1118 Instructions for Form 1118

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Instructions for Form 1118

Department of the Treasury
Internal Revenue Service

(Rev. December 2021)

(Use with the December 2021 revisions of Form 1118 and separate Schedules I and
L, the December 2020 revision of separate Schedule J, and the December 2018
revision of separate Schedule K.)

DRAFT AS OF
November 4, 2021

Foreign Tax Credit—Corporations
Section references are to the Internal
Revenue Code unless otherwise noted.

Future Developments

For the latest information about
developments related to Form 1118
and its instructions, such as
legislation enacted after they were
published, go to IRS.gov/Form1118.

Reminders

On December 22, 2017, Congress
enacted the Tax Cuts and Jobs Act,
P.L. 115-97 (the “Act”). The Act
changes the computation of foreign
tax credits for post-2017 tax years as
follows.
• Two new separate categories of
income under section 904(d): (i) any
amount includible in gross income
under section 951A (other than
passive category income) (“section
951A category income”), and (ii)
foreign branch category income.
• Repeal of section 902 indirect
credits with respect to dividends from
foreign corporations.
• Modified indirect credits under
section 960 for inclusions under
sections 951(a)(1) and 951A.
• Modified section 78 gross-up with
respect to inclusions under sections
951(a)(1) and 951A.
• Revised sourcing rule for certain
income from the sale of inventory
under section 863(b).
• Repeal of the fair market value
method for apportioning interest
expense under section 864(e).
• New adjustments for purposes of
section 904 with respect to expenses
allocable to certain stock or dividends
for which a dividends received
deduction is allowed under section
245A.
• Election to increase pre-2018
section 904(g) overall domestic loss
(ODL) recapture.
• Limited foreign tax credits with
respect to inclusions under section
965.
Nov 03, 2021

What’s New

The following changes have been
made to the December 2021 revision
of Form 1118. Most of these changes
are based on final foreign tax credit
regulations issued on December 17,
2019 (T.D. 9882, 84 FR 69022) and
on November 12, 2020 (T.D. 9922, 85
FR 71998).

Throughout the form, in columns
that request an EIN or reference ID
number, taxpayers will no longer have
the option to enter “FOREIGNUS” or
“APPLIED FOR.” Instead, if required,
if an entity does not have an EIN, the
taxpayer must enter a reference ID
number that uniquely identifies the
foreign entity for which such number
is requested. See Reference ID
numbers, later, for details.
Schedule A, column 4(b) (section
78 dividend gross-up) and Schedules
F-1, F-2, and F-3 (pertaining to
deemed paid taxes) were removed to
account for the repeal of section 902
under the Tax Cuts and Jobs Act, P.L.
115-97 (“TCJA”). This column and
these schedules had been retained in
post-2017 domestic corporate tax
years to account for the fact that some
pre-TCJA enactment rules continued
to apply in the domestic corporation's
tax years beginning after 2017 if such
domestic corporation owned the
foreign corporation through certain
pass-through entities. It would be very
rare in 2021 for a domestic
corporation to have taxes deemed
paid under section 902 on
distributions with respect to a
pre-2018 foreign corporate tax year.
As a result of the removal of
Schedule A, column 4(b), column 4(a)
is now column 4 and pertains solely to
dividends.
Similarly, Form 1118 no longer
includes reporting of current year
section 965(a) inclusions, associated
section 965(c) deductions, and
Cat. No. 10905I

foreign taxes deemed paid with
respect to section 965(a) inclusions.
Reporting of these amounts had been
retained in post-2017 domestic
corporation tax years to account for
the fact that a domestic corporation
could have a section 965(a) inclusion
in a post-2017 tax year if such
domestic corporation owned a
deferred foreign income corporation
through certain pass-through entities.
It would be very rare in 2021 for a
domestic corporation to have a
section 965(a) inclusion with respect
to a pre-2018 foreign corporate tax
year.

Similarly, the instructions remove
many of the references to pre-2018
foreign corporate tax years and
post-2017 foreign corporate tax years.
This distinction is no longer relevant in
most cases because almost all
reporting on the 2021 Form 1118 will
now be with respect to post-2017
foreign corporate tax years.
On page 1 of Form 1118, former
columns 9 (section 986(c) gain), 10
(section 987 gain), and 11 (section
988 gain) have been deleted and
replaced with new columns 9
(currency gain) and 10 (currency gain
code). Also, new columns 13(h)
(currency loss) and 13(i) (currency
loss code) have been added to
Schedule A. As a result of these
changes, we have renumbered or
re-lettered all subsequent columns of
Schedule A, as appropriate. See the
specific instructions for Schedule A,
Column 9, for additional information,
including the codes that may be
entered in columns 10 and 13(i).
On page 1 of Form 1118,
Schedule A, new column 14
(apportioned share of deductions)
now requests amounts from
Schedule H, Part I, and Schedule H,
Part II. Previously, these amounts
were combined in Schedule H, Part II
and one amount was carried over to

Schedule H. This change was
necessary due to the changes made
to Schedule H, Part I (see below).
On page 2 of Form 1118,
Schedule B, Part II has been modified
to take into account the changes to
Schedule A and to clarify that line 3
refers only to Part I of Schedule G.

respectively. Lines 6(a)(1) through (7)
have been added to report relevant
information with respect to a specific
separate category. Lines 6(b)(1)
through 6(e)(7) have been added for
similar reporting with respect to
different separate categories. Line 7
has been added to show total
amounts. Finally, terminology has
been updated throughout.

tax credit based on their share of
foreign taxes paid or accrued by the
controlled foreign corporation. See
sections 960 and 962 and Pub. 514
for more information on how to
complete Form 1118 in this case.

When To Make the
Election

DRAFT AS OF
November 4, 2021

On page 3 of Form 1118, the codes
for Schedule C, column 5(b), have
been modified. See the specific
instructions for Schedule C, Column
5(b), for the new codes.
On pages 5 and 6 of Form 1118,
Schedule E, Part I, columns 7, 8 and
9, and Part II, columns 10 and 11
have been modified to clarify that
these amounts are reported within an
annual PTEP account. The prior year
instructions required reporting within
an annual PTEP account. Therefore,
this is not a change in reporting, but
rather a clarification on the form.

On page 7 of Form 1118, two new
lines have been added to Schedule G
for reductions for disallowed taxes
under sections 965(g) and 245A (new
lines F and G). These reductions were
previously reported on the “other
reductions” line and were identified
with a code 965 or code 245A. Those
codes are no longer needed now that
the new lines have been added to the
schedule. As a result of this change,
the remaining lines on this schedule
have been re-lettered.
On pages 8 and 9 of Form 1118,
Schedule H, Part I has been
extensively revised to reflect
Regulations section 1.861-17 (as
revised by T.D. 9922). Specifically, on
Schedule H, Part I, column (b) has
been deleted because the Gross
Income Method was eliminated for tax
years beginning after 2019. See
Regulations section 1.861-17. The
previous column (c) is new column
(b). Additionally, new column (a)(i)
has been added to report gross
intangible income. Line 2 has been
revised to report amounts subject to
exclusive apportionment. Line 3 has
been modified to report the remaining
R&E deductions after exclusive
apportionment. Line 4 has been
modified and line 5 added to report
total gross intangible income and
gross receipts pertaining to the
taxpayer, controlled parties, and
uncontrolled parties from U.S.
sources and foreign sources,

As mentioned above, the total
foreign R&E deductions will no longer
be carried over to Schedule H, Part II.
This is because revised Schedule H,
Part I no longer has a need for
breaking out section 245A dividend
amounts and the Schedule H, Part I
lines no longer correspond with the
lines on Schedule H, Part II, column
(d). As a result, the total foreign R&E
deductions from Schedule H, Part I
will now be carried over directly to
Schedule A, column 14.
New separate Schedule L has
been developed for reporting of
current year foreign tax
redeterminations that relate to prior
taxable years.

General Instructions
Purpose of Form

Use Form 1118 to compute a
corporation's foreign tax credit for
certain taxes paid or accrued to
foreign countries or U.S. possessions.
See Taxes Eligible for a Credit, later.

Who Must File

Any corporation that elects the
benefits of the foreign tax credit under
section 901 must complete and attach
Form 1118 to its income tax return. In
addition, even if a corporation has not
elected to credit foreign taxes, it must
complete and attach Schedules A and
J of a Form 1118 to its income tax
return if it has any additions to,
reductions to, or recapture of any new
or existing overall foreign loss, overall
domestic loss, or separate limitation
loss accounts. See Regulations
section 1.904(f)-1(b).
Also, individuals must complete
and attach a Form 1118 to their
income tax return if they make the
election under section 962 to be taxed
at corporate rates on the amount they
must include in gross income under
sections 951(a) and 951A from their
controlled foreign corporations in
order to be eligible to claim a foreign
-2-

The election to claim the foreign tax
credit (or a deduction in lieu of a
credit) for any tax year may be made
or changed at any time before the end
of a special 10-year period described
in section 6511(d)(3) (or section
6511(c) if the period is extended by
agreement). Note that while the
limitations period for refund claims
relating to a foreign tax credit
generally runs parallel with the
election period, the limitations period
for refund claims relating to a
deduction of foreign tax does not, and
may expire before the end of the
election period.

Computer-Generated
Form 1118

The corporation may submit a
computer-generated Form 1118 and
schedules if they conform to the IRS
version. However, if a software
program is used, it must be approved
by the IRS for use in filing substitute
forms. This ensures the proper
placement of each item appearing on
the IRS version. For more information,
see Pub. 1167, General Rules and
Specifications for Substitute Forms
and Schedules.

How To Complete
Form 1118
Important. Complete a separate
Schedule A; Schedule B, Parts I & II;
Schedules C through G; Schedule I;
and Schedule K for each applicable
separate category of income. See
Categories of Income, later. Complete
Schedule B, Part III; Schedule H; and
Schedule J only once.
• Use Schedule A to compute the
corporation's income or loss before
adjustments for each applicable
category of income.
• Use Schedule B to determine the
total foreign tax credit after certain
reductions.
• Use Schedule C to compute taxes
deemed paid by the domestic
corporation filing the return with
Instructions for Form 1118 (Rev. 12-2021)

respect to inclusions under section
951(a)(1).
• Use Schedule D to compute taxes
deemed paid by the domestic
corporation filing the return with
respect to inclusions under section
951A.
• Use Schedule E to compute taxes
deemed paid by the domestic
corporation filing the return with
respect to distributions of previously
taxed income (also referred to as
previously taxed earnings and profits
(PTEP)).
• Use Schedule G to report required
reductions of tax paid, accrued, or
deemed paid.
• Use Schedule H to apportion
deductions that cannot be allocated to
an item or class of income identified
on Schedule A.
• Use Schedule I (a separate
schedule) to compute reductions of
taxes paid, accrued, or deemed paid
on foreign oil and gas income.
• Use Schedule J (a separate
schedule) to compute adjustments to
separate limitation income or losses in
determining the numerators of
limitation fractions, year-end
recharacterization balances, and
overall foreign and domestic loss
account balances.
• Use Schedule K (a separate
schedule) to reconcile the
corporation's prior year foreign tax
carryover with its current year foreign
tax carryover.
• Use Schedule L (a separate
schedule) to report foreign tax
redeterminations that occurred in the
current taxable year and that relate to
prior taxable years.

Code

Category of Income

951A

Section 951A Category
Income

FB

Foreign Branch Category
Income

PAS

Passive Category Income

901j

Section 901(j) Income

more foreign countries. For more
information on the computation of
foreign branch category income, see
Regulations section 1.904-4(f).
• When completing a Form 1118 for
foreign branch category income, enter
the code "FB" on line a at the top of
page 1.
• Foreign branch category income
does not include passive category
income.
• Foreign branch category income is
effective for tax years of U.S. persons
beginning after December 31, 2017.

DRAFT AS OF
November 4, 2021

Categories of Income

Compute a separate foreign tax credit
(using a separate Form 1118) for
each applicable separate category
described below. Enter the applicable
code from the table below, in item a at
the top of page 1 of Form 1118, to
indicate the separate category with
respect to which you are completing a
given Form 1118.

RBT PAS U.S. Source Passive
Category Income
Resourced by Treaty as
Foreign Source Passive
Category Income

RBT GEN U.S. Source General
Category Income
Resourced by Treaty as
Foreign Source General
Category Income
RBT FB

U.S. Source Foreign
Branch Income
Resourced by Treaty as
Foreign Source Foreign
Branch Category Income

RBT 951A U.S. Source Section
951A Category Income
Resourced by Treaty as
Foreign Source Section
951A Category Income
GEN

General Category Income

If you enter code "901j" or code
"RBT" in item a, also complete item b
or item c using the country codes
provided at IRS.gov/CountryCodes.

Section 951A Category Income

Section 951A category income is any
amount of global intangible low-taxed
income (GILTI) includible in gross
income under section 951A (other
than passive category income).
Section 951A defines GILTI.
• When completing a Form 1118 for
section 951A category income, enter
the code "951A" on line a at the top of
page 1.
• Section 951A category income
does not include passive category
income.

Foreign Branch Category
Income

Foreign branch income is defined
under section 904(d)(2)(J)(i) as the
business profits of a U.S. person
which are attributable to one or more
qualified business units (QBUs) (as
defined in section 989(a)) in one or

Instructions for Form 1118 (Rev. 12-2021)

-3-

Passive Category Income

Passive category income includes
passive income and specified passive
category income. When completing a
Form 1118 for passive category
income, enter the code "PAS" on line
a at the top of page 1.

Passive income. Generally, passive
income is the following.
• Any income received or accrued
that would be foreign personal holding
company income (defined in section
954(c)) if the corporation were a
controlled foreign corporation (CFC)
(defined in section 957). This includes
any gain on the sale or exchange of
stock that is more than the amount
treated as a dividend under section
1248. However, in determining if any
income would be foreign personal
holding company income, the rules of
section 864(d)(6) will apply only for
income of a CFC.
• Any amount includible in gross
income under section 1293 (which
relates to certain passive foreign
investment companies (PFICs)).
Passive income does not include:
• Any financial services income,
• Any export financing interest unless
it is also related person factoring
income (see section 904(d)(2)(G) and
Regulations section 1.904-4(h)(3)),
• Any high-taxed income, or
• Any active rents or royalties. See
Regulations section 1.904-4(b)(2)(iii)
for definitions and exceptions.
Note. Certain income received from a
CFC and certain dividends from
noncontrolled 10%-owned foreign
corporations that would otherwise be
passive income are treated as
passive category income only to the
extent provided under the
look-through rules. See Look-Through
Rules, later.

Specified passive category income. This term includes:
• Dividends from a domestic
international sales corporation (DISC)
or former DISC (as defined in section
992(a)) to the extent such dividends
are treated as foreign source income,
and
• Distributions from a former foreign
sales corporation (FSC) out of
earnings and profits attributable to
foreign trade income or interest or
carrying charges (as defined in
section 927(d)(1), before its repeal)
derived from a transaction which
results in foreign trade income (as
defined in section 932(b), before its
repeal).

investment opportunities for domestic
companies in such foreign country,
and (b) the President reports to the
Congress, not less than 30 days
before the waiver is granted, the
intention to grant such a waiver and
the reason for such waiver.

category income, and the corporation
elects to apply the treaty, on Form
1118, enter code “RBT 951A” on line
a at the top of page 1.

General Category Income

This category includes all income not
described above. When completing a
Form 1118 for the general category of
income, enter code "GEN" on line a at
the top of page 1. This category
includes high-taxed income that is not
otherwise treated as another category
of income. Usually, income is high
taxed if the total foreign income taxes
paid, accrued, or deemed paid by the
corporation for that income exceed
the highest rate of tax specified in
section 11 (and with reference to
section 15, if applicable), multiplied by
the amount of such income (including
the amount treated as a dividend
under section 78). For more
information, see Regulations section
1.904-4(c). Also see the instructions
for Schedule A, later, for additional
reporting requirements.

