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Department of the Treasury
Internal Revenue Service
Instructions for Form 1118

(Rev. December 2022)

(Use with the December 2022 revisions of Form 1118 and separate Schedule L, the
December 2021 revision of separate Schedule I, the December 2020 revision of
separate Schedule J, and the December 2018 revision of separate Schedule K.)
Foreign Tax Credit—Corporations

Section references are to the Internal What’s New allocations and apportionments are
Revenue Code unless otherwise noted. based on assets in accordance with
The following changes have been
made to the December 2022 revision the rules of Temporary Regulations
Future Developments sections 1.861-9T through 1.861-13T.
of Form 1118. Most of these changes
For the latest information about are based on final foreign tax credit New column (c) requests
developments related to Form 1118 regulations issued on December 17, information pertaining to the allocation
and its instructions, such as 2019 (T.D. 9882, 84 FR 69022); on and apportionment of Stewardship
legislation enacted after they were November 12, 2020 (T.D. 9922, 85 Deductions in accordance with the
published, go to IRS.gov/Form1118. FR 71998); and on January 4, 2022 rules of Regulations section
(T.D. 9959, 87 FR 374). 1.861-8(e)(4)(ii).
Reminders Schedule A, column 1. For tax New column (d) requests
On December 22, 2017, Congress years beginning in 2022, there is a information pertaining to the allocation
enacted the Tax Cuts and Jobs Act, new “Unrelated” code that can be and apportionment of Certain
P.L. 115-97 (the “Act”). The Act entered in column 1 in cases where Industrial/Investor Damages in
changes the computation of foreign the corporation derived foreign source accordance with the rules of
tax credits for post-2017 tax years as income and/or paid or accrued Regulations section 1.861-8(e)(5)(ii)
follows. creditable foreign taxes from or and (iii).
• Two new separate categories of through unrelated persons or their Column (e) (previously column (c))
income under section 904(d): (i) any QBUs. See the specific instructions now requests information pertaining to
amount includible in gross income for Schedule A, Column 1., for more all other deductions that are allocated
under section 951A (other than information. and apportioned based on assets.
passive category income) (“section Lines 3f(1), 3f(2), and 3f(3) now
Schedule A, column 14. Due to
951A category income”), and (ii) request information pertaining to
changes made to Schedule H
foreign branch category income. deductions allocated and apportioned
(explained below), on page 1 of Form
• Repeal of section 902 indirect (based on assets) to U.S. source
1118, Schedule A, column 14
credits with respect to dividends from income in accordance with the rules
(apportioned share of deductions)
foreign corporations. of Regulations section 1.904(b)-3(a)
now requests amounts from the
• Modified indirect credits under (2). By doing so, Schedule H, Part II
applicable line of Schedule H, Part I,
section 960 for inclusions under now requires taxpayers to show all
column (b); Schedule H, Part II,
sections 951(a)(1) and 951A. amounts allocated and apportioned
column (f); and Schedule H, Part III,
• Modified section 78 gross-up with (not just the amounts allocated and
column (g).
respect to inclusions under sections apportioned to the foreign source
951(a)(1) and 951A. Schedule C, column 5(a). On categories.
• Revised sourcing rule for certain page 3 of Form 1118, the codes for
income from the sale of inventory Schedule C, column 5(a) have been Schedule H, Part III. On page 12 of
under section 863(b). modified. See the specific instructions Form 1118, Schedule H, Part III is
• Repeal of the fair market value for Schedule C, Column 5(a), for the new. It requests information pertaining
method for apportioning interest new codes. to the allocation and apportionment of
deductions other than research and
expense under section 864(e). Schedule H, Part II. On page 11 of experimental deductions (requested
• New adjustments for purposes of Form 1118, Schedule H, Part II, has in Schedule H, Part I) and other than
section 904 with respect to expenses been extensively revised. deductions allocated and apportioned
allocable to certain stock or dividends Schedule H, Part II is now used to based on assets (requested in Part II).
for which a dividends received report deductions allocated and
deduction is allowed under section apportioned based on assets, and the Column (a) requests information
245A. title of Schedule H, Part II has been pertaining to the allocation and
• Election to increase pre-2018 revised accordingly. apportionment of officers'
section 904(g) overall domestic loss compensation expense in accordance
(ODL) recapture. Columns (a) and (b) continue to with the rules of Regulations section
• Limited foreign tax credits with request information pertaining to the 1.861-8(b)(3).
respect to inclusions under section allocation and apportionment of
965. interest deductions as these

Mar 15, 2023 Cat. No. 10905I

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Columns (b) and (c) request              Lines 2a(2), 2b(2), 2c(2), 2d(2),       Who Must File
information pertaining to the allocation and 2e(2) request the amount of         Any corporation that elects the 
and apportionment of amortization        expenses apportioned to each            benefits of the foreign tax credit under 
deductions and depletion deductions,     separate category of income as          section 901 must complete and attach 
respectively, in accordance with the     further apportioned to gross income     Form 1118 to its income tax return. In 
rules of Regulations section             other than dividend income eligible to  addition, even if a corporation has not 
1.861-8(b)(2), Temporary Regulations     be offset by the deduction under        elected to credit foreign taxes, it must 
section 1.861-8T(c)(1), for example.     section 245A.                           complete and attach Schedules A and 
Column (d) requests information          Line 3 requests expenses allocated      J of a Form 1118 to its income tax 
pertaining to the allocation and         and apportioned to section 245A         return if it has any additions to, 
apportionment of product liability       dividends.                              reductions to, or recapture of any new 
damages in accordance with the rules                                             or existing overall foreign loss, overall 
                                         Schedule L (Form 1118).    Part I, 
of Regulations section 1.861-8(e)(5)                                             domestic loss, or separate limitation 
                                         column 13, now requests "Reference 
(ii).                                                                            loss accounts. See Regulations 
                                         ID Number for Contested Tax, if 
Column (e) requests information          applicable" to reflect Regulations      section 1.904(f)-1(b).
pertaining to all other deductions.      section 1.905-1(d)(4) and new Form      Also, individuals must complete 
Column (f) is a totals column. It        7204 (see below).                       and attach a Form 1118 to their 
requests total deductions allocated      In Part III, new columns 12 through     income tax return if they make the 
and apportioned to section 245A          15 have been added to better reflect    election under section 962 to be taxed 
dividends. This is the sum of columns    section 905(b) and (c) and              at corporate rates on the amount they 
(a) through (e) for lines 2a(1), 2b(1),  Regulations section 1.905-4.            must include in gross income under 
2c(1), 2d(1), 2e(1), and 2f(1). The                                              sections 951(a) and 951A from their 
                                         New Part V, Annual Reporting for 
grand total is entered on line 3 and                                             controlled foreign corporations in 
                                         Contested Taxes, has been 
carried over to Schedule B, Part II,                                             order to be eligible to claim a foreign 
                                         developed to be used by taxpayers to 
line 8b as a negative number.                                                    tax credit based on their share of 
                                         comply with the annual notice 
Column (g) is also a totals column.      described in Regulations section        foreign income taxes paid or accrued 
It requests the sum of columns (a)       1.905-1(d)(4)(iv). For each tax year    by the controlled foreign corporation. 
through (e) for lines 2a(2), 2b(2),      following the year in which a           See sections 960 and 962 and Pub. 
2c(2), 2d(2), and 2e(2). There is no     provisional foreign tax credit election 514 for more information on how to 
grand total for column (g). Instead, for is made on new Form 7204 (see           complete Form 1118 in this case.
each applicable statutory grouping,      below), up to and including the tax 
the column (g) total for each line is    year in which the contest is resolved,  When To Make the 
carried over to column 14 of the         the taxpayer must provide the           Election
corresponding Schedule A.                information requested in this new Part  The election to claim the foreign tax 
Line 1 requests the total expense        V.                                      credit for any tax year may be made 
to be apportioned for each column.       See Schedule L (Form 1118) and          or changed at any time before the end 
Lines 2a through 2e request that         separate instructions for details.      of a special 10-year period described 
                                                                                 in section 6511(d)(3) (or section 
taxpayers enter the code for the         Form 7204.   New Form 7204,             6511(c) if the period is extended by 
applicable separate category of          Consent To Extend the Time To           agreement). The election to claim a 
income using the codes located at        Assess Tax Related to Contested         deduction in lieu of a credit for foreign 
Categories of Income, later.             Foreign Income Taxes – Provisional      income taxes may be made or 
Line 2f requests information             Foreign Tax Credit Agreement, has       changed at any time before the end of 
pertaining to deductions allocated and   been developed pursuant to              the period prescribed by section 
apportioned (generally based on the      Regulations sections 1.905-1(c)(3)      6511(a) or 6511(c). See Regulations 
source of income) to U.S. source         and 1.905-1(d)(4) to allow a taxpayer,  section 1.901-1(d).
income in accordance with the rules      under the conditions provided in 
of Regulations section 1.904(b)-3(a)     Regulations sections 1.905-1(c)(3)      Computer-Generated
(2). By doing so, Schedule H, Part III   and 1.905-1(d)(4), to elect to claim a 
requires taxpayers to show all           provisional foreign tax credit for a    Form 1118
amounts allocated and apportioned        contested foreign income tax. See       The corporation may submit a 
(not just the amounts allocated and      Form 7204 and separate instructions     computer-generated Form 1118 and 
apportioned to the foreign source        for details.                            schedules if they conform to the IRS 
categories on lines 2a through 2e).                                              version. However, if a software 
                                                                                 program is used, it must be approved 
Lines 2a(1), 2b(1), 2c(1), 2d(1),        General Instructions                    by the IRS for use in filing substitute 
2e(1), and 2f(1) request the amount of 
                                                                                 forms. This ensures the proper 
expenses apportioned to each             Purpose of Form                         placement of each item appearing on 
separate category of income as           Use Form 1118 to compute a              the IRS version. For more information, 
further apportioned to dividend          corporation's foreign tax credit for    see Pub. 1167, General Rules and 
income eligible to be offset by the      certain taxes paid or accrued to        Specifications for Substitute Forms 
deduction under section 245A.            foreign countries or U.S. possessions.  and Schedules.
                                         See Taxes Eligible for a Credit, later.

                                                       -2-                       Instructions for Form 1118 (Rev. 12-2022)

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How To Complete current taxable year and that relate to • When completing a Form 1118 for
prior taxable years. section 951A category income, enter
Form 1118
the code "951A" on line a at the top of
Important. Complete a separate Categories of Income page 1.
Schedule A; Schedule B, Parts I & II; Compute a separate foreign tax credit • Section 951A category income
Schedules C through G; Schedule I; (using a separate Form 1118) for does not include passive category
and Schedule K for each applicable each applicable separate category income.
separate category of income. See described below. Enter the applicable Foreign Branch Category
Categories of Income, later. Complete code from the table below, in item a at
Schedule B, Part III; Schedule H; and the top of page 1 of Form 1118, to Income
Schedule J only once. indicate the separate category with Foreign branch income is defined
• Use Schedule A to compute the respect to which you are completing a under section 904(d)(2)(J)(i) as the
corporation's income or loss before given Form 1118. business profits of a U.S. person
adjustments for each applicable which are attributable to one or more
qualified business units (QBUs) (as
category of income. Code Category of Income defined in section 989(a)) in one or
• Use Schedule B to determine the
total foreign tax credit after certain 951A Section 951A Category more foreign countries. For more
reductions. Income information on the computation of
• Use Schedule C to compute taxes foreign branch category income, see
FB Foreign Branch Category
deemed paid by the domestic Regulations section 1.904-4(f).
corporation filing the return with Income • When completing a Form 1118 for
respect to inclusions under section PAS Passive Category Income foreign branch category income, enter
951(a)(1). the code "FB" on line a at the top of
901j Section 901(j) Income
• Use Schedule D to compute taxes page 1.
deemed paid by the domestic RBT PAS U.S. Source Passive • Foreign branch category income
corporation filing the return with Category Income does not include passive category
income.
respect to inclusions under section Resourced by Treaty as
951A. Foreign Source Passive • Foreign branch category income is
effective for tax years of U.S. persons
• Use Schedule E to compute taxes Category Income beginning after December 31, 2017.
deemed paid by the domestic
corporation filing the return with RBT GEN U.S. Source General
Passive Category Income
respect to distributions of previously Category Income
taxed income (also referred to as Resourced by Treaty as Passive category income includes
previously taxed earnings and profits Foreign Source General passive income and specified passive
category income. When completing a
(PTEP)). Category Income
Form 1118 for passive category
• Use Schedule G to report required RBT FB U.S. Source Foreign income, enter the code "PAS" on line
reductions of tax paid, accrued, or Branch Income a at the top of page 1.
deemed paid.
Resourced by Treaty as
• Use Schedule H to apportion Passive income. Generally, passive
Foreign Source Foreign
deductions that cannot be allocated to income is the following.
Branch Category Income
an item or class of income identified • Any income received or accrued
on Schedule A. RBT 951A U.S. Source Section that would be foreign personal holding
• Use Schedule I (a separate 951A Category Income company income (defined in section
schedule) to compute reductions of Resourced by Treaty as 954(c)) if the corporation were a
taxes paid, accrued, or deemed paid Foreign Source Section controlled foreign corporation (CFC)
on foreign oil and gas income. 951A Category Income (defined in section 957). This includes
• Use Schedule J (a separate any gain on the sale or exchange of
schedule) to compute adjustments to GEN General Category Income stock that is more than the amount
separate limitation income or losses in treated as a dividend under section
determining the numerators of 1248. However, in determining if any
limitation fractions, year-end If you enter code "901j" or one of income would be foreign personal
recharacterization balances, and the "RBT" codes in item a, also holding company income, the rules of
overall foreign and domestic loss complete item b or item c using the section 864(d)(6) will apply only for
account balances. country codes provided at IRS.gov/ income of a CFC.
• Use Schedule K (a separate CountryCodes. • Any amount includible in gross
schedule) to reconcile the income under section 1293 (which
corporation's prior-year foreign tax Section 951A Category Income relates to certain passive foreign
carryover with its current-year foreign Section 951A category income is any investment companies (PFICs)).
tax carryover. amount of global intangible low-taxed Passive income does not include:
• Use Schedule L (a separate income (GILTI) includible in gross • Any financial services income,
schedule) to report foreign tax income under section 951A (other • Any export financing interest unless
redeterminations that occurred in the than passive category income). it is also related person factoring
Section 951A defines GILTI.

Instructions for Form 1118 (Rev. 12-2022) -3-

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income (see section 904(d)(2)(G) and United States does not have code “RBT GEN” on line a at the top
Regulations section 1.904-4(h)(3)), diplomatic relations, or countries of page 1.
• Any high-taxed income, or whose governments are not
• Any active rents or royalties. See recognized by the United States. As of Code “RBT FB.” If an applicable
Regulations section 1.904-4(b)(2)(iii) the date these instructions were income tax treaty treats any U.S.
for definitions and exceptions. revised, section 901(j) applied to source foreign branch category
income derived from Iran, North income as foreign source foreign
Note. Certain income received from a Korea, Sudan, and Syria. For more branch category income, and the
CFC and certain dividends from information, see section 901(j). corporation elects to apply the treaty,
noncontrolled 10%-owned foreign on Form 1118, enter code “RBT FB”
corporations that would otherwise be Note. The President of the United on line a at the top of page 1.
passive income are treated as States has the authority to waive the
passive category income only to the application of section 901(j) with Code “RBT 951A.” If an applicable
extent provided under the respect to a foreign country if it is (a) income tax treaty treats any U.S.
look-through rules. See Look-Through in the national interest of the United source section 951A category income
Rules, later. States and will expand trade and as foreign source section 951A
investment opportunities for domestic category income, and the corporation
Specified passive category in- elects to apply the treaty, on Form
companies in such foreign country,
come. This term includes: 1118, enter code “RBT 951A” on line
and (b) the President reports to the
• Dividends from a domestic a at the top of page 1.
Congress, not less than 30 days
international sales corporation (DISC)
before the waiver is granted, the
or former DISC (as defined in section General Category Income
intention to grant such a waiver and
992(a)) to the extent such dividends This category includes all income not
the reason for such waiver.
are treated as foreign source income, described above. When completing a
and Note. Effective December 10, 2004, Form 1118 for the general category of
• Distributions from a former foreign the President waived the application income, enter code "GEN" on line a at
sales corporation (FSC) out of of section 901(j) with respect to Libya. the top of page 1. This category
earnings and profits attributable to includes high-taxed income that is not
foreign trade income or interest or Income Re-Sourced by Treaty otherwise treated as another category
carrying charges (as defined in If a sourcing rule in an applicable of income. Usually, income is high
section 927(d)(1), before its repeal) income tax treaty treats any U.S. taxed if the total foreign income taxes
derived from a transaction which source income as foreign source, and paid, accrued, or deemed paid by the
results in foreign trade income (as the corporation elects to apply the corporation for that income exceed
defined in section 932(b), before its treaty, the income will be treated as the highest rate of tax specified in
repeal). foreign source. section 11 (and with reference to
section 15, if applicable), multiplied by
Section 901(j) Income Important. The corporation must the amount of such income (including
No credit is allowed for foreign income compute a separate foreign tax credit the amount treated as a dividend
taxes imposed by and paid or accrued limitation for any such income for under section 78). For more
to certain sanctioned countries. which it claims benefits under a treaty. information, see Regulations section
However, a foreign tax credit may be See Regulations sections 1.904-4(k) 1.904-4(c). Also see the instructions
claimed for foreign income taxes paid and 1.904-5(m)(7) for grouping rules for Schedule A, later, for additional
or accrued with respect to section and exceptions. On each Form 1118, reporting requirements.
901(j) income if such tax is paid or enter one of the RBT codes listed
accrued to a country other than a below on line a at the top of page 1 This category also includes
sanctioned country. and identify the applicable treaty financial services income (defined
Income derived from each country on line c at the top of page 1 below) not described above if the
sanctioned country is subject to a using the two-letter codes (from the corporation is a member of a financial
separate foreign tax credit limitation. list at IRS.gov/CountryCodes). services group (as defined in section
904(d)(2)(C)(ii)) or is predominantly
Therefore, the corporation must use a Code “RBT PAS.” If an applicable engaged in the active conduct of a
separate Form 1118 for income income tax treaty treats any U.S. banking, insurance, financing, or
derived from each such country. source passive category income as similar business.
On each Form 1118, enter the foreign source passive category Financial services income.
code “901j” on line a at the top of income, and the corporation elects to Financial services income is income
page 1 and identify the applicable apply the treaty, on Form 1118, enter received or accrued by a member of a
country using the two-letter codes code “RBT PAS” on line a at the top of financial services group or any
(from the list at IRS.gov/ page 1. corporation predominantly engaged in
CountryCodes). the active conduct of a banking,
Code “RBT GEN.” If an applicable
Sanctioned countries are those income tax treaty treats any U.S. insurance, financing, or similar
designated by the Secretary of State source general category income as business if the income is:
as countries that repeatedly provide foreign source general category • Described in section 904(d)(2)(D)
support for acts of international income, and the corporation elects to (ii),
terrorism, countries with which the apply the treaty, on Form 1118, enter

