Форма 1118 Інструкція

Department of the Treasury

Internal Revenue Service

Instructions for Form 1118

(Rev. December 2023)

(Use with the December 2022 revision of Form 1118, the December 2023 revision of

separate Schedule L, the December 2021 revision of separate Schedule I, the

December 2020 revision of separate Schedule J, and the December 2018 revision of

separate Schedule K.)

Foreign Tax Credit—Corporations

Section references are to the Internal

Revenue Code unless otherwise noted.

taxpayers are required to use the

revised Form 4626 for determining

foreign tax credits for purposes of

calculating the CAMT tax liability, if

any, under section 55.

General Instructions

Future Developments

Purpose of Form

Use Form 1118 to compute a

For the latest information about

developments related to Form 1118

and its instructions, such as legislation

enacted after they were published, go

to IRS.gov/Form1118.

corporation's foreign tax credit for

certain taxes paid or accrued to

foreign countries or U.S. possessions.

See T a xes Eligible for a Credit, later.

Reminders

On December 22, 2017, Congress

enacted the Tax Cuts and Jobs Act,

P.L. 115-97 (the “Act”). The Act

changes the computation of foreign

tax credits for post-2017 tax years as

follows.

Who Must File

What’s New

Any corporation that elects the

Final foreign tax credit regulations.

Final foreign tax credit regulations

were published January 4, 2022. The

new regulations made changes to the

rules relating to the creditability of

foreign taxes under sections 901 and

903, the applicable period for claiming

a credit or deduction for foreign taxes,

and the new election to claim a

benefits of the foreign tax credit under

section 901 must complete and attach

Form 1118 to its income tax return. In

addition, even if a corporation has not

elected to credit foreign taxes, it must

complete and attach Schedules A and

J of a Form 1118 to its income tax

return if it has any additions to,

Two new separate categories of

•

income under section 904(d): (i) any

amount includible in gross income

under section 951A (other than

passive category income) (“section

951A category income”), and (ii)

foreign branch category income.

Repeal of section 902 indirect

reductions to, or recapture of any new

or existing overall foreign loss, overall

domestic loss, or separate limitation

loss accounts. See Regulations

section 1.904(f)-1(b).

•

provisional credit for contested foreign

taxes. A Notice was subsequently

released on July 21, 2023, allowing

taxpayers to apply prior rules in place

of certain rules provided in the new

regulations. The rules described in

this Notice were modified in part by a

Notice released on December 11,

2023, to address their application to

partnerships and their partners and to

extend the relief period until further

notice. For more information, see

Treasury Decision 9959, 2022-03

I.R.B. 328, available at IRS.gov/irb/

2022-03_IRB#TD-9959, Notice

2023-55, 2023-32 I.R.B. 427,

credits with respect to dividends from

foreign corporations.

Modified indirect credits under

•

section 960 for inclusions under

sections 951(a)(1) and 951A.

Also, even if a taxpayer has not

elected to credit foreign taxes, if it has

a foreign tax redetermination under

section 905(c), it must complete and

attach Schedule L of a Form 1118 to

its income tax return for the taxable

year in which the foreign tax

Modified section 78 gross-up with

•

respect to inclusions under sections

951(a)(1) and 951A.

Revised sourcing rule for certain

•

income from the sale of inventory

under section 863(b).

Repeal of the fair market value

•

redetermination occurs. Schedule L

must be submitted irrespective of

whether the foreign tax

method for apportioning interest

expense under section 864(e).

New adjustments for purposes of

•

redetermination changed the

section 904 with respect to expenses

allocable to certain stock or dividends

for which a dividends received

deduction is allowed under section

245A.

taxpayer's U.S. tax liability."

available at IRS.gov/irb/

2023-32_IRB#NO T -2023–55, and

Notice 2023-80, 2023-52 I.R.B. 1583,

available at IRS.gov/irb/

Also, individuals must complete

and attach a Form 1118 to their

income tax return if they make the

election under section 962 to be taxed

at corporate rates on the amount they

must include in gross income under

sections 951(a) and 951A from their

controlled foreign corporations in

order to be eligible to claim a foreign

tax credit based on their share of

foreign income taxes paid or accrued

by the controlled foreign corporation.

2023-52_IRB#NO T -2023-80.

Election to increase pre-2018

•

section 904(g) overall domestic loss

(ODL) recapture.

Corporate Alternative Minimum

Tax Foreign Tax Credit. Form 1118

is not used to determine foreign tax

credits for purposes of calculating the

Corporate Alternative Minimum Tax

(CAMT) under section 55, enacted

under the Inflation Reduction Act of

2022, P.L. 117-169. Corporate

Limited foreign tax credits with

•

respect to inclusions under section

965.

Jan 16, 2024

Cat. No. 10905I

See sections 960 and 962 and Pub.

514 for more information on how to

complete Form 1118 in this case.

respect to inclusions under section

951A.

Code

951A

Category of Income

Use Schedule E to compute taxes

•

Section 951A Category

Income

deemed paid by the domestic

When To Make the Election corporation filing the return with

FB

Foreign Branch Category

Income

respect to distributions of previously

taxed income (also referred to as

previously taxed earnings and profits

(PTEP)).

The election to claim the foreign tax

credit for any tax year may be made or

changed at any time before the end of

a special 10-year period described in

section 6511(d)(3) (or section 6511(c)

if the period is extended by

PAS

901j

Passive Category Income

Section 901(j) Income

Use Schedule G to report required

•

reductions of tax paid, accrued, or

deemed paid.

RBT PAS U.S. Source Passive

Category Income

agreement). The election to claim a

deduction in lieu of a credit for foreign

income taxes may be made or

Use Schedule H to apportion

•

Resourced by Treaty as

Foreign Source Passive

Category Income

deductions that cannot be allocated to

an item or class of income identified

on Schedule A.

changed at any time before the end of

the period prescribed by section

6511(a) or 6511(c). See Regulations

section 1.901-1(d).

RBT GEN U.S. Source General

Category Income

Use Schedule I (a separate

•

schedule) to compute reductions of

taxes paid, accrued, or deemed paid

on foreign oil and gas income.

Resourced by Treaty as

Foreign Source General

Category Income

Computer-Generated

Form 1118

Use Schedule J (a separate

•

schedule) to compute adjustments to

separate limitation income or losses in

determining the numerators of

limitation fractions, year-end

RBT FB

U.S. Source Foreign

Branch Income

Resourced by Treaty as

Foreign Source Foreign

Branch Category Income

The corporation may submit a

computer-generated Form 1118 and

schedules if they conform to the IRS

version. However, if a software

program is used, it must be approved

by the IRS for use in filing substitute

forms. This ensures the proper

placement of each item appearing on

the IRS version. For more information,

see Pub. 1167, General Rules and

Specifications for Substitute Forms

and Schedules.

recharacterization balances, and

overall foreign and domestic loss

account balances.

RBT 951A U.S. Source Section

951A Category Income

Resourced by Treaty as

Foreign Source Section

951A Category Income

Use Schedule K (a separate

•

schedule) to reconcile the

corporation's prior-year foreign tax

carryover with its current-year foreign

tax carryover.

GEN

General Category Income

Use Schedule L (a separate

•

schedule) to report foreign tax

redeterminations that occurred in the

current taxable year and that relate to

prior taxable years.

How To Complete

Form 1118

If you enter code "901j" or one of

the "RBT" codes in item a, also

complete item b or item c using the

country codes provided at IRS.gov/

CountryCodes.

Important. Complete a separate

Schedule A; Schedule B, Parts I & II;

Schedules C through G; Schedule I;

Schedule K; and Schedule L, Parts I,

II, III, & V for each applicable separate

category of income. See Categories

of Income, later. Complete

Categories of Income

Compute a separate foreign tax credit

(using a separate Form 1118) for each

applicable separate category

Section 951A Category Income

Section 951A category income is any

amount of global intangible low-taxed

income (GILTI) includible in gross

income under section 951A (other

than passive category income).

Section 951A defines GILTI.

described below. Enter the applicable

code from the table below, in item a at

the top of page 1 of Form 1118, to

indicate the separate category with

respect to which you are completing a

given Form 1118.

Schedule B, Part III; Schedule H;

Schedule J and Schedule L, Part IV

only once.

Use Schedule A to compute the

•

corporation's income or loss before

adjustments for each applicable

category of income.

When completing a Form 1118 for

•

section 951A category income, enter

the code "951A" on line a at the top of

page 1.

Use Schedule B to determine the

•

total foreign tax credit after certain

reductions.

Section 951A category income

•

does not include passive category

income.

Use Schedule C to compute taxes

•

deemed paid by the domestic

corporation filing the return with

respect to inclusions under section

951(a)(1).

Foreign Branch Category

Income

Foreign branch income is defined

under section 904(d)(2)(J)(i) as the

business profits of a U.S. person

which are attributable to one or more

qualified business units (QBUs) (as

Use Schedule D to compute taxes

•

deemed paid by the domestic

corporation filing the return with

Instructions for Form 1118 (Rev. 12-2023)

2

defined in section 989(a)) in one or

more foreign countries. For more

information on the computation of

foreign branch category income, see

Regulations section 1.904-4(f).

companies in such foreign country,

and (b) the President reports to the

Congress, not less than 30 days

before the waiver is granted, the

intention to grant such a waiver and

the reason for such waiver.

Specified passive category in-

come. This term includes:

Dividends from a domestic

•

international sales corporation (DISC)

or former DISC (as defined in section

992(a)) to the extent such dividends

are treated as foreign source income,

and

When completing a Form 1118 for

•

foreign branch category income, enter

the code "FB" on line a at the top of

page 1.

Note. Effective December 10, 2004,

the President waived the application

of section 901(j) with respect to Libya.

Distributions from a former foreign

•

Foreign branch category income

•

sales corporation (FSC) out of

earnings and profits attributable to

foreign trade income or interest or

carrying charges (as defined in

section 927(d)(1), before its repeal)

derived from a transaction which

results in foreign trade income (as

defined in section 932(b), before its

repeal).

does not include passive category

income.

Income Re-Sourced by Treaty

If a sourcing rule in an applicable

income tax treaty treats any U.S.

source income as foreign source, and

the corporation elects to apply the

treaty, the income will be treated as

foreign source.

Foreign branch category income is

•

effective for tax years of U.S. persons

beginning after December 31, 2017.

Passive Category Income

Passive category income includes

passive income and specified passive

category income. When completing a

Form 1118 for passive category

income, enter the code "PAS" on line

a at the top of page 1.

Important. The corporation must

compute a separate foreign tax credit

limitation for any such income for

which it claims benefits under a treaty.

See Regulations sections 1.904-4(k)

and 1.904-5(m)(7) for grouping rules

and exceptions. On each Form 1118,

enter one of the RBT codes listed

below on line a at the top of page 1

and identify the applicable treaty

country on line c at the top of page 1

using the two-letter codes (from the

list at IRS.gov/CountryCodes).

Section 901(j) Income

No credit is allowed for foreign income

taxes imposed by and paid or accrued

to certain sanctioned countries.

However, a foreign tax credit may be

claimed for foreign income taxes paid

or accrued with respect to section

901(j) income if such tax is paid or

accrued to a country other than a

sanctioned country.

Passive income. Generally, passive

income is the following:

Any income received or accrued

•

that would be foreign personal holding

company income (defined in section

954(c)) if the corporation were a

controlled foreign corporation (CFC)

(defined in section 957). This includes

any gain on the sale or exchange of

stock that is more than the amount

treated as a dividend under section

1248. However, in determining if any

income would be foreign personal

holding company income, the rules of

section 864(d)(6) will apply only for

income of a CFC.

Income derived from each

sanctioned country is subject to a

separate foreign tax credit limitation.

Therefore, the corporation must use a

separate Form 1118 for income

derived from each such country.

Code “RBT PAS.” If an applicable

income tax treaty treats any U.S.

source passive category income as

foreign source passive category

income, and the corporation elects to

apply the treaty, on Form 1118, enter

code “RBT PAS” on line a at the top of

page 1.

On each Form 1118, enter the code

“901j” on line a at the top of page 1

and identify the applicable country

using the two-letter codes (from the

list at IRS.gov/CountryCodes).

Any amount includible in gross

•

income under section 1293 (which

relates to certain passive foreign

investment companies (PFICs)).

Code “RBT GEN.” If an applicable

income tax treaty treats any U.S.

source general category income as

foreign source general category

income, and the corporation elects to

apply the treaty, on Form 1118, enter

code “RBT GEN” on line a at the top

of page 1.

Sanctioned countries are those

designated by the Secretary of State

as countries that repeatedly provide

support for acts of international

terrorism, countries with which the

United States does not have

Passive income does not include:

Any financial services income,

•

Any export financing interest unless

it is also related person factoring

income (see section 904(d)(2)(G) and

Regulations section 1.904-4(h)(3)),

diplomatic relations, or countries

whose governments are not

Any high-taxed income (see

•

Code “RBT FB.” If an applicable

income tax treaty treats any U.S.

source foreign branch category

income as foreign source foreign

branch category income, and the

corporation elects to apply the treaty,

on Form 1118, enter code “RBT FB”

on line a at the top of page 1.

recognized by the United States. As of

the date these instructions were

revised, section 901(j) applied to

income derived from Iran, North

Korea, Sudan, and Syria. For more

information, see section 901(j).

Regulations section 1.904-4(c)), or

Any active rents or royalties. See

•

Regulations section 1.904-4(b)(2)(iii)

for definitions and exceptions.

Note. Certain income received from a

CFC and certain dividends from

Note. The President of the United

States has the authority to waive the

application of section 901(j) with

respect to a foreign country if it is (a)

in the national interest of the United

States and will expand trade and

investment opportunities for domestic

noncontrolled 10%-owned foreign

corporations that would otherwise be

passive income are treated as passive

category income only to the extent

provided under the look-through rules.

See Look-Through Rules, later.

Code “RBT 951A.” If an applicable

income tax treaty treats any U.S.

source section 951A category income

as foreign source section 951A

category income, and the corporation

Instructions for Form 1118 (Rev. 12-2023)

3

elects to apply the treaty, on Form

1118, enter code “RBT 951A” on line a

at the top of page 1.

any amount included in gross income

under section 951(a)(1)(B).

Special Rules

Source Rules for Income

Look-through rules also apply to

subpart F inclusions under section

951(a)(1)(A) and GILTI inclusions

under section 951A(a) to the extent

attributable to income of the CFC in

the passive category.

Determine income or (loss) for each

separate category on Schedule A

using the general source rules of

sections 861 through 865 and related

regulations, the special source rules

of section 904(h) described below,

and any applicable source rules

contained in any applicable tax

treaties.

General Category Income

This category includes all income not

described above. When completing a

Form 1118 for the general category of

income, enter code "GEN" on line a at

the top of page 1. This category

For more information and

examples, see section 904(d)(3) and

Regulations section 1.904-5.

includes high-taxed income that is not

otherwise treated as another category

of income. Usually, income is high

taxed if the total foreign income taxes

paid, accrued, or deemed paid by the

corporation for that income exceed

the highest rate of tax specified in

section 11 (and with reference to

section 15, if applicable), multiplied by

the amount of such income (including

the amount treated as a dividend

under section 78). For more

Noncontrolled 10%-owned foreign

corporations. Generally, dividends

received or accrued by the taxpayer

are passive category income.

Special source rules of section

904(h). Usually, the following income

from a U.S.-owned foreign

corporation, otherwise treated as

foreign source income, must be

treated as U.S. source income under

section 904(h).

However, dividends received or

accrued from a noncontrolled

10%-owned foreign corporation may

be assigned to other separate

categories under the look-through

rules of section 904(d)(4).

Any subpart F income, foreign

•

personal holding company income,

GILTI, or income from a qualified

electing fund that a U.S. shareholder

is required to include in its gross

income if such amount is attributable

to the U.S.-owned foreign

information, see Regulations section

1.904-4(c). Also see the instructions

for Schedule A, later, for additional

reporting requirements.

Certain amounts paid by a domes-

tic corporation to a related corpo-

ration. Look-through rules also apply

to foreign source interest, rents, and

royalties paid by a domestic

This category also includes

financial services income (defined

below) not described above if the

corporation is a member of a financial

services group (as defined in section

904(d)(2)(C)(ii)) or is predominantly

engaged in the active conduct of a

banking, insurance, financing, or

similar business.

corporation's U.S. source income.

corporation to a related corporation.

See Regulations section 1.904-5(g).

Interest that is properly allocable to

•

the U.S.-owned foreign corporation's

U.S. source income.

