a
statement to indicate the amount for each
category of non-U.S. assets (for example,
foreign-related party assets that give rise
to non-ECI under section 864(c)(4)(D)).
Report on line 16b other non-current U.S.
assets on the Schedule L books with third
parties (whether related or unrelated
parties). U.S. assets are those that give
rise to ECI in accordance with Regulations
section 1.884-1(d). Attach a statement
indicating the amount for each category of
assets that give rise to ECI.
Line 19. Mortgages, notes, bonds payable in less than 1 year. Enter on
line 19a interbranch liabilities on the
-32-

Line 22. Mortgages, notes, bonds payable in 1 year or more. Enter on line 22a
interbranch liabilities on the Schedule L
books that are payable in one year or
more to books of the corporation that are
not reportable on Schedule L (including
books of disregarded entities that are not
reportable on Schedule L). Report only
interbranch liabilities that accrue or pay
interest on the Schedule L books and
records to other books of the corporation
in accordance with the corporation's
internal accounting practices. Attach a
statement indicating the amounts for each
category of liability (for example, long-term
interbranch borrowings). Enter on line 22b
liabilities on the Schedule L books that are
payable in one year or more to third
parties (whether related or unrelated
parties). Attach a statement indicating the
amounts for each category of liability (for
example, long-term certificates of deposit,
other long-term borrowings, etc.).
Line 24. Other liabilities. Enter on
line 24a other interbranch liability amounts
on the Schedule L books owed to other
books of the corporation (including to
books of disregarded entities) not
reportable on Schedule L, including
amounts that do not give rise to interest
accruals or payments in accordance with
the corporation's internal accounting
practices. Attach a statement indicating
the amount for each category of
interbranch liability reported on line 24a.
Enter on line 24b other liability amounts on
the Schedule L books owed to third
parties (whether related or unrelated
parties) including amounts that do not give
rise to interest accruals or payments in
accordance with the corporation's
accounting practices. Attach a statement
indicating the amount for each category of
third-party liability reported on line 24b.

Instructions for Form 1120-F (2021)

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Line 29. Adjustments to shareholders'
equity. Some examples of adjustments to
report on this line include:
• Unrealized gains and losses on
securities held “available for sale.”
• Foreign currency translation
adjustments.
• The excess of additional pension
liability over unrecognized prior service
cost.
• Guarantees of employee stock (ESOP)
debt.
• Compensation related to employee
stock award plans.
If the total adjustment to be entered on
line 29 is a negative amount, enter the
amount in parentheses.

U.S. permanent establishment under the
application by analogy of the OECD
Transfer Pricing Guidelines as authorized
by the relevant treaty (for example, see
Article 7 (Business Profits) and the
accompanying Exchange of Notes). In
such cases, the set(s) of books that must
be reported on Schedule L are those of
the U.S. permanent establishment as
determined under the OECD Transfer
Pricing Guidelines.

set(s) of books taken into account on
Schedule L.
Note. If Schedule M-3 is filed in lieu of
Schedule M-1, the corporation is still
required to file Schedule M-2.
Do not file Schedules M-1 and M-2
(Form 1120-F) if total assets at the end of
the tax year (line 17, column (d), of
Schedule L) are less than $25,000.

DRAFT AS OF
December 14, 2021
Adaptation of Schedule L for
treaty-based reporting. The set(s) of
books reported on Schedule L for
treaty-based reporting purposes will
generally be the same set(s) of books
reported on Schedule L, as described
below. However, certain books that give
rise to ECI might not necessarily give rise
to treaty-based reporting. For example,
the assets on a set of books could still be
attributed to a U.S. office for ECI reporting
purposes even when transferred away
from the U.S. permanent establishment for
treaty reporting purposes (see, for
example, Regulations section 1.864-4(c)
(5)(iii)) if under the facts and
circumstances, such assets also
constitute a set of books that give rise to
U.S. booked liabilities under Regulations
section 1.882-5(d)(2). Under such
circumstances, the set of books would
remain reportable on Schedule L for
Code-based reporting purposes, but for
treaty-based reporting purposes, such
transfer may effect attribution to another
part of the corporate enterprise under a
functional and factual analysis and no
longer be reportable on Schedule L as
part of the U.S. permanent establishment
after the transfer is made. Additionally, a
set of books having no ECI or U.S. booked
liabilities under Regulations section
1.882-5(d)(2) might still constitute a set of
books of the U.S. permanent
establishment because the items recorded
thereon are primarily attributable to the

