# Prop. Treas. Reg. § 1.59-4: CAMT foreign tax credit. Proposed regulation, not in force. REG-112129-23, 89 FR 75062, published 2024-09-13 . Interprets 26 U.S.C. § 59. Par. 10. Sections 1.59-2 through 1.59-4 are added to read as follows: (a) Overview. This section provides rules under section 59(l) of the Code for computing the CAMT foreign tax credit, as defined in proposed § 1.56A-1(b)(9). Paragraph (b) of this section provides definitions that apply for purposes of this section. Paragraph (c) of this section describes how to compute the CAMT foreign tax credit. Paragraph (d) of this section provides rules for determining an applicable corporation's pro rata share of taxes of a controlled foreign corporation. Paragraph (e) of this section provides for the carryover of unused CFC taxes. Paragraph (f) of this section provides rules for foreign tax redeterminations. Paragraph (g) of this section describes the treatment of partnership taxes. Paragraph (h) of this section describes the treatment of members of a tax consolidated group for purposes of this section. Paragraph (i) provides examples illustrating the application of the rules in this section. Paragraph (j) of this section provides the applicability dates of this section. (b) Definitions. The following definitions apply for purposes of this section. Terms used in this section that are not defined in this section have the meanings provided in § 1.56A-1(b). (1) Eligible tax. The term eligible tax means a foreign income tax, other than a foreign income tax for which a credit is disallowed or suspended for regular tax purposes under section 245A(d), 245A(e)(3), 901(e), 901(f), 901(i), 901(j), 901(k), 901(l), 901(m), 907, 908, 909, 965(g), 999, or 6038(c) of the Code. (2) Income group. The term income group has the meaning provided in § 1.960-1(b)(13). (3) Pro rata share percentage. The term pro rata share percentage means, with respect to a controlled foreign corporation in which an applicable corporation is a United States shareholder and a taxable year of the controlled foreign corporation, a fraction, the numerator of which is the applicable corporation's pro rata share of the adjusted net income or loss of the controlled foreign corporation, as determined under § 1.56A-6, for its taxable year, and the denominator of which is the adjusted net income or loss of the controlled foreign corporation for its taxable year. (4) Residual income group. The term residual income group has the meaning provided in § 1.960-1(b)(22). (5) Section 904 category. The term section 904 category has the meaning provided in § 1.960-1(b)(23). (6) Subpart F income group. The term subpart F income group has the meaning provided in § 1.960-1(b)(31). (7) Tested income group. The term tested income group has the meaning provided in § 1.960-1(b)(34). (8) Unused CFC taxes. The term unused CFC taxes means, with respect to any taxable year of an applicable corporation, the excess (if any) of the amount described in paragraph (c)(1)(i) of this section for the taxable year, over the amount described in paragraph (c)(1)(ii) of this section for the taxable year. (c) Computation of CAMT foreign tax credit. If an applicable corporation chooses to have the benefits of subpart A of part III of subchapter N of chapter 1 for a taxable year, the amount of the CAMT foreign tax credit allowed to the applicable corporation under section 59(l) for the taxable year equals the sum of— (1) The lesser of— (i) The aggregate of the applicable corporation's pro rata shares of taxes of controlled foreign corporations, as determined under paragraph (d) of this section; or (ii) The product of the amount of the adjustment under § 1.56A-6(b)(1) and the percentage specified in section 55(b)(2)(A)(i) of the Code; and (2) The amount of eligible taxes paid, within the meaning of § 1.901-2(g)(5), by the applicable corporation during the taxable year, to the extent the taxes have been taken into account, within the meaning of § 1.56A-8(d), on the applicable corporation's AFS. (d) Applicable corporation's pro rata share of taxes of a controlled foreign corporation —(1) In general. If an applicable corporation is a United States shareholder of a controlled foreign corporation, the applicable corporation's pro rata share of the taxes of the controlled foreign corporation for a taxable year is equal to the sum of the amounts described in paragraphs (d)(2) and (3) of this section, reduced to reflect the suspensions and disallowances described in paragraph (b)(1) of this section that apply at the level of the United States shareholder. (2) Aggregate pro rata share of taxes under section 960(b) of the Code. The amount described in this paragraph (d)(2) is equal to the sum of the amount of foreign income taxes deemed paid by the applicable corporation under § 1.960-3(b) for the taxable year of the applicable corporation, to the extent the taxes have been taken into account, within the meaning of § 1.56A-8(d), on the AFS of the applicable corporation or any controlled