i1118--2023-12-00

Instructions for Form 1118

Department of the Treasury
Internal Revenue Service

(Rev. December 2023)

(Use with the December 2022 revision of Form 1118, the December 2023 revision of
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
Revenue Code unless otherwise noted.

Future Developments
For the latest information about
developments related to Form 1118
and its instructions, such as legislation
enacted after they were published, go
to IRS.gov/Form1118.

What’s New
Final foreign tax credit regulations.
Final foreign tax credit regulations
were published January 4, 2022. The
new regulations made changes to the
rules relating to the creditability of
foreign taxes under sections 901 and
903, the applicable period for claiming
a credit or deduction for foreign taxes,
and the new election to claim a
provisional credit for contested foreign
taxes. A Notice was subsequently
released on July 21, 2023, allowing
taxpayers to apply prior rules in place
of certain rules provided in the new
regulations. The rules described in
this Notice were modified in part by a
Notice released on December 11,
2023, to address their application to
partnerships and their partners and to
extend the relief period until further
notice. For more information, see
Treasury Decision 9959, 2022-03
I.R.B. 328, available at IRS.gov/irb/
2022-03_IRB#TD-9959, Notice
2023-55, 2023-32 I.R.B. 427,
available at IRS.gov/irb/
2023-32_IRB#NOT-2023–55, and
Notice 2023-80, 2023-52 I.R.B. 1583,
available at IRS.gov/irb/
2023-52_IRB#NOT-2023-80.
Corporate Alternative Minimum
Tax Foreign Tax Credit. Form 1118
is not used to determine foreign tax
credits for purposes of calculating the
Corporate Alternative Minimum Tax
(CAMT) under section 55, enacted
under the Inflation Reduction Act of
2022, P.L. 117-169. Corporate
Jan 16, 2024

taxpayers are required to use the
revised Form 4626 for determining
foreign tax credits for purposes of
calculating the CAMT tax liability, if
any, under section 55.

Reminders

On December 22, 2017, Congress
enacted the Tax Cuts and Jobs Act,
P.L. 115-97 (the “Act”). The Act
changes the computation of foreign
tax credits for post-2017 tax years as
follows.
• Two new separate categories of
income under section 904(d): (i) any
amount includible in gross income
under section 951A (other than
passive category income) (“section
951A category income”), and (ii)
foreign branch category income.
• Repeal of section 902 indirect
credits with respect to dividends from
foreign corporations.
• Modified indirect credits under
section 960 for inclusions under
sections 951(a)(1) and 951A.
• Modified section 78 gross-up with
respect to inclusions under sections
951(a)(1) and 951A.
• Revised sourcing rule for certain
income from the sale of inventory
under section 863(b).
• Repeal of the fair market value
method for apportioning interest
expense under section 864(e).
• New adjustments for purposes of
section 904 with respect to expenses
allocable to certain stock or dividends
for which a dividends received
deduction is allowed under section
245A.
• Election to increase pre-2018
section 904(g) overall domestic loss
(ODL) recapture.
• Limited foreign tax credits with
respect to inclusions under section
965.

Cat. No. 10905I

General Instructions
Purpose of Form

Use Form 1118 to compute a
corporation's foreign tax credit for
certain taxes paid or accrued to
foreign countries or U.S. possessions.
See Taxes Eligible for a Credit, later.

Who Must File

Any corporation that elects the
benefits of the foreign tax credit under
section 901 must complete and attach
Form 1118 to its income tax return. In
addition, even if a corporation has not
elected to credit foreign taxes, it must
complete and attach Schedules A and
J of a Form 1118 to its income tax
return if it has any additions to,
reductions to, or recapture of any new
or existing overall foreign loss, overall
domestic loss, or separate limitation
loss accounts. See Regulations
section 1.904(f)-1(b).
Also, even if a taxpayer has not
elected to credit foreign taxes, if it has
a foreign tax redetermination under
section 905(c), it must complete and
attach Schedule L of a Form 1118 to
its income tax return for the taxable
year in which the foreign tax
redetermination occurs. Schedule L
must be submitted irrespective of
whether the foreign tax
redetermination changed the
taxpayer's U.S. tax liability."
Also, individuals must complete
and attach a Form 1118 to their
income tax return if they make the
election under section 962 to be taxed
at corporate rates on the amount they
must include in gross income under
sections 951(a) and 951A from their
controlled foreign corporations in
order to be eligible to claim a foreign
tax credit based on their share of
foreign income taxes paid or accrued
by the controlled foreign corporation.

See sections 960 and 962 and Pub.
514 for more information on how to
complete Form 1118 in this case.

When To Make the Election
The election to claim the foreign tax
credit for any tax year may be made or
changed at any time before the end of
a special 10-year period described in
section 6511(d)(3) (or section 6511(c)
if the period is extended by
agreement). The election to claim a
deduction in lieu of a credit for foreign
income taxes may be made or
changed at any time before the end of
the period prescribed by section
6511(a) or 6511(c). See Regulations
section 1.901-1(d).

Computer-Generated
Form 1118

The corporation may submit a
computer-generated Form 1118 and
schedules if they conform to the IRS
version. However, if a software
program is used, it must be approved
by the IRS for use in filing substitute
forms. This ensures the proper
placement of each item appearing on
the IRS version. For more information,
see Pub. 1167, General Rules and
Specifications for Substitute Forms
and Schedules.

How To Complete
Form 1118
Important. Complete a separate
Schedule A; Schedule B, Parts I & II;
Schedules C through G; Schedule I;
Schedule K; and Schedule L, Parts I,
II, III, & V for each applicable separate
category of income. See Categories
of Income, later. Complete
Schedule B, Part III; Schedule H;
Schedule J and Schedule L, Part IV
only once.
• Use Schedule A to compute the
corporation's income or loss before
adjustments for each applicable
category of income.
• Use Schedule B to determine the
total foreign tax credit after certain
reductions.
• Use Schedule C to compute taxes
deemed paid by the domestic
corporation filing the return with
respect to inclusions under section
951(a)(1).
• Use Schedule D to compute taxes
deemed paid by the domestic
corporation filing the return with
2

respect to inclusions under section
951A.
• Use Schedule E to compute taxes
deemed paid by the domestic
corporation filing the return with
respect to distributions of previously
taxed income (also referred to as
previously taxed earnings and profits
(PTEP)).
• Use Schedule G to report required
reductions of tax paid, accrued, or
deemed paid.
• Use Schedule H to apportion
deductions that cannot be allocated to
an item or class of income identified
on Schedule A.
• Use Schedule I (a separate
schedule) to compute reductions of
taxes paid, accrued, or deemed paid
on foreign oil and gas income.
• Use Schedule J (a separate
schedule) to compute adjustments to
separate limitation income or losses in
determining the numerators of
limitation fractions, year-end
recharacterization balances, and
overall foreign and domestic loss
account balances.
• Use Schedule K (a separate
schedule) to reconcile the
corporation's prior-year foreign tax
carryover with its current-year foreign
tax carryover.
• Use Schedule L (a separate
schedule) to report foreign tax
redeterminations that occurred in the
current taxable year and that relate to
prior taxable years.

Categories of Income

Compute a separate foreign tax credit
(using a separate Form 1118) for each
applicable separate category
described below. Enter the applicable
code from the table below, in item a at
the top of page 1 of Form 1118, to
indicate the separate category with
respect to which you are completing a
given Form 1118.

Code

Category of Income

951A

Section 951A Category
Income

FB

Foreign Branch Category
Income

PAS

Passive Category Income

901j

Section 901(j) Income

RBT PAS U.S. Source Passive
Category Income
Resourced by Treaty as
Foreign Source Passive
Category Income
RBT GEN U.S. Source General
Category Income
Resourced by Treaty as
Foreign Source General
Category Income
RBT FB

U.S. Source Foreign
Branch Income
Resourced by Treaty as
Foreign Source Foreign
Branch Category Income

RBT 951A U.S. Source Section
951A Category Income
Resourced by Treaty as
Foreign Source Section
951A Category Income
GEN

General Category Income

If you enter code "901j" or one of
the "RBT" codes in item a, also
complete item b or item c using the
country codes provided at IRS.gov/
CountryCodes.

Section 951A Category Income

Section 951A category income is any
amount of global intangible low-taxed
income (GILTI) includible in gross
income under section 951A (other
than passive category income).
Section 951A defines GILTI.
• When completing a Form 1118 for
section 951A category income, enter
the code "951A" on line a at the top of
page 1.
• Section 951A category income
does not include passive category
income.

Foreign Branch Category
Income

Foreign branch income is defined
under section 904(d)(2)(J)(i) as the
business profits of a U.S. person
which are attributable to one or more
qualified business units (QBUs) (as

Instructions for Form 1118 (Rev. 12-2023)

defined in section 989(a)) in one or
more foreign countries. For more
information on the computation of
foreign branch category income, see
Regulations section 1.904-4(f).
• When completing a Form 1118 for
foreign branch category income, enter
the code "FB" on line a at the top of
page 1.
• Foreign branch category income
does not include passive category
income.
• Foreign branch category income is
effective for tax years of U.S. persons
beginning after December 31, 2017.

Passive Category Income

Passive category income includes
passive income and specified passive
category income. When completing a
Form 1118 for passive category
income, enter the code "PAS" on line
a at the top of page 1.
Passive income. Generally, passive
income is the following:
• Any income received or accrued
that would be foreign personal holding
company income (defined in section
954(c)) if the corporation were a
controlled foreign corporation (CFC)
(defined in section 957). This includes
any gain on the sale or exchange of
stock that is more than the amount
treated as a dividend under section
1248. However, in determining if any
income would be foreign personal
holding company income, the rules of
section 864(d)(6) will apply only for
income of a CFC.
• Any amount includible in gross
income under section 1293 (which
relates to certain passive foreign
investment companies (PFICs)).
Passive income does not include:
• Any financial services income,
• Any export financing interest unless
it is also related person factoring
income (see section 904(d)(2)(G) and
Regulations section 1.904-4(h)(3)),
• Any high-taxed income (see
Regulations section 1.904-4(c)), or
• Any active rents or royalties. See
Regulations section 1.904-4(b)(2)(iii)
for definitions and exceptions.
Note. Certain income received from a
CFC and certain dividends from
noncontrolled 10%-owned foreign
corporations that would otherwise be
passive income are treated as passive
category income only to the extent
provided under the look-through rules.
See Look-Through Rules, later.
Instructions for Form 1118 (Rev. 12-2023)

Specified passive category income. This term includes:
• Dividends from a domestic
international sales corporation (DISC)
or former DISC (as defined in section
992(a)) to the extent such dividends
are treated as foreign source income,
and
• Distributions from a former foreign
sales corporation (FSC) out of
earnings and profits attributable to
foreign trade income or interest or
carrying charges (as defined in
section 927(d)(1), before its repeal)
derived from a transaction which
results in foreign trade income (as
defined in section 932(b), before its
repeal).

Section 901(j) Income

No credit is allowed for foreign income
taxes imposed by and paid or accrued
to certain sanctioned countries.
However, a foreign tax credit may be
claimed for foreign income taxes paid
or accrued with respect to section
901(j) income if such tax is paid or
accrued to a country other than a
sanctioned country.
Income derived from each
sanctioned country is subject to a
separate foreign tax credit limitation.
Therefore, the corporation must use a
separate Form 1118 for income
derived from each such country.
On each Form 1118, enter the code
“901j” on line a at the top of page 1
and identify the applicable country
using the two-letter codes (from the
list at IRS.gov/CountryCodes).
Sanctioned countries are those
designated by the Secretary of State
as countries that repeatedly provide
support for acts of international
terrorism, countries with which the
United States does not have
diplomatic relations, or countries
whose governments are not
recognized by the United States. As of
the date these instructions were
revised, section 901(j) applied to
income derived from Iran, North
Korea, Sudan, and Syria. For more
information, see section 901(j).
Note. The President of the United
States has the authority to waive the
application of section 901(j) with
respect to a foreign country if it is (a)
in the national interest of the United
States and will expand trade and
investment opportunities for domestic

companies in such foreign country,
and (b) the President reports to the
Congress, not less than 30 days
before the waiver is granted, the
intention to grant such a waiver and
the reason for such waiver.
Note. Effective December 10, 2004,
the President waived the application
of section 901(j) with respect to Libya.

Income Re-Sourced by Treaty

If a sourcing rule in an applicable
income tax treaty treats any U.S.
source income as foreign source, and
the corporation elects to apply the
treaty, the income will be treated as
foreign source.

Important. The corporation must
compute a separate foreign tax credit
limitation for any such income for
which it claims benefits under a treaty.
See Regulations sections 1.904-4(k)
and 1.904-5(m)(7) for grouping rules
and exceptions. On each Form 1118,
enter one of the RBT codes listed
below on line a at the top of page 1
and identify the applicable treaty
country on line c at the top of page 1
using the two-letter codes (from the
list at IRS.gov/CountryCodes).
Code “RBT PAS.” If an applicable
income tax treaty treats any U.S.
source passive category income as
foreign source passive category
income, and the corporation elects to
apply the treaty, on Form 1118, enter
code “RBT PAS” on line a at the top of
page 1.
Code “RBT GEN.” If an applicable
income tax treaty treats any U.S.
source general category income as
foreign source general category
income, and the corporation elects to
apply the treaty, on Form 1118, enter
code “RBT GEN” on line a at the top
of page 1.
Code “RBT FB.” If an applicable
income tax treaty treats any U.S.
source foreign branch category
income as foreign source foreign
branch category income, and the
corporation elects to apply the treaty,
on Form 1118, enter code “RBT FB”
on line a at the top of page 1.
Code “RBT 951A.” If an applicable
income tax treaty treats any U.S.
source section 951A category income
as foreign source section 951A
category income, and the corporation
3

elects to apply the treaty, on Form
1118, enter code “RBT 951A” on line a
at the top of page 1.

General Category Income

This category includes all income not
described above. When completing a
Form 1118 for the general category of
income, enter code "GEN" on line a at
the top of page 1. This category
includes high-taxed income that is not
otherwise treated as another category
of income. Usually, income is high
taxed if the total foreign income taxes
paid, accrued, or deemed paid by the
corporation for that income exceed
the highest rate of tax specified in
section 11 (and with reference to
section 15, if applicable), multiplied by
the amount of such income (including
the amount treated as a dividend
under section 78). For more
information, see Regulations section
1.904-4(c). Also see the instructions
for Schedule A, later, for additional
reporting requirements.
This category also includes
financial services income (defined
below) not described above if the
corporation is a member of a financial
services group (as defined in section
904(d)(2)(C)(ii)) or is predominantly
engaged in the active conduct of a
banking, insurance, financing, or
similar business.

Financial services income.
Financial services income is income
received or accrued by a member of a
financial services group or any
corporation predominantly engaged in
the active conduct of a banking,
insurance, financing, or similar
business if the income is:
• Described in section 904(d)(2)(D)
(ii),
• Passive income (determined
without regard to section 904(d)(2)(B)
(iii)(II)), or
• Incidental income described in
Regulations section 1.904-4(e)(4).
Note. If the corporation qualified as a
financial services entity because it
treated certain amounts as active
financing income that are not listed in
Regulations sections 1.904-4(e)(2)(i)
(A) through (X), but that are described
as similar items in Regulations section
1.904-4(e)(2)(i)(Y), attach a statement
to Form 1118 showing the types and
amounts of the similar items.

4

Special Rules
Source Rules for Income

Determine income or (loss) for each
separate category on Schedule A
using the general source rules of
sections 861 through 865 and related
regulations, the special source rules
of section 904(h) described below,
and any applicable source rules
contained in any applicable tax
treaties.

Special source rules of section
904(h). Usually, the following income
from a U.S.-owned foreign
corporation, otherwise treated as
foreign source income, must be
treated as U.S. source income under
section 904(h).
• Any subpart F income, foreign
personal holding company income,
GILTI, or income from a qualified
electing fund that a U.S. shareholder
is required to include in its gross
income if such amount is attributable
to the U.S.-owned foreign
corporation's U.S. source income.
• Interest that is properly allocable to
the U.S.-owned foreign corporation's
U.S. source income.
• Dividends equal to the U.S. source
ratio (defined in section 904(h)(4)(B)).
The rules regarding interest and
dividends described above do not
apply to a U.S.-owned foreign
corporation if less than 10% of its
earnings and profits (E&P) for the tax
year is from U.S. sources.