Other Rules

Dividends equal to the U.S. source

•

ratio (defined in section 904(h)(4)(B)). Certain transfers of intangible

property. See section 367(d)(2)(C)

for a rule that clarifies the treatment of

certain transfers of intangible property.

The rules regarding interest and

dividends described above do not

apply to a U.S.-owned foreign

corporation if less than 10% of its

earnings and profits (E&P) for the tax

year is from U.S. sources.

Financial services income.

Reporting Foreign Tax

Information From Partnerships

If you received a Schedule K-3 (Form

1065) or a Schedule K-3 (Form 8865)

from a partnership that includes

foreign tax information, use the rules

below to report that information on

Form 1118.

Financial services income is income

received or accrued by a member of a

financial services group or any

corporation predominantly engaged in

the active conduct of a banking,

insurance, financing, or similar

business if the income is:

Amounts That Do Not

Constitute Income Under

U.S. Tax Principles

Creditable foreign taxes that are

imposed on amounts that do not

constitute income under U.S. tax

principles are treated as imposed on

income described in section 904(d)(1)

(B). See section 904(d)(2)(H).

Described in section 904(d)(2)(D)

•

(ii),

Schedule K-3, Part II, Section 1

Passive income (determined

•

without regard to section 904(d)(2)(B)

(iii)(II)), or

Gross income sourced at partner

level. This includes income from the

sale of most personal property other

than inventory, depreciable property,

and certain intangible property

sourced under section 865. This gross

income will generally be U.S. source

and therefore will not be reported on

Form 1118.

Incidental income described in

•

Look-Through Rules

Regulations section 1.904-4(e)(4).

CFCs. Generally, dividends, interest,

Note. If the corporation qualified as a

financial services entity because it

treated certain amounts as active

financing income that are not listed in

Regulations sections 1.904-4(e)(2)(i)

(A) through (X), but that are described

as similar items in Regulations section

1.904-4(e)(2)(i)(Y), attach a statement

to Form 1118 showing the types and

amounts of the similar items.

rents, and royalties received or

accrued by the taxpayer are passive

category income. However, if these

items are received or accrued by a

10% U.S. shareholder from a CFC,

they may be assigned to other

Foreign gross income sourced at

partnership level. Report on

Schedule A.

separate categories, or may be

treated as passive category income

under the look-through rules of

section 904(d)(3). Dividends include

Instructions for Form 1118 (Rev. 12-2023)

4

attributable to a separate category,

multiply the net U.S. source capital

loss by the amount of capital gain net

income from sources outside the

United States in the separate

Some foreign taxes that are

otherwise eligible for the foreign tax

credit must be reduced. These

reductions are reported on

Schedule G.

Schedule K-3, Part II, Section 2

Deductions allocated and appor-

tioned at partner level and partner-

ship level. Report on Schedule A or

Schedule H.

category divided by the aggregate

amount of capital gain net income

from sources outside the United

States in all separate categories with

capital gain net income from sources

outside the United States.

Note. A corporation may not claim a

foreign tax credit for foreign income

taxes paid to a foreign country that the

corporation does not legally owe,

including amounts eligible for refund

by the foreign country. If the

Schedule K-3, Part III, Sections 1

through 3

R&E expenses apportionment fac-

tors. Report on Schedule H, Part I.

See section 904(b)(2)(B) for

special rules regarding adjustments to

account for capital gain rate

corporation does not exercise its

available remedies to reduce the

amount of foreign income tax to what

it legally owes, a credit is not allowed

for the excess amount.

Interest expense apportionment

factors. Report on Schedule H, Part

II.

differentials (as defined in section

904(b)(3)(D)) for any tax year. At the

time these instructions went to print,

there was no capital gain rate

Foreign-derived intangible income

(FDII) deduction apportionment

factors. Report on Schedule H, Part

II.

Foreign corporations. Foreign

corporations are allowed (under

section 906) a foreign tax credit for

foreign income taxes paid or accrued

to any foreign country or U.S. territory

for income effectively connected with

the conduct of a trade or business

within the United States. The credit is

not applicable, however, if a foreign

country or U.S. territory imposes the

tax on income from U.S. sources

solely because the foreign corporation

was created or organized under the

law of the foreign country or U.S.

territory or is domiciled there for tax

purposes.

The credit may not be taken

against any tax imposed on income

not effectively connected with a U.S.

business.

In computing the foreign tax credit

limitation, the foreign corporation's

taxable income includes only the

taxable income that is effectively

connected with the conduct of a trade

or business within the United States.

differential for corporations.

Credit Limitations

Taxes Eligible for a Credit

Domestic corporations. Generally,

a domestic corporation may claim a

foreign tax credit (subject to the

limitation of section 904) for the

following taxes.

Schedule K-3, Part III, Section 4

Total foreign taxes paid or ac-

crued. Report on Schedule B.

Foreign tax redeterminations.

Report on Schedule L.

Reduction in taxes available for

credit. Report on Schedule G.

Income, war profits, and excess

•

profits taxes paid or accrued during

the tax year to any foreign country or

U.S. territory.

Schedule K-3 (Form 1065), Part VIII

Partner’s interest in foreign corpo-

ration income (Section 960).

Report on Schedule C or D, as

applicable.

Taxes paid in lieu of income taxes

•

as described in section 903.

Taxes deemed paid under section

•

960.

Income, war profits, and excess

Note. Schedule K-3 (Form 8865)

does not contain a part equivalent to

Schedule K-3 (Form 1065), Part VIII.

profits taxes and in lieu of taxes are

collectively referred to as foreign

income taxes. See Regulations

sections 1.901-2(a) and (b) and

1.903-1 for rules for determining

whether a foreign tax qualifies as a

foreign income tax.

Capital Gains

Foreign source taxable income or

(loss) before adjustments in all

separate categories in the aggregate

should include gain from the sale or

exchange of capital assets only up to

the amount of foreign source capital

gain net income (which is the smaller

of capital gain net income from

Credit or Deduction

A corporation may choose to take

either a credit or a deduction for

Final foreign tax credit

regulations issued on January

!

CAUTION

4, 2022 (T.D. 9959, 87 FR

eligible foreign income taxes paid or

accrued. The choice is made annually.

Generally, if a corporation elects the

benefits of the foreign tax credit for

any tax year, no portion of the foreign

income taxes paid or accrued in such

year will be allowed as a deduction in

that year or any subsequent tax year.

374) revised the creditability

requirements under Regulations

sections 1.901-2 and 1.903-1,

sources outside the United States or

capital gain net income). Therefore, if

the corporation has capital gain net

income from sources outside the

United States in excess of the capital

gain net income reported on its tax

return, enter a pro rata portion of the

net U.S. source capital loss as a

negative number on Schedule A,

column 13(j), for each separate

applicable for foreign taxes paid or

accrued in taxable years beginning on

or after December 28, 2021. A Notice

was subsequently released on July

21, 2023, providing taxpayers the

option to apply modified rules in place

of certain provisions of the new

regulations. For more information, see

Notice 2023-55, 2023-32 I.R.B. 427,

available at IRS.gov/irb/

Exceptions. However, a corporation

that elects the credit for foreign

income taxes may be allowed a

deduction for certain taxes for which a

credit was not allowed. These include

the following.

category with capital gain net income

from sources outside the United

States. To figure the pro rata portion of

the net U.S. source capital loss

2023-32_IRB#NOT-2023–55.

Instructions for Form 1118 (Rev. 12-2023)

5

Taxes for which the credit was

income excluded from gross income

on Form 8873, Extraterritorial Income

Exclusion. However, see section

943(d) for an exception for certain

withholding taxes.

Carryback of foreign income taxes

•

denied because of the boycott

provisions of section 908.

paid or accrued in post-2017 foreign

corporate tax years and carryforward

of foreign income taxes paid or

accrued in pre-2018 foreign corporate

tax years. See Regulations section

1.904-2(j).

Certain taxes on the purchase or

•

sale of oil or gas (section 901(f)).

Certain taxes used to provide

The applicable percentage of taxes

•

subsidies (section 901(i)).

paid or deemed paid with respect to

an amount included in income under

section 965 (section 965(g)).

Taxes paid to certain foreign

•

countries for which a credit was

denied under section 901(j).

Treaty-Based Return

Positions

Taxes paid with respect to the

•

Certain taxes paid on dividends if

amount treated as included under

•

Corporations that adopt a return

position that any U.S. treaty overrides

or modifies any provision of the

Internal Revenue Code, and causes

(or potentially causes) a reduction of

any tax incurred at any time, must

generally disclose this position. This

includes when a corporation is relying

on a U.S. treaty to claim a credit for a

foreign tax. Complete Form 8833,

Treaty-Based Return Position

the minimum holding period is not met section 965(b).

with respect to the underlying stock,

Carryback and Carryforward of

Excess Foreign Taxes

or if the corporation is obligated to

make related payments with respect

to positions in similar or related

property (section 901(k)).

If the allowable foreign income taxes

paid, accrued, or deemed paid in a

tax year in a separate category

exceed the foreign tax credit limitation

for the tax year for that separate

category, the excess is:

Certain taxes paid on gain and

•

income other than dividends if the

minimum holding period is not met

with respect to the underlying

First, carried back 1 year to offset

property, or if the corporation is

obligated to make related payments

with respect to positions in similar or

related property (see section 901(l)).

•

Disclosure Under Section 6114 or

Section 7701(b), and attach it to Form

1118. See section 6114 and

taxes imposed in the same category,

then

Carried forward 10 years to offset

•

Regulations section 301.6114-1 for

details.

taxes imposed in the same category.

In the case of a covered asset

•

acquisition (as defined in section

901(m)(2)), the disqualified portion of

any tax determined with respect to the

income or gain attributable to the

relevant foreign assets (section

901(m)). Note. This rule generally

applies to covered asset acquisitions

after December 31, 2010. See

Regulations sections 1.901(m)-1

through 1.901(m)-8 for additional

information. Note that the rules

contained in these regulations have

later effective dates.

The excess is applied first to the

earliest of the years to which it may be

carried, then to the next earliest year,

etc. The corporation may not carry a

credit to a tax year for which it claimed

a deduction, rather than a credit, for

foreign income taxes paid or accrued.

Furthermore, the corporation must

reduce the amount of any carryback

or carryforward by the amount it would

have used if it had chosen to claim a

credit rather than a deduction in that

tax year. These carryover provisions

do not apply to foreign income taxes

assigned to section 951A category

income. See section 904(c) and

Regulations section 1.904-2 for more

details.

Failure to make such a report may

result in a $10,000 penalty.

Proof of Credits

Form 1118 must be carefully filled in

with all the information called for and

with the calculations of credits

indicated.

Important. Documentation (that is,

receipts of payments or a foreign tax

return for accrued taxes) is not

required to be attached to Form 1118.

However, proof must be presented

upon request by the IRS to

Taxes paid by an accrual basis

•

taxpayer that relate to a prior tax year

in which the taxpayer elected to claim

a deduction for foreign income taxes

in that prior year. See Regulations

section 1.901-1(c)(3).

substantiate the credit. See

Regulations section 1.905-2.

If the corporation claims a foreign

tax credit for tax accrued but not paid,

the IRS may require a bond to be

furnished on Form 1117, Income Tax

Surety Bond, before the credit is

allowed. See Regulations section

1.905-2(c).

How to claim the excess credit. If

the corporation is carrying back the

excess credit to an earlier year, file an

amended tax return with a revised

Form 1118 and schedules (including a

revised Schedule K (Form 1118)).

No Credit or Deduction

No foreign tax credit (or deduction) is

allowed for certain taxes including:

Taxes on mineral income that were

•

reduced under section 901(e).

Certain taxes paid on distributions

•

Special rules apply to:

from corporations organized in a U.S.

territory (section 901(g)).

Foreign Tax

The carryback and carryforward of

•

foreign income taxes paid or accrued

on combined foreign oil and gas

income or related taxes (see section

907(f)).

Redeterminations

Taxes on combined foreign oil and

•

gas income that were reduced under

section 907(a).

The corporation's foreign tax credit

and U.S. tax liability must generally be

redetermined if:

Taxes attributable to income

•

An excess foreign tax credit for

•

excluded under section 814(a)

(relating to contiguous country

branches of domestic life insurance

companies).

Accrued foreign income taxes when

•

which an excess limitation account

exists under section 960(c)(2). See

Regulations sections 1.960-4 through

1.960-6.

paid or later adjusted differ from the

amounts claimed as credits (including

corrections to accrued amounts to

reflect final foreign tax liability and

additional payments of tax that accrue

Taxes paid or accrued to a foreign

•

country or U.S. territory with respect to

Instructions for Form 1118 (Rev. 12-2023)

6

after the close of the taxable year to

which the tax relates);

return and Form 1118 is for a change

in Foreign Tax Credit that increases

U.S. tax liability."

the tax year to which such taxes

relate.

Accrued foreign income taxes are

The amount of such taxes in foreign

•

not paid within 24 months after the

close of the tax year to which they

relate;

currency.

In addition, the amended return

must have attached to it an amended

Form 1118 and a statement that

provides the following.

The exchange rate that was used to

•

translate such amount when originally

claimed as a credit or added to

post-1986 foreign income taxes or

PTEP group taxes (as defined in

Regulations section 1.960-3(d)(1)).

Any foreign income tax paid is fully

•

or partially refunded;

The taxpayer's name, address,

•

A change in foreign tax liability that

•

identifying number, the tax year or

years of the taxpayer that are affected

by the foreign tax redetermination,

and, in the case of foreign income

taxes deemed paid, the name and

identifying number, if any, of the

foreign corporation.

affects the amount of distributions or

inclusions under sections 951, 951A,

or 1293, or affects the application of

the high-tax exception described in

section 954(b)(4); or

Redetermination of U.S. tax liability

results in an amount of additional

tax due, and the carryback or car-

ryover of an unused foreign in-

come tax under section 904(c) on-

ly partially eliminates such

A change to claim a foreign tax

•

credit for foreign income taxes that

were previously deducted or a change

to claim a deduction for foreign

income taxes that were previously

credited.

The date or dates the foreign

•

amount. The information required in

Regulations section 1.904-2(f).

income taxes were accrued, if

applicable.

The date or dates the foreign

•

Foreign tax redeterminations of

foreign corporations that relate to

tax years of the foreign corpora-

tion beginning before January 1,

2018. Provide the additional

income taxes were paid.

See Regulations section 1.905-3(a)

and (b).

The amount of foreign income taxes

•

paid or accrued on each date (in

foreign currency) and the exchange

rate used to translate each such

amount.

See Regulations section 1.905-3(b)

(1)(i) for a limited exception to a

redetermination of a U.S. tax liability

with respect to foreign income tax

claimed as a credit under section 901

(other than a tax deemed paid under

section 960).

information listed under both

categories below, as applicable.

Information sufficient to determine

•

Post-1986 pools of earnings and

taxes of foreign corporations.

any change to the characterization of

a distribution or the amount of any

inclusion under section 951(a), 951A,

1291, or 1293.

The closing balances of the pools

•

of post-1986 undistributed earnings

and post-1986 foreign income taxes

for each affected year before and after

adjusting the pools to account for the

foreign tax redetermination.

A redetermination of U.S. tax

liability is also generally required to

account for the effect of a

An amended Form 5471 when

•

applicable.

Information sufficient to determine

•

redetermination of foreign income tax

paid or accrued by a foreign

any interest due from or owing to the

taxpayer, including the amount of any

interest paid by the foreign

The dates and amounts of any

•

dividend distributions or other

inclusions made out of post-1986

undistributed earnings for the affected

year or years.

corporation on the amount of foreign

income taxes deemed paid under

section 960. See Regulations section

1.905-3(b)(2). For foreign tax

government to the taxpayer, and the

dates received.

redeterminations of a foreign

Additional Information Required

Pre-1987 accumulated profits of

foreign corporations.

corporation that relate to a taxable

year of the foreign corporation

beginning before January 1, 2018,

see Regulations section 1.905-5.

If the redetermination was because of

one of the following, the corporation

must provide the additional

The dates and amounts of any

•

dividend distributions or other

inclusions made out of E&P for the

affected year or years.

information as indicated.

Reporting Requirements

If, as a result of the foreign tax

The rate of exchange on the date of

•

Refund of foreign income taxes

paid.

any such distribution or inclusion.

redetermination, the corporation’s

U.S. tax liability for any taxable year is

changed, the corporation must file an

amended return to report the foreign

tax redetermination and, if applicable,

pay additional U.S. tax.

The amount of E&P from which

•

The date of each such refund.

The amount of such refund (in

•

such dividends were paid or

inclusions were made for the affected

year or years.

•

foreign currency).

