Foreign Tax Credit Form 1116 and Form 1118: OBBBA NCTI Basket Practitioner Guide

The foreign tax credit (FTC) is the principal mechanism for preventing double taxation of income a U.S. person earns abroad and pays foreign income taxes on. OBBBA (the One Big Beautiful Budget Act, signed July 4, 2025) made structural changes to the FTC regime that every practitioner advising clients with foreign income must understand before preparing 2026 and later year returns. The most consequential changes are the replacement of the GILTI basket with a new NCTI basket, the modification of the FTC haircut percentage on NCTI-related deemed-paid taxes, and the elimination of carryover for excess NCTI FTCs.

This guide is written for enrolled agents, CPAs, and tax attorneys who need a precise, citation-anchored reference for the FTC mechanics after OBBBA, covering both Form 1116 (individuals, trusts, and estates) and Form 1118 (corporations). All statutory citations, regulatory references, and IRS guidance must be verified against the enacted OBBBA text, current IRC 901, 904, and 960 regulations, and current IRS.gov guidance before reliance in any specific client matter.

Section 1: Introduction -- The Foreign Tax Credit and Double Taxation

How the FTC Works

When a U.S. person (individual, trust, estate, or corporation) earns income abroad and pays or accrues income taxes to a foreign country on that income, IRC 901 permits a credit against the U.S. tax that would otherwise also apply to that same income. Without the FTC, the taxpayer would pay full tax in the foreign jurisdiction and again at U.S. rates -- double taxation in the most direct sense. The credit reduces U.S. tax dollar-for-dollar, subject to the per-basket limitation under IRC 904.

U.S. corporations that own controlled foreign corporations (CFCs) do not directly pay foreign taxes at the CFC level; those taxes are paid by the CFC. When the U.S. corporate shareholder includes CFC income in its U.S. taxable income (as a Subpart F inclusion, an NCTI inclusion, or via other inclusion mechanisms), IRC 960 allows the corporate shareholder to claim a deemed-paid FTC for the foreign income taxes the CFC paid on that income. The deemed-paid credit mechanism under IRC 960 is the central FTC rule for C corporations with CFC structures, and it is the mechanism most directly affected by the OBBBA NCTI basket changes.

Individuals who directly own CFCs may also claim FTCs on Form 1116, either for taxes paid directly on foreign income or, if they made the IRC 962 election, for deemed-paid taxes on NCTI inclusions. The IRC 962 election allows an individual CFC shareholder to be taxed on NCTI inclusions at corporate rates and to claim the IRC 960 deemed-paid credit. Hedge all IRC 962 election mechanics and individual NCTI FTC rules to applicable Treasury regulations and current IRS.gov guidance.

OBBBA's Structural Changes to the FTC Regime

OBBBA made three structural changes to the FTC regime that apply to tax years beginning after December 31, 2025:

• It renamed GILTI (global intangible low-taxed income) to NCTI (Net Controlled Taxpayer Income) and renamed FDII (foreign-derived intangible income) to FDDEI (Foreign-Derived Deduction Eligible Income). These are statutory renames under the enacted OBBBA.
• It replaced the former GILTI FTC basket with a new NCTI FTC basket, maintaining the structural separation from the passive and general income baskets.
• It modified the FTC haircut in the NCTI basket and eliminated the ability to carry over unused NCTI FTCs to subsequent years. Hedge the precise haircut percentage and no-carryover mechanics to the enacted OBBBA and current IRS.gov guidance.

These changes affect the fundamental economics of CFC ownership for both corporate and individual U.S. shareholders. The haircut and no-carryover rules mean that the FTC is structurally less available to offset NCTI inclusions than practitioners may have modeled under prior law. For CFC structures with high effective foreign tax rates, the 90% haircut (as enacted, hedge to IRS.gov) produces a more favorable result than the prior TCJA 80% haircut; but for structures where the IRC 904 basket limitation produces excess credits, the no-carryover rule becomes the dominant planning constraint.