Amounts That Do Not
Constitute Income Under
U.S. Tax Principles

Creditable foreign taxes that are
imposed on amounts that do not
constitute income under U.S. tax
principles are treated as imposed on
income described in section 904(d)(1)
(B). See section 904(d)(2)(H).

Look-Through Rules
CFCs. Generally, dividends, interest,
rents, and royalties received or
accrued by the taxpayer are passive
category income. However, if these
items are received or accrued by a
10% U.S. shareholder from a CFC,
they may be assigned to other
separate categories, or may be
treated as passive category income
under the look-through rules of
section 904(d)(3). Dividends include

any amount included in gross income
under section 951(a)(1)(B).
Look-through rules also apply to
subpart F inclusions under section
951(a)(1)(A) and GILTI inclusions
under section 951A(a) to the extent
attributable to income of the CFC in
the passive category.
For more information and
examples, see section 904(d)(3) and
Regulations section 1.904-5.
Noncontrolled 10%-owned foreign
corporations. Generally, dividends
received or accrued by the taxpayer
are passive category income.
However, dividends received or
accrued from a noncontrolled
10%-owned foreign corporation may
be assigned to other separate
categories under the look-through
rules of section 904(d)(4).
Certain amounts paid by a domestic corporation to a related corporation. Look-through rules also apply
to foreign source interest, rents, and
royalties paid by a domestic
corporation to a related corporation.
See Regulations section 1.904-5(g).

Other Rules
Certain transfers of intangible
property. See section 367(d)(2)(C)
for a rule that clarifies the treatment of
certain transfers of intangible property.

Reporting Foreign Tax
Information From Partnerships

If you received a Schedule K-3 (Form
1065) or a Schedule K-3 (Form 8865)
from a partnership that includes
foreign tax information, use the rules
below to report that information on
Form 1118.

Schedule K-3, Part II, Section 1
Gross income sourced at partner
level. This includes income from the
sale of most personal property other
than inventory, depreciable property,
and certain intangible property
sourced under section 865. This gross
income will generally be U.S. source
and therefore will not be reported on
Form 1118.
Foreign gross income sourced at
partnership level. Report on
Schedule A.

Instructions for Form 1118 (Rev. 12-2023)

Schedule K-3, Part II, Section 2
Deductions allocated and apportioned at partner level and partnership level. Report on Schedule A or
Schedule H.
Schedule K-3, Part III, Sections 1
through 3
R&E expenses apportionment factors. Report on Schedule H, Part I.

attributable to a separate category,
multiply the net U.S. source capital
loss by the amount of capital gain net
income from sources outside the
United States in the separate
category divided by the aggregate
amount of capital gain net income
from sources outside the United
States in all separate categories with
capital gain net income from sources
outside the United States.

Foreign-derived intangible income
(FDII) deduction apportionment
factors. Report on Schedule H, Part
II.

See section 904(b)(2)(B) for
special rules regarding adjustments to
account for capital gain rate
differentials (as defined in section
904(b)(3)(D)) for any tax year. At the
time these instructions went to print,
there was no capital gain rate
differential for corporations.

Schedule K-3, Part III, Section 4

Credit Limitations

Interest expense apportionment
factors. Report on Schedule H, Part
II.

Total foreign taxes paid or accrued. Report on Schedule B.
Foreign tax redeterminations.
Report on Schedule L.
Reduction in taxes available for
credit. Report on Schedule G.
Schedule K-3 (Form 1065), Part VIII
Partner’s interest in foreign corporation income (Section 960).
Report on Schedule C or D, as
applicable.
Note. Schedule K-3 (Form 8865)
does not contain a part equivalent to
Schedule K-3 (Form 1065), Part VIII.

Capital Gains

Foreign source taxable income or
(loss) before adjustments in all
separate categories in the aggregate
should include gain from the sale or
exchange of capital assets only up to
the amount of foreign source capital
gain net income (which is the smaller
of capital gain net income from
sources outside the United States or
capital gain net income). Therefore, if
the corporation has capital gain net
income from sources outside the
United States in excess of the capital
gain net income reported on its tax
return, enter a pro rata portion of the
net U.S. source capital loss as a
negative number on Schedule A,
column 13(j), for each separate
category with capital gain net income
from sources outside the United
States. To figure the pro rata portion of
the net U.S. source capital loss
Instructions for Form 1118 (Rev. 12-2023)

Taxes Eligible for a Credit
Domestic corporations. Generally,
a domestic corporation may claim a
foreign tax credit (subject to the
limitation of section 904) for the
following taxes.
• Income, war profits, and excess
profits taxes paid or accrued during
the tax year to any foreign country or
U.S. territory.
• Taxes paid in lieu of income taxes
as described in section 903.
• Taxes deemed paid under section
960.
Income, war profits, and excess
profits taxes and in lieu of taxes are
collectively referred to as foreign
income taxes. See Regulations
sections 1.901-2(a) and (b) and
1.903-1 for rules for determining
whether a foreign tax qualifies as a
foreign income tax.
Final foreign tax credit
regulations issued on January
CAUTION 4, 2022 (T.D. 9959, 87 FR
374) revised the creditability
requirements under Regulations
sections 1.901-2 and 1.903-1,
applicable for foreign taxes paid or
accrued in taxable years beginning on
or after December 28, 2021. A Notice
was subsequently released on July
21, 2023, providing taxpayers the
option to apply modified rules in place
of certain provisions of the new
regulations. For more information, see
Notice 2023-55, 2023-32 I.R.B. 427,
available at IRS.gov/irb/
2023-32_IRB#NOT-2023–55.

!

Some foreign taxes that are
otherwise eligible for the foreign tax
credit must be reduced. These
reductions are reported on
Schedule G.
Note. A corporation may not claim a
foreign tax credit for foreign income
taxes paid to a foreign country that the
corporation does not legally owe,
including amounts eligible for refund
by the foreign country. If the
corporation does not exercise its
available remedies to reduce the
amount of foreign income tax to what
it legally owes, a credit is not allowed
for the excess amount.
Foreign corporations. Foreign
corporations are allowed (under
section 906) a foreign tax credit for
foreign income taxes paid or accrued
to any foreign country or U.S. territory
for income effectively connected with
the conduct of a trade or business
within the United States. The credit is
not applicable, however, if a foreign
country or U.S. territory imposes the
tax on income from U.S. sources
solely because the foreign corporation
was created or organized under the
law of the foreign country or U.S.
territory or is domiciled there for tax
purposes.
The credit may not be taken
against any tax imposed on income
not effectively connected with a U.S.
business.
In computing the foreign tax credit
limitation, the foreign corporation's
taxable income includes only the
taxable income that is effectively
connected with the conduct of a trade
or business within the United States.

Credit or Deduction

A corporation may choose to take
either a credit or a deduction for
eligible foreign income taxes paid or
accrued. The choice is made annually.
Generally, if a corporation elects the
benefits of the foreign tax credit for
any tax year, no portion of the foreign
income taxes paid or accrued in such
year will be allowed as a deduction in
that year or any subsequent tax year.

Exceptions. However, a corporation
that elects the credit for foreign
income taxes may be allowed a
deduction for certain taxes for which a
credit was not allowed. These include
the following.

5

• Taxes for which the credit was
denied because of the boycott
provisions of section 908.
• Certain taxes on the purchase or
sale of oil or gas (section 901(f)).
• Certain taxes used to provide
subsidies (section 901(i)).
• Taxes paid to certain foreign
countries for which a credit was
denied under section 901(j).
• Certain taxes paid on dividends if
the minimum holding period is not met
with respect to the underlying stock,
or if the corporation is obligated to
make related payments with respect
to positions in similar or related
property (section 901(k)).
• Certain taxes paid on gain and
income other than dividends if the
minimum holding period is not met
with respect to the underlying
property, or if the corporation is
obligated to make related payments
with respect to positions in similar or
related property (see section 901(l)).
• In the case of a covered asset
acquisition (as defined in section
901(m)(2)), the disqualified portion of
any tax determined with respect to the
income or gain attributable to the
relevant foreign assets (section
901(m)). Note. This rule generally
applies to covered asset acquisitions
after December 31, 2010. See
Regulations sections 1.901(m)-1
through 1.901(m)-8 for additional
information. Note that the rules
contained in these regulations have
later effective dates.
• Taxes paid by an accrual basis
taxpayer that relate to a prior tax year
in which the taxpayer elected to claim
a deduction for foreign income taxes
in that prior year. See Regulations
section 1.901-1(c)(3).
No Credit or Deduction

No foreign tax credit (or deduction) is
allowed for certain taxes including:
• Taxes on mineral income that were
reduced under section 901(e).
• Certain taxes paid on distributions
from corporations organized in a U.S.
territory (section 901(g)).
• Taxes on combined foreign oil and
gas income that were reduced under
section 907(a).
• Taxes attributable to income
excluded under section 814(a)
(relating to contiguous country
branches of domestic life insurance
companies).
• Taxes paid or accrued to a foreign
country or U.S. territory with respect to
6

income excluded from gross income
on Form 8873, Extraterritorial Income
Exclusion. However, see section
943(d) for an exception for certain
withholding taxes.
• The applicable percentage of taxes
paid or deemed paid with respect to
an amount included in income under
section 965 (section 965(g)).
• Taxes paid with respect to the
amount treated as included under
section 965(b).

Carryback and Carryforward of
Excess Foreign Taxes

If the allowable foreign income taxes
paid, accrued, or deemed paid in a
tax year in a separate category
exceed the foreign tax credit limitation
for the tax year for that separate
category, the excess is:
• First, carried back 1 year to offset
taxes imposed in the same category,
then
• Carried forward 10 years to offset
taxes imposed in the same category.
The excess is applied first to the
earliest of the years to which it may be
carried, then to the next earliest year,
etc. The corporation may not carry a
credit to a tax year for which it claimed
a deduction, rather than a credit, for
foreign income taxes paid or accrued.
Furthermore, the corporation must
reduce the amount of any carryback
or carryforward by the amount it would
have used if it had chosen to claim a
credit rather than a deduction in that
tax year. These carryover provisions
do not apply to foreign income taxes
assigned to section 951A category
income. See section 904(c) and
Regulations section 1.904-2 for more
details.
How to claim the excess credit. If
the corporation is carrying back the
excess credit to an earlier year, file an
amended tax return with a revised
Form 1118 and schedules (including a
revised Schedule K (Form 1118)).
Special rules apply to:

• The carryback and carryforward of

foreign income taxes paid or accrued
on combined foreign oil and gas
income or related taxes (see section
907(f)).
• An excess foreign tax credit for
which an excess limitation account
exists under section 960(c)(2). See
Regulations sections 1.960-4 through
1.960-6.

• Carryback of foreign income taxes
paid or accrued in post-2017 foreign
corporate tax years and carryforward
of foreign income taxes paid or
accrued in pre-2018 foreign corporate
tax years. See Regulations section
1.904-2(j).

Treaty-Based Return
Positions

Corporations that adopt a return
position that any U.S. treaty overrides
or modifies any provision of the
Internal Revenue Code, and causes
(or potentially causes) a reduction of
any tax incurred at any time, must
generally disclose this position. This
includes when a corporation is relying
on a U.S. treaty to claim a credit for a
foreign tax. Complete Form 8833,
Treaty-Based Return Position
Disclosure Under Section 6114 or
Section 7701(b), and attach it to Form
1118. See section 6114 and
Regulations section 301.6114-1 for
details.
Failure to make such a report may
result in a $10,000 penalty.

Proof of Credits

Form 1118 must be carefully filled in
with all the information called for and
with the calculations of credits
indicated.
Important. Documentation (that is,
receipts of payments or a foreign tax
return for accrued taxes) is not
required to be attached to Form 1118.
However, proof must be presented
upon request by the IRS to
substantiate the credit. See
Regulations section 1.905-2.
If the corporation claims a foreign
tax credit for tax accrued but not paid,
the IRS may require a bond to be
furnished on Form 1117, Income Tax
Surety Bond, before the credit is
allowed. See Regulations section
1.905-2(c).

Foreign Tax
Redeterminations

The corporation's foreign tax credit
and U.S. tax liability must generally be
redetermined if:
• Accrued foreign income 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
Instructions for Form 1118 (Rev. 12-2023)

after the close of the taxable year to
which the tax relates);
• Accrued foreign income taxes are
not paid within 24 months after the
close of the tax year to which they
relate;
• Any foreign income tax paid is fully
or partially refunded;
• A change in foreign tax liability that
affects the amount of distributions or
inclusions under sections 951, 951A,
or 1293, or affects the application of
the high-tax exception described in
section 954(b)(4); or
• A change to claim a foreign tax
credit for foreign income taxes that
were previously deducted or a change
to claim a deduction for foreign
income taxes that were previously
credited.
See Regulations section 1.905-3(a)
and (b).
See Regulations section 1.905-3(b)
(1)(i) for a limited exception to a
redetermination of a U.S. tax liability
with respect to foreign income tax
claimed as a credit under section 901
(other than a tax deemed paid under
section 960).
A redetermination of U.S. tax
liability is also generally required to
account for the effect of a
redetermination of foreign income tax
paid or accrued by a foreign
corporation on the amount of foreign
income taxes deemed paid under
section 960. See Regulations section
1.905-3(b)(2). For foreign tax
redeterminations of a foreign
corporation that relate to a taxable
year of the foreign corporation
beginning before January 1, 2018,
see Regulations section 1.905-5.

Reporting Requirements

If, as a result of the foreign tax
redetermination, the corporation’s
U.S. tax liability for any taxable year is
changed, the corporation must file an
amended return to report the foreign
tax redetermination and, if applicable,
pay additional U.S. tax.
Increase in U.S. tax liability as a
result of foreign tax redeterminations
are excepted from the general statute
of limitations against assessment and
collection. See sections 6501(c)(5)
and 905(c). If you have a foreign tax
redetermination that results in an
increase in your U.S. tax liability for
any year, please note on page 2 of
your Form 1120X: "This amended
Instructions for Form 1118 (Rev. 12-2023)

return and Form 1118 is for a change
in Foreign Tax Credit that increases
U.S. tax liability."
In addition, the amended return
must have attached to it an amended
Form 1118 and a statement that
provides the following.
• The taxpayer's name, address,
identifying number, the tax year or
years of the taxpayer that are affected
by the foreign tax redetermination,
and, in the case of foreign income
taxes deemed paid, the name and
identifying number, if any, of the
foreign corporation.
• The date or dates the foreign
income taxes were accrued, if
applicable.
• The date or dates the foreign
income taxes were paid.
• The amount of foreign income taxes
paid or accrued on each date (in
foreign currency) and the exchange
rate used to translate each such
amount.
• Information sufficient to determine
any change to the characterization of
a distribution or the amount of any
inclusion under section 951(a), 951A,
1291, or 1293.
• An amended Form 5471 when
applicable.
• Information sufficient to determine
any interest due from or owing to the
taxpayer, including the amount of any
interest paid by the foreign
government to the taxpayer, and the
dates received.
Additional Information Required
If the redetermination was because of
one of the following, the corporation
must provide the additional
information as indicated.
Refund of foreign income taxes
paid.
• The date of each such refund.
• The amount of such refund (in
foreign currency).
• The exchange rate that was used to
translate such amount when originally
claimed as a credit.
• The spot rate (as defined in
Regulations section 1.988-1(d)) for
the date the refund was received (for
purposes of computing foreign
currency gain or loss under section
988).
Accrued foreign income taxes that
are not paid on or before the date
that is 24 months after the close of

the tax year to which such taxes
relate.
• The amount of such taxes in foreign
currency.
• The exchange rate that was used to
translate such amount when originally
claimed as a credit or added to
post-1986 foreign income taxes or
PTEP group taxes (as defined in
Regulations section 1.960-3(d)(1)).
Redetermination of U.S. tax liability
results in an amount of additional
tax due, and the carryback or carryover of an unused foreign income tax under section 904(c) only partially eliminates such
amount. The information required in
Regulations section 1.904-2(f).
Foreign tax redeterminations of
foreign corporations that relate to
tax years of the foreign corporation beginning before January 1,
2018. Provide the additional
information listed under both
categories below, as applicable.
Post-1986 pools of earnings and
taxes of foreign corporations.
• The closing balances of the pools
of post-1986 undistributed earnings
and post-1986 foreign income taxes
for each affected year before and after
adjusting the pools to account for the
foreign tax redetermination.
• The dates and amounts of any
dividend distributions or other
inclusions made out of post-1986
undistributed earnings for the affected
year or years.
Pre-1987 accumulated profits of
foreign corporations.
• The dates and amounts of any
dividend distributions or other
inclusions made out of E&P for the
affected year or years.
• The rate of exchange on the date of
any such distribution or inclusion.
• The amount of E&P from which
such dividends were paid or
inclusions were made for the affected
year or years.
See Regulations sections
1.986(a)-1 and 1.905-3 through
1.905-5 for further information
regarding redeterminations and the
required notification.
For special rules relating to
corporations under the jurisdiction of
the Large Business and International
Division, see Regulations section
1.905-4(b)(4).
7