•

The exchange rate that was used to

See Regulations sections

1.986(a)-1 and 1.905-3 through

1.905-5 for further information

regarding redeterminations and the

required notification.

For special rules relating to

corporations under the jurisdiction of

the Large Business and International

Division, see Regulations section

1.905-4(b)(4).

translate such amount when originally

claimed as a credit.

Increase in U.S. tax liability as a

result of foreign tax redeterminations

are excepted from the general statute

of limitations against assessment and

collection. See sections 6501(c)(5)

and 905(c). If you have a foreign tax

redetermination that results in an

increase in your U.S. tax liability for

any year, please note on page 2 of

your Form 1120X: "This amended

The spot rate (as defined in

•

Regulations section 1.988-1(d)) for

the date the refund was received (for

purposes of computing foreign

currency gain or loss under section

988).

Accrued foreign income taxes that

are not paid on or before the date

that is 24 months after the close of

Instructions for Form 1118 (Rev. 12-2023)

7

Amended returns as required under country, notwithstanding that the

•

Schedule L. In addition to filing an

amended return with Form 1118 and

attached statement for the tax year(s)

of the taxpayer for which the U.S. tax

liability is changed as a result of the

foreign tax redetermination, the

taxpayer must include with its

current-year return a Schedule L

summarizing the foreign tax

Regulations sections 1.905-4,

liability is not finally determined and

so is not considered an amount of tax

paid.

1.905-5(e), 1.905-3T(d), and

1.905-5T.

See Regulations section 1.905-5(e)

for additional information.

This election is available only for

contested foreign income taxes that

are remitted in a taxable year in which

the taxpayer has elected under

section 901(a) to claim a credit,

instead of a deduction under section

164(a)(3), for foreign income taxes

that are paid in such year.

Contested foreign income tax lia-

bility. In general, a taxpayer cannot

claim a credit for a contested foreign

income tax liability until the contest is

resolved and the amount of the liability

is finally determined.

redeterminations that occurred that

year.

If a foreign tax redetermination

does not change the amount of U.S.

tax due for any taxable year, the

taxpayer does not need to file an

amended return and may instead

notify the IRS of the redetermination

by attaching a completed Schedule L

to the original return for the taxpayer's

taxable year in which the foreign tax

redetermination occurs. See

To make the election, a taxpayer

claiming credits on the cash basis

must file a Form 1118 for the tax year

in which the contested liability is

remitted and a Form 7204, Consent

To Extend the Time To Assess Tax

Related to Contested Foreign Income

Taxes-Provisional Foreign Tax Credit

Agreement.

Cash method taxpayers. Unless

an election to claim a provisional

credit for contested foreign income

taxes (described below) is made, a

taxpayer that claims the foreign tax

credit on a cash basis cannot claim a

credit for a contested foreign income

tax liability (or portion thereof) that has

been remitted to the foreign country

until such time as the contest is

Instructions for Schedule L for

additional information.

In addition, the taxpayer must, for

each subsequent taxable year up to

and including the taxable year in

which the contest is resolved, file

annually Schedule L (Form 1118),

Foreign Tax Redeterminations. Any

portion of a contested foreign income

tax liability for which a provisional

credit is claimed that is subsequently

refunded by the foreign country

resolved and the tax is considered

paid for purposes of section 901.

Once the contest is resolved and the

foreign income tax liability is finally

determined, the tax liability is treated

as paid in the taxable year in which

the foreign tax was remitted. See

Regulations section 1.905-1(c)(2).

Election to account for foreign tax

redeterminations with respect to

pre-2018 taxable years in the for-

eign corporation’s last pooling

year. An irrevocable election may be

made by a foreign corporation’s

controlling domestic shareholders to

account for all foreign tax

Accrual method taxpayers.

Unless an election to claim a

results in a foreign tax redetermination

under Regulations section 1.905-3(a).

redeterminations that occur in taxable

years ending on or after November 2,

2020, with respect to pre-2018

taxable years of foreign corporations

as if they occurred in the foreign

corporation’s last taxable year

provisional credit for contested foreign

income taxes is made, a taxpayer that

claims the foreign tax credit on the

accrual basis cannot claim a credit for

a contested foreign income tax liability

until such time as both the contest is

resolved and the tax is considered

paid, even if the contested liability (or

portion thereof) has previously been

remitted to the foreign country. Once

the contest is resolved and the foreign

income tax liability is finally

Accrual method taxpayers. A

taxpayer may elect to claim a foreign

tax credit for a contested foreign

income tax liability (or a portion

thereof) in the relation-back year when

the contested amount (or a portion

thereof) is remitted to the foreign

country, notwithstanding that the

liability is not finally determined and

so has not accrued.

This election is available only for

contested foreign income taxes that

relate to a taxable year in which the

taxpayer has elected under section

901(a) to claim a credit, instead of a

deduction under section 164(a)(3), for

foreign income taxes that accrued in

such year.

A taxpayer claiming credits on the

accrual basis must file an original or

amended return for the taxable year to

which the contested tax relates,

together with a Form 1118, and a

Form 7204.

In addition, the taxpayer must, for

each subsequent taxable year up to

and including the taxable year in

which the contest is resolved, file

beginning before January 1, 2018

(last pooling year). Such election is

binding on all persons who are, or

were in a prior year to which the

election applies, U.S. shareholders of

the foreign corporation with respect to

which the election is made for all of its

subsequent foreign tax

determined and paid, the tax liability

accrues, and is considered to accrue

in the relation-back year for purposes

of the foreign tax credit. See

redeterminations, as well as foreign

tax redeterminations of other

members of the same CFC group as

the foreign corporation for which the

election is made. The election is made

by filing:

Regulations section 1.905-1(d)(3).

Election to claim a provisional

credit for contested foreign

income taxes

Cash method taxpayers. A taxpayer

claiming foreign tax credits on the

cash basis may elect to claim a

foreign tax credit for a contested

foreign income tax liability (or a

portion thereof) in the year the

contested amount (or a portion

thereof) is remitted to the foreign

The statement required under

•

Regulations section 1.964-1(c)(3)(ii)

with a timely filed original income tax

return for the taxable year of each

controlling domestic shareholder of

the foreign corporation in which or

with which the foreign corporation’s

first redetermination year ends;

Any notices required under

•

Regulations section 1.964-1(c)(3)(iii);

Instructions for Form 1118 (Rev. 12-2023)

8

annually Schedule L (Form 1118). Any income and/or paid or accrued

established by or on behalf of the

domestic corporation filing Form

1118. With respect to Schedule A,

these numbers are used to uniquely

identify the payor with respect to

payments from related persons, in

order to determine the proper source

of such payment. With respect to

Schedules C through E, these

portion of a contested foreign income

tax liability for which a provisional

credit is claimed that is subsequently

refunded by the foreign country

creditable foreign taxes from or

through unrelated persons or their

QBUs. Also, column 1 can be left

blank, but only if one of the following

results in a foreign tax redetermination seven entries is made in column 2.

under Regulations section 1.905-3(a).

863(b)

RIC

•

Interest and Penalties

NOL

HTKO

951A

G2B

In most cases, interest is computed

on the deficiency or overpayment that

resulted from the foreign tax

numbers are used to uniquely identify

foreign corporations in order to keep

track of those corporations from tax

year to tax year. The reference ID

number must meet the requirements

set forth below.

adjustment (sections 6601 and 6611

and the related regulations). See

Regulations section 1.905-4(e) for

additional information.

B2G

See the instructions for column 2,

later, for more information regarding

when the above entries can be made

in column 2.

Note. Because reference ID numbers

are established by or on behalf of the

U.S. corporation filing certain forms

such as the Form 1118, there is no

need to apply to the IRS to request a

reference ID number or for permission

to use these numbers.

If the corporation does not comply

with the requirements discussed

above within the time for filing

specified, the penalty provisions of

section 6689 (and the related

regulations) will apply.

Note. Taxpayers no longer have the

option of entering “FOREIGNUS” or

“APPLIED FOR” in this column.

Instead, if the related person or their

QBU does not have an EIN, the

taxpayer must use a reference ID

number that uniquely identifies such

related person or QBU, using the rules

set forth in Reference ID numbers, in

the Requirements section, later.

Requirements. The reference ID

number must be alphanumeric

Specific Instructions

Report all amounts in U.S. dollars

unless otherwise specified. If it is

necessary to convert from a foreign

currency, attach a statement

explaining how the conversion rate

was determined.

(defined below) and no special

characters or spaces are permitted.

The length of a given reference ID

number is limited to 50 characters.

Where gross income is derived

from a related person (within the

meaning of section 267(b) or 707(b)),

enter the EIN or reference ID number

of such related person. In the case of

income derived from a QBU of the

related person, enter the EIN or

reference ID number of the QBU.

Enter the EIN or reference ID number

of related entities and their QBUs

through which the corporation paid or

accrued creditable foreign taxes, even

if no income from these entities is

reported on Schedule A. If gross

income is received or derived from an

entity other than a related person, an

EIN or reference ID number is not

required.

For these purposes, the term

"alphanumeric" means the entry can

be alphabetical, numeric, or any

combination of the two.

Lines a, b, and c at the top of

page 1 of the form. The corporation

must complete a separate Form 1118

for each applicable category of

income. See Categories of Income,

earlier, for the code to enter on line a

(at the top of page 1 of the form). Also

see those instructions for the country

code to enter on line b or line c, if

applicable.

The same reference ID number

must be used consistently from tax

year to tax year with respect to a given

entity. If for any reason a reference ID

number falls out of use (for example,

the entity no longer exists due to

disposition or liquidation), the

reference ID number used for that

entity cannot be used again for

another entity for purposes of filing

Form 1118.

There are some situations that

require correlation of a new reference

ID number with a previous reference

ID number when assigning a new

reference ID number to an entity. For

example:

Schedule A

Report gross income from sources

outside the United States for the

applicable separate category in

columns 3(a) through 11. Report the

applicable deductions to this gross

income in columns 13 and 14. Report

any net operating loss carryover in

column 15.

Example 1. Domestic Corporation

earns sales income from sales to

unrelated persons. Domestic

Corporation leaves column 1 blank

and enters the sales income in

column 7.

In the case of a merger or

•

acquisition, a Form 1118 filer must

use a reference ID number which

correlates the previous reference ID

number with the new reference ID

number assigned to the entity.

Column 1. Column 1 generally

requests an employer identification

number (EIN) or a reference ID

number for related persons or their

QBUs from or through which the

corporation derived foreign source

income and/or paid or accrued

creditable foreign taxes.

Example 2. USC, a domestic

corporation, takes into account its

distributive share of partnership

income with respect to USPS, a

domestic partnership in which USC

has a 60% interest. In column 1, USC

enters the identifying number for

USPS.

In the case of an entity

•

classification election that is made on

behalf of a foreign corporation on

Form 8832, Regulations section

301.6109-1(b)(2)(v) requires the

foreign corporation to have an EIN for

However, enter in column 1 the

"Unrelated" code in cases where the

corporation derived foreign source

Reference ID numbers. A

“reference ID number” is a number

Instructions for Form 1118 (Rev. 12-2023)

9

this election. For the first year that

Form 1118 is filed after an entity

classification election is made on

behalf of the foreign corporation on

Form 8832, both the new EIN and the

old reference ID number must be

entered in column 1, as explained in

the next paragraph.

on a single line. It may be necessary

to enter amounts in multiple columns

on that single line, depending upon

the nature of the section 863(b) gross

income and deductions. For example,

leave column 1 blank, enter “863(b)”

in column 2, and enter (as a positive

number) all section 863(b) gross

income (in columns 3 through 12) and

all section 863(b) deductions (in

columns 13 through 16). Also enter

the net amount in column 17. Note

that the totals are being reported on a

single line because it is not necessary

to report section 863(b) gross income

and deductions on a per-country

basis.

Regulated investment company

(RIC) pass-through amounts.

Aggregate all income passed through

from RICs and report the total on a

single line. Leave column 1 blank,

enter “RIC” in column 2, and report

the total in column 17. Note that the

totals are being reported on a single

line because it is not necessary to

report the RIC pass-through amounts

on a per-country basis.

Special Cases for Columns 1

and 2

Except as otherwise instructed below,

income of a U.S. shareholder with

respect to the same related person

but from multiple sources should be

reported on a country-by-country

basis.

Example. USC, a domestic

corporation, has employees who

perform services in Country X and

Country Y for the same related

You must correlate the identifying

numbers as follows: New EIN or

reference ID number [space] Old

reference ID number. If there is more

than one old reference ID number, you

must enter a space between each

such number. As indicated above, the

length of a given reference ID number

is limited to 50 characters and each

number must be alphanumeric and no

special characters are permitted.

person. The related person has a

reference ID number of 1000016.

USC earns gross income of $10 with

respect to services performed for the

related person in Country X and USC

earns gross income of $15 with

respect to services performed for the

related person in Country Y. The

two-letter country code for Country X

is XX and the two-letter country code

for Country Y is YY. On Schedule A,

USC reports as follows.

Note. This correlation requirement

applies only to the first year the new

reference ID number is used.

Branches. For each branch that is

not a foreign branch, as defined under

Regulations section 1.904-4(f)(3)(vii),

use a single line to report such

branch's gross income and

USC makes the following entries on

the first of two lines on Schedule A.

deductions. In column 1, enter

“Branch.” If there is more than one

branch, enter the identifying number

of the branch (as reported in Form

8858) after the word “Branch” on each

line. These amounts should be

reported on a Form 1118 other than

the Form 1118 for the foreign branch

income category.

Example. USC, a domestic

corporation, has a branch in Country

X. The activities of the branch do not

constitute a trade or business. In

column 1, USC enters the word

“Branch.” USC will report the income

and expenses of the branch in the

appropriate columns.

Net operating losses (NOLs).

Report any NOL carryover on a single

line. Leave column 1 blank, enter

“NOL” in column 2, and report the total

in column 15. Note that the totals are

being reported on a single line

Column

Entry

1000016

XX

1

2

8

10

because it is not necessary to report

the NOL on a per-country basis.

USC makes the following entries on

the second of two lines on

Schedule A.

Reclassifications of high-taxed in-

come. Aggregate all reclassifications

of high-taxed income and report the

total on a single line. With respect to

passive category income, for items of

income that have been included on

Schedule A and that must be

Column

Entry

1000016

YY

1

2

8

reclassified under sections 904(d)(2)

(B)(iii)(II) and 904(d)(2)(F), leave

column 1 blank and enter “HTKO” in

column 2 and enter (as a negative

number) in column 17 the net amount

of income that is being reclassified

from passive category income. With

respect to the category of income to

which such passive income is

15

See below with respect to QBUs

that are foreign branches as defined

under Regulations section 1.904-4(f)

(3)(vii).

Qualified business units (QBUs).

For branches that are QBUs, use a

separate line for each such branch to

report each branch's gross income

and deductions. Report these

Column 2. Enter the two-letter codes

(from the list at IRS.gov/

amounts on a per-country basis. In

column 1, enter the EIN or reference

ID number of the QBU. Enter the

country code in column 2. These

amounts should be reported on Form

1118 for foreign branch category

income or passive category income.

CountryCodes) of each foreign

country and U.S. territory within which

income is sourced and/or to which

taxes were paid or accrued.

reclassified, leave column 1 blank,

enter “HTKO” in column 2, and enter

(as a positive number) in column 17

the net amount of income that is being

reclassified to such category of

Note. Complete this column with

respect to all income regardless of

whether such income is from a related

person.

income. Note that the reclassifications

are being reported on a single line

because it is not necessary to report

them on a per-country basis. Also

note that tax reclassifications are

Section 863(b) gross income and

deductions. Aggregate all section

863(b) foreign source gross income

and deductions and report the totals

Instructions for Form 1118 (Rev. 12-2023)

10

needed on Schedule B. See those

instructions for more information.

into account in Schedule A, column

13(c).

enter the corresponding code in

column 10.

Foreign source exchange gain

•

Inclusions under section 951A.

Because computations for inclusions

under section 951A are reported on

separate Form 8992, GILTI, report the

inclusion under section 951A on a

single line. Specifically, there is no

need to report the identifying numbers

and various countries associated with

an inclusion under section 951A on

Form 1118.

For inclusions under section 951A,

enter “951A” in column 2 instead of a

two-letter code. Leave column 1

blank.

Reattribution of income by reason

of disregarded payments between

a foreign branch and its foreign

branch owner. For reattribution of

income from the general category to

the foreign branch category, enter

"G2B" in column 2 instead of a

two-letter code. Leave column 1

blank.

For reattribution of income from the

foreign branch category to the general

category, enter "B2G" in column 2

instead of a two-letter code. Leave

column 1 blank.

