Notice 2023-80: When the U.S. Tax Code Meets Pillar Two

On December 11, Treasury and the IRS issued Notice 2023-80 (the “Notice”), which represents the U.S. government’s first attempt to address the U.S. federal income tax implications of Pillar Two. The Notice provides guidance on the foreign tax credit and dual consolidated loss (“DCL”) issues that arise from certain Pillar Two taxes.

The Notice provides guidance on five main topics. First, the Notice confirms that it is possible for a Qualified Domestic Minimum Top-up Tax (“QDMTT”) and a tax under an Income Inclusion Rule (“IIR”) to qualify as a creditable “foreign income tax” under Treas. Reg. §1.901-2. However, the ...