IRS Issues Foreign Tax Credit Guidance Over Puerto Rico Issue

The IRS issued guidance Friday aimed at reassuring taxpayers that they’ll still be eligible to use US foreign tax credits in certain situations in Puerto Rico when some had feared they might not be able to.

Under a notice issued Friday (Notice 2022-42), the IRS said that if taxpayers amend their long-term Puerto Rican tax agreements under the terms of a new law there, any excess payments they make to Puerto Rico as a result won’t be considered “noncompulsory payments,” which would make them ineligible for the foreign tax credit. The amendments must be made by Dec. ...