97-527. Filing Requirements for Returns Claiming the Foreign Tax Credit  

  • [Federal Register Volume 62, Number 8 (Monday, January 13, 1997)]
    [Proposed Rules]
    [Pages 1700-1701]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 97-527]
    
    
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    DEPARTMENT OF THE TREASURY
    
    Internal Revenue Service
    
    26 CFR Part 1
    
    [REG-208288-90]
    RIN 1545-AP36
    
    
    Filing Requirements for Returns Claiming the Foreign Tax Credit
    
    AGENCY: Internal Revenue Service (IRS), Treasury.
    
    ACTION: Notice of proposed rulemaking.
    
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    SUMMARY: This document contains a proposed regulation relating to the 
    substantiation requirements for taxpayers claiming foreign tax credits. 
    The proposed regulation is necessary to provide guidance to U.S. 
    taxpayers who claim foreign tax credits.
    
    DATES: Written comments and requests for a public hearing must be 
    received by April 14, 1997.
    
    ADDRESSES: Send Submissions to: CC:DOM:CORP:R (REG-208288-90), room 
    5228, Internal Revenue Service, POB 7604, Ben Franklin Station, 
    Washington, DC 20044. Submissions may be hand delivered between the 
    hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG-208288-90), Courier's 
    Desk, Internal Revenue Service, 1111 Constitution Avenue NW., 
    Washington, DC. Alternatively, taxpayers may submit comments 
    electronically via the internet by selecting the ``Tax Regs'' option on 
    the IRS Home Page, or by submitting comments directly to the IRS 
    internet site at HTTP://www.irs.ustreas.gov/prod/tax__regs/
    comments.html.
    
    FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Joan 
    Thomsen, (202) 622-3840 (not a toll-free call); concerning submissions, 
    Evangelista Lee, (202) 622-7190 (not a toll-free call).
    
    SUPPLEMENTARY INFORMATION:
    
    Background
    
        On June 3, 1988, the Internal Revenue Service issued a Notice 
    (Notice 88-65, 1988-1 C.B. 552) which stated that regulations would be 
    issued suspending portions of Sec. 1.905-2 of the Treasury Regulations. 
    Section 1.905-2 requires taxpayers who claim foreign tax credits to 
    attach documents to their returns substantiating the credits. The 
    Notice was issued in response to problems taxpayers were experiencing 
    because they could not timely obtain and prepare the necessary 
    documentation in a form suitable for submission with their tax returns. 
    The intent of the Notice was to advise taxpayers that Treasury and the 
    IRS would issue a new regulation that would suspend, beginning on 
    January 1, 1988, the existing regulation requiring the submission of 
    this documentation with a tax return. This new regulation has not been 
    issued. Instead of suspending the relevant portions of the existing 
    regulation, Treasury and the IRS now have decided to permanently 
    eliminate the requirement that documentation be submitted with the tax 
    return, effective January 1, 1988.
    
    Explanation of Provisions
    
    Sec. 1.905-2(a)(1), 1.905-2(b) (1) and (2), and 1.905-2(c)
    
        Sections 1.905-2(a)(1), 1.905-2(b) (1) and (2), and 1.905-2(c) are 
    unchanged from the final regulations.
    
    Sec. 1.905-2(a)(2)
    
        Under Sec. 1.905-2(a)(2), taxpayers generally are required to 
    attach to their income tax returns either (1) the receipt for the 
    foreign tax payment, or (2) a foreign tax return for accrued foreign 
    taxes. Proposed Sec. 1.905-2(a)(2) removes the requirement that the 
    documentation must be attached to the income tax return.
        The proposed regulation now provides that such evidence of foreign 
    taxes must be presented to the district director upon request.
    
    Sec. 1.905-2(b)(3)
    
        Section 1.905-2(b)(3) addresses issues for taxes withheld at the 
    source. The section allows the district director to accept secondary 
    evidence of such withholding. The proposed regulation clarifies that 
    evidence of a tax withheld at the source and the amount withheld is 
    only sufficient for an interim credit.
    
    [[Page 1701]]
    
    Upon request of the district director, taxpayers must provide evidence, 
    as provided in Sec. 1.905-2(a)(2), that the tax withheld was actually 
    paid to the foreign country. Although this regulation will be effective 
    on the date that is 30 days after the date the final regulation is 
    published in the Federal Register, it reflects an IRS requirement 
    upheld as a reasonable interpretation of current law by the Tax Court 
    and the Court of Appeals for the Seventh Circuit in Continental 
    Illinois Corp. v. Commissioner, T.C. Memo. 1991-66, 61 T.C.M. (CCH) 
    1916, 1939-42 (1991), aff'd in part and rev'd in part, 998 F.2d 513, 
    516-17 (7th Cir. 1993).
    
