Tuesday, September 28, 2004

The Treasury Department announced yesterday (in JS-1960) that the special foreign tax credit restrictions of § 901(j) no longer apply to income and taxes attributable to Iraq:

U.S. tax rules allow taxpayers a credit against U.S. income tax for taxes paid to a foreign country. Special rules in §§ 901(j) and 952(a)(5) generally deny foreign tax credits and impose other restrictions in the case of income attributable to countries with which the U.S. does not conduct diplomatic relations or which have been identified as sponsors of international terrorism. Rev. Rul. 95-63 provides a list of countries that have been identified as meeting the specified criteria and that are, therefore, subject to these restrictions. The restrictions of § 901(j) and related provisions cease to apply with respect to a particular country if the Secretary of State certifies to the Secretary of the Treasury that the country no longer meets the criteria in that section.

The State Department has certified that Iraq is no longer a country described in § 901(j)(2)(A), effective June 28, 2004. Accordingly, as of that date, the denial of foreign tax credits and other restrictions of § 901(j) and related provisions do not apply to income and taxes attributable to Iraq.