Section 2: OBBBA Changes Overview

GILTI to NCTI and FDII to FDDEI (Enacted Facts)

OBBBA renamed GILTI to NCTI effective for tax years beginning after December 31, 2025. This is an enacted statutory fact; the statute renames the income category. Prior-law GILTI regulations, notices, and rulings remain relevant for tax years through December 31, 2025, but the statutory provision operating after that date is NCTI. Similarly, OBBBA renamed FDII to FDDEI effective for the same period. The functional income categories they describe are substantively restructured under OBBBA; practitioners should not assume the NCTI computation is identical to the GILTI computation, or that FDDEI expense allocation rules are identical to FDII rules. Hedge all computation-level mechanics to the enacted OBBBA text and any Treasury regulations or IRS guidance issued under the amended statute.

New NCTI FTC Basket (Enacted Fact)

OBBBA created a new NCTI FTC basket, replacing the former GILTI basket, effective for tax years beginning after December 31, 2025. The NCTI basket operates under the same structural principle as the prior GILTI basket: foreign income taxes in the NCTI basket are subject to a separate FTC limitation from the passive, general, and treaty-resourced income baskets. Credits in excess of the NCTI basket limitation cannot spill over to offset U.S. tax on income in other baskets, and credits from other baskets cannot be used against NCTI inclusions.

90% Haircut on NCTI Basket Deemed-Paid Taxes (Hedge to Enacted OBBBA and IRS.gov)

OBBBA modified the haircut applied to foreign income taxes deemed paid in the NCTI basket. Under TCJA, the GILTI basket haircut was 80%: only 80% of the foreign income taxes deemed paid under IRC 960 on a GILTI inclusion were treated as creditable. OBBBA increased this percentage. As enacted, OBBBA provides that 90% of the foreign income taxes deemed paid in the NCTI basket are creditable (with 10% disallowed). Practitioners must hedge this 90% figure to the enacted OBBBA and current IRS.gov guidance before applying it to any specific client matter. Implementing regulations and updated form instructions may clarify the computation mechanics, the interaction with the Section 250 deduction, and the treatment of taxes on blended-rate CFC structures. Do not state the 90% figure as a bare fact in client advice; always reference the enacted OBBBA and confirm at IRS.gov.

No Carryover of Excess NCTI FTCs (Hedge to Enacted OBBBA and IRS.gov)

Under OBBBA, foreign tax credits in the NCTI basket that exceed the NCTI basket FTC limitation in the current year are permanently disallowed. There is no carryforward to future years and no carryback to prior years. This is a fundamental departure from the general FTC rules: under IRC 904(c), excess FTCs in the passive and general income baskets may generally be carried forward for up to ten years and carried back one year. The no-carryover rule for the NCTI basket means unused NCTI credits are an irrecoverable loss in the year generated. Hedge this rule entirely to the enacted OBBBA and current IRS.gov guidance, as implementing regulations may address specific situations.

FDDEI Expense Allocation (Hedge Entirely to IRC 250 as Amended and IRS.gov)

FDDEI expense allocation mechanics directly affect the FTC computation. The rules governing which deductions are allocated and apportioned against FDDEI-related income versus other income categories determine the FTC limitation in the NCTI basket and in other baskets. These allocation rules are governed by IRC 250 as amended by OBBBA and the IRC 861 expense allocation regulations. Practitioners must hedge all FDDEI allocation percentages, mechanics, and interaction with the FTC computation entirely to IRC 250 as amended and current IRS.gov guidance. No specific allocation percentage is stated in this guide because the precise figures and their application to particular fact patterns require verification against the enacted statute and any applicable regulatory guidance.

Section 3: FTC Baskets After OBBBA

The FTC limitation under IRC 904 operates on a basket-by-basket basis. Each basket is a separate limitation category; the FTC limitation is computed independently for each basket, and credits in one basket cannot offset U.S. tax on income in a different basket. The basket system prevents taxpayers from using high-taxed foreign income to shelter low-taxed or domestic income from U.S. tax. All specific percentage allocations or formula mechanics within each basket must be hedged to IRS.gov and applicable Treasury regulations; only the structural existence of each basket is stated here as enacted fact.

Baskets in Effect After OBBBA (Tax Years Beginning After December 31, 2025)

The basket structure means that a taxpayer with high foreign taxes on NCTI and a low FTC limitation in the NCTI basket will lose the excess NCTI credits permanently, while excess credits in the passive or general income baskets can be carried forward. Practitioners should analyze each basket separately when modeling the overall FTC position.