DRAFT AS OF
November 4, 2021

Section 901(j) Income

No credit is allowed for foreign taxes
imposed by and paid or accrued to
certain sanctioned countries.
However, a foreign tax credit may be
claimed for foreign taxes paid or
accrued with respect to section 901(j)
income if such tax is paid or accrued
to a country other than a sanctioned
country.
Income derived from each
sanctioned country is subject to a
separate foreign tax credit limitation.
Therefore, the corporation must use a
separate Form 1118 for income
derived from each such country.
On each Form 1118, enter the
code “901j” on line a at the top of
page 1 and identify the applicable
country using the two-letter codes
(from the list at IRS.gov/
CountryCodes).
Sanctioned countries are those
designated by the Secretary of State
as countries that repeatedly provide
support for acts of international
terrorism, countries with which the
United States does not have
diplomatic relations, or countries
whose governments are not
recognized by the United States. As of
the date these instructions were
revised, section 901(j) applied to
income derived from Iran, North
Korea, Sudan, and Syria. For more
information, see section 901(j).
Note. The President of the United
States has the authority to waive the
application of section 901(j) with
respect to a foreign country if it is (a)
in the national interest of the United
States and will expand trade and

Note. Effective December 10, 2004,
the President waived the application
of section 901(j) with respect to Libya.

Income Re-Sourced by Treaty

If a sourcing rule in an applicable
income tax treaty treats any U.S.
source income as foreign source, and
the corporation elects to apply the
treaty, the income will be treated as
foreign source.

Important. The corporation must
compute a separate foreign tax credit
limitation for any such income for
which it claims benefits under a treaty.
See Regulations sections 1.904-4(k)
and 1.904-5(m)(7) for grouping rules
and exceptions. On each Form 1118,
enter one of the RBT codes listed
below on line a at the top of page 1
and identify the applicable treaty
country on line c at the top of page 1
using the two-letter codes (from the
list at IRS.gov/CountryCodes).
Code “RBT PAS.” If an applicable
income tax treaty treats any U.S.
source passive category income as
foreign source passive category
income, and the corporation elects to
apply the treaty, on Form 1118, enter
code “RBT PAS” on line a at the top of
page 1.
Code “RBT GEN.” If an applicable
income tax treaty treats any U.S.
source general category income as
foreign source general category
income, and the corporation elects to
apply the treaty, on Form 1118, enter
code “RBT GEN” on line a at the top
of page 1.
Code “RBT FB.” If an applicable
income tax treaty treats any U.S.
source foreign branch category
income as foreign source foreign
branch category income, and the
corporation elects to apply the treaty,
on Form 1118, enter code “RBT FB”
on line a at the top of page 1.
Code “RBT 951A.” If an applicable
income tax treaty treats any U.S.
source section 951A category income
as foreign source section 951A
-4-

This category also includes
financial services income (defined
below) not described above if the
corporation is a member of a financial
services group (as defined in section
904(d)(2)(C)(ii)) or is predominantly
engaged in the active conduct of a
banking, insurance, financing, or
similar business.
Financial services income.
Financial services income is income
received or accrued by a member of a
financial services group or any
corporation predominantly engaged in
the active conduct of a banking,
insurance, financing, or similar
business if the income is:
• Described in section 904(d)(2)(D)
(ii),
• Passive income (determined
without regard to section 904(d)(2)(B)
(iii)(II)), or
• Incidental income described in
Regulations section 1.904-4(e)(4).
Note. If the corporation qualified as a
financial services entity because it
treated certain amounts as active
financing income that are not listed in
Regulations sections 1.904-4(e)(2)(i)
(A) through (X), but that are described
as similar items in Regulations section
1.904-4(e)(2)(i)(Y), attach a statement
to Form 1118 showing the types and
amounts of the similar items.
Instructions for Form 1118 (Rev. 12-2021)

Special Rules
Source Rules for Income

Determine income or (loss) for each
separate category on Schedule A
using the general source rules of
sections 861 through 865 and related
regulations, the special source rules
of section 904(h) described below,
and any applicable source rules
contained in any applicable tax
treaties.

any amount included in gross income
under section 951(a)(1)(B).
Look-through rules also apply to
subpart F inclusions under section
951(a)(1)(A) and GILTI inclusions
under section 951A(a) to the extent
attributable to income of the CFC in
the passive category.
For more information and
examples, see section 904(d)(3) and
Regulations section 1.904-5.

Schedule K-3, Part II, Section 2

Noncontrolled 10%-Owned Foreign Corporations. Generally,
dividends received or accrued by the
taxpayer are passive category
income. However, dividends received
or accrued from a noncontrolled
10%-owned foreign corporation may
be assigned to other separate
categories under the look-through
rules of section 904(d)(4).

Interest expense apportionment
factors. Report on Schedule H, Part
II.

Deductions allocated and apportioned at partner level and partnership level. Report on Schedule A or
Schedule H.
Schedule K-3, Part III, Sections 1
through 3

DRAFT AS OF
November 4, 2021

Special source rules of section
904(h). Usually, the following income
from a U.S.-owned foreign
corporation, otherwise treated as
foreign source income, must be
treated as U.S. source income under
section 904(h).
• Any subpart F income, foreign
personal holding company income,
GILTI, or income from a qualified
electing fund that a U.S. shareholder
is required to include in its gross
income if such amount is attributable
to the U.S.-owned foreign
corporation's U.S. source income.
• Interest that is properly allocable to
the U.S.-owned foreign corporation's
U.S. source income.
• Dividends equal to the U.S. source
ratio (defined in section 904(h)(4)(B)).
The rules regarding interest and
dividends described above do not
apply to a U.S.-owned foreign
corporation if less than 10% (0.10) of
its earnings and profits (E&P) for the
tax year is from U.S. sources.

Amounts That Do Not
Constitute Income Under
U.S. Tax Principles

Creditable foreign taxes that are
imposed on amounts that do not
constitute income under U.S. tax
principles are treated as imposed on
income described in section 904(d)(1)
(B). See section 904(d)(2)(H).

Look-Through Rules
CFCs. Generally, dividends, interest,
rents, and royalties received or
accrued by the taxpayer are passive
category income. However, if these
items are received or accrued by a
10% (0.10) U.S. shareholder from a
CFC, they may be assigned to other
separate categories, or may be
treated as passive category income
under the look-through rules of
section 904(d)(3). Dividends include

Instructions for Form 1118 (Rev. 12-2021)

Certain amounts paid by a domestic corporation to a related corporation. Look-through rules also
apply to foreign source interest, rents,
and royalties paid by a domestic
corporation to a related corporation.
See Regulations section 1.904-5(g).

Other Rules
Certain transfers of intangible
property. See section 367(d)(2)(C)
for a rule that clarifies the treatment of
certain transfers of intangible
property.

Reporting Foreign Tax
Information From Partnerships

If you received a Schedule K-3 (Form
1065) or a Schedule K-3 (Form 8865)
from a partnership that includes
foreign tax information, use the rules
below to report that information on
Form 1118.
Schedule K-3, Part II, Section 1

Gross income sourced at partner
level. This includes income from the
sale of most personal property other
than inventory, depreciable property,
and certain intangible property
sourced under section 865. This gross
income will generally be U.S. source
and therefore will not be reported on
Form 1118.
Foreign gross income sourced at
partnership level. Report on
Schedule A.

-5-

R&E expenses apportionment factors. Report on Schedule H, Part I.

Foreign-derived intangible income
(FDII) deduction apportionment
factors. Report on Schedule H, Part
II.
Schedule K-3, Part III, Section 4
Total foreign taxes paid or accrued. Report on Schedule B.
Reduction in taxes available for
credit. Report on Schedule G.
Schedule K-3 (Form 1065), Part
VIII
Partner’s interest in foreign corporation income (Section 960).
Report on Schedule C or D, as
applicable.
Note. Schedule K-3 (Form 8865),
does not contain a part equivalent to
Schedule K-3 (Form 1065), Part VIII.

Capital Gains

Foreign source taxable income or
(loss) before adjustments in all
separate categories in the aggregate
should include gain from the sale or
exchange of capital assets only up to
the amount of foreign source capital
gain net income (which is the smaller
of capital gain net income from
sources outside the United States or
capital gain net income). Therefore, if
the corporation has capital gain net
income from sources outside the
United States in excess of the capital
gain net income reported on its tax
return, enter a pro rata portion of the
net U.S. source capital loss as a
negative number on Schedule A,
column 13(j), for each separate
category with capital gain net income
from sources outside the United
States. To figure the pro rata portion
of the net U.S. source capital loss
attributable to a separate category,

multiply the net U.S. source capital
loss by the amount of capital gain net
income from sources outside the
United States in the separate category
divided by the aggregate amount of
capital gain net income from sources
outside the United States in all
separate categories with capital gain
net income from sources outside the
United States.

the United States. The credit is not
applicable, however, if a foreign
country or U.S. possession imposes
the tax on income from U.S. sources
solely because the foreign corporation
was created or organized under the
law of the foreign country or U.S.
possession or is domiciled there for
tax purposes.
The credit may not be taken
against any tax imposed on income
not effectively connected with a U.S.
business.
In computing the foreign tax credit
limitation, the foreign corporation's
taxable income includes only the
taxable income that is effectively
connected with the conduct of a trade
or business within the United States.

• In the case of a covered asset
acquisition (as defined in section
901(m)(2)), the disqualified portion of
any tax determined with respect to the
income or gain attributable to the
relevant foreign assets (section
901(m)). Note. This rule generally
applies to covered asset acquisitions
after December 31, 2010. See
Regulations sections 1.901(m)-1
through 1.901(m)-8 for additional
information. Note that the rules
contained in these regulations have
later effective dates.

DRAFT AS OF
November 4, 2021

See section 904(b)(2)(B) for
special rules regarding adjustments to
account for capital gain rate
differentials (as defined in section
904(b)(3)(D)) for any tax year. At the
time these instructions went to print,
there was no capital gain rate
differential for corporations.

Credit Limitations

Taxes Eligible for a Credit
Domestic corporations. Generally,
a domestic corporation may claim a
foreign tax credit (subject to the
limitation of section 904) for the
following taxes.
• Income, war profits, and excess
profits taxes (defined in Regulations
section 1.901-2(a)) paid or accrued
during the tax year to any foreign
country or U.S. possession.
• Taxes deemed paid under section
960.
• Taxes paid in lieu of foreign income
taxes as described in section 903 and
Regulations section 1.903-1.
Some foreign taxes that are
otherwise eligible for the foreign tax
credit must be reduced. These
reductions are reported on
Schedule G.
Note. A corporation may not claim a
foreign tax credit for foreign taxes paid
to a foreign country that the
corporation does not legally owe,
including amounts eligible for refund
by the foreign country. If the
corporation does not exercise its
available remedies to reduce the
amount of foreign tax to what it legally
owes, a credit is not allowed for the
excess amount.
Foreign corporations. Foreign
corporations are allowed (under
section 906) a foreign tax credit for
income, war profits, and excess
profits taxes paid or accrued to any
foreign country or U.S. possession for
income effectively connected with the
conduct of a trade or business within

Credit or Deduction

A corporation may choose to take
either a credit or a deduction for
eligible foreign taxes paid or accrued.
The choice is made annually.
Generally, if a corporation elects the
benefits of the foreign tax credit for
any tax year, no portion of the foreign
taxes paid or accrued in such year will
be allowed as a deduction in that year
or any subsequent tax year.

Exceptions. However, a corporation
that elects the credit for eligible
foreign taxes may be allowed a
deduction for certain taxes for which a
credit was not allowed. These include
the following.
• Taxes for which the credit was
denied because of the boycott
provisions of section 908.
• Certain taxes on the purchase or
sale of oil or gas (section 901(f)).
• Certain taxes used to provide
subsidies (section 901(i)).
• Taxes paid to certain foreign
countries for which a credit was
denied under section 901(j).
• Certain taxes paid on dividends if
the minimum holding period is not met
with respect to the underlying stock,
or if the corporation is obligated to
make related payments with respect
to positions in similar or related
property (section 901(k)).
• Certain taxes paid on gain and
income other than dividends if the
minimum holding period is not met
with respect to the underlying
property, or if the corporation is
obligated to make related payments
with respect to positions in similar or
related property (see section 901(l)).
-6-

No Credit or Deduction

No foreign tax credit (or deduction) is
allowed for certain taxes including:
• Taxes on mineral income that were
reduced under section 901(e).
• Certain taxes paid on distributions
from possessions’ corporations
(section 901(g)).
• Taxes on combined foreign oil and
gas income that were reduced under
section 907(a).
• Taxes attributable to income
excluded under section 814(a)
(relating to contiguous country
branches of domestic life insurance
companies).
• Taxes paid or accrued to a foreign
country or U.S. possession with
respect to income excluded from
gross income on Form 8873,
Extraterritorial Income Exclusion.
However, see section 943(d) for an
exception for certain withholding
taxes.
• The applicable percentage of taxes
paid or deemed paid with respect to
an amount included in income under
section 965 (section 965(g)).
• Taxes paid with respect to the
amount treated as included under
section 965(b).

Carryback and Carryforward of
Excess Foreign Taxes

If the allowable foreign taxes paid,
accrued, or deemed paid in a tax year
in a separate category exceed the
foreign tax credit limitation for the tax
year for that separate category, the
excess is:
• First, carried back 1 year to offset
taxes imposed in the same category,
then
• Carried forward 10 years to offset
taxes imposed in the same category.
The excess is applied first to the
earliest of the years to which it may be
carried, then to the next earliest year,
Instructions for Form 1118 (Rev. 12-2021)

etc. The corporation may not carry a
credit to a tax year for which it claimed
a deduction, rather than a credit, for
foreign taxes paid or accrued.
Furthermore, the corporation must
reduce the amount of any carryback
or carryforward by the amount it would
have used if it had chosen to claim a
credit rather than a deduction in that
tax year. These carryover provisions
do not apply to foreign taxes assigned
to section 951A category income. See
section 904(c) and Regulations
section 1.904-2 for more details.

Important. Documentation (that is,
receipts of payments or a foreign tax
return for accrued taxes) is not
required to be attached to Form 1118.
However, proof must be presented
upon request by the IRS to
substantiate the credit. See
Regulations section 1.905-2.

Reporting Requirements

If as a result of the foreign tax
redetermination the corporation’s U.S.
tax liability for any taxable year is
changed, the corporation must file an
amended return and Form 1118 and
attach a statement that provides the
following.
• The taxpayer's name, address,
identifying number, the tax year or
years of the taxpayer that are affected
by the foreign tax redetermination,
and, in the case of foreign taxes
deemed paid, the name and
identifying number, if any, of the
foreign corporation.
• The date or dates the foreign
income taxes were accrued, if
applicable.
• The date or dates the foreign
income taxes were paid.
• The amount of foreign income taxes
paid or accrued on each date (in
foreign currency) and the exchange
rate used to translate each such
amount.
• Information sufficient to determine
any change to the characterization of
a distribution or the amount of any
inclusion under section 951(a), 951A,
1291, or 1293.
• Information sufficient to determine
any interest due from or owing to the
taxpayer, including the amount of any
interest paid by the foreign
government to the taxpayer, and the
dates received.