Schedule L. In addition to filing an
amended return with Form 1118 and
attached statement for the tax year(s)
of the taxpayer for which the U.S. tax
liability is changed as a result of the
foreign tax redetermination, the
taxpayer must include with its
current-year return a Schedule L
summarizing the foreign tax
redeterminations that occurred that
year.
If a foreign tax redetermination
does not change the amount of U.S.
tax due for any taxable year, the
taxpayer does not need to file an
amended return and may instead
notify the IRS of the redetermination
by attaching a completed Schedule L
to the original return for the taxpayer's
taxable year in which the foreign tax
redetermination occurs. See
Instructions for Schedule L for
additional information.
Election to account for foreign tax
redeterminations with respect to
pre-2018 taxable years in the foreign corporation’s last pooling
year. An irrevocable election may be
made by a foreign corporation’s
controlling domestic shareholders to
account for all foreign tax
redeterminations that occur in taxable
years ending on or after November 2,
2020, with respect to pre-2018
taxable years of foreign corporations
as if they occurred in the foreign
corporation’s last taxable year
beginning before January 1, 2018
(last pooling year). Such election is
binding on all persons who are, or
were in a prior year to which the
election applies, U.S. shareholders of
the foreign corporation with respect to
which the election is made for all of its
subsequent foreign tax
redeterminations, as well as foreign
tax redeterminations of other
members of the same CFC group as
the foreign corporation for which the
election is made. The election is made
by filing:
• The statement required under
Regulations section 1.964-1(c)(3)(ii)
with a timely filed original income tax
return for the taxable year of each
controlling domestic shareholder of
the foreign corporation in which or
with which the foreign corporation’s
first redetermination year ends;
• Any notices required under
Regulations section 1.964-1(c)(3)(iii);

8

• Amended returns as required under
Regulations sections 1.905-4,
1.905-5(e), 1.905-3T(d), and
1.905-5T.
See Regulations section 1.905-5(e)
for additional information.
Contested foreign income tax liability. In general, a taxpayer cannot
claim a credit for a contested foreign
income tax liability until the contest is
resolved and the amount of the liability
is finally determined.
Cash method taxpayers. Unless
an election to claim a provisional
credit for contested foreign income
taxes (described below) is made, a
taxpayer that claims the foreign tax
credit on a cash basis cannot claim a
credit for a contested foreign income
tax liability (or portion thereof) that has
been remitted to the foreign country
until such time as the contest is
resolved and the tax is considered
paid for purposes of section 901.
Once the contest is resolved and the
foreign income tax liability is finally
determined, the tax liability is treated
as paid in the taxable year in which
the foreign tax was remitted. See
Regulations section 1.905-1(c)(2).
Accrual method taxpayers.
Unless an election to claim a
provisional credit for contested foreign
income taxes is made, a taxpayer that
claims the foreign tax credit on the
accrual basis cannot claim a credit for
a contested foreign income tax liability
until such time as both the contest is
resolved and the tax is considered
paid, even if the contested liability (or
portion thereof) has previously been
remitted to the foreign country. Once
the contest is resolved and the foreign
income tax liability is finally
determined and paid, the tax liability
accrues, and is considered to accrue
in the relation-back year for purposes
of the foreign tax credit. See
Regulations section 1.905-1(d)(3).

Election to claim a provisional
credit for contested foreign
income taxes
Cash method taxpayers. A taxpayer
claiming foreign tax credits on the
cash basis may elect to claim a
foreign tax credit for a contested
foreign income tax liability (or a
portion thereof) in the year the
contested amount (or a portion
thereof) is remitted to the foreign

country, notwithstanding that the
liability is not finally determined and
so is not considered an amount of tax
paid.
This election is available only for
contested foreign income taxes that
are remitted in a taxable year in which
the taxpayer has elected under
section 901(a) to claim a credit,
instead of a deduction under section
164(a)(3), for foreign income taxes
that are paid in such year.
To make the election, a taxpayer
claiming credits on the cash basis
must file a Form 1118 for the tax year
in which the contested liability is
remitted and a Form 7204, Consent
To Extend the Time To Assess Tax
Related to Contested Foreign Income
Taxes-Provisional Foreign Tax Credit
Agreement.
In addition, the taxpayer must, for
each subsequent taxable year up to
and including the taxable year in
which the contest is resolved, file
annually Schedule L (Form 1118),
Foreign Tax Redeterminations. Any
portion of a contested foreign income
tax liability for which a provisional
credit is claimed that is subsequently
refunded by the foreign country
results in a foreign tax redetermination
under Regulations section 1.905-3(a).
Accrual method taxpayers. A
taxpayer may elect to claim a foreign
tax credit for a contested foreign
income tax liability (or a portion
thereof) in the relation-back year when
the contested amount (or a portion
thereof) is remitted to the foreign
country, notwithstanding that the
liability is not finally determined and
so has not accrued.
This election is available only for
contested foreign income taxes that
relate to a taxable year in which the
taxpayer has elected under section
901(a) to claim a credit, instead of a
deduction under section 164(a)(3), for
foreign income taxes that accrued in
such year.
A taxpayer claiming credits on the
accrual basis must file an original or
amended return for the taxable year to
which the contested tax relates,
together with a Form 1118, and a
Form 7204.
In addition, the taxpayer must, for
each subsequent taxable year up to
and including the taxable year in
which the contest is resolved, file
Instructions for Form 1118 (Rev. 12-2023)

annually Schedule L (Form 1118). Any
portion of a contested foreign income
tax liability for which a provisional
credit is claimed that is subsequently
refunded by the foreign country
results in a foreign tax redetermination
under Regulations section 1.905-3(a).

Interest and Penalties

In most cases, interest is computed
on the deficiency or overpayment that
resulted from the foreign tax
adjustment (sections 6601 and 6611
and the related regulations). See
Regulations section 1.905-4(e) for
additional information.
If the corporation does not comply
with the requirements discussed
above within the time for filing
specified, the penalty provisions of
section 6689 (and the related
regulations) will apply.

Specific Instructions

Report all amounts in U.S. dollars
unless otherwise specified. If it is
necessary to convert from a foreign
currency, attach a statement
explaining how the conversion rate
was determined.
Lines a, b, and c at the top of
page 1 of the form. The corporation
must complete a separate Form 1118
for each applicable category of
income. See Categories of Income,
earlier, for the code to enter on line a
(at the top of page 1 of the form). Also
see those instructions for the country
code to enter on line b or line c, if
applicable.

Schedule A

Report gross income from sources
outside the United States for the
applicable separate category in
columns 3(a) through 11. Report the
applicable deductions to this gross
income in columns 13 and 14. Report
any net operating loss carryover in
column 15.
Column 1. Column 1 generally
requests an employer identification
number (EIN) or a reference ID
number for related persons or their
QBUs from or through which the
corporation derived foreign source
income and/or paid or accrued
creditable foreign taxes.
However, enter in column 1 the
"Unrelated" code in cases where the
corporation derived foreign source
Instructions for Form 1118 (Rev. 12-2023)

income and/or paid or accrued
creditable foreign taxes from or
through unrelated persons or their
QBUs. Also, column 1 can be left
blank, but only if one of the following
seven entries is made in column 2.
• 863(b)
• RIC
• NOL
• HTKO
• 951A
• G2B
• B2G
See the instructions for column 2,
later, for more information regarding
when the above entries can be made
in column 2.
Note. Taxpayers no longer have the
option of entering “FOREIGNUS” or
“APPLIED FOR” in this column.
Instead, if the related person or their
QBU does not have an EIN, the
taxpayer must use a reference ID
number that uniquely identifies such
related person or QBU, using the rules
set forth in Reference ID numbers, in
the Requirements section, later.
Where gross income is derived
from a related person (within the
meaning of section 267(b) or 707(b)),
enter the EIN or reference ID number
of such related person. In the case of
income derived from a QBU of the
related person, enter the EIN or
reference ID number of the QBU.
Enter the EIN or reference ID number
of related entities and their QBUs
through which the corporation paid or
accrued creditable foreign taxes, even
if no income from these entities is
reported on Schedule A. If gross
income is received or derived from an
entity other than a related person, an
EIN or reference ID number is not
required.
Example 1. Domestic Corporation
earns sales income from sales to
unrelated persons. Domestic
Corporation leaves column 1 blank
and enters the sales income in
column 7.
Example 2. USC, a domestic
corporation, takes into account its
distributive share of partnership
income with respect to USPS, a
domestic partnership in which USC
has a 60% interest. In column 1, USC
enters the identifying number for
USPS.
Reference ID numbers. A
“reference ID number” is a number

established by or on behalf of the
domestic corporation filing Form
1118. With respect to Schedule A,
these numbers are used to uniquely
identify the payor with respect to
payments from related persons, in
order to determine the proper source
of such payment. With respect to
Schedules C through E, these
numbers are used to uniquely identify
foreign corporations in order to keep
track of those corporations from tax
year to tax year. The reference ID
number must meet the requirements
set forth below.
Note. Because reference ID numbers
are established by or on behalf of the
U.S. corporation filing certain forms
such as the Form 1118, there is no
need to apply to the IRS to request a
reference ID number or for permission
to use these numbers.
Requirements. The reference ID
number must be alphanumeric
(defined below) and no special
characters or spaces are permitted.
The length of a given reference ID
number is limited to 50 characters.
For these purposes, the term
"alphanumeric" means the entry can
be alphabetical, numeric, or any
combination of the two.
The same reference ID number
must be used consistently from tax
year to tax year with respect to a given
entity. If for any reason a reference ID
number falls out of use (for example,
the entity no longer exists due to
disposition or liquidation), the
reference ID number used for that
entity cannot be used again for
another entity for purposes of filing
Form 1118.
There are some situations that
require correlation of a new reference
ID number with a previous reference
ID number when assigning a new
reference ID number to an entity. For
example:
• In the case of a merger or
acquisition, a Form 1118 filer must
use a reference ID number which
correlates the previous reference ID
number with the new reference ID
number assigned to the entity.
• In the case of an entity
classification election that is made on
behalf of a foreign corporation on
Form 8832, Regulations section
301.6109-1(b)(2)(v) requires the
foreign corporation to have an EIN for
9

this election. For the first year that
Form 1118 is filed after an entity
classification election is made on
behalf of the foreign corporation on
Form 8832, both the new EIN and the
old reference ID number must be
entered in column 1, as explained in
the next paragraph.
You must correlate the identifying
numbers as follows: New EIN or
reference ID number [space] Old
reference ID number. If there is more
than one old reference ID number, you
must enter a space between each
such number. As indicated above, the
length of a given reference ID number
is limited to 50 characters and each
number must be alphanumeric and no
special characters are permitted.
Note. This correlation requirement
applies only to the first year the new
reference ID number is used.
Branches. For each branch that is
not a foreign branch, as defined under
Regulations section 1.904-4(f)(3)(vii),
use a single line to report such
branch's gross income and
deductions. In column 1, enter
“Branch.” If there is more than one
branch, enter the identifying number
of the branch (as reported in Form
8858) after the word “Branch” on each
line. These amounts should be
reported on a Form 1118 other than
the Form 1118 for the foreign branch
income category.
Example. USC, a domestic
corporation, has a branch in Country
X. The activities of the branch do not
constitute a trade or business. In
column 1, USC enters the word
“Branch.” USC will report the income
and expenses of the branch in the
appropriate columns.
See below with respect to QBUs
that are foreign branches as defined
under Regulations section 1.904-4(f)
(3)(vii).
Column 2. Enter the two-letter codes
(from the list at IRS.gov/
CountryCodes) of each foreign
country and U.S. territory within which
income is sourced and/or to which
taxes were paid or accrued.
Note. Complete this column with
respect to all income regardless of
whether such income is from a related
person.

10

Special Cases for Columns 1
and 2

Except as otherwise instructed below,
income of a U.S. shareholder with
respect to the same related person
but from multiple sources should be
reported on a country-by-country
basis.
Example. USC, a domestic
corporation, has employees who
perform services in Country X and
Country Y for the same related
person. The related person has a
reference ID number of 1000016.
USC earns gross income of $10 with
respect to services performed for the
related person in Country X and USC
earns gross income of $15 with
respect to services performed for the
related person in Country Y. The
two-letter country code for Country X
is XX and the two-letter country code
for Country Y is YY. On Schedule A,
USC reports as follows.
USC makes the following entries on
the first of two lines on Schedule A.
Column

Entry

1

1000016

2

XX

8

10

USC makes the following entries on
the second of two lines on
Schedule A.
Column

Entry

1

1000016

2

YY

8

15

Qualified business units (QBUs).
For branches that are QBUs, use a
separate line for each such branch to
report each branch's gross income
and deductions. Report these
amounts on a per-country basis. In
column 1, enter the EIN or reference
ID number of the QBU. Enter the
country code in column 2. These
amounts should be reported on Form
1118 for foreign branch category
income or passive category income.
Section 863(b) gross income and
deductions. Aggregate all section
863(b) foreign source gross income
and deductions and report the totals

on a single line. It may be necessary
to enter amounts in multiple columns
on that single line, depending upon
the nature of the section 863(b) gross
income and deductions. For example,
leave column 1 blank, enter “863(b)”
in column 2, and enter (as a positive
number) all section 863(b) gross
income (in columns 3 through 12) and
all section 863(b) deductions (in
columns 13 through 16). Also enter
the net amount in column 17. Note
that the totals are being reported on a
single line because it is not necessary
to report section 863(b) gross income
and deductions on a per-country
basis.
Regulated investment company
(RIC) pass-through amounts.
Aggregate all income passed through
from RICs and report the total on a
single line. Leave column 1 blank,
enter “RIC” in column 2, and report
the total in column 17. Note that the
totals are being reported on a single
line because it is not necessary to
report the RIC pass-through amounts
on a per-country basis.
Net operating losses (NOLs).
Report any NOL carryover on a single
line. Leave column 1 blank, enter
“NOL” in column 2, and report the total
in column 15. Note that the totals are
being reported on a single line
because it is not necessary to report
the NOL on a per-country basis.
Reclassifications of high-taxed income. Aggregate all reclassifications
of high-taxed income and report the
total on a single line. With respect to
passive category income, for items of
income that have been included on
Schedule A and that must be
reclassified under sections 904(d)(2)
(B)(iii)(II) and 904(d)(2)(F), leave
column 1 blank and enter “HTKO” in
column 2 and enter (as a negative
number) in column 17 the net amount
of income that is being reclassified
from passive category income. With
respect to the category of income to
which such passive income is
reclassified, leave column 1 blank,
enter “HTKO” in column 2, and enter
(as a positive number) in column 17
the net amount of income that is being
reclassified to such category of
income. Note that the reclassifications
are being reported on a single line
because it is not necessary to report
them on a per-country basis. Also
note that tax reclassifications are
Instructions for Form 1118 (Rev. 12-2023)

needed on Schedule B. See those
instructions for more information.

into account in Schedule A, column
13(c).

Inclusions under section 951A.
Because computations for inclusions
under section 951A are reported on
separate Form 8992, GILTI, report the
inclusion under section 951A on a
single line. Specifically, there is no
need to report the identifying numbers
and various countries associated with
an inclusion under section 951A on
Form 1118.
For inclusions under section 951A,
enter “951A” in column 2 instead of a
two-letter code. Leave column 1
blank.

If the corporation is a U.S.
shareholder in a PFIC that is a
qualified electing fund, report all
income deemed received (before
gross-up) under section 1293.