Instructions for Form 1120-F (2021)

Schedules M-1 and M-3

In completing Schedules M-1 and M-3, the
following apply.
• A corporation with total assets of $10
million or more on the last day of the tax
year that are reportable on Schedule L
must file Schedule M-3 (Form 1120-F)
instead of Schedule M-1.
• A corporation filing Form 1120-F that is
not required to file Schedule M-3 may
voluntarily file Schedule M-3 instead of
Schedule M-1. See the Instructions for
Schedule M-3 (Form 1120-F) for more
information.
• Corporations that (a) are required to file
Schedule M-3 (Form 1120-F) and have
less than $50 million total assets at the
end of the tax year, or (b) are not required
to file Schedule M-3 (Form 1120-F) and
voluntarily file Schedule M-3 (Form
1120-F), must either (i) complete
Schedule M-3 (Form 1120-F) entirely, or
(ii) complete Schedule M-3 (Form 1120-F)
through Part I, and complete
Schedule M-1 instead of completing Parts
II and III of Schedule M-3 (Form 1120-F). If
the corporation chooses to complete
Schedule M-1 instead of completing Parts
II and III of Schedule M-3, the amount on
Schedule M-1, line 1, must equal the
amount on Schedule M-3, Part I, line 11.
See the Instructions for Schedule M-3
(Form 1120-F) for more information.
• If Schedule M-3 is not required, the
foreign corporation must report on line 1 of
Schedule M-1 the net income (loss) per
the set of books taken into account on
Schedule L.
• The foreign corporation must report on
line 1 of Schedule M-2 the balance of
unappropriated retained earnings per the

-33-

Schedule W

Complete Schedule W to determine the
portion of the foreign corporation's
overpayment (on Form 1120-F, page 1,
line 8a) resulting from tax deducted and
withheld under Chapter 3 or 4.

Line 3. The amount to be entered on
Schedule W, line 3, may be computed
using the general guidelines set forth in
the following table.
a. Tax on ECI per the tax return.
Enter the amount from Form
1120-F, page 1, line 2. . . . . .

a.

b. To properly reflect the
overpayment described in section
6611(e)(4), refigure the taxable
income on Form 1120-F, Section
II, line 31, by excluding from
Section II, lines 8 through 10, any
amount from the disposition of a
U.S. real property interest, any
partnership ECTI allocable to the
corporation under the rules of
Regulations section 1.1446-2,
and for transactions occurring
after December 31, 2018, any
amount from the disposition of an
interest (that is not publicly
traded) in a partnership that is
engaged in the conduct of a trade
or business in the United States
(attach explanation of amounts
excluded). . . . . . . . . . . . . b.
c. Refigured tax on ECI. Using the
refigured taxable income from line
b, refigure the tax for Schedule II
of Form 1120-F on Schedule J
and enter the refigured tax from
Schedule J, line 9 here. . . . . c.
d. Subtract line c from line a. Enter
the result here and on
Schedule W, line 3. . . . . . .

d.

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Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United
States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to
figure and collect the right amount of tax.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form
displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents
may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential,
as required by Internal Revenue Code section 6103.

DRAFT AS OF
December 14, 2021
The estimated burden for taxpayers filing this form is approved under OMB control number 1545-0123.

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. You can send us comments through IRS.gov/FormsComments. Or you can write to the Internal Revenue
Service, Tax Forms and Publications Division, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send the tax
form to this address. Instead, see Where To File, earlier, near the beginning of the instructions.

-34-

Instructions for Form 1120-F (2021)

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Form 1120-F

Principal Business Activity Codes

This list of principal business activities and their
associated codes is designed to classify an enterprise
by the type of activity in which it is engaged to facilitate
the administration of the Internal Revenue Code. These
principal business activity codes are based on the North
American Industry Classification System.