DRAFT AS OF
November 4, 2021

How to claim the excess credit. If
the corporation is carrying back the
excess credit to an earlier year, file an
amended tax return with a revised
Form 1118 and schedules (including a
revised Schedule K (Form 1118)).
Special rules apply to:

• The carryback and carryforward of

foreign taxes paid or accrued on
combined foreign oil and gas income
or related taxes (see section 907(f)).
• An excess foreign tax credit for
which an excess limitation account
exists under section 960(c)(2). See
Regulations sections 1.960-4 through
1.960-6.
• Carryback of foreign taxes paid or
accrued in post-2017 foreign
corporate tax years and carryforward
of foreign taxes paid or accrued in
pre-2018 foreign corporate tax years.
See Regulations section 1.904-2(j).

Treaty-Based Return
Positions

Corporations that adopt a return
position that any U.S. treaty overrides
or modifies any provision of the
Internal Revenue Code, and causes
(or potentially causes) a reduction of
any tax incurred at any time, must
generally disclose this position.
Complete Form 8833, Treaty-Based
Return Position Disclosure Under
Section 6114 or Section 7701(b), and
attach it to Form 1118. See section
6114 and Regulations section
301.6114-1 for details.
Failure to make such a report may
result in a $10,000 penalty.

Proof of Credits

Form 1118 must be carefully filled in
with all the information called for and
with the calculations of credits
indicated.

Instructions for Form 1118 (Rev. 12-2021)

If the corporation claims a foreign
tax credit for tax accrued but not paid,
the IRS may require a bond to be
furnished on Form 1117, Income Tax
Surety Bond, before the credit is
allowed. See Regulations section
1.905-2(c).

Foreign Tax
Redeterminations

The corporation's foreign tax credit
and U.S. tax liability must generally be
redetermined if:
• Accrued foreign taxes when paid or
later adjusted differ from the amounts
claimed as credits (including
corrections to accrued amounts to
reflect final foreign tax liability and
additional payments of tax that accrue
after the close of the taxable year to
which the tax relates);
• Accrued foreign taxes are not paid
within 24 months after the close of the
tax year to which they relate; or
• Any foreign tax paid is fully or
partially refunded; or
• A change in foreign tax liability that
affects the amount of distributions or
inclusions under sections 951, 951A,
or 1293, or affects the application of
the high-tax exception described in
section 954(b)(4).
See Regulations section 1.905-3(a)
and (b).

See Regulations section 1.905-3(b)
(1)(i) for a limited exception to a
redetermination of a U.S. tax liability
with respect to foreign income tax
claimed as a credit under section 901
(other than a tax deemed paid under
section 960).
A redetermination of U.S. tax
liability is also generally required to
account for the effect of a
redetermination of foreign tax paid or
accrued by a foreign corporation on
the amount of foreign taxes deemed
paid under section 960. See
Regulations section 1.905-3(b)(2). For
foreign tax redeterminations of a
foreign corporation that relate to a
taxable year of the foreign corporation
beginning before January 1, 2018,
see Regulations section 1.905-5.
-7-

Additional Information Required
If the redetermination was because of
one of the following, the corporation
must provide the additional
information as indicated.
Refund of foreign taxes paid.
• The date of each such refund.
• The amount of such refund (in
foreign currency).
• The exchange rate that was used to
translate such amount when originally
claimed as a credit.
• The spot rate (as defined in
Regulations section 1.988-1(d)) for
the date the refund was received (for
purposes of computing foreign
currency gain or loss under section
988).
Accrued foreign income taxes that
are not paid on or before the date
that is 24 months after the close of
the tax year to which such taxes
relate.

• The amount of such taxes in foreign
currency.
• The exchange rate that was used to
translate such amount when originally
claimed as a credit or added to
post-1986 foreign income taxes or
PTEP group taxes (as defined in
Regulations section 1.960-3(d)(1)).

attached statement for the tax year(s)
of the taxpayer for which the U.S. tax
liability is changed as a result of the
foreign tax redetermination, the
taxpayer must include with its current
year return a Schedule L summarizing
the foreign tax redeterminations that
occurred that year.
If a foreign tax redetermination
does not change the amount of U.S.
tax due for any taxable year, the
taxpayer does not need to file an
amended return and may instead
notify the IRS of the redetermination
by attaching a completed Schedule L
to the original return for the taxpayer's
taxable year in which the foreign tax
redetermination occurs. See
instructions for Schedule L for
additional information.

See Regulations section 1.905-5(e)
for additional information.

Interest and Penalties

In most cases, interest is computed
on the deficiency or overpayment that
resulted from the foreign tax
adjustment (sections 6601 and 6611
and the related regulations). See
Regulations section 1.905-4(e) for
additional information.

DRAFT AS OF
November 4, 2021

Redetermination of U.S. tax liability results in an amount of additional tax due, and the carryback or
carryover of an unused foreign income tax under section 904(c) only partially eliminates such
amount. The information required in
Regulations section 1.904-2(f).
Foreign tax redeterminations of
foreign corporations that relate to
tax years of the foreign corporation beginning before January 1,
2018. Provide the additional
information listed under both
categories below, as applicable.

Post-1986 pools of earnings and
taxes of foreign corporations.
• The closing balances of the pools
of post-1986 undistributed earnings
and post-1986 foreign income taxes
for each affected year before and after
adjusting the pools to account for the
foreign tax redetermination.
• The dates and amounts of any
dividend distributions or other
inclusions made out of post-1986
undistributed earnings for the affected
year or years.
Pre-1987 accumulated profits of
foreign corporations.
• The dates and amounts of any
dividend distributions or other
inclusions made out of E&P for the
affected year or years.
• The rate of exchange on the date of
any such distribution or inclusion.
• The amount of E&P from which
such dividends were paid or
inclusions were made for the affected
year or years.
See Regulations sections
1.986(a)-1 and 1.905-3 through
1.905-5 for further information
regarding redeterminations and the
required notification.
For special rules relating to
corporations under the jurisdiction of
the Large Business and International
Division, see Regulations section
1.905-4(b)(4).
Schedule L. In addition to filing an
amended return with Form 1118 and

Election to account for foreign tax
redeterminations with respect to
pre-2018 taxable years in the foreign corporation’s last pooling
year. An irrevocable election may be
made by a foreign corporation’s
controlling domestic shareholders to
account for all foreign tax
redeterminations that occur in taxable
years ending on or after November 2,
2020, with respect to pre-2018
taxable years of foreign corporations
as if they occurred in the foreign
corporation’s last taxable year
beginning before January 1, 2018
(last pooling year). Such election is
binding on all persons who are, or
were in a prior year to which the
election applies, U.S. shareholders of
the foreign corporation with respect to
which the election is made for all of its
subsequent foreign tax
redeterminations, as well as foreign
tax redeterminations of other
members of the same CFC group as
the foreign corporation for which the
election is made. The election is
made by filing:
• The statement required under
Regulations section 1.964-1(c)(3)(ii)
with a timely filed original income tax
return for the taxable year of each
controlling domestic shareholder of
the foreign corporation in which or
with which the foreign corporation’s
first redetermination year ends;
• Any notices required under
Regulations section 1.964-1(c)(3)(iii);
• Amended returns as required under
Regulations sections 1.905-4,
1.905-5(e), 1.905-3T(d), and
1.905-5T.
-8-

If the corporation does not comply
with the requirements discussed
above within the time for filing
specified, the penalty provisions of
section 6689 (and the related
regulations) will apply.

Specific Instructions

Report all amounts in U.S. dollars
unless otherwise specified. If it is
necessary to convert from a foreign
currency, attach a statement
explaining how the conversion rate
was determined.
Lines a, b, and c at the top of
page 1 of the form. The corporation
must complete a separate Form 1118
for each applicable category of
income. See Categories of Income,
earlier, for the code to enter on line a
(at the top of page 1 of the form). Also
see those instructions for the country
code to enter on line b or line c, if
applicable.

Schedule A

Report gross income from sources
outside the United States for the
applicable separate category in
columns 3(a) through 11. Report the
applicable deductions to this gross
income in columns 13 and 14. Report
any net operating loss carryover in
column 15.

Column 1. Column 1 requests an
employer identification number (EIN)
or a reference ID number for related
persons or their QBUs from or through
which the corporation derived foreign
source income and/or paid or accrued
creditable foreign taxes.
Note. Taxpayers no longer have the
option of entering “FOREIGNUS” or
“APPLIED FOR” in this column.
Instead, if the related person or their
QBU does not have an EIN, the
taxpayer must use a reference ID
number that uniquely identifies such
related person or QBU, using the
Instructions for Form 1118 (Rev. 12-2021)

rules set forth in Reference ID
numbers, in the Requirements
section, later.
Where gross income is derived
from a related person (within the
meaning of section 267(b) or 707(b)),
enter the EIN or reference ID number
of such related person. In the case of
income derived from a QBU of the
related person, enter the EIN or
reference ID number of the QBU.
Enter the EIN or reference ID number
of related entities and their QBUs
through which the corporation paid or
accrued creditable foreign taxes, even
if no income from these entities is
reported on Schedule A. If gross
income is received or derived from an
entity other than a related person, an
EIN or reference ID number is not
required.

(defined below) and no special
characters or spaces are permitted.
The length of a given reference ID
number is limited to 50 characters.
For these purposes, the term
"alphanumeric" means the entry can
be alphabetical, numeric, or any
combination of the two.
The same reference ID number
must be used consistently from tax
year to tax year with respect to a given
entity. If for any reason a reference ID
number falls out of use (for example,
the entity no longer exists due to
disposition or liquidation), the
reference ID number used for that
entity cannot be used again for
another entity for purposes of filing
Form 1118.
There are some situations that
require correlation of a new reference
ID number with a previous reference
ID number when assigning a new
reference ID number to an entity. For
example:
• In the case of a merger or
acquisition, a Form 1118 filer must
use a reference ID number which
correlates the previous reference ID
number with the new reference ID
number assigned to the entity.
• In the case of an entity
classification election that is made on
behalf of a foreign corporation on
Form 8832, Regulations section
301.6109-1(b)(2)(v) requires the
foreign corporation to have an EIN for
this election. For the first year that
Form 1118 is filed after an entity
classification election is made on
behalf of the foreign corporation on
Form 8832, both the new EIN and the
old reference ID number must be
entered in column 1, as explained in
the next paragraph.
You must correlate the identifying
numbers as follows: New EIN or
reference ID number [space] Old
reference ID number. If there is more
than one old reference ID number,
you must enter a space between each
such number. As indicated above, the
length of a given reference ID number
is limited to 50 characters and each
number must be alphanumeric and no
special characters are permitted.

Regulations section 1.904-4(f)(3)(vii),
use a single line to report such
branch's gross income and
deductions. In column 1, enter
“Branch.” If there is more than one
branch, enter the identifying number
of the branch (as reported in Form
8858) after the word “Branch” on each
line. These amounts should be
reported on a Form 1118 other than
the Form 1118 for the foreign branch
income category.

DRAFT AS OF
November 4, 2021

Example 1. Domestic Corporation
earns sales income from sales to
unrelated persons. Domestic
Corporation leaves column 1 blank
and enters the sales income in
column 7.
Example 2. USC, a domestic
corporation, takes into account its
distributive share of partnership
income with respect to USPS, a
domestic partnership in which USC
has a 60% (0.60) interest. In column
1, USC enters the identifying number
for USPS.
Reference ID numbers. A
“reference ID number” is a number
established by or on behalf of the
domestic corporation filing Form
1118. With respect to Schedule A,
these numbers are used to uniquely
identify the payor with respect to
payments from related persons, in
order to determine the proper source
of such payment. With respect to
Schedules C through E, these
numbers are used to uniquely identify
foreign corporations in order to keep
track of those corporations from tax
year to tax year. The reference ID
number must meet the requirements
set forth below.
Note. Because reference ID numbers
are established by or on behalf of the
U.S. corporation filing certain forms
such as the Form 1118, there is no
need to apply to the IRS to request a
reference ID number or for permission
to use these numbers.
Requirements. The reference ID
number must be alphanumeric
Instructions for Form 1118 (Rev. 12-2021)

Note. This correlation requirement
applies only to the first year the new
reference ID number is used.
Branches. For each branch that is
not a foreign branch, as defined under
-9-

Example. USC, a domestic
corporation, has a branch in Country
X. The activities of the branch do not
constitute a trade or business. In
column 1, USC enters the word
“Branch.” USC will report the income
and expenses of the branch in the
appropriate columns.

See below with respect to QBUs
that are foreign branches as defined
under Regulations section 1.904-4(f)
(3)(vii).
Column 2. Enter the two-letter codes
(from the list at IRS.gov/
CountryCodes) of each foreign
country and U.S. possession within
which income is sourced and/or to
which taxes were paid or accrued.
Note. Complete this column with
respect to all income regardless of
whether such income is from a related
person.

Special Cases for Columns 1
and 2

Except as otherwise instructed below,
income of a U.S. shareholder with
respect to the same related person
but from multiple sources should be
reported on a country-by-country
basis.
Example. USC, a domestic
corporation, has employees who
perform services in Country X and
Country Y for the same related
person. The related person has a
reference ID number of 1000016.
USC earns gross income of $10 with
respect to services performed for the
related person in Country X and USC
earns gross income of $15 with
respect to services performed for the
related person in Country Y. The
two-letter country code for Country X
is XX and the two-letter country code
for Country Y is YY. On Schedule A,
USC reports as follows.
USC makes the following entries
on the first of two lines on Schedule A.

Column

Entry

1

1000016

2

XX

8

10

USC makes the following entries
on the second of two lines on
Schedule A.

Net operating losses (NOLs).
Report any NOL carryover on a single
line. Leave column 1 blank, enter
“NOL” in column 2, and report the
total in column 15. Note that the totals
are being reported on a single line
because it is not necessary to report
the NOL on a per-country basis.

category, enter "B2G" in column 2
instead of a two-letter code. Leave
column 1 blank.
See Regulations section 1.904-4(f)
(2)(vi)(B) for more information
regarding the rules pertaining to
reattribution of income by reason of
disregarded payments between a
foreign branch and its foreign branch
owner.

DRAFT AS OF
November 4, 2021
Column

Entry

1

1000016

2

YY

8

15

Qualified business units (QBUs).
For branches that are QBUs, use a
separate line for each such branch to
report each branch's gross income
and deductions. Report these
amounts on a per-country basis. In
column 1, enter the EIN or reference
ID number of the QBU. Enter the
country code in column 2. These
amounts should be reported on Form
1118 for foreign branch category
income or passive category income.

Section 863(b) gross income and
deductions. Aggregate all section
863(b) foreign source gross income
and deductions and report the totals
on a single line. It may be necessary
to enter amounts in multiple columns
on that single line, depending upon
the nature of the section 863(b) gross
income and deductions. For example,
leave column 1 blank, enter “863(b)”
in column 2, and enter (as a positive
number) all section 863(b) gross
income (in columns 3 through 12) and
all section 863(b) deductions (in
columns 13 through 16). Also enter
the net amount in column 17. Note
that the totals are being reported on a
single line because it is not necessary
to report section 863(b) gross income
and deductions on a per-country
basis.
Regulated investment company
(RIC) pass-through amounts.
Aggregate all income passed through
from RICs and report the total on a
single line. Leave column 1 blank,
enter “RIC” in column 2, and report
the total in column 17. Note that the
totals are being reported on a single
line because it is not necessary to
report the RIC pass-through amounts
on a per-country basis.

Reclassifications of high-taxed income. Aggregate all
reclassifications of high-taxed income
and report the total on a single line.
With respect to passive category
income, for items of income that have
been included on Schedule A and that
must be reclassified under sections
904(d)(2)(B)(iii)(II) and 904(d)(2)(F),
leave column 1 blank and enter
“HTKO” in column 2 and enter (as a
negative number) in column 17 the
net amount of income that is being
reclassified from passive category
income. With respect to the category
of income to which such passive
income is reclassified, leave column 1
blank, enter “HTKO” in column 2, and
enter (as a positive number) in column
17 the net amount of income that is
being reclassified to such category of
income. Note that the reclassifications
are being reported on a single line
because it is not necessary to report
them on a per-country basis. Also
note that tax reclassifications are
needed on Schedule B. See those
instructions for more information.

