New
collection (Request for a new OMB Control Number)
No
Regular
01/04/2022
Requested
Previously Approved
36 Months From Approved
11,400
0
22,800
0
0
0
Sections 901 and 905 allow a taxpayer
to claim a foreign tax credit for foreign income taxes paid or
accrued in a taxable year, depending on taxpayer’s method of
accounting for such taxes. However, regardless of the year in which
the credit is allowed based on taxpayer’s method of accounting, the
foreign tax credit is allowed only to the extent the foreign income
taxes are ultimately both owed and actually remitted to the foreign
country. For accrual method taxpayers, section 461(f) (flush
language), §1.461-2(a)(2)(i), and §1.905-1(d)(3) provide that a
foreign income tax liability that is contested does not accrue and
is not creditable until the contest is resolved. For cash method
taxpayers, a foreign income tax liability that is contested is not
a reasonable approximation of the taxpayer’s final foreign income
tax liability and, thus, under §1.901-2(e)(2)(i), is not considered
an amount of tax paid for purposes of section 901 until the contest
is resolved. However, §§1.905-1(c)(3) and 1.905-1(d)(4) allow
taxpayers to make an election to claim a provisional foreign tax
credit for a contested foreign income tax liability to the extent
that the taxpayer has remitted the contested tax to the foreign
country. As a condition for making this election, the taxpayer must
enter into a provisional foreign tax credit agreement, in which the
taxpayer gives the IRS information regarding the contested foreign
income tax liability and agrees to comply with the conditions of
the election, including agreeing to not to assert the statute of
limitations on assessment as a defense to assessment of taxes and
interest by the IRS with respect to the contested tax for a period
of three years from the year in which taxpayer notifies the IRS of
the resolution of the contest. See §1.905-1(d)(4)(ii). The likely
respondents are: U.S. persons who pay or accrue foreign income
taxes.
US Code:
26
USC 461 Name of Law: General rule for taxable year of
deduction
US Code: 26
USC 901 Name of Law: Taxes of foreign countries and of
possessions of United States
This is a request for a new OMB
control number for collections of information in new regulations
that are not on existing IRS forms. The number of potentially
affected taxpayers increased relative to the burden estimate in the
proposed regulations because the final regulations expand the
availability of the election to taxpayers claiming foreign tax
credits on the cash basis.
On behalf of this Federal agency, I certify that
the collection of information encompassed by this request complies
with 5 CFR 1320.9 and the related provisions of 5 CFR
1320.8(b)(3).
The following is a summary of the topics, regarding
the proposed collection of information, that the certification
covers:
(i) Why the information is being collected;
(ii) Use of information;
(iii) Burden estimate;
(iv) Nature of response (voluntary, required for a
benefit, or mandatory);
(v) Nature and extent of confidentiality; and
(vi) Need to display currently valid OMB control
number;
If you are unable to certify compliance with any of
these provisions, identify the item by leaving the box unchecked
and explain the reason in the Supporting Statement.
1545-2296 Supporting Statement 2022-01-04.docx
Provisional Foreign Tax Credit Agreement