8993 Instructions for Form 8993

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Instructions for Form 8993

Department of the Treasury
Internal Revenue Service

(Rev. January 2022)

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

DRAFT AS OF
November 10, 2021
Section references are to the Internal Revenue
Code unless otherwise noted.

determine the allowable deduction
under section 250.

Future Developments

The deduction is allowed only to
domestic corporations (not including
real estate investment trusts (REITs),
regulated investment companies (RICs),
and S corporations) and section 962
electing individuals. For the treatment of
a domestic corporation that is a partner
in a partnership, see Regulations
sections 1.250(b)-1(e) and
1.250(b)-3(e).

For the latest information about
developments related to Form 8993 and
its instructions, such as legislation
enacted after they were published, go to
IRS.gov/Form8993.

What’s New

Changes have been made throughout
these instructions based on the final
section 250 regulations (T.D. 9901, 85
FR 43042, July 15, 2020).

Important Reminders
Domestic corporation’s deduction.
For tax years beginning on or after
January 1, 2018, and before January 1,
2026, section 250 generally allows a
deduction equal to the sum of 37.5% of
the corporation's FDII plus 50% of its
GILTI (thereafter, these deductions are
reduced to 21.875% and 37.5%,
respectively).
Deduction limitation. If the sum of
FDII and GILTI exceeds taxable income,
the deduction under section 250 is
limited to taxable income.

General Instructions
Purpose of Form

Public Law 115-97 (Tax Cuts and Jobs
Act of 2017) enacted section 250 for the
allowance of a deduction for the eligible
percentage of FDII and GILTI.
See Form 8992, U.S. Shareholder
Calculation of Global Intangible
Low-Taxed Income (GILTI), and its
instructions for more information on
GILTI.
Use Form 8993 to figure the amount
of the eligible deduction for FDII and
GILTI under section 250.

Who Must File

All domestic corporations (and U.S.
individual shareholders of controlled
foreign corporations (CFCs) making a
section 962 election (962 electing
individual)) must use Form 8993 to
Nov 10, 2021

When and Where To File

Attach Form 8993 to your income tax
return and file both by the due date
(including extensions) for that return.

Definitions and Overview
Steps for Computing the
Deduction Under Section 250
1. Deduction Eligible Income (DEI)
is determined.
2. Deemed Tangible Income Return
(DTIR) is determined.
3. Deemed Intangible Income (DII)
is determined.
4. Foreign-Derived Deduction
Eligible Income (FDDEI) is determined.
5. Foreign-Derived Ratio (FDR) is
determined.
6. FDII is determined.
7. If there is excess FDII and GILTI
over taxable income, the FDII reduction
and the GILTI reduction are determined.
8. The eligible deduction under
section 250 is determined.

FDDEI

FDDEI means, with respect to a
taxpayer for its tax year, any deduction
eligible income of the taxpayer that is
derived in connection with:
1. Property that is sold by the
taxpayer to any person who is a foreign
person and that the taxpayer
establishes to the satisfaction of the
Secretary is for a foreign use (see
Regulations section 1.250(b)-4); or
2. Services provided by the
taxpayer that the taxpayer establishes
to the satisfaction of the Secretary are
provided to any person, or with respect
Cat. No. 71352N

to property, located outside the United
States (see Regulations section
1.250(b)-5).

Special rules for determining foreign
use apply to transactions that involve
property or services provided to related
parties (see section 250(b)(5)(C) and
Regulations section 1.250(b)-6).

Sale

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

Foreign Use

“Foreign use” is defined to mean “any
use, consumption, or disposition which
is not within the United States.” See
Regulations section 1.250(b)-4(d). For
the latest guidance about foreign use,
go to IRS.gov/Form8993.

Qualified Business Asset
Investment (QBAI)

A domestic corporation’s QBAI is the
average of the aggregate of its adjusted
bases, determined as of the close of
each quarter of the tax year, in specified
tangible property used in its trade or
business and of a type with respect to
which a deduction is allowable under
section 167. See Regulations section
1.250(b)-2.

Information From Partnership

A domestic corporate partner of a
partnership takes into account its
distributive share of a partnership's
gross DEI, gross FDDEI, deductions,
and its share of partnership QBAI, in
order to calculate the partner's FDII. See
Regulations section 1.250(b)-1(e)(1).
The above partnership information
should have been reported to the
partners on Schedule K-3 (Form 1065).
For partners in a partnership, attach
a statement to Form 8993 listing each
partnership's name; employer
identification number (EIN); the
partner's share of the partnership's
QBAI reported on line 7b; and other
FDDEI items reported on lines 9b, 10b,
13, and 17.