Inclusions under section 951A.
Because computations for inclusions
under section 951A are reported on
separate Form 8892, GILTI, report the
inclusion under section 951A on a
single line. Specifically, there is no
need to report the identifying numbers
and various countries associated with
an inclusion under section 951A on
Form 1118.
For inclusions under section 951A,
enter “951A” in column 2 instead of a
two-letter code. Leave column 1
blank.
Reattribution of income by reason
of disregarded payments between
a foreign branch and its foreign
branch owner. For reattribution of
income from the general category to
the foreign branch category, enter
"G2B" in column 2 instead of a
two-letter code. Leave column 1
blank.
For reattribution of income from the
foreign branch category to the general
-10-

Column 3(a). Report all inclusions
under sections 951(a)(1) (including
amounts under section 951(a)(1)(B)
and section 964(e)(4)) and 951A
(before gross-up). See section 904(d)
(3) and Look-Through Rules, earlier,
for more information with respect to
the separate category of such
inclusions. For each inclusion under
section 951(a)(1) with respect to a
CFC, make sure to enter the
appropriate identifying number in
column 1 and the country of residence
of the CFC in column 2.
Note. Under the Act, inclusions under
section 951(a)(1) now include hybrid
dividends received by a CFC from
another CFC of the same U.S.
shareholder. See section 964(e)(4).
Do not report the inclusion under
section 951A net of the deduction
allowed under section 250. The
deduction under section 250 is taken
into account in Schedule A, column
13(c).
If the corporation is a U.S.
shareholder in a PFIC that is a
qualified electing fund, report all
income deemed received (before
gross-up) under section 1293.
Column 3(b). In column 3(b), include
taxes deemed paid by a domestic
corporation with respect to inclusions
under section 951(a)(1) and section
951A as gross-ups. For inclusions
under section 951(a)(1), the gross-up
is the taxes deemed paid as reported
in the total of Schedule C, column 7.
The gross-up for inclusions under
section 951A is the amount computed
in Schedule D, Part II, column 3.
Column 4. Report dividends from
sources outside the United States for
the applicable separate category. This
includes dividends eligible for the
dividends received deduction under
section 245A. Note that hybrid
dividends are not eligible for the
dividends received deduction.

Instructions for Form 1118 (Rev. 12-2021)

Note. In general, dividends from a
domestic corporation are U.S. source
income, including dividends from a
domestic corporation which has 80%
(0.80) or more of its gross income
from sources outside the United
States.
Column 5. Enter interest received
from foreign sources. See section
861(c) for the treatment of interest
from a domestic corporation that
meets the foreign business
requirement.

Column 13(a). Enter the dividends
received deduction allowed on foreign
source dividends under section 245A.
This should be equal to the amount
reported in Schedule A, column 4, if
all such dividend income is eligible for
the dividends received deduction.

foreign source income in the
applicable separate category of
income (the amount entered in
column 7).
Column 13(g). Enter expenses
allocable to gross income from
performance of services that are
allocated and apportioned to foreign
source income in the applicable
separate category of income (the
amount entered in column 8).

DRAFT AS OF
November 4, 2021

Column 7. Include foreign source
gross income from sales (net of
returns and allowances and less costs
of goods sold). Include the foreign
source portion of section 863(b) sales
in this column.
Note. Under section 863(b), income
from the sale of inventory property is
sourced to the place of production.
Accordingly, do not include inventory
produced in the United States and
sold overseas in this column.
Column 8. Include gross income,
including compensation,
commissions, fees, etc., for technical,
managerial, engineering,
construction, scientific, or similar
services outside the United States.

Columns 9 and 10. Include the
following amounts in column 9. Use a
separate line for each type of gain and
enter the corresponding code in
column 10.
• Foreign source exchange gain
recognized under section 986(c) on a
distribution of PTEP. Enter code
“986c” in column 10.
• Foreign source exchange gain
recognized under section 987(3) on a
remittance from a QBU. Enter code
“987” in column 10.
• Foreign source exchange gain
recognized under section 988. Enter
code “988” in column 10.
Note. Section 988 exchange gain or
loss is sourced by reference to the
residence of the taxpayer or the QBU
of the taxpayer on whose books the
nonfunctional currency asset or
liability is properly reflected.
Column 11. Include other gross
income from sources outside the
United States for the applicable
separate category. Attach a schedule
identifying the gross income by type.

Instructions for Form 1118 (Rev. 12-2021)

Note. Certain hybrid dividends are
not eligible for the dividends received
deduction under section 245A. See
section 245A(e)(1).
Note. An amount treated as a
dividend under section 1291(d)(2)(B)
(related to PFICs) is ineligible for the
dividends received deduction. See
section 245A(f).

Note. The foreign branch income and
section 951A income categories do
not include any dividend income
eligible to be offset by the deduction
under section 245A.

Column 13(b). Enter the deduction
allowed under section 250(a)(1)(A)
with respect to foreign derived
intangible income, taking into account
the other provisions of section 250,
that is allocated and apportioned to
foreign source income in the
applicable separate category of
income. See Regulations section
1.861-8(e)(13).
Column 13(c). Enter the deduction
allowed under section 250(a)(1)(B)
with respect to GILTI (section 951A
inclusion), taking into account the
other provisions of section 250, that is
allocated and apportioned to foreign
source income in the applicable
separate category of income. See
Regulations section 1.861-8(e)(14).
Column 13(d). Enter the
depreciation, depletion, and
amortization deductions related to
rental, royalty, and licensing expenses
that are allocated and apportioned to
foreign source income in the
applicable separate category of
income.
Column 13(e). Enter the other
allocable expenses related to rental,
royalty, and licensing expenses that
are allocated and apportioned to
foreign source income in the
applicable separate category of
income.
Column 13(f). Enter expenses
allocable to gross income from sales
that are allocated and apportioned to
-11-

Columns 13(h) and 13(i). Include
any foreign source exchange loss
recognized under section 986(c) on a
distribution of PTEP, any foreign
source exchange loss recognized
under section 987(3) on a remittance
from a QBU, and any foreign source
exchange loss recognized under
section 988. Use a separate line for
each type of loss and enter the
corresponding code in column 13(i).
See the instructions for Schedule A,
column 9, earlier, for the applicable
codes.

Column 13(j). Include other
deductions allocable to income from
sources outside the United States
(dividends, interest, etc.) for the
applicable separate category that are
not otherwise included in Schedule H.
Include any reduction of foreign
source capital gain net income. If
foreign source capital gain net income
from all separate categories is more
than the capital gain net income
reported on the corporation's tax
return, enter a pro rata portion of the
excess as a negative number in each
separate category. See Capital Gains,
earlier.
In column 13(j), do not include
other expenses directly allocable to
dividends eligible for the dividends
received deduction under section
245A. Such directly allocable
expenses may include wire transfer,
currency exchange, and similar fees
incurred in connection with the
payment of dividends eligible for the
dividends received deduction under
section 245A. These expenses
reduce taxable income, but are not
taken into account in computing the
foreign tax credit limitation. See
section 904(b)(4).
Attach a schedule that lists all other
deductions included in column 13(j).
The schedule should include totals for
each line in column 13(j) that has an
entry.

Column 14. Enter only the
apportioned share from the applicable
line of Schedule H, Part I, column (b),
and Schedule H, Part II, column (d)
that relates to gross income reported
in columns 3 through 11 of
Schedule A. The applicable line of
Schedule H, Part I, column (b) is the
amount on line 6a(7), 6b(7), 6c(7),
6d(7), or 6e(7) of column (b) that
corresponds with the category of
income for which the corporation is
completing Form 1118. For example,
if the code entered on Schedule H,
Part I, line 6a is “PAS,” then enter the
amount from line 6a(7), column (b) on
the Form 1118 that the corporation is
completing for the passive category of
income (as indicated on line a at the
top of page 1 of Form 1118). The
applicable line of Schedule H, Part II,
column (d) is the amount on
line 3a(2), 3b(2), 3c(2), 3d(2), 3e(2),
or 3f(2) of column (d) that
corresponds with the category of
income for which the corporation is
completing Form 1118. For example,
if the code entered on Schedule H,
Part II, line 3a is “PAS,” then enter the
amount from line 3a(2), column (d) on
the Form 1118 that the corporation is
completing for the passive category of
income (as indicated on line a at the
top of page 1 of Form 1118).

determining the amount to enter in
column 15.
It is not necessary to report the
NOL deduction on a related-person or
per-country basis. Therefore, only
enter an amount on the totals line of
column 15. See Net operating losses,
earlier.

example, if the taxpayer entered on
Schedule A, line A, foreign source
sales income and paid tax to both
Country A and Country B on such
income, the filer would complete two
lines A on Schedule B with the tax
paid to Country A on one line and the
tax paid to Country B on the other line.

DRAFT AS OF
November 4, 2021

It is not necessary to report the
apportioned expenses on a
related-person or per-country basis.
Therefore, only enter an amount in the
totals line of column 14.
Note. With respect to the
apportionment of deductions reported
on Schedule H, Part II, the reduction
required by section 904(b)(4) in
deductions relating to dividends
eligible for the dividends received
deduction under section 245A is taken
into account (for purposes of
determining foreign source income or
loss in each separate category) by
carrying to Schedule A, column 14,
only the amounts on Schedule H, Part
II, column (d), lines 3a(2), 3b(2),
3c(2), 3d(2), 3e(2), and 3f(2).
Column 15. Enter the corporation's
NOL deduction allowed under section
172 that is attributable to foreign
source income in the applicable
separate category. If the NOL is part
of an overall foreign loss, see
Regulations section 1.904(g)-3 for
allocation rules that apply in

Schedule B

Part I—Foreign Taxes Paid,
Accrued, and Deemed Paid

Report only foreign taxes paid,
accrued, or deemed paid for the
separate category for which this Form
1118 is being completed. Report all
amounts in U.S. dollars. If the
corporation must convert from foreign
currency, attach a schedule showing
the amounts in foreign currency and
the exchange rate used.

For corporations claiming the credit
on the accrual basis, the exchange
rate for translating foreign taxes into
U.S. dollars will generally be an
average exchange rate for the tax
year to which the taxes relate.
However, the exchange rate on the
date of payment must be used if the
foreign taxes (a) are paid more than
24 months after the close of the tax
year to which they relate, or (b) are
paid in a tax year prior to the tax year
to which they relate. In addition,
corporations may elect to use the
exchange rate on the date of
payment. Corporations may elect to
use the payment date exchange rates
for all creditable foreign income taxes
or only those taxes that are
attributable to QBUs with U.S. dollar
functional currencies. The election is
made by attaching a statement to a
timely filed (including extensions)
Form 1118 that indicates the
corporation is making the election
under section 986(a)(1)(D). Once
made, the election applies for all
subsequent tax years and is
revocable only with the consent of the
IRS. See section 986(a)(1)(D).
The information entered on
each line of Schedule B, Part
CAUTION I, must pertain to an
identifying number and/or country
code specified on the corresponding
line of Schedule A, column 1 and/or
column 2. If foreign tax was paid to
more than one country on the same
income, enter the letter corresponding
to that income on multiple lines. For

!

-12-

Column 1. Claim the foreign tax
credit for the tax year in which the
taxes were paid or accrued,
depending on the method of
accounting used.
Note. For any given tax year, the
corporation can use the cash method
or the accrual method, but not both. If
a credit for taxes accrued is claimed,
show both the date accrued and the
date paid.
If the cash method of accounting is
used, an election under section
905(a) may be made to claim the
credit based on accrued taxes.
To make this election, check the
accrual box in column 1. Once made,
the election is binding on all
subsequent tax years in which a
foreign tax credit is claimed. Also, the
credits for foreign taxes, regardless of
whether they are claimed on the
accrual or cash basis, are subject to
the redetermination provisions of
section 905(c). See Foreign Tax
Credit Redeterminations, earlier, for
details.
Column 2(a). Include foreign taxes
withheld at source on dividends from
a first-tier foreign corporation. After
December 31, 2017, such taxes are
not creditable to the extent the
distribution is a dividend eligible for a
dividends received deduction under
section 245A. However, continue to
report the taxes in this column 2(a)
and reverse the taxes on Schedule G.
Column 2(b). Include foreign taxes
withheld at source on PTEP
distributions from a first-tier foreign
corporation. See sections 901 and
903. Do not include foreign taxes
withheld at source on PTEP
distributions from a lower-tier foreign
corporation to an upper-tier foreign
corporation and then deemed paid by
the domestic corporation under
section 960(b) on a distribution from
the upper-tier foreign corporation to
the domestic corporation. These
amounts are reported on Schedule E.

Instructions for Form 1118 (Rev. 12-2021)

Note. With respect to taxes
attributable to section 965(a) PTEP or
section 965(b) PTEP, do not reduce
the taxes by the applicable
percentage. The applicable
percentage reduction is taken into
account on Schedule G.
Column 2(c). Include foreign taxes
withheld on branch distributions or
transfers as determined under section
987. See sections 901 and 903.

account and the amount of previously
suspended taxes that are attributable
to that related income.

adjustment on line 8b these expense
amounts from Schedule H, Part II,
lines 5 and 6.

Line 4. If the corporation is
reclassifying high-taxed income from
passive category income, enter the
related tax adjustment on line 4.
Indicate whether the adjustment is
positive or (negative).

Line 8c. If the negative adjustments
included on line 8b (such as those
amounts coming in from Schedule H,
Part II, lines 5 and 6) exceed any
positive adjustments that are also
included on line 8b, the net line 8b
adjustment will be negative. When
this net negative amount on line 8b is
subtracted from a positive taxable
income amount on line 8a, the result
will be a positive line 8c amount that is
larger than the positive amount on
line 8a.

DRAFT AS OF
November 4, 2021

Column 2(f). Include foreign taxes
withheld at source on income not
specifically reportable in columns 2(a)
through 2(e). For example, some
countries withhold at source on sales
of stock of their resident companies
and such foreign tax paid or accrued
by the domestic corporate seller
would be reported in column 2(f).

Column 2(g). Include foreign taxes
paid or accrued on the portion of sales
income sourced to a foreign country.
This does not include taxes withheld
at source reported in column (f).
Column 3. Enter in column 3 the total
of the taxes deemed paid that
corresponds with the identifying
number specified on the
corresponding line of Schedule A,
column 1, with respect to the following
amounts.
• The taxes deemed paid under
section 960(a) as reported in
Schedule C, column 10.
• The taxes deemed paid under
section 960(b) as reported in
Schedule E, Part I, column 11.
Enter on the Schedule B, Part I line
that corresponds with the Schedule A
line with “951A” in column 2 the tax
deemed paid under section 960(d)
equal to the total amount reported in
Schedule D, Part II, column 4.

Part II—Separate
Foreign Tax Credit
Line 1b. If the corporation had a
foreign tax credit splitting event in a
prior tax year that resulted in a
suspension of foreign taxes under
section 909, enter the amount of
those taxes attributable to related
income taken into account in the
current tax year. The amount of taxes
suspended in a prior tax year should
have appeared on Schedule G, line E,
on your Form 1118 for that prior tax
year. See the regulations under
section 909 for rules for determining
when related income is taken into
Instructions for Form 1118 (Rev. 12-2021)

Line 5. Enter the total amount of
foreign taxes carried forward or back
to the current year. The amount of
foreign taxes carried forward to the
current tax year is the amount from
Schedule K (Form 1118), line 3,
column (xiv), plus the amount from
Schedule I (Form 1118), Part III,
line 3. Attach Schedule I (Form 1118)
and Schedule K (Form 1118) to Form
1118.

