1116 Schedule C Instructions for Schedule C (Form 1116)

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Instructions for Schedule C
(Form 1116)

Department of the Treasury
Internal Revenue Service

(December 2022)

Foreign Tax Redeterminations

DRAFT AS OF
November 8, 2022

Section references are to the Internal Revenue Code
unless otherwise noted.

Future Developments

For the latest information about developments related to
Schedule C (Form 1116) and its instructions, such as
legislation enacted after they were published, go to
IRS.gov/Form1116.

General Instructions
What’s New

Schedule C has been revised. Part I, column 13, now
requests "Reference ID Number for Contested Tax, if
applicable" to reflect Regulations section 1.905-1(d)(4)
and new Form 7204, Consent To Extend the Time To
Assess Tax Related to Contested Foreign Income
Taxes—Provisional Foreign Tax Credit Agreement.
We added new Part V, Annual Reporting for Contested
Taxes, to be used by taxpayers beginning with the 2023
tax year to comply with the annual notice requirement
described in Regulations section 1.905-1(d)(4)(iv). For
each tax year following the year in which a provisional
foreign tax credit election is made on Form 7204, up to
and including the tax year in which the contest is resolved,
the taxpayer must provide the information requested in
Part V.

Purpose of Schedule

Schedule C (Form 1116) is used to identify current year
foreign tax redeterminations in each separate category,
the years to which they relate, and other information that
satisfies your obligation to notify the IRS of foreign tax
redeterminations that occurred in the current year that
relate to prior years.
Use Part I to report foreign tax redeterminations that
resulted in an increase in the amount of foreign taxes
accrued and paid by the taxpayer.
Note. If you claim credit for foreign taxes on the cash
basis method of accounting (you checked the box for
“Paid” on Form 1116, Part II), and you pay additional
foreign income taxes that relate to a prior tax year, that
isn’t a foreign tax redetermination. You don’t report those
additional foreign taxes paid in Part I of Schedule C. You
report those as foreign taxes paid on Form 1116, Part II,
filed for the tax year in which you paid the additional
foreign taxes.
Use Part II to report foreign tax redeterminations that
resulted in a decrease in the amount of foreign taxes paid
or accrued by the taxpayer.
Nov 7, 2022

Use Part III to report foreign tax redeterminations that
resulted in a change in the amount of foreign taxes paid or
accrued in any relation back year.
Use Part IV to report foreign tax redeterminations that
resulted in a change in the U.S. tax liability for any relation
back year or other affected tax year (for example, by
reason of a change in allowable foreign tax credit
carryovers).
Use Part V to satisfy the annual reporting requirement
under Regulations section 1.905-1(d)(4)(iv) for contested
foreign income taxes for which the taxpayer claimed a
provisional foreign tax credit beginning with the 2023 tax
year.

Who Must File

Any taxpayer that has a foreign tax redetermination under
section 905(c) must complete this schedule and attach it
to the income tax return for the tax year in which the
foreign tax redetermination occurs. This schedule must be
filed irrespective of whether the foreign tax
redetermination changed your U.S. tax liability.
Note. If your U.S. tax liability for any year changes by
reason of the foreign tax redetermination, you must file an
amended return for the tax year with respect to which the
U.S. tax liability is adjusted, in addition to filing
Schedule C for the year in which the foreign tax
redetermination occurs. See Foreign Tax
Redeterminations in the Instructions for Form 1116 for
additional information regarding foreign tax
redeterminations that result in a change in U.S. tax liability
and the related reporting requirements.
If a foreign tax redetermination doesn’t change the
amount of U.S. tax due for any tax year, you don’t need to
file an amended return. You satisfy your reporting
requirements under Regulations section 1.905-4(b)(1)(v)
with respect to the foreign tax redetermination by filing a
Schedule C with the return for the tax year in which the
foreign tax redetermination occurs.

Definitions
Foreign tax redetermination. A foreign tax
redetermination means a change in the liability for foreign
income taxes including if:
• Accrued foreign taxes when paid or later adjusted
differ from the amounts claimed as credits (including
corrections to accrued amounts to reflect final foreign tax
liability and additional payments of tax that accrue after
the close of the tax year to which the tax relates);
• Accrued foreign taxes aren’t paid within 24 months
after the close of the tax year to which they relate; or
• Any foreign tax paid is fully or partially refunded.

