Bloomberg Tax
March 6, 2023, 6:44 PMUpdated: March 6, 2023, 8:46 PM

Treasury Mulls How Foreign Tax Credit Works With OECD Minimum Tax (1)

Michael Rapoport
Michael Rapoport
Senior Reporter, Bloomberg Tax
Isabel Gottlieb
Isabel Gottlieb

The Treasury Department is considering guidance on how its foreign tax credit regulations will interact with the pending 15% global minimum tax, an official said Monday.

Given the recent moves by various countries to start implementing the global minimum tax, “that’s becoming a live issue,” said Isaac Wood, an attorney-adviser in Treasury’s Office of Tax Policy, speaking at a Federal Bar Association virtual conference.

The foreign tax credit guidance will address the treatment of measures in the minimum tax, known as Pillar Two—including the qualified domestic minimum top-up tax, or QDMTT, said Michael Plowgian, deputy assistant secretary for international tax affairs at Treasury, who was speaking at the same event. QDMTTs are a version of the minimum tax that a country applies within its borders.

Treasury issued new foreign tax credit rules in December 2021, toughening the standards by which companies could apply their foreign tax payments to their US tax bills. The department has said in the past that it planned to modify its foreign tax credit regulations to take into account the provisions of the 2021 global tax agreement that includes the minimum tax.

Wood also appeared to throw cold water on some tax practitioners’ pleas for Treasury to provide more flexibility in its foreign tax credit rules on withholding taxes for services.

In November, Treasury proposed a “single-country exception” that would make it easier for companies to have their withholding taxes for royalties qualify for the credit, and some taxpayers have urged the department to offer a similar break on service withholding taxes. But Wood said services are “different from the royalty case.” The exception on royalty withholding taxes was a response to specific fact patterns, he said, while Treasury hasn’t seen any similar fact patterns with regard to services.

(Updates with comments from Plowgian starting in third paragraph.)

To contact the reporters on this story: Michael Rapoport in New Jersey at; Isabel Gottlieb in New York at

To contact the editors responsible for this story: Meg Shreve at; Vandana Mathur at