Line 7. If the corporation has a
current year overall domestic loss or
recapture of an overall domestic loss
account, or, in any of its separate
categories, a current year separate
limitation loss, an overall foreign loss,
recapture of an overall foreign loss, or
current year separate limitation
income in a category in which it has a
beginning balance of income that
must be recharacterized, adjustments
must be made. See the separate
Instructions for Schedule J to
determine if that schedule must be
filed.
Line 8b. Enter as a positive amount
taxable income that should not be
taken into account in computing the
foreign tax credit limitation. These
adjustments will decrease the net
worldwide taxable income reported on
line 8c (see the line 8c instructions,
later).
Enter as a negative amount
adjustments that increase the net
worldwide taxable income reported on
line 8c (see the line 8c instructions,
later). For example, the net worldwide
taxable income you report on line 8c
should not include expenses allocated
and apportioned to dividends for
which a dividends received deduction
is allowed under section 245A (see
section 904(b)(4)). Because the
line 8a amount (taxable income from
your tax return) includes these
expenses, a positive adjustment is
needed to back out these expenses
(thus increasing the net worldwide
taxable income reported on line 8c).
As such, include as a negative
-13-

Line 9. Divide line 7 by line 8c to
determine the limitation fraction. Enter
the fraction on line 9 as a decimal with
the same number of places as the
number of digits to the left of the
decimal in adjusted taxable income on
line 8c. For example, if adjusted
taxable income on line 8c is
$100,000, compute the limitation
fraction to 6 decimal places.
Line 12. The limitation may be
increased under section 960(c) for
any tax year that the domestic
corporation receives a PTEP
distribution. Enter on line 12 the
increase described in section 960(c)
(1).
If the line 12 amount exceeds the
domestic corporation's U.S. income
tax liability, the excess is deemed an
overpayment and can be claimed on
the domestic corporation's income tax
return as a refundable credit (Form
1120, Schedule J, Part III, line 20d, or
the corresponding line of other
corporate income tax returns). See
section 960(c)(5).

Part III—Summary of
Separate Credits

Complete Part III only once. Enter on
lines 1 through 6 the separate foreign
tax credits from Part II, line 14, for
each applicable separate category.

Note. Complete Part III only on the
Form 1118 with the largest amount
entered on Part II, line 14.
Line 8. If the corporation participates
in or cooperates with an international
boycott, the foreign tax credit may be
reduced. Complete Form 5713,
International Boycott Report. If the
corporation chooses to apply the
international boycott factor to
calculate the reduction in the credit,

enter the amount from line 2a(3) of
Schedule C (Form 5713) on line 8.

not previously taxed for the foreign
corporation's tax year that ended
November 30, 2021, enter “202111.”

Schedule C

Column 3. Enter the applicable
two-letter codes from the list at
IRS.gov/CountryCodes.

Report taxes deemed paid by the
domestic corporation under section
960(a) with respect to inclusions
under section 951(a)(1). This
schedule should be completed by
separate category of income and
subpart F income group. If there is a
subpart F inclusion related to more
than one subpart F income group,
complete a separate line for each
subpart F income group.

Column 4. Enter the applicable
three-character alphabet code for the
foreign corporation's functional
currency using the ISO 4217
standard. These codes are available
at https://www.six-group.com/en/
products-services/financialinformation/datastandards.html#scrollTo=currencycodes. Click on List One (XLS).

Code

i

Subpart F Income Group
(Reg. sec. 1.904-4(c)(3)(i)
through (iv))
All passive income received
during the tax year that is
subject to a withholding tax of
15% (0.15 ) or greater.

DRAFT AS OF
November 4, 2021

Column 1a. Enter the name of the
foreign corporation whose earnings
were included in income by the
domestic corporation filing the return.
Column 1b. Enter the foreign
corporation's EIN or reference ID
number. See Reference ID numbers,
earlier.

Note. Taxpayers no longer have the
option of entering “FOREIGNUS” or
“APPLIED FOR” in this column.
Instead, if the foreign corporation
does not have an EIN, the taxpayer
must use a reference ID number that
uniquely identifies such foreign
corporation, using the rules set forth in
Reference ID numbers, in the
Requirements section, earlier.
Column 1c. Enter the QBU's
reference ID number (if applicable).
See Reference ID numbers, earlier.
Complete column 1c only if a CFC
has one or more QBUs with passive
category income. See Regulations
section 1.904-4(c)(4).
Note. Taxpayers no longer have the
option of entering “FOREIGNUS” or
“APPLIED FOR” in this column.
Instead, if the QBU (or the CFC, if
applicable) does not have an EIN, the
taxpayer must use a reference ID
number that uniquely identifies such
QBU (or the CFC, if applicable), using
the rules set forth in Reference ID
numbers, in the Requirements
section, earlier.
Column 2. Enter the year and month
in which the foreign corporation's U.S.
tax year ended using format
YYYYMM.
Example. When figuring foreign
taxes deemed paid in 2021 by a
calendar year domestic corporation
with respect to inclusions out of E&P

Column 5(a). Enter the code which
describes the subpart F income group
classification (as set forth in
Regulations section 1.960-1(d)(2)(ii)
(B)(2)). Please enter the applicable
code from the following list.
Code
DIRRA

Subpart F Income Group (Reg.
sec. 1.960-1(d)(2)(ii)(B)(2))
Dividends,
interest,
royalties, and annuities.

rents,

NGCPT Net gain from certain property
transactions.
NGCT

Net gain from
transactions.

NFCG

Net foreign gain currency.

IEQI

Income equivalent to interest.

FBCSA

Foreign base company sales
income.

FBCSE

Foreign base company services
income.

FIFBC

Full inclusion foreign
company income.

INSUR

Insurance income described in
section 952(a)(1).

BOYC

Boycott income.

BKOP

Bribes, kickbacks, and other
payments described in section
952(a)(4).

901J

commodities

base

Income subject to section 901(j)
described in section 952(a)(5).

Column 5(b). Enter the code which
describes the subpart F income group
classification (as set forth in
Regulations section 1.904-4(c)(3)(i)
through (iv)). Please enter the
applicable code from the following list.

-14-

ii

All passive income received
during the tax year that is
subject to a withholding tax of
less than 15% (0.15) (but
greater than zero).

iii

All passive income received
during the tax year that is
subject to no withholding tax or
other foreign tax.

iv

All passive income received
during the tax year that is
subject to no withholding tax but
is subject to a foreign tax other
than a withholding tax.

Column 5(c). Enter the name of the
qualified business unit. Complete
column 5(c) only if a CFC has one or
more QBUs with passive category
income. See Regulations section
1.904-4(c)(4).
Column 6. Enter the total net income
in the subpart F income group
(identified in column 5(a) and 5(b)) in
the functional currency of the foreign
corporation. If there is net income
related to more than one subpart F
income group, use a separate line for
each subpart F income group.
Column 7. Enter the total current
year taxes in the subpart F income
group (identified in column 5(a) and
5(b)) in U.S. dollars.
Note. See the instructions for
Schedule G, later, for information on
reduction of foreign taxes for failure to
furnish information required under
section 6038.
Column 8(a). Enter the section
951(a)(1) inclusion attributable to the
subpart F income group (identified in
column 5(a) and 5(b)) in the functional
currency of the foreign corporation.
Column 8(b). Enter the amount from
column 8(a) translated into U.S.
dollars at the appropriate exchange
rate specified in section 989(b).
Column 10. For each line, multiply
the amount in column 7 by the amount
in column 9 and enter the result in
column 10. This is the tax deemed
paid computed under section 960(a).
Instructions for Form 1118 (Rev. 12-2021)

Example 1. USC is a domestic
corporation. CFC is a controlled
foreign corporation incorporated in
Country X. CFC has two qualified
business units (QBUs): QBU1 and
QBU2. QBU1 and QBU2 are
organized in Country X. The U.S. tax
year for USC, CFC, QBU1, and QBU2
ends on December 31. The functional
currency of CFC, QBU1, and QBU2 is
the “u.” At all relevant times, 1u = $1.
For its U.S. tax year ending December
31, 2021, after foreign taxes, QBU1
has 1,000,000u passive category
dividend income subject to a less than
15% withholding tax (“QBU1 income
group 1”). QBU1 has 1,000,000u
passive category dividend income
subject to a greater than 15%
withholding tax (“QBU1 income group
2”). QBU2 has 2,400,000u passive
category dividend income subject to a
less than 15% withholding tax (“QBU2
income group”). QBU1 has current
year taxes of $50,000 and $200,000
in QBU1 income group 1 and QBU1
income group 2, respectively. QBU2
has current year taxes of $240,000 in
QBU2 income group. USC has a
subpart F inclusion with respect to
CFC of which an amount of 800,000u
is attributable to each of QBU1
income group 1 and QBU1 income
group 2 and 1,920,000u is attributable
to QBU2 income group. The country
code for Country X is “OC.” CFC,
QBU1, and QBU2 have reference ID
numbers of 100000, 100011, and
100012, respectively. The applicable
three-character alphabet code for the
“u” using the ISO 4217 standard is
“UUU.” USC completes Schedule C of
its Form 1118 with respect to the
passive category as follows.
USC makes the following entries
on the first of three lines on
Schedule C.

Column

Entry

Column

Entry

1a

CFC

1a

CFC

1b

100000

1b

100000

1c

100011

1c

100012

2

202112

2

202112

DRAFT AS OF
November 4, 2021
3

OC

3

OC

4

UUU

4

UUU

5(a)

DIRRA

5(a)

DIRRA

5(b)

ii

5(b)

ii

5(c)

QBU1

5(c)

QBU2

6

1,000,000u

6

2,400,000u

7

50,000

7

240,000

8(a)

800,000u

8(a)

1,920,000u

8(b)

800,000

8(b)

1,920,000

9

0.800

9

0.800

10

40,000

10

192,000

USC makes the following entries
on the second of three lines on
Schedule C.
Column

Entry

1a

CFC

1b

100000

1c

100011

2

202112

3

OC

4

UUU

5(a)

DIRRA

5(b)

i

5(c)

QBU1

6

1,000,000u

7

200,000

8(a)

800,000u

8(b)

800,000

9

0.800

10

160,000

USC makes the following entries
on the third of three lines on
Schedule C.

Instructions for Form 1118 (Rev. 12-2021)

-15-

Example 2. USC is a domestic
corporation. CFC1 and CFC2 are
controlled foreign corporations
incorporated in Country X. The U.S.
tax year for USC, CFC1, and CFC2
ends on December 31. At all relevant
times, 1u = $1. For its U.S. tax year
ending December 31, 2021, after
foreign taxes, CFC1 has 1,000,000u
passive category dividend income
subject to a withholding tax of less
than 15% (“CFC1 income group 1”)
and 2,400,000u passive category
interest income subject to foreign tax
other than withholding tax (“CFC1
income group 2”). CFC1 has current
year taxes (including the withholding
tax) of $50,000 in CFC1 income group
1 and $240,000 in CFC1 income
group 2. USC has a subpart F
inclusion with respect to CFC1 of
which 800,000u is attributable to
CFC1 income group 1 and
1,920,000u is attributable to CFC1
income group 2. For its U.S. tax year
ending December 31, 2021, after
foreign taxes, CFC2 has 1,800,000u
of passive category gain from
commodities transactions subject to
foreign tax other than withholding tax
(“CFC2 income group”). CFC2 has
current year taxes of $450,000 in the
CFC2 income group. USC has a
subpart F inclusion of 1,440,000u
attributable to the CFC2 income
group. The country code for Country X
is “OC.” CFC1 and CFC2 have
reference ID numbers of 100011 and
100012, respectively. The functional
currency of both CFC1 and CFC2 is
the “u.” The applicable

three-character alphabet code for the
“u” using the ISO 4217 standard is
“UUU.” USC completes Schedule C of
its Form 1118 with respect to the
passive category as follows.
USC makes the following entries
on the first of three lines on
Schedule C.

Column

Entry

1a

CFC2

1b

100012

1c
2

202112

3

OC

Schedule A with “951A” in column 2 of
Schedule A).

Part I—Foreign Corporation's
Tested Income and Foreign
Taxes
Column 1a. Enter the name of each
CFC that has tested income, as
defined in section 951A(c)(2)(A). Do
not report information of CFCs with
tested losses, as defined in section
951A(c)(2)(B).

DRAFT AS OF
November 4, 2021
Entry

4

UUU

5(a)

NGCT

1a

CFC1

5(b)

iv

1b

100011

5(c)

Column

1c

6

1,800,000u

7

450,000

2

202112

3

OC

8(a)

1,440,000u

4

UUU

8(b)

1,440,000

5(a)

DIRRA

9

0.800

5(b)

ii

10

360,000

5(c)
6

1,000,000u

7

50,000

8(a)

800,000u

8(b)

800,000

9

0.800

10

40,000

USC makes the following entries
on the second of three lines on
Schedule C.
Column

Entry

1a

CFC1

1b

100011

1c
2

202112

3

OC

4

UUU

5(a)

DIRRA

5(b)

iv

5(c)
6

2,400,000u

7

240,000

8(a)

1,920,000u

8(b)

1,920,000

9

0.800

10

192,000

USC makes the following entries
on the third of three lines on
Schedule C.

Schedule D

Report taxes deemed paid under
section 960(d) with respect to
inclusions under section 951A. This
schedule should only be completed
with respect to the Form 1118 filed for
the section 951A category, and, in
rare cases, the passive category.

Schedule D is generally completed
by a domestic corporation that owns,
within the meaning of section 958(a),
stock in one or more CFCs that claims
taxes deemed paid with respect to
inclusions under section 951A.
Schedule D is also generally
completed by an individual (or an
estate or trust) that has made an
election under section 962 ("section
962 elector").
If more than one line is needed in
Part II:
• In Part II, column 2, the same
denominator will be used (the Part I,
column 5 total) in the inclusion
percentage calculation for each line;
and
• In Part II, column 3, the same
multiplication factor will be used (the
Part I, column 9 total) for each line.
If more than one line is completed
in Part II, the column 4 amounts
should be summed and included on a
single line on Form 1118, Schedule B,
Part I, column 3 (that is, the line on
Schedule B, Part I, column 3, that
corresponds with the line in
-16-

Column 1b. Enter the EIN or
reference ID number of the foreign
corporation. See Reference ID
numbers, earlier.

Note. Taxpayers no longer have the
option of entering “FOREIGNUS” or
“APPLIED FOR” in this column.
Instead, if the foreign corporation
does not have an EIN, the taxpayer
must use a reference ID number that
uniquely identifies such foreign
corporation, using the rules set forth in
Reference ID numbers, in the
Requirements section, earlier.
Column 2. Enter the year and month
in which the CFC's U.S. tax year
ended using the format YYYYMM.
Column 3. Enter the applicable
two-letter codes from the list at
IRS.gov/CountryCodes.
Column 4. Enter the applicable
three-character alphabet code for the
foreign corporation's functional
currency using the ISO 4217
standard. These codes are available
at https://www.six-group.com/en/
products-services/financialinformation/datastandards.html#scrollTo=currencycodes. Click on List One (XLS).
Column 5. Enter the U.S.
shareholder's pro rata share of the
CFC's tested income from the
applicable Form 8992 schedule. If the
U.S. shareholder is not a member of a
U.S. consolidated group, enter the
amount reported on Form 8992,
Schedule A, column (e), for the CFC.
If the U.S. shareholder is a member of
a U.S. consolidated group, enter the
amount reported with respect to that
U.S. shareholder on Schedule B
(Form 8992), Part I, column (g), for the
CFC.
Column 6. Enter the CFC's tested
income from the applicable Form
8992 schedule. If the U.S.