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• Passive income (determined             income described in section 904(d)(1)      Schedule K-3, Part II, Section 1
without regard to section 904(d)(2)(B)   (B). See section 904(d)(2)(H).
(iii)(II)), or                                                                      Gross income sourced at partner 
• Incidental income described in         Look-Through Rules                         level. This includes income from the 
Regulations section 1.904-4(e)(4).       CFCs.    Generally, dividends, interest,   sale of most personal property other 
                                         rents, and royalties received or           than inventory, depreciable property, 
Note. If the corporation qualified as a  accrued by the taxpayer are passive        and certain intangible property 
financial services entity because it     category income. However, if these         sourced under section 865. This gross 
treated certain amounts as active        items are received or accrued by a         income will generally be U.S. source 
financing income that are not listed in  10% (0.10) U.S. shareholder from a         and therefore will not be reported on 
Regulations sections 1.904-4(e)(2)(i)    CFC, they may be assigned to other         Form 1118.
(A) through (X), but that are described  separate categories, or may be             Foreign gross income sourced at 
as similar items in Regulations section  treated as passive category income         partnership level. Report on 
1.904-4(e)(2)(i)(Y), attach a statement  under the look-through rules of            Schedule A.
to Form 1118 showing the types and       section 904(d)(3). Dividends include 
amounts of the similar items.            any amount included in gross income        Schedule K-3, Part II, Section 2
                                         under section 951(a)(1)(B).
Special Rules                                                                       Deductions allocated and appor-
                                          Look-through rules also apply to 
Source Rules for Income                  subpart F inclusions under section         tioned at partner level and partner-
Determine income or (loss) for each      951(a)(1)(A) and GILTI inclusions          ship level. Report on Schedule A or 
separate category on Schedule A          under section 951A(a) to the extent        Schedule H.
using the general source rules of        attributable to income of the CFC in 
sections 861 through 865 and related     the passive category.                      Schedule K-3, Part III, Sections 1 
regulations, the special source rules     For more information and                  through 3
of section 904(h) described below,       examples, see section 904(d)(3) and        R&E expenses apportionment fac-
and any applicable source rules          Regulations section 1.904-5.               tors. Report on Schedule H, Part I.
contained in any applicable tax          Noncontrolled 10%-owned foreign            Interest expense apportionment 
treaties.                                corporations.  Generally, dividends        factors. Report on Schedule H, Part 
Special source rules of section          received or accrued by the taxpayer        II.
904(h).   Usually, the following income  are passive category income. 
from a U.S.-owned foreign                However, dividends received or             Foreign-derived intangible income 
corporation, otherwise treated as        accrued from a noncontrolled               (FDII) deduction apportionment 
foreign source income, must be           10%-owned foreign corporation may          factors. Report on Schedule H, Part 
treated as U.S. source income under      be assigned to other separate              II.
section 904(h).                          categories under the look-through 
• Any subpart F income, foreign          rules of section 904(d)(4).                Schedule K-3, Part III, Section 4
personal holding company income,         Certain amounts paid by a domes-           Total foreign taxes paid or ac-
GILTI, or income from a qualified        tic corporation to a related corpo-        crued.  Report on Schedule B.
electing fund that a U.S. shareholder    ration.  Look-through rules also 
                                                                                    Foreign tax redeterminations. 
is required to include in its gross      apply to foreign source interest, rents, 
                                                                                    Report on Schedule L.
income if such amount is attributable    and royalties paid by a domestic 
to the U.S.-owned foreign                corporation to a related corporation.      Reduction in taxes available for 
corporation's U.S. source income.        See Regulations section 1.904-5(g).        credit. Report on Schedule G.
• Interest that is properly allocable to 
the U.S.-owned foreign corporation's     Other Rules
                                                                                    Schedule K-3 (Form 1065), Part 
U.S. source income.
                                         Certain transfers of intangible 
• Dividends equal to the U.S. source                                                VIII
                                         property. See section 367(d)(2)(C) 
ratio (defined in section 904(h)(4)(B)).                                            Partner’s interest in foreign corpo-
                                         for a rule that clarifies the treatment of 
  The rules regarding interest and       certain transfers of intangible            ration income (Section 960). 
dividends described above do not         property.                                  Report on Schedule C or D, as 
apply to a U.S.-owned foreign                                                       applicable.
corporation if less than 10% (0.10) of   Reporting Foreign Tax 
its earnings and profits (E&P) for the   Information From Partnerships              Note.  Schedule K-3 (Form 8865), 
tax year is from U.S. sources.           If you received a Schedule K-3 (Form       does not contain a part equivalent to 
Amounts That Do Not                      1065) or a Schedule K-3 (Form 8865)        Schedule K-3 (Form 1065), Part VIII.
                                         from a partnership that includes           Capital Gains
Constitute Income Under                  foreign tax information, use the rules     Foreign source taxable income or 
U.S. Tax Principles                      below to report that information on        (loss) before adjustments in all 
Creditable foreign taxes that are        Form 1118.                                 separate categories in the aggregate 
imposed on amounts that do not                                                      should include gain from the sale or 
constitute income under U.S. tax                                                    exchange of capital assets only up to 
principles are treated as imposed on 

Instructions for Form 1118 (Rev. 12-2022)               -5-

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the amount of foreign source capital Final foreign tax credit Exceptions. However, a corporation
gain net income (which is the smaller ! regulations issued on January that elects the credit for eligible
of capital gain net income from CAUTION 4, 2022 (T.D. 9959, 87 FR
foreign income taxes may be allowed
sources outside the United States or 374) revised the creditability a deduction for certain taxes for which
capital gain net income). Therefore, if requirements under Regulations a credit was not allowed. These
the corporation has capital gain net sections 1.901-2 and 1.903-1, include the following.
income from sources outside the applicable for foreign taxes paid or • Taxes for which the credit was
United States in excess of the capital accrued in taxable years beginning on denied because of the boycott
gain net income reported on its tax or after December 28, 2021. provisions of section 908.
return, enter a pro rata portion of the • Certain taxes on the purchase or
net U.S. source capital loss as a Note. A corporation may not claim a sale of oil or gas (section 901(f)).
negative number on Schedule A, foreign tax credit for foreign income • Certain taxes used to provide
column 13(j), for each separate taxes paid to a foreign country that the subsidies (section 901(i)).
category with capital gain net income corporation does not legally owe, • Taxes paid to certain foreign
from sources outside the United including amounts eligible for refund countries for which a credit was
States. To figure the pro rata portion by the foreign country. If the denied under section 901(j).
of the net U.S. source capital loss corporation does not exercise its • Certain taxes paid on dividends if
attributable to a separate category, available remedies to reduce the the minimum holding period is not met
multiply the net U.S. source capital amount of foreign income tax to what with respect to the underlying stock,
loss by the amount of capital gain net it legally owes, a credit is not allowed or if the corporation is obligated to
income from sources outside the for the excess amount. make related payments with respect
United States in the separate category to positions in similar or related
divided by the aggregate amount of Foreign corporations. Foreign
capital gain net income from sources corporations are allowed (under property (section 901(k)).
outside the United States in all section 906) a foreign tax credit for • Certain taxes paid on gain and
separate categories with capital gain income, war profits, and excess income other than dividends if the
net income from sources outside the profits taxes paid or accrued to any minimum holding period is not met
United States. foreign country or U.S. possession for with respect to the underlying
income effectively connected with the property, or if the corporation is
See section 904(b)(2)(B) for conduct of a trade or business within obligated to make related payments
special rules regarding adjustments to the United States. The credit is not with respect to positions in similar or
account for capital gain rate applicable, however, if a foreign related property (see section 901(l)).
differentials (as defined in section country or U.S. possession imposes • In the case of a covered asset
904(b)(3)(D)) for any tax year. At the the tax on income from U.S. sources acquisition (as defined in section
time these instructions went to print, solely because the foreign corporation 901(m)(2)), the disqualified portion of
there was no capital gain rate was created or organized under the any tax determined with respect to the
differential for corporations. law of the foreign country or U.S. income or gain attributable to the
possession or is domiciled there for relevant foreign assets (section
Credit Limitations tax purposes. 901(m)). Note. This rule generally
applies to covered asset acquisitions
Taxes Eligible for a Credit The credit may not be taken after December 31, 2010. See
against any tax imposed on income Regulations sections 1.901(m)-1
Domestic corporations. Generally, not effectively connected with a U.S. through 1.901(m)-8 for additional
a domestic corporation may claim a business. information. Note that the rules
foreign tax credit (subject to the
limitation of section 904) for the In computing the foreign tax credit contained in these regulations have
following taxes. limitation, the foreign corporation's later effective dates.
• Income, war profits, and excess taxable income includes only the • Taxes paid by an accrual basis
profits taxes paid or accrued during taxable income that is effectively taxpayer that relate to a prior tax year
the tax year to any foreign country or connected with the conduct of a trade in which the taxpayer elected to claim
U.S. possession. See the or business within the United States. a deduction for eligible foreign income
taxes in that prior year. See
requirements for creditability in Credit or Deduction
Regulations section 1.901-1(c)(3).
Regulations section 1.901-2(a) and A corporation may choose to take
(b). either a credit or a deduction for No Credit or Deduction
• Taxes deemed paid under section eligible foreign income taxes paid or No foreign tax credit (or deduction) is
960. accrued. The choice is made allowed for certain taxes including:
• Taxes paid in lieu of foreign income annually. Generally, if a corporation • Taxes on mineral income that were
taxes as described in section 903 and elects the benefits of the foreign tax reduced under section 901(e).
Regulations section 1.903-1. credit for any tax year, no portion of • Certain taxes paid on distributions
Some foreign taxes that are the foreign income taxes paid or from possessions’ corporations
otherwise eligible for the foreign tax accrued in such year will be allowed (section 901(g)).
credit must be reduced. These as a deduction in that year or any • Taxes on combined foreign oil and
reductions are reported on subsequent tax year. gas income that were reduced under
Schedule G. section 907(a).

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• Taxes attributable to income income or related taxes (see section Foreign Tax
excluded under section 814(a) 907(f)).
Redeterminations
(relating to contiguous country • An excess foreign tax credit for
branches of domestic life insurance which an excess limitation account The corporation's foreign tax credit
companies). exists under section 960(c)(2). See and U.S. tax liability must generally be
• Taxes paid or accrued to a foreign Regulations sections 1.960-4 through redetermined if:
country or U.S. possession with 1.960-6. • Accrued foreign income taxes when
respect to income excluded from • Carryback of foreign income taxes paid or later adjusted differ from the
gross income on Form 8873, paid or accrued in post-2017 foreign amounts claimed as credits (including
Extraterritorial Income Exclusion. corporate tax years and carryforward corrections to accrued amounts to
However, see section 943(d) for an of foreign income taxes paid or reflect final foreign tax liability and
exception for certain withholding accrued in pre-2018 foreign corporate additional payments of tax that accrue
taxes. tax years. See Regulations section after the close of the taxable year to
• The applicable percentage of taxes 1.904-2(j). which the tax relates);
paid or deemed paid with respect to • Accrued foreign income taxes are
not paid within 24 months after the
an amount included in income under Treaty-Based Return
close of the tax year to which they
section 965 (section 965(g)). Positions relate;
• Taxes paid with respect to the Corporations that adopt a return • Any foreign income tax paid is fully
amount treated as included under position that any U.S. treaty overrides or partially refunded;
section 965(b). or modifies any provision of the • A change in foreign tax liability that
Carryback and Carryforward of Internal Revenue Code, and causes affects the amount of distributions or
Excess Foreign Taxes (or potentially causes) a reduction of inclusions under sections 951, 951A,
any tax incurred at any time, must
If the allowable foreign income taxes or 1293, or affects the application of
generally disclose this position. This
paid, accrued, or deemed paid in a the high-tax exception described in
includes when a corporation is relying
tax year in a separate category section 954(b)(4); or
on a U.S. treaty to claim a credit for a
exceed the foreign tax credit limitation • A change to claim a foreign tax
foreign tax. Complete Form 8833,
for the tax year for that separate credit for foreign income taxes that
Treaty-Based Return Position
category, the excess is: were previously deducted or a change
Disclosure Under Section 6114 or
• First, carried back 1 year to offset to claim a deduction for foreign
Section 7701(b), and attach it to Form
taxes imposed in the same category, income taxes that were previously
1118. See section 6114 and
then credited.
Regulations section 301.6114-1 for
• Carried forward 10 years to offset
details. See Regulations section 1.905-3(a)
taxes imposed in the same category.
and (b).
Failure to make such a report may
The excess is applied first to the result in a $10,000 penalty. See Regulations section 1.905-3(b)
earliest of the years to which it may be
(1)(i) for a limited exception to a
carried, then to the next earliest year, Proof of Credits redetermination of a U.S. tax liability
etc. The corporation may not carry a Form 1118 must be carefully filled in with respect to foreign income tax
credit to a tax year for which it claimed with all the information called for and claimed as a credit under section 901
a deduction, rather than a credit, for with the calculations of credits (other than a tax deemed paid under
foreign income taxes paid or accrued. indicated. section 960).
Furthermore, the corporation must
reduce the amount of any carryback Important. Documentation (that is, A redetermination of U.S. tax
or carryforward by the amount it would receipts of payments or a foreign tax liability is also generally required to
have used if it had chosen to claim a return for accrued taxes) is not account for the effect of a
credit rather than a deduction in that required to be attached to Form 1118. redetermination of foreign income tax
tax year. These carryover provisions However, proof must be presented paid or accrued by a foreign
do not apply to foreign income taxes upon request by the IRS to corporation on the amount of foreign
assigned to section 951A category substantiate the credit. See income taxes deemed paid under
income. See section 904(c) and Regulations section 1.905-2. section 960. See Regulations section
Regulations section 1.904-2 for more 1.905-3(b)(2). For foreign tax
details. If the corporation claims a foreign
tax credit for tax accrued but not paid, redeterminations of a foreign
How to claim the excess credit. If the IRS may require a bond to be corporation that relate to a taxable
the corporation is carrying back the furnished on Form 1117, Income Tax year of the foreign corporation
excess credit to an earlier year, file an Surety Bond, before the credit is beginning before January 1, 2018,
amended tax return with a revised allowed. See Regulations section see Regulations section 1.905-5.
Form 1118 and schedules (including a 1.905-2(c). Reporting Requirements
revised Schedule K (Form 1118)).
If, as a result of the foreign tax
Special rules apply to: redetermination, the corporation’s
• The carryback and carryforward of U.S. tax liability for any taxable year is
foreign income taxes paid or accrued changed, the corporation must file an
on combined foreign oil and gas amended return to report the foreign