Agriculture, Forestry, Fishing,
and Hunting

238300

Using the list of activities and codes below,
determine from which activity the company derives the
largest percentage of its “total receipts.” Total receipts is
defined as the sum of gross receipts or sales (page 4,
line 1a) plus all other income (page 4, lines 4 through
10). If the company purchases raw materials and
supplies them to a subcontractor to produce the finished
product, but retains title to the product, the company is
Building Finishing Contractors
(including drywall, insulation,
painting, wallcovering, flooring,
tile, & finish carpentry)
Other Specialty Trade
Contractors (including site
preparation)

325900

considered a manufacturer and must use one of the
manufacturing codes (311110-339900).
Once the principal business activity is determined,
entries must be made on page 1, items F(1), F(2), and
F(3). For item F(1), enter the six-digit code selected
from the list below. For item F(2), enter the company's
business activity. For item F(3), enter a brief description
of the principal product or service of the company.

Other Chemical Product &
Preparation Mfg
Plastics and Rubber Products
Manufacturing
326100 Plastics Product Mfg
326200 Rubber Product Mfg
Nonmetallic Mineral Product
Manufacturing
327100 Clay Product & Refractory Mfg
327210 Glass & Glass Product Mfg
327300 Cement & Concrete Product Mfg
327400 Lime & Gypsum Product Mfg
327900 Other Nonmetallic Mineral
Product Mfg
Primary Metal Manufacturing
331110 Iron & Steel Mills & Ferroalloy
Mfg
331200 Steel Product Mfg from
Purchased Steel
331310 Alumina & Aluminum Production
& Processing
331400 Nonferrous Metal (except
Aluminum) Production &
Processing
331500 Foundries
Fabricated Metal Product
Manufacturing
332110 Forging & Stamping
332210 Cutlery & Handtool Mfg
332300 Architectural & Structural Metals
Mfg
332400 Boiler, Tank, & Shipping
Container Mfg
332510 Hardware Mfg
332610 Spring & Wire Product Mfg
332700 Machine Shops; Turned Product;
& Screw, Nut, & Bolt Mfg
332810 Coating, Engraving, Heat
Treating, & Allied Activities
332900 Other Fabricated Metal Product
Mfg
Machinery Manufacturing
333100 Agriculture, Construction, &
Mining Machinery Mfg
333200 Industrial Machinery Mfg
333310 Commercial & Service Industry
Machinery Mfg
333410 Ventilation, Heating,
Air-Conditioning, & Commercial
Refrigeration Equipment Mfg
333510 Metalworking Machinery Mfg
333610 Engine, Turbine & Power
Transmission Equipment Mfg
333900 Other General Purpose
Machinery Mfg
Computer and Electronic Product
Manufacturing
334110 Computer & Peripheral
Equipment Mfg
334200 Communications Equipment Mfg
334310 Audio & Video Equipment Mfg
334410 Semiconductor & Other
Electronic Component Mfg
334500 Navigational, Measuring,
Electromedical, & Control
Instruments Mfg
334610 Manufacturing & Reproducing
Magnetic & Optical Media
Electrical Equipment, Appliance, and
Component Manufacturing
335100 Electric Lighting Equipment Mfg
335200 Major Household Appliance Mfg
335310 Electrical Equipment Mfg
335900 Other Electrical Equipment &
Component Mfg
Transportation Equipment
Manufacturing
336100 Motor Vehicle Mfg
336210 Motor Vehicle Body & Trailer Mfg
336300 Motor Vehicle Parts Mfg
336410 Aerospace Product & Parts Mfg
336510 Railroad Rolling Stock Mfg
336610 Ship & Boat Building
336990 Other Transportation Equipment
Mfg

Furniture and Related Product
Manufacturing
337000 Furniture & Related Product
Manufacturing
Miscellaneous Manufacturing
339110 Medical Equipment & Supplies
Mfg
339900 Other Miscellaneous
Manufacturing