    Special Analyses
    
        It has been determined that this Treasury decision is not a 
    significant regulatory action as defined in Executive Order 12866. 
    Therefore, a regulatory assessment is not required. It has also been 
    determined that section 553(b) of the Administrative Procedures Act (5 
    U.S.C. chapter 5) does not apply to this regulation, and because the 
    regulation does not impose a collection of information on small 
    entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
    apply. Pursuant to section 7805(f) of the Internal Revenue Code, this 
    notice of proposed rulemaking will be submitted to the Chief Counsel 
    for Advocacy of the Small Business Administration for comment on its 
    impact on small business.
    
    Comments and Requests for a Public Hearing
    
        Before this proposed regulation is adopted as a final regulation, 
    consideration will be given to any comments that are submitted timely 
    to the IRS. All comments will be available for public inspection and 
    copying. A public hearing may be scheduled if requested in writing by 
    any person that timely submits comments. If a public hearing is 
    scheduled, notice of the date, time, and place for the hearing will be 
    published in the Federal Register.
    
    Drafting Information
    
        The principal author of this regulation is Joan Thomsen of the 
    Office of the Associate Chief Counsel (International), IRS.
        However, other personnel from the IRS and Treasury Department 
    participated in their development.
    
    List of Subjects in 26 CFR Part 1
    
        Income taxes, Reporting and recordkeeping requirements.
    
    Proposed Amendments to the Regulations
    
        Accordingly, 26 CFR part 1 is proposed to be amended as follows:
    
    PART 1--INCOME TAXES
    
        Paragraph 1. The authority citation for 26 CFR part 1 continues to 
    read in part as follows:
    
        Authority: 26 U.S.C. 7805 * * *
    
        Par. 2. Section 1.905-2 is amended by:
        1. Revising the second through fourth sentences in paragraph 
    (a)(2).
        2. Adding two sentences to the end of paragraph (b)(3).
        The revision and addition read as follows:
    
    
    Sec. 1.905-2  Conditions of allowance of credit.
    
        (a) * * *
        (2) * * * Except where it is established to the satisfaction of the 
    district director that it is impossible for the taxpayer to furnish 
    such evidence, the taxpayer must provide upon request the receipt for 
    each such tax payment if credit is sought for taxes already paid or 
    withheld, or the return on which each such accrued tax was based if 
    credit is sought for taxes accrued. This receipt or return must be 
    either the original, a duplicate original, or a duly certified or 
    authenticated copy. The preceding two sentences are effective for 
    returns whose original due date falls on or after January 1, 1988. * * 
    *
        (b) * * *
        (3) * * * Any foreign tax credit claimed for taxes withheld at the 
    source is an interim credit and the taxpayer must prove that any taxes 
    withheld at the source were paid to the foreign country, as required in 
    paragraph (a) of this section. The preceding sentence is effective the 
    date that is 30 days after the date this regulation is published in the 
    Federal Register as a final regulation, however, for periods prior to 
    the date that is 30 days after the date this regulation is published in 
    the Federal Register as a final regulation, see Continental Illinois 
    Corp. v. Commissioner, T.C. Memo. 1991-66, 61 T.C.M. (CCH) 1916, 1939-
    42 (1991), aff'd in part and rev'd in part, 998 F.2d 513, 516-17 (7th 
    Cir. 1993), wherein the court upheld this rule as a reasonable 
    interpretation of section 905(b) of the Internal Revenue Code.
    * * * * *
    Margaret Milner Richardson,
    Commissioner of Internal Revenue.
    [FR Doc. 97-527 Filed 1-10-97; 8:45 am]
    BILLING CODE 4830-01-U
    
    
    

Document Information

Published:
01/13/1997
Department:
Internal Revenue Service
Entry Type:
Proposed Rule
Action:
Notice of proposed rulemaking.
Document Number:
97-527
Dates:
Written comments and requests for a public hearing must be received by April 14, 1997.
Pages:
1700-1701 (2 pages)
Docket Numbers:
REG-208288-90
RINs:
1545-AP36: Section 905(b) Regulations
RIN Links:
https://www.federalregister.gov/regulations/1545-AP36/section-905-b-regulations
PDF File:
97-527.pdf
CFR: (4)
26 CFR 1.905-2(a)(1)
26 CFR 1.905-2(a)(2)
26 CFR 1.905-2(b)(3)
26 CFR 1.905-2