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Unanswered questions Timing differences: As mentioned, income taxes relating to nonconforming
Foreign taxes “taken into ac- the second prong of the two-prong test foreign tax years and how that impacts
count”: As mentioned, Sec. 59(l) pro- requires that the foreign income taxes FTCs in the corporate AMT, includ-
vides that, for purposes of the corporate are “paid or accrued (for federal income ing rules for utilization of FTCs in the
AMT FTC, foreign income taxes must tax purposes)” by the relevant corpora- first year.
be “taken into account” on the relevant tion. However, it is unclear whether, Foreign tax redeterminations: A
applicable financial statement and to be eligible for the corporate AMT foreign tax redetermination under Sec.
“paid or accrued (for federal income tax FTC, foreign income taxes must accrue 905(c) may change the amount of a cor-
purposes)” by the relevant corporation. in the same tax year of the applicable porate AMT FTC previously claimed
Thus, foreign income taxes are eligible corporation for financial statement and and an applicable corporation’s tentative
for the corporate AMT FTC only if a tax return purposes. Thus, it is unclear minimum tax for the tax year in which
two-prong test is met. how differences in foreign tax, U.S. tax, the corporate AMT FTC was claimed.
As currently drafted, it is unclear and U.S. financial statement year ends A foreign tax redetermination gen-
what “taken into account” on the may affect such qualification. In many erally occurs if there is a change in a
relevant applicable financial statements circumstances, the timing of the accrual taxpayer’s foreign tax liability that affects
means for purposes of the corporate of foreign income taxes will differ for a taxpayer’s previously claimed FTC.
AMT FTC. For example, does this financial statement and U.S. federal For example, assume a taxpayer claims
refer to the current tax expense on the income tax purposes. Further, in certain an FTC in year 1 based on foreign
financial statements, or the total tax countries (e.g., India), some companies taxes paid or accrued in year 1. In year
expense on the financial statements are required to have a fiscal year end for 3, the taxpayer is audited by the foreign
(that includes both current tax and local tax purposes that differs from the country, and the taxpayer’s original tax
deferred tax expense/benefit)? Sec. U.S. tax year required under Sec. 898. liability for year 1 is adjusted. Such a
56A(c)(5) — the rule that provides that These timing differences could cre- redetermination impacts the amount of
AFSI shall be adjusted to disregard ate particular issues in the very first year FTC claimed in year 1.
federal income taxes, or income, war of corporate AMT applicability. For Sec. 905(c) specifies three main types
profits, or excess profit taxes (within example, assume an applicable corpora- of foreign tax changes that result in a
the meaning of Sec. 901) with respect tion has a financial statement and U.S. foreign tax redetermination: (1) if for-
to a foreign country or possession of federal income tax year end of Dec. 31 eign income taxes paid or later adjusted
the United States that are taken into and a foreign income tax year end of differ from amounts accrued by the
account on the taxpayer’s applicable June 30. The corporate AMT provisions taxpayer and claimed as an FTC; (2)
financial statements — provides that are first effective for the U.S. tax year if accrued foreign income taxes are not
“[t]he Secretary shall prescribe such ended Dec. 31, 2023. For purposes of paid within two years after the close of
regulations or other guidance as may the corporate AMT FTC, the foreign the tax year to which the taxes relate; or
be necessary and appropriate to provide income taxes paid for the period July 1, (3) if there is a refund of foreign income
for the proper treatment of current 2022, to June 30, 2023, are taken into taxes previously paid. Sec. 905(c) and the
and deferred taxes for purposes of this account (at the end of such tax year and regulations thereunder provide specific
paragraph, including the time at which in the first effective corporate AMT rules as to when and how any adjust-
such taxes are properly taken into year), as these taxes have been both (1) ments to a taxpayer’s foreign income
account.” accrued for financial statement purposes tax liability are taken into account for
Further, some income items are and (2) accrued for U.S. federal income purposes of the FTC.
reported on the applicable financial tax purposes as of June 30, 2023. How- It is unclear how foreign tax redeter-
statements as a single, net-of-tax item, ever, the income subject to the corporate minations will be taken into account for
and foreign taxes may be reported net AMT provisions would be Jan. 1, 2023, purposes of the corporate AMT FTC.
of an FTC benefit in the effective tax through Dec. 31, 2023. The foreign income taxes might not be
rate rather than reported separately as a Notably, during the legislative pro- taken into account on the applicable
gross income item and a corresponding cess, Finance Committee Chairman financial statement of the relevant cor-
tax expense. As drafted, it is unclear Sen. Ron Wyden, D-Ore., clarified in a poration in the year to which the foreign
whether taxes that are reported on a net colloquy (168 Cong. Rec. 4166 (2022)) income taxes relate (i.e., they might be
rather than gross basis are considered with Sen. Bob Menendez, D-N.J., that taken into account on the applicable
“taken into account” for purposes of the Treasury will have regulatory authority financial statement in the tax year in
corporate AMT FTC. to address potential issues with foreign which the redetermination occurs).

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