Daily Tax Report ®

Spending on Offshore Subsidiaries Could Trim Foreign Tax Credits

Dec. 4, 2019, 9:46 AM

The Treasury Department solved one expense allocation problem for companies but created another in the foreign tax credit rules it recently proposed.

Companies got good news on how to allocate research and development expenses—an issue that could have pushed $40 billion in spending offshore, according to the IRS. A similar expense allocation issue, however, hits what are known as stewardship expenses, spending that protects overseas investments.

In the Dec. 2 proposed guidance (REG-105495-19), the Internal Revenue Service said companies should allocate stewardship expenses the same way they would allocate the much more substantial...

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