Relation-Back to the Future

The most recent changes to the “relation-back” doctrine in Treas. Reg. §1.905-1(d)(1)(ii) include changes that increase the practical risk of double taxation from administrative practices and time-barred refund claims. Under the doctrine, a contested foreign tax does not accrue until the contest is resolved and the liability becomes finally determined. For foreign tax credit purposes, however, the foreign tax, once finally determined, is considered to accrue in the taxable year “to which it relates,” which is commonly understood to be the foreign tax year with respect to which the contested liability arose. Most of the timing rules for foreign tax ...