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Form 1120-F Instructions for Schedule I

Instructions for Schedule I (Form 1120-F), Interest Expense Allocation Under Regulations Section 1.882-5

Rev. 2023

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Department of the Treasury  
Internal Revenue Service  
2023  
Instructions for Schedule I  
(Form 1120-F)  
Interest Expense Allocation Under Regulations Section 1.882-5  
Section references are to the Internal Revenue  
Code unless otherwise noted.  
allocation rules of Regulations section  
1.882-5 are the exclusive rules for  
allocating interest expense under  
section 882(c) to ECI and for attributing  
interest expense to business profits of a  
U.S. permanent establishment under all  
income tax treaties other than treaties  
that, pursuant to their express  
Treaty-based return positions. If the  
corporation determines its interest  
expense attributable to its business  
profits of a U.S. permanent  
Future Developments  
establishment pursuant to the express  
provisions and accompanying  
For the latest information about  
developments related to Schedule I  
(Form 1120-F) and its instructions, such  
as legislation enacted after they were  
published, go to IRS.gov/Form1120F.  
documents of an applicable treaty, then  
Schedule I still must be completed  
based on the treaty method used  
(substituting the amount of assets,  
liabilities, and interest expense  
determined under the treaty method for  
the amounts that would have been  
reported under Regulations section  
1.882-5) and attached to Form 1120-F.  
The corporation is also required to  
complete and attach Form 8833,  
Treaty-Based Return Position  
provisions and accompanying  
documents, permit attribution of  
business profits to a U.S. permanent  
establishment under application of the  
OECD Transfer Pricing Guidelines, by  
analogy. If the foreign corporation files  
its tax return using a treaty-based  
method of the type provided in these  
treaties, see Treaty-based return  
positions below for reporting  
General Instructions  
Purpose of Schedule  
Schedule I (Form 1120-F) is used to  
report the amount of interest expense  
allocable to effectively connected  
income (“ECI”) and the deductible  
amount of such allocation for the tax  
year under section 882(c) and  
requirements.  
Disclosure.  
Who Must File  
Exceptions From Filing  
Schedule I  
Regulations section 1.882-5. The  
schedule discloses the basic  
All foreign corporations that have  
interest expense allocable to ECI under  
section 882(c) must complete  
calculations for the year and also  
identifies the various elections the  
taxpayer uses under Regulations  
sections 1.882-5(a)(7) and (d)(5), and  
under the branch profits tax rules of  
Regulations section 1.884-1(e)(3).  
A foreign corporation is not required to  
file Schedule I if it (a) does not have a  
trade or business within the United  
States, (b) has no worldwide interest  
expense for the tax year to allocate  
under Regulations section 1.882-5, or  
(c) conducts limited activities in the  
United States for the tax year that it  
determines do not give rise to ECI or do  
not give rise to a U.S. permanent  
Schedule I to report this allocation,  
regardless of whether the amount  
allocable under Regulations section  
1.882-5 is deductible in the current year,  
or is otherwise deferred or permanently  
disallowed under other sections of the  
Internal Revenue Code (for example,  
sections 163(e), 163(j), 263A, 265(a),  
and 267(a)(3)). The information  
Note. The tax election under  
Regulations section 1.884-1(e)(3) is not  
effectuated under the regulations by its  
identification on Schedule I (Form  
1120-F). See Regulations section  
1.884-1(e)(3)(iv) for the time, place, and  
manner for making the liability reduction  
election and the separate disclosures  
required to be attached to Form 1120-F  
for each liability reduction election  
made.  
establishment to which business profits  
are attributable, and the corporation files  
a protective income tax return under  
Regulations section 1.882-4(a)(3)(vi).  
Protective elections on protective re-  
turns. A corporation that files a  
reported on Schedule I is also needed  
to complete Form 1120-F, Section III  
(the determination of the branch-level  
interest tax under section 884(f)).  
Interest expense that is treated as  
“branch interest” under Regulations  
section 1.884-4(b) may be subject to  
information reporting under section  
1461 or section 6049 and potential  
withholding under sections 1441 and  
1442. A foreign corporation that is a  
reporting corporation and required to file  
Form 1120-F must complete Schedule I  
and attach it to Form 1120-F.  
Reporting corporation. A reporting  
corporation is any foreign corporation  
that is engaged in a trade or business or  
treated as engaged in a trade or  
business within the United States  
directly or indirectly at any time during  
the tax year.  
protective tax return on Form 1120-F  
under Regulations section 1.882-4(a)(3)  
(vi) may voluntarily file Schedule I with  
the protective return to preserve timely  
elections under Regulations section  
1.882-5(a)(7) if the return is filed by the  
original due date (including extensions)  
of the corporation's Form 1120-F. The  
protective elections are not effective if  
filed during the additional extended  
period described under Regulations  
section 1.882-4(a)(3). The foreign  
corporation need only complete the  
relevant portions of Schedule I that  
identify its right to use the following  
elections:  
Under Regulations section 1.882-5,  
the amount of interest expense of a  
foreign corporation that is allocable  
under section 882(c) to income which is  
effectively connected (or treated as  
effectively connected) with the conduct  
of a trade or business within the United  
States is the sum of the interest  
expense allocable by the foreign  
corporation under the three-step  
process set forth in Regulations  
sections 1.882-5(b), (c), and (d) or (e),  
and the directly allocated interest  
expense determined under Regulations  
section 1.882-5(a)(1)(ii). The interest  
Dec 6, 2023  
Cat. No. 50606A  
The Adjusted U.S.-Booked Liability  
A corporation that files a protective  
Schedule P (Form 1120-F). Enter  
amounts from Schedule P (Form  
1120-F), lines 13, 11, 8, and 7 on  
Schedule I, line 5, column (b); line 8,  
column (b); line 9, column (b), and  
line 22; respectively, making any  
necessary adjustments to comply with  
the rules in Regulations section 1.882-5.  
(“AUSBL) method or Separate Currency return under Regulations section  
Pools method (item B checkboxes);  
The actual or fixed ratio in Step 2  
1.882-4(a)(3)(vi) need not enter  
amounts on Schedule I (other than for  
the published rate election on line 10d)  
in order to preserve an allocation  
method. If a taxpayer files a protective  
return under Regulations section  
1.882-4(a)(3)(vi) and does not file  
Schedule I to identify the relevant  
elections under Regulations section  
1.882-5 for an applicable year, then the  
Director of Field Operations is  
(line 6 checkboxes);  
The published rate election for banks  
under the AUSBL method in Step 3  
(line 10 checkbox); and  
The de minimis foreign currency  
Form 8990, Limitation on Business  
Interest Expense Under Section  
163(j). Business interest expense  
includes any interest paid or accrued on  
indebtedness properly allocable to a  
trade or business. Business interest  
expense is generally limited to the sum  
of business interest income, 30% of the  
adjusted taxable income, and floor plan  
financing interest. Form 8990 is  
election under the Separate Currency  
Pools method in Step 3 (line 16b  
checkbox).  
The corporation need only identify  
the protective election in the first year it  
is required to be made under  
authorized to make all applicable  
allocation method elections on behalf of  
the corporation for such applicable year  
if it is later determined that the taxpayer  
was engaged in a trade or business or  
treated as engaged in a trade or  
business within the United States and  
had ECI during the year.  
Regulations section 1.882-5(a)(7) or in  
any year a taxpayer is eligible to adopt  
or change an election and chooses to  
do so for that year. For example, an  
election to use the AUSBL method or  
the Separate Currency Pools method is  
an election that must generally be  
maintained for a minimum 5-year period.  