foreign corporation with respect to which the applicable corporation is a United States shareholder. (3) Aggregate pro rata share of the eligible current year taxes. The amount described in this paragraph (d)(3) is equal to the sum of— (i) The amount of eligible current year taxes, as defined in § 1.960-1(b)(5), deemed paid by the applicable corporation under § 1.960-2(b) for the taxable year of the applicable corporation, to the extent the taxes have been taken into account, within the meaning of § 1.56A-8(d), on the AFS of the controlled foreign corporation or the applicable corporation; (ii) The aggregate of the applicable corporation's proportionate share of eligible current year taxes, as defined in § 1.960-1(b)(5), of the controlled foreign corporation for each tested income group within each section 904 category of the controlled foreign corporation, as determined under § 1.960-2(c)(5) for the taxable year of the applicable corporation, to the extent the taxes have been taken into account, within the meaning of § 1.56A-8(d), on the AFS of the controlled foreign corporation or applicable corporation; (iii) Solely with respect to any subpart F income group and tested income group within a section 904 category of the controlled foreign corporation for which the denominator of the applicable corporation's proportionate share fraction (as described in § 1.960-2(b)(3)(i) and (c)(5), respectively) is zero or less than zero, the aggregate amount of eligible current year taxes of the controlled foreign corporation for each such income group within each section 904 category of the controlled foreign corporation, for the controlled foreign corporation's taxable year that ends with or within the taxable year of the applicable corporation, to the extent the taxes have been taken into account, within the meaning of § 1.56A-8(d), on the AFS of the controlled foreign corporation or applicable corporation, multiplied by the pro rata share percentage, as defined in paragraph (b)(3) of this section, for such taxable year of the controlled foreign corporation; and (iv) The aggregate amount of eligible current year taxes, as defined in § 1.960-1(b)(5), of the controlled foreign corporation for each residual income group, as defined in § 1.960-1(d)(2)(ii)(D), of the controlled foreign corporation, for the controlled foreign corporation's taxable year that ends with or within the taxable year of the applicable corporation, to the extent the taxes have been taken into account, within the meaning of § 1.56A-8(d), on the AFS of the controlled foreign corporation or applicable corporation, multiplied by the pro rata share percentage, as defined in paragraph (b)(3) of this section, for such taxable year of the controlled foreign corporation. (e) Carryover of unused CFC taxes —(1) In general. If an applicable corporation chooses to have the benefits of subpart A of part III of subchapter N of chapter 1 for a taxable year, any unused CFC taxes for the taxable year are carried to each of the five succeeding taxable years, in chronological order, to increase the amount described in paragraph (c)(1)(i) of this section, but only to the extent not absorbed as taxes deemed paid under paragraph (e)(2) of this section in a prior taxable year. The amount of taxes deemed paid under paragraph (e)(2) of this section in a carryover taxable year is absorbed regardless of whether the taxpayer chooses to have the benefits of subpart A of part III of subchapter N of chapter 1 for the carryover taxable year. (2) Amount of unused CFC taxes deemed paid in a carryover taxable year. The amount of unused CFC taxes deemed paid in any taxable year is equal to the lesser of— (i) The amount of unused CFC taxes that are carried to the taxable year under paragraph (e)(1) of this section; or (ii) The excess (if any) of the amount described in paragraph (c)(1)(ii) of this section for the taxable year over the amount described in paragraph (c)(1)(i) of this section for the taxable year. (3) Ordering rule. If, as a result of the limitation in paragraph (e)(2)(ii) of this section, the amount of unused CFC taxes deemed paid under paragraph (e)(2) of this section is less than the full amount of unused CFC taxes that are carried to the taxable year under paragraph (e)(1) of this section, then the unused CFC taxes that are absorbed as deemed paid under paragraph (e)(2) of this section are first the unused CFC taxes from the fifth preceding taxable year, followed sequentially by the unused CFC taxes from the fourth, third, second, and first preceding taxable year, respectively, up to the amount described in paragraph (e)(2)(ii) of this section. (f) Foreign tax redetermination. Foreign income taxes paid or accrued as a result of a foreign tax redetermination, as defined in § 1.905-3(a), are eligible to be claimed as a CAMT foreign tax credit only if the domestic corporation is an applicable corporation in the taxable year to which the foreign tax redetermination relates (relation-back year). A CAMT foreign