Modifications Related to Foreign Tax Credit Limitation
Section 70311 · Sec. 70311 ·
What this chapter is about
This part changes how costs are split between home and foreign income. Interest and research costs may no longer be charged against one kind of foreign income. Those costs go against United States income instead. The change starts with tax years after December 31, 2025.
The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70311 in the PDF
What the document says
“the taxpayer's taxable income from sources without the United States shall be determined by allocating and apportioning--”
The section adds a new paragraph (5) to section 904(b) of the Internal Revenue Code of 1986. Solely for applying the foreign tax credit limit to the amounts in subsection (d)(1)(A), foreign source taxable income is worked out by charging to that income the deduction under section 250(a)(1)(B) and any deduction under section 164(a)(3) for taxes on those amounts, charging no interest expense or research and experimental expenditures to it, and charging any other deduction to it only where directly allocable. Anything that would otherwise have gone against that income goes against United States source income instead.
What the document actually says
“the taxpayer's taxable income from sources without the United States shall be determined by allocating and apportioning--”
That sentence, in plain words
Foreign source income is worked out in a set way. The list that follows says which costs go against it.
What this is about
Interest and research costs are kept off it. Other costs go against it only if tied to it. What is left goes against home income.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
“Section 951A(f)(1)(A) is amended by striking "904(h)(1)" and inserting "904(h)".”
The section corrects three cross references in the Internal Revenue Code of 1986: paragraph (1)(B) becomes paragraph (1)(D) in section 904(d)(2)(H)(i), paragraph (1)(A) becomes paragraph (1)(C) in section 904(d)(4)(C)(ii), and 904(h)(1) becomes 904(h) in section 951A(f)(1)(A).
What the document actually says
“Section 951A(f)(1)(A) is amended by striking "904(h)(1)" and inserting "904(h)".”
That sentence, in plain words
One pointer is taken out of a tax rule. A new pointer is put in.
What this is about
Two more pointers are fixed the same way. They point to other parts of the tax code. That code is not indexed here.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “shall apply”Who acts: Secretary of the TreasuryHow: statuteSec. 70311 in the PDF
What the document says
“The amendments made by this section shall apply to taxable years beginning after December 31, 2025.”
The section applies its amendments to taxable years beginning after December 31, 2025.
What the document actually says
“The amendments made by this section shall apply to taxable years beginning after December 31, 2025.”
That sentence, in plain words
The changes start with tax years that begin after December 31, 2025.
What this is about
Earlier tax years are not touched. The old rules still hold for them. The date is fixed in the law.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
Each distinct thing the section does: the new allocation rule for deductions against foreign source net CFC tested income, the three cross reference changes, and the effective date.
Nothing in the section is left out. It has three subsections and each is recorded.
The section works by amending sections 904 and 951A of the Internal Revenue Code of 1986, which are not indexed here, so how the foreign tax credit limit works cannot be checked against anything on this site.