Cat. No. 37575M

have an ownership interest, enter the information for that
entity.
For additional information on EINs and reference IDs,
see Reference ID numbers in the Instructions for Form
1118.
Parts I and II, column 3. Enter the code for the
country or U.S. possession to which tax is paid using the
country codes provided at IRS.gov/CountryCodes.
Parts I and II, column 6. Enter the payor’s income
subject to tax in the foreign jurisdiction, as reported on the
foreign tax return.
Parts I and II, column 9. Enter the exchange rate
originally used to convert the local currency (in which the
redetermined foreign tax was paid) to U.S. dollars.
Parts I and II, column 11. Enter the U.S. dollar
amount of foreign tax of each payor entity that was
reported by the taxpayer on its original or amended return
(not taking into account the foreign tax redetermination).

Relation back year. Relation back year means the U.S.
tax year in which the foreign taxes being redetermined
were originally taken into account.
Example. In U.S. tax year 1, you took into account $2
million of Country X foreign income taxes accrued with
respect to the foreign tax year that ended within U.S. tax
year 1. In year 3, Country X assessed an additional $1
million of taxes with respect to the foreign tax year that
ended within U.S. tax year 1. The relation back year is
U.S. tax year 1.

DRAFT AS OF
November 8, 2022

Affected tax year. Affected tax year means any tax year
for which the U.S. tax liability is changed as a result of a
foreign tax redetermination. This includes tax years in
which the U.S. tax liability is changed as a result of a
change in a carryover of a tax attribute, such as a foreign
tax credit carryover or a net operating loss carryover, from
a relation back year.
Functional currency. Functional currency means the
dollar, or in the case of a qualified business unit (QBU),
the currency of the economic environment in which a
significant part of such unit’s activities are conducted and
which is used by such unit in keeping its books and
records. See section 985(b).

Part I

Columns 4 and 5. Enter the date the additional foreign
taxes were paid and the ending date of the foreign tax
year to which such taxes relate.
Column 7. Enter the amounts of additional tax accrued in
the local currency in which the tax is payable.

Reference ID number for contested tax. See the
Instructions for Form 7204 for the definition of and
requirements for the reference ID number for contested
tax.

Column 8. Enter the amounts of the additional tax
denominated in the functional currency of the payor that
accrued the additional tax.

Specific Instructions

Column 13. Enter the reference ID number for the
contested tax, if applicable, using the reference ID
number reported on Form 7204 filed with respect to the
contested tax.

Important: All information reported on Schedule C must
be in English. All amounts must be stated in U.S. dollars,
unless otherwise specified on the schedule.

Part II

If there are more than three payor entities for a relation
back year, attach a statement that lists all information
requested on Schedule C for those payor entities
following the format of Schedule C. If there are more than
2 relation back years (Parts I, II, III, or IV), there are other
affected years in addition to the relation back years (Part
IV), or more than 5 relation back years (Part V), attach a
statement that lists all information requested on
Schedule C for those years following the format of
Schedule C.

Columns 4 and 5. Enter the date the foreign taxes were
refunded or deemed refunded and the ending date of the
foreign tax year to which such taxes relate. If the foreign
taxes are deemed refunded by reason of the section
905(c)(2) two-year rule described in the Note in the
instructions for column 13, enter in column 4 the date that
is 24 months after the close of the tax year to which the
foreign taxes relate.

Checkboxes at top of page 1. Use a separate
Schedule C for each applicable category of income and
check the corresponding box. Check only one box for
each completed Schedule C.
See Categories of Income in the Instructions for Form
1116 for additional information regarding separate
categories. For country codes on lines (h) and (i), see
IRS.gov/CountryCodes for the code to use.

Column 8. Enter the amount refunded or deemed
refunded denominated in the functional currency of the
payor that paid or accrued the refunded amount.

Column 7. Enter the amount of the tax refunded or
deemed refunded in the local currency in which the tax is
payable.

