The US Treasury Department and the Inland Revenue Service have released Notice 2016-52, which provides guidance relating to certain transactions that will be considered foreign tax credit splitter arrangements under section 909.
Section 909 is intended to prevent the separation of creditable foreign taxes from related income by, in general, deferring the right to claim credits until the related income is included in US taxable income.
According to the notice, Treasury and the IRS intend to issue regulations under section 909 that will identify two new splitter arrangements relating to section 902 corporations that pay foreign income taxes pursuant to foreign-initiated adjustments.
The regulations will apply similar rules to taxpayers that take the position that taxes paid by a US person pursuant to a foreign-initiated adjustment to the tax liability of a section 902 corporation are eligible for a direct foreign tax credit under section 901.
The notice applies to foreign income taxes paid on or after September 15, 2016. The amount of additional foreign income taxes paid must be greater than $10 million.
The notice was issued following the investigations by the European Commission (EC) against the tax practices of US multinationals, such as the claim against Apple of up to EUR13bn (USD14.5bn), plus interest.