DRAFT AS OF
December 14, 2021
Crop Production
111100 Oilseed & Grain Farming
111210 Vegetable & Melon Farming
(including potatoes & yams)
111300 Fruit & Tree Nut Farming
111400 Greenhouse, Nursery, &
Floriculture Production
111900 Other Crop Farming (including
tobacco, cotton, sugarcane, hay,
peanut, sugar beet & all other
crop farming)
Animal Production
112111 Beef Cattle Ranching & Farming
112112 Cattle Feedlots
112120 Dairy Cattle & Milk Production
112210 Hog & Pig Farming
112300 Poultry & Egg Production
112400 Sheep & Goat Farming
112510 Aquaculture (including shellfish &
finfish farms & hatcheries)
112900 Other Animal Production
Forestry and Logging
113110 Timber Tract Operations
113210 Forest Nurseries & Gathering of
Forest Products
113310 Logging
Fishing, Hunting and Trapping
114110 Fishing
114210 Hunting & Trapping
Support Activities for Agriculture and
Forestry
115110 Support Activities for Crop
Production (including cotton
ginning, soil preparation,
planting, & cultivating)
115210 Support Activities for Animal
Production
115310 Support Activities For Forestry

Mining
211120
211130
212110
212200
212310
212320
212390
213110

Crude Petroleum Extraction
Natural Gas Extraction
Coal Mining
Metal Ore Mining
Stone Mining & Quarrying
Sand, Gravel, Clay, & Ceramic &
Refractory Minerals Mining &
Quarrying
Other Nonmetallic Mineral
Mining & Quarrying
Support Activities for Mining

Utilities
221100
221210
221300
221500

Electric Power Generation,
Transmission & Distribution
Natural Gas Distribution
Water, Sewage & Other Systems
Combination Gas & Electric

Construction

Construction of Buildings
236110 Residential Building Construction
236200 Nonresidential Building
Construction
Heavy and Civil Engineering
Construction
237100 Utility System Construction
237210 Land Subdivision
237310 Highway, Street, & Bridge
Construction
237990 Other Heavy & Civil Engineering
Construction
Specialty Trade Contractors
238100 Foundation, Structure, & Building
Exterior Contractors (including
framing carpentry, masonry,
glass, roofing, & siding)
238210 Electrical Contractors
238220 Plumbing, Heating, &
Air-Conditioning Contractors
238290 Other Building Equipment
Contractors

238900

Manufacturing

Food Manufacturing
311110 Animal Food Mfg
311200 Grain & Oilseed Milling
311300 Sugar & Confectionery Product
Mfg
311400 Fruit & Vegetable Preserving &
Specialty Food Mfg
311500 Dairy Product Mfg
311610 Animal Slaughtering and
Processing
311710 Seafood Product Preparation &
Packaging
311800 Bakeries, Tortilla & Dry Pasta
Mfg
311900 Other Food Mfg (including
coffee, tea, flavorings &
seasonings)
Beverage and Tobacco Product
Manufacturing
312110 Soft Drink & Ice Mfg
312120 Breweries
312130 Wineries
312140 Distilleries
312200 Tobacco Manufacturing
Textile Mills and Textile Product Mills
313000 Textile Mills
314000 Textile Product Mills
Apparel Manufacturing
315100 Apparel Knitting Mills
315210 Cut & Sew Apparel Contractors
315220 Men's & Boys' Cut & Sew
Apparel Mfg
315240 Women's, Girls' and Infants' Cut
& Sew Apparel Mfg
315280 Other Cut & Sew Apparel Mfg
315990 Apparel Accessories & Other
Apparel Mfg
Leather and Allied Product
Manufacturing
316110 Leather & Hide Tanning &
Finishing
316210 Footwear Mfg (including rubber
& plastics)
316990 Other Leather & Allied Product
Mfg
Wood Product Manufacturing
321110 Sawmills & Wood Preservation
321210 Veneer, Plywood, & Engineered
Wood Product Mfg
321900 Other Wood Product Mfg
Paper Manufacturing
322100 Pulp, Paper, & Paperboard Mills
322200 Converted Paper Product Mfg
Printing and Related Support Activities
323100 Printing & Related Support
Activities
Petroleum and Coal Products
Manufacturing
324110 Petroleum Refineries (including
integrated)
324120 Asphalt Paving, Roofing, &
Saturated Materials Mfg
324190 Other Petroleum & Coal
Products Mfg
Chemical Manufacturing
325100 Basic Chemical Mfg
325200 Resin, Synthetic Rubber, &
Artificial & Synthetic Fibers &
Filaments Mfg
325300 Pesticide, Fertilizer, & Other
Agricultural Chemical Mfg
325410 Pharmaceutical & Medicine Mfg
325500 Paint, Coating, & Adhesive Mfg
325600 Soap, Cleaning Compound, &
Toilet Preparation Mfg