Column 13. Check the box if the foreign tax
redetermination is a result of the application of the section
905(c)(2) two-year rule.

Parts I, II, III, and IV, column 1. In this column, enter the
ending date of the relation back year or affected year (Part
IV).

Note. Under section 905(c)(2), if accrued foreign income
taxes aren’t paid on or before the date that is 24 months
after the close of the tax year to which they relate, there is
a resulting foreign tax redetermination that is accounted
for as if the unpaid portion of the foreign income taxes
were refunded on that date. Credit may be claimed for
those taxes if and when they are ultimately paid. Foreign
income taxes that first accrue after the date 24 months

Parts I and II, columns 2a and 2b. In columns 2a and
2b, enter the name and the employer identification
number (EIN) or reference ID of the payor. If you paid the
tax directly, enter your name. If the tax was paid by a
pass-through entity, such as a partnership, in which you
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Instructions for Schedule C (Form 1116) (12-2022)

after the close of the tax year to which the taxes relate
may not be claimed as a credit until paid.

Columns 8 and 9. Enter the date the contest was
resolved and the amount of tax refunded or additional tax
paid, if any. Any portion of a contested foreign income tax
liability for which a provisional credit is claimed that is
subsequently refunded or any additional amounts of
foreign income tax paid results in a foreign tax
redetermination that must be reported on Schedule C.

Part III
Columns 2 and 3. Enter the redetermined foreign taxes
paid or accrued and the foreign taxes paid or accrued per
your original or previously amended return.

DRAFT AS OF
November 8, 2022
Additional Information

Columns 4 and 5. Enter the total amount of foreign tax
credit claimed in the separate category on your original or
previously amended return and the total amount of foreign
tax credit claimed after the foreign tax redetermination.

For more information, see section 905(c) and Regulations
sections 1.905-3, 1.905-4, and 1.905-5.

Part IV

Paperwork Reduction Act Notice.

We ask for the information on Schedule C to carry out the
Internal Revenue laws of the United States. You're
required to give us the information. We need it to ensure
that you're complying with these laws and to allow us to
figure and collect the right amount of tax.

Columns 2 through 4. Enter the total redetermined U.S.
tax liability, the total U.S. tax liability reported on your
original or previously amended return, and the difference
(subtracting column 3 from column 2) for each affected
tax year.

You're 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.

Part V

Don't complete Part V for the 2022 tax year.
Beginning with the 2023 tax year, taxpayers will
CAUTION enter the information requested on Schedule C,
Part V, using the instructions provided next.

!

Column 1. For taxpayers that claim credits on the
accrual basis, enter the relation back year. For taxpayers
that claim credits on the cash basis, enter the year in
which the contested foreign income tax liability was
remitted to the foreign country. The tax year entered on
column 1 should correspond with the tax year entered on
line 1 on Form 7204 that was filed in order to claim a
provisional credit for the contested tax.

The time needed to complete and file Schedule C will
vary depending on individual circumstances. The
estimated burden for individual taxpayers filing this form is
approved under OMB control number 1545-0074 and is
included in the estimates shown in the instructions for
their individual income tax return. The estimated burden
for all other taxpayers who file this form is:
Recordkeeping, 14 min.; Learning about the law or
the form, 14 min.; Preparing the form, 15 min.

Column 2. Enter the name of the payor. If you paid the
tax directly, enter your name. If the tax was paid by a
pass-through entity, such as a partnership, in which you
have an ownership interest, enter the name of that entity.

If you have comments concerning the accuracy of
these time estimates or suggestions for making this form
simpler, we would be happy to hear from you. You can
write to the IRS at the address listed in the instructions of
the tax return with which this form is filed.

Column 3. Enter the reference ID number for the
contested tax that was used on Form 7204.
Columns 4 and 5. Enter the code of the country or U.S.
possession to which the tax was paid using the country
codes provided at IRS.gov/CountryCode and the amount
of contested tax that was provisionally claimed as credit.
Columns 6 and 7. Check the box in column 6 if the
contest is still ongoing and check the box in column 7 if
the contest was resolved.

Instructions for Schedule C (Form 1116) (12-2022)

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