Reattribution of income by reason
of disregarded payments between
a foreign branch and its foreign
branch owner. For reattribution of
income from the general category to
the foreign branch category, enter
"G2B" in column 2 instead of a
two-letter code. Leave column 1
blank.
For reattribution of income from the
foreign branch category to the general
category, enter "B2G" in column 2
instead of a two-letter code. Leave
column 1 blank.
See Regulations section 1.904-4(f)
(2)(vi)(B) for more information
regarding the rules pertaining to
reattribution of income by reason of
disregarded payments between a
foreign branch and its foreign branch
owner.
Column 3(a). Report all inclusions
under sections 951(a)(1) (including
amounts under section 951(a)(1)(B)
and section 964(e)(4)) and 951A
(before gross-up). See section 904(d)
(3) and Look-Through Rules, earlier,
for more information with respect to
the separate category of such
inclusions. For each inclusion under
section 951(a)(1) with respect to a
CFC, make sure to enter the
appropriate identifying number in
column 1 and the country of residence
of the CFC in column 2.
Note. Under the Act, inclusions under
section 951(a)(1) now include hybrid
dividends received by a CFC from
another CFC of the same U.S.
shareholder. See section 964(e)(4).
Do not report the inclusion under
section 951A net of the deduction
allowed under section 250. The
deduction under section 250 is taken
Instructions for Form 1118 (Rev. 12-2023)

Column 3(b). In column 3(b), include
taxes deemed paid by a domestic
corporation with respect to inclusions
under section 951(a)(1) and section
951A as gross-ups. For inclusions
under section 951(a)(1), the gross-up
is the taxes deemed paid as reported
in the total of Schedule C, column 7.
The gross-up for inclusions under
section 951A is the amount computed
in Schedule D, Part II, column 3.
Column 4. Report dividends from
sources outside the United States for
the applicable separate category. This
includes dividends eligible for the
dividends received deduction under
section 245A. Note that hybrid
dividends are not eligible for the
dividends received deduction.
Note. In general, dividends from a
domestic corporation are U.S. source
income, including dividends from a
domestic corporation which has 80%
or more of its gross income from
sources outside the United States.
Column 5. Enter interest received
from foreign sources. See section
861(c) for the treatment of interest
from a domestic corporation that
meets the foreign business
requirement.
Column 7. Include foreign source
gross income from sales (net of
returns and allowances and less costs
of goods sold). Include the foreign
source portion of section 863(b) sales
in this column.
Note. Under section 863(b), income
from the sale of inventory property is
sourced to the place of production.
Accordingly, do not include inventory
produced in the United States and
sold overseas in this column.
Column 8. Include gross income,
including compensation,
commissions, fees, etc., for technical,
managerial, engineering,
construction, scientific, or similar
services outside the United States.
Columns 9 and 10. Include the
following amounts in column 9. Use a
separate line for each type of gain and

enter the corresponding code in
column 10.
• Foreign source exchange gain
recognized under section 986(c) on a
distribution of PTEP. Enter code
“986c” in column 10.
• Foreign source exchange gain
recognized under section 987(3) on a
remittance from a QBU. Enter code
“987” in column 10.
• Foreign source exchange gain
recognized under section 988. Enter
code “988” in column 10.
Note. Section 988 exchange gain or
loss is sourced by reference to the
residence of the taxpayer or the QBU
of the taxpayer on whose books the
nonfunctional currency asset or
liability is properly reflected.
Column 11. Include other gross
income from sources outside the
United States for the applicable
separate category. Attach a schedule
identifying the gross income by type.
Column 13(a). Enter the dividends
received deduction allowed on foreign
source dividends under section 245A.
This should be equal to the amount
reported in Schedule A, column 4, if
all such dividend income is eligible for
the dividends received deduction.
Note. Certain hybrid dividends are
not eligible for the dividends received
deduction under section 245A. See
section 245A(e)(1).
Note. An amount treated as a
dividend under section 1291(d)(2)(B)
(related to PFICs) is ineligible for the
dividends received deduction. See
section 245A(f).
Note. The foreign branch income and
section 951A income categories do
not include any dividend income
eligible to be offset by the deduction
under section 245A.
Column 13(b). Enter the deduction
allowed under section 250(a)(1)(A)
with respect to foreign derived
intangible income, taking into account
the other provisions of section 250,
that is allocated and apportioned to
foreign source income in the
applicable separate category of
income. See Regulations section
1.861-8(e)(13).
Column 13(c). Enter the deduction
allowed under section 250(a)(1)(B)
with respect to GILTI (section 951A
11

inclusion), taking into account the
other provisions of section 250, that is
allocated and apportioned to foreign
source income in the applicable
separate category of income. See
Regulations section 1.861-8(e)(14).
Column 13(d). Enter the
depreciation, depletion, and
amortization deductions related to
rental, royalty, and licensing expenses
that are allocated and apportioned to
foreign source income in the
applicable separate category of
income.
Column 13(e). Enter the other
allocable expenses related to rental,
royalty, and licensing expenses that
are allocated and apportioned to
foreign source income in the
applicable separate category of
income.
Column 13(f). Enter expenses
allocable to gross income from sales
that are allocated and apportioned to
foreign source income in the
applicable separate category of
income (the amount entered in
column 7).
Column 13(g). Enter expenses
allocable to gross income from
performance of services that are
allocated and apportioned to foreign
source income in the applicable
separate category of income (the
amount entered in column 8).
Columns 13(h) and 13(i). Include
any foreign source exchange loss
recognized under section 986(c) on a
distribution of PTEP, any foreign
source exchange loss recognized
under section 987(3) on a remittance
from a QBU, and any foreign source
exchange loss recognized under
section 988. Use a separate line for
each type of loss and enter the
corresponding code in column 13(i).
See the instructions for Schedule A,
column 9, earlier, for the applicable
codes.
Column 13(j). Include other
deductions allocable to income from
sources outside the United States
(dividends, interest, etc.) for the
applicable separate category that are
not otherwise included in Schedule H.
Include any reduction of foreign
source capital gain net income. If
foreign source capital gain net income
from all separate categories is more
than the capital gain net income
12

reported on the corporation's tax
return, enter a pro rata portion of the
excess as a negative number in each
separate category. See Capital Gains,
earlier.
In column 13(j), do not include
other expenses directly allocable to
dividends eligible for the dividends
received deduction under section
245A. Such directly allocable
expenses may include wire transfer,
currency exchange, and similar fees
incurred in connection with the
payment of dividends eligible for the
dividends received deduction under
section 245A. These expenses
reduce taxable income, but are not
taken into account in computing the
foreign tax credit limitation. See
section 904(b)(4).
Attach a schedule that lists all other
deductions included in column 13(j).
The schedule should include totals for
each line in column 13(j) that has an
entry.
Column 14. Enter only the
apportioned share from the applicable
line of Schedule H, Part I, column (b);
Part II, column (f); and Part III, column
(g) that relates to gross income
reported in columns 3 through 11 of
Schedule A. The applicable line of
Schedule H, Part I, column (b) is the
amount on line 6a(7), 6b(7), 6c(7),
6d(7), or 6e(7) of column (b) that
corresponds with the category of
income for which the corporation is
completing Form 1118. For example, if
the code entered on Schedule H, Part
I, line 6a is “PAS,” then enter the
amount from line 6a(7), column (b) on
the Form 1118 that the corporation is
completing for the passive category of
income (as indicated on line a at the
top of page 1 of Form 1118). The
applicable line of Schedule H, Part II,
column (f) is the amount on line 3a(2),
3b(2), 3c(2), 3d(2),or 3e(2), of column
(f) that corresponds with the category
of income for which the corporation is
completing Form 1118. For example, if
the code entered on Schedule H, Part
II, line 3a is “PAS,” then enter the
amount from line 3a(2), column (f) on
the Form 1118 that the corporation is
completing for the passive category of
income (as indicated on line a at the
top of page 1 of Form 1118). The
applicable line of Schedule H, Part III,
column (g) is the amount on
line 2a(2), 2b(2), 2c(2), 2d(2), or 2e(2)
of column (g) that corresponds with

the category of income for which the
corporation is completing Form 1118.
For example, if the code entered on
Schedule H, Part III, line 2a is “PAS,”
then enter the amount from line 2a(2),
column (g) on the Form 1118 that the
corporation is completing for the
passive category of income (as
indicated on line a at the top of page 1
of Form 1118).
It is not necessary to report the
apportioned expenses on a
related-person or per-country basis.
Therefore, only enter an amount in the
totals line of column 14.
Note. With respect to the
apportionment of deductions reported
on Schedule H, Part II, the reduction
required by section 904(b)(4) in
deductions relating to dividends
eligible for the dividends received
deduction under section 245A is taken
into account (for purposes of
determining foreign source income or
loss in each separate category) by
carrying to Schedule A, column 14,
only the amounts on Schedule H, Part
II, column (f), lines 3a(2), 3b(2), 3c(2),
3d(2), and 3e(2). Likewise, with
respect to the apportionment of
deductions reported on Schedule H,
Part III, the reduction required by
section 904(b)(4) in deductions
relating to dividends eligible for the
dividends received deduction under
section 245A is taken into account (for
purposes of determining foreign
source income or loss in each
separate category) by carrying to
Schedule A, column 14, only the
amounts on Schedule H, Part III,
column (g), lines 2a(2), 2b(2), 2c(2),
2d(2), or 2e(2).
Column 15. Enter the corporation's
NOL deduction allowed under section
172 that is attributable to foreign
source income in the applicable
separate category. If the NOL is part
of an overall foreign loss, see
Regulations section 1.904(g)-3 for
allocation rules that apply in
determining the amount to enter in
column 15.
It is not necessary to report the
NOL deduction on a related-person or
per-country basis. Therefore, only
enter an amount on the totals line of
column 15. See Net operating losses,
earlier.

Instructions for Form 1118 (Rev. 12-2023)

Schedule B
Part I—Foreign Taxes Paid,
Accrued, and Deemed Paid

Report only foreign income taxes
paid, accrued, or deemed paid for the
separate category for which this Form
1118 is being completed. Report all
amounts in U.S. dollars. If the
corporation must convert from foreign
currency, attach a schedule showing
the amounts in foreign currency and
the exchange rate used.
For corporations claiming the credit
on the accrual basis, the exchange
rate for translating foreign income
taxes into U.S. dollars will generally be
an average exchange rate for the tax
year to which the taxes relate.
However, the exchange rate on the
date of payment must be used if the
foreign income taxes (a) are paid
more than 24 months after the close
of the tax year to which they relate, or
(b) are paid in a tax year prior to the
tax year to which they relate. In
addition, corporations may elect to
use the exchange rate on the date of
payment. Corporations may elect to
use the payment date exchange rates
for all creditable foreign income taxes
or only those taxes that are
attributable to QBUs with U.S. dollar
functional currencies. The election is
made by attaching a statement to a
timely filed (including extensions)
Form 1118 that indicates the
corporation is making the election
under section 986(a)(1)(D). Once
made, the election applies for all
subsequent tax years and is revocable
only with the consent of the IRS. See
section 986(a)(1)(D).
The information entered on
each line of Schedule B, Part
CAUTION I, must pertain to an
identifying number and/or country
code specified on the corresponding
line of Schedule A, column 1 and/or
column 2. If foreign tax was paid to
more than one country on the same
income, enter the letter corresponding
to that income on multiple lines. For
example, if the taxpayer entered on
Schedule A, line A, foreign source
sales income and paid tax to both
Country A and Country B on such
income, the filer would complete two
lines A on Schedule B with the tax
paid to Country A on one line and the
tax paid to Country B on the other line.

!

Instructions for Form 1118 (Rev. 12-2023)

Column 1. Claim the foreign tax
credit for the tax year in which the
taxes were paid or accrued,
depending on the method of
accounting used.
Note. For any given tax year, the
corporation can use the cash method
or the accrual method, but not both. If
a credit for taxes accrued is claimed,
show both the date accrued and the
date paid.
If the cash method of accounting is
used, an election under section
905(a) may be made to claim the
credit based on accrued taxes.
To make this election, check the
accrual box in column 1. Once made,
the election is binding on all
subsequent tax years in which a
foreign tax credit is claimed. Also, the
credits for foreign taxes, regardless of
whether they are claimed on the
accrual or cash basis, are subject to
the redetermination provisions of
section 905(c). See Foreign Tax
Credit Redeterminations, earlier, for
details.
Column 2(a). Include foreign income
taxes withheld at source on dividends
from a first-tier foreign corporation.
After December 31, 2017, such taxes
are not creditable to the extent the
distribution is a dividend eligible for a
dividends received deduction under
section 245A. However, continue to
report the taxes in this column 2(a)
and reverse the taxes on Schedule G.
Column 2(b). Include foreign income
taxes withheld at source on PTEP
distributions from a first-tier foreign
corporation. See sections 901 and
903. Do not include foreign income
taxes withheld at source on PTEP
distributions from a lower-tier foreign
corporation to an upper-tier foreign
corporation and then deemed paid by
the domestic corporation under
section 960(b) on a distribution from
the upper-tier foreign corporation to
the domestic corporation. These
amounts are reported on Schedule E.
Note. With respect to taxes
attributable to section 965(a) PTEP or
section 965(b) PTEP, do not reduce
the taxes by the applicable
percentage. The applicable
percentage reduction is taken into
account on Schedule G.
Column 2(c). Include foreign income
taxes withheld on branch distributions

or transfers as determined under
section 987. See sections 901 and
903.
Column 2(f). Include foreign income
taxes withheld at source on income
not specifically reportable in columns
2(a) through 2(e). For example, some
countries withhold at source on sales
of stock of their resident companies
and such foreign income tax paid or
accrued by the domestic corporate
seller would be reported in column
2(f).
Column 2(g). Include foreign income
taxes paid or accrued on the portion
of sales income sourced to a foreign
country. This does not include taxes
withheld at source reported in column
(f).
Column 3. Enter in column 3 the total
of the taxes deemed paid that
corresponds with the identifying
number specified on the
corresponding line of Schedule A,
column 1, with respect to the following
amounts.
• The taxes deemed paid under
section 960(a) as reported in
Schedule C, column 10.
• The taxes deemed paid under
section 960(b) as reported in
Schedule E, Part I, column 11.
Enter on the Schedule B, Part I line
that corresponds with the Schedule A
line with “951A” in column 2 the tax
deemed paid under section 960(d)
equal to the total amount reported in
Schedule D, Part II, column 4.

Part II—Separate
Foreign Tax Credit
Line 1b. If the corporation had a
foreign tax credit splitting event in a
prior tax year that resulted in a
suspension of foreign taxes under
section 909, enter the amount of
those taxes attributable to related
income taken into account in the
current tax year. The amount of taxes
suspended in a prior tax year should
have appeared on Schedule G, line E,
on your Form 1118 for that prior tax
year. See the regulations under
section 909 for rules for determining
when related income is taken into
account and the amount of previously
suspended taxes that are attributable
to that related income.
Line 4. If the corporation is
reclassifying high-taxed income from
passive category income, enter the
13

related tax adjustment on line 4.
Indicate whether the adjustment is
positive or (negative).
Line 5. Enter the total amount of
foreign income taxes carried forward
or back to the current year. The
amount of foreign income taxes
carried forward to the current tax year
is the amount from Schedule K (Form
1118), line 3, column (xiv), plus the
amount from Schedule I (Form 1118),
Part III, line 3. Attach Schedule I (Form
1118) and Schedule K (Form 1118) to
Form 1118.
Line 7. If the corporation has a
current-year overall domestic loss or
recapture of an overall domestic loss
account, or, in any of its separate
categories, a current-year separate
limitation loss, an overall foreign loss,
recapture of an overall foreign loss, or
current-year separate limitation
income in a category in which it has a
beginning balance of income that
must be recharacterized, adjustments
must be made. See the separate
Instructions for Schedule J to
determine if that schedule must be
filed.
Line 8b. Enter as a positive amount
taxable income that should not be
taken into account in computing the
foreign tax credit limitation. These
adjustments will decrease the net
worldwide taxable income reported on
line 8c (see the line 8c instructions,
later).
Enter as a negative amount
adjustments that increase the net
worldwide taxable income reported on
line 8c (see the line 8c instructions,
later). For example, the net worldwide
taxable income you report on line 8c
should not include expenses allocated
and apportioned to dividends for
which a dividends received deduction
is allowed under section 245A (see
section 904(b)(4)). Because the
line 8a amount (taxable income from
your tax return) includes these
expenses, a positive adjustment is
needed to back out these expenses
(thus increasing the net worldwide
taxable income reported on line 8c).
As such, include as a negative
adjustment on line 8b these expense
amounts from Schedule H, Part II,
lines 5 and 6.
Line 8c. If the negative adjustments
included on line 8b (such as those
amounts coming in from Schedule H,
14

Part II, lines 5 and 6) exceed any
positive adjustments that are also
included on line 8b, the net line 8b
adjustment will be negative. When this
net negative amount on line 8b is
subtracted from a positive taxable
income amount on line 8a, the result
will be a positive line 8c amount that is
larger than the positive amount on
line 8a.
Line 9. Divide line 7 by line 8c to
determine the limitation fraction. Enter
the fraction on line 9 as a decimal with
the same number of places as the
number of digits to the left of the
decimal in adjusted taxable income on
line 8c. For example, if adjusted
taxable income on line 8c is $100,000,
compute the limitation fraction to 6
decimal places.
Line 12. The limitation may be
increased under section 960(c) for
any tax year that the domestic
corporation receives a PTEP
distribution. Enter on line 12 the
increase described in section 960(c)
(1).
If the line 12 amount exceeds the
domestic corporation's U.S. income
tax liability, the excess is deemed an
overpayment and can be claimed on
the domestic corporation's income tax
return as a refundable credit (Form
1120, Schedule J, Part III, line 20d, or
the corresponding line of other
corporate income tax returns). See
section 960(c)(5).

