Instructions for Form 8993, Section 250 Deduction for Foreign Derived Intangible Income (FDII) and Global Intangible Low-Taxed Income (GILTI)

• Legal Form Number: 8993
• Year: 2021
• Issuer: Treasury Department
• Section: Treasury Department

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Instructions for Form 8993

(Rev. January 2022)

Section 250 Deduction for Foreign-Derived Intangible Income (FDII) and Global

Intangible Low-Taxed Income (GILTI)

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 8993 and

its instructions, such as legislation

enacted after they were published, go to

IRS.gov/Form8993.

What’s New

Changes have been made throughout

these instructions based on the final

section 250 regulations (T.D. 9901, 85

FR 43042, July 15, 2020).

Important Reminders

Domestic corporation’s deduction.

For tax years beginning on or after

January 1, 2018, and before January 1,

2026, section 250 generally allows a

deduction equal to the sum of 37.5% of

the corporation's FDII plus 50% of its

GILTI (thereafter, these deductions are

reduced to 21.875% and 37.5%,

respectively).

Deduction limitation. If the sum of

FDII and GILTI exceeds taxable income,

the deduction under section 250 is

limited to taxable income.

General Instructions

Purpose of Form

Public Law 115-97 (Tax Cuts and Jobs

Act of 2017) enacted section 250 for the

allowance of a deduction for the eligible

percentage of FDII and GILTI.

See Form 8992, U.S. Shareholder

Calculation of Global Intangible

Low-Taxed Income (GILTI), and its

instructions for more information on

GILTI.

Use Form 8993 to figure the amount

of the eligible deduction for FDII and

GILTI under section 250.

Who Must File

All domestic corporations (and U.S.

individual shareholders of controlled

foreign corporations (CFCs) making a

section 962 election (962 electing

individual)) must use Form 8993 to

determine the allowable deduction

under section 250.

The deduction is allowed only to

domestic corporations (not including

real estate investment trusts (REITs),

regulated investment companies (RICs),

and S corporations) and section 962

electing individuals. For the treatment of

a domestic corporation that is a partner

in a partnership, see Regulations

sections 1.250(b)-1(e) and

1.250(b)-3(e).

When and Where To File

Attach Form 8993 to your income tax

return and file both by the due date

(including extensions) for that return.

Definitions and Overview

Steps for Computing the

Deduction Under Section 250

1. Deduction Eligible Income (DEI)

is determined.

2. Deemed Tangible Income Return

(DTIR) is determined.

3. Deemed Intangible Income (DII)

is determined.

4. Foreign-Derived Deduction

Eligible Income (FDDEI) is determined.

5. Foreign-Derived Ratio (FDR) is

determined.

6. FDII is determined.

7. If there is excess FDII and GILTI

over taxable income, the FDII reduction

and the GILTI reduction are determined.

8. The eligible deduction under

section 250 is determined.

FDDEI

FDDEI means, with respect to a

taxpayer for its tax year, any deduction

eligible income of the taxpayer that is

derived in connection with:

1. Property that is sold by the

taxpayer to any person who is a foreign

person and that the taxpayer

establishes to the satisfaction of the

Secretary is for a foreign use (see

Regulations section 1.250(b)-4); or

2. Services provided by the

taxpayer that the taxpayer establishes

to the satisfaction of the Secretary are

provided to any person, or with respect

to property, located outside the United

States (see Regulations section

1.250(b)-5).

Special rules for determining foreign

use apply to transactions that involve

property or services provided to related

parties (see section 250(b)(5)(C) and

Regulations section 1.250(b)-6).

Sale

The terms “sold,” “sells,” and “sale”

include any lease, license, exchange, or

other disposition of property.

Foreign Use

“Foreign use” is defined to mean “any

use, consumption, or disposition which

is not within the United States.” See

Regulations section 1.250(b)-4(d). For

the latest guidance about foreign use,

go to IRS.gov/Form8993.

Qualified Business Asset

Investment (QBAI)

A domestic corporation’s QBAI is the

average of the aggregate of its adjusted

bases, determined as of the close of

each quarter of the tax year, in specified

tangible property used in its trade or

business and of a type with respect to

which a deduction is allowable under

section 167. See Regulations section

1.250(b)-2.

Information From Partnership

A domestic corporate partner of a

partnership takes into account its

distributive share of a partnership's

gross DEI, gross FDDEI, deductions,

and its share of partnership QBAI, in

order to calculate the partner's FDII. See

Regulations section 1.250(b)-1(e)(1).

The above partnership information

should have been reported to the

partners on Schedule K-3 (Form 1065).

For partners in a partnership, attach

a statement to Form 8993 listing each

partnership's name; employer

identification number (EIN); the

partner's share of the partnership's

QBAI reported on line 7b; and other

FDDEI items reported on lines 9b, 10b,

13, and 17.

Documentation

For special substantiation requirements

under the Regulations, see sections

Nov 10, 2021 Cat. No. 71352N