IRS issues corrections to proposed foreign tax allocation rules
Taxpayers subject to IRC §§ 898(c) and 960(d)(4) must note the corrected language in the proposed regulations (REG-115145-25) as comments are due by Sept. 17, 2026.
The Internal Revenue Service released a notice of proposed rulemaking correction (FR Doc 2026-17764) that amends the regulations published on August 3, 2026 under docket REG-115145-25. The corrections pertain to the allocation of foreign taxes for foreign corporations after the repeal of the one-month deferral election and to the disallowance of foreign tax credits on certain distributions of previously taxed earnings and profits under sections 898(c) and 960(d)(4).
The notice lists specific textual changes: reference "1.441-2(b)(1)(i)" replaces "1.442-2(b)(1)(i)"; "Sec. 1.898(c)-1(e)(4)" replaces "Sec. 1.898(c)-1(c)(4)"; a citation to "taxpayer described in Sec. 1.901-2(f)" is corrected; the phrase "percentage are adjusted" replaces "percentage is adjusted"; "before the first day" supersedes "before the last day"; references to "an income group specific allocation" are inserted in two paragraphs; and several instances of "FC1's" replace "FC's". Additional minor edits correct paragraph citations and wording throughout the proposed sections 1.898(c)-1 and 1.960-3.
Comments on the corrected proposal must be submitted electronically through the Federal eRulemaking Portal by September 17, 2026. Paper comments may be mailed to the IRS address listed in the notice. The Treasury and IRS will make all comments publicly available in the docket.
For questions about the section 898(c) corrections, contact Hayley Rassuchine; for section 960(d)(4) issues, contact Le Chen. General comment-submission inquiries may be directed to the Publications and Regulations office.
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