Instructions for Form 1118 (Rev. 12-2022) -7-

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tax redetermination and, if applicable, • The exchange rate that was used to inclusions were made for the affected
pay additional U.S. tax. translate such amount when originally year or years.
claimed as a credit. See Regulations sections
•
Increase in U.S. tax liability as a The spot rate (as defined in 1.986(a)-1 and 1.905-3 through
result of foreign tax redeterminations Regulations section 1.988-1(d)) for 1.905-5 for further information
are excepted from the general statute the date the refund was received (for regarding redeterminations and the
of limitations against assessment and purposes of computing foreign required notification.
collection. See sections 6501(c)(5) currency gain or loss under section
For special rules relating to
and 905(c). If you have a foreign tax 988).
redetermination that results in an corporations under the jurisdiction of
increase in your U.S. tax liability for Accrued foreign income taxes that the Large Business and International
any year, please note on page 2 of are not paid on or before the date Division, see Regulations section
your Form 1120X: "This amended that is 24 months after the close of 1.905-4(b)(4).
return and Form 1118 is for a change the tax year to which such taxes
Schedule L. In addition to filing an
in Foreign Tax Credit that increases relate.
amended return with Form 1118 and
U.S. tax liability." • The amount of such taxes in foreign
attached statement for the tax year(s)
currency.
of the taxpayer for which the U.S. tax
In addition, the amended return • The exchange rate that was used to
liability is changed as a result of the
must have attached to it an amended translate such amount when originally
foreign tax redetermination, the
Form 1118 and a statement that claimed as a credit or added to
taxpayer must include with its
provides the following. post-1986 foreign income taxes or
current-year return a Schedule L
• The taxpayer's name, address, PTEP group taxes (as defined in
summarizing the foreign tax
identifying number, the tax year or Regulations section 1.960-3(d)(1)).
years of the taxpayer that are affected redeterminations that occurred that
by the foreign tax redetermination, Redetermination of U.S. tax liabili- year.
and, in the case of foreign income ty results in an amount of addition- If a foreign tax redetermination
taxes deemed paid, the name and al tax due, and the carryback or does not change the amount of U.S.
identifying number, if any, of the carryover of an unused foreign in- tax due for any taxable year, the
foreign corporation. come tax under section 904(c) on- taxpayer does not need to file an
• The date or dates the foreign ly partially eliminates such amended return and may instead
income taxes were accrued, if amount. The information required in notify the IRS of the redetermination
applicable. Regulations section 1.904-2(f). by attaching a completed Schedule L
• The date or dates the foreign Foreign tax redeterminations of to the original return for the taxpayer's
income taxes were paid. foreign corporations that relate to taxable year in which the foreign tax
• The amount of foreign income taxes tax years of the foreign corpora- redetermination occurs. See
paid or accrued on each date (in tion beginning before January 1, instructions for Schedule L for
foreign currency) and the exchange 2018. Provide the additional additional information.
rate used to translate each such information listed under both Election to account for foreign tax
amount. categories below, as applicable. redeterminations with respect to
• Information sufficient to determine pre-2018 taxable years in the for-
any change to the characterization of Post-1986 pools of earnings and
a distribution or the amount of any taxes of foreign corporations. eign corporation’s last pooling
inclusion under section 951(a), 951A, • The closing balances of the pools year. An irrevocable election may be
1291, or 1293. of post-1986 undistributed earnings made by a foreign corporation’s
• An amended Form 5471 when and post-1986 foreign income taxes controlling domestic shareholders to
applicable. for each affected year before and after account for all foreign tax
• Information sufficient to determine adjusting the pools to account for the redeterminations that occur in taxable
any interest due from or owing to the foreign tax redetermination. years ending on or after November 2,
taxpayer, including the amount of any • The dates and amounts of any 2020, with respect to pre-2018
interest paid by the foreign dividend distributions or other taxable years of foreign corporations
government to the taxpayer, and the inclusions made out of post-1986 as if they occurred in the foreign
dates received. undistributed earnings for the affected corporation’s last taxable year
year or years. beginning before January 1, 2018
(last pooling year). Such election is
Additional Information Required Pre-1987 accumulated profits of binding on all persons who are, or
foreign corporations. were in a prior year to which the
If the redetermination was because of • The dates and amounts of any election applies, U.S. shareholders of
one of the following, the corporation dividend distributions or other the foreign corporation with respect to
must provide the additional inclusions made out of E&P for the which the election is made for all of its
information as indicated. affected year or years. subsequent foreign tax
Refund of foreign income taxes • The rate of exchange on the date of redeterminations, as well as foreign
paid. any such distribution or inclusion. tax redeterminations of other
• The date of each such refund. • The amount of E&P from which members of the same CFC group as
• The amount of such refund (in such dividends were paid or the foreign corporation for which the
foreign currency).
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election is made. The election is           Election to claim a provisional          foreign income taxes that accrued in 
made by filing:                             credit for contested foreign             such year.
• The statement required under              income taxes                             A taxpayer claiming credits on the 
Regulations section 1.964-1(c)(3)(ii)                                                accrual basis must file an original or 
with a timely filed original income tax     Cash method taxpayers.      A            amended return for the taxable year to 
return for the taxable year of each         taxpayer claiming foreign tax credits    which the contested tax relates, 
controlling domestic shareholder of         on the cash basis may elect to claim a   together with a Form 1118, and a 
the foreign corporation in which or         foreign tax credit for a contested       Form 7204.
with which the foreign corporation’s        foreign income tax liability (or a 
first redetermination year ends;            portion thereof) in the year the         In addition, the taxpayer must, for 
• Any notices required under                contested amount (or a portion           each subsequent taxable year up to 
Regulations section 1.964-1(c)(3)(iii);     thereof) is remitted to the foreign      and including the taxable year in 
• Amended returns as required under         country, notwithstanding that the        which the contest is resolved, file 
Regulations sections 1.905-4,               liability is not finally determined and  annually Schedule L (Form 1118). 
1.905-5(e), 1.905-3T(d), and                so is not considered an amount of tax    Any portion of a contested foreign 
1.905-5T.                                   paid.                                    income tax liability for which a 
                                                                                     provisional credit is claimed that is 
See Regulations section 1.905-5(e)          This election is available only for      subsequently refunded by the foreign 
for additional information.                 contested foreign income taxes that      country results in a foreign tax 
Contested foreign income tax lia-           are remitted in a taxable year in which  redetermination under Regulations 
bility. In general, a taxpayer cannot       the taxpayer has elected under           section 1.905-3(a).
claim a credit for a contested foreign      section 901(a), to claim a credit, 
income tax liability until the contest is   instead of a deduction under section     Interest and Penalties
resolved and the amount of the              164(a)(3), for foreign income taxes      In most cases, interest is computed 
liability is finally determined.            that are paid in such year.              on the deficiency or overpayment that 
                                            To make the election, a taxpayer         resulted from the foreign tax 
  Cash method taxpayers.         Unless                                              adjustment (sections 6601 and 6611 
                                            claiming credits on the cash basis 
an election to claim a provisional                                                   and the related regulations). See 
                                            must file a Form 1118 for the tax year 
credit for contested foreign income                                                  Regulations section 1.905-4(e) for 
                                            in which the contested liability is 
taxes (described below) is made, a                                                   additional information.
                                            remitted and a Form 7204, Consent 
taxpayer that claims the foreign tax 
                                            To Extend the Time To Assess Tax 
credit on a cash basis cannot claim a                                                If the corporation does not comply 
                                            Related to Contested Foreign Income 
credit for a contested foreign income                                                with the requirements discussed 
                                            Taxes-Provisional Foreign Tax Credit 
tax liability (or portion thereof) that has                                          above within the time for filing 
                                            Agreement.
been remitted to the foreign country                                                 specified, the penalty provisions of 
until such time as the contest is           In addition, the taxpayer must, for      section 6689 (and the related 
resolved and the tax is considered          each subsequent taxable year up to       regulations) will apply.
paid for purposes of section 901.           and including the taxable year in 
Once the contest is resolved and the        which the contest is resolved, file 
foreign income tax liability is finally     annually Schedule L (Form 1118),         Specific Instructions
determined, the tax liability is treated    Foreign Tax Redeterminations. Any        Report all amounts in U.S. dollars 
as paid in the taxable year in which        portion of a contested foreign income    unless otherwise specified. If it is 
the foreign tax was remitted. See           tax liability for which a provisional    necessary to convert from a foreign 
Regulations section 1.905-1(c)(2).          credit is claimed that is subsequently   currency, attach a statement 
                                            refunded by the foreign country          explaining how the conversion rate 
  Accrual method taxpayers.                 results in a foreign tax redetermination was determined.
Unless an election to claim a               under Regulations section 1.905-3(a).    Lines a, b, and c at the top of 
provisional credit for contested foreign 
income taxes is made, a taxpayer that       Accrual method taxpayers.     A          page 1 of the form. The corporation 
claims the foreign tax credit on the        taxpayer may elect to claim a foreign    must complete a separate Form 1118 
accrual basis cannot claim a credit for     tax credit for a contested foreign       for each applicable category of 
a contested foreign income tax liability    income tax liability (or a portion       income. See Categories of Income, 
until such time as both the contest is      thereof) in the relation-back year       earlier, for the code to enter on line a 
resolved and the tax is considered          when the contested amount (or a          (at the top of page 1 of the form). Also 
paid, even if the contested liability (or   portion thereof) is remitted to the      see those instructions for the country 
portion thereof) has previously been        foreign country, notwithstanding that    code to enter on line b or line c, if 
remitted to the foreign country. Once       the liability is not finally determined  applicable.
the contest is resolved and the foreign     and so has not accrued.
income tax liability is finally             This election is available only for      Schedule A
determined and paid, the tax liability      contested foreign income taxes that      Report gross income from sources 
accrues, and is considered to accrue        relate to a taxable year in which the    outside the United States for the 
in the relation-back year for purposes      taxpayer has elected under section       applicable separate category in 
of the foreign tax credit. See              901(a), to claim a credit, instead of a  columns 3(a) through 11. Report the 
Regulations section 1.905-1(d)(3).          deduction under section 164(a)(3), for   applicable deductions to this gross 
                                                                                     income in columns 13 and 14. Report 

Instructions for Form 1118 (Rev. 12-2022)                -9-

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any net operating loss carryover in Example 1. Domestic Corporation There are some situations that
column 15. earns sales income from sales to require correlation of a new reference
unrelated persons. Domestic ID number with a previous reference
Column 1. Column 1 generally
Corporation leaves column 1 blank ID number when assigning a new
requests an employer identification
and enters the sales income in reference ID number to an entity. For
number (EIN) or a reference ID
column 7. example:
number for related persons or their
QBUs from or through which the Example 2. USC, a domestic • In the case of a merger or
corporation derived foreign source corporation, takes into account its acquisition, a Form 1118 filer must
income and/or paid or accrued distributive share of partnership use a reference ID number which
creditable foreign taxes. income with respect to USPS, a correlates the previous reference ID
However, for tax years beginning in domestic partnership in which USC number with the new reference ID
2022, there is a new “Unrelated” code has a 60% (0.60) interest. In column number assigned to the entity.
that can be entered in column 1 in 1, USC enters the identifying number • In the case of an entity
cases where the corporation derived for USPS. classification election that is made on
behalf of a foreign corporation on
foreign source income and/or paid or Reference ID numbers. A
Form 8832, Regulations section
accrued creditable foreign taxes from “reference ID number” is a number
301.6109-1(b)(2)(v) requires the
or through unrelated persons or their established by or on behalf of the
foreign corporation to have an EIN for
QBUs. Also, column 1 can be left domestic corporation filing Form
this election. For the first year that
blank, but only if one of the following 1118. With respect to Schedule A,
Form 1118 is filed after an entity
seven entries is made in column 2. these numbers are used to uniquely
classification election is made on
• 863(b) identify the payor with respect to
behalf of the foreign corporation on
• RIC payments from related persons, in
Form 8832, both the new EIN and the
• NOL order to determine the proper source
old reference ID number must be
• HTKO of such payment. With respect to
entered in column 1, as explained in
• 951A Schedules C through E, these
the next paragraph.
• G2B numbers are used to uniquely identify
• B2G foreign corporations in order to keep You must correlate the identifying
See the instructions for column 2, track of those corporations from tax numbers as follows: New EIN or
later, for more information regarding year to tax year. The reference ID reference ID number [space] Old
when the above entries can be made number must meet the requirements reference ID number. If there is more
in column 2. set forth below. than one old reference ID number,
you must enter a space between each
Note. Taxpayers no longer have the Note. Because reference ID numbers such number. As indicated above, the
option of entering “FOREIGNUS” or are established by or on behalf of the length of a given reference ID number
“APPLIED FOR” in this column. U.S. corporation filing certain forms is limited to 50 characters and each
Instead, if the related person or their such as the Form 1118, there is no number must be alphanumeric and no
QBU does not have an EIN, the need to apply to the IRS to request a special characters are permitted.
taxpayer must use a reference ID reference ID number or for permission
number that uniquely identifies such to use these numbers. Note. This correlation requirement
applies only to the first year the new
related person or QBU, using the Requirements. The reference ID reference ID number is used.
rules set forth in Reference ID number must be alphanumeric
numbers, in the Requirements (defined below) and no special Branches. For each branch that is
section, later. characters or spaces are permitted. not a foreign branch, as defined under
Where gross income is derived The length of a given reference ID Regulations section 1.904-4(f)(3)(vii),
from a related person (within the number is limited to 50 characters. use a single line to report such
branch's gross income and
meaning of section 267(b) or 707(b)), For these purposes, the term deductions. In column 1, enter
enter the EIN or reference ID number "alphanumeric" means the entry can “Branch.” If there is more than one
of such related person. In the case of be alphabetical, numeric, or any branch, enter the identifying number
income derived from a QBU of the combination of the two. of the branch (as reported in Form
related person, enter the EIN or
reference ID number of the QBU. The same reference ID number 8858) after the word “Branch” on each
Enter the EIN or reference ID number must be used consistently from tax line. These amounts should be
of related entities and their QBUs year to tax year with respect to a given reported on a Form 1118 other than
through which the corporation paid or entity. If for any reason a reference ID the Form 1118 for the foreign branch
accrued creditable foreign taxes, even number falls out of use (for example, income category.
if no income from these entities is the entity no longer exists due to
Example. USC, a domestic
reported on Schedule A. If gross disposition or liquidation), the
corporation, has a branch in Country
income is received or derived from an reference ID number used for that
X. The activities of the branch do not
entity other than a related person, an entity cannot be used again for
constitute a trade or business. In
EIN or reference ID number is not another entity for purposes of filing
column 1, USC enters the word
required. Form 1118.
“Branch.” USC will report the income

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and expenses of the branch in the Qualified business units (QBUs). leave column 1 blank and enter
appropriate columns. For branches that are QBUs, use a “HTKO” in column 2 and enter (as a
See below with respect to QBUs separate line for each such branch to negative number) in column 17 the
that are foreign branches as defined report each branch's gross income net amount of income that is being
under Regulations section 1.904-4(f) and deductions. Report these reclassified from passive category
(3)(vii). amounts on a per-country basis. In income. With respect to the category
column 1, enter the EIN or reference of income to which such passive
Column 2. Enter the two-letter codes ID number of the QBU. Enter the income is reclassified, leave column 1
(from the list at IRS.gov/ country code in column 2. These blank, enter “HTKO” in column 2, and
CountryCodes) of each foreign amounts should be reported on Form enter (as a positive number) in column
country and U.S. possession within 1118 for foreign branch category 17 the net amount of income that is
which income is sourced and/or to income or passive category income. being reclassified to such category of
which taxes were paid or accrued. income. Note that the reclassifications
Section 863(b) gross income and are being reported on a single line
Note. Complete this column with deductions. Aggregate all section because it is not necessary to report
respect to all income regardless of 863(b) foreign source gross income them on a per-country basis. Also
whether such income is from a related and deductions and report the totals note that tax reclassifications are
person. on a single line. It may be necessary needed on Schedule B. See those
to enter amounts in multiple columns instructions for more information.
Special Cases for Columns 1 on that single line, depending upon
and 2 the nature of the section 863(b) gross Inclusions under section 951A.
Except as otherwise instructed below, income and deductions. For example, Because computations for inclusions
income of a U.S. shareholder with leave column 1 blank, enter “863(b)” under section 951A are reported on
respect to the same related person in column 2, and enter (as a positive separate Form 8892, GILTI, report the
but from multiple sources should be number) all section 863(b) gross inclusion under section 951A on a
reported on a country-by-country income (in columns 3 through 12) and single line. Specifically, there is no
basis. all section 863(b) deductions (in need to report the identifying numbers
Example. USC, a domestic columns 13 through 16). Also enter and various countries associated with
corporation, has employees who the net amount in column 17. Note an inclusion under section 951A on
perform services in Country X and that the totals are being reported on a Form 1118.
Country Y for the same related single line because it is not necessary For inclusions under section 951A,
person. The related person has a to report section 863(b) gross income enter “951A” in column 2 instead of a
reference ID number of 1000016. and deductions on a per-country two-letter code. Leave column 1
USC earns gross income of $10 with basis. blank.
respect to services performed for the Regulated investment company Reattribution of income by reason
related person in Country X and USC (RIC) pass-through amounts. of disregarded payments between
earns gross income of $15 with Aggregate all income passed through a foreign branch and its foreign
respect to services performed for the from RICs and report the total on a branch owner. For reattribution of
related person in Country Y. The single line. Leave column 1 blank, income from the general category to
two-letter country code for Country X enter “RIC” in column 2, and report the foreign branch category, enter
is XX and the two-letter country code the total in column 17. Note that the "G2B" in column 2 instead of a
for Country Y is YY. On Schedule A, totals are being reported on a single two-letter code. Leave column 1
USC reports as follows. line because it is not necessary to blank.
report the RIC pass-through amounts For reattribution of income from the
USC makes the following entries on a per-country basis. foreign branch category to the general
on the first of two lines on Schedule A.
Net operating losses (NOLs). category, enter "B2G" in column 2
Report any NOL carryover on a single instead of a two-letter code. Leave
Column Entry line. Leave column 1 blank, enter column 1 blank.
1 1000016 “NOL” in column 2, and report the See Regulations section 1.904-4(f)
total in column 15. Note that the totals (2)(vi)(B) for more information
2 XX are being reported on a single line regarding the rules pertaining to
8 10 because it is not necessary to report reattribution of income by reason of
the NOL on a per-country basis. disregarded payments between a
USC makes the following entries foreign branch and its foreign branch
Reclassifications of high-taxed in-
on the second of two lines on owner.
come. Aggregate all
Schedule A.
reclassifications of high-taxed income Column 3(a). Report all inclusions
and report the total on a single line. under sections 951(a)(1) (including
Column Entry With respect to passive category amounts under section 951(a)(1)(B)
income, for items of income that have and section 964(e)(4)) and 951A
1 1000016 been included on Schedule A and that (before gross-up). See section 904(d)
2 YY must be reclassified under sections (3) and Look-Through Rules, earlier,
8 15 904(d)(2)(B)(iii)(II) and 904(d)(2)(F), for more information with respect to