However, the election available to  
foreign banks to use a published rate  
under the AUSBL method in Step 3  
must be made each year. If a  
required, unless an exception for filing is  
met. For more information, see section  
163(j), Form 8990, and the Instructions  
for Form 8990.  
Note. Under Regulations section  
1.882-5(a)(7), no interest expense  
allocation elections may be made on an  
amended return. In addition, the relief  
for late tax elections provided under the  
rules of Regulations section 301.9100-1  
(and any guidance promulgated  
Assets and Liabilities Based on  
Schedule L Set(s) of Books and  
Records  
Generally, the assets and liabilities  
required to be reported on Schedule L  
are the total assets and liabilities  
corporation is subject to Regulations  
section 1.882-5 for the first time, the  
election is due with an original timely  
filed return (excluding the additional  
extended period provided by  
thereunder) is not available.  
reflected on the set(s) of books of the  
foreign corporation that give rise to  
income effectively connected with the  
corporation's trade or business within  
the United States and to U.S.-booked  
liabilities (as defined in Regulations  
section 1.882-5(d)(2)). The total assets  
and liabilities reflected on such books  
include the third party U.S. assets (as  
defined in Regulations section  
Other Forms and Schedules  
Related to Schedule I  
Regulations section 1.882-4(a)(3))  
whether or not the taxpayer files a  
protective return under Regulations  
section 1.882-4(a)(3)(vi). The protective  
election need not be filed with  
Form 1120-F, Schedule L, and  
Schedule M-3 (Form 1120-F). The  
set(s) of books that give rise to  
U.S.-booked liabilities under  
Regulations section 1.882-5(d)(2) are  
the same set(s) of books and records  
that are reportable as of the tax year  
end on Form 1120-F, Schedule L. They  
are also the same set(s) of books and  
records that are used by foreign banks  
to report income and expenses on  
Schedule M-3 (Form 1120-F).  
subsequent protective returns filed  
under Regulations section 1.882-4(a)(3)  
(vi) for any subsequent year to which the  
minimum 5-year period applies.  
1.884-1(d)) and third party liabilities  
(whether with related or unrelated  
parties), as well as the interbranch  
assets and liabilities and assets that  
give rise to noneffectively connected  
income in whole or in part. Such books  
reflect the assets of the foreign  
However, the indication of the election  
with a protective return is only effective  
for a year that the corporation is  
engaged in a trade or business or  
treated as engaged in a trade or  
Form 1120-F, Section III, Part II  
(branch-level interest tax). The  
amount of interest expense from  
business within the United States.  
Accordingly, if a protective election is  
made for a first year protective return  
and in fact the taxpayer is not engaged  
in a trade or business or treated as  
engaged in a trade or business until the  
second year of activity within the United  
States, the protective election made in  
the first year is not effective for the  
corporation's second year of activity  
because Regulations section 1.882-5 is  
not applicable to the corporation until  
such second year. The elections used  
by a taxpayer for all years in which it  
files Form 1120-F and reports ECI must  
be shown on Schedule I, including years  
subsequent to the year in which an  
election under Regulations section  
1.882-5(a)(7) is made.  
corporation located in the United States  
and all other of its assets used in its  
trade or business within the United  
States (other than its assets giving rise  
to ECI under sections 864(c)(6) or (7)),  
as authorized under Regulations section  
1.6012-2(g)(1)(iii). A foreign corporation  
may instead report its worldwide assets,  
liabilities, and equity on Schedule L.  
Schedule I, line 24g is reportable on  
Form 1120-F, Section III, Part II, line 7b.  
The amount of the allocation under  
Regulations section 1.882-5 reportable  
on Schedule I, line 23 is reportable on  
Form 1120-F, Section III, Part II, line 7c.  
Schedule M-3 (Form 1120-F), Part III,  
lines 26b and 26c. The amount of  
interest expense allocation reportable  
on Schedule I, line 23 is includible on  
Schedule M-3 (Form 1120-F), Part III,  
line 26b, columns (d) and (e). The  
amounts subject to deferral and  
If the foreign corporation has more  
than one set of books and records  
relating to assets located in the United  
States or assets used in a trade or  
business conducted in the United  
States, it must report the combined  
amounts on Schedule L and must  
eliminate asset and liability amounts  
recorded between these books.  
disallowance on Schedule I, lines 24a  
through 24f are reportable on  
Schedule M-3 (Form 1120-F), Part III,  
line 26c, columns (b), (c), and (e).  
Instructions for Schedule I (Form 1120-F) (2023)  
2
duction under Regulations section  
Comptroller of the Currency. See  
Required Reporting on  
Schedule I  
1.882-5. All corporations required to file sections 581 and 585(a)(2).  
Schedule I must report the summary  
Note. The reference to the definition of  
Lines 1 through 9. Schedule I requires  
disclosure of data and interest allocation  
elections for all parts of the three-step  
formula under Regulations section  
1.882-5. On page 1, the corporation is  
required to complete Step 1 (lines 1  
through 5) to determine its average U.S.  
assets, Step 2 (lines 6 through 7c) to  
determine its U.S.-connected liabilities,  
and Step 3 (lines 8 and 9) to determine  
its U.S.-booked liabilities under  
amounts requested on lines 21 through  
25.  
the term “bank” for purposes of  
determining the U.S.-booked liabilities of  
banks under Regulations section  
1.882-5(d)(2)(iii) requires that the  
corporation meet the section 585(a)(2)  
regulated banking requirements in its  
trade or business within the United  
States. The section 585(a)(2) standard  
must also be satisfied at the  
Line 22. Direct interest  
allocations. Interest expense that is  
directly allocable under Regulations  
section 1.882-5(a)(1)(ii) in accordance  
with the rules of Temporary Regulations  
section 1.861-10T(b) or (c) is reported  
on line 22.  
corporation's U.S. trade or business  
level for purposes of electing the deposit  
liability safe harbor applicable to the  
reduction of excess interest under  
Regulations section 1.884-4(a)(2)(iii).  
Line 23. Summary of Regulations  
section 1.882-5 allocation. The  
amount of interest expense allocable to  
ECI under Regulations section 1.882-5  
is the sum of the amount allocated  
under either the AUSBL or Separate  
Currency Pools method on line 15 or 20,  
and the amount directly allocated to ECI  
and reportable on line 22. The resulting  
amount allocable and reported on  
line 23 is also reconciled and reported  
on Form 1120-F, Section III, Part II,  
line 7c (branch-level interest tax).  
Regulations section 1.882-5(d)(2) and  
its related U.S.-booked interest  
expense. The total on line 9, column (c)  
is also used for purposes of determining  
the corporation's branch interest under  
section 884(f)(1)(A) and Regulations  
section 1.884-4(b), and in the  
Lines 1 Through 9: All  
Foreign Corporations  
Lines 1 Through 5. Step 1:  
Determination of Total Value of  
U.S. Assets  
Assets includible on lines 1 through 5  
are the U.S. assets of the corporation as  
defined in Regulations sections  
1.882-5(b) and 1.884-1(d). The U.S.  
assets are valued on an average basis  
for interest expense allocation  
purposes.  
Frequency of averaging. The average  
value of assets for this step is to be  
computed at the most frequent, regular  
intervals for which data is reasonably  
available. For large banks (as defined in  
section 585(c)(2)) and dealers in  
calculation of the corporation's  
branch-level interest tax on excess  
interest under section 884(f)(1)(B) and  
Regulations section 1.884-4(a)(2).  