Documentation

For special substantiation requirements
under the Regulations, see sections

1.250(b)-3(f), 1.250(b)-4(d)(3), and
1.250(b)-5(e)(4).

Section 250 Deduction
Limitation

If the sum of FDII and GILTI exceeds
taxable income, the deduction under
section 250 is subject to limitation. See
the instructions for lines 26 and 27,
later, for additional information.

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

amount of the gross income included in
DEI produced with respect to the
property bears to the total amount of
gross income produced with respect to
the property. If specified tangible
property is only partially depreciable,
then only the depreciable portion is
QBAI. The adjusted basis is determined
by using the alternative depreciation
system under section 168(g) and
allocating depreciation deductions with
respect to such property ratably to each
day during the period in the tax year to
which such depreciation relates. Then,
multiply QBAI by 10% (0.10) and enter
this result on Form 8993, line 7a.
Multiply a partner's share of the
partnership's QBAI by 10% (0.10) and
enter this result on Form 8993, line 7b.

DRAFT AS OF
November 10, 2021
Corrections to Form 8993

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

Computer-Generated Form
8993

Generally, all computer-generated
forms must receive prior approval from
the IRS and are subject to an annual
review. Requests for approval may be
submitted electronically to
[email protected], or requests
may be mailed to: Internal Revenue
Service, Attention: Substitute Forms
Program, SE:W:CAR:MP:P:TP, 1111
Constitution Ave. NW, Room 6554,
Washington, DC 20224.

Specific Instructions
Part I. Determining DEI
and DII

DEI means, with respect to any
domestic corporation, the excess (if
any) of the gross income of the
corporation, less exclusions, over
deductions (including taxes) properly
allocable to such gross income.

Line 1. Gross Income

For purposes of this form, gross income
includes all income from whatever
source derived. Enter the amount from
Form 1120, line 11.

Line 2. Exclusions

Exclude the following items to the extent
included on line 1.
1. Any amount included in the gross
income of such corporation under
section 951(a)(1). Include the section 78
gross-up with respect to the inclusion
under section 951(a)(1).
2. Any amount included in the gross
income of such corporation under
section 951A. Section 951A defines
GILTI. Include the section 78 gross-up

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

Allocable deductions include all
deductions (including taxes) properly
allocable to gross DEI on line 4. See
Regulations section 1.250(b)-1(d)(2) for
more details. Deductions properly
allocable to gross DEI are determined
without regard to sections 163(j), 170(b)
(2), 172, 246(b), and 250.

Include the partner's share of the
partnership's deductions properly
allocable to the amount on line 4. Do not
duplicate expenses already included on
line 1.

Line 6. DEI

If the result is zero or negative, enter
zero on line 6, and your FDII deduction
under section 250 is zero. Enter zero on
lines 21 and 28.

Line 7. Deemed Tangible
Income Return (10% of QBAI)

The DTIR with respect to a domestic
corporation is the corporation’s QBAI for
the year multiplied by 10%. In addition,
for purposes of determining a domestic
corporate partner's DTIR, a domestic
corporation's QBAI is increased by its
share of the partnership's adjusted
basis in partnership specified tangible
property. See Regulations section
1.250(b)-2(g).
First, compute QBAI (defined earlier).
See Regulations section 1.250(b)-2.
“Specified tangible property” means any
tangible property used in the production
of the gross income included in DEI. If
such property was used in the
production of DEI and income that is not
DEI (such as dual-use property), the
property is treated as specified tangible
property in the same proportion that the
-2-

Line 8. DII

DII is the excess (if any) of the
corporation’s DEI over its DTIR. If the
result is zero or negative, enter zero on
line 8, and your FDII deduction under
section 250 is zero. Enter zero on lines
21 and 28.