If the corporation is a U.S.

shareholder in a PFIC that is a

qualified electing fund, report all

income deemed received (before

gross-up) under section 1293.

recognized under section 986(c) on a

distribution of PTEP. Enter code

“986c” in column 10.

Foreign source exchange gain

•

recognized under section 987(3) on a

Column 3(b). In column 3(b), include remittance from a QBU. Enter code

taxes deemed paid by a domestic

corporation with respect to inclusions

under section 951(a)(1) and section

951A as gross-ups. For inclusions

under section 951(a)(1), the gross-up

is the taxes deemed paid as reported

in the total of Schedule C, column 7.

The gross-up for inclusions under

section 951A is the amount computed

in Schedule D, Part II, column 3.

“987” in column 10.

Foreign source exchange gain

•

recognized under section 988. Enter

code “988” in column 10.

Note. Section 988 exchange gain or

loss is sourced by reference to the

residence of the taxpayer or the QBU

of the taxpayer on whose books the

nonfunctional currency asset or

liability is properly reflected.

Column 11. Include other gross

income from sources outside the

United States for the applicable

separate category. Attach a schedule

identifying the gross income by type.

Column 13(a). Enter the dividends

received deduction allowed on foreign

source dividends under section 245A.

This should be equal to the amount

reported in Schedule A, column 4, if

all such dividend income is eligible for

the dividends received deduction.

Column 4. Report dividends from

sources outside the United States for

the applicable separate category. This

includes dividends eligible for the

dividends received deduction under

section 245A. Note that hybrid

dividends are not eligible for the

dividends received deduction.

Note. In general, dividends from a

domestic corporation are U.S. source

income, including dividends from a

domestic corporation which has 80%

or more of its gross income from

sources outside the United States.

Column 5. Enter interest received

from foreign sources. See section

861(c) for the treatment of interest

from a domestic corporation that

meets the foreign business

requirement.

Column 7. Include foreign source

gross income from sales (net of

returns and allowances and less costs

of goods sold). Include the foreign

source portion of section 863(b) sales

in this column.

See Regulations section 1.904-4(f)

(2)(vi)(B) for more information

regarding the rules pertaining to

reattribution of income by reason of

disregarded payments between a

foreign branch and its foreign branch

owner.

Note. Certain hybrid dividends are

not eligible for the dividends received

deduction under section 245A. See

section 245A(e)(1).

Note. An amount treated as a

dividend under section 1291(d)(2)(B)

(related to PFICs) is ineligible for the

dividends received deduction. See

section 245A(f).

Column 3(a). Report all inclusions

under sections 951(a)(1) (including

amounts under section 951(a)(1)(B)

and section 964(e)(4)) and 951A

(before gross-up). See section 904(d)

(3) and Look-Through Rules, earlier,

for more information with respect to

the separate category of such

Note. The foreign branch income and

section 951A income categories do

not include any dividend income

eligible to be offset by the deduction

under section 245A.

Column 13(b). Enter the deduction

allowed under section 250(a)(1)(A)

with respect to foreign derived

intangible income, taking into account

the other provisions of section 250,

that is allocated and apportioned to

foreign source income in the

inclusions. For each inclusion under

section 951(a)(1) with respect to a

CFC, make sure to enter the

Note. Under section 863(b), income

from the sale of inventory property is

sourced to the place of production.

Accordingly, do not include inventory

produced in the United States and

sold overseas in this column.

appropriate identifying number in

column 1 and the country of residence

of the CFC in column 2.

Note. Under the Act, inclusions under

section 951(a)(1) now include hybrid

dividends received by a CFC from

another CFC of the same U.S.

Column 8. Include gross income,

including compensation,

commissions, fees, etc., for technical,

managerial, engineering,

applicable separate category of

income. See Regulations section

1.861-8(e)(13).

Column 13(c). Enter the deduction

allowed under section 250(a)(1)(B)

with respect to GILTI (section 951A

shareholder. See section 964(e)(4).

construction, scientific, or similar

services outside the United States.

Do not report the inclusion under

section 951A net of the deduction

allowed under section 250. The

deduction under section 250 is taken

Columns 9 and 10. Include the

following amounts in column 9. Use a

separate line for each type of gain and

Instructions for Form 1118 (Rev. 12-2023)

11

inclusion), taking into account the

reported on the corporation's tax

the category of income for which the

corporation is completing Form 1118.

For example, if the code entered on

other provisions of section 250, that is return, enter a pro rata portion of the

allocated and apportioned to foreign

source income in the applicable

separate category of income. See

Regulations section 1.861-8(e)(14).

Column 13(d). Enter the

depreciation, depletion, and

amortization deductions related to

rental, royalty, and licensing expenses

that are allocated and apportioned to

foreign source income in the

applicable separate category of

income.

Column 13(e). Enter the other

allocable expenses related to rental,

royalty, and licensing expenses that

are allocated and apportioned to

foreign source income in the

applicable separate category of

income.

Column 13(f). Enter expenses

allocable to gross income from sales

that are allocated and apportioned to

foreign source income in the

applicable separate category of

income (the amount entered in

column 7).

Column 13(g). Enter expenses

allocable to gross income from

performance of services that are

allocated and apportioned to foreign

source income in the applicable

separate category of income (the

amount entered in column 8).

Columns 13(h) and 13(i). Include

any foreign source exchange loss

recognized under section 986(c) on a

distribution of PTEP, any foreign

source exchange loss recognized

under section 987(3) on a remittance

from a QBU, and any foreign source

exchange loss recognized under

section 988. Use a separate line for

each type of loss and enter the

corresponding code in column 13(i).

See the instructions for Schedule A,

column 9, earlier, for the applicable

codes.

excess as a negative number in each

separate category. See Capital Gains, Schedule H, Part III, line 2a is “PAS,”

earlier.

then enter the amount from line 2a(2),

column (g) on the Form 1118 that the

corporation is completing for the

passive category of income (as

indicated on line a at the top of page 1

of Form 1118).

In column 13(j), do not include

other expenses directly allocable to

dividends eligible for the dividends

received deduction under section

245A. Such directly allocable

expenses may include wire transfer,

currency exchange, and similar fees

incurred in connection with the

payment of dividends eligible for the

dividends received deduction under

section 245A. These expenses

reduce taxable income, but are not

taken into account in computing the

foreign tax credit limitation. See

section 904(b)(4).

It is not necessary to report the

apportioned expenses on a

related-person or per-country basis.

Therefore, only enter an amount in the

totals line of column 14.

Note. With respect to the

apportionment of deductions reported

on Schedule H, Part II, the reduction

required by section 904(b)(4) in

deductions relating to dividends

eligible for the dividends received

deduction under section 245A is taken

into account (for purposes of

Attach a schedule that lists all other

deductions included in column 13(j).

The schedule should include totals for

each line in column 13(j) that has an

entry.

determining foreign source income or

loss in each separate category) by

carrying to Schedule A, column 14,

only the amounts on Schedule H, Part

II, column (f), lines 3a(2), 3b(2), 3c(2),

3d(2), and 3e(2). Likewise, with

respect to the apportionment of

deductions reported on Schedule H,

Part III, the reduction required by

section 904(b)(4) in deductions

relating to dividends eligible for the

dividends received deduction under

section 245A is taken into account (for

purposes of determining foreign

source income or loss in each

Column 14. Enter only the

apportioned share from the applicable

line of Schedule H, Part I, column (b);

Part II, column (f); and Part III, column

(g) that relates to gross income

reported in columns 3 through 11 of

Schedule A. The applicable line of

Schedule H, Part I, column (b) is the

amount on line 6a(7), 6b(7), 6c(7),

6d(7), or 6e(7) of column (b) that

corresponds with the category of

income for which the corporation is

completing Form 1118. For example, if

the code entered on Schedule H, Part

I, line 6a is “PAS,” then enter the

separate category) by carrying to

Schedule A, column 14, only the

amounts on Schedule H, Part III,

column (g), lines 2a(2), 2b(2), 2c(2),

2d(2), or 2e(2).

amount from line 6a(7), column (b) on

the Form 1118 that the corporation is

completing for the passive category of

income (as indicated on line a at the

top of page 1 of Form 1118). The

applicable line of Schedule H, Part II,

column (f) is the amount on line 3a(2),

3b(2), 3c(2), 3d(2),or 3e(2), of column

(f) that corresponds with the category

of income for which the corporation is

completing Form 1118. For example, if

the code entered on Schedule H, Part

II, line 3a is “PAS,” then enter the

Column 15. Enter the corporation's

NOL deduction allowed under section

172 that is attributable to foreign

source income in the applicable

separate category. If the NOL is part

of an overall foreign loss, see

Regulations section 1.904(g)-3 for

allocation rules that apply in

Column 13(j). Include other

deductions allocable to income from

sources outside the United States

(dividends, interest, etc.) for the

applicable separate category that are

not otherwise included in Schedule H.

determining the amount to enter in

column 15.

amount from line 3a(2), column (f) on

the Form 1118 that the corporation is

completing for the passive category of

income (as indicated on line a at the

top of page 1 of Form 1118). The

applicable line of Schedule H, Part III,

column (g) is the amount on

It is not necessary to report the

NOL deduction on a related-person or

per-country basis. Therefore, only

enter an amount on the totals line of

column 15. See Net operating losses,

earlier.

Include any reduction of foreign

source capital gain net income. If

foreign source capital gain net income

from all separate categories is more

than the capital gain net income

line 2a(2), 2b(2), 2c(2), 2d(2), or 2e(2)

of column (g) that corresponds with

Instructions for Form 1118 (Rev. 12-2023)

12

or transfers as determined under

section 987. See sections 901 and

903.

Column 1. Claim the foreign tax

credit for the tax year in which the

taxes were paid or accrued,

depending on the method of

accounting used.

Note. For any given tax year, the

corporation can use the cash method

or the accrual method, but not both. If

a credit for taxes accrued is claimed,

show both the date accrued and the

date paid.

If the cash method of accounting is

used, an election under section

905(a) may be made to claim the

credit based on accrued taxes.

To make this election, check the

accrual box in column 1. Once made,

the election is binding on all

Schedule B

Part I—Foreign Taxes Paid,

Accrued, and Deemed Paid

Column 2(f). Include foreign income

taxes withheld at source on income

not specifically reportable in columns

2(a) through 2(e). For example, some

countries withhold at source on sales

of stock of their resident companies

and such foreign income tax paid or

accrued by the domestic corporate

seller would be reported in column

2(f).

Column 2(g). Include foreign income

taxes paid or accrued on the portion

of sales income sourced to a foreign

country. This does not include taxes

withheld at source reported in column

(f).

Report only foreign income taxes

paid, accrued, or deemed paid for the

separate category for which this Form

1118 is being completed. Report all

amounts in U.S. dollars. If the

corporation must convert from foreign

currency, attach a schedule showing

the amounts in foreign currency and

the exchange rate used.

For corporations claiming the credit

on the accrual basis, the exchange

rate for translating foreign income

taxes into U.S. dollars will generally be

an average exchange rate for the tax

year to which the taxes relate.

subsequent tax years in which a

foreign tax credit is claimed. Also, the

credits for foreign taxes, regardless of

whether they are claimed on the

accrual or cash basis, are subject to

the redetermination provisions of

section 905(c). See Foreign T a x

Credit Redeterminations, earlier, for

details.

Column 2(a). Include foreign income

taxes withheld at source on dividends

from a first-tier foreign corporation.

After December 31, 2017, such taxes

are not creditable to the extent the

distribution is a dividend eligible for a

dividends received deduction under

section 245A. However, continue to

report the taxes in this column 2(a)

and reverse the taxes on Schedule G.

Column 3. Enter in column 3 the total

of the taxes deemed paid that

corresponds with the identifying

number specified on the

However, the exchange rate on the

date of payment must be used if the

foreign income taxes (a) are paid

more than 24 months after the close

of the tax year to which they relate, or

(b) are paid in a tax year prior to the

tax year to which they relate. In

corresponding line of Schedule A,

column 1, with respect to the following

amounts.

The taxes deemed paid under

addition, corporations may elect to

use the exchange rate on the date of

payment. Corporations may elect to

use the payment date exchange rates

for all creditable foreign income taxes

or only those taxes that are

•

section 960(a) as reported in

Schedule C, column 10.

The taxes deemed paid under

•

section 960(b) as reported in

Schedule E, Part I, column 11.

attributable to QBUs with U.S. dollar

functional currencies. The election is

made by attaching a statement to a

timely filed (including extensions)

Form 1118 that indicates the

Enter on the Schedule B, Part I line

that corresponds with the Schedule A

line with “951A” in column 2 the tax

deemed paid under section 960(d)

equal to the total amount reported in

Schedule D, Part II, column 4.

corporation is making the election

under section 986(a)(1)(D). Once

made, the election applies for all

subsequent tax years and is revocable

only with the consent of the IRS. See

section 986(a)(1)(D).

Column 2(b). Include foreign income

taxes withheld at source on PTEP

distributions from a first-tier foreign

corporation. See sections 901 and

903. Do not include foreign income

taxes withheld at source on PTEP

distributions from a lower-tier foreign

corporation to an upper-tier foreign

corporation and then deemed paid by

the domestic corporation under

Part II—Separate

Foreign Tax Credit

Line 1b. If the corporation had a

foreign tax credit splitting event in a

prior tax year that resulted in a

The information entered on

each line of Schedule B, Part

suspension of foreign taxes under

section 909, enter the amount of

those taxes attributable to related

income taken into account in the

current tax year. The amount of taxes

suspended in a prior tax year should

have appeared on Schedule G, line E,

on your Form 1118 for that prior tax

year. See the regulations under

section 909 for rules for determining

when related income is taken into

account and the amount of previously

suspended taxes that are attributable

to that related income.

!

CAUTION

I, must pertain to an

identifying number and/or country

code specified on the corresponding

line of Schedule A, column 1 and/or

column 2. If foreign tax was paid to

more than one country on the same

income, enter the letter corresponding

to that income on multiple lines. For

example, if the taxpayer entered on

Schedule A, line A, foreign source

sales income and paid tax to both

Country A and Country B on such

income, the filer would complete two

lines A on Schedule B with the tax

paid to Country A on one line and the

tax paid to Country B on the other line.

section 960(b) on a distribution from

the upper-tier foreign corporation to

the domestic corporation. These

amounts are reported on Schedule E.

Note. With respect to taxes

attributable to section 965(a) PTEP or

section 965(b) PTEP, do not reduce

the taxes by the applicable

percentage. The applicable

percentage reduction is taken into

account on Schedule G.

Line 4. If the corporation is

Column 2(c). Include foreign income

reclassifying high-taxed income from

passive category income, enter the

taxes withheld on branch distributions

Instructions for Form 1118 (Rev. 12-2023)

13

related tax adjustment on line 4.

Indicate whether the adjustment is

positive or (negative).

Part II, lines 5 and 6) exceed any

positive adjustments that are also

included on line 8b, the net line 8b

adjustment will be negative. When this

net negative amount on line 8b is

subtracted from a positive taxable

income amount on line 8a, the result

will be a positive line 8c amount that is

larger than the positive amount on

line 8a.

Schedule C

Report taxes deemed paid by the

domestic corporation under section

960(a) with respect to inclusions

under section 951(a)(1). This

Line 5. Enter the total amount of

foreign income taxes carried forward

or back to the current year. The

schedule should be completed by

separate category of income and

subpart F income group. If there is a

subpart F inclusion related to more

than one subpart F income group,

complete a separate line for each

subpart F income group.

amount of foreign income taxes

carried forward to the current tax year

is the amount from Schedule K (Form

1118), line 3, column (xiv), plus the

amount from Schedule I (Form 1118),

Line 9. Divide line 7 by line 8c to

Part III, line 3. Attach Schedule I (Form determine the limitation fraction. Enter

1118) and Schedule K (Form 1118) to the fraction on line 9 as a decimal with

Form 1118.

the same number of places as the

number of digits to the left of the

decimal in adjusted taxable income on

line 8c. For example, if adjusted

taxable income on line 8c is $100,000,

compute the limitation fraction to 6

decimal places.

Line 12. The limitation may be

increased under section 960(c) for

any tax year that the domestic

corporation receives a PTEP

distribution. Enter on line 12 the

increase described in section 960(c)

(1).

An individual (or an estate or trust)

that has made an election under

section 962 ("section 962 elector")

should also complete Schedule C and

report taxes deemed paid.