Line 8, column (c), and line 9, column  
(c) are also included in the interest  
expense allocation computation in Step  
3 of the AUSBL method if elected by the  
corporation.  
Line 24. Deferrals and  
disallowances under other Code  
sections. The interest expense  
allocation reportable on line 23 is  
determined under Regulations section  
1.882-5 before application of other  
Code sections that defer or disallow the  
interest deduction in whole or in part.  
See Regulations section 1.882-5(a)(5).  
Lines 1 through 9 must be  
completed by all corporations  
!
CAUTION  
required to file Schedule I,  
regardless of whether the corporation  
allocates interest expense under the  
AUSBL or Separate Currency Pools  
method for the applicable year.  
Specific Instructions  
Lines 10 through 20. Allocations, di-  
rect interest allocations, deferrals,  
and other disallowances. Step 3 of  
the AUSBL method is provided on lines  
10 through 15. Step 3 of the Separate  
Currency Pools method is provided on  
lines 16a through 20. These Step 3  
methods are mutually exclusive and  
cannot both apply to the corporation in  
the same year. The methods are subject  
to the general 5-year minimum period  
election rules of Regulations section  
1.882-5(a)(7).  
Item A. Foreign banks. Check the box  
in item A if the foreign corporation is a  
bank as defined in Regulations section  
1.882-5(c)(4). The term “bank” is  
securities (within the meaning of section  
475) the minimum averaging period is  
monthly (beginning of tax year and  
monthly thereafter). For any other  
taxpayer, the minimum averaging period  
is semi-annually (beginning, middle, and  
end of the tax year). See Regulations  
section 1.882-5(b)(3).  
Line 1. Under section 864(e)(2), the  
foreign corporation must value its U.S.  
assets on lines 2 through 5, using the  
adjusted basis method as described in  
Regulations section 1.882-5(b)(2)(i)).  
defined in the regulation as a bank that  
meets the statutory definition applicable  
to domestic banks (except for the fact  
that the corporation is foreign) and  
without regard to whether the  
corporation's required banking activities  
are effectively connected with its trade  
or business within the United States.  
The required banking activities need  
only be conducted on a worldwide  
basis. To qualify as a bank for interest  
expense allocation purposes, the  
AUSBL method filers. AUSBL  
method filers complete all columns on  
lines 1 through 15 and lines 21 through  
25. Do not complete lines 16a through  
20.  
Line 2, column (a). Total assets per  
books. Enter the total average assets  
derived from the combined set(s) of  
books that are reportable on  
foreign corporation must be subject to  
bank regulatory supervision and  
examination in its home country of a  
type similar to that required of domestic  
banks by a State or Federal authority  
having supervision over banking  
Schedule L. The total average assets  
include interbranch balances with other  
set(s) of books of the corporation that  
are not reportable on Schedule L.  
Separate currency pools method  
filers. Separate Currency Pools  
method filers complete all columns on  
lines 1 through 9 and lines 16a through  
25. Do not complete lines 10 through  
15.  
institutions, and a substantial amount of  
the corporation's business must consist  
of receiving deposits and making loans  
and discounts, or of exercising fiduciary  
powers similar to those permitted to  
national banks under authority of the  
Line 3a, column (a). Total inter-  
branch assets. Enter on line 3a,  
column (a), the total of the corporation's  
average interbranch assets included on  
line 2, column (a). The average  
Lines 21 through 25. Summary – In-  
terest expense allocation and de-  
Instructions for Schedule I (Form 1120-F) (2023)  
3
interbranch assets recorded on the  
set(s) of Schedule L books do not  
create U.S. assets under Regulations  
section 1.882-5(b)(1)(iv) and are  
disregarded for purposes of the interest  
expense allocation rules.  
section 1.864-4(c)(5)(ii), enter the  
amount of the asset on line 3c, column  
(a), in the proportion that the income,  
gain, or loss from such asset that is  
treated as non-ECI bears to the total  
income, gain, or loss from such asset.  
Do the same for the non-ECI portion of  
any asset whose income is allocated  
under the proposed global dealing  
regulations or under an Advance Pricing  
Agreement pursuant to a competent  
authority agreement. See Proposed  
Regulations sections 1.884-1(d)(2)(vii)  
and 1.884-1(d)(2)(xi), Example 8. Attach  
a statement which describes each type  
of “other” non-ECI asset included on  
line 3c. For each type, show the  
disregarded treatment in Regulations  
section 1.882-5.  
Line 3e, column (a). Adjustments for  
assets that give rise to direct inter-  
est expense allocations under Regu-  
lations section 1.882-5(a)(1)(ii).  
Enter on line 3e, column (a), the  
Note. If under Proposed Regulations  
section 1.863-3(h) ("the proposed  
global dealing regulations"), which  
references the Proposed Regulations  
section 1.482-8 principles), the  
average value of the portion of all assets  
included on line 2 that give rise to direct  
interest expense allocations under  
Regulations section 1.882-5(a)(1)(ii) in  
accordance with the requirements of  
Temporary Regulations section  
corporation recognizes an amount  
recorded as an interbranch asset, such  
amount is treated as the allocation and  
source of third-party securities dealing  
income and is not eliminated from U.S.  
assets on line 3a, column (a). Such  
interbranch assets are eliminated only  
to the extent they are allocated under  
the proposed global dealing regulations  
to foreign source non-ECI. The allocable  
amount to non-ECI is eliminated from  
U.S. assets on line 3c, column (a) (total  
other non-ECI assets).  
1.861-10T(b) or (c), and Temporary  
Regulations section 1.861-10T(d). A  
foreign corporation that allocates its  
interest expense under the direct  
calculation of the amount included on  
line 3c for that type, including a total for  
each type.  
allocation rules shall reduce the basis of  
the asset that meets the requirements of  
Temporary Regulations section  
Line 3d, column (a). Adjustments for  
amounts from partnerships and cer-  
1.861-10T (b) or (c) by the principal  
amount of the indebtedness that meets  
tain disregarded entities included on the requirements of Temporary  
line 2, column (a). With respect to  
amounts from partnerships included on  
line 2, column (a), all such amounts  
must be “backed out” on this line 3d,  
column (a). Enter on line 3d, column (a),  
all amounts on the Schedule L books for  
investments in partnerships (whether  
recorded as an investment in the  
Regulations section 1.861-10T (b) or  
(c). The amount of directly allocable  
interest under Regulations section  
1.882-5(a)(1)(ii) is reported on line 22.  
Line 3b, column (a). Total non-ECI  
assets under section 864(c)(4)(D).  