Part II. Determining FDDEI

Each place where general property is
listed refers to amounts connected to
the sale, lease, exchange, or other
disposition of general property to a
foreign person and, as established to
the satisfaction of the Secretary, is for a
foreign use as defined in Regulations
sections 1.250(b)-3 and 1.250(b)-4(d)
(1) and (2). The term “general property”
means any property other than
intangible property; a security (as
defined in section 475(c)(2)); an interest
in a partnership, trust, or estate; or a
commodity described in section 475(e)
(2)(A) that is not a physical commodity
or a commodity described in section
475(e)(2)(B) through (D).
Each place where intangible property
is listed refers to amounts connected to
the sale, license, exchange, or other
disposition of intangible property to a
foreign person and, as established to
the satisfaction of the Secretary, is for a
foreign use as defined in Regulations
sections 1.250(b)-3 and 1.250(b)-4(d)
(2).
Each place where services are listed
refers to amounts connected to services
that, as established to the satisfaction of
the Secretary, are provided to any
person, or with respect to property,
located outside the United States as
defined in Regulations section
1.250(b)-5.
If a transaction includes both a sales
component and a service component,

Instructions for Form 8993 (Rev. 1-2022)

the transaction is classified as either a
sale or as a service according to the
overall predominant character of the
transaction. See Regulations section
1.250(b)-3(d).
For purposes of determining a
domestic corporation’s deductions that
are properly allocable to gross FDDEI,
the corporation’s deductions are
allocated and apportioned to gross
FDDEI under the rules of sections
1.861-8 through 1.861-14T and
1.861-17 by treating section 250(b) as
an operative section described in
section 1.861-8(f). See Regulations
section 1.250(b)-1(d)(2).

Line 10a. Cost of Goods Sold

Enter the amount of cost of goods sold
attributable to the amount(s) on line 9a.
For purposes of this form, when
figuring FDDEI, cost of goods sold
includes the:
1. Cost of goods sold to customers,
and
2. Adjusted basis of non-inventory
property sold or otherwise disposed of
in trade or business.

that are allocated and apportioned to
gross FDDEI on line 11.

Column A. General Property

Enter the amount, if any, of the partner’s
share of the partnership’s deductions
that are allocated and apportioned to
gross FDDEI from all sales of general
property.

DRAFT AS OF
November 10, 2021
The partnership should determine
and report the partner’s share of each
item necessary to compute FDII in
accordance with the partner’s
distributive share of the underlying item
of income, gain, deduction, and loss of
the partnership.

Line 9a. Gross Receipts

“Foreign-derived gross receipts” means
gross receipts that are used to compute
gross FDDEI as defined in Regulations
section 1.250(b)-1.

Column A. General Property

Enter the amount of foreign-derived
gross receipts from all sales of general
property.

Column B. Intangible Property
Enter the amount of foreign-derived
gross receipts from all sales of
intangible property.

Column C. Services

Enter the amount of foreign-derived
gross receipts from all services.

Line 9b. Gross Receipts From
Partnerships

Enter the amount, if any, of the partner’s
share of the partnership’s
foreign-derived gross receipts.

Column A. General Property

Enter the amount, if any, of the partner’s
share of the partnership’s
foreign-derived gross receipts from all
sales of general property.

Column B. Intangible Property

Enter the amount, if any, of the partner’s
share of the partnership’s
foreign-derived gross receipts from all
sales of intangible property.

Column C. Services

Enter the amount, if any, of the partner’s
share of the partnership’s
foreign-derived gross receipts from all
services.
Instructions for Form 8993 (Rev. 1-2022)

In making that determination,
attribute costs of goods sold to gross
receipts using a reasonable method in
accordance with Regulations section
1.250(b)-1(d)(1).

Cost of goods sold must be attributed
to gross receipts with respect to gross
DEI or gross FDDEI regardless of
whether certain costs included in cost of
goods sold can be associated with
activities undertaken in an earlier tax
year (including a year before the
effective date of section 250).

Line 10b. Cost of Goods Sold
From Partnerships

Enter the amount, if any, of the partner’s
share of the partnership’s cost of goods
sold attributable to the amount on
line 9b.

Line 12. Allocable Deductions

Enter the amount of the deductions that
are allocated and apportioned to gross
FDDEI on line 11. See Regulations
section 1.250(b)-1(d)(2) for more
details. Report interest and research
and experimental (R&E) deductions on
lines 14 and 15, respectively.
Deductions are determined without
regard to sections 163(j),170(b)(2), 172,
246(b), and 250.

Column A. General Property

Enter the amount of the deductions that
are allocated and apportioned to gross
FDDEI from all sales of general
property.

Column B. Intangible Property

Enter the amount of the deductions that
are allocated and apportioned to gross
FDDEI from all sales of intangible
property.

Column C. Services

Enter the amount of the deductions that
are allocated and apportioned to gross
FDDEI from all services.

