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Guidance Issued on Foreign Tax Credits and Global Minimum Tax

December 22, 2023

IRS, Treasury Provide Clarification on Foreign Tax Credits and Minimum Tax
The Internal Revenue Service (IRS) and the U.S. Department of the Treasury issued guidance December 11 on the interplay between foreign tax credits and the 15 percent global minimum tax. According to the guidance, certain foreign taxes imposed under the pending global minimum tax will be eligible for foreign tax credits. Still, it will depend on exactly what kinds of taxes and taxpayers are involved. Taxes imposed under Pillar Two of the Organisation for Economic Co-operation and Development’s global tax agreement would generally not be eligible for the foreign tax credit.

IRS, Treasury Issue Guidance on Book Minimum Tax Double-Counting
The Internal Revenue Service (IRS) and the U.S. Department of the Treasury issued additional interim guidance December 15 on how to address the possibility that a taxpayer’s income could be double-counted in determining its liability under the new book-income minimum tax. Existing rules call for a taxpayer’s income subject to the corporate alternative minimum tax (CAMT) to include both dividends received from a controlled foreign corporation (CFC) and its pro rata share of the CFC’s net income. The guidance will allow taxpayers to disregard some of the impact that foreign affiliates’ dividend payments have on their income when taxpayers determine their liability under the CAMT.

Pennsylvania Supreme Court Won’t Review Hospitals’ Denied Tax Exemptions
On December 5, Pennsylvania’s highest court denied appeals filed by a trio of hospitals in Chester County over a case, Phoenixville Hospital v. County of Chester Board of Assessment Appeals, involving management fees and executive salaries paid. The justices denied the appeals filed by Phoenixville Hospital, Jennersville Hospital and Brandywine Hospital — previously or currently owned by Tower Health — stating that the hospitals had not shown a lack of profit motive given that they paid millions in management fees to Tower Health. The lower courts ruled that the limited liability companies operating the hospitals of Tower Health failed to qualify for tax exemptions typically reserved for nonprofits.

Information contained in this publication should not be construed as legal advice or opinion or as a substitute for the advice of counsel. The articles by these authors may have first appeared in other publications. The content provided is for educational and informational purposes for the use of clients and others who may be interested in the subject matter. We recommend that readers seek specific advice from counsel about particular matters of interest.

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