Enter on line 3b, column (a), the  
Line 3f, column (a). Other adjust-  
ments to average assets included on  
line 2. Enter on line 3f, column (a), the  
average asset balances for any other  
amounts included on line 2, column (a),  
that do not constitute U.S. assets as  
defined in Regulations section  
average assets included on line 2,  
column (a) that give rise to non-ECI  
received from foreign related  
corporations under section 864(c)(4)  
(D). Such amounts include assets from  
transactions with foreign related  
partnership interest or in the partnership  
assets) included on line 2, column (a).  
corporations that give rise to foreign  
source dividends, interest, rents, or  
royalties, whether or not such amounts  
are attributable to a U.S. office of the  
corporation under section 864(c)(5). A  
foreign related corporation is a foreign  
corporation the taxpayer owns (under  
section 958(a)) or is treated as owning  
(under section 958(b)) more than 50%  
of the total combined voting power of all  
classes of stock entitled to vote. Enter  
the average asset number for assets  
described in section 864(c)(4)(D) on  
line 3b, column (a), regardless of  
Note. Partnership interests are  
reported in Step 1 as follows: The  
corporation's adjusted outside basis in a  
partnership (from Schedule P (Form  
1120-F), line 13, “Total” column) that is  
treated as a U.S. asset under  
1.884-1(d). Assets includible on this line  
may include, for example, amounts with  
respect to securities that are  
marked-to-market for tax purposes  
under section 475 that are not  
marked-to-market on the set(s) of books  
reported on line 2, column (a). If the  
mark-to-market amount includible for tax  
purposes is an increase to the basis of  
the assets included on line 2, column  
(a), include such increase as a negative  
number on line 3f, column (a). Similarly,  
if the mark-to-market amount decreases  
the basis of the assets included on  
line 2, column (a), include such  
Regulations sections 1.882-5 and  
1.884-1(d)(3) is generally entered on  
Schedule I (Form 1120-F), line 5,  
column (b).  
With respect to amounts from  
disregarded entities included on line 2,  
column (a), enter on line 3d, column (a),  
any adjustment needed to reflect the  
following: Investments in disregarded  
entities should not be included on line 2,  
column (a) if the set(s) of books are  
reportable on Schedule L. Instead, the  
total assets of such disregarded entity's  
Schedule L books should be combined  
on line 2, column (a), with all other  
set(s) of books reportable on  
whether such assets give rise to  
non-ECI under another Code section or  
regulation. For example, report income  
that is non-ECI under section 864(c)(4)  
(D) on line 3b, column (a) even if such  
income is also not attributable to a U.S.  
office of a banking, financing, or similar  
business under Regulations section  
1.864-6(b)(2)(ii)(b) and the principles of  
Regulations section 1.864-4(c)(5)(ii).  
decrease as a positive number on  
line 3f, column (a). Other adjustments  
for book-to-tax differences with respect  
to asset values on line 2, column (a),  
such as depreciation and amortization,  
are also reportable on line 3f, column  
(a). Enter an aggregate net increase as  
a negative number. Enter an aggregate  
net decrease as a positive number.  
Line 4, column (a). Combine lines 3a  
through 3f and enter the result on line 4,  
column (a). The result on line 4, column  
(a), constitutes the total net adjustment  
to the average book assets from the  
Schedule L set(s) of books reported on  
line 2, column (a).  
Schedule L. If another Schedule L book  
reflects an investment in a disregarded  
entity whose books are not reportable  
on Schedule L, then the assets of the  
disregarded entity are not reported on  
line 2, column (a). The amount of the  
investment in the disregarded entity that  
is included in the total assets reported  
on line 2, column (a), must be reversed  
on line 3d, column (a), to reflect its  
Line 3c, column (a). Total other  
non-ECI assets. Enter on line 3c,  
column (a), all other assets (or portion  
thereof) included on line 2, column (a),  
that give rise to domestic or foreign  
source non-ECI. If income from a  
security is treated as partially ECI and  
partially non-ECI under Regulations  
Instructions for Schedule I (Form 1120-F) (2023)  
4
tax principles for the year. The  
Line 5. Total Value of U.S. Assets  
for the Tax Year  
Line 5, column (d). Total average val-  
ue of U.S. assets included in Step 1.  
Combine the amounts on line 5,  
corporation's worldwide liabilities  
include the liabilities of only the  
Line 5, column (a). Average U.S. as-  
sets on set(s) of Schedule L books.  
Subtract the amount on line 4, column  
(a), from line 2, column (a), and enter  
the amount on line 5, column (a). The  
resulting amount is the total average  
value of U.S. assets under Regulations  
section 1.884-1(d) included on the  
Schedule L set(s) of books, excluding  
any partnership interests included on  
line 2.  
corporation filing the Form 1120-F, plus  
the corporation's share of partnership  
liabilities and any liabilities of any  
disregarded entities that are treated as  
liabilities of the foreign corporation  
under U.S. tax principles. The books of  
the foreign corporation and any such  
disregarded entities must be combined,  
with applicable eliminating entries for  
transactions between them. See  
Regulations section 1.882-5(c)(2)(viii).  
The classification of the worldwide  
liabilities is determined under U.S. tax  
principles. See Regulations section  
1.882-5(c)(2)(ii). The value of the  
worldwide liabilities must be determined  
substantially in accordance with U.S. tax  
principles. Large banks (as defined in  
section 585(c)(2)) must average the  
worldwide liabilities using the beginning,  
middle, and end of year values.  
columns (a), (b), and (c), and enter the  
amount on line 5, column (d). This  
amount is the total average value of the  
corporation's U.S. assets included in  
Step 1 of the Regulations section  
1.882-5 formula. If the corporation uses  
the Separate Currency Pools method to  
allocate interest expense in Step 3 of  
the Regulations section 1.882-5  
formula, see the instructions for  
line 16a, later. The amount on line 5,  
column (d), is also reportable on  
Line 5, column (b). Average value of  
partnership interests that is a U.S.  
asset. Enter on line 5, column (b), the  
amount from Schedule P (Form  
Schedule H (Form 1120-F), line 22a.  
Lines 6 Through 7c. Step 2:  
Determination of  
U.S.-Connected Liabilities –  
Regulations Section 1.882-5(c)  
Line 6. Actual ratio or fixed ratio  
method. Check the applicable box to  
specify whether the corporation uses  
the actual ratio or the fixed ratio method  
for the tax year to determine its  
1120-F), line 13 (“Total” column) that is  
treated as a U.S. asset under  
Regulations sections 1.882-5 and  
1.884-1(d)(3). This amount is the sum of  
the corporation's outside basis in  
partnership interests as adjusted under  
Regulations section 1.884-1(d)(3). The  
amount entered from Schedule P,  
line 13, may include the corporation's  
outside basis in partnerships whose  
book value is included on line 2, column  
(a), as well as partnership interests  
whose book value is not recorded on the  
Schedule L books and is not included  
on line 2, column (a).  
Corporations other than large banks  
must average the worldwide liabilities  
using the year-to-year values of its  
liabilities.  
U.S.-connected liabilities in Step 2 of  
the allocation formula. The amount of  
U.S.-connected liabilities is the total  
value of U.S. assets for the tax year  
(line 5, column (d)) multiplied by the  
actual ratio or the applicable fixed ratio  
the corporation has timely elected and is  
eligible to use for the tax year. The  
actual ratio or fixed ratio election must  
be made on an original timely filed tax  
return for the first year the corporation is  
subject to Regulations section 1.882-5  
and is subject to the minimum 5-year  
period under Regulations section  
1.882-5(a)(7). An election to change the  
method after such minimum 5-year  
period is also subject to the minimum  
5-year period.  
Actual ratio information. If the  
corporation uses the actual ratio,  
complete lines 6a through 6c, and skip  
line 6d.  
Fixed ratio information. If the  
corporation uses the fixed ratio, skip  
lines 6a through 6c, and enter the  
applicable fixed ratio on line 6d. For  
foreign banks (described in Regulations  
section 1.882-5(c)(4)), the fixed ratio is  
95%. For corporations other than foreign  
banks and insurance companies, the  
fixed ratio is 50%.  
Line 6b. Average worldwide assets.  
Enter the average worldwide assets as  
adjusted for U.S. tax principles on  
line 6b, using the same nonconsolidated  
books for reporting average worldwide  
liabilities on line 6a. Transactions with  
disregarded entities included in the  
actual ratio computation constitute  
interbranch transactions under U.S. tax  
principles and must be eliminated. See  
Regulations section 1.882-5(c)(2)(viii).  