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the separate category of such source portion of section 863(b) sales Note. The foreign branch income and
inclusions. For each inclusion under in this column. section 951A income categories do
section 951(a)(1) with respect to a not include any dividend income
CFC, make sure to enter the Note. Under section 863(b), income eligible to be offset by the deduction
appropriate identifying number in from the sale of inventory property is under section 245A.
column 1 and the country of residence sourced to the place of production.
of the CFC in column 2. Accordingly, do not include inventory Column 13(b). Enter the deduction
produced in the United States and allowed under section 250(a)(1)(A)
Note. Under the Act, inclusions under sold overseas in this column. with respect to foreign derived
section 951(a)(1) now include hybrid intangible income, taking into account
Column 8. Include gross income,
dividends received by a CFC from the other provisions of section 250,
including compensation,
another CFC of the same U.S. that is allocated and apportioned to
commissions, fees, etc., for technical,
shareholder. See section 964(e)(4). foreign source income in the
managerial, engineering, applicable separate category of
Do not report the inclusion under construction, scientific, or similar income. See Regulations section
section 951A net of the deduction services outside the United States. 1.861-8(e)(13).
allowed under section 250. The Columns 9 and 10. Include the Column 13(c). Enter the deduction
deduction under section 250 is taken following amounts in column 9. Use a allowed under section 250(a)(1)(B)
into account in Schedule A, column separate line for each type of gain and with respect to GILTI (section 951A
13(c). enter the corresponding code in inclusion), taking into account the
column 10. other provisions of section 250, that is
•
If the corporation is a U.S. Foreign source exchange gain allocated and apportioned to foreign
shareholder in a PFIC that is a recognized under section 986(c) on a source income in the applicable
qualified electing fund, report all distribution of PTEP. Enter code separate category of income. See
income deemed received (before “986c” in column 10. Regulations section 1.861-8(e)(14).
gross-up) under section 1293. Foreign source exchange gain
•
Column 3(b). In column 3(b), include recognized under section 987(3) on a Column 13(d). Enter the
taxes deemed paid by a domestic remittance from a QBU. Enter code depreciation, depletion, and
corporation with respect to inclusions “987” in column 10. amortization deductions related to
under section 951(a)(1) and section • Foreign source exchange gain rental, royalty, and licensing expenses
951A as gross-ups. For inclusions recognized under section 988. Enter that are allocated and apportioned to
under section 951(a)(1), the gross-up code “988” in column 10. foreign source income in the
is the taxes deemed paid as reported applicable separate category of
in the total of Schedule C, column 7. Note. Section 988 exchange gain or income.
The gross-up for inclusions under loss is sourced by reference to the Column 13(e). Enter the other
section 951A is the amount computed residence of the taxpayer or the QBU allocable expenses related to rental,
in Schedule D, Part II, column 3. of the taxpayer on whose books the royalty, and licensing expenses that
nonfunctional currency asset or are allocated and apportioned to
Column 4. Report dividends from liability is properly reflected. foreign source income in the
sources outside the United States for
the applicable separate category. This Column 11. Include other gross applicable separate category of
includes dividends eligible for the income from sources outside the income.
dividends received deduction under United States for the applicable Column 13(f). Enter expenses
section 245A. Note that hybrid separate category. Attach a schedule allocable to gross income from sales
dividends are not eligible for the identifying the gross income by type. that are allocated and apportioned to
dividends received deduction. Column 13(a). Enter the dividends foreign source income in the
received deduction allowed on foreign applicable separate category of
Note. In general, dividends from a source dividends under section 245A. income (the amount entered in
domestic corporation are U.S. source This should be equal to the amount column 7).
income, including dividends from a reported in Schedule A, column 4, if Column 13(g). Enter expenses
domestic corporation which has 80% all such dividend income is eligible for allocable to gross income from
(0.80) or more of its gross income the dividends received deduction. performance of services that are
from sources outside the United
allocated and apportioned to foreign
States. Note. Certain hybrid dividends are
source income in the applicable
Column 5. Enter interest received not eligible for the dividends received
separate category of income (the
from foreign sources. See section deduction under section 245A. See
amount entered in column 8).
861(c) for the treatment of interest section 245A(e)(1).
from a domestic corporation that Columns 13(h) and 13(i). Include
meets the foreign business Note. An amount treated as a any foreign source exchange loss
requirement. dividend under section 1291(d)(2)(B) recognized under section 986(c) on a
(related to PFICs) is ineligible for the distribution of PTEP, any foreign
Column 7. Include foreign source dividends received deduction. See source exchange loss recognized
gross income from sales (net of section 245A(f). under section 987(3) on a remittance
returns and allowances and less costs from a QBU, and any foreign source
of goods sold). Include the foreign
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exchange loss recognized under            top of page 1 of Form 1118). The           Column 15. Enter the corporation's 
section 988. Use a separate line for      applicable line of Schedule H, Part II,    NOL deduction allowed under section 
each type of loss and enter the           column (f) is the amount on line 3a(2),    172 that is attributable to foreign 
corresponding code in column 13(i).       3b(2), 3c(2), 3d(2),or 3e(2), of column    source income in the applicable 
See the instructions for Schedule A,      (f) that corresponds with the category     separate category. If the NOL is part 
column 9, earlier, for the applicable     of income for which the corporation is     of an overall foreign loss, see 
codes.                                    completing Form 1118. For example,         Regulations section 1.904(g)-3 for 
                                          if the code entered on Schedule H, 
Column 13(j). Include other                                                          allocation rules that apply in 
                                          Part II, line 3a is “PAS,” then enter the 
deductions allocable to income from                                                  determining the amount to enter in 
                                          amount from line 3a(2), column (f) on 
sources outside the United States                                                    column 15.
                                          the Form 1118 that the corporation is 
(dividends, interest, etc.) for the                                                  It is not necessary to report the 
                                          completing for the passive category of 
applicable separate category that are                                                NOL deduction on a related-person or 
                                          income (as indicated on line a at the 
not otherwise included in Schedule H.                                                per-country basis. Therefore, only 
                                          top of page 1 of Form 1118). The 
Include any reduction of foreign          applicable line of Schedule H, Part III,   enter an amount on the totals line of 
source capital gain net income. If        column (g) is the amount on                column 15. See Net operating losses, 
foreign source capital gain net income    line 2a(2), 2b(2), 2c(2), 2d(2), or 2e(2)  earlier.
from all separate categories is more      of column (g) that corresponds with 
than the capital gain net income          the category of income for which the 
                                                                                     Schedule B
reported on the corporation's tax         corporation is completing Form 1118. 
return, enter a pro rata portion of the   For example, if the code entered on        Part I—Foreign Taxes Paid, 
excess as a negative number in each       Schedule H, Part III, line 2a is “PAS,”    Accrued, and Deemed Paid
separate category. See Capital Gains,     then enter the amount from line 2a(2),     Report only foreign income taxes 
earlier.                                  column (g) on the Form 1118 that the       paid, accrued, or deemed paid for the 
In column 13(j), do not include           corporation is completing for the          separate category for which this Form 
other expenses directly allocable to      passive category of income (as             1118 is being completed. Report all 
dividends eligible for the dividends      indicated on line a at the top of page 1   amounts in U.S. dollars. If the 
received deduction under section          of Form 1118).                             corporation must convert from foreign 
245A. Such directly allocable                                                        currency, attach a schedule showing 
                                          It is not necessary to report the 
expenses may include wire transfer,                                                  the amounts in foreign currency and 
                                          apportioned expenses on a 
currency exchange, and similar fees                                                  the exchange rate used.
                                          related-person or per-country basis. 
incurred in connection with the 
                                          Therefore, only enter an amount in the 
payment of dividends eligible for the                                                For corporations claiming the credit 
                                          totals line of column 14.
dividends received deduction under                                                   on the accrual basis, the exchange 
section 245A. These expenses              Note. With respect to the                  rate for translating foreign income 
reduce taxable income, but are not        apportionment of deductions reported       taxes into U.S. dollars will generally 
taken into account in computing the       on Schedule H, Part II, the reduction      be an average exchange rate for the 
foreign tax credit limitation. See        required by section 904(b)(4) in           tax year to which the taxes relate. 
section 904(b)(4).                        deductions relating to dividends           However, the exchange rate on the 
Attach a schedule that lists all other    eligible for the dividends received        date of payment must be used if the 
deductions included in column 13(j).      deduction under section 245A is taken      foreign income taxes (a) are paid 
The schedule should include totals for    into account (for purposes of              more than 24 months after the close 
each line in column 13(j) that has an     determining foreign source income or       of the tax year to which they relate, or 
entry.                                    loss in each separate category) by         (b) are paid in a tax year prior to the 
Column 14. Enter only the                 carrying to Schedule A, column 14,         tax year to which they relate. In 
apportioned share from the applicable     only the amounts on Schedule H, Part       addition, corporations may elect to 
line of Schedule H, Part I, column (b);   II, column (f), lines 3a(2), 3b(2), 3c(2), use the exchange rate on the date of 
Part II, column (f); and Part III, column 3d(2), and 3e(2). Likewise, with           payment. Corporations may elect to 
(g) that relates to gross income          respect to the apportionment of            use the payment date exchange rates 
reported in columns 3 through 11 of       deductions reported on Schedule H,         for all creditable foreign income taxes 
Schedule A. The applicable line of        Part III, the reduction required by        or only those taxes that are 
Schedule H, Part I, column (b) is the     section 904(b)(4) in deductions            attributable to QBUs with U.S. dollar 
amount on line 6a(7), 6b(7), 6c(7),       relating to dividends eligible for the     functional currencies. The election is 
6d(7), or 6e(7) of column (b) that        dividends received deduction under         made by attaching a statement to a 
corresponds with the category of          section 245A is taken into account (for    timely filed (including extensions) 
income for which the corporation is       purposes of determining foreign            Form 1118 that indicates the 
completing Form 1118. For example,        source income or loss in each              corporation is making the election 
if the code entered on Schedule H,        separate category) by carrying to          under section 986(a)(1)(D). Once 
Part I, line 6a is “PAS,” then enter the  Schedule A, column 14, only the            made, the election applies for all 
amount from line 6a(7), column (b) on     amounts on Schedule H, Part III,           subsequent tax years and is 
the Form 1118 that the corporation is     column (g), lines 2a(2), 2b(2), 2c(2),     revocable only with the consent of the 
completing for the passive category of    2d(2), or 2e(2).                           IRS. See section 986(a)(1)(D).
income (as indicated on line a at the 

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The information entered on distributions from a lower-tier foreign prior tax year that resulted in a
! each line of Schedule B, Part corporation to an upper-tier foreign suspension of foreign taxes under
CAUTION I, must pertain to an corporation and then deemed paid by section 909, enter the amount of
identifying number and/or country the domestic corporation under those taxes attributable to related
code specified on the corresponding section 960(b) on a distribution from income taken into account in the
line of Schedule A, column 1 and/or the upper-tier foreign corporation to current tax year. The amount of taxes
column 2. If foreign tax was paid to the domestic corporation. These suspended in a prior tax year should
more than one country on the same amounts are reported on Schedule E. have appeared on Schedule G, line E,
income, enter the letter corresponding on your Form 1118 for that prior tax
to that income on multiple lines. For Note. With respect to taxes year. See the regulations under
example, if the taxpayer entered on attributable to section 965(a) PTEP or section 909 for rules for determining
Schedule A, line A, foreign source section 965(b) PTEP, do not reduce when related income is taken into
sales income and paid tax to both the taxes by the applicable account and the amount of previously
Country A and Country B on such percentage. The applicable suspended taxes that are attributable
income, the filer would complete two percentage reduction is taken into to that related income.
lines A on Schedule B with the tax account on Schedule G.
Line 4. If the corporation is
paid to Country A on one line and the Column 2(c). Include foreign income reclassifying high-taxed income from
tax paid to Country B on the other line. taxes withheld on branch distributions passive category income, enter the
or transfers as determined under related tax adjustment on line 4.
Column 1. Claim the foreign tax section 987. See sections 901 and Indicate whether the adjustment is
credit for the tax year in which the 903. positive or (negative).
taxes were paid or accrued,
depending on the method of Column 2(f). Include foreign income Line 5. Enter the total amount of
accounting used. taxes withheld at source on income foreign income taxes carried forward
not specifically reportable in columns
Note. For any given tax year, the or back to the current year. The
2(a) through 2(e). For example, some
corporation can use the cash method amount of foreign income taxes
countries withhold at source on sales
or the accrual method, but not both. If carried forward to the current tax year
of stock of their resident companies
a credit for taxes accrued is claimed, is the amount from Schedule K (Form
and such foreign income tax paid or
show both the date accrued and the 1118), line 3, column (xiv), plus the
accrued by the domestic corporate
date paid. amount from Schedule I (Form 1118),
seller would be reported in column Part III, line 3. Attach Schedule I
If the cash method of accounting is 2(f). (Form 1118) and Schedule K (Form
used, an election under section
905(a) may be made to claim the Column 2(g). Include foreign income 1118) to Form 1118.
credit based on accrued taxes. taxes paid or accrued on the portion Line 7. If the corporation has a
of sales income sourced to a foreign
To make this election, check the current-year overall domestic loss or
country. This does not include taxes
accrual box in column 1. Once made, recapture of an overall domestic loss
withheld at source reported in column
the election is binding on all account, or, in any of its separate
(f).
subsequent tax years in which a categories, a current-year separate
foreign tax credit is claimed. Also, the Column 3. Enter in column 3 the total limitation loss, an overall foreign loss,
credits for foreign taxes, regardless of of the taxes deemed paid that recapture of an overall foreign loss, or
whether they are claimed on the corresponds with the identifying current-year separate limitation
accrual or cash basis, are subject to number specified on the income in a category in which it has a
the redetermination provisions of corresponding line of Schedule A, beginning balance of income that
section 905(c). See Foreign Tax column 1, with respect to the following must be recharacterized, adjustments
Credit Redeterminations, earlier, for amounts. must be made. See the separate
details. • The taxes deemed paid under Instructions for Schedule J to
section 960(a) as reported in determine if that schedule must be
Column 2(a). Include foreign income filed.
Schedule C, column 10.
taxes withheld at source on dividends
• The taxes deemed paid under
from a first-tier foreign corporation. Line 8b. Enter as a positive amount
section 960(b) as reported in
After December 31, 2017, such taxes taxable income that should not be
Schedule E, Part I, column 11.
are not creditable to the extent the taken into account in computing the
distribution is a dividend eligible for a Enter on the Schedule B, Part I line foreign tax credit limitation. These
dividends received deduction under that corresponds with the Schedule A adjustments will decrease the net
section 245A. However, continue to line with “951A” in column 2 the tax worldwide taxable income reported on
report the taxes in this column 2(a) deemed paid under section 960(d) line 8c (see the line 8c instructions,
and reverse the taxes on Schedule G. equal to the total amount reported in later).
Schedule D, Part II, column 4. Enter as a negative amount
Column 2(b). Include foreign income
taxes withheld at source on PTEP Part II—Separate adjustments that increase the net
worldwide taxable income reported on
distributions from a first-tier foreign Foreign Tax Credit
line 8c (see the line 8c instructions,
corporation. See sections 901 and
Line 1b. If the corporation had a later). For example, the net worldwide
903. Do not include foreign income
foreign tax credit splitting event in a taxable income you report on line 8c
taxes withheld at source on PTEP