Line 7. If the corporation has a

current-year overall domestic loss or

recapture of an overall domestic loss

account, or, in any of its separate

categories, a current-year separate

limitation loss, an overall foreign loss,

recapture of an overall foreign loss, or

current-year separate limitation

income in a category in which it has a

beginning balance of income that

must be recharacterized, adjustments

must be made. See the separate

Instructions for Schedule J to

Column 1a. Enter the name of the

foreign corporation whose earnings

were included in income by the

domestic corporation filing the return.

Column 1b. Enter the foreign

corporation's EIN or reference ID

number. See Reference ID numbers,

earlier.

determine if that schedule must be

filed.

If the line 12 amount exceeds the

domestic corporation's U.S. income

tax liability, the excess is deemed an

overpayment and can be claimed on

the domestic corporation's income tax

return as a refundable credit (Form

1120, Schedule J, Part III, line 20d, or

the corresponding line of other

Note. Taxpayers no longer have the

option of entering “FOREIGNUS” or

“APPLIED FOR” in this column.

Instead, if the foreign corporation

does not have an EIN, the taxpayer

must use a reference ID number that

uniquely identifies such foreign

corporation, using the rules set forth in

Reference ID numbers, in the

Line 8b. Enter as a positive amount

taxable income that should not be

taken into account in computing the

foreign tax credit limitation. These

adjustments will decrease the net

worldwide taxable income reported on

line 8c (see the line 8c instructions,

later).

corporate income tax returns). See

section 960(c)(5).

Requirements section, earlier.

Enter as a negative amount

Column 1c. Enter the tested unit’s

reference ID number (if applicable).

See Reference ID numbers, earlier.

Complete column 1c only if a CFC has

one or more tested units with passive

category income. See Regulations

section 1.904-4(c)(4).

Part III—Summary of

Separate Credits

Complete Part III only once. Enter on

lines 1 through 6 the separate foreign

tax credits from Part II, line 14, for

each applicable separate category.

adjustments that increase the net

worldwide taxable income reported on

line 8c (see the line 8c instructions,

later). For example, the net worldwide

taxable income you report on line 8c

should not include expenses allocated

and apportioned to dividends for

which a dividends received deduction

is allowed under section 245A (see

section 904(b)(4)). Because the

line 8a amount (taxable income from

your tax return) includes these

Note. Complete Part III only on the

Form 1118 with the largest amount

entered on Part II, line 14.

Note. Taxpayers no longer have the

option of entering “FOREIGNUS” or

“APPLIED FOR” in this column.

Instead, if the tested unit (or the CFC,

if applicable) does not have an EIN,

the taxpayer must use a reference ID

number that uniquely identifies such

tested unit (or the CFC, if applicable),

using the rules set forth in Reference

ID numbers, in the Requirements

section, earlier.

Line 8. If the corporation participates

in or cooperates with an international

boycott, the foreign tax credit may be

reduced. Complete Form 5713,

International Boycott Report. If the

corporation chooses to apply the

international boycott factor to

expenses, a positive adjustment is

needed to back out these expenses

(thus increasing the net worldwide

taxable income reported on line 8c).

As such, include as a negative

calculate the reduction in the credit,

enter the amount from line 2a(3) of

Schedule C (Form 5713) on line 8.

adjustment on line 8b these expense

amounts from Schedule H, Part II,

lines 5 and 6.

Column 2. Enter the year and month

in which the foreign corporation's U.S.

tax year ended using format

YYYYMM.

Line 8c. If the negative adjustments

included on line 8b (such as those

amounts coming in from Schedule H,

Instructions for Form 1118 (Rev. 12-2023)

14

Example. When figuring foreign

taxes deemed paid in 2023 by a

calendar year domestic corporation

with respect to inclusions out of E&P

not previously taxed for the foreign

corporation's tax year that ended

November 30, 2023, enter “202311.”

Column 3. Enter the applicable

two-letter codes from the list at

IRS.gov/CountryCodes.

Column 4. Enter the applicable

three-character alphabet code for the

foreign corporation's functional

currency using the ISO 4217

standard.

column 5(a) and 5(b)) in the functional

currency of the foreign corporation.

Column 8(b). Enter the amount from

column 8(a) translated into U.S.

dollars at the appropriate exchange

rate specified in section 989(b).

Column 10. For each line, multiply

the amount in column 7 by the amount

in column 9 and enter the result in

column 10. This is the tax deemed

paid computed under section 960(a).

Code

Subpart F Income Group

(Reg. sec. 1.904-4(c)(3)(i)

through (iv))

All passive income received

during the tax year that is

subject to a withholding tax of

15% or greater.

i

All passive income received

during the tax year that is

subject to a withholding tax of

less than 15% (but greater than

zero).

ii

Example 1. USC is a domestic

corporation. CFC is a controlled

foreign corporation incorporated in

Country X. CFC has two tested units,

each of which is a qualified business

unit (QBU): QBU1 and QBU2. QBU1

and QBU2 are organized in Country

X. The U.S. tax year for USC, CFC,

QBU1, and QBU2 ends on December

31. The functional currency of CFC,

QBU1, and QBU2 is the “u.” At all

relevant times, 1u = $1. For its U.S. tax

year ending December 31, 2023, after

foreign taxes, QBU1 has 1,000,000u

passive category dividend income

subject to a less than 15% withholding

tax (“QBU1 income group 1”). QBU1

has 1,000,000u passive category

dividend income subject to a greater

than 15% withholding tax (“QBU1

income group 2”). QBU2 has

All passive income received

during the tax year that is

subject to no withholding tax or

other foreign tax.

iii

iv

All passive income received

during the tax year that is

subject to no withholding tax but

is subject to a foreign tax other

than a withholding tax.

Column 5(a). Enter the code which

describes the subpart F income group

classification (as set forth in

Regulations section 1.960-1(d)(2)(ii)

(B)(2)). Please enter the applicable

code from the following list.

Column 5(c). Enter the name of the

tested unit. Complete column 5(c)

only if a CFC has one or more tested

units with passive category income.

See Regulations section 1.904-4(c)

(4).

Code

Subpart F Income Group (Reg.

sec. 1.960-1(d)(2)(ii)(B)(2))

DIRRA Dividends, interest, rents, royalties,

and annuities

NGCPT Net gain from certain property

transactions

Column 6. Enter the total net income

in the subpart F income group

NGCT

Net gain from commodities

transactions

(identified in column 5(a) and 5(b)) in

the functional currency of the foreign

corporation. If there is net income

related to more than one subpart F

income group, use a separate line for

each subpart F income group. In

general, the amount entered on a

given line will be equal to the total of

all amounts in column (xvi) of

NFCG

IEQI

Net foreign currency gain

2,400,000u passive category dividend

income subject to a less than 15%

withholding tax (“QBU2 income

Income equivalent to interest

NPC

Income from notional principal

contracts

group”). QBU1 has eligible

current-year taxes of $50,000 and

$200,000 in QBU1 income group 1

and QBU1 income group 2,

PILOD Payments in lieu of dividends

PSC Personal service contracts

FBCSA Foreign base company sales

income

respectively. QBU2 has eligible

Schedule Q (Form 5471) for the

subpart F income group identified in

Schedule C, column 5 for the foreign

corporation identified in column 1 and

for the category of income with

current-year taxes of $240,000 in

QBU2 income group. USC has a

subpart F inclusion with respect to

CFC of which an amount of 800,000u

is attributable to each of QBU1

FBCSE Foreign base company services

income

FIFBC

Full inclusion foreign base

company income

respect to which a Form 1118 and the

corresponding Schedule Q (Form

5471) is being completed.

income group 1 and QBU1 income

group 2 and 1,920,000u is attributable

to QBU2 income group. The country

code for Country X is “OC.” CFC,

QBU1, and QBU2 have reference ID

numbers of 100000, 100011, and

100012, respectively. The applicable

three-character alphabet code for the

“u” using the ISO 4217 standard is

“UUU.” USC completes Schedule C of

its Form 1118 with respect to the

passive category as follows.

INSUR Insurance income described in

section 952(a)(1)

Column 7. Enter the total eligible

current-year taxes in the subpart F

income group (identified in column

5(a) and 5(b)) in U.S. dollars.

BOYC

BKOP

Boycott income

Bribes, kickbacks, and other

payments described in section

952(a)(4)

901J

Income subject to section 901(j)

described in section 952(a)(5)

Note. See the instructions for

Schedule G, later, for information on

reduction of foreign taxes for failure to

furnish information required under

section 6038.

Column 8(a). Enter the section

951(a)(1) inclusion attributable to the

subpart F income group (identified in

Column 5(b). Enter the code which

describes the subpart F income group

classification (as set forth in

USC makes the following entries on

the first of three lines on Schedule C.

Regulations section 1.904-4(c)(3)(i)

through (iv)). Please enter the

applicable code from the following list.

Instructions for Form 1118 (Rev. 12-2023)

15

alphabet code for the “u” using the

ISO 4217 standard is “UUU.” USC

completes Schedule C of its Form

1118 with respect to the passive

category as follows.

Column

1a

Entry

CFC

Column

1a

Entry

CFC

1b

100000

100011

202312

OC

1b

100000

100012

202312

OC

1c

USC makes the following entries on

2

the first of three lines on Schedule C.

3

Column

Entry

4

UUU

4

UUU

1a

1b

1c

2

CFC1

5(a)

5(b)

5(c)

6

DIRRA

ii

5(a)

5(b)

5(c)

6

DIRRA

ii

100011

QBU1

1,000,000u

50,000

800,000u

800,000

0.800

QBU2

202312

OC

2,400,000u

240,000

1,920,000u

1,920,000

0.800

3

7

4

UUU

DIRRA

ii

8(a)

8(b)

9

8(a)

8(b)

9

5(a)

5(b)

5(c)

6

10

40,000

10

192,000

1,000,000u

50,000

USC makes the following entries on

the second of three lines on

Schedule C.

Example 2. USC is a domestic

corporation. CFC1 and CFC2 are

controlled foreign corporations

7

8(a)

8(b)

9

800,000u

800,000

0.800

incorporated in Country X. The U.S.

tax year for USC, CFC1, and CFC2

ends on December 31. At all relevant

times, 1u = $1. For its U.S. tax year

ending December 31, 2023, after

foreign taxes, CFC1 has 1,000,000u

passive category dividend income

subject to a withholding tax of less

than 15% (“CFC1 income group 1”)

and 2,400,000u passive category

interest income subject to foreign tax

other than withholding tax (“CFC1

income group 2”). CFC1 has eligible

current-year taxes (including the

withholding tax) of $50,000 in CFC1

income group 1 and $240,000 in

CFC1 income group 2. USC has a

subpart F inclusion with respect to

CFC1 of which 800,000u is

Column

1a

Entry

CFC

10

40,000

1b

100000

100011

202312

OC

1c

USC makes the following entries on

the second of three lines on

Schedule C.

2

3

4

UUU

Column

Entry

5(a)

5(b)

5(c)

6

DIRRA

i

1a

1b

1c

2

CFC1

100011

QBU1

1,000,000u

200,000

800,000u

800,000

0.800

202312

OC

7

3

8(a)

8(b)

9

4

UUU

DIRRA

iv

attributable to CFC1 income group 1

and 1,920,000u is attributable to

CFC1 income group 2. For its U.S. tax

year ending December 31, 2023, after

foreign taxes, CFC2 has 1,800,000u

of passive category gain from

5(a)

5(b)

5(c)

6

10

160,000

USC makes the following entries on

the third of three lines on Schedule C.

2,400,000u

240,000

commodities transactions subject to

foreign tax other than withholding tax

(“CFC2 income group”). CFC2 has

eligible current-year taxes of $450,000

in the CFC2 income group. USC has a

subpart F inclusion of 1,440,000u

attributable to the CFC2 income

group. The country code for Country X

is “OC.” CFC1 and CFC2 have

7

8(a)

8(b)

9

1,920,000u

1,920,000

0.800

10

192,000

USC makes the following entries on

the third of three lines on Schedule C.

reference ID numbers of 100011 and

100012, respectively. The functional

currency of both CFC1 and CFC2 is

the “u.” The applicable three-character

Instructions for Form 1118 (Rev. 12-2023)

16

Schedule A with “951A” in column 2 of is not a member of a U.S.

Column

Entry

Schedule A).

consolidated group, enter the amount

1a

1b

1c

2

CFC2

reported on Form 8992, Schedule A,

column (c), for the CFC. If the U.S.

shareholder is a member of a U.S.

consolidated group, enter the amount

reported with respect to that U.S.

shareholder on Schedule B (Form

8992), Part I, column (e), for the CFC.

Column 8. Enter the CFC's tested

foreign income taxes from Schedule Q

(Form 5471), line 3, column (xii).

Part I—Foreign Corporation's

Tested Income and Foreign

Taxes

Column 1a. Enter the name of each

CFC that has tested income, as

defined in section 951A(c)(2)(A). Do

not report information of CFCs with

tested losses, as defined in section

951A(c)(2)(B).

100012

202312

OC

3

4

UUU

NGCT

iv

5(a)

5(b)

5(c)

6

Column 1b. Enter the EIN or

reference ID number of the foreign

corporation. See Reference ID

numbers, earlier.

Column 9. Enter the pro rata share of

tested foreign income taxes paid or

accrued by the CFC. To determine this

amount, multiply the amount in

1,800,000u

450,000

7

8(a)

8(b)

9

1,440,000u

1,440,000

0.800

column 7 by the amount in column 8.

Note. Taxpayers no longer have the

option of entering “FOREIGNUS” or

“APPLIED FOR” in this column.

Instead, if the foreign corporation

does not have an EIN, the taxpayer

must use a reference ID number that

uniquely identifies such foreign

corporation, using the rules set forth in

Reference ID numbers, in the

Note. See the instructions for

Schedule G, later, for information on

reduction of foreign taxes for failure to

furnish information required under

section 6038.

10

360,000

Part II—Foreign Income Tax

Deemed Paid

Schedule D

Report taxes deemed paid under

section 960(d) with respect to

Note. While multiple line entries may

be necessary for Schedule D, Part I,

because such lines are completed for

each CFC, in general, only one line

will be completed in Schedule D, Part

II, because the domestic corporation

filing Form 1118 only has one section

951A inclusion. However, there is an

exception if Form 1118 is completed

by an individual (or by an estate or

trust) that has made an election under

section 962 ("section 962 elector")

and the section 962 elector is a

shareholder of an S corporation that

has made an election to treat the S

corporation as an entity (rather than

as an aggregate of its owners), as

provided in Notice 2020-69, 2020-39

I.R.B. 604, on a timely (including

extensions) filed original Form 1120-S

with respect to the first tax year

ending on or after September 1, 2020.

In this case, the section 962 elector

may have more than one section 951A

inclusion that will be reported on

separate lines on Schedule D, Part II.

There might be multiple lines as a

result of (1) the section 962 elector's

section 951A inclusion, and (2) the

section 962 elector's share of the

section 951A inclusion of the S

Requirements section, earlier.

inclusions under section 951A. This

schedule should only be completed

with respect to the Form 1118 filed for

the section 951A category, and, in

rare cases, the passive category.

Column 2. Enter the year and month

in which the CFC's U.S. tax year

ended using the format YYYYMM.

Column 3. Enter the applicable

two-letter codes from the list at

IRS.gov/CountryCodes.

Column 4. Enter the applicable

three-character alphabet code for the

foreign corporation's functional

currency using the ISO 4217

standard.

Schedule D is generally completed

by a domestic corporation that owns,

within the meaning of section 958(a),

stock in one or more CFCs that claims

taxes deemed paid with respect to

inclusions under section 951A.

Schedule D is also generally

completed by an individual (or an

estate or trust) that has made an

election under section 962 ("section

962 elector").

Column 5. Enter the U.S.

shareholder's pro rata share of the

CFC's tested income from the

applicable Form 8992 schedule. If the

U.S. shareholder is not a member of a

U.S. consolidated group, enter the

amount reported on Form 8992,

Schedule A, column (e), for the CFC.

If the U.S. shareholder is a member of

a U.S. consolidated group, enter the

amount reported with respect to that

U.S. shareholder on Schedule B

(Form 8992), Part I, column (g), for the

CFC.

If more than one line is needed in

Part II:

In Part II, column 2, the same

•

denominator will be used (the Part I,

column 5 total) in the inclusion

percentage calculation for each line;

and

In Part II, column 3, the same

•

multiplication factor will be used (the

Part I, column 9 total) for each line.

If the domestic corporation is a

partner in a partnership, enter the

domestic corporate partner's pro rata

share of CFC tested income from

Schedule K-3, Part VIII, line 3.