Section 4: Form 1116 -- Individual, Trust, and Estate Filers

Who Files Form 1116

Form 1116 (Foreign Tax Credit) is filed by individual taxpayers, trusts, and estates who are U.S. residents or citizens and who paid or accrued qualified foreign income taxes to a foreign country or U.S. possession. Form 1116 implements the IRC 904 basket limitation at the individual filer level and is filed separately for each basket that has a qualifying foreign tax item.

There is a de minimis threshold below which an individual may elect to claim the FTC without filing Form 1116 (claiming the credit directly without a per-basket limitation). The de minimis threshold is subject to adjustment and must be confirmed at IRS.gov or in the current Form 1116 instructions before relying on any specific figure. Above the de minimis threshold, Form 1116 is required and the per-basket limitation applies to each basket separately.

Per-Basket Computation on Form 1116

For each basket (passive, general, treaty-resourced, or NCTI), the Form 1116 computation determines:

• The amount of qualified foreign income taxes paid or accrued (or, for IRC 962 election filers, deemed paid) in that basket,
• The FTC limitation for the basket (the ratio of foreign-source taxable income in the basket to total worldwide taxable income, multiplied by the U.S. tax on total worldwide taxable income),
• The creditable amount (the lesser of the foreign taxes in the basket, subject to any applicable haircut such as the NCTI basket haircut, or the basket limitation), and
• Any excess (taxes in excess of the limitation): carryover in the passive and general baskets; permanently disallowed in the NCTI basket. Hedge all carryover rules to IRC 904(c) and enacted OBBBA, confirmed at IRS.gov.

A separate Form 1116 is completed for each basket. The total FTC across all baskets is then reported on the individual's return. Hedge all specific computation line references to the current Form 1116 instructions at IRS.gov.

High-Tax Exclusion Election

An election is available to exclude certain high-taxed income from NCTI treatment. If the election is made for income that would otherwise be NCTI, the income is excluded from the NCTI inclusion entirely for the year of the election. The election can affect NCTI basket FTC allocation because income removed from NCTI is not in the NCTI basket; it may be reallocated to the general income basket or treated differently depending on its character after exclusion. The election mechanics, eligibility thresholds, and interaction with the NCTI basket are hedged entirely to applicable proposed and final Treasury regulations and current IRS.gov guidance. Practitioners should evaluate the election for individual CFC shareholders with high effective foreign tax rates where the NCTI basket haircut and no-carryover rule would otherwise produce permanently lost credits.

Ordering Rules and Credit Limitation

The ordering rules for the FTC computation determine the sequence in which foreign taxes, U.S. tax, and carryovers are applied within each basket. For the NCTI basket, there is no carryover (excess is lost), so the entire NCTI basket FTC must be modeled in the current year. For the passive and general baskets, ordering rules for carryforwards are governed by IRC 904(c) and applicable regulations. Hedge all ordering mechanics to those authorities and current IRS.gov guidance.

NCTI Basket: No Carryback and No Carryforward (Hedge to Enacted OBBBA and IRS.gov)

Individual CFC shareholders who have NCTI inclusions (either directly or via the IRC 962 election) face the same NCTI basket no-carryover rule that applies to corporations. Excess NCTI FTCs on Form 1116 are permanently lost at year end. There is no carryback and no carryforward for the NCTI basket. Hedge this rule to enacted OBBBA and IRS.gov; confirm whether the no-carryover rule applies uniformly to individual filers or whether any exception applies under regulations that may be issued. The passive and general income basket carryforward (IRC 904(c)) is unaffected; individual filers retain carryover rights in those baskets.

Individual filers with PFIC interests should also be aware that the PFIC regime and the FTC interact where PFIC distributions or mark-to-market elections produce income with foreign tax dimensions. For PFIC-specific FTC interaction analysis, see the PFIC Recognition and Referral Practitioner Guide.