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should not include expenses allocated Note. Complete Part III only on the using the rules set forth in Reference
and apportioned to dividends for Form 1118 with the largest amount ID numbers, in the Requirements
which a dividends received deduction entered on Part II, line 14. section, earlier.
is allowed under section 245A (see
Line 8. If the corporation participates Column 2. Enter the year and month
section 904(b)(4)). Because the
in or cooperates with an international in which the foreign corporation's U.S.
line 8a amount (taxable income from
boycott, the foreign tax credit may be tax year ended using format
your tax return) includes these
reduced. Complete Form 5713, YYYYMM.
expenses, a positive adjustment is
International Boycott Report. If the
needed to back out these expenses Example. When figuring foreign
corporation chooses to apply the
(thus increasing the net worldwide taxes deemed paid in 2022 by a
international boycott factor to
taxable income reported on line 8c). calendar year domestic corporation
calculate the reduction in the credit,
As such, include as a negative with respect to inclusions out of E&P
enter the amount from line 2a(3) of
adjustment on line 8b these expense not previously taxed for the foreign
Schedule C (Form 5713) on line 8.
amounts from Schedule H, Part II, corporation's tax year that ended
lines 5 and 6. November 30, 2022, enter “202211.”
Line 8c. If the negative adjustments Schedule C Column 3. Enter the applicable
included on line 8b (such as those Report taxes deemed paid by the two-letter codes from the list at
amounts coming in from Schedule H, domestic corporation under section IRS.gov/CountryCodes.
Part II, lines 5 and 6) exceed any 960(a) with respect to inclusions
Column 4. Enter the applicable
positive adjustments that are also under section 951(a)(1). This
three-character alphabet code for the
included on line 8b, the net line 8b schedule should be completed by
foreign corporation's functional
adjustment will be negative. When separate category of income and
currency using the ISO 4217
this net negative amount on line 8b is subpart F income group. If there is a
standard.
subtracted from a positive taxable subpart F inclusion related to more
income amount on line 8a, the result than one subpart F income group, Column 5(a). Enter the code which
will be a positive line 8c amount that is complete a separate line for each describes the subpart F income group
larger than the positive amount on subpart F income group. classification (as set forth in
Regulations section 1.960-1(d)(2)(ii)
line 8a. Column 1a. Enter the name of the
(B)(2)). Please enter the applicable
Line 9. Divide line 7 by line 8c to foreign corporation whose earnings
code from the following list.
determine the limitation fraction. Enter were included in income by the
the fraction on line 9 as a decimal with domestic corporation filing the return.
the same number of places as the Column 1b. Enter the foreign
number of digits to the left of the corporation's EIN or reference ID
decimal in adjusted taxable income on number. See Reference ID numbers,
line 8c. For example, if adjusted earlier.
taxable income on line 8c is
$100,000, compute the limitation Note. Taxpayers no longer have the
fraction to 6 decimal places. option of entering “FOREIGNUS” or
Line 12. The limitation may be “APPLIED FOR” in this column.
increased under section 960(c) for Instead, if the foreign corporation
any tax year that the domestic does not have an EIN, the taxpayer
corporation receives a PTEP must use a reference ID number that
distribution. Enter on line 12 the uniquely identifies such foreign
increase described in section 960(c) corporation, using the rules set forth in
(1). Reference ID numbers, in the
Requirements section, earlier.
If the line 12 amount exceeds the
domestic corporation's U.S. income Column 1c. Enter the tested unit’s
tax liability, the excess is deemed an reference ID number (if applicable).
overpayment and can be claimed on See Reference ID numbers, earlier.
the domestic corporation's income tax Complete column 1c only if a CFC
return as a refundable credit (Form has one or more tested units with
1120, Schedule J, Part III, line 20d, or passive category income. See
the corresponding line of other Regulations section 1.904-4(c)(4).
corporate income tax returns). See
Note. Taxpayers no longer have the
section 960(c)(5).
option of entering “FOREIGNUS” or
Part III—Summary of “APPLIED FOR” in this column.
Separate Credits Instead, if the tested unit (or the CFC,
Complete Part III only once. Enter on if applicable) does not have an EIN,
lines 1 through 6 the separate foreign the taxpayer must use a reference ID
tax credits from Part II, line 14, for number that uniquely identifies such
each applicable separate category. tested unit (or the CFC, if applicable),

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Code    Subpart F Income Group (Reg.         Column 5(c).  Enter the name of the       tax year ending December 31, 2022, 
        sec. 1.960-1(d)(2)(ii)(B)(2))        tested unit. Complete column 5(c)         after foreign taxes, QBU1 has 
                                             only if a CFC has one or more tested      1,000,000u passive category dividend 
DIRRA   Dividends,    interest,   rents,                                               income subject to a less than 15% 
        royalties, and annuities.            units with passive category income. 
                                             See Regulations section 1.904-4(c)        withholding tax (“QBU1 income group 
NGCPT Net  gain  from  certain  property     (4).                                      1”). QBU1 has 1,000,000u passive 
        transactions.                                                                  category dividend income subject to a 
NGCT    Net  gain  from  commodities         Column 6. Enter the total net income      greater than 15% withholding tax 
        transactions.                        in the subpart F income group             (“QBU1 income group 2”). QBU2 has 
                                             (identified in column 5(a) and 5(b)) in   2,400,000u passive category dividend 
NFCG    Net foreign currency gain.           the functional currency of the foreign    income subject to a less than 15% 
IEQI    Income equivalent to interest.       corporation. If there is net income       withholding tax (“QBU2 income 
NPC     Income  from  notional  principal    related to more than one subpart F        group”). QBU1 has eligible 
        contracts                            income group, use a separate line for     current-year taxes of $50,000 and 
                                             each subpart F income group. In 
PILOD   Payments in lieu of dividends                                                  $200,000 in QBU1 income group 1 
                                             general, the amount entered on a          and QBU1 income group 2, 
PSC     Personal service contracts           given line will be equal to the total of  respectively. QBU2 has eligible 
FBCSA   Foreign  base  company  sales        all amounts in column (xvi) of            current-year taxes of $240,000 in 
        income.                              Schedule Q (Form 5471) for the            QBU2 income group. USC has a 
FBCSE   Foreign  base  company  services     subpart F income group identified in      subpart F inclusion with respect to 
        income.                              Schedule C, column 5 for the foreign      CFC of which an amount of 800,000u 
                                             corporation identified in column 1 and    is attributable to each of QBU1 
FIFBC   Full  inclusion  foreign  base       for the category of income with           income group 1 and QBU1 income 
        company income.
                                             respect to which a Form 1118 and the      group 2 and 1,920,000u is attributable 
INSUR   Insurance  income  described  in     corresponding Schedule Q (Form            to QBU2 income group. The country 
        section 952(a)(1).                   5471) is being completed.                 code for Country X is “OC.” CFC, 
BOYC    Boycott income.                      Column 7. Enter the total eligible        QBU1, and QBU2 have reference ID 
BKOP    Bribes,  kickbacks,  and  other      current-year taxes in the subpart F       numbers of 100000, 100011, and 
        payments  described  in  section     income group (identified in column        100012, respectively. The applicable 
        952(a)(4).                           5(a) and 5(b)) in U.S. dollars.           three-character alphabet code for the 
901J    Income  subject  to  section  901(j)                                           “u” using the ISO 4217 standard is 
        described in section 952(a)(5).      Note. See the instructions for            “UUU.” USC completes Schedule C of 
                                             Schedule G, later, for information on     its Form 1118 with respect to the 
                                             reduction of foreign taxes for failure to passive category as follows.
Column 5(b). Enter the code which            furnish information required under        USC makes the following entries 
describes the subpart F income group         section 6038.                             on the first of three lines on 
classification (as set forth in              Column 8(a).  Enter the section           Schedule C.
Regulations section 1.904-4(c)(3)(i)         951(a)(1) inclusion attributable to the 
through (iv)). Please enter the              subpart F income group (identified in 
applicable code from the following list.     column 5(a) and 5(b)) in the functional   Column     Entry
                                             currency of the foreign corporation.      1a         CFC
Code    Subpart F Income Group                                                         1b         100000
        (Reg. sec. 1.904-4(c)(3)(i)          Column 8(b).  Enter the amount from 
        through (iv))                        column 8(a) translated into U.S.          1c         100011
                                             dollars at the appropriate exchange 
        All passive income received          rate specified in section 989(b).         2          202212
        during the tax year that is 
     i                                                                                 3          OC
        subject to a withholding tax of      Column 10. For each line, multiply 
        15% (0.15 ) or greater.              the amount in column 7 by the amount      4          UUU
        All passive income received          in column 9 and enter the result in       5(a)        DIRRA
        during the tax year that is          column 10. This is the tax deemed         5(b)                           ii
     ii subject to a withholding tax of      paid computed under section 960(a).
        less than 15% (0.15) (but                                                      5(c)       QBU1
        greater than zero).                  Example 1.    USC is a domestic 
                                             corporation. CFC is a controlled          6          1,000,000u
        All passive income received          foreign corporation incorporated in       7          50,000
        during the tax year that is 
iii                                          Country X. CFC has two tested units,      8(a)       800,000u
        subject to no withholding tax or 
        other foreign tax.                   each of which is a qualified business 
                                             unit (QBU): QBU1 and QBU2. QBU1           8(b)       800,000
        All passive income received          and QBU2 are organized in Country         9          0.800
        during the tax year that is          X. The U.S. tax year for USC, CFC, 
iv      subject to no withholding tax but                                              10         40,000
        is subject to a foreign tax other    QBU1, and QBU2 ends on December 
        than a withholding tax.              31. The functional currency of CFC,       USC makes the following entries 
                                             QBU1, and QBU2 is the “u.” At all         on the second of three lines on 
                                             relevant times, 1u = $1. For its U.S.     Schedule C.
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                                       other than withholding tax (“CFC1      Column     Entry
Column        Entry                    income group 2”). CFC1 has eligible 
1a            CFC                      current-year taxes (including the      1a         CFC1
1b            100000                   withholding tax) of $50,000 in CFC1    1b         100011
                                       income group 1 and $240,000 in 
                                                                              1c 
1c            100011                   CFC1 income group 2. USC has a 
2             202212                   subpart F inclusion with respect to    2          202212
3             OC                       CFC1 of which 800,000u is              3          OC
                                       attributable to CFC1 income group 1    4          UUU
4             UUU                      and 1,920,000u is attributable to 
5(a)          DIRRA                    CFC1 income group 2. For its U.S. tax  5(a)       DIRRA
5(b)          i                        year ending December 31, 2022, after   5(b)       iv
                                       foreign taxes, CFC2 has 1,800,000u     5(c)
5(c)          QBU1                     of passive category gain from 
6             1,000,000u               commodities transactions subject to    6          2,400,000u
7             200,000                  foreign tax other than withholding tax 7          240,000
                                       (“CFC2 income group”). CFC2 has        8(a)       1,920,000u
8(a)          800,000u                 eligible current-year taxes of 
8(b)          800,000                  $450,000 in the CFC2 income group.     8(b)       1,920,000
9             0.800                    USC has a subpart F inclusion of       9          0.800
                                       1,440,000u attributable to the CFC2    10         192,000
10            160,000                  income group. The country code for 
                                       Country X is “OC.” CFC1 and CFC2 
USC makes the following entries 
                                       have reference ID numbers of 100011 
on the third of three lines on                                                USC makes the following entries 
                                       and 100012, respectively. The 
Schedule C.                                                                   on the third of three lines on 
                                       functional currency of both CFC1 and   Schedule C.
                                       CFC2 is the “u.” The applicable 
Column        Entry                    three-character alphabet code for the 
                                                                              Column     Entry
                                       “u” using the ISO 4217 standard is 
1a            CFC                      “UUU.” USC completes Schedule C of     1a         CFC2
1b            100000                   its Form 1118 with respect to the      1b         100012
1c            100012                   passive category as follows.
                                                                              1c 
2             202212                      USC makes the following entries 
                                       on the first of three lines on         2          202212
3             OC                       Schedule C.                            3          OC
4             UUU                                                             4          UUU
5(a)          DIRRA                       Column       Entry
                                                                              5(a)       NGCT
5(b)          ii                          1a           CFC1                   5(b)       iv
5(c)          QBU2                        1b           100011                 5(c)
6             2,400,000u                  1c                                  6          1,800,000u
7             240,000                     2            202212                 7          450,000
8(a)          1,920,000u                  3            OC                     8(a)       1,440,000u
8(b)          1,920,000                   4            UUU                    8(b)       1,440,000
9             0.800                       5(a)         DIRRA                  9          0.800
10            192,000                     5(b)                        ii      10         360,000
                                          5(c)
Example 2.  USC is a domestic 
corporation. CFC1 and CFC2 are            6            1,000,000u
controlled foreign corporations           7            50,000
incorporated in Country X. The U.S.                                           Schedule D
                                          8(a)         800,000u
tax year for USC, CFC1, and CFC2                                              Report taxes deemed paid under 
ends on December 31. At all relevant      8(b)         800,000                section 960(d) with respect to 
times, 1u = $1. For its U.S. tax year     9            0.800                  inclusions under section 951A. This 
ending December 31, 2022, after                                               schedule should only be completed 
                                          10           40,000  
foreign taxes, CFC1 has 1,000,000u                                            with respect to the Form 1118 filed for 
passive category dividend income                                              the section 951A category, and, in 
subject to a withholding tax of less                                          rare cases, the passive category.
                                          USC makes the following entries 
than 15% (“CFC1 income group 1”) 
                                       on the second of three lines on 
and 2,400,000u passive category                                               Schedule D is generally completed 
                                       Schedule C.
interest income subject to foreign tax                                        by a domestic corporation that owns, 
                                                                              within the meaning of section 958(a), 

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stock in one or more CFCs that claims foreign corporation's functional trust) that has made an election under
taxes deemed paid with respect to currency using the ISO 4217 section 962 ("section 962 elector")
inclusions under section 951A. standard. and the section 962 elector is a
shareholder of an S corporation that
Schedule D is also generally Column 5. Enter the U.S.
has made an election to treat the S
completed by an individual (or an shareholder's pro rata share of the
corporation as an entity (rather than
estate or trust) that has made an CFC's tested income from the
as an aggregate of its owners), as
election under section 962 ("section applicable Form 8992 schedule. If the
provided in Notice 2020-69, 2020-39
962 elector"). U.S. shareholder is not a member of a
I.R.B. 604, on a timely (including
U.S. consolidated group, enter the
extensions) filed original Form 1120-S
If more than one line is needed in amount reported on Form 8992,
with respect to the first tax year
Part II: Schedule A, column (e), for the CFC.
ending on or after September 1, 2020.
• In Part II, column 2, the same If the U.S. shareholder is a member of
In this case, the section 962 elector
denominator will be used (the Part I, a U.S. consolidated group, enter the
may have more than one section
column 5 total) in the inclusion amount reported with respect to that
951A inclusion that will be reported on
percentage calculation for each line; U.S. shareholder on Schedule B
separate lines on Schedule D, Part II.
and (Form 8992), Part I, column (g), for the
There might be multiple lines as a
• In Part II, column 3, the same CFC.
multiplication factor will be used (the result of (1) the section 962 elector's
If the domestic corporation is a
Part I, column 9 total) for each line. section 951A inclusion, and (2) the
partner in a partnership, enter the section 962 elector's share of the
If more than one line is completed domestic corporate partner's pro rata section 951A inclusion of the S
in Part II, the column 4 amounts share of CFC tested income from corporation. There could also be
should be summed and included on a Schedule K-3, Part VIII, line 3. multiple lines if the section 962 elector
single line on Form 1118, Schedule B, Column 6. Enter the CFC's tested has an interest in more than one S
Part I, column 3 (that is, the line on income from the applicable Form corporation.
Schedule B, Part I, column 3, that 8992 schedule. If the U.S. Column 1. Enter the GILTI (that is,
corresponds with the line in shareholder is not a member of a U.S. the section 951A inclusion) from Form
Schedule A with “951A” in column 2 of consolidated group, enter the amount 8992, Part II, line 5.
Schedule A). reported on Form 8992, Schedule A,
Part I—Foreign Corporation's column (c), for the CFC. If the U.S. Column 3. This amount as
Tested Income and Foreign shareholder is a member of a U.S. determined on this line is the section
consolidated group, enter the amount 78 gross-up with respect to an
Taxes reported with respect to that U.S. inclusion under section 951A which is
Column 1a. Enter the name of each shareholder on Schedule B (Form reported on Form 1118, Schedule A,
CFC that has tested income, as 8992), Part I, column (e), for the CFC. column 3(b).
defined in section 951A(c)(2)(A). Do Column 8. Enter the CFC's tested
not report information of CFCs with foreign income taxes from Schedule E
tested losses, as defined in section Schedule Q (Form 5471), line 3, Report taxes deemed paid by the
951A(c)(2)(B). column (xii). domestic corporation under section
Column 1b. Enter the EIN or Column 9. Enter the pro rata share of 960(b) with respect to PTEP
reference ID number of the foreign tested foreign income taxes paid or distributions. Taxes reported on this
corporation. See Reference ID accrued by the CFC. To determine schedule are with respect to foreign
numbers, earlier. this amount, multiply the amount in income taxes levied on distributions of
column 7 by the amount in column 8. PTEP from a lower-tier foreign
Note. Taxpayers no longer have the corporation to an upper-tier foreign
option of entering “FOREIGNUS” or Note. See the instructions for corporation when those taxes are
“APPLIED FOR” in this column. Schedule G, later, for information on subsequently deemed paid by the
Instead, if the foreign corporation reduction of foreign taxes for failure to domestic corporation upon
does not have an EIN, the taxpayer furnish information required under distribution of such PTEP by the
must use a reference ID number that section 6038. upper-tier foreign corporation to the
uniquely identifies such foreign domestic corporation.
corporation, using the rules set forth in Part II—Foreign Income Tax
Reference ID numbers, in the Deemed Paid Note. Foreign withholding taxes
Requirements section, earlier. Note. While multiple line entries may levied on a domestic corporation as a
Column 2. Enter the year and month be necessary for Schedule D, Part I, result of distributions of PTEP from a
in which the CFC's U.S. tax year because such lines are completed for first-tier foreign corporation to such
ended using the format YYYYMM. each CFC, in general, only one line domestic corporation are not reported
will be completed in Schedule D, Part on Schedule E. Such taxes are
Column 3. Enter the applicable II, because the domestic corporation reported on Schedule B, Part I,
two-letter codes from the list at filing Form 1118 only has one section column 2(b), as tax withheld on
IRS.gov/CountryCodes. 951A inclusion. However, there is an distributions of PTEP.
Column 4. Enter the applicable exception if Form 1118 is completed
three-character alphabet code for the by an individual (or by an estate or

