Tax News

CCH (cch.taxgroup.com) reports:

Final regulations ease the reporting requirements of a regulated investment company (RIC) that elects under Code Sec. 853 to forgo a deduction or credit for certain foreign taxes paid and pass on those tax items to its shareholders. These final regulations adopt, with modifications, proposed regulations issued September 18, 2006 (NPRM REG-105248-04, TAXDAY, 2007/09/18, I.1). When this election is made, the foreign taxes at issue are added to the RIC's dividends paid deduction. Each shareholder then includes their proportionate share of the foreign taxes in gross income, is treated as having paid that share, and then deducts or claims a credit for their deemed payment of foreign tax.
Because the foreign tax credit regime has been amended to eliminate the per country limitation, a RIC no longer must inform shareholders of the dollar amounts paid to each foreign country. Rather, the statement to the shareholder must provide only the total amount of the shareholder's proportionate share of creditable foreign taxes paid, income from sources within countries described in Code Sec. 901(j), if any, and income derived from sources within other foreign countries or possessions of the United States. Various deadlines, such as the number of days by which a RIC must notify shareholders of its foreign tax passthrough election, have also been extended to reflect statutory changes.
These final regulations also adopt changes to the RIC's IRS reporting requirements. While the regulations retain the general requirement that a RIC must file a statement to elect Code Sec. 853; requirements that such statement be filed with Forms 1099 and 1096 have been eliminated. Final regulations also require that a RIC agree to provide certain information on foreign source income received and foreign taxes paid. Such information is provided on or with a modified Form 1118, Foreign Tax Credit - Corporations, but the IRS may issue future advice changing the form used for this reporting requirement.
The final regulations are applicable for RIC taxable years ending on or after December 31, 2007. For reporting purposes, however, a taxpayer may rely on the current regulations for a taxable year ending on or after December 31, 2007, but beginning before August 24, 2007.
T.D. 9357, 2007FED ¶47,064
Other References:
Code Sec. 853
CCH Reference - 2007FED ¶26,441
CCH Reference - 2007FED ¶26,442
CCH Reference - 2007FED ¶26,443
CCH Reference - 2007FED ¶26,444
Tax Research Consultant
CCH Reference - TRC RIC: 3,350