Section 5: Form 1118 -- Corporate Filers

Who Files Form 1118

Form 1118 (Foreign Tax Credit -- Corporations) is filed by C corporations that have creditable foreign income taxes, including domestic corporations claiming deemed-paid FTCs under IRC 960 on Subpart F or NCTI inclusions from CFCs. Form 1118 implements the same basket structure as Form 1116 but is designed for the corporate deemed-paid credit mechanics under IRC 960. The instructions for Form 1118 are the authoritative reference for the corporate computation; hedge all line-level mechanics to the current Form 1118 instructions at IRS.gov.

NCTI Basket Interaction Under OBBBA (Hedge to Enacted OBBBA and IRS.gov)

Under OBBBA, corporate U.S. shareholders with NCTI inclusions must compute their NCTI basket FTC under the NCTI basket rules: the haircut on deemed-paid taxes (90% as enacted; hedge to OBBBA and IRS.gov) and the no-carryover rule for excess credits. The corporate deemed-paid credit under IRC 960 is the amount of foreign income taxes deemed paid by the U.S. corporation as a result of the NCTI inclusion, subject to the haircut. Only the creditable percentage (90% as enacted; hedge to IRS.gov) of the taxes deemed paid in the NCTI basket is available as a credit against the U.S. corporation's tax liability, and the amount is then further subject to the IRC 904 NCTI basket limitation.

For CFC structures with CFCs operating in multiple foreign jurisdictions with different effective tax rates, the NCTI basket FTC computation is done on a pooled basis across the relevant CFCs' tested income. The interaction of tested income and tested taxes at the CFC level with the U.S. shareholder's NCTI basket FTC limitation is governed by IRC 951A as amended and applicable Treasury regulations. For a detailed analysis of the Form 5471 reporting requirements that feed into this computation, see the Form 5471 and 5472 Foreign Corporation Reporting Practitioner Guide.

Form 1118 Schedule J Adjustments (Hedge to Form 1118 Instructions and IRS.gov)

Form 1118 Schedule J tracks the computation of deemed-paid foreign income taxes for the NCTI basket (and other baskets) at the CFC level and the U.S. shareholder level. The adjustments on Schedule J reflect the haircut, the IRC 904 limitation, and any disallowed amounts. Hedge all Schedule J mechanics to the current Form 1118 instructions and IRS.gov. Practitioners should confirm that tax software applies the updated OBBBA haircut (not the prior 80% TCJA haircut) for tax years beginning after December 31, 2025.

Errors in the FTC computation are a meaningful audit risk. The IRS has historically scrutinized GILTI basket FTC claims, and the NCTI basket computations under OBBBA will continue to be an audit focus as the new rules take effect. For audit risk and statute of limitations considerations for international tax positions, see the IRC 6501 Audit Statute of Limitations Practitioner Guide.

AFSI and CAMT Coordination

C corporations subject to the corporate alternative minimum tax (CAMT) under IRC 55 must coordinate their regular FTC computation with the CAMT computation on Form 4626. Adjusted financial statement income (AFSI), the base for the CAMT, does not follow the same income recognition rules as the regular tax, and the FTC interacts with the CAMT at the AFSI level under rules that are separate from the IRC 904 basket limitation that applies for regular tax purposes. For the full CAMT and AFSI interaction analysis, see the CAMT Corporate Alternative Minimum Tax Form 4626 Practitioner Guide.

Section 6: NCTI and FDDEI Interaction

Section 250 Deduction and the FTC (Hedge to IRC 250 as Amended and IRS.gov)

The Section 250 deduction allows domestic C corporations to deduct a percentage of their NCTI and FDDEI income. The enacted OBBBA percentage for the Section 250 deduction for NCTI is stated in IRC 250 as amended; hedge the specific figure to IRC 250 as amended by OBBBA and current IRS.gov guidance before relying on it in a client matter. The deduction reduces U.S. taxable income, which in turn affects the effective U.S. tax rate on NCTI. Because the FTC limitation in the NCTI basket is computed as a ratio of NCTI-related foreign-source income to total worldwide income multiplied by the U.S. tax on worldwide income, the Section 250 deduction interacts with the FTC limitation calculation: it changes the U.S. tax in the computation and the income allocated to the NCTI basket, affecting how much FTC capacity exists in the basket. Hedge all Section 250 deduction percentages and FTC interaction mechanics to IRC 250 as amended and current IRS.gov guidance.