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Part I—Tax Deemed Paid by PTEP Note. With respect to distributions of
Taxes related to previously PTEP resulting from inclusions under
Group
Domestic Corporation taxed E&P section 965, report the taxes properly
Code
Column 1a. Enter the name of each attributable to such PTEP without
first-tier foreign corporation that had Reclassified section 965(a) PTEP R965a
reduction for the foreign tax credit
foreign income taxes properly Reclassified section 965(b) PTEP R965b disallowance. The disallowance is
attributable to PTEP distributions to a General section 959(c)(1) PTEP 959c1 taken into account in Schedule G. See
domestic corporation that were not the specific instructions for
Reclassified section 951A PTEP R951A
previously deemed paid by a Schedule G, later.
domestic corporation. For Reclassified section 245A(d) R245Ad
distributions of PTEP that originated in PTEP Part II—Tax Paid or Deemed
lower-tier foreign corporations, enter a Section 965(a) PTEP 965a Paid by First- and Lower-Tier
unique alphabetic character before Section 965(b) PTEP 965b Foreign Corporations
the name of the distributing foreign The purpose of Part II is to track the
corporation to identify the source of Section 951A PTEP 951A
current-year and historical PTEP
the PTEP distribution. See the Section 245A(d) PTEP 245Ad distributions between foreign
instructions for Part II, Column 1a. for Section 951(a)(1)(A) PTEP 951a1A corporations and taxes paid, accrued,
more information, including an or deemed paid by upper-tier foreign
example. corporations on such PTEP
Column 1b. Enter the EIN or Column 6. Enter the inclusion year distributions. These amounts are to be
reference ID number of the foreign for the PTEP of the foreign reported on this Part II only to the
corporation. See Reference ID corporation to which inclusion under extent that there is a PTEP distribution
numbers, earlier. section 951(a) and GILTI inclusion to the domestic corporation entered in
amounts of U.S. shareholders are Part I. The amounts entered in Part II
Note. Taxpayers no longer have the attributable. This is the annual PTEP could relate to current-year or
option of entering “FOREIGNUS” or account. See Regulations section prior-year PTEP distributions between
“APPLIED FOR” in this column. 1.960-3(c)(1). foreign corporations, so the applicable
Instead, if the foreign corporation year should be noted in column 2
does not have an EIN, the taxpayer Column 7. Enter the total amount of using the format YYYYMM.
must use a reference ID number that the foreign corporation’s PTEP in the
uniquely identifies such foreign PTEP group within an annual PTEP If foreign income taxes paid,
corporation, using the rules set forth in account identified in columns 5 and 6. accrued, or deemed paid by a first-tier
Reference ID numbers, in the Enter the amount in the functional foreign corporation are properly
Requirements section, earlier. currency of the first-tier foreign attributable to a PTEP distribution
corporation. from one or more lower-tier foreign
Column 2. Enter the year and month corporations, report all such PTEP
for the U.S. tax year of the first-tier Column 8. Enter the total amount of distributions by the lower-tier foreign
foreign corporation in which the the foreign corporations’ PTEP group corporations in Part II, even if the
first-tier foreign corporation made the taxes with respect to the PTEP group distributing lower-tier foreign
PTEP distribution to the domestic within the annual PTEP account corporations did not pay or accrue
corporation. Use the format YYYYMM. identified in columns 5 and 6. Enter (and were not deemed to pay) any
If there is a PTEP distribution related the amount in U.S. dollars. foreign income taxes with respect to
to more than one PTEP group within Column 9. Enter the PTEP the PTEP distributions. For each tier,
an annual PTEP account, complete a distribution from the PTEP group report the amount of the PTEP
separate line for each PTEP group within the annual PTEP account distribution from the first-tier foreign
within an annual PTEP account. See identified in columns 5 and 6 in the corporation that is attributable to a
Regulations section 1.960-3(c)(2). functional currency of the first-tier PTEP distribution from the lower-tier
Column 3. Enter the applicable foreign corporation. If there is a PTEP foreign corporation and the amount of
two-letter codes from the list at distribution related to more than one foreign income taxes paid, accrued, or
IRS.gov/CountryCodes. PTEP group within an annual PTEP deemed paid by that lower-tier foreign
account, complete a separate line for corporation with respect to that
Column 4. Enter the applicable each PTEP group within an annual portion of the PTEP distribution.
three-character alphabet code for the PTEP account. Because only eligible current-year tax
distributing foreign corporation's paid or accrued by a CFC with respect
functional currency using the ISO Column 11. For each line, multiply
to its receipt of a PTEP distribution
4217 standard. the amount in column 8 by the amount
from a lower-tier foreign corporation
in column 10. This is the U.S. dollar
are eligible to be treated as deemed
Column 5. Enter the code which amount of the foreign income taxes
paid under section 960(b), no foreign
describes the PTEP group properly attributable to the PTEP
income taxes of the lowest-tier foreign
classification (as set forth in distribution reported in column 9 and
corporation to which the PTEP
Regulations section 1.960-3(c)(2)). not deemed to have been paid by the
distribution is attributable are properly
Please enter the applicable PTEP domestic corporation for the tax year
attributable to a PTEP distribution
group code from the following list. or any prior tax year.
made to an upper-tier foreign

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corporation. See Regulations section Column 3. Enter the applicable foreign corporation. If there is a PTEP
1.960-1(d)(3)(ii)(C). two-letter codes from the list at distribution related to more than one
Column 1a. Enter the name of each IRS.gov/CountryCodes. PTEP group within an annual PTEP
account, complete a separate line for
lower-tier foreign corporation that Column 4b. Enter the EIN or each PTEP group within an annual
distributed PTEP to an upper-tier reference ID number of the recipient PTEP account. Only report the
foreign corporation, in the current year foreign corporation. See Reference ID amount of PTEP that was ultimately
or a prior year, that in turn was numbers, earlier. distributed to the domestic
distributed in the current year to a
corporation in the current year, even if
domestic corporation. In column 1a, Note. Taxpayers no longer have the
the amount of PTEP distributed to the
preceding the name of the distributing option of entering “FOREIGNUS” or
upper-tier foreign corporation was
lower-tier foreign corporation, enter a “APPLIED FOR” in this column.
greater than that amount.
unique alphabetic character that Instead, if the recipient foreign
corresponds to a PTEP distribution corporation does not have an EIN, the Column 14. Enter the U.S. dollar
reported in Part I. For example, in the taxpayer must use a reference ID amount of the recipient foreign
case of a PTEP distribution from number that uniquely identifies such corporation's income taxes paid,
CFC3, third-tier foreign corporation, to foreign corporation, using the rules set accrued, and deemed paid that are
CFC2, second-tier foreign forth in Reference ID numbers, in the properly attributable to the PTEP
corporation, to CFC1, first-tier foreign Requirements section, earlier. distribution reported in column 12 and
corporation, to USP, a domestic not deemed to have been paid by the
Column 5. Enter the U.S. tax year of
corporation, the domestic corporation domestic corporation for any prior tax
the recipient foreign corporation which
correlates the distributions as follows. year.
includes the date the foreign
Part I, column 1a. Enter “A corporation received the PTEP Note. See the Note in the instructions
CFC1” (to report distribution from distribution. for Part I, column 11, for purposes of
CFC1 to domestic corporation Column 6. Enter the applicable reporting foreign income taxes
sourced from PTEP distributions from two-letter codes from the list at properly attributable to PTEP
CFC2 and CFC3). IRS.gov/CountryCodes. distributions resulting from inclusions
under section 965.
Part II, column 1a. Enter “A Column 7. Enter the applicable
CFC2” (to report distribution from three-character alphabet code for the Note. See the instructions for
CFC2 to CFC1), and enter “A CFC3” distributing foreign corporation's Schedule G, later, for information on
(to report distribution from CFC3 to functional currency using the ISO reduction of foreign taxes for failure to
CFC2). 4217 standard. furnish information required under
Column 1b. Enter the EIN or Column 8. Enter the applicable section 6038.
reference ID number of the PTEP group code from the list Example 1. USC is a domestic
distributing foreign corporation. See provided in the specific instructions corporation. CFC1, a Country Y
Reference ID numbers, earlier. for Schedule E, Part I, Column 5, corporation, wholly owns Country X
earlier.
Note. Taxpayers no longer have the corporations CFC2 and CFC3. The
option of entering “FOREIGNUS” or Column 9. Enter the annual PTEP U.S. tax year for USC, CFC1, CFC2,
“APPLIED FOR” in this column. account. See the instructions for and CFC3 ends on December 31.
Instead, if the distributing foreign Schedule E, Part I, Column 6, earlier. During the U.S. tax year ending
December 31, 2022, CFC2 and
corporation does not have an EIN, the Column 10. Enter the total amount of CFC3, both second-tier CFCs, each
taxpayer must use a reference ID the foreign corporation’s PTEP in the distribute 100u, comprising all of their
number that uniquely identifies such PTEP group within the annual PTEP respective section 965(a) PTEP within
foreign corporation, using the rules set account identified in column 8 and the annual PTEP account for the 2017
forth in Reference ID numbers, in the column 9. Enter such amount in the tax year (“2017 section 965(a) PTEP”)
Requirements section, earlier. functional currency of the distributing within the general category, to CFC1,
Column 2. Enter the U.S. tax year of foreign corporation. a first-tier CFC. CFC1 pays 40u equal
the distributing foreign corporation Column 11. Enter the total amount of to $40 of eligible current-year taxes to
which includes the date when the the foreign corporation’s PTEP group Country X on the 200u PTEP
foreign corporation distributed the taxes with respect to the PTEP group distributions, reducing the 2017
PTEP to the upper-tier foreign within the annual PTEP account section 965(a) PTEP to 160u. In that
corporation. identified in column 8 and column 9. same year, CFC1 distributes all 160u
Note. If the PTEP distributed in Part I Enter this amount in U.S. dollars. To of the 2017 section 965(a) PTEP to
relates to PTEP distributions from determine the appropriate translation USC. CFC1 does not have any other
lower-tier foreign corporations made rate, see section 986(a). PTEP balances. The reference ID
numbers for CFC1, CFC2, and CFC3
in more than one tax year, figure and Column 12. Enter the PTEP are 10041, 10042, and 10043,
show the tax deemed paid on a distribution with respect to the PTEP respectively. The country codes for
separate line for each distribution. group within the annual PTEP account Country X and Country Y are OC and
identified in columns 8 and 9 in the BC, respectively. The functional
functional currency of the distributing currency of CFC1, CFC2, and CFC3

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is the “u.” The applicable                Column         Entry                    currency of CFC1, CFC2, and CFC3 
three-character alphabet code for the                                             is the “u.” The applicable 
“u” using the ISO 4217 standard is        1a             A CFC3                   three-character alphabet code for the 
“UUU.”                                    1b             10043                    “u” using the ISO 4217 standard is 
                                                                                  “UUU.”
USC makes the following entries           2              202112
                                                                                  Schedule E reporting is not 
on a single line on Schedule E, Part I.   3              OC
                                                                                  necessary for USC’s tax years ending 
                                          4a             CFC1
Column                     Entry                                                  December 31, 2018, 2019, 2020, and 
                                          4b             10041                    2021. For USC's tax year ending 
         1a                A CFC1                                                 December 31, 2022, USC makes the 
                                          5              202212
         1b                10041                                                  following entries on a single line on its 
                                          6              BC                       general category Form 1118, 
         2                 202212                                                 Schedule E, Part I.
                                          7              UUU
         3                 BC
                                          8              965a
         4                 UUU                                                    Column                     Entry
                                          9              2017
         5                 965a                                                           1a                 A CFC1
                                          10             80u
         6                 2017                                                           1b                 20041
                                          11             0
         7                 160u                                                           2                  202212
                                          12             80u
         8                 40                                                             3                  OC
                                          13             1.000
         9                 160u                                                           4                  UUU
                                          14             0
         10                1.000                                                          5                  965a
         11                40                                                             6                  2017
                                          Example 2. USC is a domestic 
                                                                                          7                  40u
                                         corporation. CFC1 and CFC2 are 
USC makes the following entries          Country X corporations, and CFC3 is              8                  10
on the first of two lines on Schedule E, a Country Y corporation. The U.S. tax            9                  40u
Part II.                                 year for USC, CFC1, CFC2, and                    10                 1.000
                                         CFC3 ends on December 31. During 
                                         CFC3’s U.S. tax year ending                      11                 10
Column                     Entry
                                         December 31, 2018, CFC3 distributes 
         1a                A CFC2        100u, comprising its entire section 
         1b                10042         965(a) PTEP within the annual PTEP       USC makes the following entries 
                                         account for the 2017 tax year (“2017     on the first of two lines on Schedule E, 
         2                 202212        section 965(a) PTEP”) within the         Part II.
         3                 OC            general category, to CFC2, a CFC 
         4a                CFC1          that wholly owns CFC3. CFC2 pays         Column                     Entry
                                         eligible current-year tax of 20u to 
         4b                10041         Country X equal to $20 on the 100u               1a                 A CFC2
         5                 202212        PTEP distribution, reducing the 2017             1b                 20042
         6                 BC            section 965(a) PTEP to 80u. In                   2                  201912
                                         CFC2’s U.S. tax year ending 
         7                 UUU           December 31, 2019, CFC2 distributes              3                  OC
         8                 965a          40u of the 2017 section 965(a) PTEP              4a                 CFC1
         9                 2017          to CFC1, a CFC that wholly owns                  4b                 20041
                                         CFC2. CFC1 pays no tax on such 
         10                80u           distribution, but is deemed to pay $10           5                  201912
         11                0             of the eligible current-year tax that            6                  OC
         12                80u           was paid by CFC2 in 2017. In CFC1’s              7                  UUU
                                         U.S. tax year ending December 31, 
         13                1.000                                                          8                  965a
                                         2022, CFC1 distributes 40u to USC, 
         14                0             who wholly owns CFC1. USC pays no                9                  2017
                                         foreign tax on such distribution, but is         10                 80u
                                         deemed to pay the $10 of eligible 
USC makes the following entries          current-year tax that was paid by                11                 20
on the second of two lines on            CFC2 in 2017 and deemed paid by                  12                 40u
Schedule E, Part II.                     CFC1 in 2019. The reference ID                   13                 0.500
                                         numbers for CFC1, CFC2, and CFC3 
                                         are 20041, 20042, and 20043,                     14                 10
                                         respectively. The country codes for 
                                         Country X and Country Y are OC and 
                                         BC, respectively. The functional 

