Layla Asali Comments on Need for Regulation on "Foreign Tax Redeterminations" in Bloomberg Law

"IRS Stresses Amended Returns Need Consistency on Foreign Taxes"

Bloomberg Law


Tax Member Layla Asali commented on an August 20 ruling from the Internal Revenue Service (IRS) Office of Chief Counsel involving a taxpayer that wanted to amend its tax returns to claim foreign tax credits instead of deductions for foreign taxes paid. The amended returns led to the tax payer owing taxes in some years and due refunds in other years. But the taxes-due years were past the statute of limitations for the IRS to collect, and the agency refused to accept some of the amended returns. The IRS previously addressed a similar issue in a November 2020 proposed regulation (REG 101657-20) that hasn't yet been finalized. The regulation indicates that situations akin to the case discussed in the August 20 ruling should be considered "foreign tax redeterminations," which would allow the IRS to collect on past tax deficiencies that result even if the statute of limitations has expired. Until that regulation is finalized, the process to resolve such issues with the IRS may be "complex and cumbersome," Asali said.