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Modifications to the Foreign Tax Credit System Under the Tax Cuts and Jobs Act

Volume 5 No 1    /    Read Article

By Neha Rastogi and Stanley C. Ruchelman

The T.C.J.A. introduces new concepts in foreign tax credit planning and eliminates others. Gone are the pool of post-1986 earnings & profits and deemed-paid foreign tax credits for intercompany dividends. In their place is a dividends received deduction. Allocations of interest expense between foreign-source income and domestic income now must be based on tax book value. Entities that manufacture in one jurisdiction and sell in another will find that the source of income is controlled only by production activities. Neha Rastogi and Stanley C. Ruchelman explain.  See more →