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USC makes the following entries          Country X equal to $45 on the 450u       Part II, of its Form 1118 with respect 
on the second of two lines on            PTEP distribution, reducing the 2016     to general category income.
Schedule E, Part II.                     section 951(a)(1)(A) PTEP to 405u. 
                                         CFC1 is also deemed to pay $50 of 
Column               Entry               the eligible current-year tax paid by    Column               Entry
                                         CFC2 on its receipt of the 2018                 1a            A CFC2
1a                   A CFC3              distribution of the PTEP from CFC3. In 
                                                                                         1b            10042
1b                   20043               the same year, CFC1 distributes 630u 
2                    201812              to USC, which wholly owns CFC1.                 2             202212
                                         Such distribution includes all of               3             CC
3                    BC                  CFC1’s 2016 section 951(a)(1)(A) 
                                                                                         4a            CFC1
4a                   CFC2                PTEP of 405u and 2018 section 951A 
4b                   20042               PTEP of 225u. USC pays no foreign               4b            10041
                                         tax on such distribution, but is                5             202212
5                    201812              deemed to pay $50 of the eligible               6             OC
6                    OC                  current-year tax deemed paid by 
7                    UUU                 CFC1 and $70 on the eligible                    7             UUU
                                         current-year tax paid by CFC1 on the            8             951a1A
8                    965a                2019 and 2022 distributions of the              9             2016
9                    2017                PTEP from CFC2.
                                                                                         10            810u
10                   80u                 The reference ID numbers for                    11            100
11                   0                   CFC1, CFC2, and CFC3 are 10041, 
12                   40u                 10042, and 10043, respectively. The             12            405u   
                                         country codes for Country X, Country            13            0.500
13                   0.500
                                         Y, and Country Z are OC, CC, and                14            50
14                   0                   BC, respectively. The functional 
                                         currency of CFC1, CFC2, and CFC3         USC makes the following entries 
                                         is the “u.” The applicable               on the second of two lines on 
Example 3. USC is a domestic             three-character alphabet code for the    Schedule E, Part II, of its Form 1118 
corporation. CFC1 is a Country X         “u” using the ISO 4217 standard is       with respect to general category 
corporation, CFC2 is a Country Y         “UUU.”                                   income.
corporation, and CFC3 is a Country Z 
corporation. The U.S. tax year of        Schedule E reporting is not 
USC, CFC1, CFC2, and CFC3 ends           necessary for USC's tax years ending 
                                                                                  Column               Entry
on December 31. During CFC3’s U.S.       December 31, 2018, 2019, 2020, and 
tax year ending December 31, 2018,       2021. For USC's tax year ending                 1a            A CFC3
CFC3 distributes 1,000u, comprising      December 31, 2022, USC completes                1b            10043
all of its subpart F PTEP within the     Form 1118, Schedule E, as follows:              2             201812
annual PTEP account for the 2016 tax     USC makes the following entries                 3             BC
year (“2016 section 951(a)(1)(A)         on Schedule E, Part I, with respect to          4a            CFC2
PTEP”) within the general category, to   general category income.
CFC2, a CFC that wholly owns CFC3.                                                       4b            10042
CFC2 pays eligible current-year tax of                                                   5             201812
100u to Country Y equal to $100 on       Column                     Entry
the 1,000u PTEP distribution,                                                            6             CC
reducing the 2016 section 951(a)(1)             1a                  A CFC1
                                                                                         7             UUU
(A) PTEP to 900u. In CFC2’s tax year            1b                  10041
                                                                                         8             951a1A
ending December 31, 2019, CFC2                  2                   202212
distributes 250u, comprising all of its                                                  9             2016
                                                3                   OC
section 951A PTEP within the annual                                                      10            810u
PTEP account for the 2018 tax year              4                   UUU
                                                                                         11                  0
(“2018 section 951A PTEP”) within the           5                   951a1A
section 951A category, to CFC1, a                                                        12            405u
                                                6                   2016
CFC that wholly owns CFC2. CFC1                                                          13            0.500
pays eligible current-year tax of 25u to        7                   405u
                                                                                         14                  0
Country X equal to $25 on the 250u              8                   95
PTEP distribution, reducing the 2018                                              USC makes the following entries 
                                                9                   405u
section 951A PTEP to 225u. During                                                 on a line on Schedule E, Part I, of its 
CFC2’s tax year ending December                 10                  1.000
                                                                                  Form 1118 with respect to section 
31, 2022, CFC2 distributes 450u out             11                  95            951A category income.
of its 2016 section 951(a)(1)(A) PTEP 
balance of 900u to CFC1. CFC1 pays       USC makes the following entries 
eligible current-year tax of 45u to      on the first of two lines on Schedule E, 
                                                   -22-                         Instructions for Form 1118 (Rev. 12-2022)

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1. The foreign taxes minus the tax be reduced by the relevant applicable
Column Entry on that income, or percentage. See Regulations section
1a B CFC1 2. The tax on that income 1.965-5(b). Taxes deemed paid with
1b 10041 determined without regard to the respect to distributions of section
deduction for percentage depletion 965(a) PTEP and section 965(b)
2 202212 PTEP must be reduced by the
minus the tax on that income.
3 OC relevant applicable percentage. See
The reduction must be made on a Regulations section 1.965-5(c)(1)(i)
4 UUU country-by-country basis (Regulations and (iii).
5 951A section 1.901-3(a)(1)). Attach a
6 2018 separate schedule showing the Line G. Enter disallowed taxes under
reduction. section 245A. Such disallowed taxes
7 225u may also include, for example, gain
8 25 Line C. If the corporation chooses to on certain sales of CFC stock treated
calculate the reduction in the foreign as dividends. See section 964(e)(4).
9 225u tax by identifying taxes specifically
10 1.000 attributable to participation in or Line H. For any other reductions in
11 25 cooperation with an international taxes, enter the code “OTH” and
boycott, enter the amount from attach a statement with the amount
Schedule C (Form 5713), line 2b. See and the nature of such other
USC makes the following entries Form 5713 and its separate reduction.
on a line on Schedule E, Part II, of its Schedule C and instructions.
Form 1118 with respect to section
951A category income. Line D. If the corporation controls a Schedule H
foreign corporation or partnership and Computer-Generated
fails to furnish any return or any
Column Entry information in any return required Schedule H
1a B CFC2 under section 6038(a) by the due A computer-generated Schedule H
date, reduce the foreign taxes may be filed if it conforms to the IRS
1b 10042 available for credit under sections 901 version. In some cases, Schedule H
2 201912 and 960 by 10% (0.10). If the failure must be expanded to properly report
3 CC continues for 90 days or more after apportioned deductions. This applies
the date of written notice by the IRS, in cases such as when the
4a CFC1 reduce the tax by an additional 5% corporation:
4b 10041 (0.05) for each 3-month period or • Has more than two product lines
5 201912 fraction thereof during which the (under the gross receipts method of
failure continues after the 90-day apportioning research and
6 OC period has expired. See section experimental (R&E) deductions in Part
7 UUU 6038(c) for limitations and special I), or
8 951A rules. • Has more than five categories of
income (statutory groupings within
9 2018 In addition, a $10,000 penalty is
Part I, line 6; Part II, line 3; or Part III,
imposed under section 6038(b) for
line 2) with respect to which expenses
10 225u failure to supply the information
are required to be apportioned.
11 0 required under section 6038(a) for
12 225u each entity within the time prescribed. Note. If there are more than five
If the required information is not foreign source statutory groupings
13 1.000 submitted within 90 days after the IRS within Part II, line 3, or Part III, line 2,
14 0 has mailed notice to the U.S. person, add them after the U.S. source
additional penalties may apply. residual grouping.
Schedule F Note. The reduction in foreign taxes Part I—Research and
Reserved for future use. available for credit is reduced by any Experimental Deductions
dollar penalty imposed under section Note. These instructions refer to the
6038(b). regulations issued on November 12,
Schedule G 2020. See Regulations section
Line E. Enter foreign income taxes
Part I paid or accrued during the current tax 1.861-17 (T.D. 9922, 85 FR 72042, as
year that have been suspended due corrected by 86 FR 54367).
Line A. If the corporation claims a
to the rules of section 909.
deduction for percentage depletion Use Part I to apportion R&E
under section 613 with respect to any Line F. Enter disallowed taxes under deductions. Use the gross receipts
part of its foreign mineral income (as section 965(g). method described in Regulations
section 1.861-17 and report
defined in section 901(e)(2)) for the Taxes paid or accrued with respect applicable amounts in column (a).
tax year, any foreign taxes on that to distributions of section 965(a)
income must be reduced by the PTEP and section 965(b) PTEP must
smaller of:

Instructions for Form 1118 (Rev. 12-2022) -23-

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Column (a), Gross Receipts              defined in Regulations section          sales, licenses, leases, or services of 
Method                                  1.861-17(d)(4)) nor income pertaining   controlled parties (as defined in 
                                        to sales, licenses, leases, or services Regulations section 1.861-17(d)(4)).
Enter in the spaces provided the SIC    of uncontrolled parties (as defined in 
                                                                                Lines 6a(3), 6b(3), 6c(3), 6d(3), 
Code numbers (based upon the            Regulations section 1.861-17(d)(3)).
                                                                                and 6e(3). For each product line and 
Standard Industrial Classification      Line 5b. For each product line, enter   for each separate category, enter the 
System) of the product lines to which   the aggregate foreign source “gross     foreign source “gross intangible 
the R&E deductions relate. See          intangible income” (as defined in       income” (as defined in Regulations 
Regulations section 1.861-17(b)(3) for  Regulations section 1.861-17(b)(2)) of  section 1.861-17(b)(2)) of the 
details on choosing SIC codes and       the taxpayer that is income pertaining  taxpayer that is income pertaining to 
changing a product category.            to sales, licenses, leases, or services sales, licenses, leases, or services of 
                                        of controlled parties (as defined in    uncontrolled parties (as defined in 
Note. If the corporation has more 
                                        Regulations section 1.861-17(d)(4)).    Regulations section 1.861-17(d)(3)).
than two product lines, see 
Computer-Generated Schedule H,          Line 5c. For each product line, enter   Lines 6a(4), 6b(4), 6c(4), 6d(4), 
earlier.                                the aggregate foreign source “gross     and 6e(4). For each product line and 
                                        intangible income” (as defined in       for each separate category, add lines 
Columns (a)(i) and (a)(iv)              Regulations section 1.861-17(b)(2)) of  (1), (2), and (3) and enter the sum on 
                                        the taxpayer that is income pertaining  line (4).
Line 1.  For each product line, enter   to sales, licenses, leases, or services 
the taxpayer’s worldwide “gross         of uncontrolled parties (as defined in  Columns (a)(ii) and (a)(v)
intangible income” (as defined in       Regulations section 1.861-17(d)(3)).
Regulations section 1.861-17(b)(2)).                                            Line 1.  For each product line, enter 
                                        Line 5d. For each product line, add     the taxpayer’s worldwide gross 
Line 4a. For each product line, enter   lines 5a through 5c and enter the sum   receipts from sales and leases of 
the U.S. source “gross intangible       on line 5d.                             products or services.
income” (as defined in Regulations 
section 1.861-17(b)(2)) of the          Lines 6a through 6e.  For lines 6a      Line 4a. For each product line, enter 
taxpayer that is neither income         through 6e, enter the code for the      the taxpayer’s gross receipts from 
pertaining to sales, licenses, leases,  applicable separate category of         sales and leases of products or 
or services of controlled parties (as   income (foreign source statutory        services related to U.S. source gross 
defined in Regulations section          grouping). See Categories of Income     intangible income.
1.861-17(d)(4)) nor income pertaining   earlier. If code “901j” or one of the 
to sales, licenses, leases, or services “RBT” codes applies, also enter the     Line 4b. For each product line, enter 
of uncontrolled parties (as defined in  applicable country.                     the controlled parties’ (as defined in 
                                                                                Regulations section 1.861-17(d)(4)) 
Regulations section 1.861-17(d)(3)).                                            gross receipts from sales, leases, 
                                        Note. If the corporation has more 
Line 4b. For each product line, enter   than five separate categories of        licenses, or services that are related 
the U.S. source “gross intangible       income, Schedule H, Part I, line 6      to the taxpayer’s U.S. source gross 
income” (as defined in Regulations      must be expanded to properly report     intangible income.
section 1.861-17(b)(2)) of the          apportioned R&E deductions. See         Line 4c. For each product line, enter 
taxpayer that is income pertaining to   Computer-Generated Schedule H,          the uncontrolled parties’ (as defined in 
sales, licenses, leases, or services of earlier.                                Regulations section 1.861-17(d)(3)) 
controlled parties (as defined in                                               gross receipts from sales, leases, 
                                        Lines 6a(1), 6b(1), 6c(1), 6d(1), 
Regulations section 1.861-17(d)(4)).                                            licenses, or services of uncontrolled 
                                        and 6e(1).  For each product line and 
Line 4c. For each product line, enter   for each separate category, enter the   parties that are related to the 
the U.S. source “gross intangible       foreign source “gross intangible        taxpayer’s U.S. source gross 
income” (as defined in Regulations      income” (as defined in Regulations      intangible income.
section 1.861-17(b)(2)) of the          section 1.861-17(b)(2)) of the          Line 4d. For each product line, add 
taxpayer that is income pertaining to   taxpayer that is neither income         lines 4a through 4c and enter the sum 
sales, licenses, leases, or services of pertaining to sales, licenses, leases,  on line 4d.
uncontrolled parties (as defined in     or services of controlled parties (as 
Regulations section 1.861-17(d)(3)).    defined in Regulations section          Line 5a. For each product line, enter 
                                        1.861-17(d)(4)) nor income pertaining   the taxpayer’s gross receipts from 
Line 4d. For each product line, add                                             sales and leases of products or 
                                        to sales, licenses, leases, or services 
lines 4a through 4c and enter the sum                                           services related to foreign source 
                                        of uncontrolled parties (as defined in 
on line 4d.                                                                     gross intangible income.
                                        Regulations section 1.861-17(d)(3)).
Line 5a. For each product line, enter                                           Line 5b. For each product line, enter 
                                        Lines 6a(2), 6b(2), 6c(2), 6d(2), 
the aggregate foreign source “gross                                             the controlled parties’ (as defined in 
                                        and 6e(2).  For each product line and 
intangible income” (as defined in                                               Regulations section 1.861-17(d)(4)) 
                                        for each separate category, enter the 
Regulations section 1.861-17(b)(2)) of                                          gross receipts from sales, leases, 
                                        foreign source “gross intangible 
the taxpayer that is neither income                                             licenses, or services that are related 
                                        income” (as defined in Regulations 
pertaining to sales, licenses, leases,                                          to the taxpayer’s foreign source gross 
                                        section 1.861-17(b)(2)) of the 
or services of controlled parties (as                                           intangible income.
                                        taxpayer that is income pertaining to 

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Line 5c.  For each product line, enter   exclusively to the residual grouping of  intangible income within the statutory 
the uncontrolled parties' (as defined in U.S. source gross income, if the R&E     grouping by the worldwide gross 
Regulations section 1.861-17(d)(3))      that accounts for more than 50%          receipts for the product line. Multiply 
gross receipts from sales, licenses,     (0.50) of the amount of such R&E         the result by the line 3 R&E 
leases, or services that are related to  deductions were performed in the         deductions to be apportioned.
the taxpayer's foreign source gross      United States. A similar rule applies    Example 3.    With respect to the 
intangible income.                       when a majority of R&E is performed      first product line reported on 
                                         outside the United States.
Line 5d.  For each product line, add                                              Schedule H, Part I, there are two 
                                          Enter 50% (0.50) of line 1 on either 
lines 4a through 4c and enter the sum                                             foreign tax credit separate limitation 
                                         line 2a or line 2b (as explained 
on line 4d.                                                                       categories with gross receipts that are 
                                         above).                                  related to foreign source gross 
Lines 6a(1), 6b(1), 6c(1), 6d(1),                                                 intangible income within each of the 
                                         Line 4d. According to Regulations 
and 6e(1).  For each product line,                                                two categories. With respect to the 
                                         section 1.861-17(d)(1), to determine 
enter the taxpayer's gross receipts                                               first separate category, to determine 
                                         the line 3 amount of R&E 
from sales and leases of products or                                              the amount to enter on line 6a(5), 
                                         expenditures to be apportioned to the 
services that are related to foreign                                              column (a)(iii), divide the amount on 
                                         residual grouping of U.S. source 
source gross intangible income within                                             line 6a(4), column (a)(ii) by the 
                                         gross income, divide the gross 
the relevant separate category.                                                   amount on line 1, column (a)(ii) and 
                                         receipts related to the gross intangible 
Lines 6a(2), 6b(2), 6c(2), 6d(2),        income within the residual grouping      multiply the result by the amount on 
and 6e(2).  For each product line,       by the worldwide gross receipts for      line 3, column (a)(iii). Similarly, with 
enter the controlled parties’ (as        the product line. Multiply the result by respect to the second separate 
defined in Regulations section           the line 3 R&E deductions to be          category, to determine the amount to 
1.861-17(d)(4)) gross receipts from      apportioned.                             enter on line 6b(5), column (a)(iii), 
sales, licenses, leases, or services                                              divide the amount on line 6b(4), 
                                          Example 1.  With respect to the 
that are related to foreign source                                                column (a)(ii) by the amount on line 1, 
                                         first product line reported on 
gross intangible income within the                                                column (a)(ii) and multiply the result 
                                         Schedule H, Part I, to determine the 
relevant statutory grouping.                                                      by the amount on line 3, column (a)
                                         amount to enter on line 4d, column (a)   (iii).
Lines 6a(3), 6b(3), 6c(3), 6d(3),        (iii), divide the amount on line 4d, 
and 6e(3).  For each product line,       column (a)(ii) by the amount on line 1,  Lines 6a(6), 6b(6), 6c(6), 6d(6), 
enter the uncontrolled parties’ (as      column (a)(ii). Multiply the result by   and 6e(6). Enter the amount of 
defined in Regulations section           the amount on line 3, column (a)(iii).   line 2b R&E deductions, if any, to be 
1.861-17(d)(3)) gross receipts from                                               apportioned to each separate 
                                         Line 5d. According to Regulations 
sales, licenses, leases, or services                                              category. As indicated in Regulations 
                                         section 1.861-17(d)(1), to determine 
that are related to foreign source                                                section 1.861-17(c), if there are 
                                         the line 3 amount of R&E 
gross intangible income within the                                                multiple separate categories with 
                                         expenditures to be apportioned to the 
relevant statutory grouping.                                                      foreign source gross intangible 
                                         aggregate statutory grouping of          income with respect to a given 
Lines 6a(4), 6b(4), 6c(4), 6d(4),        foreign source gross income, divide      product line, the line 2b amount is 
and 6e(4).  For each product line and    the gross receipts related to the gross  apportioned ratably based on the 
for each separate category, add lines    intangible income within the statutory   relative amounts of gross receipts 
(1), (2), and (3) and enter the sum on   grouping(s) by the worldwide gross       from gross intangible income in each 
line (4).                                receipts for the product line. Multiply  separate category, as determined 
                                         the result by the line 3 R&E             under Regulations section 
Columns (a)(iii) and (a)(vi)             deductions to be apportioned.            1.861-17(d).
Line 1.   Enter the total R&E             Example 2.  With respect to the 
deductions connected with the            first product line reported on           Column (b)
product lines.                           Schedule H, Part I, to determine the 
                                         amount to enter on line 5d, column (a)   Line 1. Enter total R&E deductions 
Line 2a or 2b. Reduce the line 1         (iii), divide the amount on line 5d,     for all product lines (for example, from 
totals by a 50% (0.50) exclusive         column (a)(ii) by the amount on line 1,  column (a)(iii) and, if applicable, 
apportionment amount (Regulations        column (a)(ii). Multiply the result by   columns (a)(vi), (a)(ix), etc.).
section 1.861-17(c)).                    the amount on line 3, column (a)(iii).
                                                                                  Note.  Line 1, column (b) is the total 
Note. For tax years beginning on or      Lines 6a(5), 6b(5), 6c(5), 6d(5),        worldwide R&E deductions for all 
after January 1, 2020, there is no       and 6e(5). Enter the amount of line 3    product lines.
longer a rule with respect to legally    R&E deductions apportioned to each 
                                                                                  Lines 2a and 4d. Enter on line 2a 
mandated R&E. See Regulations            separate category. According to 
                                                                                  the total amount exclusively 
section 1.861-17 (T.D. 9922)             Regulations section 1.861-17(d)(1), to 
                                                                                  apportioned to U.S. source gross 
published in the Federal Register on     determine the line 3 amount of R&E 
                                                                                  intangible income for all product lines. 
November 12, 2020.                       expenditures to be apportioned 
                                                                                  Enter on line 4d the total amount of 
                                         among the statutory groupings of 
Under the exclusive apportionment                                                 line 3 R&E expenditures apportioned 
                                         foreign source gross income, divide 
rules, 50% (0.50) of the R&E                                                      to the residual grouping of U.S. 
                                         the gross receipts related to the gross 
deductions are apportioned 