Column 6. Enter the CFC's tested

income from the applicable Form

8992 schedule. If the U.S. shareholder

If more than one line is completed

in Part II, the column 4 amounts

should be summed and included on a

single line on Form 1118, Schedule B,

Part I, column 3 (that is, the line on

Schedule B, Part I, column 3, that

corresponds with the line in

corporation. There could also be

multiple lines if the section 962 elector

has an interest in more than one S

corporation.

Instructions for Form 1118 (Rev. 12-2023)

17

Instead, if the foreign corporation

does not have an EIN, the taxpayer

must use a reference ID number that

uniquely identifies such foreign

corporation, using the rules set forth in

Reference ID numbers, in the

Column 1. Enter the GILTI (that is,

the section 951A inclusion) from Form

8992, Part II, line 5.

Column 3. This amount as

determined on this line is the section

78 gross-up with respect to an

inclusion under section 951A which is

reported on Form 1118, Schedule A,

column 3(b).

Column 7. Enter the total amount of

the foreign corporation’s PTEP in the

PTEP group within an annual PTEP

account identified in columns 5 and 6.

Enter the amount in the functional

currency of the first-tier foreign

corporation.

Column 8. Enter the total amount of

the foreign corporations’ PTEP group

taxes with respect to the PTEP group

within the annual PTEP account

identified in columns 5 and 6. Enter

the amount in U.S. dollars.

Requirements section, earlier.

Column 2. Enter the year and month

for the U.S. tax year of the first-tier

foreign corporation in which the

first-tier foreign corporation made the

PTEP distribution to the domestic

corporation. Use the format YYYYMM.

If there is a PTEP distribution related

to more than one PTEP group within

an annual PTEP account, complete a

separate line for each PTEP group

within an annual PTEP account. See

Regulations section 1.960-3(c)(2).

Schedule E

Report taxes deemed paid by the

domestic corporation under section

960(b) with respect to PTEP

Column 9. Enter the PTEP

distribution from the PTEP group

within the annual PTEP account

identified in columns 5 and 6 in the

functional currency of the first-tier

foreign corporation. If there is a PTEP

distribution related to more than one

PTEP group within an annual PTEP

account, complete a separate line for

each PTEP group within an annual

PTEP account.

distributions. Taxes reported on this

schedule are with respect to foreign

income taxes levied on distributions of

PTEP from a lower-tier foreign

corporation to an upper-tier foreign

corporation when those taxes are

subsequently deemed paid by the

domestic corporation upon

Column 3. Enter the applicable

two-letter codes from the list at

IRS.gov/CountryCodes.

Column 4. Enter the applicable

three-character alphabet code for the

distributing foreign corporation's

functional currency using the ISO

4217 standard.

distribution of such PTEP by the

upper-tier foreign corporation to the

domestic corporation.

Column 11. For each line, multiply

the amount in column 8 by the amount

in column 10. This is the U.S. dollar

amount of the foreign income taxes

properly attributable to the PTEP

distribution reported in column 9 and

not deemed to have been paid by the

domestic corporation for the tax year

or any prior tax year.

Note. Foreign withholding taxes

levied on a domestic corporation as a

result of distributions of PTEP from a

first-tier foreign corporation to such

domestic corporation are not reported

on Schedule E. Such taxes are

reported on Schedule B, Part I,

column 2(b), as tax withheld on

distributions of PTEP.

Column 5. Enter the code which

describes the PTEP group

classification (as set forth in

Regulations section 1.960-3(c)(2)).

Please enter the applicable PTEP

group code from the following list.

Note. With respect to distributions of

PTEP resulting from inclusions under

section 965, report the taxes properly

attributable to such PTEP without

reduction for the foreign tax credit

disallowance. The disallowance is

taken into account in Schedule G. See

the specific instructions for

PTEP

Taxes related to previously

Part I—Tax Deemed Paid by

Domestic Corporation

Group

taxed E&P

Code

Reclassified section 965(a) PTEP

Reclassified section 965(b) PTEP

General section 959(c)(1) PTEP

Reclassified section 951A PTEP

R965a

R965b

959c1

Column 1a. Enter the name of each

first-tier foreign corporation that had

foreign income taxes properly

attributable to PTEP distributions to a

domestic corporation that were not

previously deemed paid by a

R951A

R245Ad

Schedule G, later.

Reclassified section 245A(d)

PTEP

Part II—Tax Paid or Deemed

Paid by First- and Lower-Tier

Foreign Corporations

domestic corporation. For

distributions of PTEP that originated in

lower-tier foreign corporations, enter a

unique alphabetic character before

the name of the distributing foreign

corporation to identify the source of

the PTEP distribution. See the

instructions for Part II, Column 1a. for

more information, including an

example.

Section 965(a) PTEP

Section 965(b) PTEP

Section 951A PTEP

965a

965b

The purpose of Part II is to track the

current-year and historical PTEP

distributions between foreign

951A

Section 245A(d) PTEP

Section 951(a)(1)(A) PTEP

245Ad

951a1A

corporations and taxes paid, accrued,

or deemed paid by upper-tier foreign

corporations on such PTEP

distributions. These amounts are to be

reported on this Part II only to the

extent that there is a PTEP distribution

to the domestic corporation entered in

Part I. The amounts entered in Part II

could relate to current-year or

Column 6. Enter the inclusion year

for the PTEP of the foreign corporation

to which inclusion under section

Column 1b. Enter the EIN or

reference ID number of the foreign

corporation. See Reference ID

numbers, earlier.

951(a) and GILTI inclusion amounts of

U.S. shareholders are attributable.

This is the annual PTEP account. See

Regulations section 1.960-3(c)(1).

prior-year PTEP distributions between

foreign corporations, so the applicable

Note. Taxpayers no longer have the

option of entering “FOREIGNUS” or

“APPLIED FOR” in this column.

Instructions for Form 1118 (Rev. 12-2023)

18

year should be noted in column 2

using the format YYYYMM.

Part II, column 1a. Enter “A

CFC2” (to report distribution from

CFC2 to CFC1), and enter “A CFC3”

(to report distribution from CFC3 to

CFC2).

distributing foreign corporation's

functional currency using the ISO

4217 standard.

If foreign income taxes paid,

Column 8. Enter the applicable

PTEP group code from the list

accrued, or deemed paid by a first-tier

foreign corporation are properly

attributable to a PTEP distribution

from one or more lower-tier foreign

corporations, report all such PTEP

distributions by the lower-tier foreign

corporations in Part II, even if the

distributing lower-tier foreign

Column 1b. Enter the EIN or

provided in the specific instructions for

reference ID number of the distributing Schedule E, Part I, Column 5, earlier.

foreign corporation. See Reference ID

Column 9. Enter the annual PTEP

numbers, earlier.

account. See the instructions for

Schedule E, Part I, Column 6, earlier.

Note. Taxpayers no longer have the

option of entering “FOREIGNUS” or

“APPLIED FOR” in this column.

Column 10. Enter the total amount of

the foreign corporation’s PTEP in the

PTEP group within the annual PTEP

account identified in column 8 and

column 9. Enter such amount in the

functional currency of the distributing

foreign corporation.

Column 11. Enter the total amount of

the foreign corporation’s PTEP group

taxes with respect to the PTEP group

within the annual PTEP account

identified in column 8 and column 9.

Enter this amount in U.S. dollars. To

determine the appropriate translation

rate, see section 986(a).

corporations did not pay or accrue

(and were not deemed to pay) any

foreign income taxes with respect to

the PTEP distributions. For each tier,

report the amount of the PTEP

Instead, if the distributing foreign

corporation does not have an EIN, the

taxpayer must use a reference ID

number that uniquely identifies such

foreign corporation, using the rules set

forth in Reference ID numbers, in the

Requirements section, earlier.

distribution from the first-tier foreign

corporation that is attributable to a

PTEP distribution from the lower-tier

foreign corporation and the amount of

foreign income taxes paid, accrued, or

deemed paid by that lower-tier foreign

corporation with respect to that

Column 2. Enter the U.S. tax year of

the distributing foreign corporation

which includes the date when the

foreign corporation distributed the

PTEP to the upper-tier foreign

corporation.

portion of the PTEP distribution.

Because only eligible current-year tax

paid or accrued by a CFC with respect

to its receipt of a PTEP distribution

from a lower-tier foreign corporation

are eligible to be treated as deemed

paid under section 960(b), no foreign

income taxes of the lowest-tier foreign

corporation to which the PTEP

Column 12. Enter the PTEP

Note. If the PTEP distributed in Part I

relates to PTEP distributions from

lower-tier foreign corporations made

in more than 1 tax year, figure and

show the tax deemed paid on a

separate line for each distribution.

Column 3. Enter the applicable

two-letter codes from the list at

IRS.gov/CountryCodes.

Column 4b. Enter the EIN or

reference ID number of the recipient

foreign corporation. See Reference ID

numbers, earlier.

distribution with respect to the PTEP

group within the annual PTEP account

identified in columns 8 and 9 in the

functional currency of the distributing

foreign corporation. If there is a PTEP

distribution related to more than one

PTEP group within an annual PTEP

account, complete a separate line for

each PTEP group within an annual

PTEP account. Only report the

distribution is attributable are properly

attributable to a PTEP distribution

made to an upper-tier foreign

corporation. See Regulations section

1.960-1(d)(3)(ii)(C).

Column 1a. Enter the name of each

lower-tier foreign corporation that

distributed PTEP to an upper-tier

foreign corporation, in the current year

or a prior year, that in turn was

amount of PTEP that was ultimately

distributed to the domestic

corporation in the current year, even if

the amount of PTEP distributed to the

upper-tier foreign corporation was

greater than that amount.

Note. Taxpayers no longer have the

option of entering “FOREIGNUS” or

“APPLIED FOR” in this column.

distributed in the current year to a

domestic corporation. In column 1a,

preceding the name of the distributing

lower-tier foreign corporation, enter a

unique alphabetic character that

corresponds to a PTEP distribution

reported in Part I. For example, in the

case of a PTEP distribution from

CFC3, third-tier foreign corporation, to

CFC2, second-tier foreign

Column 14. Enter the U.S. dollar

amount of the recipient foreign

corporation's income taxes paid,

accrued, and deemed paid that are

properly attributable to the PTEP

distribution reported in column 12 and

not deemed to have been paid by the

domestic corporation for any prior tax

year.

Instead, if the recipient foreign

corporation does not have an EIN, the

taxpayer must use a reference ID

number that uniquely identifies such

foreign corporation, using the rules set

forth in Reference ID numbers, in the

Requirements section, earlier.

Column 5. Enter the U.S. tax year of

the recipient foreign corporation which

includes the date the foreign

corporation received the PTEP

distribution.

Column 6. Enter the applicable

two-letter codes from the list at

IRS.gov/CountryCodes.

corporation, to CFC1, first-tier foreign

corporation, to USP, a domestic

Note. See the Note in the instructions

for Part I, column 11, for purposes of

reporting foreign income taxes

properly attributable to PTEP

distributions resulting from inclusions

under section 965.

corporation, the domestic corporation

correlates the distributions as follows.

Part I, column 1a. Enter “A CFC1”

(to report distribution from CFC1 to

domestic corporation sourced from

PTEP distributions from CFC2 and

CFC3).

Note. See the instructions for

Column 7. Enter the applicable

Schedule G, later, for information on

three-character alphabet code for the

Instructions for Form 1118 (Rev. 12-2023)

19

reduction of foreign taxes for failure to

furnish information required under

section 6038.

account for the 2017 tax year (“2017

section 965(a) PTEP”) within the

general category, to CFC2, a CFC that

wholly owns CFC3. CFC2 pays

eligible current-year tax of 20u to

Country X equal to $20 on the 100u

PTEP distribution, reducing the 2017

section 965(a) PTEP to 80u. In

CFC2’s U.S. tax year ending

Column

Entry

1a

1b

2

A CFC2

10042

202312

OC

Example 1. USC is a domestic

corporation. CFC1, a Country Y

corporation, wholly owns Country X

corporations CFC2 and CFC3. The

U.S. tax year for USC, CFC1, CFC2,

and CFC3 ends on December 31.

During the U.S. tax year ending

December 31, 2023, CFC2 and

CFC3, both second-tier CFCs, each

distribute 100u, comprising all of their

respective section 965(a) PTEP within

the annual PTEP account for the 2017

tax year (“2017 section 965(a) PTEP”)

within the general category, to CFC1,

a first-tier CFC. CFC1 pays 40u equal

to $40 of eligible current-year taxes to

Country X on the 200u PTEP

3

4a

4b

5

CFC1

10041

202312

BC

December 31, 2019, CFC2 distributes

40u of the 2017 section 965(a) PTEP

to CFC1, a CFC that wholly owns

CFC2. CFC1 pays no tax on such

distribution, but is deemed to pay $10

of the eligible current-year tax that

was paid by CFC2 in 2017. In CFC1’s

U.S. tax year ending December 31,

2023, CFC1 distributes 40u to USC,

who wholly owns CFC1. USC pays no

foreign tax on such distribution, but is

deemed to pay the $10 of eligible

current-year tax that was paid by

CFC2 in 2017 and deemed paid by

CFC1 in 2019. The reference ID

numbers for CFC1, CFC2, and CFC3

are 20041, 20042, and 20043,

6

7

UUU

965a

2017

80u

8

9

10

11

12

13

14

0

80u

distributions, reducing the 2017

section 965(a) PTEP to 160u. In that

same year, CFC1 distributes all 160u

of the 2017 section 965(a) PTEP to

USC. CFC1 does not have any other

PTEP balances. The reference ID

numbers for CFC1, CFC2, and CFC3

are 10041, 10042, and 10043,

1.000

0

USC makes the following entries on

the second of two lines on

Schedule E, Part II.

respectively. The country codes for

Country X and Country Y are OC and

BC, respectively. The functional

currency of CFC1, CFC2, and CFC3

is the “u.” The applicable

respectively. The country codes for

Country X and Country Y are OC and

BC, respectively. The functional

currency of CFC1, CFC2, and CFC3

is the “u.” The applicable

Column

Entry

1a

1b

2

A CFC3

10043

202312

OC

three-character alphabet code for the

“u” using the ISO 4217 standard is

“UUU.”

three-character alphabet code for the

“u” using the ISO 4217 standard is

“UUU.”

Schedule E reporting is not

3

necessary for USC’s tax years ending

December 31, 2018, 2019, 2020,

2021, and 2022. For USC's tax year

ending December 31, 2023, USC

makes the following entries on a

single line on its general category

Form 1118, Schedule E, Part I.

4a

4b

5

CFC1

10041

202312

BC

USC makes the following entries on

a single line on Schedule E, Part I.

Column

Entry

6

7

UUU

965a

2017

80u

1a

1b

2

A CFC1

10041

202312

BC

8

Column

Entry

9

1a

1b

2

A CFC1

20041

202312

OC

10

11

12

13

14

3

0

4

UUU

965a

2017

160u

40

80u

5

3

1.000

0

6

4

UUU

965a

2017

40u

7

5

8

6

9

160u

1.000

40

Example 2. USC is a domestic

corporation. CFC1 and CFC2 are

Country X corporations, and CFC3 is

a Country Y corporation. The U.S. tax

year for USC, CFC1, CFC2, and

CFC3 ends on December 31. During

CFC3’s U.S. tax year ending

7

10

11

8

10

9

40u

10

11

1.000

10

USC makes the following entries on

the first of two lines on Schedule E,

Part II.

December 31, 2018, CFC3 distributes

100u, comprising its entire section

965(a) PTEP within the annual PTEP

Instructions for Form 1118 (Rev. 12-2023)

20

USC makes the following entries on December 31. During CFC3’s U.S. tax ending December 31, 2023, USC

the first of two lines on Schedule E,

Part II.

year ending December 31, 2018,

CFC3 distributes 1,000u, comprising

all of its subpart F PTEP within the

annual PTEP account for the 2016 tax

year (“2016 section 951(a)(1)(A)

PTEP”) within the general category, to

CFC2, a CFC that wholly owns CFC3.

CFC2 pays eligible current-year tax of

100u to Country Y equal to $100 on

the 1,000u PTEP distribution,

completes Form 1118, Schedule E, as

follows:

USC makes the following entries on

Schedule E, Part I, with respect to

general category income.

Column

Entry

1a

1b

2

A CFC2

20042

201912

OC

Column

Entry

A CFC1

10041

202312

OC

3

1a

1b

2

reducing the 2016 section 951(a)(1)

(A) PTEP to 900u. In CFC2’s tax year

ending December 31, 2019, CFC2

distributes 250u, comprising all of its

section 951A PTEP within the annual

PTEP account for the 2018 tax year

(“2018 section 951A PTEP”) within the

section 951A category, to CFC1, a

CFC that wholly owns CFC2. CFC1

pays eligible current-year tax of 25u to

Country X equal to $25 on the 250u

PTEP distribution, reducing the 2018

section 951A PTEP to 225u. During

CFC2’s tax year ending December 31,

2023, CFC2 distributes 450u out of its

2016 section 951(a)(1)(A) PTEP

balance of 900u to CFC1. CFC1 pays

eligible current-year tax of 45u to

Country X equal to $45 on the 450u

PTEP distribution, reducing the 2016

section 951(a)(1)(A) PTEP to 405u.