Part III—Summary of
Separate Credits

Complete Part III only once. Enter on
lines 1 through 6 the separate foreign
tax credits from Part II, line 14, for
each applicable separate category.
Note. Complete Part III only on the
Form 1118 with the largest amount
entered on Part II, line 14.

Line 8. If the corporation participates
in or cooperates with an international
boycott, the foreign tax credit may be
reduced. Complete Form 5713,
International Boycott Report. If the
corporation chooses to apply the
international boycott factor to
calculate the reduction in the credit,
enter the amount from line 2a(3) of
Schedule C (Form 5713) on line 8.

Schedule C

Report taxes deemed paid by the
domestic corporation under section
960(a) with respect to inclusions
under section 951(a)(1). This
schedule should be completed by
separate category of income and
subpart F income group. If there is a
subpart F inclusion related to more
than one subpart F income group,
complete a separate line for each
subpart F income group.
An individual (or an estate or trust)
that has made an election under
section 962 ("section 962 elector")
should also complete Schedule C and
report taxes deemed paid.

Column 1a. Enter the name of the
foreign corporation whose earnings
were included in income by the
domestic corporation filing the return.
Column 1b. Enter the foreign
corporation's EIN or reference ID
number. See Reference ID numbers,
earlier.
Note. Taxpayers no longer have the
option of entering “FOREIGNUS” or
“APPLIED FOR” in this column.
Instead, if the foreign corporation
does not have an EIN, the taxpayer
must use a reference ID number that
uniquely identifies such foreign
corporation, using the rules set forth in
Reference ID numbers, in the
Requirements section, earlier.
Column 1c. Enter the tested unit’s
reference ID number (if applicable).
See Reference ID numbers, earlier.
Complete column 1c only if a CFC has
one or more tested units with passive
category income. See Regulations
section 1.904-4(c)(4).
Note. Taxpayers no longer have the
option of entering “FOREIGNUS” or
“APPLIED FOR” in this column.
Instead, if the tested unit (or the CFC,
if applicable) does not have an EIN,
the taxpayer must use a reference ID
number that uniquely identifies such
tested unit (or the CFC, if applicable),
using the rules set forth in Reference
ID numbers, in the Requirements
section, earlier.
Column 2. Enter the year and month
in which the foreign corporation's U.S.
tax year ended using format
YYYYMM.

Instructions for Form 1118 (Rev. 12-2023)

Example. When figuring foreign
taxes deemed paid in 2023 by a
calendar year domestic corporation
with respect to inclusions out of E&P
not previously taxed for the foreign
corporation's tax year that ended
November 30, 2023, enter “202311.”
Column 3. Enter the applicable
two-letter codes from the list at
IRS.gov/CountryCodes.
Column 4. Enter the applicable
three-character alphabet code for the
foreign corporation's functional
currency using the ISO 4217
standard.
Column 5(a). Enter the code which
describes the subpart F income group
classification (as set forth in
Regulations section 1.960-1(d)(2)(ii)
(B)(2)). Please enter the applicable
code from the following list.
Code

Subpart F Income Group (Reg.
sec. 1.960-1(d)(2)(ii)(B)(2))

DIRRA

Dividends, interest, rents, royalties,
and annuities

NGCPT Net gain from certain property
transactions
NGCT

Net gain from
transactions

commodities

NFCG

Net foreign currency gain

IEQI

Income equivalent to interest

NPC

Income from notional principal
contracts

PILOD

Payments in lieu of dividends

PSC

Personal service contracts

FBCSA

Foreign base company sales
income

FBCSE

Foreign base company services
income

FIFBC

Full inclusion foreign
company income

INSUR

Insurance income described in
section 952(a)(1)

BOYC

Boycott income

BKOP

Bribes, kickbacks, and other
payments described in section
952(a)(4)

901J

Income subject to section 901(j)
described in section 952(a)(5)

base

Column 5(b). Enter the code which
describes the subpart F income group
classification (as set forth in
Regulations section 1.904-4(c)(3)(i)
through (iv)). Please enter the
applicable code from the following list.
Instructions for Form 1118 (Rev. 12-2023)

Code

Subpart F Income Group
(Reg. sec. 1.904-4(c)(3)(i)
through (iv))

i

All passive income received
during the tax year that is
subject to a withholding tax of
15% or greater.

ii

All passive income received
during the tax year that is
subject to a withholding tax of
less than 15% (but greater than
zero).

iii

All passive income received
during the tax year that is
subject to no withholding tax or
other foreign tax.

iv

All passive income received
during the tax year that is
subject to no withholding tax but
is subject to a foreign tax other
than a withholding tax.

Column 5(c). Enter the name of the
tested unit. Complete column 5(c)
only if a CFC has one or more tested
units with passive category income.
See Regulations section 1.904-4(c)
(4).
Column 6. Enter the total net income
in the subpart F income group
(identified in column 5(a) and 5(b)) in
the functional currency of the foreign
corporation. If there is net income
related to more than one subpart F
income group, use a separate line for
each subpart F income group. In
general, the amount entered on a
given line will be equal to the total of
all amounts in column (xvi) of
Schedule Q (Form 5471) for the
subpart F income group identified in
Schedule C, column 5 for the foreign
corporation identified in column 1 and
for the category of income with
respect to which a Form 1118 and the
corresponding Schedule Q (Form
5471) is being completed.
Column 7. Enter the total eligible
current-year taxes in the subpart F
income group (identified in column
5(a) and 5(b)) in U.S. dollars.
Note. See the instructions for
Schedule G, later, for information on
reduction of foreign taxes for failure to
furnish information required under
section 6038.
Column 8(a). Enter the section
951(a)(1) inclusion attributable to the
subpart F income group (identified in

column 5(a) and 5(b)) in the functional
currency of the foreign corporation.
Column 8(b). Enter the amount from
column 8(a) translated into U.S.
dollars at the appropriate exchange
rate specified in section 989(b).
Column 10. For each line, multiply
the amount in column 7 by the amount
in column 9 and enter the result in
column 10. This is the tax deemed
paid computed under section 960(a).
Example 1. USC is a domestic
corporation. CFC is a controlled
foreign corporation incorporated in
Country X. CFC has two tested units,
each of which is a qualified business
unit (QBU): QBU1 and QBU2. QBU1
and QBU2 are organized in Country
X. The U.S. tax year for USC, CFC,
QBU1, and QBU2 ends on December
31. The functional currency of CFC,
QBU1, and QBU2 is the “u.” At all
relevant times, 1u = $1. For its U.S. tax
year ending December 31, 2023, after
foreign taxes, QBU1 has 1,000,000u
passive category dividend income
subject to a less than 15% withholding
tax (“QBU1 income group 1”). QBU1
has 1,000,000u passive category
dividend income subject to a greater
than 15% withholding tax (“QBU1
income group 2”). QBU2 has
2,400,000u passive category dividend
income subject to a less than 15%
withholding tax (“QBU2 income
group”). QBU1 has eligible
current-year taxes of $50,000 and
$200,000 in QBU1 income group 1
and QBU1 income group 2,
respectively. QBU2 has eligible
current-year taxes of $240,000 in
QBU2 income group. USC has a
subpart F inclusion with respect to
CFC of which an amount of 800,000u
is attributable to each of QBU1
income group 1 and QBU1 income
group 2 and 1,920,000u is attributable
to QBU2 income group. The country
code for Country X is “OC.” CFC,
QBU1, and QBU2 have reference ID
numbers of 100000, 100011, and
100012, respectively. The applicable
three-character alphabet code for the
“u” using the ISO 4217 standard is
“UUU.” USC completes Schedule C of
its Form 1118 with respect to the
passive category as follows.
USC makes the following entries on
the first of three lines on Schedule C.

15

Entry

Column

Entry

1a

CFC

1a

CFC

1b

100000

1b

100000

1c

100011

1c

100012

2

202312

2

202312

3

OC

3

OC

4

UUU

4

UUU

Column

Entry

5(a)

DIRRA

5(a)

DIRRA

1a

CFC1

5(b)

ii

5(b)

ii

1b

100011

5(c)

QBU1

5(c)

QBU2

1c

6

1,000,000u

6

2,400,000u

2

7

50,000

7

240,000

3

OC

4

UUU

5(a)

DIRRA

0.800

5(b)

ii

192,000

5(c)

8(a)

800,000u

8(a)

1,920,000u

8(b)

800,000

8(b)

1,920,000

9
10

0.800
40,000

USC makes the following entries on
the second of three lines on
Schedule C.
Column

Entry

1a

CFC

1b

100000

1c

100011

2

202312

3

OC

4

UUU

5(a)

DIRRA

5(b)

i

5(c)

QBU1

6

1,000,000u

7

200,000

8(a)

800,000u

8(b)

800,000

9

0.800

10

160,000

USC makes the following entries on
the third of three lines on Schedule C.

16

alphabet code for the “u” using the
ISO 4217 standard is “UUU.” USC
completes Schedule C of its Form
1118 with respect to the passive
category as follows.
USC makes the following entries on
the first of three lines on Schedule C.

Column

9
10

Example 2. USC is a domestic
corporation. CFC1 and CFC2 are
controlled foreign corporations
incorporated in Country X. The U.S.
tax year for USC, CFC1, and CFC2
ends on December 31. At all relevant
times, 1u = $1. For its U.S. tax year
ending December 31, 2023, after
foreign taxes, CFC1 has 1,000,000u
passive category dividend income
subject to a withholding tax of less
than 15% (“CFC1 income group 1”)
and 2,400,000u passive category
interest income subject to foreign tax
other than withholding tax (“CFC1
income group 2”). CFC1 has eligible
current-year taxes (including the
withholding tax) of $50,000 in CFC1
income group 1 and $240,000 in
CFC1 income group 2. USC has a
subpart F inclusion with respect to
CFC1 of which 800,000u is
attributable to CFC1 income group 1
and 1,920,000u is attributable to
CFC1 income group 2. For its U.S. tax
year ending December 31, 2023, after
foreign taxes, CFC2 has 1,800,000u
of passive category gain from
commodities transactions subject to
foreign tax other than withholding tax
(“CFC2 income group”). CFC2 has
eligible current-year taxes of $450,000
in the CFC2 income group. USC has a
subpart F inclusion of 1,440,000u
attributable to the CFC2 income
group. The country code for Country X
is “OC.” CFC1 and CFC2 have
reference ID numbers of 100011 and
100012, respectively. The functional
currency of both CFC1 and CFC2 is
the “u.” The applicable three-character

202312

6

1,000,000u

7

50,000

8(a)

800,000u

8(b)

800,000

9

0.800

10

40,000

USC makes the following entries on
the second of three lines on
Schedule C.
Column

Entry

1a

CFC1

1b

100011

1c
2

202312

3

OC

4

UUU

5(a)

DIRRA

5(b)

iv

5(c)
6

2,400,000u

7

240,000

8(a)

1,920,000u

8(b)

1,920,000

9

0.800

10

192,000

USC makes the following entries on
the third of three lines on Schedule C.

Instructions for Form 1118 (Rev. 12-2023)

Column

Entry

1a

CFC2

1b

100012

1c
2

202312

3

OC

4

UUU

5(a)

NGCT

5(b)

iv

5(c)
6

1,800,000u

7

450,000

8(a)

1,440,000u

8(b)

1,440,000

9

0.800

10

360,000

Schedule D

Report taxes deemed paid under
section 960(d) with respect to
inclusions under section 951A. This
schedule should only be completed
with respect to the Form 1118 filed for
the section 951A category, and, in
rare cases, the passive category.
Schedule D is generally completed
by a domestic corporation that owns,
within the meaning of section 958(a),
stock in one or more CFCs that claims
taxes deemed paid with respect to
inclusions under section 951A.
Schedule D is also generally
completed by an individual (or an
estate or trust) that has made an
election under section 962 ("section
962 elector").

If more than one line is needed in
Part II:
• In Part II, column 2, the same
denominator will be used (the Part I,
column 5 total) in the inclusion
percentage calculation for each line;
and
• In Part II, column 3, the same
multiplication factor will be used (the
Part I, column 9 total) for each line.
If more than one line is completed
in Part II, the column 4 amounts
should be summed and included on a
single line on Form 1118, Schedule B,
Part I, column 3 (that is, the line on
Schedule B, Part I, column 3, that
corresponds with the line in
Instructions for Form 1118 (Rev. 12-2023)

Schedule A with “951A” in column 2 of
Schedule A).

Part I—Foreign Corporation's
Tested Income and Foreign
Taxes
Column 1a. Enter the name of each
CFC that has tested income, as
defined in section 951A(c)(2)(A). Do
not report information of CFCs with
tested losses, as defined in section
951A(c)(2)(B).
Column 1b. Enter the EIN or
reference ID number of the foreign
corporation. See Reference ID
numbers, earlier.
Note. Taxpayers no longer have the
option of entering “FOREIGNUS” or
“APPLIED FOR” in this column.
Instead, if the foreign corporation
does not have an EIN, the taxpayer
must use a reference ID number that
uniquely identifies such foreign
corporation, using the rules set forth in
Reference ID numbers, in the
Requirements section, earlier.
Column 2. Enter the year and month
in which the CFC's U.S. tax year
ended using the format YYYYMM.
Column 3. Enter the applicable
two-letter codes from the list at
IRS.gov/CountryCodes.
Column 4. Enter the applicable
three-character alphabet code for the
foreign corporation's functional
currency using the ISO 4217
standard.
Column 5. Enter the U.S.
shareholder's pro rata share of the
CFC's tested income from the
applicable Form 8992 schedule. If the
U.S. shareholder is not a member of a
U.S. consolidated group, enter the
amount reported on Form 8992,
Schedule A, column (e), for the CFC.
If the U.S. shareholder is a member of
a U.S. consolidated group, enter the
amount reported with respect to that
U.S. shareholder on Schedule B
(Form 8992), Part I, column (g), for the
CFC.
If the domestic corporation is a
partner in a partnership, enter the
domestic corporate partner's pro rata
share of CFC tested income from
Schedule K-3, Part VIII, line 3.
Column 6. Enter the CFC's tested
income from the applicable Form
8992 schedule. If the U.S. shareholder

is not a member of a U.S.
consolidated group, enter the amount
reported on Form 8992, Schedule A,
column (c), for the CFC. If the U.S.
shareholder is a member of a U.S.
consolidated group, enter the amount
reported with respect to that U.S.
shareholder on Schedule B (Form
8992), Part I, column (e), for the CFC.
Column 8. Enter the CFC's tested
foreign income taxes from Schedule Q
(Form 5471), line 3, column (xii).
Column 9. Enter the pro rata share of
tested foreign income taxes paid or
accrued by the CFC. To determine this
amount, multiply the amount in
column 7 by the amount in column 8.
Note. See the instructions for
Schedule G, later, for information on
reduction of foreign taxes for failure to
furnish information required under
section 6038.

Part II—Foreign Income Tax
Deemed Paid

Note. While multiple line entries may
be necessary for Schedule D, Part I,
because such lines are completed for
each CFC, in general, only one line
will be completed in Schedule D, Part
II, because the domestic corporation
filing Form 1118 only has one section
951A inclusion. However, there is an
exception if Form 1118 is completed
by an individual (or by an estate or
trust) that has made an election under
section 962 ("section 962 elector")
and the section 962 elector is a
shareholder of an S corporation that
has made an election to treat the S
corporation as an entity (rather than
as an aggregate of its owners), as
provided in Notice 2020-69, 2020-39
I.R.B. 604, on a timely (including
extensions) filed original Form 1120-S
with respect to the first tax year
ending on or after September 1, 2020.
In this case, the section 962 elector
may have more than one section 951A
inclusion that will be reported on
separate lines on Schedule D, Part II.
There might be multiple lines as a
result of (1) the section 962 elector's
section 951A inclusion, and (2) the
section 962 elector's share of the
section 951A inclusion of the S
corporation. There could also be
multiple lines if the section 962 elector
has an interest in more than one S
corporation.