-35-

Wholesale Trade

Merchant Wholesalers, Durable Goods
423100 Motor Vehicle & Motor Vehicle
Parts & Supplies
423200 Furniture & Home Furnishings
423300 Lumber & Other Construction
Materials
423400 Professional & Commercial
Equipment & Supplies
423500 Metal & Mineral (except
Petroleum)
423600 Household Appliances and
Electrical & Electronic Goods
423700 Hardware, & Plumbing & Heating
Equipment & Supplies
423800 Machinery, Equipment, &
Supplies
423910 Sporting & Recreational Goods &
Supplies
423920 Toy & Hobby Goods & Supplies
423930 Recyclable Materials
423940 Jewelry, Watch, Precious Stone,
& Precious Metals
423990 Other Miscellaneous Durable
Goods
Merchant Wholesalers, Nondurable
Goods
424100 Paper & Paper Products
424210 Drugs & Druggists' Sundries
424300 Apparel, Piece Goods, & Notions
424400 Grocery & Related Products
424500 Farm Product Raw Materials
424600 Chemical & Allied Products
424700 Petroleum & Petroleum Products
424800 Beer, Wine, & Distilled Alcoholic
Beverages
424910 Farm Supplies
424920 Book, Periodical, & Newspapers
424930 Flower, Nursery Stock, & Florists'
Supplies
424940 Tobacco & Tobacco Products
424950 Paint, Varnish, & Supplies
424990 Other Miscellaneous Nondurable
Goods
Wholesale Electronic Markets and
Agents and Brokers
425110 Business to Business Electronic
Markets
425120 Wholesale Trade Agents &
Brokers

Retail Trade

Motor Vehicle and Parts Dealers
441110 New Car Dealers
441120 Used Car Dealers
441210 Recreational Vehicle Dealers
441222 Boat Dealers
441228 Motorcycle, ATV, and All Other
Motor Vehicle Dealers
441300 Automotive Parts, Accessories,
& Tire Stores
Furniture and Home Furnishings Stores
442110 Furniture Stores
442210 Floor Covering Stores
442291 Window Treatment Stores
442299 All Other Home Furnishings
Stores
Electronics and Appliance Stores
443141 Household Appliance Stores
443142 Electronics Stores (including
Audio, Video, Computer, and
Camera Stores)
Building Material and Garden
Equipment and Supplies Dealers
444110 Home Centers

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Form 1120-F (Continued)
444120
444130
444190
444200

Paint & Wallpaper Stores
Hardware Stores
Other Building Material Dealers
Lawn & Garden Equipment &
Supplies Stores
Food and Beverage Stores
445110 Supermarkets and Other
Grocery (except Convenience)
Stores
445120 Convenience Stores
445210 Meat Markets
445220 Fish & Seafood Markets
445230 Fruit & Vegetable Markets
445291 Baked Goods Stores
445292 Confectionery & Nut Stores
445299 All Other Specialty Food Stores
445310 Beer, Wine, & Liquor Stores
Health and Personal Care Stores
446110 Pharmacies & Drug Stores
446120 Cosmetics, Beauty Supplies, &
Perfume Stores
446130 Optical Goods Stores
446190 Other Health & Personal Care
Stores
Gasoline Stations
447100 Gasoline Stations (including
convenience stores with gas)
Clothing and Clothing Accessories
Stores
448110 Men's Clothing Stores
448120 Women's Clothing Stores
448130 Children's & Infants' Clothing
Stores
448140 Family Clothing Stores
448150 Clothing Accessories Stores
448190 Other Clothing Stores
448210 Shoe Stores
448310 Jewelry Stores
448320 Luggage & Leather Goods
Stores
Sporting Goods, Hobby, Book, and
Music Stores
451110 Sporting Goods Stores
451120 Hobby, Toy, & Game Stores
451130 Sewing, Needlework, & Piece
Goods Stores
451140 Musical Instrument & Supplies
Stores
451211 Book Stores
451212 News Dealers & Newsstands
General Merchandise Stores
452200 Department Stores
452300 General Merchandise Stores
Incl. Warehouse Clubs and
Supercenters
Miscellaneous Store Retailers
453110 Florists
453210 Office Supplies & Stationery
Stores
453220 Gift, Novelty, & Souvenir Stores
453310 Used Merchandise Stores
453910 Pet & Pet Supplies Stores
453920 Art Dealers
453930 Manufactured (Mobile) Home
Dealers
453990 All Other Miscellaneous Store
Retailers (including tobacco,
candle, & trophy shops)
Nonstore Retailers
454110 Electronic Shopping &
Mail-Order Houses
454210 Vending Machine Operators
454310 Fuel Dealers (including Heating
Oil and Liquefied Petroleum)
454390 Other Direct Selling
Establishments (including
door-to-door retailing, frozen
food plan providers, party plan
merchandisers, & coffee-break
service providers)