CFC1 is also deemed to pay $50 of

the eligible current-year tax paid by

CFC2 on its receipt of the 2018

4a

4b

5

CFC1

20041

201912

OC

3

6

4

UUU

7

UUU

965a

2017

80u

5

951a1A

2016

405u

95

8

6

9

7

10

11

12

13

14

8

20

9

405u

1.000

95

40u

10

11

0.500

10

USC makes the following entries on

the first of two lines on Schedule E,

Part II, of its Form 1118 with respect to

general category income.

USC makes the following entries on

the second of two lines on

Schedule E, Part II.

Column

Entry

A CFC2

10042

202312

CC

Column

Entry

1a

1b

2

1a

1b

2

A CFC3

20043

201812

BC

distribution of the PTEP from CFC3. In

the same year, CFC1 distributes 630u

to USC, which wholly owns CFC1.

Such distribution includes all of

3

4a

4b

5

CFC1

10041

202312

OC

3

CFC1’s 2016 section 951(a)(1)(A)

PTEP of 405u and 2018 section 951A

PTEP of 225u. USC pays no foreign

tax on such distribution, but is

4a

4b

5

CFC2

20042

201812

OC

6

deemed to pay $50 of the eligible

current-year tax deemed paid by

CFC1 and $70 on the eligible

7

UUU

6

8

951a1A

2016

7

UUU

965a

2017

80u

current-year tax paid by CFC1 on the

2019 and 2023 distributions of the

PTEP from CFC2.

9

8

10

11

12

13

14

810u

9

100

10

11

12

13

14

The reference ID numbers for

CFC1, CFC2, and CFC3 are 10041,

10042, and 10043, respectively. The

country codes for Country X, Country

Y, and Country Z are OC, CC, and BC,

respectively. The functional currency

of CFC1, CFC2, and CFC3 is the “u.”

The applicable three-character

405u

0

0.500

50

40u

0.500

0

USC makes the following entries on

the second of two lines on

Schedule E, Part II, of its Form 1118

with respect to general category

income.

alphabet code for the “u” using the

ISO 4217 standard is “UUU.”

Example 3. USC is a domestic

corporation. CFC1 is a Country X

corporation, CFC2 is a Country Y

corporation, and CFC3 is a Country Z

corporation. The U.S. tax year of USC,

CFC1, CFC2, and CFC3 ends on

Schedule E reporting is not

necessary for USC's tax years ending

December 31, 2018, 2019, 2020,

2021, and 2022. For USC's tax year

Instructions for Form 1118 (Rev. 12-2023)

21

fails to furnish any return or any

information in any return required

under section 6038(a) by the due

date, reduce the foreign income taxes

available for credit under sections 901

and 960 by 10%. If the failure

Column

Entry

A CFC3

10043

201812

BC

Column

Entry

B CFC2

10042

201912

CC

1a

1b

2

1a

1b

2

continues for 90 days or more after

the date of written notice by the IRS,

reduce the tax by an additional 5% for

each 3-month period or fraction

thereof during which the failure

continues after the 90-day period has

expired. See section 6038(c) for

limitations and special rules.

3

4a

4b

5

CFC2

10042

201812

CC

4a

4b

5

CFC1

10041

201912

OC

6

7

UUU

951a1A

2016

810u

0

7

UUU

951A

2018

225u

0

8

In addition, a $10,000 penalty is

imposed under section 6038(b) for

failure to supply the information

9

10

11

12

13

14

10

11

12

13

14

required under section 6038(a) for

each entity within the time prescribed.

If the required information is not

submitted within 90 days after the IRS

has mailed notice to the U.S. person,

additional penalties may apply.

405u

0.500

0

225u

1.000

0

USC makes the following entries on

a line on Schedule E, Part I, of its

Form 1118 with respect to section

951A category income.

Note. The reduction in foreign

income taxes available for credit is

reduced by any dollar penalty

imposed under section 6038(b).

Schedule F

Reserved for future use.

Line E. Enter foreign income taxes

paid or accrued during the current tax

year that have been suspended due to

the rules of section 909.

Schedule G

Part I

Column

Entry

B CFC1

10041

202312

OC

1a

1b

2

Line A. If the corporation claims a

deduction for percentage depletion

under section 613 with respect to any

part of its foreign mineral income (as

defined in section 901(e)(2)) for the

tax year, any foreign taxes on that

income must be reduced by the

smaller of:

Line F. Enter disallowed taxes under

section 965(g).

3

Taxes paid or accrued with respect

to distributions of section 965(a)

PTEP and section 965(b) PTEP must

be reduced by the relevant applicable

percentage. See Regulations section

1.965-5(b). Taxes deemed paid with

respect to distributions of section

965(a) PTEP and section 965(b)

PTEP must be reduced by the

relevant applicable percentage. See

Regulations section 1.965-5(c)(1)(i)

and (iii).

Line G. Enter disallowed taxes under

section 245A. Such disallowed taxes

may also include, for example, gain on

certain sales of CFC stock treated as

dividends. See section 964(e)(4).

4

UUU

951A

2018

225u

25

5

6

1. The foreign taxes minus the tax

7

on that income, or

8

2. The tax on that income

determined without regard to the

deduction for percentage depletion

minus the tax on that income.

9

225u

1.000

25

10

11

The reduction must be made on a

country-by-country basis (Regulations

section 1.901-3(a)(1)). Attach a

separate schedule showing the

reduction.

USC makes the following entries on

a line on Schedule E, Part II, of its

Form 1118 with respect to section

951A category income.

Line C. If the corporation chooses to

calculate the reduction in the foreign

tax by identifying taxes specifically

attributable to participation in or

cooperation with an international

boycott, enter the amount from

Schedule C (Form 5713), line 2b. See

Form 5713 and its separate

Line H. For any other reductions in

taxes, enter the code “OTH” and

attach a statement with the amount

and the nature of such other

reduction.

Schedule C and instructions.

Line D. If the corporation controls a

foreign corporation or partnership and

Instructions for Form 1118 (Rev. 12-2023)

22

intangible income” (as defined in

of uncontrolled parties (as defined in

Regulations section 1.861-17(d)(3)).

Schedule H

Regulations section 1.861-17(b)(2)).

Computer-Generated

Line 4a. For each product line, enter

the U.S. source “gross intangible

income” (as defined in Regulations

section 1.861-17(b)(2)) of the

Line 5d. For each product line, add

lines 5a through 5c and enter the sum

on line 5d.

Schedule H

A computer-generated Schedule H

may be filed if it conforms to the IRS

version. In some cases, Schedule H

must be expanded to properly report

apportioned deductions. This applies

in cases such as when the

Lines 6a through 6e. For lines 6a

through 6e, enter the code for the

applicable separate category of

income (foreign source statutory

grouping). See Categories of Income

earlier. If code “901j” or one of the

“RBT” codes applies, also enter the

applicable country.

taxpayer that is neither income

pertaining to sales, licenses, leases,

or services of controlled parties (as

defined in Regulations section

1.861-17(d)(4)) nor income pertaining

to sales, licenses, leases, or services

of uncontrolled parties (as defined in

Regulations section 1.861-17(d)(3)).

corporation:

Has more than two product lines

•

(under the gross receipts method of

apportioning research and

experimental (R&E) deductions in Part

I), or

Note. If the corporation has more

than five separate categories of

income, Schedule H, Part I, line 6

must be expanded to properly report

apportioned R&E deductions. See

Computer-Generated Schedule H,

earlier.

Line 4b. For each product line, enter

the U.S. source “gross intangible

income” (as defined in Regulations

section 1.861-17(b)(2)) of the

Has more than five categories of

•

income (statutory groupings within

Part I, line 6; Part II, line 3; or Part III,

line 2) with respect to which expenses

are required to be apportioned.

taxpayer that is income pertaining to

sales, licenses, leases, or services of

controlled parties (as defined in

Regulations section 1.861-17(d)(4)).

Lines 6a(1), 6b(1), 6c(1), 6d(1),

and 6e(1). For each product line and

for each separate category, enter the

foreign source “gross intangible

income” (as defined in Regulations

section 1.861-17(b)(2)) of the

Note. If there are more than five

foreign source statutory groupings

within Part II, line 3, or Part III, line 2,

add them after the U.S. source

residual grouping.

Line 4c. For each product line, enter

the U.S. source “gross intangible

income” (as defined in Regulations

section 1.861-17(b)(2)) of the

taxpayer that is income pertaining to

sales, licenses, leases, or services of

uncontrolled parties (as defined in

Regulations section 1.861-17(d)(3)).

taxpayer that is neither income

Part I—Research and

pertaining to sales, licenses, leases,

or services of controlled parties (as

defined in Regulations section

Experimental Deductions

Note. These instructions refer to the

regulations issued on November 12,

2020. See Regulations section

1.861-17 (T.D. 9922, 85 FR 72042, as

corrected by 86 FR 54367).

Line 4d. For each product line, add

lines 4a through 4c and enter the sum

on line 4d.

1.861-17(d)(4)) nor income pertaining

to sales, licenses, leases, or services

of uncontrolled parties (as defined in

Regulations section 1.861-17(d)(3)).

Line 5a. For each product line, enter

the aggregate foreign source “gross

intangible income” (as defined in

Regulations section 1.861-17(b)(2)) of

the taxpayer that is neither income

pertaining to sales, licenses, leases,

or services of controlled parties (as

defined in Regulations section

Use Part I to apportion R&E

deductions. Use the gross receipts

method described in Regulations

section 1.861-17 and report

Lines 6a(2), 6b(2), 6c(2), 6d(2),

and 6e(2). For each product line and

for each separate category, enter the

foreign source “gross intangible

income” (as defined in Regulations

section 1.861-17(b)(2)) of the

applicable amounts in column (a).

Column (a), Gross Receipts

Method

taxpayer that is income pertaining to

sales, licenses, leases, or services of

controlled parties (as defined in

Regulations section 1.861-17(d)(4)).

1.861-17(d)(4)) nor income pertaining

to sales, licenses, leases, or services

of uncontrolled parties (as defined in

Regulations section 1.861-17(d)(3)).

Enter in the spaces provided the SIC

Code numbers (based upon the

Standard Industrial Classification

System) of the product lines to which

the R&E deductions relate. See

Regulations section 1.861-17(b)(3) for

details on choosing SIC codes and

changing a product category.

Lines 6a(3), 6b(3), 6c(3), 6d(3),

and 6e(3). For each product line and

for each separate category, enter the

foreign source “gross intangible

Line 5b. For each product line, enter

the aggregate foreign source “gross

intangible income” (as defined in

Regulations section 1.861-17(b)(2)) of

the taxpayer that is income pertaining

to sales, licenses, leases, or services

of controlled parties (as defined in

Regulations section 1.861-17(d)(4)).

income” (as defined in Regulations

section 1.861-17(b)(2)) of the

taxpayer that is income pertaining to

sales, licenses, leases, or services of

uncontrolled parties (as defined in

Regulations section 1.861-17(d)(3)).

Note. If the corporation has more

than two product lines, see

Computer-Generated Schedule H,

earlier.

Line 5c. For each product line, enter

the aggregate foreign source “gross

intangible income” (as defined in

Lines 6a(4), 6b(4), 6c(4), 6d(4),

and 6e(4). For each product line and

for each separate category, add lines

(1), (2), and (3) and enter the sum on

line (4).

Columns (a)(i) and (a)(iv)

Regulations section 1.861-17(b)(2)) of

the taxpayer that is income pertaining

to sales, licenses, leases, or services

Line 1. For each product line, enter

the taxpayer’s worldwide “gross

Instructions for Form 1118 (Rev. 12-2023)

23

worldwide gross receipts for the

product line. Multiply the result by the

line 3 R&E deductions to be

apportioned.

Columns (a)(ii) and (a)(v)

Lines 6a(2), 6b(2), 6c(2), 6d(2),

and 6e(2). For each product line,

enter the controlled parties’ (as

defined in Regulations section

1.861-17(d)(4)) gross receipts from

sales, licenses, leases, or services

that are related to foreign source

gross intangible income within the

relevant statutory grouping.

Lines 6a(3), 6b(3), 6c(3), 6d(3),

and 6e(3). For each product line,

enter the uncontrolled parties’ (as

defined in Regulations section

1.861-17(d)(3)) gross receipts from

sales, licenses, leases, or services

that are related to foreign source

gross intangible income within the

relevant statutory grouping.

Line 1. For each product line, enter

the taxpayer’s worldwide gross

receipts from sales and leases of

products or services.

Line 4a. For each product line, enter

the taxpayer’s gross receipts from

sales and leases of products or

services related to U.S. source gross

intangible income.

Line 4b. For each product line, enter

the controlled parties’ (as defined in

Regulations section 1.861-17(d)(4))

gross receipts from sales, leases,

licenses, or services that are related

to the taxpayer’s U.S. source gross

intangible income.

Example 1. With respect to the

first product line reported on

Schedule H, Part I, to determine the

amount to enter on line 4d, column (a)

(iii), divide the amount on line 4d,

column (a)(ii) by the amount on line 1,

column (a)(ii). Multiply the result by

the amount on line 3, column (a)(iii).

Line 5d. According to Regulations

section 1.861-17(d)(1), to determine

the line 3 amount of R&E

expenditures to be apportioned to the

aggregate statutory grouping of

foreign source gross income, divide

the gross receipts related to the gross

intangible income within the statutory

grouping(s) by the worldwide gross

receipts for the product line. Multiply

the result by the line 3 R&E

Line 4c. For each product line, enter

the uncontrolled parties’ (as defined in

Regulations section 1.861-17(d)(3))

gross receipts from sales, leases,

licenses, or services of uncontrolled

parties that are related to the

Lines 6a(4), 6b(4), 6c(4), 6d(4),

and 6e(4). For each product line and

for each separate category, add lines

(1), (2), and (3) and enter the sum on

line (4).

deductions to be apportioned.

taxpayer’s U.S. source gross

Example 2. With respect to the

Columns (a)(iii) and (a)(vi)

intangible income.

first product line reported on

Line 1. Enter the total R&E

deductions connected with the

product lines.

Schedule H, Part I, to determine the

amount to enter on line 5d, column (a)

(iii), divide the amount on line 5d,

column (a)(ii) by the amount on line 1,

column (a)(ii). Multiply the result by

the amount on line 3, column (a)(iii).

Line 4d. For each product line, add

lines 4a through 4c and enter the sum

on line 4d.

Line 5a. For each product line, enter

the taxpayer’s gross receipts from

sales and leases of products or

services related to foreign source

gross intangible income.

Line 5b. For each product line, enter

the controlled parties’ (as defined in

Regulations section 1.861-17(d)(4))

gross receipts from sales, leases,

licenses, or services that are related

to the taxpayer’s foreign source gross

intangible income.

Line 5c. For each product line, enter

the uncontrolled parties' (as defined in

Regulations section 1.861-17(d)(3))

gross receipts from sales, licenses,

leases, or services that are related to

the taxpayer's foreign source gross

intangible income.

Line 5d. For each product line, add

lines 4a through 4c and enter the sum

on line 4d.

Lines 6a(1), 6b(1), 6c(1), 6d(1),

and 6e(1). For each product line,

enter the taxpayer's gross receipts

from sales and leases of products or

services that are related to foreign

source gross intangible income within

the relevant separate category.

Line 2a or 2b. Reduce the line 1

totals by a 50% exclusive

apportionment amount (Regulations

section 1.861-17(c)).

Lines 6a(5), 6b(5), 6c(5), 6d(5),

and 6e(5). Enter the amount of line 3

R&E deductions apportioned to each

separate category. According to

Regulations section 1.861-17(d)(1), to

determine the line 3 amount of R&E

expenditures to be apportioned

among the statutory groupings of

foreign source gross income, divide

the gross receipts related to the gross

intangible income within the statutory

grouping by the worldwide gross

receipts for the product line. Multiply

the result by the line 3 R&E

Note. For tax years beginning on or

after January 1, 2020, there is no

longer a rule with respect to legally

mandated R&E. See Regulations

section 1.861-17 (T.D. 9922)

published in the Federal Register on

November 12, 2020.