Use the same averaging period  
Line 5, column (c). Average U.S. as-  
sets not includible in set(s) of  
Schedule L books reported on line 5,  
column (a), or from partnerships re-  
ported on line 5, column (b). Enter  
on line 5, column (c), the average value  
of U.S. assets (other than the  
applicable to worldwide liabilities. If the  
corporation uses the actual ratio  
corporation's outside basis in  
partnership interests that is a U.S.  
asset) from set(s) of books that are not  
reportable on Schedule L. Such assets  
may generally include certain securities  
attributable to a U.S. office of a banking,  
financing, or similar business under  
Regulations section 1.864-4(c)(5)(iii)  
that are booked in a foreign bank's  
home office or other foreign location.  
Other assets reportable on line 5,  
column (c), may generally also include  
assets that are no longer held in  
method, the amount entered on line 6b  
is also reported on Schedule H (Form  
1120-F), line 22b.  
Fixed Ratio Filers — Regulations  
Section 1.882-5(c)(4)  
Line 7a. U.S.-connected liabilities be-  
fore Regulations section 1.884-1(e)  
(3) election(s). Multiply the average  
U.S. assets from line 5, column (d), by  
the ratio entered on line 6e and enter  
the result on line 7a. The result is the  
amount of U.S.-connected liabilities  
determined before the application of any  
liability reduction election(s) made  
under Regulations section 1.884-1(e)  
(3).  
Line 7b. U.S. liability reduction elec-  
tion amount. Enter the total amount of  
U.S. liability reductions made under  
Regulations section 1.884-1(e)(3) for  
the current year.  
connection with a trade or business  
within the United States that give rise to  
ECI under section 864(c)(6) or section  
864(c)(7). However, not all assets that  
give rise to ECI, including ECI  
recognized under section 864(c)(7),  
constitute U.S. assets under  
Actual Ratio Filers — Regulations  
Section 1.882-5(c)  
Regulations section 1.884-1(d). See  
Regulations section 1.884-1(d)(2)(xi),  
Example 5, and Regulations section  
1.884-1(d)(5).  
Line 6a. Average worldwide liabili-  
ties. Enter on line 6a the average  
worldwide liabilities as adjusted for U.S.  
Instructions for Schedule I (Form 1120-F) (2023)  
5
Note. A liability reduction election may  
be made only to the extent needed to  
reduce a dividend equivalent amount  
under section 884(b) to zero. See  
dealing regulations (for example,  
mark-to-market valuations of dealer  
derivative securities may constitute  
liabilities that are treated as  
Line 9. U.S.-Booked Interest  
Expense  
Line 9, column (a). Schedule L  
Regulations section 1.884-1(e)(3)(iv) for U.S.-booked liabilities includible on  
booked interest expense. Enter the  
amount of third-party interest expense  
from the Schedule L set(s) of books with  
respect to liabilities reported on line 8,  
column (a). Do not include interest  
expense that is directly allocable under  
Regulations section 1.882-5(a)(1)(ii),  
including the corporation's distributive  
share of direct interest expense  
the time, place, and manner for making  
the liability reduction election and the  
separate disclosures required to be  
attached to Form 1120-F for each  
liability reduction election made.  
If the corporation uses the Separate  
Currency Pools method for Step 3 (lines  
16a through 20), the amount included  
on line 7b must also be allocated to  
determine the U.S.-connected liabilities  
for each currency. See the instructions  
for lines 7c below and line 17b later. If  
no liability reduction election is made for  
the tax year, enter -0- on line 7b.  
line 8, column (a)). Do not include  
liability amounts on line 8a to the extent  
they give rise to directly allocable  
interest under Regulations section  
1.882-5(a)(1)(ii) or are partnership  
liabilities includible in column (b).  
Corporations other than banks.  
The definition of U.S.-booked liability for  
a foreign corporation other than a bank  
is described in Regulations section  
1.882-5(d)(2)(ii). Liabilities reflected on  
allocations from partnerships otherwise  
reportable in column (b). All direct  
interest expense allocations to ECI are  
the Schedule L books must be recorded reported on line 22.  
on such books reasonably  
Line 9, column (b). U.S.-booked in-  
contemporaneous to the time the liability  
is incurred.  
terest expense from partnerships.  
Enter on line 9, column (b), the portion  
of the amount from Schedule P (Form  
1120-F), line 8 (“Total” column) that is  
interest expense on U.S.-booked  
liabilities. Do not include interest  
expense that is directly allocable under  
Regulations section 1.882-5(a)(1)(ii)  
from the corporation's distributive share  
of a partnership's direct interest  
expense allocations. All direct interest  
expense allocations to ECI are reported  
on line 22.  
Line 7c. U.S.-connected liabilities.  
Subtract line 7b from line 7a and enter  
the amount on line 7c. The amount  
entered is the amount of  
Foreign banks. The liability recorded  
on the set(s) of Schedule L books must  
be that of a foreign bank that conducts  
regulated banking operations in the  
United States as described in section  
585(a)(2)(B). Note: This requirement  
applies only for the determination of  
U.S.-booked liabilities and  
U.S.-connected liabilities for purposes  
of determining the amount of interest  
expense allocable to ECI in Step 3. If  
the corporation uses the Separate  
Currency Pools method for Step 3, the  
sum of all U.S.-connected liabilities  
shown on line 17b (including any  
statements for lines 16a through 19 for  
additional separate currency pool  
computations) must equal the amount  
shown on line 7c after the liability  
reduction election has been taken into  
account.  
corresponding U.S.-booked interest  
expense. It does not apply for other  
purposes such as determining the  
eligibility for the fixed ratio under Step 2,  
reportable on line 6d. The liability must  
be recorded on the Schedule L books  
before the close of the day on which the  
liability is incurred unless an inadvertent  
error is shown under the facts and  
circumstances. See the definition and  
requirements for U.S.-booked liabilities  
of foreign banks under Regulations  
section 1.882-5(d)(2)(iii). Note: The  
section 585(a)(2)(B) standard also  
applies for eligibility to reduce excess  
interest using the deposit liability safe  
harbor under the branch-level interest  
tax on excess interest under  
Line 9, column (c). Total U.S.-booked  
interest expense. Add the amounts on  
line 9, column (a), and line 9, column  
(b), and enter the result on line 9,  
column (c). This result is also required  
to be reported on Form 1120-F,  
Lines 8 and 9. Step 3: Interest  
Expense Allocation (Including  
U.S.-Booked Liabilities and  
U.S.-Booked Interest Expense  
Included in the Determination  
of Branch Interest)  
Section III, line 8. This amount plus  
line 22 is the corporation’s tentative  
branch interest for purposes of the  
branch level interest tax under  
Regulations section 1.884-4(b). See the  
instructions for Form 1120-F, Section III,  
Part II, line 8.  
Line 8. Average Third Party  
U.S.-Booked Liabilities  
Regulations section 1.884-4(a)(2)(iii).  
Lines 10 Through 15. Step  
3: Adjusted U.S.-Booked  
Liabilities Method  
Line 8, column (b). U.S.-booked lia-  
bilities of partnership interests.  