17

Column 1. Enter the GILTI (that is,
the section 951A inclusion) from Form
8992, Part II, line 5.
Column 3. This amount as
determined on this line is the section
78 gross-up with respect to an
inclusion under section 951A which is
reported on Form 1118, Schedule A,
column 3(b).

Schedule E

Report taxes deemed paid by the
domestic corporation under section
960(b) with respect to PTEP
distributions. Taxes reported on this
schedule are with respect to foreign
income taxes levied on distributions of
PTEP from a lower-tier foreign
corporation to an upper-tier foreign
corporation when those taxes are
subsequently deemed paid by the
domestic corporation upon
distribution of such PTEP by the
upper-tier foreign corporation to the
domestic corporation.

Note. Foreign withholding taxes
levied on a domestic corporation as a
result of distributions of PTEP from a
first-tier foreign corporation to such
domestic corporation are not reported
on Schedule E. Such taxes are
reported on Schedule B, Part I,
column 2(b), as tax withheld on
distributions of PTEP.

Part I—Tax Deemed Paid by
Domestic Corporation
Column 1a. Enter the name of each
first-tier foreign corporation that had
foreign income taxes properly
attributable to PTEP distributions to a
domestic corporation that were not
previously deemed paid by a
domestic corporation. For
distributions of PTEP that originated in
lower-tier foreign corporations, enter a
unique alphabetic character before
the name of the distributing foreign
corporation to identify the source of
the PTEP distribution. See the
instructions for Part II, Column 1a. for
more information, including an
example.
Column 1b. Enter the EIN or
reference ID number of the foreign
corporation. See Reference ID
numbers, earlier.
Note. Taxpayers no longer have the
option of entering “FOREIGNUS” or
“APPLIED FOR” in this column.
18

Instead, if the foreign corporation
does not have an EIN, the taxpayer
must use a reference ID number that
uniquely identifies such foreign
corporation, using the rules set forth in
Reference ID numbers, in the
Requirements section, earlier.
Column 2. Enter the year and month
for the U.S. tax year of the first-tier
foreign corporation in which the
first-tier foreign corporation made the
PTEP distribution to the domestic
corporation. Use the format YYYYMM.
If there is a PTEP distribution related
to more than one PTEP group within
an annual PTEP account, complete a
separate line for each PTEP group
within an annual PTEP account. See
Regulations section 1.960-3(c)(2).
Column 3. Enter the applicable
two-letter codes from the list at
IRS.gov/CountryCodes.
Column 4. Enter the applicable
three-character alphabet code for the
distributing foreign corporation's
functional currency using the ISO
4217 standard.
Column 5. Enter the code which
describes the PTEP group
classification (as set forth in
Regulations section 1.960-3(c)(2)).
Please enter the applicable PTEP
group code from the following list.
Taxes related to previously
taxed E&P

PTEP
Group
Code

Reclassified section 965(a) PTEP

R965a

Reclassified section 965(b) PTEP

R965b

General section 959(c)(1) PTEP

959c1

Reclassified section 951A PTEP

R951A

Reclassified section 245A(d)
PTEP

R245Ad

Section 965(a) PTEP

965a

Section 965(b) PTEP

965b

Section 951A PTEP

951A

Section 245A(d) PTEP
Section 951(a)(1)(A) PTEP

245Ad
951a1A

Column 6. Enter the inclusion year
for the PTEP of the foreign corporation
to which inclusion under section
951(a) and GILTI inclusion amounts of
U.S. shareholders are attributable.
This is the annual PTEP account. See
Regulations section 1.960-3(c)(1).

Column 7. Enter the total amount of
the foreign corporation’s PTEP in the
PTEP group within an annual PTEP
account identified in columns 5 and 6.
Enter the amount in the functional
currency of the first-tier foreign
corporation.
Column 8. Enter the total amount of
the foreign corporations’ PTEP group
taxes with respect to the PTEP group
within the annual PTEP account
identified in columns 5 and 6. Enter
the amount in U.S. dollars.
Column 9. Enter the PTEP
distribution from the PTEP group
within the annual PTEP account
identified in columns 5 and 6 in the
functional currency of the first-tier
foreign corporation. If there is a PTEP
distribution related to more than one
PTEP group within an annual PTEP
account, complete a separate line for
each PTEP group within an annual
PTEP account.
Column 11. For each line, multiply
the amount in column 8 by the amount
in column 10. This is the U.S. dollar
amount of the foreign income taxes
properly attributable to the PTEP
distribution reported in column 9 and
not deemed to have been paid by the
domestic corporation for the tax year
or any prior tax year.
Note. With respect to distributions of
PTEP resulting from inclusions under
section 965, report the taxes properly
attributable to such PTEP without
reduction for the foreign tax credit
disallowance. The disallowance is
taken into account in Schedule G. See
the specific instructions for
Schedule G, later.

Part II—Tax Paid or Deemed
Paid by First- and Lower-Tier
Foreign Corporations

The purpose of Part II is to track the
current-year and historical PTEP
distributions between foreign
corporations and taxes paid, accrued,
or deemed paid by upper-tier foreign
corporations on such PTEP
distributions. These amounts are to be
reported on this Part II only to the
extent that there is a PTEP distribution
to the domestic corporation entered in
Part I. The amounts entered in Part II
could relate to current-year or
prior-year PTEP distributions between
foreign corporations, so the applicable
Instructions for Form 1118 (Rev. 12-2023)

year should be noted in column 2
using the format YYYYMM.
If foreign income taxes paid,
accrued, or deemed paid by a first-tier
foreign corporation are properly
attributable to a PTEP distribution
from one or more lower-tier foreign
corporations, report all such PTEP
distributions by the lower-tier foreign
corporations in Part II, even if the
distributing lower-tier foreign
corporations did not pay or accrue
(and were not deemed to pay) any
foreign income taxes with respect to
the PTEP distributions. For each tier,
report the amount of the PTEP
distribution from the first-tier foreign
corporation that is attributable to a
PTEP distribution from the lower-tier
foreign corporation and the amount of
foreign income taxes paid, accrued, or
deemed paid by that lower-tier foreign
corporation with respect to that
portion of the PTEP distribution.
Because only eligible current-year tax
paid or accrued by a CFC with respect
to its receipt of a PTEP distribution
from a lower-tier foreign corporation
are eligible to be treated as deemed
paid under section 960(b), no foreign
income taxes of the lowest-tier foreign
corporation to which the PTEP
distribution is attributable are properly
attributable to a PTEP distribution
made to an upper-tier foreign
corporation. See Regulations section
1.960-1(d)(3)(ii)(C).
Column 1a. Enter the name of each
lower-tier foreign corporation that
distributed PTEP to an upper-tier
foreign corporation, in the current year
or a prior year, that in turn was
distributed in the current year to a
domestic corporation. In column 1a,
preceding the name of the distributing
lower-tier foreign corporation, enter a
unique alphabetic character that
corresponds to a PTEP distribution
reported in Part I. For example, in the
case of a PTEP distribution from
CFC3, third-tier foreign corporation, to
CFC2, second-tier foreign
corporation, to CFC1, first-tier foreign
corporation, to USP, a domestic
corporation, the domestic corporation
correlates the distributions as follows.
Part I, column 1a. Enter “A CFC1”
(to report distribution from CFC1 to
domestic corporation sourced from
PTEP distributions from CFC2 and
CFC3).
Instructions for Form 1118 (Rev. 12-2023)

Part II, column 1a. Enter “A
CFC2” (to report distribution from
CFC2 to CFC1), and enter “A CFC3”
(to report distribution from CFC3 to
CFC2).
Column 1b. Enter the EIN or
reference ID number of the distributing
foreign corporation. See Reference ID
numbers, earlier.
Note. Taxpayers no longer have the
option of entering “FOREIGNUS” or
“APPLIED FOR” in this column.
Instead, if the distributing foreign
corporation does not have an EIN, the
taxpayer must use a reference ID
number that uniquely identifies such
foreign corporation, using the rules set
forth in Reference ID numbers, in the
Requirements section, earlier.
Column 2. Enter the U.S. tax year of
the distributing foreign corporation
which includes the date when the
foreign corporation distributed the
PTEP to the upper-tier foreign
corporation.
Note. If the PTEP distributed in Part I
relates to PTEP distributions from
lower-tier foreign corporations made
in more than 1 tax year, figure and
show the tax deemed paid on a
separate line for each distribution.
Column 3. Enter the applicable
two-letter codes from the list at
IRS.gov/CountryCodes.
Column 4b. Enter the EIN or
reference ID number of the recipient
foreign corporation. See Reference ID
numbers, earlier.
Note. Taxpayers no longer have the
option of entering “FOREIGNUS” or
“APPLIED FOR” in this column.
Instead, if the recipient foreign
corporation does not have an EIN, the
taxpayer must use a reference ID
number that uniquely identifies such
foreign corporation, using the rules set
forth in Reference ID numbers, in the
Requirements section, earlier.
Column 5. Enter the U.S. tax year of
the recipient foreign corporation which
includes the date the foreign
corporation received the PTEP
distribution.
Column 6. Enter the applicable
two-letter codes from the list at
IRS.gov/CountryCodes.
Column 7. Enter the applicable
three-character alphabet code for the

distributing foreign corporation's
functional currency using the ISO
4217 standard.
Column 8. Enter the applicable
PTEP group code from the list
provided in the specific instructions for
Schedule E, Part I, Column 5, earlier.
Column 9. Enter the annual PTEP
account. See the instructions for
Schedule E, Part I, Column 6, earlier.
Column 10. Enter the total amount of
the foreign corporation’s PTEP in the
PTEP group within the annual PTEP
account identified in column 8 and
column 9. Enter such amount in the
functional currency of the distributing
foreign corporation.
Column 11. Enter the total amount of
the foreign corporation’s PTEP group
taxes with respect to the PTEP group
within the annual PTEP account
identified in column 8 and column 9.
Enter this amount in U.S. dollars. To
determine the appropriate translation
rate, see section 986(a).
Column 12. Enter the PTEP
distribution with respect to the PTEP
group within the annual PTEP account
identified in columns 8 and 9 in the
functional currency of the distributing
foreign corporation. If there is a PTEP
distribution related to more than one
PTEP group within an annual PTEP
account, complete a separate line for
each PTEP group within an annual
PTEP account. Only report the
amount of PTEP that was ultimately
distributed to the domestic
corporation in the current year, even if
the amount of PTEP distributed to the
upper-tier foreign corporation was
greater than that amount.
Column 14. Enter the U.S. dollar
amount of the recipient foreign
corporation's income taxes paid,
accrued, and deemed paid that are
properly attributable to the PTEP
distribution reported in column 12 and
not deemed to have been paid by the
domestic corporation for any prior tax
year.
Note. See the Note in the instructions
for Part I, column 11, for purposes of
reporting foreign income taxes
properly attributable to PTEP
distributions resulting from inclusions
under section 965.
Note. See the instructions for
Schedule G, later, for information on
19

reduction of foreign taxes for failure to
furnish information required under
section 6038.
Example 1. USC is a domestic
corporation. CFC1, a Country Y
corporation, wholly owns Country X
corporations CFC2 and CFC3. The
U.S. tax year for USC, CFC1, CFC2,
and CFC3 ends on December 31.
During the U.S. tax year ending
December 31, 2023, CFC2 and
CFC3, both second-tier CFCs, each
distribute 100u, comprising all of their
respective section 965(a) PTEP within
the annual PTEP account for the 2017
tax year (“2017 section 965(a) PTEP”)
within the general category, to CFC1,
a first-tier CFC. CFC1 pays 40u equal
to $40 of eligible current-year taxes to
Country X on the 200u PTEP
distributions, reducing the 2017
section 965(a) PTEP to 160u. In that
same year, CFC1 distributes all 160u
of the 2017 section 965(a) PTEP to
USC. CFC1 does not have any other
PTEP balances. The reference ID
numbers for CFC1, CFC2, and CFC3
are 10041, 10042, and 10043,
respectively. The country codes for
Country X and Country Y are OC and
BC, respectively. The functional
currency of CFC1, CFC2, and CFC3
is the “u.” The applicable
three-character alphabet code for the
“u” using the ISO 4217 standard is
“UUU.”
USC makes the following entries on
a single line on Schedule E, Part I.

Entry

1a

A CFC2

1b

10042

2

202312

3

OC

4a

CFC1

4b

10041

5

202312

6

BC

7

UUU

8

965a

9

2017

10

80u

11

0

12

80u

13

1.000

14

0

USC makes the following entries on
the second of two lines on
Schedule E, Part II.
Column

Entry

1a

A CFC3

1b

10043

2

202312

3

OC

4a

CFC1

4b

10041

5

202312

Column

Entry

6

BC

1a

A CFC1

7

UUU

1b

10041

8

965a

2

202312

9

2017

3

BC

10

80u

4

UUU

11

0

5

965a

12

80u

6

2017

13

1.000

7

160u

14

0

8

40

9

160u

10

1.000

11

40

USC makes the following entries on
the first of two lines on Schedule E,
Part II.
20

Column

Example 2. USC is a domestic
corporation. CFC1 and CFC2 are
Country X corporations, and CFC3 is
a Country Y corporation. The U.S. tax
year for USC, CFC1, CFC2, and
CFC3 ends on December 31. During
CFC3’s U.S. tax year ending
December 31, 2018, CFC3 distributes
100u, comprising its entire section
965(a) PTEP within the annual PTEP

account for the 2017 tax year (“2017
section 965(a) PTEP”) within the
general category, to CFC2, a CFC that
wholly owns CFC3. CFC2 pays
eligible current-year tax of 20u to
Country X equal to $20 on the 100u
PTEP distribution, reducing the 2017
section 965(a) PTEP to 80u. In
CFC2’s U.S. tax year ending
December 31, 2019, CFC2 distributes
40u of the 2017 section 965(a) PTEP
to CFC1, a CFC that wholly owns
CFC2. CFC1 pays no tax on such
distribution, but is deemed to pay $10
of the eligible current-year tax that
was paid by CFC2 in 2017. In CFC1’s
U.S. tax year ending December 31,
2023, CFC1 distributes 40u to USC,
who wholly owns CFC1. USC pays no
foreign tax on such distribution, but is
deemed to pay the $10 of eligible
current-year tax that was paid by
CFC2 in 2017 and deemed paid by
CFC1 in 2019. The reference ID
numbers for CFC1, CFC2, and CFC3
are 20041, 20042, and 20043,
respectively. The country codes for
Country X and Country Y are OC and
BC, respectively. The functional
currency of CFC1, CFC2, and CFC3
is the “u.” The applicable
three-character alphabet code for the
“u” using the ISO 4217 standard is
“UUU.”
Schedule E reporting is not
necessary for USC’s tax years ending
December 31, 2018, 2019, 2020,
2021, and 2022. For USC's tax year
ending December 31, 2023, USC
makes the following entries on a
single line on its general category
Form 1118, Schedule E, Part I.
Column

Entry

1a

A CFC1

1b

20041

2

202312

3

OC

4

UUU

5

965a

6

2017

7

40u

8

10

9

40u

10

1.000

11

10

Instructions for Form 1118 (Rev. 12-2023)

USC makes the following entries on
the first of two lines on Schedule E,
Part II.
Column

Entry

1a

A CFC2

1b

20042

2

201912

3

OC

4a

CFC1

4b

20041

5

201912

6

OC

7

UUU

8

965a

9

2017

10

80u

11

20

12

40u

13

0.500

14

10

USC makes the following entries on
the second of two lines on
Schedule E, Part II.
Column

Entry

1a

A CFC3

1b

20043

2

201812

3

BC

4a

CFC2

4b

20042

5

201812

6

OC

7

UUU

8

965a

9

2017

10

80u

11

0

12

40u

13

0.500

14

0

Example 3. USC is a domestic
corporation. CFC1 is a Country X
corporation, CFC2 is a Country Y
corporation, and CFC3 is a Country Z
corporation. The U.S. tax year of USC,
CFC1, CFC2, and CFC3 ends on
Instructions for Form 1118 (Rev. 12-2023)