The bottom line for planning: a corporate client with significant NCTI income should always model the Section 250 deduction and the NCTI basket FTC limitation together. Modeling them separately and adding the results will not produce an accurate picture of the net U.S. tax cost on NCTI.

FDDEI Expense Allocation and the FTC Limitation (Hedge Entirely to IRC 250 and IRS.gov)

FDDEI expense allocation under the IRC 861 rules determines how domestic deductions (including interest, research and development expenses, stewardship costs, and general and administrative expenses) are allocated and apportioned between foreign-source and domestic-source income. The portion of domestic deductions allocated against foreign-source income in each basket reduces the foreign-source taxable income in that basket, which in turn reduces the FTC limitation for the basket (because the basket limitation is a fraction with foreign-source taxable income in the numerator). For corporations with significant FDDEI, the expense allocation can substantially reduce FTC capacity in the NCTI basket and in other baskets. Hedge all allocation percentages, mechanics, and interaction with the FTC limitation entirely to IRC 250 as amended by OBBBA, the IRC 861 allocation regulations, and current IRS.gov guidance.

Practitioners handling corporate clients with significant foreign operations should model the FTC computation and the Section 250 deduction together in a single integrated model, because the two interact through the expense allocation rules. A standalone FTC model that ignores FDDEI expense allocation, or a Section 250 model that ignores its effect on FTC capacity, will not give accurate results.

Section 7: High-Tax Exclusion Election

The Election and Its Effect

An election is available to exclude high-taxed income from NCTI (and FDDEI) treatment. When the election is made for a CFC's income that would otherwise constitute NCTI, that income is not included in the U.S. shareholder's NCTI inclusion for the year of the election. This means the income is also not subject to the NCTI basket haircut or the no-carryover rule. The excluded income may be recharacterized and reallocated -- typically to the general income basket or another applicable category -- for FTC purposes. Hedge all eligibility thresholds, mechanics, and post-exclusion character of the income to applicable proposed and final Treasury regulations and current IRS.gov guidance.

Basket Allocation After the Election

The election can affect the FTC basket allocation in both directions. Income excluded from NCTI loses access to the NCTI basket FTC mechanism but may produce creditable foreign taxes in the general income basket (subject to normal carryforward rules under IRC 904(c)), which may be more favorable if the taxpayer has general income basket capacity. Conversely, if the taxpayer's general income basket is already in excess-credit position, moving high-taxed income out of NCTI and into the general basket may simply shift the excess credit from a non-carryforward basket (NCTI) to a carryforward basket (general) -- which may or may not improve the taxpayer's overall position depending on future income projections. Hedge all eligibility thresholds and mechanics to applicable proposed and final regulations and current IRS.gov guidance.

Continuing IRS Guidance

The interaction between the high-tax exclusion election and the NCTI basket is an area of continuing IRS guidance. The high-tax exclusion under prior GILTI regulations has been a significant area of regulatory activity, and the OBBBA changes to the NCTI regime are expected to generate additional regulatory guidance on how the exclusion election works in the NCTI context, including any changes to the applicable threshold rate and the anti-abuse rules that govern coordinated exclusion elections across multiple CFCs. Practitioners should monitor IRS.gov for proposed and final regulations addressing the high-tax exclusion in the NCTI context before advising clients on whether to make the election for 2026 and later years.

Section 8: Practical Planning Points

Model the Haircut Before Assuming Full FTC Offset

The most common planning error for CFC shareholders after OBBBA will be assuming that the foreign income taxes paid at the CFC level fully offset the NCTI inclusion at the U.S. level. Under OBBBA, only the percentage of those taxes specified in the enacted legislation (reported as 90%; hedge to enacted OBBBA and IRS.gov) is creditable in the NCTI basket, before the IRC 904 basket limitation is applied. Practitioners should build the haircut into their first-pass FTC model, not as a secondary adjustment. Do not illustrate the arithmetic of the haircut in client advice without also hedging the specific percentage and computation mechanics to enacted OBBBA and IRS.gov, as these details are subject to regulatory implementation.