Enter on line 8, column (b), the portion  
of the amount from Sched ule P, line 11  
(“Total” column) that constitutes U.S.  
booked liabilities under Regulations  
section 1.882-5(d)(2). This amount is  
the corporation's average U.S.-booked  
liabilities with respect to its distributive  
share of liabilities during the averaging  
period from partnerships engaged in a  
trade or business or treated as engaged  
in a trade or business within the United  
States. The amount reportable on line 8,  
column (b), is the corporation's share of  
partnership liabilities for which it is  
allocated a distributive share of interest  
expense. See Regulations section  
1.884-1(d)(3)(vi).  
Line 8, column (a). Schedule L  
U.S.-booked liabilities. Enter on  
line 8, column (a), the average amount  
of third-party U.S.-booked liabilities from  
the set(s) of books reportable on  
Schedule L using the most frequent  
averaging period available but not less  
frequently than the minimum averaging  
periods required for U.S. assets  
If the amount on line 7c exceeds the  
amount on line 8, column (c), the  
corporation has “excess interest” as  
defined in section 884(f)(1)(B).  
Complete lines 10 through 13, and skip  
lines 14a and 14b. If the amount on  
line 7c is less than or equal to the  
amount on line 8, column (c), skip lines  
10 through 13, and complete the  
determination of the scaling ratio on  
lines 14a and 14b.  
reported on line 5. The average  
U.S.-booked liabilities include all  
third-party liabilities on the set(s) of  
Schedule L books whether interest  
bearing or not. Exclude interbranch  
liabilities shown on the Schedule L  
books unless such amounts are treated  
as allocations of third-party amounts  
with respect to a global dealing  
operation under the proposed global  
Instructions for Schedule I (Form 1120-F) (2023)  
6
See Regulations section 1.882-5(d)(5)  
(ii).  
Lines 10 Through 13.  
Lines 14a Through 15.  
Computation of AUSBL Method  
Allocation Under the  
Computation of AUSBL Method  
Allocation With Excess Interest  
Line 10e. If the amount on line 10b is  
zero and the foreign corporation does  
not properly make or is not eligible to  
make the published rate election, enter  
on line 10e an interest rate that is  
reasonable under the facts and  
circumstances. One reasonable  
approach in determining such interest  
rate would include using an interest rate  
that:  
Scale-Down Ratio  
Line 10. Published rate election for  
banks. If the corporation is a foreign  
bank that elects to compute excess  
interest under the AUSBL method using  
the average published one-month Term  
Secured Overnight Financing Rate  
published by the Chicago Mercantile  
Exchange Group Benchmark  
If U.S.-connected liabilities on line 7c  
are less than U.S.-booked liabilities on  
line 8, column (c), the AUSBL method  
allocation is subject to a “scale-down” of  
the U.S.-booked interest expense  
reported on line 9, column (c). Complete  
lines 14a and 14b in lieu of lines 10  
through 13. If line 7c exceeds line 8,  
column (c), leave lines 14a and 14b  
blank.  
Line 14b. Scaled-down U.S. book in-  
terest. Multiply the amount of U.S.  
booked interest on line 9, column (c), by  
the scale-down ratio on line 14a, and  
enter the result on line 14b. The  
Administration, Ltd. (or any successor  
administrator) (“Term SOFR”) for the  
taxable year, plus a static spread  
adjustment of 0.11448% for the tax year  
(or the transitional rate as explained in  
the "Note" below), check the box on  
line 10 and skip lines 10a through 10c.  
Enter the published rate on line 10d.  
See Regulations section 1.882-5(d)(5)  
(ii)(B) for additional information. The  
published rate election does not apply  
to corporations other than foreign  
banks. For this purpose, the corporation  
is eligible to make the published rate  
election under the same standard that  
qualifies the corporation as a bank  
eligible to make the 95% fixed ratio  
election in Regulations section  
Approximates the foreign  
corporation's actual average U.S.-dollar  
borrowing rate with respect to  
interest-bearing U.S.-dollar  
denominated liabilities, and  
Is consistently applied by the foreign  
corporation from year to year.  
Examples of interest rates that would  
generally be considered reasonable  
include the actual average interest rate  
on interest-bearing U.S.-dollar  
allocated amount is the total amount of  
the AUSBL method allocation under  
Regulations section 1.882-5(d)(4). The  
amount on line 14b does not include any  
amount directly allocable to ECI under  
Regulations section 1.882-5(a)(1)(ii).  
denominated liabilities that are  
U.S.-booked liabilities or an average  
arm's length rate of interest that would  
be charged to the foreign corporation on  
its interest-bearing U.S.-dollar  
Hedging amounts. If the  
corporation has income, expense, gain,  
or loss from a hedging transaction of a  
U.S.-booked liability that gives rise to  
interest expense subject to the  
denominated liabilities. A U.S.-dollar  
borrowing rate of zero would generally  
not be considered reasonable.  
1.882-5(c)(4). The published rate  
election is an annual election.  
scale-down ratio, such hedging income,  
expense, gain, or loss amount is also  
subject to reduction under the same  
scaling ratio reported on line 14a. See  
Regulations section 1.882-5(d)(4) and  
Proposed Regulations section  
Note. For a taxable year that includes  
June 30, 2023, a taxpayer that makes  
the annual published rate election must  
compute the interest expense  
If the rules set forth above apply to  
the foreign corporation, attach a  
statement to Schedule I (Form 1120-F)  
explaining how the interest rate entered  
on line 10e was derived.  
attributable to excess U.S.-connected  
liabilities by ratably using the average  
30-day U.S. dollar London Interbank  
Offered Rate for the portion of its  
1.882-5(d)(2)(vi). Do not report such  
scale-down reductions of hedging  
income, expense, gains, or losses on  
line 14b. The ratio reported on line 14a  
shall be applied to each type of item in  
accordance with its characterization and  
the scaled down hedging income,  
expense, gain, or loss is reported on  
Form 1120-F, Section II, in the  
Line 12. Excess interest. Multiply the  
rate on line 10e by the amount of excess  
U.S.-connected liabilities on line 11 and  
enter the result on line 12. This amount  
is the corporation's excess interest  
expense portion of its overall  
taxable year ending on June 30, 2023,  
and the average one-month Term  
SOFR, plus a static spread adjustment  
of 0.11448%, for the portion of its  
taxable year beginning on July 1, 2023.  
Regulations section 1.882-5 allocation  
that is allocable to ECI under the AUSBL  
method in Regulations section  
Lines 10a Through 10c. Excess  
Interest – Average Actual U.S.  
Dollar Rate  
Line 10a. Actual U.S. dollar interest.  
If the corporation does not properly  
make or is not eligible to make a  
appropriate category to which the  
hedging item is characterized. For  
instance, periodic expense from an  
interest rate notional principal contract  
hedging transaction that is recorded on  
the set(s) of books reportable on  
Schedule L, and that is subject to the  
scaling ratio, is reported on Form  
1120-F, Section II, line 27. Such amount  
is also subject to reporting on  
1.882-5(d)(5). The amount on line 12  
also constitutes the corporation's  
excess interest under section 884(f)(1)  
(B). See Regulations section 1.884-4(a)  
(2).  
Line 13. Interest expense allocation.  
Add the amount reported on line 12 and  
the amount of U.S.-booked interest  
expense from line 9, column (c) and  
enter the result on line 13. This amount  
is the corporation's total amount of  
interest expense allocable under the  
three-step formula when  
published rate election for the tax year,  
enter the interest expense paid or  
accrued by the corporation for the tax  
year on its average worldwide U.S.  
dollar liabilities, excluding U.S.-booked  
liabilities included on line 8, column (c).  
Schedule H (Form 1120-F), line 38a, as  
allocable in part to ECI and in part to  
non-ECI in accordance with the scaling  
ratio of line 14a.  