tax credit with respect to such foreign income taxes may be claimed only in the relation-back year, even if the taxes are reflected in a journal entry of an AFS within a taxable year that is later than the relation-back year. (g) Treatment of partnership taxes. For purposes of paragraph (c)(2) of this section, if an applicable corporation is a partner in a partnership (or an indirect partner in the partnership through one or more other partnerships or other pass-through entities), the amount of eligible taxes paid or accrued by the applicable corporation for the taxable year includes the amount of creditable foreign tax expenditures (within the meaning of § 1.704-1(b)(4)(viii)) allocated to the applicable corporation for regular tax purposes, reduced to reflect the suspensions and disallowances described in paragraph (b)(1) of this section that apply at the level of the partner. (h) Tax consolidated groups. Members of a tax consolidated group are treated as a single entity for purposes of this section. See also § 1.1502-56A(a)(2). For rules regarding the use of consolidated unused CFC taxes, see § 1.1502-56A(i). (i) Examples. The following examples illustrate the application of the rules in this section. For purposes of these examples, each entity uses the calendar year as its taxable year and for AFS purposes and has a U.S. dollar functional currency. (1) Example 1: Eligible tax —(i) Facts. X is an applicable corporation for its taxable year ending on December 31, 2024. In 2024, X paid $100x of foreign withholding taxes on dividend payments received on stock in a foreign corporation that X holds for investment purposes. For regular tax purposes, a foreign tax credit is disallowed for the $100x of foreign withholding taxes because X's holding period in the stock did not meet the minimum holding period required under section 901(k). (ii) Analysis. Under paragraph (b)(1) of this section, X's eligible taxes for CAMT foreign tax credit purposes do not include the $100x of foreign withholding taxes for which a credit is disallowed for regular tax purposes under section 901(k). (2) Example 2: Pro rata share of taxes of a controlled foreign corporation —(i) Facts. X, a domestic corporation, is an applicable corporation for its taxable year ending on December 31, 2024. X owns 60% of the stock of FC, a controlled foreign corporation. X's pro rata share percentage, as defined in paragraph (b)(3) of this section, with respect to FC is also 60%. FC earns subpart F income, tested income, and residual income. In 2024, X is deemed to pay $4x of foreign income tax under § 1.960-2(b) with respect to the subpart F income. In 2024, X's proportionate share, as defined in § 1.960-2(c)(5), of eligible current year taxes of FC for the tested income group of FC is $4x. In 2024, FC has $2x of eligible current year taxes in the residual income group. All the taxes paid by FC in 2024 are eligible current year taxes, as defined in § 1.960-1(b)(5). All the taxes paid by FC in 2024 are also eligible taxes within the meaning of paragraph (b)(1) of this section, and no suspensions or disallowances described in paragraph (b)(1) of this section apply at the level of X, the United States shareholder of FC. Finally, all the taxes paid by FC in 2024 are taken into account, within the meaning of § 1.56A-8(d), in the 2024 AFS of FC or X. (ii) Analysis. Under paragraph (d)(3) of this section, X's aggregate pro rata share of FC's eligible current year taxes is $9.2x. This includes the $4x of foreign income tax X is deemed to pay under § 1.960-2(b), X's $4x proportionate share of eligible current year taxes of FC for the tested income group of FC, and X's $1.2x pro rata share of eligible current year taxes of FC in the residual income group (60% × $2x). (3) Example 3: Partnership taxes —(i) Facts. X, a domestic corporation, is an applicable corporation for its taxable year ending on December 31, 2024. In 2024, X is a partner in PRS, a domestic partnership that uses the calendar year as its taxable year. In 2024, PRS paid $300x of foreign income taxes to Country G, which PRS accounted for as a current tax expense in its AFS. The $300x of foreign income taxes paid to Country G are creditable foreign tax expenditures (within the meaning of § 1.704-1(b)(4)(viii)) of PRS, $180x of which are allocated to X for regular tax purposes. None of the suspensions or disallowances described in paragraph (b)(1) of this section apply at the level of X. (ii) Analysis. Under paragraph (g) of this section, the amount of eligible taxes paid by X for purposes of computing the amount of CAMT foreign tax credit under paragraph (c)(2) of this section includes $180x of creditable foreign tax expenditures of PRS that are allocated to X for regular tax purposes. Under § 1.56A-8(d)(3), the foreign income taxes taken into account in the AFS of PRS are considered taken into account in the AFS of X. (j) Applicability date. This section applies to taxable years of applicable corporations ending after September 13, 2024.