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Companies Get More Flexibility as IRS Tweaks Foreign Tax Credits

Dec. 29, 2021, 3:05 PM

Multinational companies will gain flexibility in determining which foreign taxes are creditable in the U.S. after the IRS refined rules first proposed in 2020.

Final rules (RIN 1545-BP70) issued Tuesday by the IRS and the Treasury Department keep a “jurisdictional nexus” requirement that was in proposed rules released in 2020. That requirement says companies can’t claim foreign tax credits for taxes they pay in another country unless that country’s tax law is based on the company having a “nexus” or certain kind of connection to that jurisdiction. The rule is designed to block credits on measures the U.S. ...