Instructions for Form 1118 (Rev. 12-2021)

shareholder is not a member of a U.S.
consolidated group, enter the amount
reported on Form 8992, Schedule A,
column (c), for the CFC. If the U.S.
shareholder is a member of a U.S.
consolidated group, enter the amount
reported with respect to that U.S.
shareholder on Schedule B (Form
8992), Part I, column (e), for the CFC.

Column 1. Enter the GILTI (that is,
the section 951A inclusion) from Form
8992, Part II, line 5.
Column 3. This amount as
determined on this line is the section
78 gross-up with respect to an
inclusion under section 951A which is
reported on Form 1118, Schedule A,
column 3(b).

does not have an EIN, the taxpayer
must use a reference ID number that
uniquely identifies such foreign
corporation, using the rules set forth in
Reference ID numbers, in the
Requirements section, earlier.
Column 2. Enter the year and month
for the U.S. tax year of the first-tier
foreign corporation in which the
first-tier foreign corporation made the
PTEP distribution to the domestic
corporation. Use the format YYYYMM.
If there is a PTEP distribution related
to more than one PTEP group within
an annual PTEP account, complete a
separate line for each PTEP group
within an annual PTEP account. See
Regulations section 1.960-3(c)(2).

DRAFT AS OF
November 4, 2021

Column 8. Enter the CFC's tested
foreign income taxes from
Schedule Q (Form 5471), line 3,
column (xii).

Column 9. Enter the pro rata share of
tested foreign income taxes paid or
accrued by the CFC. To determine
this amount, multiply the amount in
column 7 by the amount in column 8.
Note. See the instructions for
Schedule G, later, for information on
reduction of foreign taxes for failure to
furnish information required under
section 6038.

Part II—Foreign Income Tax
Deemed Paid

Note. While multiple line entries may
be necessary for Schedule D, Part I,
because such lines are completed for
each CFC, in general, only one line
will be completed in Schedule D, Part
II, because the domestic corporation
filing Form 1118 only has one section
951A inclusion. However, there is an
exception if Form 1118 is completed
by an individual (or by an estate or
trust) that has made an election under
section 962 ("section 962 elector")
and the section 962 elector is a
shareholder of an S corporation that
has made an election to treat the S
corporation as an entity (rather than
as an aggregate of its owners), as
provided in Notice 2020-69, 2020-39
I.R.B. 604, on a timely (including
extensions) filed original Form 1120-S
with respect to the first tax year
ending on or after September 1, 2020.
In this case, the section 962 elector
may have more than one section
951A inclusion that will be reported on
separate lines on Schedule D, Part II.
There might be multiple lines as a
result of (1) the section 962 elector's
section 951A inclusion, and (2) the
section 962 elector's share of the
section 951A inclusion of the S
corporation. There also could be
multiple lines if the section 962 elector
has an interest in more than one S
corporation.
Instructions for Form 1118 (Rev. 12-2021)

Schedule E

Report taxes deemed paid by the
domestic corporation under section
960(b) with respect to PTEP
distributions. Taxes reported on this
schedule are with respect to foreign
taxes levied on distributions of PTEP
from a lower-tier foreign corporation to
an upper-tier foreign corporation when
those taxes are subsequently deemed
paid by the domestic corporation
upon distribution of such PTEP by the
upper-tier foreign corporation to the
domestic corporation.
Note. Foreign withholding taxes
levied on a domestic corporation as a
result of distributions of PTEP from a
first-tier foreign corporation to such
domestic corporation are not reported
on Schedule E. Such taxes are
reported on Schedule B, Part I,
column 2(b), as tax withheld on
distributions of PTEP.

Part I—Tax Deemed Paid by
Domestic Corporation
Column 1a. Enter the name of each
first-tier foreign corporation that had
foreign income taxes properly
attributable to PTEP distributions to a
domestic corporation that were not
previously deemed paid by a
domestic corporation. For
distributions of PTEP that originated in
lower-tier foreign corporations, enter a
unique alphabetic character before
the name of the distributing foreign
corporation to identify the source of
the PTEP distribution. See the
instructions for Part II, Column 1a. for
more information, including an
example.
Column 1b. Enter the EIN or
reference ID number of the foreign
corporation. See Reference ID
numbers, earlier.
Note. Taxpayers no longer have the
option of entering “FOREIGNUS” or
“APPLIED FOR” in this column.
Instead, if the foreign corporation
-17-

Column 3. Enter the applicable
two-letter codes from the list at
IRS.gov/CountryCodes.

Column 4. Enter the applicable
three-character alphabet code for the
distributing foreign corporation's
functional currency using the ISO
4217 standard. These codes are
available at https://www.sixgroup.com/en/products-services/
financial-information/datastandards.html#scrollTo=currencycodes. Click on List One (XLS).
Column 5. Enter the code which
describes the PTEP group
classification (as set forth in
Regulations section 1.960-3(c)(2)).
Please enter the applicable PTEP
group code from the following list.
Taxes related to previously
taxed E&P

PTEP
Group
Code

Reclassified section 965(a) PTEP

R965a

Reclassified section 965(b) PTEP

R965b

General section 959(c)(1) PTEP

959c1

Reclassified section 951A PTEP

R951A

Reclassified section 245A(d)
PTEP

R245Ad

Section 965(a) PTEP

965a

Section 965(b) PTEP

965b

Section 951A PTEP
Section 245A(d) PTEP
Section 951(a)(1)(A) PTEP

951A
245Ad
951a1A

Column 6. Enter the inclusion year
for the PTEP of the foreign
corporation to which inclusion under
section 951(a) and GILTI inclusion

amounts of U.S. shareholders are
attributable. This is the annual PTEP
account. See Regulations section
1.960-3(c)(1).
Column 7. Enter the total amount of
the foreign corporation’s PTEP in the
PTEP group within an annual PTEP
account identified in columns 5 and 6.
Enter the amount in the functional
currency of the first-tier foreign
corporation.

could relate to current year or prior
year PTEP distributions between
foreign corporations, so the applicable
year should be noted in column 2
using the format YYYYMM.
If foreign income taxes paid,
accrued, or deemed paid by a first-tier
foreign corporation are properly
attributable to a PTEP distribution
from one or more lower-tier foreign
corporations, report all such PTEP
distributions by the lower-tier foreign
corporations in Part II, even if the
distributing lower-tier foreign
corporations did not pay or accrue
(and were not deemed to pay) any
foreign income taxes with respect to
the PTEP distributions. For each tier,
report the amount of the PTEP
distribution from the first-tier foreign
corporation that is attributable to a
PTEP distribution from the lower-tier
foreign corporation and the amount of
foreign income taxes paid, accrued, or
deemed paid by that lower-tier foreign
corporation with respect to that
portion of the PTEP distribution.
Because only foreign taxes imposed
on the receipt of a PTEP distribution
from a lower-tier foreign corporation
are eligible for credit under section
960(b), no foreign taxes of the
lowest-tier foreign corporation to
which the PTEP distribution is
attributable are properly attributable to
a PTEP distribution made to an
upper-tier foreign corporation. See
Regulations section 1.960-1(d)(3)(ii)
(C).

sourced from PTEP distributions from
CFC2 and CFC3).
Part II, column 1a. Enter “A
CFC2” (to report distribution from
CFC2 to CFC1), and enter “A CFC3”
(to report distribution from CFC3 to
CFC2).

DRAFT AS OF
November 4, 2021

Column 8. Enter the total amount of
the foreign corporations’ PTEP group
taxes with respect to the PTEP group
within the annual PTEP account
identified in columns 5 and 6. Enter
the amount in U.S. dollars.

Column 9. Enter the PTEP
distribution from the PTEP group
within the annual PTEP account
identified in columns 5 and 6 in the
functional currency of the first-tier
foreign corporation. If there is a PTEP
distribution related to more than one
PTEP group within an annual PTEP
account, complete a separate line for
each PTEP group within an annual
PTEP account.

Column 11. For each line, multiply
the amount in column 8 by the amount
in column 10. This is the U.S. dollar
amount of the foreign income taxes
properly attributable to the PTEP
distribution reported in column 9 and
not deemed to have been paid by the
domestic corporation for the tax year
or any prior tax year.
Note. With respect to distributions of
PTEP resulting from inclusions under
section 965, report the taxes properly
attributable to such PTEP without
reduction for the foreign tax credit
disallowance. The disallowance is
taken into account in Schedule G. See
the specific instructions for
Schedule G, later.

Part II—Tax Paid or Deemed
Paid by First- and Lower-Tier
Foreign Corporations

The purpose of Part II is to track the
current year and historical PTEP
distributions between foreign
corporations and taxes paid, accrued,
or deemed paid by upper-tier foreign
corporations on such PTEP
distributions. These amounts are to be
reported on this Part II only to the
extent that there is a PTEP distribution
to the domestic corporation entered in
Part I. The amounts entered in Part II

Column 1a. Enter the name of each
lower-tier foreign corporation that
distributed PTEP to an upper-tier
foreign corporation, in the current year
or a prior year, that in turn was
distributed in the current year to a
domestic corporation. In column 1a,
preceding the name of the distributing
lower-tier foreign corporation, enter a
unique alphabetic character that
corresponds to a PTEP distribution
reported in Part I. For example, in the
case of a PTEP distribution from
CFC3, third-tier foreign corporation, to
CFC2, second-tier foreign
corporation, to CFC1, first-tier foreign
corporation, to USP, a domestic
corporation, the domestic corporation
correlates the distributions as follows.
Part I, column 1a. Enter “A
CFC1” (to report distribution from
CFC1 to domestic corporation
-18-

Column 1b. Enter the EIN or
reference ID number of the
distributing foreign corporation. See
Reference ID numbers, earlier.

Note. Taxpayers no longer have the
option of entering “FOREIGNUS” or
“APPLIED FOR” in this column.
Instead, if the distributing foreign
corporation does not have an EIN, the
taxpayer must use a reference ID
number that uniquely identifies such
foreign corporation, using the rules set
forth in Reference ID numbers, in the
Requirements section, earlier.
Column 2. Enter the U.S. tax year of
the distributing foreign corporation
which includes the date when the
foreign corporation distributed the
PTEP to the upper-tier foreign
corporation.
Note. If the PTEP distributed in Part I
relates to PTEP distributions from
lower-tier foreign corporations made
in more than one tax year, figure and
show the tax deemed paid on a
separate line for each distribution.
Column 3. Enter the applicable
two-letter codes from the list at
IRS.gov/CountryCodes.
Column 4b. Enter the EIN or
reference ID number of the recipient
foreign corporation. See Reference ID
numbers, earlier.

Note. Taxpayers no longer have the
option of entering “FOREIGNUS” or
“APPLIED FOR” in this column.
Instead, if the recipient foreign
corporation does not have an EIN, the
taxpayer must use a reference ID
number that uniquely identifies such
foreign corporation, using the rules set
forth in Reference ID numbers, in the
Requirements section, earlier.
Column 5. Enter the U.S. tax year of
the recipient foreign corporation which
includes the date the foreign
corporation received the PTEP
distribution.
Column 6. Enter the applicable
two-letter codes from the list at
IRS.gov/CountryCodes.
Instructions for Form 1118 (Rev. 12-2021)

Column 7. Enter the applicable
three-character alphabet code for the
distributing foreign corporation's
functional currency using the ISO
4217 standard. These codes are
available at https://www.sixgroup.com/en/products-services/
financial-information/datastandards.html#scrollTo=currencycodes. Click on List One (XLS).

Note. See the Note in the instructions
for Part I, column 11, for purposes of
reporting foreign income taxes
properly attributable to PTEP
distributions resulting from inclusions
under section 965.
Note. See the instructions for
Schedule G, later, for information on
reduction of foreign taxes for failure to
furnish information required under
section 6038.

Column

Entry

1a

A CFC1

1b

10041

2

202112

3

BC

4

UUU

5

965a

6

2017

7

160u

DRAFT AS OF
November 4, 2021

Column 8. Enter the applicable
PTEP group code from the list
provided in the specific instructions
for Schedule E, Part I, Column 5,
earlier.

Column 9. Enter the annual PTEP
account. See the instructions for
Schedule E, Part I, Column 6, earlier.

Column 10. Enter the total amount of
the foreign corporation’s PTEP in the
PTEP group within the annual PTEP
account identified in column 8 and
column 9. Enter such amount in the
functional currency of the distributing
foreign corporation.
Column 11. Enter the total amount of
the foreign corporation’s PTEP group
taxes with respect to the PTEP group
within the annual PTEP account
identified in column 8 and column 9.
Enter this amount in U.S. dollars. To
determine the appropriate translation
rate, see section 986(a).

Column 12. Enter the PTEP
distribution with respect to the PTEP
group within the annual PTEP account
identified in columns 8 and 9 in the
functional currency of the distributing
foreign corporation. If there is a PTEP
distribution related to more than one
PTEP group within an annual PTEP
account, complete a separate line for
each PTEP group within an annual
PTEP account. Only report the
amount of PTEP that was ultimately
distributed to the domestic
corporation in the current year, even if
the amount of PTEP distributed to the
upper-tier foreign corporation was
greater than that amount.

Example 1. USC is a domestic
corporation. CFC1, a Country Y
corporation, wholly owns Country X
corporations CFC2 and CFC3. The
U.S. tax year for USC, CFC1, CFC2,
and CFC3 ends on December 31.
During the U.S. tax year ending
December 31, 2021, CFC2 and
CFC3, both second-tier CFCs, each
distribute 100u, comprising all of their
respective section 965(a) PTEP within
the annual PTEP account for the 2017
tax year (“2017 section 965(a) PTEP”)
within the general category, to CFC1,
a first-tier CFC. CFC1 pays 40u equal
to $40 of taxes to Country X on the
200u PTEP distributions, reducing the
2017 section 965(a) PTEP to 160u. In
that same year, CFC1 distributes all
160u of the 2017 section 965(a) PTEP
to USC. CFC1 does not have any
other PTEP balances. The reference
ID numbers for CFC1, CFC2, and
CFC3 are 10041, 10042, and 10043,
respectively. The country codes for
Country X and Country Y are OC and
BC, respectively. The functional
currency of CFC1, CFC2, and CFC3
is the “u.” The applicable
three-character alphabet code for the
“u” using the ISO 4217 standard is
“UUU.”
USC makes the following entries
on a single line on Schedule E, Part I.

40

9

160u

10

1.000

11

40

USC makes the following entries
on the first of two lines on Schedule E,
Part II.
Column

Entry

1a

A CFC2

1b

10042

2

202112

3

OC

4a

CFC1

4b

10041

5

202112

6

BC

7

UUU

8

965a

9

2017

10

80u

11

0

12

80u

13

1.000

14

0

USC makes the following entries
on the second of two lines on
Schedule E, Part II.

Column 14. Enter the U.S. dollar
amount of the recipient foreign
corporation's income taxes paid,
accrued, and deemed paid that are
properly attributable to the PTEP
distribution reported in column 12 and
not deemed to have been paid by the
domestic corporation for any prior tax
year.

Instructions for Form 1118 (Rev. 12-2021)

8

-19-

Column

Entry

1a

A CFC3

1b

10043

2

202112

3

OC

4a

CFC1

4b

10041

5

202112

6

BC

“u” using the ISO 4217 standard is
“UUU.”
Schedule E reporting is not
necessary for USC’s tax years ending
December 31, 2018, 2019, and 2020.
For USC's tax year ending December
31, 2021, USC makes the following
entries on a single line on its general
category Form 1118, Schedule E, Part
I.