December 31. During CFC3’s U.S. tax
year ending December 31, 2018,
CFC3 distributes 1,000u, comprising
all of its subpart F PTEP within the
annual PTEP account for the 2016 tax
year (“2016 section 951(a)(1)(A)
PTEP”) within the general category, to
CFC2, a CFC that wholly owns CFC3.
CFC2 pays eligible current-year tax of
100u to Country Y equal to $100 on
the 1,000u PTEP distribution,
reducing the 2016 section 951(a)(1)
(A) PTEP to 900u. In CFC2’s tax year
ending December 31, 2019, CFC2
distributes 250u, comprising all of its
section 951A PTEP within the annual
PTEP account for the 2018 tax year
(“2018 section 951A PTEP”) within the
section 951A category, to CFC1, a
CFC that wholly owns CFC2. CFC1
pays eligible current-year tax of 25u to
Country X equal to $25 on the 250u
PTEP distribution, reducing the 2018
section 951A PTEP to 225u. During
CFC2’s tax year ending December 31,
2023, CFC2 distributes 450u out of its
2016 section 951(a)(1)(A) PTEP
balance of 900u to CFC1. CFC1 pays
eligible current-year tax of 45u to
Country X equal to $45 on the 450u
PTEP distribution, reducing the 2016
section 951(a)(1)(A) PTEP to 405u.
CFC1 is also deemed to pay $50 of
the eligible current-year tax paid by
CFC2 on its receipt of the 2018
distribution of the PTEP from CFC3. In
the same year, CFC1 distributes 630u
to USC, which wholly owns CFC1.
Such distribution includes all of
CFC1’s 2016 section 951(a)(1)(A)
PTEP of 405u and 2018 section 951A
PTEP of 225u. USC pays no foreign
tax on such distribution, but is
deemed to pay $50 of the eligible
current-year tax deemed paid by
CFC1 and $70 on the eligible
current-year tax paid by CFC1 on the
2019 and 2023 distributions of the
PTEP from CFC2.
The reference ID numbers for
CFC1, CFC2, and CFC3 are 10041,
10042, and 10043, respectively. The
country codes for Country X, Country
Y, and Country Z are OC, CC, and BC,
respectively. The functional currency
of CFC1, CFC2, and CFC3 is the “u.”
The applicable three-character
alphabet code for the “u” using the
ISO 4217 standard is “UUU.”
Schedule E reporting is not
necessary for USC's tax years ending
December 31, 2018, 2019, 2020,
2021, and 2022. For USC's tax year

ending December 31, 2023, USC
completes Form 1118, Schedule E, as
follows:
USC makes the following entries on
Schedule E, Part I, with respect to
general category income.
Column

Entry

1a

A CFC1

1b

10041

2

202312

3

OC

4

UUU

5

951a1A

6

2016

7

405u

8

95

9

405u

10

1.000

11

95

USC makes the following entries on
the first of two lines on Schedule E,
Part II, of its Form 1118 with respect to
general category income.
Column

Entry

1a

A CFC2

1b

10042

2

202312

3

CC

4a

CFC1

4b

10041

5

202312

6

OC

7

UUU

8

951a1A

9

2016

10

810u

11

100

12

405u

13

0.500

14

50

USC makes the following entries on
the second of two lines on
Schedule E, Part II, of its Form 1118
with respect to general category
income.

21

Column

Entry

Column

Entry

1a

A CFC3

1a

B CFC2

1b

10043

1b

10042

2

201812

2

201912

3

BC

3

CC

4a

CFC2

4a

CFC1

4b

10042

4b

10041

5

201812

5

201912

6

CC

6

OC

7

UUU

7

UUU

8

951a1A

8

951A

9

2016

9

2018

10

810u

10

225u

11

0

11

0

12

405u

12

225u

13

0.500

13

1.000

14

0

14

0

USC makes the following entries on
a line on Schedule E, Part I, of its
Form 1118 with respect to section
951A category income.

Schedule F

Reserved for future use.

Schedule G
Column

Entry

1a

B CFC1

1b

10041

2

202312

3

OC

4

UUU

5

951A

6

2018

7

225u

8

25

9

225u

10

1.000

11

25

USC makes the following entries on
a line on Schedule E, Part II, of its
Form 1118 with respect to section
951A category income.

Part I
Line A. If the corporation claims a
deduction for percentage depletion
under section 613 with respect to any
part of its foreign mineral income (as
defined in section 901(e)(2)) for the
tax year, any foreign taxes on that
income must be reduced by the
smaller of:
1. The foreign taxes minus the tax
on that income, or
2. The tax on that income
determined without regard to the
deduction for percentage depletion
minus the tax on that income.
The reduction must be made on a
country-by-country basis (Regulations
section 1.901-3(a)(1)). Attach a
separate schedule showing the
reduction.
Line C. If the corporation chooses to
calculate the reduction in the foreign
tax by identifying taxes specifically
attributable to participation in or
cooperation with an international
boycott, enter the amount from
Schedule C (Form 5713), line 2b. See
Form 5713 and its separate
Schedule C and instructions.

fails to furnish any return or any
information in any return required
under section 6038(a) by the due
date, reduce the foreign income taxes
available for credit under sections 901
and 960 by 10%. If the failure
continues for 90 days or more after
the date of written notice by the IRS,
reduce the tax by an additional 5% for
each 3-month period or fraction
thereof during which the failure
continues after the 90-day period has
expired. See section 6038(c) for
limitations and special rules.
In addition, a $10,000 penalty is
imposed under section 6038(b) for
failure to supply the information
required under section 6038(a) for
each entity within the time prescribed.
If the required information is not
submitted within 90 days after the IRS
has mailed notice to the U.S. person,
additional penalties may apply.
Note. The reduction in foreign
income taxes available for credit is
reduced by any dollar penalty
imposed under section 6038(b).
Line E. Enter foreign income taxes
paid or accrued during the current tax
year that have been suspended due to
the rules of section 909.
Line F. Enter disallowed taxes under
section 965(g).
Taxes paid or accrued with respect
to distributions of section 965(a)
PTEP and section 965(b) PTEP must
be reduced by the relevant applicable
percentage. See Regulations section
1.965-5(b). Taxes deemed paid with
respect to distributions of section
965(a) PTEP and section 965(b)
PTEP must be reduced by the
relevant applicable percentage. See
Regulations section 1.965-5(c)(1)(i)
and (iii).
Line G. Enter disallowed taxes under
section 245A. Such disallowed taxes
may also include, for example, gain on
certain sales of CFC stock treated as
dividends. See section 964(e)(4).
Line H. For any other reductions in
taxes, enter the code “OTH” and
attach a statement with the amount
and the nature of such other
reduction.

Line D. If the corporation controls a
foreign corporation or partnership and
22

Instructions for Form 1118 (Rev. 12-2023)

Schedule H
Computer-Generated
Schedule H

A computer-generated Schedule H
may be filed if it conforms to the IRS
version. In some cases, Schedule H
must be expanded to properly report
apportioned deductions. This applies
in cases such as when the
corporation:
• Has more than two product lines
(under the gross receipts method of
apportioning research and
experimental (R&E) deductions in Part
I), or
• Has more than five categories of
income (statutory groupings within
Part I, line 6; Part II, line 3; or Part III,
line 2) with respect to which expenses
are required to be apportioned.
Note. If there are more than five
foreign source statutory groupings
within Part II, line 3, or Part III, line 2,
add them after the U.S. source
residual grouping.

Part I—Research and
Experimental Deductions

Note. These instructions refer to the
regulations issued on November 12,
2020. See Regulations section
1.861-17 (T.D. 9922, 85 FR 72042, as
corrected by 86 FR 54367).
Use Part I to apportion R&E
deductions. Use the gross receipts
method described in Regulations
section 1.861-17 and report
applicable amounts in column (a).
Column (a), Gross Receipts
Method
Enter in the spaces provided the SIC
Code numbers (based upon the
Standard Industrial Classification
System) of the product lines to which
the R&E deductions relate. See
Regulations section 1.861-17(b)(3) for
details on choosing SIC codes and
changing a product category.
Note. If the corporation has more
than two product lines, see
Computer-Generated Schedule H,
earlier.
Columns (a)(i) and (a)(iv)
Line 1. For each product line, enter
the taxpayer’s worldwide “gross
Instructions for Form 1118 (Rev. 12-2023)

intangible income” (as defined in
Regulations section 1.861-17(b)(2)).

of uncontrolled parties (as defined in
Regulations section 1.861-17(d)(3)).

Line 4a. For each product line, enter
the U.S. source “gross intangible
income” (as defined in Regulations
section 1.861-17(b)(2)) of the
taxpayer that is neither income
pertaining to sales, licenses, leases,
or services of controlled parties (as
defined in Regulations section
1.861-17(d)(4)) nor income pertaining
to sales, licenses, leases, or services
of uncontrolled parties (as defined in
Regulations section 1.861-17(d)(3)).

Line 5d. For each product line, add
lines 5a through 5c and enter the sum
on line 5d.

Line 4b. For each product line, enter
the U.S. source “gross intangible
income” (as defined in Regulations
section 1.861-17(b)(2)) of the
taxpayer that is income pertaining to
sales, licenses, leases, or services of
controlled parties (as defined in
Regulations section 1.861-17(d)(4)).
Line 4c. For each product line, enter
the U.S. source “gross intangible
income” (as defined in Regulations
section 1.861-17(b)(2)) of the
taxpayer that is income pertaining to
sales, licenses, leases, or services of
uncontrolled parties (as defined in
Regulations section 1.861-17(d)(3)).
Line 4d. For each product line, add
lines 4a through 4c and enter the sum
on line 4d.
Line 5a. For each product line, enter
the aggregate foreign source “gross
intangible income” (as defined in
Regulations section 1.861-17(b)(2)) of
the taxpayer that is neither income
pertaining to sales, licenses, leases,
or services of controlled parties (as
defined in Regulations section
1.861-17(d)(4)) nor income pertaining
to sales, licenses, leases, or services
of uncontrolled parties (as defined in
Regulations section 1.861-17(d)(3)).
Line 5b. For each product line, enter
the aggregate foreign source “gross
intangible income” (as defined in
Regulations section 1.861-17(b)(2)) of
the taxpayer that is income pertaining
to sales, licenses, leases, or services
of controlled parties (as defined in
Regulations section 1.861-17(d)(4)).
Line 5c. For each product line, enter
the aggregate foreign source “gross
intangible income” (as defined in
Regulations section 1.861-17(b)(2)) of
the taxpayer that is income pertaining
to sales, licenses, leases, or services

Lines 6a through 6e. For lines 6a
through 6e, enter the code for the
applicable separate category of
income (foreign source statutory
grouping). See Categories of Income
earlier. If code “901j” or one of the
“RBT” codes applies, also enter the
applicable country.
Note. If the corporation has more
than five separate categories of
income, Schedule H, Part I, line 6
must be expanded to properly report
apportioned R&E deductions. See
Computer-Generated Schedule H,
earlier.
Lines 6a(1), 6b(1), 6c(1), 6d(1),
and 6e(1). For each product line and
for each separate category, enter the
foreign source “gross intangible
income” (as defined in Regulations
section 1.861-17(b)(2)) of the
taxpayer that is neither income
pertaining to sales, licenses, leases,
or services of controlled parties (as
defined in Regulations section
1.861-17(d)(4)) nor income pertaining
to sales, licenses, leases, or services
of uncontrolled parties (as defined in
Regulations section 1.861-17(d)(3)).
Lines 6a(2), 6b(2), 6c(2), 6d(2),
and 6e(2). For each product line and
for each separate category, enter the
foreign source “gross intangible
income” (as defined in Regulations
section 1.861-17(b)(2)) of the
taxpayer that is income pertaining to
sales, licenses, leases, or services of
controlled parties (as defined in
Regulations section 1.861-17(d)(4)).
Lines 6a(3), 6b(3), 6c(3), 6d(3),
and 6e(3). For each product line and
for each separate category, enter the
foreign source “gross intangible
income” (as defined in Regulations
section 1.861-17(b)(2)) of the
taxpayer that is income pertaining to
sales, licenses, leases, or services of
uncontrolled parties (as defined in
Regulations section 1.861-17(d)(3)).
Lines 6a(4), 6b(4), 6c(4), 6d(4),
and 6e(4). For each product line and
for each separate category, add lines
(1), (2), and (3) and enter the sum on
line (4).
23

Columns (a)(ii) and (a)(v)
Line 1. For each product line, enter
the taxpayer’s worldwide gross
receipts from sales and leases of
products or services.
Line 4a. For each product line, enter
the taxpayer’s gross receipts from
sales and leases of products or
services related to U.S. source gross
intangible income.
Line 4b. For each product line, enter
the controlled parties’ (as defined in
Regulations section 1.861-17(d)(4))
gross receipts from sales, leases,
licenses, or services that are related
to the taxpayer’s U.S. source gross
intangible income.
Line 4c. For each product line, enter
the uncontrolled parties’ (as defined in
Regulations section 1.861-17(d)(3))
gross receipts from sales, leases,
licenses, or services of uncontrolled
parties that are related to the
taxpayer’s U.S. source gross
intangible income.
Line 4d. For each product line, add
lines 4a through 4c and enter the sum
on line 4d.
Line 5a. For each product line, enter
the taxpayer’s gross receipts from
sales and leases of products or
services related to foreign source
gross intangible income.
Line 5b. For each product line, enter
the controlled parties’ (as defined in
Regulations section 1.861-17(d)(4))
gross receipts from sales, leases,
licenses, or services that are related
to the taxpayer’s foreign source gross
intangible income.
Line 5c. For each product line, enter
the uncontrolled parties' (as defined in
Regulations section 1.861-17(d)(3))
gross receipts from sales, licenses,
leases, or services that are related to
the taxpayer's foreign source gross
intangible income.
Line 5d. For each product line, add
lines 4a through 4c and enter the sum
on line 4d.
Lines 6a(1), 6b(1), 6c(1), 6d(1),
and 6e(1). For each product line,
enter the taxpayer's gross receipts
from sales and leases of products or
services that are related to foreign
source gross intangible income within
the relevant separate category.