Line 13. Allocable Deductions
From Partnerships

Enter the amount, if any, of the partner’s
share of the partnership’s deductions
-3-

Column B. Intangible Property

Enter the amount, if any, of the partner’s
share of the partnership’s deductions
that are allocated and apportioned to
gross FDDEI from all sales of intangible
property.

Column C. Services

Enter the amount, if any, of the partner’s
share of the partnership’s deductions
that are allocated and apportioned to
gross FDDEI from all services.

Line 14. Interest Deductions

The term “interest” refers to the gross
amount of interest expense incurred by
a taxpayer in a given year. For purposes
of determining properly allocable
interest deductions, the corporation’s
interest expense deduction is
determined without regard to section
163(j), and includes any expense under
section 163 (including original issue
discount), and interest equivalents. See
Regulations section 1.250(b)-1(d)(2)(ii).
See Temporary Regulations section
1.861-9T(b) for the definition of interest
equivalents and Regulations section
1.861-9T(c) for sections that disallow,
suspend, or require the capitalization of
interest deductions.
Interest deductions are apportioned
to gross DEI and gross FDDEI based
ordinarily on the tax book value of the
taxpayer’s assets. See Regulations
section 1.250(b)-1(d)(2)(i). A taxpayer
may elect to use the alternative tax book
value method. See Regulations sections
1.861-9(g)(1)(ii) and 1.861-9(i). When
reporting the asset that is the basis of
stock in nonaffiliated 10%-owned
corporations, adjust such amount for
earnings and profits. See Regulations
section 1.861-12(c)(2)(i)(A). See
Regulations sections 1.861-10 and
1.861-10T for exceptions to the general
rule of fungibility (such as qualified
nonrecourse indebtedness, integrated
financial transactions, and excess
related party indebtedness).
The total interest deductions for the
members of the corporation's affiliated
group are allocated and apportioned to
the statutory and residual groupings
under proposed, final, and Temporary

Regulations sections 1.861-8 through
1.861-14.
The amount reported on this line
should include interest paid or accrued
by the taxpayer and the taxpayer’s
share of interest expense incurred by a
partnership. With respect to corporate
partners with an interest in the
partnership of 10% or more, interest
expense, including the partner’s
distributive share of partnership interest
expense, is apportioned by reference to
the partner’s assets, including the
partner’s pro rata share of partnership
assets. See Regulations section
1.861-9(e)(2). A corporate partner with
a less-than-10% interest in a
partnership shall directly allocate its
distributive share of the partnership’s
interest expense to its distributive share
of partnership gross income and be
apportioned in accordance with the
partner’s relative distributive share of
gross FDDEI. See Regulations section
1.861-9(e)(4). The above partnership
information should have been reported
to the partners on Schedule K-3 (Form
1065).

The amount reported on this line
should include R&E deductions of the
taxpayer and the taxpayer’s share of
R&E deductions incurred by a
partnership. This requires that the
partnership report to its partners the
gross receipts related to certain income
within the statutory and residual
groupings within a SIC code and the
partner’s distributive share of the
partnership’s R&E deductions, if any,
connected with the SIC codes. See
section 1.861-17(f). The above
partnership information should have
been reported to the partners on
Schedule K-3 (Form 1065).

If the result reported on line 25 is
zero or negative, your taxable income is
greater than the sum of FDII and GILTI,
and your deduction under section 250 is
not limited.
If the result reported on line 25 is a
positive number, your taxable income is
less than the sum of your FDII and
GILTI, and your deduction under section
250 is limited to taxable income. Refer
to the instructions for lines 26 and 27,
later, to determine the amount by which
you need to reduce FDII and GILTI.

DRAFT AS OF
November 10, 2021
Line 15. Research and
Experimental Deductions

R&E expenses deducted under section
174 are definitely related to gross
intangible income reasonably
connected with relevant broad product
categories of the taxpayer and are
allocable to all items of gross intangible
income as a class related to such
product categories. Gross intangible
income is all gross income attributable
to intangible property including sales,
services, and royalties (including
section 367(d) inclusions), but does not
include dividends or other inclusions
with respect to stock such as sections
951, 951A, and 1293. See Regulations
section 1.861-17(b)(2). The product
categories are generally determined by
reference to the three-digit Standard
Industrial Classification (SIC) code. See
Regulations section 1.861-17(b)(3).
R&E expenses are apportioned in the
same proportions that the amounts of
the taxpayer’s gross receipts (including
those of certain controlled and
uncontrolled parties) from certain sales,
leases, licenses, and services that are
related to gross intangible income in the
statutory or residual grouping bear to
the total amount of gross receipts in the
class. See Regulations section
1.861-17(d). The exclusive
apportionment rule in Regulations
section 1.861-17(c) does not apply for
purposes of apportioning R&E to
determine the deduction for FDII.