Column

Entry

1a

A CFC3

1b

20043

2

201812

3

BC

4a

CFC2

4b

20042

5

201812

6

OC

DRAFT AS OF
November 4, 2021
7

UUU

8

965a

9

2017

10

80u

11

0

12

80u

13

1.000

14

0

Example 2. USC is a domestic
corporation. CFC1 and CFC2 are
Country X corporations, and CFC3 is
a Country Y corporation. The U.S. tax
year for USC, CFC1, CFC2, and
CFC3 ends on December 31. During
CFC3’s U.S. tax year ending
December 31, 2018, CFC3 distributes
100u, comprising its entire section
965(a) PTEP within the annual PTEP
account for the 2017 tax year (“2017
section 965(a) PTEP”) within the
general category, to CFC2, a CFC
that wholly owns CFC3. CFC2 pays
tax of 20u to Country X equal to $20
on the 100u PTEP distribution,
reducing the 2017 section 965(a)
PTEP to 80u. In CFC2’s U.S. tax year
ending December 31, 2019, CFC2
distributes 40u of the 2017 section
965(a) PTEP to CFC1, a CFC that
wholly owns CFC2. CFC1 pays no tax
on such distribution, but is deemed to
pay $10 of the tax paid by CFC2. In
CFC1’s U.S. tax year ending
December 31, 2021, CFC1 distributes
40u to USC, who wholly owns CFC1.
USC pays no foreign tax on such
distribution, but is deemed to pay $10
of the tax paid by CFC2. The
reference ID numbers for CFC1,
CFC2, and CFC3 are 20041, 20042,
and 20043, respectively. The country
codes for Country X and Country Y
are OC and BC, respectively. The
functional currency of CFC1, CFC2,
and CFC3 is the “u.” The applicable
three-character alphabet code for the

Column

Entry

1a

A CFC1

1b

20041

2

202112

3

OC

4

UUU

5

965a

6

2017

7

40u

8

10

9

40u

10

1.000

11

10

USC makes the following entries
on the first of two lines on Schedule E,
Part II.
Column

Entry

1a

A CFC2

1b

20042

2

201912

3

OC

4a

CFC1

4b

20041

5

201912

6

OC

7

UUU

8

965a

9

2017

10

80u

11

20

12

40u

13

0.500

14

10

USC makes the following entries
on the second of two lines on
Schedule E, Part II.
-20-

7

UUU

8

965a

9

2017

10

80u

11

0

12

40u

13

0.500

14

0

Example 3. USC is a domestic
corporation. CFC1 is a Country X
corporation, CFC2 is a Country Y
corporation, and CFC3 is a Country Z
corporation. The U.S. tax year of
USC, CFC1, CFC2, and CFC3 ends
on December 31. During CFC3’s U.S.
tax year ending December 31, 2018,
CFC3 distributes 1,000u, comprising
all of its subpart F PTEP within the
annual PTEP account for the 2016 tax
year (“2016 section 951(a)(1)(A)
PTEP”) within the general category, to
CFC2, a CFC that wholly owns CFC3.
CFC2 pays tax of 100u to Country Y
equal to $100 on the 1,000u PTEP
distribution, reducing the 2016 section
951(a)(1)(A) PTEP to 900u. In CFC2’s
tax year ending December 31, 2019,
CFC2 distributes 250u, comprising all
of its section 951A PTEP within the
annual PTEP account for the 2018 tax
year (“2018 section 951A PTEP”)
within the section 951A category, to
CFC1, a CFC that wholly owns CFC2.
CFC1 pays tax of 25u to Country X
equal to $25 on the 250u PTEP
distribution, reducing the 2018 section
951A PTEP to 225u. During CFC2’s
tax year ending December 31, 2021,
CFC2 distributes 450u out of its 2016
section 951(a)(1)(A) PTEP balance of
900u to CFC1. CFC1 pays tax of 45u
to Country X equal to $45 on the 450u
PTEP distribution, reducing the 2016
section 951(a)(1)(A) PTEP to 405u.
CFC1 is also deemed to pay $50 of
the tax paid by CFC2 on the 2018
distribution of the PTEP from CFC3. In
Instructions for Form 1118 (Rev. 12-2021)

the same year, CFC1 distributes 630u
to USC, which wholly owns CFC1.
Such distribution includes all of
CFC1’s 2016 section 951(a)(1)(A)
PTEP of 405u and 2018 section 951A
PTEP of 225u. USC pays no foreign
tax on such distribution, but is
deemed to pay $50 of the tax deemed
paid by CFC1 and the $70 tax paid by
CFC1 on the 2019 and 2021
distributions of the PTEP from CFC2.

Column

Entry

Column

Entry

1a

A CFC2

1a

B CFC1

1b

10042

1b

10041

2

202112

2

202112

3

CC

3

OC

DRAFT AS OF
November 4, 2021

The reference ID numbers for
CFC1, CFC2, and CFC3 are 10041,
10042, and 10043, respectively. The
country codes for Country X, Country
Y, and Country Z are OC, CC, and
BC, respectively. The functional
currency of CFC1, CFC2, and CFC3
is the “u.” The applicable
three-character alphabet code for the
“u” using the ISO 4217 standard is
“UUU.”

Schedule E reporting is not
necessary for USC's tax years ending
December 31, 2018, 2019, and 2020.
For USC's tax year ending December
31, 2021, USC completes Form 1118,
Schedule E, as follows:
USC makes the following entries
on Schedule E, Part I, with respect to
general category income.

4a

CFC1

4

UUU

4b

10041

5

951A

5

202112

6

2018

6

OC

7

225u

7

UUU

8

25

8

951a1A

9

225u

9

2016

10

1.000

10

810u

11

25

11

100

12

405u

13

0.500

14

50

USC makes the following entries
on the second of two lines on
Schedule E, Part II, of its Form 1118
with respect to general category
income.
Column

Entry

1a

A CFC3

1b

10043

Column

Entry

2

201812

1a

A CFC1

3

BC

1b

10041

4a

CFC2

2

202112

4b

10042

3

OC

5

201812

4

UUU

6

CC

5

951a1A

7

UUU

6

2016

8

951a1A

7

405u

9

2016

8

95

10

810u

9

405u

11

0

10

1.000

12

405u

11

95

13

0.500

14

0

USC makes the following entries
on the first of two lines on Schedule E,
Part II, of its Form 1118 with respect
to general category income.

Instructions for Form 1118 (Rev. 12-2021)

USC makes the following entries
on a line on Schedule E, Part II, of its
Form 1118 with respect to section
951A category income.

USC makes the following entries
on a line on Schedule E, Part I, of its
Form 1118 with respect to section
951A category income.

-21-

Column

Entry

1a

B CFC2

1b

10042

2

201912

3

CC

4a

CFC1

4b

10041

5

201912

6

OC

7

UUU

8

951A

9

2018

10

225u

11

0

12

225u

13

1.000

14

0

Schedule F

Reserved for future use.

Schedule G
Part I
Line A. If the corporation claims a
deduction for percentage depletion
under section 613 with respect to any
part of its foreign mineral income (as
defined in section 901(e)(2)) for the
tax year, any foreign taxes on that
income must be reduced by the
smaller of:

1. The foreign taxes minus the tax
on that income, or
2. The tax on that income
determined without regard to the
deduction for percentage depletion
minus the tax on that income.
The reduction must be made on a
country-by-country basis (Regulations
section 1.901-3(a)(1)). Attach a
separate schedule showing the
reduction.

be reduced by the relevant applicable
percentage. See Regulations section
1.965-5(b). Taxes deemed paid with
respect to distributions of section
965(a) PTEP and section 965(b)
PTEP must be reduced by the
relevant applicable percentage. See
Regulations section 1.965-5(c)(1)(i)
and (iii).

System) of the product lines to which
the R&E deductions relate. See
Regulations section 1.861-17(b)(3) for
details on choosing SIC codes and
changing a product category.
Note. If the corporation has more
than two product lines, see
Computer-Generated Schedule H,
earlier.

DRAFT AS OF
November 4, 2021

Line C. If the corporation chooses to
calculate the reduction in the foreign
tax by identifying taxes specifically
attributable to participation in or
cooperation with an international
boycott, enter the amount from
Schedule C (Form 5713), line 2b. See
Form 5713 and its separate
Schedule C and instructions.

Line D. If the corporation controls a
foreign corporation or partnership and
fails to furnish any return or any
information in any return required
under section 6038(a) by the due
date, reduce the foreign taxes
available for credit under sections 901
and 960 by 10% (0.10). If the failure
continues for 90 days or more after
the date of written notice by the IRS,
reduce the tax by an additional 5%
(0.05) for each 3-month period or
fraction thereof during which the
failure continues after the 90-day
period has expired. See section
6038(c) for limitations and special
rules.
In addition, a $10,000 penalty is
imposed under section 6038(b) for
failure to supply the information
required under section 6038(a) for
each entity within the time prescribed.
If the required information is not
submitted within 90 days after the IRS
has mailed notice to the U.S. person,
additional penalties may apply.
Note. The reduction in foreign taxes
available for credit is reduced by any
dollar penalty imposed under section
6038(b).
Line E. Enter foreign income taxes
paid or accrued during the current tax
year that have been suspended due
to the rules of section 909.
Line F. Enter disallowed taxes under
section 965(g).
Taxes paid or accrued with respect
to distributions of section 965(a)
PTEP and section 965(b) PTEP must

Line G. Enter disallowed taxes under
section 245A. Such disallowed taxes
may also include, for example, gain
on certain sales of CFC stock treated
as dividends. See section 964(e)(4).
Line H. For any other reductions in
taxes, enter the code “OTH” and
attach a statement with the amount
and the nature of such other
reduction.

Schedule H
Computer-Generated
Schedule H

A computer-generated Schedule H
may be filed if it conforms to the IRS
version. In some cases, Schedule H
must be expanded to properly report
apportioned deductions. This applies
in cases such as when the
corporation:
• Has more than two product lines
(under the gross receipts method of
apportioning research and
experimental (R&E) deductions),
• Has section 901(j) income from
more sanctioned countries than space
permits within Part I, line 6, and Part II,
line 3; and
• Has income re-sourced by treaty
from more countries than space
permits within Part I, line 6, and Part II,
line 3.

Part I—Research and
Experimental Deductions

Note. These instructions refer to the
regulations issued on November 12,
2020. See Regulations section
1.861-17 (T.D. 9922, 85 FR 72042).
Use Part I to apportion R&E
deductions. Use the gross receipts
method described in Regulations
section 1.861-17 and report
applicable amounts in column (a).
Column (a), Gross Receipts
Method
Enter in the spaces provided the SIC
Code numbers (based upon the
Standard Industrial Classification
-22-

Columns (a)(i) and (a)(iv)

Line 1. For each product line, enter
the taxpayer’s worldwide “gross
intangible income” (as defined in
Regulations section 1.861-17(b)(2)).

Line 4a. For each product line, enter
the U.S. source “gross intangible
income” (as defined in Regulations
section 1.861-17(b)(2)) of the
taxpayer that is neither income
pertaining to sales, licenses, leases,
or services of controlled parties (as
defined in Regulations section
1.861-17(d)(4)) nor income pertaining
to sales, licenses, leases, or services
of uncontrolled parties (as defined in
Regulations section 1.861-17(d)(3)).
Line 4b. For each product line, enter
the U.S. source “gross intangible
income” (as defined in Regulations
section 1.861-17(b)(2)) of the
taxpayer that is income pertaining to
sales, licenses, leases, or services of
controlled parties (as defined in
Regulations section 1.861-17(d)(4)).
Line 4c. For each product line, enter
the U.S. source “gross intangible
income” (as defined in Regulations
section 1.861-17(b)(2)) of the
taxpayer that is income pertaining to
sales, licenses, leases, or services of
uncontrolled parties (as defined in
Regulations section 1.861-17(d)(3)).
Line 4d. For each product line, add
lines 4a through 4c and enter the sum
on line 4d.
Line 5a. For each product line, enter
the aggregate foreign source “gross
intangible income” (as defined in
Regulations section 1.861-17(b)(2)) of
the taxpayer that is neither income
pertaining to sales, licenses, leases,
or services of controlled parties (as
defined in Regulations section
1.861-17(d)(4)) nor income pertaining
to sales, licenses, leases, or services
of uncontrolled parties (as defined in
Regulations section 1.861-17(d)(3)).

Instructions for Form 1118 (Rev. 12-2021)

Line 5b. For each product line, enter
the aggregate foreign source “gross
intangible income” (as defined in
Regulations section 1.861-17(b)(2)) of
the taxpayer that is income pertaining
to sales, licenses, leases, or services
of controlled parties (as defined in
Regulations section 1.861-17(d)(4)).

countries than space permits on line 6
or had income re-sourced by treaty for
more countries than space permits on
line 6, see Computer-Generated
Schedule H, earlier.
Columns (a)(ii) and (a)(v)

from sales and leases of products or
services that are related to foreign
source gross intangible income within
the relevant separate category.
Lines 6a(2), 6b(2), 6c(2), 6d(2),
and 6e(2). For each product line,
enter the controlled parties’ (as
defined in Regulations section
1.861-17(d)(4)) gross receipts from
sales, licenses, leases, or services
that are related to foreign source
gross intangible income within the
relevant statutory grouping.

DRAFT AS OF
November 4, 2021

Line 5c. For each product line, enter
the aggregate foreign source “gross
intangible income” (as defined in
Regulations section 1.861-17(b)(2)) of
the taxpayer that is income pertaining
to sales, licenses, leases, or services
of uncontrolled parties (as defined in
Regulations section 1.861-17(d)(3)).
Line 5d. For each product line, add
lines 5a through 5c and enter the sum
on line 5d.

Lines 6a(1), 6b(1), 6c(1), 6d(1),
and 6e(1). For each product line and
for each separate category, enter the
foreign source “gross intangible
income” (as defined in Regulations
section 1.861-17(b)(2)) of the
taxpayer that is neither income
pertaining to sales, licenses, leases,
or services of controlled parties (as
defined in Regulations section
1.861-17(d)(4)) nor income pertaining
to sales, licenses, leases, or services
of uncontrolled parties (as defined in
Regulations section 1.861-17(d)(3)).
Lines 6a(2), 6b(2), 6c(2), 6d(2),
and 6e(2). For each product line and
for each separate category, enter the
foreign source “gross intangible
income” (as defined in Regulations
section 1.861-17(b)(2)) of the
taxpayer that is income pertaining to
sales, licenses, leases, or services of
controlled parties (as defined in
Regulations section 1.861-17(d)(4)).
Lines 6a(3), 6b(3), 6c(3), 6d(3),
and 6e(3). For each product line and
for each separate category, enter the
foreign source “gross intangible
income” (as defined in Regulations
section 1.861-17(b)(2)) of the
taxpayer that is income pertaining to
sales, licenses, leases, or services of
uncontrolled parties (as defined in
Regulations section 1.861-17(d)(3)).
Lines 6a(4), 6b(4), 6c(4), 6d(4),
and 6e(4). For each product line and
for each separate category, add lines
(1), (2), and (3) and enter the sum on
line (4).
Note. If the corporation had section
901(j) income from more sanctioned
Instructions for Form 1118 (Rev. 12-2021)

Line 1. For each product line, enter
the taxpayer’s worldwide gross
receipts from sales and leases of
products or services.

Line 4a. For each product line, enter
the taxpayer’s gross receipts from
sales and leases of products or
services related to U.S. source gross
intangible income.

Line 4b. For each product line, enter
the controlled parties’ (as defined in
Regulations section 1.861-17(d)(4))
gross receipts from sales, leases,
licenses, or services that are related
to the taxpayer’s U.S. source gross
intangible income.