Transit and Ground Passenger
Transportation
485110 Urban Transit Systems
485210 Interurban & Rural Bus
Transportation
485310 Taxi and Ridesharing Services
485320 Limousine Service
485410 School & Employee Bus
Transportation
485510 Charter Bus Industry
485990 Other Transit & Ground
Passenger Transportation
Pipeline Transportation
486000 Pipeline Transportation
Scenic & Sightseeing Transportation
487000 Scenic & Sightseeing
Transportation
Support Activities for Transportation
488100 Support Activities for Air
Transportation
488210 Support Activities for Rail
Transportation
488300 Support Activities for Water
Transportation
488410 Motor Vehicle Towing
488490 Other Support Activities for Road
Transportation
488510 Freight Transportation
Arrangement
488990 Other Support Activities for
Transportation
Couriers and Messengers
492110 Couriers
492210 Local Messengers & Local
Delivery
Warehousing and Storage
493100 Warehousing & Storage (except
lessors of miniwarehouses &
self-storage units)

brokers, check clearing, &
money transmitting)
Securities, Commodity Contracts, and
Other Financial Investments and
Related Activities
523110 Investment Banking & Securities
Dealing
523120 Securities Brokerage
523130 Commodity Contracts Dealing
523140 Commodity Contracts Brokerage
523210 Securities & Commodity
Exchanges
523900 Other Financial Investment
Activities (including portfolio
management & investment
advice)
Insurance Carriers and Related
Activities
524140 Direct Life, Health, and Medical
Insurance and Reinsurance
Carriers
524150 Direct Insurance and
Reinsurance (except Life,
Health, and Medical) Carriers
524210 Insurance Agencies &
Brokerages
524290 Other Insurance Related
Activities (including third-party
administration of insurance and
pension funds)
Funds, Trusts, and Other Financial
Vehicles
525100 Insurance & Employee Benefit
Funds
525910 Open-End Investment Funds
(Form 1120-RIC)
525920 Trusts, Estates, & Agency
Accounts
525990 Other Financial Vehicles
(including mortgage REITs &
closed-end investment funds)
“Offices of Bank Holding Companies” and
“Offices of Other Holding Companies” are
located under Management of
Companies (Holding Companies), later.

541214 Payroll Services
541219 Other Accounting Services
Architectural, Engineering, and Related
Services
541310 Architectural Services
541320 Landscape Architecture Services
541330 Engineering Services
541340 Drafting Services
541350 Building Inspection Services
541360 Geophysical Surveying &
Mapping Services
541370 Surveying & Mapping (except
Geophysical) Services
541380 Testing Laboratories
Specialized Design Services
541400 Specialized Design Services
(including interior, industrial,
graphic, & fashion design)
Computer Systems Design and Related
Services
541511 Custom Computer Programming
Services
541512 Computer Systems Design
Services
541513 Computer Facilities Management
Services
541519 Other Computer Related
Services
Other Professional, Scientific, and
Technical Services
541600 Management, Scientific, &
Technical Consulting Services
541700 Scientific Research &
Development Services
541800 Advertising & Related Services
541910 Marketing Research & Public
Opinion Polling
541920 Photographic Services
541930 Translation & Interpretation
Services
541940 Veterinary Services
541990 All Other Professional, Scientific,
& Technical Services

DRAFT AS OF
December 14, 2021

Transportation and
Warehousing

Air, Rail, and Water Transportation
481000 Air Transportation
482110 Rail Transportation
483000 Water Transportation
Truck Transportation
484110 General Freight Trucking, Local
484120 General Freight Trucking,
Long-distance
484200 Specialized Freight Trucking