The No-Carryover Rule Requires Year-by-Year Optimization

Because excess NCTI FTCs are permanently lost under OBBBA (hedge to enacted OBBBA and IRS.gov), the planning paradigm shifts from multi-year average utilization to current-year optimization. This means practitioners must analyze the NCTI basket FTC limitation at year-end, not just at extension filing. Planning tools that matter include: the timing of CFC distributions and income inclusions, the high-tax exclusion election for appropriate CFCs, the QBAI impact on NCTI (confirm whether OBBBA eliminated QBAI against enacted OBBBA and IRS.gov), and foreign tax expense allocation. Practitioners should assess the effect of any OBBBA changes to the NCTI inclusion computation on the volume of NCTI and therefore on the size of the NCTI basket FTC claim.

Individual CFC Shareholders Face the Same Constraints

Individual CFC shareholders -- including individual partners of partnerships that own CFCs, S-corp shareholders whose S-corps have CFC ownership, and individuals with direct CFC ownership -- face the same haircut and no-carryover rules as corporations for the NCTI basket on Form 1116. The planning tools available differ somewhat (IRC 962 election, direct credit versus deemed-paid credit), but the structural constraints are the same. Hedge all individual NCTI FTC mechanics to enacted OBBBA and IRS.gov. For audit exposure from FTC errors on individual returns with international positions, see the IRC 6501 Audit Statute of Limitations Practitioner Guide.

Foreign Tax Expense Allocation Affects Both Corporate and Individual Filers

The IRC 861 expense allocation rules determine how domestic deductions reduce foreign-source taxable income in each basket. For individual filers with Form 1116, certain deductions may be partially allocated against foreign-source income. These allocations reduce the basket limitation. Practitioners should not compute the Form 1116 FTC limitation without first working through the IRC 861 allocation steps for each basket. Hedge all allocation mechanics to the IRC 861 allocation regulations and current IRS.gov guidance.

Frequently Asked Questions

Common questions from enrolled agents, CPAs, and tax attorneys on the foreign tax credit after OBBBA.

Related Practitioner Guides

The following guides cover related international tax rules, CFC reporting, and audit considerations that practitioners should analyze alongside the foreign tax credit computation.

