IRS Notice: Foreign Tax Credit Limitation on Section 951A PTEP Distributions (IRC §960(d)(4))

The IRS has published a notice announcing its intent to issue proposed regulations regarding I.R.C. §960(d)(4), which disallows a foreign tax credit for 10 percent of foreign income taxes paid with respect to distributions of previously taxed earnings and profits (PTEP) resulting from section 951A inclusions. The notice clarifies that I.R.C. §960(d)(4) applies to foreign income taxes related to section 959(a) distributions when the underlying PTEP results from a section 951A inclusion in a taxable year of the U.S. shareholder ending after June 28, 2025. The guidance establishes separate PTEP groups for pre- and post-June 28, 2025, section 951A inclusions, ...