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Форма 1118 Інструкція

Інструкція по формуванню 1118, іноземних податкових кредитів

Рев. Грудень 2023

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  • Форма 1118 - Іноземний податковий кредит - корпорації
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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  
corporation's foreign tax credit for  
certain taxes paid or accrued to  
foreign countries or U.S. possessions.  
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/  
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/  
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.  
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/  
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  
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  
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  
“NOLin 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 Tax  
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  
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  
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  
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  
1c  
USC makes the following entries on  
2
2
the first of three lines on Schedule C.  
3
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
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  
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  
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  
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  
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  
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  
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
3
4a  
4b  
5
CFC2  
10042  
201812  
CC  
4a  
4b  
5
CFC1  
10041  
201912  
OC  
6
6
7
UUU  
951a1A  
2016  
810u  
0
7
UUU  
951A  
2018  
225u  
0
8
8
In addition, a $10,000 penalty is  
imposed under section 6038(b) for  
failure to supply the information  
9
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  
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  
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  
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  
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  
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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)  
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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)  
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