Under the exclusive apportionment

rules, 50% of the R&E deductions are

apportioned exclusively to the residual

grouping of U.S. source gross income,

if the R&E that accounts for more than

50% of the amount of such R&E

deductions to be apportioned.

deductions were performed in the

United States. A similar rule applies

when a majority of R&E is performed

outside the United States.

Example 3. With respect to the

first product line reported on

Schedule H, Part I, there are two

foreign tax credit separate limitation

categories with gross receipts that are

related to foreign source gross

Enter 50% of line 1 on either line 2a

or line 2b (as explained above).

intangible income within each of the

two categories. With respect to the

first separate category, to determine

the amount to enter on line 6a(5),

column (a)(iii), divide the amount on

line 6a(4), column (a)(ii) by the

Line 4d. According to Regulations

section 1.861-17(d)(1), to determine

the line 3 amount of R&E

expenditures to be apportioned to the

residual grouping of U.S. source gross

income, divide the gross receipts

related to the gross intangible income

within the residual grouping by the

amount on line 1, column (a)(ii) and

multiply the result by the amount on

Instructions for Form 1118 (Rev. 12-2023)

24

line 3, column (a)(iii). Similarly, with

respect to the second separate

category, to determine the amount to

enter on line 6b(5), column (a)(iii),

divide the amount on line 6b(4),

column (a)(ii) by the amount on line 1,

column (a)(ii) and multiply the result

by the amount on line 3, column (a)

(iii).

apportioned to foreign source gross

excess related party indebtedness.

intangible income for all product lines. See Regulations section 1.861-10(e)

for an exception to the general rule of

Note. Include the amount from

column (b) of line 6a(7) in column 14

of the Schedule A that corresponds

with the code entered on line 6a. If

applicable, you should likewise

include the amount from column (b) of

line 6b(7) in column 14 of the

fungibility for excess related party

indebtedness.

Line 1c. Enter all other assets that

attract specifically allocable interest

deductions. See Regulations section

1.861-10 for other exceptions to the

general rule of fungibility (such as

qualified nonrecourse indebtedness

and integrated financial transactions).

Lines 6a(6), 6b(6), 6c(6), 6d(6),

and 6e(6). Enter the amount of

line 2b R&E deductions, if any, to be

apportioned to each separate

category. As indicated in Regulations

section 1.861-17(c), if there are

multiple separate categories with

foreign source gross intangible

income with respect to a given

product line, the line 2b amount is

apportioned ratably based on the

relative amounts of gross receipts

from gross intangible income in each

separate category, as determined

under Regulations section

Schedule A that corresponds with the

code entered on line 6b. If applicable,

on page 10 of Form 1118, you should

likewise include the amount(s) from

column (b) of lines 6c(7), 6d(7), and

6e(7) in column 14 of the Schedule A

that corresponds with the code

entered on lines 6c, 6d, and 6e,

respectively.

Line 1d. Enter the total of the exempt

assets and assets without directly

identifiable yield that are to be

excluded from the interest

apportionment formula (Regulations

section 1.861-8(d)(2) and Temporary

Regulations sections 1.861-8T(d)(2)

and 1.861-9T(g)(3)). This could

include an exempt portion of assets

that produce foreign-derived

Part II—Deductions Allocated

and Apportioned Based on

Assets

intangible income and/or an exempt

portion of CFC stock that gives rise to

inclusions under section 951A.

Columns (a)(i) Through (b)(iv)

1.861-17(d).

Use these columns to apportion

interest deductions. See final and

temporary Regulations sections

1.861-8 through 1.861-14 for rules on

the apportionment of interest

deductions based on the tax book

value or adjusted tax book value of

assets.

Lines 3a through 3f. For lines 3a

through 3e, enter the code for the

applicable separate category of

income (statutory grouping). See

Categories of Income, earlier. If code

“901j” or one of the “RBT” codes

applies, also enter the applicable

country.

Column (b)

Line 1. Enter total R&E deductions

for all product lines (for example, from

column (a)(iii) and, if applicable,

columns (a)(vi), (a)(ix), etc.).

Note. Line 1, column (b) is the total

worldwide R&E deductions for all

product lines.

Lines 2a and 4d. Enter on line 2a

the total amount exclusively

A corporation may elect to use the

alternative tax book value method.

See Regulations section 1.861-9(i).

Note. If the corporation had more

than five separate categories of

income, Schedule H, Part II, line 3

must be expanded to properly report

deductions apportioned based on

assets. See Computer-Generated

Schedule H, earlier.

Columns (a) and (b) are subdivided

into “Nonfinancial Corporations” and

“Financial Corporations.” In allocating

interest deductions, members of an

affiliated group that are financial

corporations must be treated as a

separate affiliated group. Complete

columns (a)(ii) and (b)(iv) for

apportioned to U.S. source gross

intangible income for all product lines.

Enter on line 4d the total amount of

line 3 R&E expenditures apportioned

to the residual grouping of U.S. source

gross intangible income for all product

lines.

The assets in each statutory

grouping (lines 3a through 3e) and the

residual grouping (line 3f) are divided

between those assets generating

dividend income eligible to be offset

by the deduction under section 245A

versus those generating all other

types of gross income. The foreign

branch income and section 951A

income categories do not include

assets generating dividend income

eligible to be offset by the deduction

under section 245A. The assets on

line 2 are characterized as assets in

one of the statutory groupings or as

belonging to the residual grouping.

members of the corporation's affiliated

group that are financial corporations

and columns (a)(i) and (b)(iii) for

members that are nonfinancial

corporations.

Note. Line 2a, column (b) plus

line 4d, column (b) equals the total

amount of R&E deductions for all

product lines apportioned to U.S.

source gross intangible income for all

product lines.

Lines 6a(7), 6b(7), 6c(7), 6d(7),

and 6e(7). Enter on each of these

lines the total amount of line 3 R&E

expenditures apportioned to the

statutory grouping of foreign source

gross income for all product lines.

See Regulations section 1.861-11

for the definition of an affiliated group.

Columns (a)(i) and (a)(ii)

Line 1a. Enter the average of the

total assets of the affiliated group. See

Regulations section 1.861-9(g)(2) for

the definition of “average” for these

purposes.

Enter the value of the assets in

each of the statutory groupings on

lines 3a through 3e, and enter the

value of the assets in the residual

grouping on line 3f. See Regulations

Note. The sum of lines 6a(7), 6b(7),

6c(7), 6d(7), and 6e(7) in column (b)

equals the total amount of R&E

deductions for all product lines

Line 1b. Enter the assets included on

line 1a that are characterized as

Instructions for Form 1118 (Rev. 12-2023)

25

sections 1.861-12 and 1.861-13 and

Temporary Regulations sections

1.861-9T(g)(3), 1.861-12T(g)(2), and

1.861-12T for the rules for

Example 2. To determine the

amount to enter on line 3b(2), column

(b)(iv), do the following.

Computer-Generated Schedule H,

earlier.

Enter on lines 3a through 3e the

1. Divide the amount on line 3b(2), amount of expenses apportioned to

characterizing the assets.

column (a)(ii), by the amount on line 2, each separate category of income as

column (a)(ii).

further apportioned between dividend

income eligible to be offset by the

deduction under section 245A and all

other gross income.

Enter on line 3f the amount of

expenses apportioned to income in

the residual grouping (U.S. source

income) as further apportioned

between dividend income eligible to

be offset by the deduction under

section 245A and all other gross

income.

Columns (b)(iii) and (b)(iv)

2. Multiply the result by the

amount on line 2, column (b)(iv).

Line 1a. Enter the total interest

deductions for the members of the

corporation's affiliated group. These

include any expense that is currently

deductible under section 163

Column (c)

Complete this column to apportion

stewardship deductions. See

(including original issue discount),

and interest equivalents. See

Regulations section 1.861-8(e)(4)(ii).

Regulations section 1.861-9 and

Temporary Regulations section

1.861-9T for the definition of interest

equivalents and a list of the sections

that disallow or suspend interest

deductions or require the

Column (d)

Complete this column to apportion

certain industrial/investor damages.

See Regulations section 1.861-8(e)(5)

(ii) and (iii).

Attach a schedule that explains in

detail how the above apportionments

were made.

capitalization of interest deductions.

Line 1b. Enter the interest

Column (f)

Column (e)

deductions associated with the assets

on line 1b of columns (a)(i) and (a)(ii),

respectively, that attract specifically

allocable interest deductions under

Regulations section 1.861-10(e).

To determine the totals to enter in

column (f), use the following steps.

Step 1: For each applicable line

beginning with line 3a(1), enter the

sum of the amounts in columns (b)(iii),

(b)(iv), (c), (d), and (e) in this column

(f).

Complete this column to apportion all

other deductions allocated and

apportioned based on assets (other

than interest deductions, stewardship

deductions, and certain industrial/

investor damages). See final and

temporary Regulations sections

1.861-8 and 1.861-14.

Note. These interest deductions will

be divided among the statutory

groupings and the residual grouping.

The interest deductions allocated and

apportioned to the statutory groupings

will appear as a definitely allocable

deduction in Schedule A, column

13(j).

Step 2: With respect to section 245A

dividends, enter the sum of any

amounts entered in column (f) of lines

3a(1), 3b(1), 3c(1), 3d(1), 3e(1), and

3f(1) on line 4, column (f). Include this

line 4 result as a negative amount on

Schedule B, Part II, line 8b.

Line Instructions for Columns (c),

(d), and (e)

Line 1a. For each column, enter the

total expenses to be allocated and

apportioned. See final and temporary

Regulations sections 1.861-8 and

1.861-14. Also report this amount on

line 2.

Lines 3a through 3f. For lines 3a

through 3e, enter the code for the

applicable separate category of

income (statutory grouping). See

Categories of Income, earlier. If code

“901j” or one of the “RBT” codes

applies, also enter the applicable

country.

Line 1c. Enter the interest

deductions associated with the assets

on line 1c of columns (a)(i) and (a)(ii),

respectively, that attract specifically

allocable interest deductions.

Note. This is the adjustment required

by section 904(b)(4) to worldwide

taxable income to eliminate the

expenses properly allocated or

Lines 3a through 3f. To figure the

amount of interest deductions to

apportion to each separate category

of income (statutory grouping) and to

the residual grouping, divide the

assets apportioned to the grouping by

the total assets apportioned and

multiply the result by the interest

deductions to be apportioned.

apportioned to stock or dividend

income for which a dividends received

deduction is allowed in section 245A.

As such, it includes both foreign

source amounts (that is, the amounts

from the applicable statutory

groupings on lines 3a(1), 3b(1), 3c(1),

3d(1), and 3e(1)) and U.S. source

amounts (that is, the amount from the

residual grouping on line 3f(1)).

Note. If the corporation had more

than five separate categories of

income, Schedule H, Part II, line 3

must be expanded to properly report

stewardship deductions in column (c),

certain industrial/investor damages in

column (d), and “other deductions” in

column (e). To clarify, in column (e),

report all other deductions allocated

and apportioned based on assets

(other than those listed in columns (b),

(c), and (d)). See

Example 1. To determine the

amount to enter on line 3a(1), column

(b)(iii), do the following.

1. Divide the amount entered on

line 3a(1), column (a)(i), by the

amount on line 2, column (a)(i).

Step 3: With respect to amounts

other than section 245A dividends, for

each applicable statutory grouping,

include the amount in column (f) of

line 3a(2), 3b(2), 3c(2), 3d(2), or 3e(2)

in column 14 of the corresponding

Schedule A. For example, if the

2. Multiply the result by the

amount on line 2, column (b)(iii).

taxpayer enters "PAS" on Schedule H,

Part II, line 3a, the taxpayer takes the

Instructions for Form 1118 (Rev. 12-2023)

26

total on line 3a(2), column (f) and

includes it in column 14 of the

Schedule A being completed for the

Passive Category.

final and temporary Regulations

sections 1.861-8 and 1.861-14.

Lines 2a through 2f. For lines 2a

through 2e, enter the code for the

applicable separate category of

income (statutory grouping). See

Categories of Income, earlier. If code

“901j” or one of the “RBT” codes

applies, also enter the applicable

country.

Column (f). Column (f) is a totals

column. It requests total deductions

allocated and apportioned to section

245A dividends. This is the sum of

any amounts entered in columns (a)

through (e) on lines 2a(1), 2b(1),

2c(1), 2d(1), 2e(1), and 2f(1). The

total is entered on line 3 and is also

included on Schedule B, Part II,

line 8b as a negative number.

Note. Do not include the amount on

line 3f(2), column (f) in column 14 on

any Schedule A. The amount on

line 3f(2), column (f) is a residual

grouping amount and not an

Note. If the corporation had more

than five separate categories of

income, Schedule H, Part III, line 2

must be expanded to properly report

deductions other than research and

experimental deductions (reported in

Schedule H, Part I), and other than

deductions allocated and apportioned

based on assets (reported in

Schedule H, Part II). See

applicable statutory grouping amount.

Note. Due to the reporting

requirement described in step 3

above, you do not need to report a

grand total for amounts other than

section 245A dividends (that is, the

amount reported on line 4).

Note. This is the adjustment required

by section 904(b)(4) to worldwide

taxable income to eliminate the

expenses properly allocated or

apportioned to stock or dividend

income for which a dividends received

deduction is allowed in section 245A.

As such, it includes both foreign

source amounts (that is, the amounts

from the applicable statutory

Part III—Other Deductions

Computer-Generated Schedule H,

earlier.

Report in Schedule H, Part III

information pertaining to the allocation

and apportionment of deductions

other than research and experimental

deductions (reported in Schedule H,

Part I) and other than deductions

allocated and apportioned based on

assets (reported in Schedule H, Part

II).

Enter on lines 2a through 2e the

amount of expenses apportioned to

each separate category of income as

further apportioned between dividend

income eligible to be offset by the

deduction under section 245A and all

other gross income.

Enter on line 2f the amount of

expenses apportioned to income in

the residual grouping (U.S. source

income) as further apportioned

between dividend income eligible to

be offset by the deduction under

section 245A and all other gross

income.

groupings on lines 3a(1), 3b(1), 3c(1),

3d(1), and 3e(1)) and U.S. source

amounts (that is, the amount from the

residual grouping on line 3f(1)).

Column (g). With respect to each

applicable statutory grouping, column

(g) requests the sum of any amounts

entered in columns (a) through (e) for

lines 2a(2), 2b(2), 2c(2), 2d(2), and

2e(2). These are amounts other than

section 245A dividends.

Column (a). Complete this column to

apportion officers' compensation

expense in accordance with the rules

of Regulations section 1.861-8(b)(3).

Columns (b) and (c). Complete this

column to apportion amortization

deductions and depletion deductions,

respectively, in accordance with the

rules of Regulations section

Note. Unlike column (f), this column

(g) does not request a total. Instead,

for each applicable statutory grouping,

the column (g) total for each

Attach a schedule that explains in

detail how the above apportionments

were made.

1.861-8(b)(2) and Temporary

Regulations section 1.861-8T(c)(1),

for example.

applicable line is carried over to

column 14 of the corresponding

Schedule A. For example, if the

taxpayer enters "PAS" on Schedule H,

Part III, line 2a, the taxpayer takes the

total on line 2a(2), column (g) and

includes it in column 14 of the

Line 3. See the instructions for

column (f) above.

Column (d). Complete this column to

apportion product liability damages in

accordance with the rules of

Schedules I, J, K, and L

Regulations section 1.861-8(e)(5)(ii).

See the separate instructions for

Schedule I, Schedule J, Schedule K,

and Schedule L to see if the

Schedule A being completed for the

Passive Category.

Column (e). Complete this column to

apportion deductions other than those

reported on Schedule H, Part I;

corporation must file these schedules.

Line instructions

Line 1. For each column, enter the

total expenses to be allocated and

apportioned.

Schedule H, Part II; or Schedule H,

Part III, columns (a) through (d). See

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the

United States. You are required to give us the information. We need it to ensure that you are complying with these laws

and to allow us to figure and collect the right amount of tax.

You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act

unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be

retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax

returns and return information are confidential, as required by section 6103.

Instructions for Form 1118 (Rev. 12-2023)

27

The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden

for business taxpayers filing this form is approved under OMB control number 1545-0123 and is included in the estimates

shown in the instructions for their business income tax return.

If you have suggestions for making Form 1118 and related schedules simpler, we would be happy to hear from you.

You can send us comments from IRS.gov/FormComments. Or you can send your comments to Internal Revenue Service,

Tax Forms and Publications Division, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send the tax

form to this office. Instead, see Where To File in the instructions for the tax return with which this form is filed.

Instructions for Form 1118 (Rev. 12-2023)

28

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