Instructions for Form 1118, Foreign Tax Credit - Corporations Revision Date 01/05/2022

• Issuer: Treasury Department
• Section: Treasury Department

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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

Department of the Treasury

Internal Revenue Service

Section references are to the Internal

Revenue Code unless otherwise noted.

Future Developments

For the latest information about

developments related to Form 1118

and its instructions, such as legislation

enacted after they were published, go

to IRS.gov/Form1118.

What’s New

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

provisional credit for contested foreign

taxes. A Notice was subsequently

released on July 21, 2023, allowing

taxpayers to apply prior rules in place

of certain rules provided in the new

regulations. The rules described in

this Notice were modified in part by a

Notice released on December 11,

2023, to address their application to

partnerships and their partners and to

extend the relief period until further

notice. For more information, see

Treasury Decision 9959, 2022-03

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

2022-03_IRB#TD-9959, Notice

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

available at IRS.gov/irb/

2023-32_IRB#NOT-2023–55, and

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

available at IRS.gov/irb/

2023-52_IRB#NOT-2023-80.

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

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.

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.

•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

credits with respect to dividends from

foreign corporations.

•Modified indirect credits under

section 960 for inclusions under

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

•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

method for apportioning interest

expense under section 864(e).

•New adjustments for purposes of

section 904 with respect to expenses

allocable to certain stock or dividends

for which a dividends received

deduction is allowed under section

245A.

•Election to increase pre-2018

section 904(g) overall domestic loss

(ODL) recapture.

•Limited foreign tax credits with

respect to inclusions under section

965.

General Instructions

Purpose of Form

Use Form 1118 to compute a

corporation's foreign tax credit for

certain taxes paid or accrued to

foreign countries or U.S. possessions.

See Taxes Eligible for a Credit, later.

Who Must File

Any corporation that elects the

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,

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).

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

redetermination occurs. Schedule L

must be submitted irrespective of

whether the foreign tax

redetermination changed the

taxpayer's U.S. tax liability."

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.

Jan 16, 2024 Cat. No. 10905I

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See sections 960 and 962 and Pub.

514 for more information on how to

complete Form 1118 in this case.

When To Make the Election

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

agreement). The election to claim a

deduction in lieu of a credit for foreign

income taxes may be made or

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).

Computer-Generated

Form 1118

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.

How To Complete

Form 1118

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

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.

•Use Schedule B to determine the

total foreign tax credit after certain

reductions.

•Use Schedule C to compute taxes

deemed paid by the domestic

corporation filing the return with

respect to inclusions under section

951(a)(1).

•Use Schedule D to compute taxes

deemed paid by the domestic

corporation filing the return with

respect to inclusions under section

951A.

•Use Schedule E to compute taxes

deemed paid by the domestic

corporation filing the return with

respect to distributions of previously

taxed income (also referred to as

previously taxed earnings and profits

(PTEP)).

•Use Schedule G to report required

reductions of tax paid, accrued, or

deemed paid.

•Use Schedule H to apportion

deductions that cannot be allocated to

an item or class of income identified

on Schedule A.

•Use Schedule I (a separate

schedule) to compute reductions of

taxes paid, accrued, or deemed paid

on foreign oil and gas income.

•Use Schedule J (a separate

schedule) to compute adjustments to

separate limitation income or losses in

determining the numerators of

limitation fractions, year-end

recharacterization balances, and

overall foreign and domestic loss

account balances.

•Use Schedule K (a separate

schedule) to reconcile the

corporation's prior-year foreign tax

carryover with its current-year foreign

tax carryover.

•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.

Categories of Income

Compute a separate foreign tax credit

(using a separate Form 1118) for each

applicable separate category

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.

Code Category of Income

951A Section 951A Category

Income

FB Foreign Branch Category

Income

PAS Passive Category Income

901j Section 901(j) Income

RBT PAS U.S. Source Passive

Category Income

Resourced by Treaty as

Foreign Source Passive

Category Income

RBT GEN U.S. Source General

Category Income

Resourced by Treaty as

Foreign Source General

Category Income

RBT FB U.S. Source Foreign

Branch Income

Resourced by Treaty as

Foreign Source Foreign

Branch Category Income

RBT 951A U.S. Source Section

951A Category Income

Resourced by Treaty as

Foreign Source Section

951A Category Income

GEN General Category Income

If you enter code "901j" or one of

the "RBT" codes in item a, also

complete item b or item c using the

country codes provided at IRS.gov/

CountryCodes.

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.

•When completing a Form 1118 for

section 951A category income, enter

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

page 1.

•Section 951A category income

does not include passive category

income.

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

2Instructions for Form 1118 (Rev. 12-2023)