Instructions for Form 1118 (Rev. 12-2022)             -25-

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source gross intangible income for all   separate affiliated group. Complete       The assets in each statutory 
product lines.                           columns (a)(ii) and (b)(iv) for           grouping (lines 3a through 3e) and the 
                                         members of the corporation's affiliated  residual grouping (line 3f) are divided 
Note. Line 2a, column (b) plus           group that are financial corporations     between those assets generating 
line 4d, column (b) equals the total     and columns (a)(i) and (b)(iii) for       dividend income eligible to be offset 
amount of R&E deductions for all         members that are nonfinancial             by the deduction under section 245A 
product lines apportioned to U.S.        corporations.                             versus those generating all other 
source gross intangible income for all                                             types of gross income. The foreign 
product lines.                           See Regulations section 1.861-11          branch income and section 951A 
                                         for the definition of an affiliated group.
Lines 6a(7), 6b(7), 6c(7), 6d(7),                                                  income categories do not include 
and 6e(7). Enter on each of these                                                  assets generating dividend income 
lines the total amount of line 3 R&E     Columns (a)(i) and (a)(ii)                eligible to be offset by the deduction 
                                                                                   under section 245A. The assets on 
expenditures apportioned to the          Line 1a. Enter the average of the         line 2 are characterized as assets in 
statutory grouping of foreign source     total assets of the affiliated group. See one of the statutory groupings or as 
gross income for all product lines.      Regulations section 1.861-9(g)(2) for     belonging to the residual grouping.
                                         the definition of “average” for these 
Note. The sum of lines 6a(7), 6b(7),                                               Enter the value of the assets in 
                                         purposes.
6c(7), 6d(7), and 6e(7) in column (b)                                              each of the statutory groupings on 
equals the total amount of R&E           Line 1b. Enter the assets included on     lines 3a through 3e, and enter the 
deductions for all product lines         line 1a that are characterized as         value of the assets in the residual 
apportioned to foreign source gross      excess related party indebtedness.        grouping on line 3f. See Regulations 
intangible income for all product lines. See Regulations section 1.861-10(e)       sections 1.861-12 and 1.861-13 and 
                                         for an exception to the general rule of   Temporary Regulations sections 
Note. Include the amount from            fungibility for excess related party      1.861-9T(g)(3), 1.861-12T(g)(2), and 
column (b) of line 6a(7) in column 14    indebtedness.                             1.861-12T for the rules for 
of the Schedule A that corresponds                                                 characterizing the assets.
with the code entered on line 6a. If     Line 1c. Enter all other assets that 
applicable, you should likewise          attract specifically allocable interest 
include the amount from column (b) of    deductions. See Regulations section       Columns (b)(iii) and (b)(iv)
line 6b(7) in column 14 of the           1.861-10 for other exceptions to the 
Schedule A that corresponds with the     general rule of fungibility (such as      Line 1a. Enter the total interest 
code entered on line 6b. If applicable,  qualified nonrecourse indebtedness        deductions for the members of the 
on page 10 of Form 1118, you should      and integrated financial transactions).   corporation's affiliated group. These 
                                                                                   include any expense that is currently 
likewise include the amount(s) from      Line 1d. Enter the total of the exempt    deductible under section 163 
column (b) of lines 6c(7), 6d(7), and    assets and assets without directly        (including original issue discount), 
6e(7) in column 14 of the Schedule A     identifiable yield that are to be         and interest equivalents. See 
that corresponds with the code           excluded from the interest                Regulations section 1.861-9 and 
entered on lines 6c, 6d, and 6e,         apportionment formula (Regulations        Temporary Regulations section 
respectively.                            section 1.861-8(d)(2) and Temporary       1.861-9T for the definition of interest 
                                         Regulations sections 1.861-8T(d)(2) 
Part II—Deductions Allocated                                                       equivalents and a list of the sections 
                                         and 1.861-9T(g)(3)). This could           that disallow or suspend interest 
and Apportioned Based on                 include an exempt portion of assets       deductions or require the 
Assets                                   that produce foreign-derived              capitalization of interest deductions.
Columns (a)(i) Through (b)(iv)           intangible income and/or an exempt 
                                         portion of CFC stock that gives rise to   Line 1b. Enter the interest 
Use these columns to apportion           inclusions under section 951A.            deductions associated with the assets 
                                                                                   on line 1b of columns (a)(i) and (a)(ii), 
interest deductions. See final and       Lines 3a through 3f. For lines 3a         respectively, that attract specifically 
temporary Regulations sections           through 3e, enter the code for the        allocable interest deductions under 
1.861-8 through 1.861-14 for rules on    applicable separate category of           Regulations section 1.861-10(e).
the apportionment of interest            income (statutory grouping). See 
deductions based on the tax book         Categories of Income, earlier. If code    Note. These interest deductions will 
value or adjusted tax book value of      “901j” or one of the “RBT” codes          be divided among the statutory 
assets.                                  applies, also enter the applicable        groupings and the residual grouping. 
                                         country.                                  The interest deductions allocated and 
A corporation may elect to use the                                                 apportioned to the statutory groupings 
alternative tax book value method.       Note. If the corporation had more         will appear as a definitely allocable 
See Regulations section 1.861-9(i).      than five separate categories of          deduction in Schedule A, column 
                                         income, Schedule H, Part II, line 3       13(j).
Columns (a) and (b) are subdivided       must be expanded to properly report 
into “Nonfinancial Corporations” and     deductions apportioned based on           Line 1c. Enter the interest 
“Financial Corporations.” In allocating  assets. See Computer-Generated            deductions associated with the assets 
interest deductions, members of an       Schedule H, earlier.                      on line 1c of columns (a)(i) and (a)(ii), 
affiliated group that are financial                                                respectively, that attract specifically 
corporations must be treated as a                                                  allocable interest deductions.

                                                       -26-                        Instructions for Form 1118 (Rev. 12-2022)

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Lines 3a through 3f. To figure the       Lines 3a through 3f.  For lines 3a        expenses properly allocated or 
amount of interest deductions to         through 3e, enter the code for the        apportioned to stock or dividend 
apportion to each separate category      applicable separate category of           income for which a dividends received 
of income (statutory grouping) and to    income (statutory grouping).See           deduction is allowed in section 245A. 
the residual grouping, divide the        Categories of Income, earlier. If code    As such, it includes both foreign 
assets apportioned to the grouping by    “901j” or one of the “RBT” codes          source amounts (i.e., the amounts 
the total assets apportioned and         applies, also enter the applicable        from the applicable statutory 
multiply the result by the interest      country.                                  groupings on lines 3a(1), 3b(1), 3c(1), 
deductions to be apportioned.                                                      3d(1), and 3e(1)) and U.S. source 
                                         Note. If the corporation had more         amounts (i.e., the amount from the 
Example 1.      To determine the         than five separate categories of          residual grouping on line 3f(1)).
amount to enter on line 3a(1), column    income, Schedule H, Part II, line 3       Step 3: Amounts other than section 
(b)(iii), do the following.              must be expanded to properly report       245A dividends – With respect to 
1. Divide the amount entered on          stewardship deductions in column (c),     each applicable statutory grouping, 
line 3a(1), column (a)(i), by the        certain industrial/investor damages in    include the amount in column (f) of 
amount on line 2, column (a)(i).         column (d), and “other deductions” in     line 3a(2), 3b(2), 3c(2), 3d(2), or 3e(2) 
2. Multiply the result by the            column (e). To clarify, in column (e),    in column 14 of the corresponding 
amount on line 2, column (b)(iii).       report all other deductions allocated     Schedule A. For example, if the 
                                         and apportioned based on assets           taxpayer enters "PAS" on Schedule H, 
Example 2.      To determine the         (other than those listed in columns (b),  Part II, line 3a, the taxpayer takes the 
amount to enter on line 3b(2), column    (c), and (d)). See                        total on line 3a(2), column (f) and 
(b)(iv), do the following.               Computer-Generated Schedule H,            includes it in column 14 of the 
1. Divide the amount on line 3b(2),      earlier.                                  Schedule A being completed for the 
column (a)(ii), by the amount on line 2,  Enter on lines 3a through 3e the         Passive Category.
column (a)(ii).                          amount of expenses apportioned to 
2. Multiply the result by the            each separate category of income as       Note. Do not include the amount on 
amount on line 2, column (b)(iv).        further apportioned between dividend      line 3f(2), column (f) in column 14 on 
                                         income eligible to be offset by the       any Schedule A. The amount on 
Column (c)                               deduction under section 245A and all      line 3f(2), column (f) is a residual 
                                         other gross income.                       grouping amount and not an 
Complete this column to apportion         Enter on line 3f the amount of           applicable statutory grouping amount.
stewardship deductions. See              expenses apportioned to income in 
                                                                                   Note. Due to the reporting 
Regulations section 1.861-8(e)(4)(ii).   the residual grouping (U.S. source 
                                                                                   requirement described in step 3 
                                         income) as further apportioned 
                                                                                   above, you do not need to report a 
Column (d)                               between dividend income eligible to 
                                                                                   grand total for amounts other than 
                                         be offset by the deduction under 
                                                                                   section 245A dividends (i.e., the 
Complete this column to apportion        section 245A and all other gross 
                                                                                   amount reported on line 4).
certain industrial/investor damages.     income.
See Regulations section 1.861-8(e)(5)     Attach a schedule that explains in       Part III—Other Deductions
(ii) and (iii).                          detail how the above apportionments       Report in Schedule H, Part III 
                                         were made.
Column (e)                                                                         information pertaining to the allocation 
                                                                                   and apportionment of deductions 
                                         Column (f)
Complete this column to apportion all                                              other than research and experimental 
other deductions allocated and                                                     deductions (reported in Schedule H, 
apportioned based on assets (other       To determine the totals to enter in       Part I) and other than deductions 
than interest deductions, stewardship    column (f), use the following steps.      allocated and apportioned based on 
deductions, and certain industrial/      Step 1:  For each applicable line         assets (reported in Schedule H, Part 
investor damages). See final and         beginning with line 3a(1), enter the      II).
temporary Regulations sections           sum of the amounts in columns (b)(iii),   Column (a). Complete this column to 
1.861-8 and 1.861-14.                    (b)(iv), (c), (d), and (e) in this column apportion officers' compensation 
                                         (f).                                      expense in accordance with the rules 
Line instructions for columns (c),       Step 2:  With respect to section 245A     of Regulations section 1.861-8(b)(3).
(d), and (e)                             dividends, enter the sum of any           Columns (b) and (c). Complete this 
Line 1a. For each column, enter the      amounts entered in column (f) of lines    column to apportion amortization 
total expenses to be allocated and       3a(1), 3b(1), 3c(1), 3d(1), 3e(1), and    deductions and depletion deductions, 
apportioned. See final and temporary     3f(1) on line 4, column (f). Include this respectively, in accordance with the 
Regulations sections 1.861-8 and         line 4 result as a negative amount on     rules of Regulations section 
1.861-14. Also report this amount on     Schedule B, Part II, line 8b.             1.861-8(b)(2) and Temporary 
                                                                                   Regulations section 1.861-8T(c)(1), 
line 2.                                  Note. This is the adjustment required     for example.
                                         by section 904(b)(4) to worldwide 
                                         taxable income to eliminate the 

Instructions for Form 1118 (Rev. 12-2022)          -27-

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Column (d). Complete this column to     (g) requests the sum of any amounts       experimental deductions (reported in 
apportion product liability damages in  entered in columns (a) through (e) for    Schedule H, Part I), and other than 
accordance with the rules of            lines 2a(2), 2b(2), 2c(2), 2d(2), and     deductions allocated and apportioned 
Regulations section 1.861-8(e)(5)(ii).  2e(2). These are amounts other than       based on assets (reported in 
                                        section 245A dividends.                   Schedule H, Part II). See 
Column (e). Complete this column to                                               Computer-Generated Schedule H, 
apportion deductions other than those   Note. Unlike column (f), this column      earlier.
reported on Schedule H, Part I;         (g) does not request a total. Instead, 
                                                                                  Enter on lines 2a through 2e the 
Schedule H, Part II; or Schedule H,     for each applicable statutory 
                                                                                  amount of expenses apportioned to 
Part III, columns (a) through (d). See  grouping, the column (g) total for each 
                                                                                  each separate category of income as 
final and temporary Regulations         applicable line is carried over to 
                                                                                  further apportioned between dividend 
sections 1.861-8 and 1.861-14.          column 14 of the corresponding 
                                                                                  income eligible to be offset by the 
Column (f). Column (f) is a totals      Schedule A. For example, if the 
                                                                                  deduction under section 245A and all 
column. It requests total deductions    taxpayer enters "PAS" on Schedule H, 
                                                                                  other gross income.
allocated and apportioned to section    Part III, line 2a, the taxpayer takes the 
245A dividends. This is the sum of      total on line 2a(2), column (g) and       Enter on line 2f the amount of 
any amounts entered in columns (a)      includes it in column 14 of the           expenses apportioned to income in 
through (e) on lines 2a(1), 2b(1),      Schedule A being completed for the        the residual grouping (U.S. source 
2c(1), 2d(1), 2e(1), and 2f(1). The     Passive Category.                         income) as further apportioned 
                                                                                  between dividend income eligible to 
total is entered on line 3 and is also                                            be offset by the deduction under 
included on Schedule B, Part II,        Line instructions
                                                                                  section 245A and all other gross 
line 8b as a negative number.           Line 1. For each column, enter the        income.
                                        total expenses to be allocated and 
                                                                                  Attach a schedule that explains in 
Note. This is the adjustment required   apportioned.
by section 904(b)(4) to worldwide                                                 detail how the above apportionments 
taxable income to eliminate the         Lines 2a through 2f. For lines 2a         were made.
expenses properly allocated or          through 2e, enter the code for the 
                                                                                  Line 3. See the instructions for 
apportioned to stock or dividend        applicable separate category of 
                                                                                  column (f) above.
income for which a dividends received   income (statutory grouping). See 
deduction is allowed in section 245A.   Categories of Income, earlier. If code 
As such, it includes both foreign       “901j” or one of the “RBT” codes          Schedules I, J, K, and L
source amounts (i.e., the amounts       applies, also enter the applicable        See the separate instructions for 
from the applicable statutory           country.                                  Schedule I, Schedule J, Schedule K, 
groupings on lines 3a(1), 3b(1), 3c(1),                                           and Schedule L to see if the 
3d(1), and 3e(1)) and U.S. source       Note. If the corporation had more 
                                                                                  corporation must file these schedules.
amounts (i.e., the amount from the      than five separate categories of 
residual grouping on line 3f(1)).       income, Schedule H, Part III, line 2 
                                        must be expanded to properly report 
Column (g). With respect to each        deductions other than research and 
applicable statutory grouping, column 

                                                    -28-                          Instructions for Form 1118 (Rev. 12-2022)

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Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the 
United States. You are required to give us the information. We need it to ensure that you are complying with these laws 
and to allow us to figure and collect the right amount of tax.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act 
unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be 
retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax 
returns and return information are confidential, as required by section 6103.
The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden 
for business taxpayers filing this form is approved under OMB control number 1545-0123 and is included in the 
estimates shown in the instructions for their business income tax return.
If you have suggestions for making Form 1118 and related schedules simpler, we would be happy to hear from you. 
You can send us comments from IRS.gov/FormComments. Or you can send your comments to Internal Revenue 
Service, Tax Forms and Publications Division, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not 
send the tax form to this office. Instead, see Where To File in the instructions for the tax return with which this form is 
filed.

Instructions for Form 1118 (Rev. 12-2022)                   -29-

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