Line 10b. Enter on line 10b the average  
worldwide U.S. dollar denominated  
liabilities (whether or not interest  
U.S.-connected liabilities exceed  
U.S.-booked liabilities under the AUSBL  
method. It does not include any  
bearing) that are not U.S.-booked  
liabilities included on line 8, column (c).  
amounts directly allocable to ECI under  
Regulations section 1.882-5(a)(1)(ii).  
Instructions for Schedule I (Form 1120-F) (2023)  
7
A transaction that hedges a U.S.  
asset is taken into account for purposes  
of determining the currency  
allocation is made in additional  
columns. See Regulations section  
1.882-5(e)(2). The worldwide interest  
expense in each currency pool includes  
interest expense in each currency that is  
recorded on the Schedule L books and  
reportable on Schedule I, line 9, column  
(c).  
Line 18b. Worldwide average liabili-  
ties in each separate currency pool.  
Enter on line 18b the average liabilities  
(whether or not interest bearing)  
Lines 16a Through 20.  
Step 3: Separate Currency  
Pools Method  
denomination and the value of the U.S.  
asset. See Regulations section  
1.882-5(e)(1)(i).  
Corporations that allocate interest  
expense under a Separate Currency  
Pools election report the allocations  
under a three-step method for each  
currency in which the corporation has  
U.S. assets (as defined in Regulations  
section 1.884-1(d)), on Schedule I, lines  
16a through 20. The amount of the  
Line 17b. U.S.-connected liabilities  
per currency. Complete line 17b as  
follows:  
Determination of U.S.-connected  
liabilities if no U.S. liability reduction  
interest expense allocation is the sum of election is made. For each applicable  
denominated in each separate currency  
pool. In column (a), enter the average  
worldwide liabilities (whether or not  
interest bearing) denominated in U.S.  
dollars. For all other separate currency  
pools, enter the average amount of  
liabilities (whether or not interest  
the separate interest expense  
column, multiply the U.S. assets on  
line 16a by the U.S.-connected liability  
ratio on line 17a and enter the amount  
on line 17b. The resulting amount  
constitutes the U.S.-connected liabilities  
for each currency pool when the  
corporation does not make a U.S.  
liability reduction election under  
allocations in each currency. If the  
corporation makes a 3% currency  
election under Regulations section  
1.882-5(e)(1)(i), check the box on  
line 16b and include the U.S. dollar  
value of all currencies for which the 3%  
currency election applies in the U.S.  
dollar denominated column on line 16a.  
bearing) denominated in the currency of  
the currency pool. Do not enter the U.S.  
dollar value of the currency pool for any  
column other than column (a). In  
Regulations section 1.884-1(e)(3).  
Schedule I accommodates reporting  
of the interest expense allocations in  
Determination of U.S.-connected  
liabilities if a U.S. liability reduction  
determining the average worldwide  
borrowing rate, the liabilities in each  
currency pool include the amounts  
recorded on the set(s) of books  
four currencies (including the U.S. dollar election is made. If the corporation  
and the foreign corporation's functional  
currency). If the foreign corporation has  
makes one or more U.S. liability  
reduction elections for the tax year  
reportable on Schedule L and included  
on Schedule I, line 8, column (c).  
Determine the average third-party  
liabilities using the most frequent  
averaging period for which data is  
reasonably available in accordance with  
the principles of Regulations sections  
1.882-5(b)(3) and (c)(2)(iv).  
U.S. assets in more than four currencies under Regulations section 1.884-1(e)  
that are not subject to a 3% currency  
election, attach separate sheets using  
the same size and format as shown on  
the schedule and provide the  
(3), the total amount of the liability  
reduction shown on line 7b must be  
allocated to each of the separate  
currency pools in proportion to the U.S.  
assets in each pool. The amount  
information requested on lines 16a  
through 19 on the attached sheets for all entered on line 17b for each column is  
such additional currencies. Report on  
Schedule I, line 20, column (d), the total  
results for all separate currency  
computed as:  
1. The amount on line 16a multiplied  
Line 18c. Borrowing rate. Divide  
line 18a by line 18b. The result is the  
average worldwide borrowing rate for  
each separate currency pool.  
Line 19. Interest expense allocation  
by separate currency pool. For each  
column, multiply the amount on line 17b  
by the borrowing rate on line 18c and  
enter the result on line 19. The amount  
on line 19 is the amount of interest  
expense allocable to ECI in each  
separate currency pool.  
by the ratio on line 17a, less  
allocations shown on line 19 for  
2. The amount of the liability  
reduction election entered on line 7b  
multiplied by the proportion that the  
average U.S. assets in the separate  
currency pool bears to all of the U.S.  
assets in all separate currencies (that is,  
the total average U.S. assets entered on  
line 5, column (d)).  
columns (a) through (d), plus any  
additional line 19 amounts shown on  
attached separate sheets (if any).  
Line 16a. U.S. Assets — U.S. dollar  
value denominated in currency.  
Enter the U.S. dollar value of the  
average amount of U.S. assets in the  
appropriate column (a) through (d) (or  
on the attached separate sheets for  
additional currencies). Enter in column  
(a) the U.S. dollar denominated U.S.  
assets, plus the U.S. dollar value of any  
U.S. assets for which a 3% currency  
election is applicable for the tax year. In  
column (b), enter the average U.S.  
dollar value of U.S. assets denominated  
in the corporation's home country  
functional currency. Enter the average  
U.S. assets of all other currency pools  
beginning with column (c).  
Attach a statement showing the  
computation and the allocation of the  
liability reduction election to each  
separate currency pool.  
Line 20. Total interest expense allo-  
cable to ECI under the separate cur-  
rency pools method. On line 20, enter  
the sum of the amounts in each column  
on line 19 (including amounts from  
line 19 of attached statement, if any).  
The amount on line 20 is the total  
Line 18a. Worldwide book interest  
expense for each separate currency  
pool. Enter for each column on line 18a  
the corporation's worldwide interest  
expense paid or accrued for the tax year  
in the separate currency pool. In column  
(a), enter the worldwide U.S. dollar  
interest paid or accrued. For all other  
separate currency pools, enter the  
worldwide interest expense in the  
amount of interest expense allocable to  
ECI under the Separate Currency Pools  
method. The amount on line 20 does  
not include any amount of interest  
expense directly allocable under  
Note. The sum of all U.S. assets in  
columns (a) through (d) (and in any  
columns shown on any attached  
separate sheets) must equal the total  
average U.S. assets entered on line 5,  
column (d).  
Regulations section 1.882-5(a)(1)(ii).  
functional currency of the currency pool.  
Do not enter the U.S. dollar value of the  
functional currency pool in column (b) or  
for any other non-U.S. dollar currencies  
for which a separate currency pool  
Instructions for Schedule I (Form 1120-F) (2023)  
8
amount of interest expense taken into  
account for branch-level interest tax  
The amount reportable on line 24a is  
included on Schedule M-3 (Form  
Lines 21 Through 25.  
Summary – Interest  
Expense Allocation and  
Deduction Under  
Regulations Section  
1.882-5  
purposes under section 884(f)(1)(B) and 1120-F), Part III, line 26c, column (c).  