Line 4c. For each product line, enter
the uncontrolled parties’ (as defined in
Regulations section 1.861-17(d)(3))
gross receipts from sales, leases,
licenses, or services of uncontrolled
parties that are related to the
taxpayer’s U.S. source gross
intangible income.
Line 4d. For each product line, add
lines 4a through 4c and enter the sum
on line 4d.
Line 5a. For each product line, enter
the taxpayer’s gross receipts from
sales and leases of products or
services related to foreign source
gross intangible income.
Line 5b. For each product line, enter
the controlled parties’ (as defined in
Regulations section 1.861-17(d)(4))
gross receipts from sales, leases,
licenses, or services that are related
to the taxpayer’s foreign source gross
intangible income.
Line 5c. For each product line, enter
the uncontrolled parties' (as defined in
Regulations section 1.861-17(d)(3))
gross receipts from sales, licenses,
leases, or services that are related to
the taxpayer's foreign source gross
intangible income.
Line 5d. For each product line, add
lines 4a through 4c and enter the sum
on line 4d.
Lines 6a(1), 6b(1), 6c(1), 6d(1),
and 6e(1). For each product line,
enter the taxpayer's gross receipts
-23-

Lines 6a(3), 6b(3), 6c(3), 6d(3),
and 6e(3). For each product line,
enter the uncontrolled parties’ (as
defined in Regulations section
1.861-17(d)(3)) gross receipts from
sales, licenses, leases, or services
that are related to foreign source
gross intangible income within the
relevant statutory grouping.

Lines 6a(4), 6b(4), 6c(4), 6d(4),
and 6e(4). For each product line and
for each separate category, add lines
(1), (2), and (3) and enter the sum on
line (4).
Note. If the corporation had section
901(j) income from more sanctioned
countries than space permits on line 6
or had income re-sourced by treaty for
more countries than space permits on
line 6, see Computer-Generated
Schedule H, earlier.
Columns (a)(iii) and (a)(vi)
Line 1. Enter the total R&E
deductions connected with the
product lines.
Line 2a or 2b. Reduce the line 1
totals by a 50% (0.50) exclusive
apportionment amount (Regulations
section 1.861-17(c)).
Note. For tax years beginning on or
after January 1, 2020, there is no
longer a rule with respect to legally
mandated R&E. See Regulations
section 1.861-17 (T.D. 9922)
published in the Federal Register on
November 12, 2020.
Under the exclusive apportionment
rules, 50% (0.50) of the R&E
deductions are apportioned
exclusively to the residual grouping of
U.S. source gross income, if the R&E
that accounts for more than 50%
(0.50) of the amount of such R&E
deductions were performed in the
United States. A similar rule applies

when a majority of R&E is performed
outside the United States.
Enter 50% (0.50) of line 1 on either
line 2a or line 2b (as explained
above).
Line 4d. According to Regulations
section 1.861-17(d)(1), to determine
the line 3 amount of R&E
expenditures to be apportioned to the
residual grouping of U.S. source
gross income, divide the gross
receipts related to the gross intangible
income within the residual grouping
by the worldwide gross receipts for
the product line. Multiply the result by
the line 3 R&E deductions to be
apportioned.

Note. If the corporation had section
901(j) income from more sanctioned
countries than space permits on line 6
or had income re-sourced by treaty for
more countries than space permits on
line 6, see Computer-Generated
Schedule H, earlier.
Example 3. With respect to the
first product line reported on
Schedule H, Part I, there are two
foreign tax credit separate limitation
categories with gross receipts that are
related to foreign source gross
intangible income within each of the
two categories. With respect to the
first separate category, to determine
the amount to enter on line 6a(5),
column (a)(iii), divide the amount on
line 6a(4), column (a)(ii) by the
amount on line 1, column (a)(ii) and
multiply the result by the amount on
line 3, column (a)(iii). Similarly, with
respect to the second separate
category, to determine the amount to
enter on line 6b(5), column (a)(iii),
divide the amount on line 6b(4),
column (a)(ii) by the amount on line 1,
column (a)(ii) and multiply the result
by the amount on line 3, column (a)
(iii).

Note. Line 1, column (b) is the total
worldwide R&E deductions for all
product lines.
Lines 2a and 4d. Enter on line 2a
the total amount exclusively
apportioned to U.S. source gross
intangible income for all product lines.
Enter on line 4d the total amount of
line 3 R&E expenditures apportioned
to the residual grouping of U.S.
source gross intangible income for all
product lines.

DRAFT AS OF
November 4, 2021

Example 1. With respect to the
first product line reported on
Schedule H, Part I, to determine the
amount to enter on line 4d, column (a)
(iii), divide the amount on line 4d,
column (a)(ii) by the amount on line 1,
column (a)(ii). Multiply the result by
the amount on line 3, column (a)(iii).
Line 5d. According to Regulations
section 1.861-17(d)(1), to determine
the line 3 amount of R&E
expenditures to be apportioned to the
aggregate statutory grouping of
foreign source gross income, divide
the gross receipts related to the gross
intangible income within the statutory
grouping(s) by the worldwide gross
receipts for the product line. Multiply
the result by the line 3 R&E
deductions to be apportioned.
Example 2. With respect to the
first product line reported on
Schedule H, Part I, to determine the
amount to enter on line 5d, column (a)
(iii), divide the amount on line 5d,
column (a)(ii) by the amount on line 1,
column (a)(ii). Multiply the result by
the amount on line 3, column (a)(iii).

Lines 6a(5), 6b(5), 6c(5), 6d(5),
and 6e(5). Enter the amount of line 3
R&E deductions apportioned to each
separate category. According to
Regulations section 1.861-17(d)(1), to
determine the line 3 amount of R&E
expenditures to be apportioned
among the statutory groupings of
foreign source gross income, divide
the gross receipts related to the gross
intangible income within the statutory
grouping by the worldwide gross
receipts for the product line. Multiply
the result by the line 3 R&E
deductions to be apportioned.

Lines 6a(6), 6b(6), 6c(6), 6d(6),
and 6e(6). Enter the amount of
line 2b R&E deductions, if any, to be
apportioned to each separate
category. As indicated in Regulations
section 1.861-17(c), if there are
multiple separate categories with
foreign source gross intangible
income with respect to a given
product line, the line 2b amount is
apportioned ratably based on the
relative amounts of gross receipts
from gross intangible income in each
separate category, as determined
under Regulations section
1.861-17(d).
Note. If the corporation had section
901(j) income from more sanctioned
countries than space permits on line 6
or had income re-sourced by treaty for
more countries than space permits on
line 6, see Computer-Generated
Schedule H, earlier.
Column (b)
Line 1. Enter total R&E deductions
for all product lines (for example, from
column (a)(iii) and, if applicable,
columns (a)(vi), (a)(ix), etc.).

-24-

Note. Line 2a, column (b) plus
line 4d, column (b) equals the total
amount of R&E deductions for all
product lines apportioned to U.S.
source gross intangible income for all
product lines.

Lines 6a(7), 6b(7), 6c(7), 6d(7),
and 6e(7). Enter on each of these
lines the total amount of line 3 R&E
expenditures apportioned to the
statutory grouping of foreign source
gross income for all product lines.

Note. The sum of lines 6a(7), 6b(7),
6c(7), 6d(7), and 6e(7) in column (b)
equals the total amount of R&E
deductions for all product lines
apportioned to foreign source gross
intangible income for all product lines.
Note. Include the amount from
column (b) of line 6a(7) in column 14
of the Schedule A that corresponds
with the code entered on line 6a. If
applicable, you should likewise
include the amount from column (b) of
line 6b(7) in column 14 of the
Schedule A that corresponds with the
code entered on line 6b. On page 10
of Form 1118, you should likewise
include the amount(s) from column (b)
of lines 6c(7), 6d(7), and 6e(7) in
column 14 of the Schedule A that
corresponds with the code entered on
lines 6c, 6d, and 6e, respectively.

Part II—Interest Deductions,
All Other Deductions,
and Total Deductions

Note. The line 4 totals will generally
be less than the totals on lines 1 and 2
because the line 4 totals do not
include the gross income and
deductions that are implicitly
apportioned to the residual grouping.
Columns (a)(i) Through (b)(iv)
Use these columns to apportion
interest deductions. See final and
temporary Regulations sections
Instructions for Form 1118 (Rev. 12-2021)

1.861-8 through 1.861-14 for rules on
the apportionment of interest
deductions based on the tax book
value or adjusted tax book value of
assets.
A corporation may elect to use the
alternative tax book value method.
See Regulations section 1.861-9(i).

Lines 3a through 3f. For lines 3a
through 3f, enter the code for the
applicable separate category of
income. See Categories of Income,
earlier. The assets in each statutory
grouping are further divided between
those assets generating dividend
income eligible to be offset by the
deduction under section 245A versus
those generating all other types of
gross income. The foreign branch
income and section 951A income
categories do not include assets
generating dividend income eligible to
be offset by the deduction under
section 245A. The assets on line 2 are
characterized as assets in one of the
statutory groupings or as belonging to
the residual grouping.
Enter the value of the assets in
each of the statutory groupings on
lines 3a through 3f. See Regulations
sections 1.861-12 and 1.861-13 and
Temporary Regulations sections
1.861-9T(g)(3), 1.861-12T(g)(2), and
1.861-12T for the rules for
characterizing the assets.

Lines 3a through 3f. To figure the
amount of interest deductions to
apportion to each subgroup of the
statutory grouping, divide the assets
apportioned to the subgroup by the
total assets apportioned and multiply
the result by the interest deductions to
be apportioned.

DRAFT AS OF
November 4, 2021

Columns (a) and (b) are subdivided
into “Nonfinancial Corporations” and
“Financial Corporations.” In allocating
interest deductions, members of an
affiliated group that are financial
corporations must be treated as a
separate affiliated group. Complete
columns (a)(ii) and (b)(iv) for
members of the corporation's affiliated
group that are financial corporations
and columns (a)(i) and (b)(iii) for
members that are nonfinancial
corporations.
See Regulations section 1.861-11
for the definition of an affiliated group.
Columns (a)(i) and (a)(ii)

Line 1a. Enter the average of the
total assets of the affiliated group. See
Regulations section 1.861-9(g)(2) for
the definition of “average” for these
purposes.
Line 1b. Enter the assets included on
line 1a that are characterized as
excess related party indebtedness.
See Regulations section 1.861-10(e)
for an exception to the general rule of
fungibility for excess related party
indebtedness.
Line 1c. Enter all other assets that
attract specifically allocable interest
deductions. See Regulations section
1.861-10 for other exceptions to the
general rule of fungibility (such as
qualified nonrecourse indebtedness
and integrated financial transactions).
Line 1d. Enter the total of the exempt
assets and assets without directly
identifiable yield that are to be
excluded from the interest
apportionment formula (Regulations
section 1.861-8(d)(2) and Temporary
Regulations sections 1.861-8T(d)(2)
and 1.861-9T(g)(3)). This could
include an exempt portion of assets
that produce foreign-derived
intangible income and/or an exempt
portion of CFC stock that gives rise to
inclusions under section 951A.

Instructions for Form 1118 (Rev. 12-2021)

Columns (b)(iii) and (b)(iv)
Line 1a. Enter the total interest
deductions for the members of the
corporation's affiliated group. These
include any expense that is currently
deductible under section 163
(including original issue discount),
and interest equivalents. See
Regulations section 1.861-9 and
Temporary Regulations section
1.861-9T for the definition of interest
equivalents and a list of the sections
that disallow or suspend interest
deductions or require the
capitalization of interest deductions.
Line 1b. Enter the interest
deductions associated with the assets
on line 1b of columns (a)(i) and (a)(ii),
respectively, that attract specifically
allocable interest deductions under
Regulations section 1.861-10(e).
Note. These interest deductions will
be divided among the statutory
groupings and will appear as a
definitely allocable deduction in
Schedule A, column 13(j).
Line 1c. Enter the interest
deductions associated with the assets
on line 1c of columns (a)(i) and (a)(ii),
respectively, that attract specifically
allocable interest deductions.

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Example 1. To determine the
amount to enter on line 3a(1), column
(b)(iii), do the following.
1. Divide the amount entered on
line 3a(1), column (a)(i), by the
amount on line 2, column (a)(i).
2. Multiply the result by the
amount on line 2, column (b)(iii).
Example 2. To determine the
amount to enter on line 3b(2), column
(b)(iv), do the following.
1. Divide the amount on line 3b(2),
column (a)(ii), by the amount on line 2,
column (a)(ii).
2. Multiply the result by the
amount on line 2, column (b)(iv).
Column (c)
Complete this column to apportion all
other deductions not definitely
allocable (other than interest
deductions and R&E deductions). See
final and temporary Regulations
sections 1.861-8 and 1.861-14.
Line 1a. Enter the total other
deductions. Examples include
stewardship expenses; legal and
accounting expenses; and other
expenses related to certain supportive
functions such as overhead, general
and administrative, advertising, and
marketing. Deductions for charitable
contributions are generally definitely
related and allocable to all gross
income and apportioned solely to
domestic source income.
Lines 3a through 3f. For lines 3a
through 3f, enter the code for the
applicable separate category of
income. See Categories of Income,
earlier. Enter the amount of expenses
apportioned to each separate
category of income as further
apportioned between dividend income
eligible to be offset by the deduction
under section 245A and all other
gross income.
Note. If the corporation had section
901(j) income from more sanctioned
countries than space permits on line 3
or had income re-sourced by treaty for

more countries than space permits on
line 3, see Computer-Generated
Schedule H, earlier.
Column (d)
In column (d), for each line beginning
with line 3a(1) and ending with
line 3f(3), enter the sum of the
amounts in Part II, columns (b)(iii) and
(b)(iv); and Part II, column (c) for that
line. For example, on line 3a(1),
column (d), enter the sum of Part II,
column (b)(iii), line 3a(1); Part II,
column (b)(iv), line 3a(1); and Part II,
column (c), line 3a(1).

Lines 5 and 6. An adjustment is
required to worldwide taxable income
and foreign source income taken into
account to eliminate the expenses
properly allocated or apportioned to
stock or dividend income for which a
dividends received deduction is
allowed under section 245A. See
section 904(b)(4).

column 14, for information regarding
the adjustment required by section
904(b)(4) to foreign source income or
loss in each category.
Line 6. On line 6, enter expenses
apportioned to the dividends that are
eligible for a dividends received
deduction under section 245A and are
treated as U.S. source income under
section 904(h). This is the residual
amount of expenses allocated to such
dividend income and not otherwise
apportioned to the foreign source
portion of such dividends. Include this
line 6 amount as a negative amount
on Schedule B, Part II, line 8b.

DRAFT AS OF
November 4, 2021

Note. Be sure to also enter the totals
from lines 3a(2), 3b(2), 3c(2), 3d(2),
3e(2), and 3f(2) in column 14 of the
corresponding Schedule A.

Line 4. Enter on this line the sum of
the amounts entered in column (d) for
lines 3a(3), 3b(3), 3c(3), 3d(3), 3e(3),
and 3f(3) of Schedule H, Part II.

Line 5. On line 5, enter expenses
apportioned to foreign source
dividends which are eligible for a
deduction under section 245A. This is
the sum of the amounts entered in
column (d), lines 3a(1), 3b(1), 3c(1),
3d(1), 3e(1), and 3f(1) of Schedule H,
Part II. Include this line 5 amount as a
negative number on Schedule B, Part
II, line 8b. This is the adjustment
required by section 904(b)(4) to total
taxable income from all sources
(worldwide income). See the Note in
the instructions for Schedule A,

Schedules I, J, K, and L

See the separate instructions for
Schedule I, Schedule J, Schedule K,
and Schedule L to see if the
corporation must file these schedules.

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the
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and to allow us to figure and collect the right amount of tax.
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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 section 6103.
The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden
for business taxpayers filing this form is approved under OMB control number 1545-0123 and is included in the
estimates shown in the instructions for their business income tax return.
If you have suggestions for making Form 1118 and related schedules simpler, we would be happy to hear from you.
You can send us comments from IRS.gov/FormComments. Or you can send your comments to 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 office. Instead, see Where To File in the instructions for the tax return with which this form is
filed.

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Instructions for Form 1118 (Rev. 12-2021)