No credit is given for 10 percent of foreign tax on certain payouts
What the document says“No credit shall be allowed under section 901 for 10 percent of any foreign income taxes paid or accrued (or deemed paid under subsection (b)(1)) with respect to any amount excluded from gross income under section 959(a) by reason of an inclusion in gross income under section 951A(a).”
The section adds a new paragraph (4) to section 960(d) of the Internal Revenue Code of 1986 barring a credit under section 901 for 10 percent of foreign income taxes paid, accrued or deemed paid on an amount excluded from gross income under section 959(a) because of an inclusion under section 951A(a).
What the document actually says“No credit shall be allowed under section 901 for 10 percent of any foreign income taxes paid or accrued (or deemed paid under subsection (b)(1)) with respect to any amount excluded from gross income under section 959(a) by reason of an inclusion in gross income under section 951A(a).”
No credit is given for a tenth of the foreign tax. That is tax on money already taxed once and paid out later.
The other nine tenths may still be claimed. The rule reaches tax paid and tax treated as paid. The tax code is not indexed here.
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