Regulations section 1.884-4(a),  
Line 24b. Deferred interest  
regardless of whether the deductibility  
expense. Enter on line 24b the amount  
of such amount is temporarily deferred  
of allocable interest expense on line 23  
or disallowed for allocation to  
that is deferred as a deduction in the  
tax-exempt income (including treaty  
current tax year by a provision of the  
exempt income). The amount reportable  
Internal Revenue Code other than  
on line 23 is reconciled and reported on  
section 163(j) (for example, section  
Form 1120-F, Section III, line 7c, and on  
163(e) or section 267(a)(3)) but may be  
Schedule M-3 (Form 1120-F), Part III,  
allowed as a deduction in a subsequent  
line 26b, columns (d) and (e).  
Line 22. Interest expense directly al-  
locable under Regulations section  
1.882-5(a)(1)(ii). Enter the amount of  
interest expense directly allocable to  
ECI under Regulations section  
tax year. Attach a statement indicating  
1.882-5(a)(1)(ii), including such  
amounts from Schedule P (Form  
1120-F), line 7. A foreign corporation  
that has a U.S. asset and indebtedness  
that meet the requirements of  
Line 24. Tax-exempt allocations, dis-  
allowances, deferrals, and capitaliza-  
tion of interest expense allocation  
from line 23. The amount of interest  
expense allocable to ECI entered on  
line 23 is subject to additional rules that  
may defer or disallow deductibility in  
whole or in part.  
the amount of current year deferral for  
each applicable provision.  
Note. Enter all amounts on line 24b as  
a negative amount. These line 24b  
amounts are a reduction of the  
Temporary Regulations section  
1.861-10T(b) or (c), as limited by  
Temporary Regulations section  
1.861-10T(d)(1), shall directly allocate  
interest expense from such  
allocation in determining the deductible  
interest expense for the year.  
The amount reportable on line 24b is  
Line 24a. Tax-exempt allocations  
and other permanently disallowed  
interest expense. Enter on line 24a  
the amount of allocable interest  
included on Schedule M-3 (Form  
indebtedness to income from such  
asset in the manner and to the extent  
provided in Temporary Regulations  
section 1.861-10T.  
1120-F), Part III, line 26c, column (b).  
Line 24c. Disallowed business  
interest expense under section  
163(j). Enter on line 24c the amount of  
allocable interest expense on line 23  
that cannot be deducted in the current  
year because it is disallowed business  
interest expense under section 163(j).  
Attach Form 8990, Limitation on  
Business Interest Expense Under  
Section 163(j).  
expense on line 23 that is subject to  
further allocation and apportionment to  
tax-exempt income under section 265 or  
under the provisions of an applicable  
income tax treaty. Attach a statement  
showing how such allocation between  
exempt and non-exempt ECI has been  
made. See Regulations section  
Note. See Temporary Regulations  
section 1.861-10T(d) for rules requiring  
reductions in basis to assets required by  
the direct interest allocation rules in  
Temporary Regulations section  
1.861-10T(b) or (c). The rules of  
Temporary Regulations section  
1.861-10T(c) apply only to non-financial  
institutions. Financial institutions are  
permitted to directly allocate interest  
expense only under the non-recourse  
indebtedness rules described in  
Temporary Regulations section  
1.861-10T(b).  
1.882-5(a)(5) and Regulations section  
1.882-5(a)(8), examples (3) and (4).  
Treaty-exempt income may include  
income that is ECI under the force of  
attraction principle of section 864(c)(3)  
but which is business profits not  
Note. Enter all amounts on line 24c as  
a negative amount. These line 24c  
amounts are a reduction of the  
allocation in determining the deductible  
interest expense for the year.  
attributable to a U.S. permanent  
establishment of the corporation under  
an applicable treaty to which  
The amount reportable on line 24c is  
included on Schedule M-3 (Form  
Line 23. Total interest expense allo-  
cable to ECI under Regulations sec-  
tion 1.882-5. Add lines 21 and 22 and  
enter the result on line 23. This result is  
the total amount of interest expense  
allocable to ECI, including directly  
allocated interest. This allocable amount  
may not exceed the total interest  
Regulations section 1.882-5 applies in  
determining the attributable business  
profits. For such treaties, the amount  
allocable to ECI reported on line 23  
requires additional allocation and  
apportionment between taxable ECI and  
treaty-exempt ECI under Regulations  
section 1.882-5(a)(5). Also include on  
line 24a any other interest expense that  
is permanently disallowed by a section  
of the Internal Revenue Code (for  
example, section 163(f)(2)) or an  
income tax treaty. Include in the  
1120-F), Part III, line 26c, column (b).  
Line 24d. Capitalized interest  
expense. Enter on line 24d the amount  
of allocable interest expense on line 23  
that is capitalizable (for example, under  
section 263A). Attach a statement  
describing how such allocation has  
been made.  
expense paid or accrued by the  
corporation. See Regulations section  
1.882-5(a)(3). The amount on line 23  
does not include any interest expense  
that was allocable to ECI under  
Note. Enter all amounts on line 24d as  
a negative amount. These amounts are  
treated as a reduction of the allocation  
in determining the deductible interest  
expense for the year.  
Regulations section 1.882-5 in a  
attached statement the amount of  
interest expense disallowed for each  
applicable provision or income tax  
treaty.  
previous tax year and was subject to  
limitation and deferral by another  
The amount reportable on line 24d is  
section of the Internal Revenue Code in  
that previous tax year but deductible in  
the current tax year. If the corporation's  
total interest expense paid or accrued is  
less than the amount of allocation that  
would result by adding lines 21 and 22,  
enter such lesser amount on line 23.  
The amount entered on line 23 is the  
included on Schedule M-3 (Form  
1120-F), Part III, line 26c, column (c).  
Note. Enter all amounts on line 24a as  
a negative amount. These line 24a  
amounts are a reduction of the  
Line 24e. Current year deduction  
of interest expense deferred in a  
prior year. Enter on line 24e the  
amount of allocable interest expense  
deductible in the current tax year that  
allocation in determining the deductible  
interest expense for the year.  
Instructions for Schedule I (Form 1120-F) (2023)  
9
was deferred in a prior tax year under a  
provision of the Internal Revenue Code  
other than section 163(j) (for example,  
section 163(e) or section 267(a)(3)).  
Attach a statement indicating the  
amount of current year deduction of a  
prior year deferral for each applicable  
provision.  
deductible in the current tax year that  
was disallowed in a prior tax year under  
section 163(j). Attach Form 8990.  
line 24g is also reported and reconciled  
for its temporary and permanent  
differences on Schedule M-3 (Form  
1120-F), Part III, line 26c, columns (b)  
and (c). See the Instructions for  
Schedule M-3 (Form 1120-F), Part III,  
line 26c.  
Line 25. Amount of allocation deduc-  
tible on Form 1120-F, Section II,  
line 18. Combine lines 23 and 24g and  
enter the result on line 25. The result is  
the corporation's deductible amount of  
interest expense allocation for the tax  
year and is reportable on Form 1120-F,  
Section II, line 18.  
Note. Enter all amounts on lines 24e  
and 24f as positive amounts. These  
amounts are treated as an increase to  
the deductible interest expense for the  
year.  
The amount reportable on line 24e is  
The amount reportable on line 24f is  
included on Schedule M-3 (Form  
included on Schedule M-3 (Form  
1120-F), Part III, line 26c, column (b).  
1120-F), Part III, line 26c, column (b).  
Line 24f. Current year deduction  
of business interest expense  
Line 24g. Total deferrals and  
disallowances. Combine lines 24a  
through 24f and enter the result on  
line 24g. The amount entered on  
disallowed in a prior year under  
section 163(j). Enter on line 24f the  
amount of business interest expense  
Instructions for Schedule I (Form 1120-F) (2023)  
10