24

Lines 6a(2), 6b(2), 6c(2), 6d(2),
and 6e(2). For each product line,
enter the controlled parties’ (as
defined in Regulations section
1.861-17(d)(4)) gross receipts from
sales, licenses, leases, or services
that are related to foreign source
gross intangible income within the
relevant statutory grouping.
Lines 6a(3), 6b(3), 6c(3), 6d(3),
and 6e(3). For each product line,
enter the uncontrolled parties’ (as
defined in Regulations section
1.861-17(d)(3)) gross receipts from
sales, licenses, leases, or services
that are related to foreign source
gross intangible income within the
relevant statutory grouping.
Lines 6a(4), 6b(4), 6c(4), 6d(4),
and 6e(4). For each product line and
for each separate category, add lines
(1), (2), and (3) and enter the sum on
line (4).
Columns (a)(iii) and (a)(vi)
Line 1. Enter the total R&E
deductions connected with the
product lines.
Line 2a or 2b. Reduce the line 1
totals by a 50% exclusive
apportionment amount (Regulations
section 1.861-17(c)).
Note. For tax years beginning on or
after January 1, 2020, there is no
longer a rule with respect to legally
mandated R&E. See Regulations
section 1.861-17 (T.D. 9922)
published in the Federal Register on
November 12, 2020.
Under the exclusive apportionment
rules, 50% of the R&E deductions are
apportioned exclusively to the residual
grouping of U.S. source gross income,
if the R&E that accounts for more than
50% of the amount of such R&E
deductions were performed in the
United States. A similar rule applies
when a majority of R&E is performed
outside the United States.
Enter 50% of line 1 on either line 2a
or line 2b (as explained above).
Line 4d. According to Regulations
section 1.861-17(d)(1), to determine
the line 3 amount of R&E
expenditures to be apportioned to the
residual grouping of U.S. source gross
income, divide the gross receipts
related to the gross intangible income
within the residual grouping by the

worldwide gross receipts for the
product line. Multiply the result by the
line 3 R&E deductions to be
apportioned.
Example 1. With respect to the
first product line reported on
Schedule H, Part I, to determine the
amount to enter on line 4d, column (a)
(iii), divide the amount on line 4d,
column (a)(ii) by the amount on line 1,
column (a)(ii). Multiply the result by
the amount on line 3, column (a)(iii).
Line 5d. According to Regulations
section 1.861-17(d)(1), to determine
the line 3 amount of R&E
expenditures to be apportioned to the
aggregate statutory grouping of
foreign source gross income, divide
the gross receipts related to the gross
intangible income within the statutory
grouping(s) by the worldwide gross
receipts for the product line. Multiply
the result by the line 3 R&E
deductions to be apportioned.
Example 2. With respect to the
first product line reported on
Schedule H, Part I, to determine the
amount to enter on line 5d, column (a)
(iii), divide the amount on line 5d,
column (a)(ii) by the amount on line 1,
column (a)(ii). Multiply the result by
the amount on line 3, column (a)(iii).
Lines 6a(5), 6b(5), 6c(5), 6d(5),
and 6e(5). Enter the amount of line 3
R&E deductions apportioned to each
separate category. According to
Regulations section 1.861-17(d)(1), to
determine the line 3 amount of R&E
expenditures to be apportioned
among the statutory groupings of
foreign source gross income, divide
the gross receipts related to the gross
intangible income within the statutory
grouping by the worldwide gross
receipts for the product line. Multiply
the result by the line 3 R&E
deductions to be apportioned.
Example 3. With respect to the
first product line reported on
Schedule H, Part I, there are two
foreign tax credit separate limitation
categories with gross receipts that are
related to foreign source gross
intangible income within each of the
two categories. With respect to the
first separate category, to determine
the amount to enter on line 6a(5),
column (a)(iii), divide the amount on
line 6a(4), column (a)(ii) by the
amount on line 1, column (a)(ii) and
multiply the result by the amount on
Instructions for Form 1118 (Rev. 12-2023)

line 3, column (a)(iii). Similarly, with
respect to the second separate
category, to determine the amount to
enter on line 6b(5), column (a)(iii),
divide the amount on line 6b(4),
column (a)(ii) by the amount on line 1,
column (a)(ii) and multiply the result
by the amount on line 3, column (a)
(iii).
Lines 6a(6), 6b(6), 6c(6), 6d(6),
and 6e(6). Enter the amount of
line 2b R&E deductions, if any, to be
apportioned to each separate
category. As indicated in Regulations
section 1.861-17(c), if there are
multiple separate categories with
foreign source gross intangible
income with respect to a given
product line, the line 2b amount is
apportioned ratably based on the
relative amounts of gross receipts
from gross intangible income in each
separate category, as determined
under Regulations section
1.861-17(d).
Column (b)
Line 1. Enter total R&E deductions
for all product lines (for example, from
column (a)(iii) and, if applicable,
columns (a)(vi), (a)(ix), etc.).
Note. Line 1, column (b) is the total
worldwide R&E deductions for all
product lines.
Lines 2a and 4d. Enter on line 2a
the total amount exclusively
apportioned to U.S. source gross
intangible income for all product lines.
Enter on line 4d the total amount of
line 3 R&E expenditures apportioned
to the residual grouping of U.S. source
gross intangible income for all product
lines.
Note. Line 2a, column (b) plus
line 4d, column (b) equals the total
amount of R&E deductions for all
product lines apportioned to U.S.
source gross intangible income for all
product lines.
Lines 6a(7), 6b(7), 6c(7), 6d(7),
and 6e(7). Enter on each of these
lines the total amount of line 3 R&E
expenditures apportioned to the
statutory grouping of foreign source
gross income for all product lines.
Note. The sum of lines 6a(7), 6b(7),
6c(7), 6d(7), and 6e(7) in column (b)
equals the total amount of R&E
deductions for all product lines
Instructions for Form 1118 (Rev. 12-2023)

apportioned to foreign source gross
intangible income for all product lines.
Note. Include the amount from
column (b) of line 6a(7) in column 14
of the Schedule A that corresponds
with the code entered on line 6a. If
applicable, you should likewise
include the amount from column (b) of
line 6b(7) in column 14 of the
Schedule A that corresponds with the
code entered on line 6b. If applicable,
on page 10 of Form 1118, you should
likewise include the amount(s) from
column (b) of lines 6c(7), 6d(7), and
6e(7) in column 14 of the Schedule A
that corresponds with the code
entered on lines 6c, 6d, and 6e,
respectively.

Part II—Deductions Allocated
and Apportioned Based on
Assets
Columns (a)(i) Through (b)(iv)
Use these columns to apportion
interest deductions. See final and
temporary Regulations sections
1.861-8 through 1.861-14 for rules on
the apportionment of interest
deductions based on the tax book
value or adjusted tax book value of
assets.
A corporation may elect to use the
alternative tax book value method.
See Regulations section 1.861-9(i).
Columns (a) and (b) are subdivided
into “Nonfinancial Corporations” and
“Financial Corporations.” In allocating
interest deductions, members of an
affiliated group that are financial
corporations must be treated as a
separate affiliated group. Complete
columns (a)(ii) and (b)(iv) for
members of the corporation's affiliated
group that are financial corporations
and columns (a)(i) and (b)(iii) for
members that are nonfinancial
corporations.
See Regulations section 1.861-11
for the definition of an affiliated group.
Columns (a)(i) and (a)(ii)
Line 1a. Enter the average of the
total assets of the affiliated group. See
Regulations section 1.861-9(g)(2) for
the definition of “average” for these
purposes.
Line 1b. Enter the assets included on
line 1a that are characterized as

excess related party indebtedness.
See Regulations section 1.861-10(e)
for an exception to the general rule of
fungibility for excess related party
indebtedness.
Line 1c. Enter all other assets that
attract specifically allocable interest
deductions. See Regulations section
1.861-10 for other exceptions to the
general rule of fungibility (such as
qualified nonrecourse indebtedness
and integrated financial transactions).
Line 1d. Enter the total of the exempt
assets and assets without directly
identifiable yield that are to be
excluded from the interest
apportionment formula (Regulations
section 1.861-8(d)(2) and Temporary
Regulations sections 1.861-8T(d)(2)
and 1.861-9T(g)(3)). This could
include an exempt portion of assets
that produce foreign-derived
intangible income and/or an exempt
portion of CFC stock that gives rise to
inclusions under section 951A.
Lines 3a through 3f. For lines 3a
through 3e, enter the code for the
applicable separate category of
income (statutory grouping). See
Categories of Income, earlier. If code
“901j” or one of the “RBT” codes
applies, also enter the applicable
country.
Note. If the corporation had more
than five separate categories of
income, Schedule H, Part II, line 3
must be expanded to properly report
deductions apportioned based on
assets. See Computer-Generated
Schedule H, earlier.
The assets in each statutory
grouping (lines 3a through 3e) and the
residual grouping (line 3f) are divided
between those assets generating
dividend income eligible to be offset
by the deduction under section 245A
versus those generating all other
types of gross income. The foreign
branch income and section 951A
income categories do not include
assets generating dividend income
eligible to be offset by the deduction
under section 245A. The assets on
line 2 are characterized as assets in
one of the statutory groupings or as
belonging to the residual grouping.
Enter the value of the assets in
each of the statutory groupings on
lines 3a through 3e, and enter the
value of the assets in the residual
grouping on line 3f. See Regulations
25

sections 1.861-12 and 1.861-13 and
Temporary Regulations sections
1.861-9T(g)(3), 1.861-12T(g)(2), and
1.861-12T for the rules for
characterizing the assets.
Columns (b)(iii) and (b)(iv)
Line 1a. Enter the total interest
deductions for the members of the
corporation's affiliated group. These
include any expense that is currently
deductible under section 163
(including original issue discount),
and interest equivalents. See
Regulations section 1.861-9 and
Temporary Regulations section
1.861-9T for the definition of interest
equivalents and a list of the sections
that disallow or suspend interest
deductions or require the
capitalization of interest deductions.
Line 1b. Enter the interest
deductions associated with the assets
on line 1b of columns (a)(i) and (a)(ii),
respectively, that attract specifically
allocable interest deductions under
Regulations section 1.861-10(e).
Note. These interest deductions will
be divided among the statutory
groupings and the residual grouping.
The interest deductions allocated and
apportioned to the statutory groupings
will appear as a definitely allocable
deduction in Schedule A, column
13(j).

Example 2. To determine the
amount to enter on line 3b(2), column
(b)(iv), do the following.
1. Divide the amount on line 3b(2),
column (a)(ii), by the amount on line 2,
column (a)(ii).
2. Multiply the result by the
amount on line 2, column (b)(iv).
Column (c)
Complete this column to apportion
stewardship deductions. See
Regulations section 1.861-8(e)(4)(ii).
Column (d)
Complete this column to apportion
certain industrial/investor damages.
See Regulations section 1.861-8(e)(5)
(ii) and (iii).
Column (e)
Complete this column to apportion all
other deductions allocated and
apportioned based on assets (other
than interest deductions, stewardship
deductions, and certain industrial/
investor damages). See final and
temporary Regulations sections
1.861-8 and 1.861-14.
Line Instructions for Columns (c),
(d), and (e)

Line 1c. Enter the interest
deductions associated with the assets
on line 1c of columns (a)(i) and (a)(ii),
respectively, that attract specifically
allocable interest deductions.

Line 1a. For each column, enter the
total expenses to be allocated and
apportioned. See final and temporary
Regulations sections 1.861-8 and
1.861-14. Also report this amount on
line 2.

Lines 3a through 3f. To figure the
amount of interest deductions to
apportion to each separate category
of income (statutory grouping) and to
the residual grouping, divide the
assets apportioned to the grouping by
the total assets apportioned and
multiply the result by the interest
deductions to be apportioned.

Lines 3a through 3f. For lines 3a
through 3e, enter the code for the
applicable separate category of
income (statutory grouping). See
Categories of Income, earlier. If code
“901j” or one of the “RBT” codes
applies, also enter the applicable
country.

Example 1. To determine the
amount to enter on line 3a(1), column
(b)(iii), do the following.
1. Divide the amount entered on
line 3a(1), column (a)(i), by the
amount on line 2, column (a)(i).
2. Multiply the result by the
amount on line 2, column (b)(iii).

26

Note. If the corporation had more
than five separate categories of
income, Schedule H, Part II, line 3
must be expanded to properly report
stewardship deductions in column (c),
certain industrial/investor damages in
column (d), and “other deductions” in
column (e). To clarify, in column (e),
report all other deductions allocated
and apportioned based on assets
(other than those listed in columns (b),
(c), and (d)). See

Computer-Generated Schedule H,
earlier.
Enter on lines 3a through 3e the
amount of expenses apportioned to
each separate category of income as
further apportioned between dividend
income eligible to be offset by the
deduction under section 245A and all
other gross income.
Enter on line 3f the amount of
expenses apportioned to income in
the residual grouping (U.S. source
income) as further apportioned
between dividend income eligible to
be offset by the deduction under
section 245A and all other gross
income.
Attach a schedule that explains in
detail how the above apportionments
were made.
Column (f)
To determine the totals to enter in
column (f), use the following steps.
Step 1: For each applicable line
beginning with line 3a(1), enter the
sum of the amounts in columns (b)(iii),
(b)(iv), (c), (d), and (e) in this column
(f).
Step 2: With respect to section 245A
dividends, enter the sum of any
amounts entered in column (f) of lines
3a(1), 3b(1), 3c(1), 3d(1), 3e(1), and
3f(1) on line 4, column (f). Include this
line 4 result as a negative amount on
Schedule B, Part II, line 8b.
Note. This is the adjustment required
by section 904(b)(4) to worldwide
taxable income to eliminate the
expenses properly allocated or
apportioned to stock or dividend
income for which a dividends received
deduction is allowed in section 245A.
As such, it includes both foreign
source amounts (that is, the amounts
from the applicable statutory
groupings on lines 3a(1), 3b(1), 3c(1),
3d(1), and 3e(1)) and U.S. source
amounts (that is, the amount from the
residual grouping on line 3f(1)).
Step 3: With respect to amounts
other than section 245A dividends, for
each applicable statutory grouping,
include the amount in column (f) of
line 3a(2), 3b(2), 3c(2), 3d(2), or 3e(2)
in column 14 of the corresponding
Schedule A. For example, if the
taxpayer enters "PAS" on Schedule H,
Part II, line 3a, the taxpayer takes the
Instructions for Form 1118 (Rev. 12-2023)

total on line 3a(2), column (f) and
includes it in column 14 of the
Schedule A being completed for the
Passive Category.
Note. Do not include the amount on
line 3f(2), column (f) in column 14 on
any Schedule A. The amount on
line 3f(2), column (f) is a residual
grouping amount and not an
applicable statutory grouping amount.
Note. Due to the reporting
requirement described in step 3
above, you do not need to report a
grand total for amounts other than
section 245A dividends (that is, the
amount reported on line 4).

Part III—Other Deductions

Report in Schedule H, Part III
information pertaining to the allocation
and apportionment of deductions
other than research and experimental
deductions (reported in Schedule H,
Part I) and other than deductions
allocated and apportioned based on
assets (reported in Schedule H, Part
II).

Column (a). Complete this column to
apportion officers' compensation
expense in accordance with the rules
of Regulations section 1.861-8(b)(3).
Columns (b) and (c). Complete this
column to apportion amortization
deductions and depletion deductions,
respectively, in accordance with the
rules of Regulations section
1.861-8(b)(2) and Temporary
Regulations section 1.861-8T(c)(1),
for example.
Column (d). Complete this column to
apportion product liability damages in
accordance with the rules of
Regulations section 1.861-8(e)(5)(ii).
Column (e). Complete this column to
apportion deductions other than those
reported on Schedule H, Part I;
Schedule H, Part II; or Schedule H,
Part III, columns (a) through (d). See

final and temporary Regulations
sections 1.861-8 and 1.861-14.
Column (f). Column (f) is a totals
column. It requests total deductions
allocated and apportioned to section
245A dividends. This is the sum of
any amounts entered in columns (a)
through (e) on lines 2a(1), 2b(1),
2c(1), 2d(1), 2e(1), and 2f(1). The
total is entered on line 3 and is also
included on Schedule B, Part II,
line 8b as a negative number.
Note. This is the adjustment required
by section 904(b)(4) to worldwide
taxable income to eliminate the
expenses properly allocated or
apportioned to stock or dividend
income for which a dividends received
deduction is allowed in section 245A.
As such, it includes both foreign
source amounts (that is, the amounts
from the applicable statutory
groupings on lines 3a(1), 3b(1), 3c(1),
3d(1), and 3e(1)) and U.S. source
amounts (that is, the amount from the
residual grouping on line 3f(1)).
Column (g). With respect to each
applicable statutory grouping, column
(g) requests the sum of any amounts
entered in columns (a) through (e) for
lines 2a(2), 2b(2), 2c(2), 2d(2), and
2e(2). These are amounts other than
section 245A dividends.
Note. Unlike column (f), this column
(g) does not request a total. Instead,
for each applicable statutory grouping,
the column (g) total for each
applicable line is carried over to
column 14 of the corresponding
Schedule A. For example, if the
taxpayer enters "PAS" on Schedule H,
Part III, line 2a, the taxpayer takes the
total on line 2a(2), column (g) and
includes it in column 14 of the
Schedule A being completed for the
Passive Category.

Line instructions

Lines 2a through 2f. For lines 2a
through 2e, enter the code for the
applicable separate category of
income (statutory grouping). See
Categories of Income, earlier. If code
“901j” or one of the “RBT” codes
applies, also enter the applicable
country.
Note. If the corporation had more
than five separate categories of
income, Schedule H, Part III, line 2
must be expanded to properly report
deductions other than research and
experimental deductions (reported in
Schedule H, Part I), and other than
deductions allocated and apportioned
based on assets (reported in
Schedule H, Part II). See
Computer-Generated Schedule H,
earlier.
Enter on lines 2a through 2e the
amount of expenses apportioned to
each separate category of income as
further apportioned between dividend
income eligible to be offset by the
deduction under section 245A and all
other gross income.
Enter on line 2f the amount of
expenses apportioned to income in
the residual grouping (U.S. source
income) as further apportioned
between dividend income eligible to
be offset by the deduction under
section 245A and all other gross
income.
Attach a schedule that explains in
detail how the above apportionments
were made.
Line 3. See the instructions for
column (f) above.

Schedules I, J, K, and L

See the separate instructions for
Schedule I, Schedule J, Schedule K,
and Schedule L to see if the
corporation must file these schedules.

Line 1. For each column, enter the
total expenses to be allocated and
apportioned.

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
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returns and return information are confidential, as required by section 6103.

Instructions for Form 1118 (Rev. 12-2023)

27

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.

28

Instructions for Form 1118 (Rev. 12-2023)