Line 16. Other Apportioned
Deductions

Enter all other apportioned deductions
that relate to gross FDDEI that are not
otherwise included on lines 12, 14, and
15. If a deduction does not bear a
definite relationship to a class of gross
income constituting less than all of
gross income, it shall ordinarily be
treated as definitely related and
allocable to all of the taxpayer's gross
income, including gross DEI and gross
FDDEI, except where otherwise
directed in the regulations.

Line 26. FDII Reduction

The reduction in FDII for which a
deduction is allowed equals such
excess multiplied by a percentage equal
to the corporation’s FDII divided by the
sum of its FDII and GILTI.
Use the Line 26 Worksheet to
compute the FDII reduction.

Line 26 Worksheet
Line A

Enter the
amount
from
line 25. If
zero or
less,
enter -0- on
line E of
this
worksheet
and stop.

Line B

Enter the
amount
from line 21.

Line C

Enter the
amount
from line 23.

Line D

Divide line
B by line C.

Line E

Multiply line
A by line D.
Enter this
line E
amount on
Form 8993,
line 26.

Line 17. Other Apportioned
Deductions From Partnerships

Enter all other apportioned deductions
that relate to gross FDDEI from
partnerships that are not otherwise
included on lines 13, 14, and 15.

Part III. Determining FDII
and/or GILTI Deduction
Line 20. Foreign-Derived Ratio

FDR is determined by computing the
ratio of FDDEI over DEI. See Definitions
and Overview, earlier, for the discussion
of FDDEI. Divide the amount on line 19
by the amount on line 6. The resulting
ratio must not exceed 1.

Line 22. GILTI Inclusion

Enter the amount of GILTI reported on
Form 8992, Part II, line 5. Attach Form
8992 to your income tax return.

Line 24. Taxable Income

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

Line 25. Excess FDII and GILTI
Over Taxable Income

Subtract the taxable income amount
reported on line 24 from the total FDII
and GILTI on line 23.

-4-

Line 27. GILTI Reduction

The reduction in GILTI is determined by
the excess amount less the FDII
reduction.
Use the Line 27 Worksheet to
compute the FDII reduction.

Instructions for Form 8993 (Rev. 1-2022)

Line 27 Worksheet
Line F

Enter the
amount
from
line 25. If
zero or
less, enter
zero on line
H of this
worksheet
and stop.

Line 28. FDII Deduction

To figure the FDII deduction, subtract
the amount from line 26 (FDII
reduction), from the amount on line 21
(FDII).
Then, multiply the resulting amount
by 37.5% (0.375) to obtain the FDII
deduction and enter it on line 28.

collect the right amount of tax. You are
not required to provide the information
requested on a form that is subject to
the Paperwork Reduction Act unless the
form displays a valid OMB control
number. Books or records relating to a
form or its instructions must be retained
as long as their contents may become
material in the administration of any
Internal Revenue law. Generally, tax
returns and return information are
confidential, as required by section
6103.

DRAFT AS OF
November 10, 2021
Line G

Enter the
amount
from line E
in the
worksheet
above, as
reported on
line 26, of
Form 8993.

Line H

Subtract
line G from
line F.
Enter this
line H
amount on
Form 8993,
line 27.

Instructions for Form 8993 (Rev. 1-2022)

Line 29. GILTI Deduction

To figure the GILTI deduction, subtract
the amount from line 27 (GILTI
reduction), from the amount on line 22
(GILTI inclusion). Then, add any amount
received by the corporation (or 962
electing individual) that is treated as a
dividend under section 78 which is
attributable to GILTI, from Form 1118,
Schedule A, column 3(b). Lastly,
multiply that amount by 50% (0.50).
Enter the sum of lines 28 and 29 on
Form 1120, Schedule C, line 22, or on
the comparable schedules of other
corporate returns.
Paperwork Reduction Act Notice.
We ask for the information on this form
to carry out the Internal Revenue laws of
the United States. You are required to
give us the information. We need it to
ensure that you are complying with
these laws and to allow us to figure and

-5-

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 comments concerning the
accuracy of these time estimates or
suggestions for making this form
simpler, we would be happy to hear
from you. See the instructions for the tax
return with which this form is filed.