Information

Publishing Industries (except Internet)
511110 Newspaper Publishers
511120 Periodical Publishers
511130 Book Publishers
511140 Directory & Mailing List
Publishers
511190 Other Publishers
511210 Software Publishers
Motion Picture and Sound Recording
Industries
512100 Motion Picture & Video Industries
(except video rental)
512200 Sound Recording Industries
Broadcasting (except Internet)
515100 Radio & Television Broadcasting
515210 Cable & Other Subscription
Programming
Telecommunications
517000 Telecommunications (including
paging, cellular, satellite, cable &
other program distribution,
resellers, other
telecommunications, & Internet
service providers)
Data Processing Services
518210 Data Processing, Hosting, &
Related Services
Other Information Services
519100 Other Information Services
(including news syndicates,
libraries, Internet publishing &
broadcasting)

Finance and Insurance

Depository Credit Intermediation
522110 Commercial Banking
522120 Savings Institutions
522130 Credit Unions
522190 Other Depository Credit
Intermediation
Nondepository Credit Intermediation
522210 Credit Card Issuing
522220 Sales Financing
522291 Consumer Lending
522292 Real Estate Credit (including
mortgage bankers & originators)
522293 International Trade Financing
522294 Secondary Market Financing
522298 All Other Nondepository Credit
Intermediation
Activities Related to Credit
Intermediation
522300 Activities Related to Credit
Intermediation (including loan

Real Estate and Rental and
Leasing

Real Estate
531110 Lessors of Residential Buildings
& Dwellings (including equity
REITs)
531120 Lessors of Nonresidential
Buildings (except
Miniwarehouses) (including
equity REITs)
531130 Lessors of Miniwarehouses &
Self-Storage Units (including
equity REITs)
531190 Lessors of Other Real Estate
Property (including equity REITs)
531210 Offices of Real Estate Agents &
Brokers
531310 Real Estate Property Managers
531320 Offices of Real Estate Appraisers
531390 Other Activities Related to Real
Estate
Rental and Leasing Services
532100 Automotive Equipment Rental &
Leasing
532210 Consumer Electronics &
Appliances Rental
532281 Formal Wear & Costume Rental
532282 Video Tape & Disc Rental
532283 Home Health Equipment Rental
532284 Recreational Goods Rental
532289 All Other Consumer Goods
Rental
532310 General Rental Centers
532400 Commercial & Industrial
Machinery & Equipment Rental &
Leasing
Lessors of Nonfinancial Intangible
Assets (except copyrighted works)
533110 Lessors of Nonfinancial
Intangible Assets (except
copyrighted works)

Professional, Scientific, and
Technical Services

Legal Services
541110 Offices of Lawyers
541190 Other Legal Services
Accounting, Tax Preparation,
Bookkeeping, and Payroll Services
541211 Offices of Certified Public
Accountants
541213 Tax Preparation Services

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Management of Companies
(Holding Companies)
551111
551112

Offices of Bank Holding
Companies
Offices of Other Holding
Companies

Administrative and Support and
Waste Management and
Remediation Services

Administrative and Support Services
561110 Office Administrative Services
561210 Facilities Support Services
561300 Employment Services
561410 Document Preparation Services
561420 Telephone Call Centers
561430 Business Service Centers
(including private mail centers &
copy shops)
561440 Collection Agencies
561450 Credit Bureaus
561490 Other Business Support Services
(including repossession services,
court reporting, & stenotype
services)
561500 Travel Arrangement &
Reservation Services
561600 Investigation & Security Services
561710 Exterminating & Pest Control
Services
561720 Janitorial Services
561730 Landscaping Services
561740 Carpet & Upholstery Cleaning
Services
561790 Other Services to Buildings &
Dwellings
561900 Other Support Services
(including packaging & labeling
services, & convention & trade
show organizers)
Waste Management and Remediation
Services
562000 Waste Management &
Remediation Services

Educational Services
611000

Educational Services (including
schools, colleges, & universities)

Page 37 of 37

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Form 1120-F (Continued)
Health Care and Social
Assistance

Offices of Physicians and Dentists
621111 Offices of Physicians (except
mental health specialists)
621112 Offices of Physicians, Mental
Health Specialists
621210 Offices of Dentists
Offices of Other Health Practitioners
621310 Offices of Chiropractors
621320 Offices of Optometrists
621330 Offices of Mental Health
Practitioners (except Physicians)
621340 Offices of Physical, Occupational
& Speech Therapists, &
Audiologists
621391 Offices of Podiatrists
621399 Offices of All Other
Miscellaneous Health
Practitioners
Outpatient Care Centers
621410 Family Planning Centers
621420 Outpatient Mental Health &
Substance Abuse Centers
621491 HMO Medical Centers
621492 Kidney Dialysis Centers
621493 Freestanding Ambulatory
Surgical & Emergency Centers
621498 All Other Outpatient Care
Centers
Medical and Diagnostic Laboratories
621510 Medical & Diagnostic
Laboratories
Home Health Care Services
621610 Home Health Care Services
Other Ambulatory Health Care Services
621900 Other Ambulatory Health Care
Services (including ambulance
services & blood & organ banks)

Hospitals
622000 Hospitals
Nursing and Residential Care Facilities
623000 Nursing & Residential Care
Facilities
Social Assistance
624100 Individual & Family Services
624200 Community Food & Housing, &
Emergency & Other Relief
Services
624310 Vocational Rehabilitation
Services
624410 Child Day Care Services

marinas, fitness centers, &
bowling centers)

Accommodation and Food
Services

Accommodation
721110 Hotels (except Casino Hotels) &
Motels
721120 Casino Hotels
721191 Bed & Breakfast Inns
721199 All Other Traveler
Accommodation
721210 RV (Recreational Vehicle) Parks
& Recreational Camps
721310 Rooming & Boarding Houses,
Dormitories, & Workers’ Camps
Food Services and Drinking Places
722300 Special Food Services (including
food service contractors &
caterers)
722410 Drinking Places (Alcoholic
Beverages)
722511 Full-Service Restaurants
722513 Limited-Service Restaurants
722514 Cafeterias and Buffets
722515 Snack and Non-alcoholic
Beverage Bars

Automotive & Electronic) Repair
& Maintenance
811410 Home & Garden Equipment &
Appliance Repair & Maintenance
811420 Reupholstery & Furniture Repair
811430 Footwear & Leather Goods
Repair
811490 Other Personal & Household
Goods Repair & Maintenance
Personal and Laundry Services
812111 Barber Shops
812112 Beauty Salons
812113 Nail Salons
812190 Other Personal Care Services
(including diet & weight reducing
centers)
812210 Funeral Homes & Funeral
Services
812220 Cemeteries & Crematories
812310 Coin-Operated Laundries &
Drycleaners
812320 Drycleaning & Laundry Services
(except Coin-Operated)
812330 Linen & Uniform Supply
812910 Pet Care (except Veterinary)
Services
812920 Photofinishing
812930 Parking Lots & Garages
812990 All Other Personal Services
Religious, Grantmaking, Civic,
Professional, and Similar Organizations
813000 Religious, Grantmaking, Civic,
Professional, & Similar
Organizations (including
condominium and homeowners
associations)

DRAFT AS OF
December 14, 2021
Arts, Entertainment, and
Recreation

Performing Arts, Spectator Sports, and
Related Industries
711100 Performing Arts Companies
711210 Spectator Sports (including
sports clubs & racetracks)
711300 Promoters of Performing Arts,
Sports, & Similar Events
711410 Agents & Managers for Artists,
Athletes, Entertainers, & Other
Public Figures
711510 Independent Artists, Writers, &
Performers
Museums, Historical Sites, and Similar
Institutions
712100 Museums, Historical Sites, &
Similar Institutions
Amusement, Gambling, and Recreation
Industries
713100 Amusement Parks & Arcades
713200 Gambling Industries
713900 Other Amusement & Recreation
Industries (including golf
courses, skiing facilities,

Other Services

Repair and Maintenance
811110 Automotive Mechanical &
Electrical Repair & Maintenance
811120 Automotive Body, Paint, Interior,
& Glass Repair
811190 Other Automotive Repair &
Maintenance (including oil
change & lubrication shops & car
washes)
811210 Electronic & Precision
Equipment Repair &
Maintenance
811310 Commercial & Industrial
Machinery & Equipment (except

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