• IRC 721(c): Partnership Contributions and Gain Deferral Method -- Gain deferral analysis for U.S. transferors in partnerships with related foreign partners and CFC holdings.
• IRC 1446: Partnership Withholding on ECTI, Forms 8804 and 8805 -- Section 1446(a) withholding obligations for partnerships with foreign partners and the FTC credit mechanics for Form 8805 amounts.
• IRC 904 FTC Limitation, Basket Rules, and OBBBA Section 904(b)(5) -- FTC limitation formula, basket system, Section 904(b)(5) expense allocation restriction for the NCTI basket, and five open guidance questions for 2026 FTC planning.
• IRC 987 Branch Functional Currency: FEEP Method, Remittance, and Form 8964 -- FEEP method mechanics, remittance proportion, Forms 8964-TRA and 8964-ELE, and Notice 2026-17 proposed simplifications (not yet final).
• IRC 245A Participation Exemption DRD -- IRC 245A DRD: no IRC 960 deemed-paid FTC on exempt dividends, and expense disallowance under IRC 245A(d) for borrowings funding SFC investments.
• IRC 956 U.S. Property, Deemed Dividends, and the FCUS Extension: OBBBA Practitioner Guide -- IRC 956 and the Section 245A analog: deemed dividend mechanics, FCUS extension, and open FTC questions for FCFC groups.
• IRC 1248 CFC Stock Sale Gain Recharacterization: PTEP, Section 245A, and NCTI OBBBA Practitioner Guide -- IRC 960(e) deemed-paid FTC on IRC 1248-recharacterized gain, basket allocation, and post-2025 NCTI E&P complications.
• PFIC/FCFC Overlap: IRC 1297(e) Exception and OBBBA Practitioner Alert -- how OBBBA FCFC reclassification may void the IRC 1297(e) CFC exception for existing PFIC shareholders, and protective election steps for 2026.
• IRC 959 and 961 PTEP Mechanics, Ordering Rules, and Basis Adjustments: OBBBA Practitioner Guide -- Section 960(d)(4) FTC disallowance on NCTI PTEP distributions, deemed-paid credit under IRC 960(b), and FTC basket allocation across PTEP tiers.
• Form 5471 and Form 5472 Foreign Corporation Reporting Guide -- U.S. shareholders who file Form 5471 for their controlled foreign corporations compute NCTI inclusions and claim deemed-paid foreign tax credits under IRC 960 on Form 1116 or Form 1118; the 90% NCTI basket FTC haircut and no-carryover rule apply directly to NCTI inclusions reported on Form 5471.
• CAMT Corporate Alternative Minimum Tax Form 4626 Guide -- corporate CAMT filers must coordinate their adjusted financial statement income computation with foreign tax credit planning; AFSI adjustments and deemed-paid FTC calculations interact for multinational C corporations subject to both the 15% CAMT and the NCTI basket FTC haircut.
• PFIC Recognition and Referral Guide -- individual CFC shareholders with NCTI inclusions face the same 90% FTC haircut and no-carryover rule as corporations; practitioners advising clients with both PFIC and CFC holdings must navigate the interaction between PFIC regime considerations and the NCTI basket FTC on Form 1116.
• IRC 6501 Audit Statute of Limitations Guide -- substantial FTC overstatements can trigger a 6-year statute of limitations under IRC 6501; FTC carryover errors and NCTI basket misclassifications are areas of IRS focus; the SOL guide is a required companion for practitioners managing FTC audit risk.
• IRC 267A Anti-Hybrid Rules: Hybrid Deduction Accounts and Specified Payment Guide -- IRC 267A can disallow deductions for specified payments in hybrid arrangements before those payments enter the foreign-source income base used in the Form 1116 and Form 1118 limitation; practitioners computing the FTC for multinational clients should confirm no specified payment has been denied under the anti-hybrid rules.
• IRC 59A Base Erosion Anti-Abuse Tax: BEAT Calculation, Form 8991, and OBBBA Interactions Guide -- the BEAT under IRC 59A adds back base erosion payments and interacts with the foreign tax credit because BEAT limits the credits a taxpayer can use against the modified taxable income base; corporate FTC filers near the applicable taxpayer threshold should run the Form 8991 BEAT calculation alongside the Form 1118 limitation.
• Pillar Two / GLOBE Minimum Tax: U.S. Practitioner Guide -- OECD GloBE framework for U.S. MNEs: ETR computation, SBIE carve-out, QDMTT safe harbor, NCTI covered-tax open question, and asymmetric UTPR exposure.
• IRC 951B Foreign-Controlled U.S. Shareholder (FCUS): OBBBA Practitioner Guide -- the OBBBA-enacted IRC 951B rules and the 958(b)(4) restoration determine which persons are U.S. shareholders with Subpart F and NCTI inclusions eligible for the deemed-paid credit on Form 1118; practitioners computing the FTC for multinational structures should confirm the FCUS and FCFC status of each foreign corporation before running the NCTI basket limitation.
• IRC 897 FIRPTA: USRPI, USRPHC, and QFPF Exemption -- FIRPTA withholding for foreign persons disposing of U.S. real property interests, and coordination with FTC planning for USRPI-related ECI.
• IRC 954 Subpart F: FPHCI, FBCSI, FBCSEI, and HTE Election -- CFC Practitioner Guide -- Six Subpart F income categories, threshold rules, HTE election mechanics, and post-OBBBA NCTI coordination for CFC practitioners.
• IRC 367 Outbound Transfers, GRAs, and 367(d) IP Repatriation -- IRC 367(a) gain recognition, gain recognition agreements under Treas. Reg. 1.367(a)-8, the 367(d) deemed royalty regime for outbound intangible transfers, IP repatriation, and OBBBA NCTI interaction open questions.
• IRC 7874 Anti-Inversion Rules, Surrogate Foreign Corporation, and Expatriate Corporation -- Anti-inversion rules for outbound corporate restructuring: surrogate foreign corporation (80% threshold), expatriate corporation inversion gain tax (60-80% threshold), substantial business activities safe harbor, serial acquisition look-back rules, and post-inversion NCTI analysis under OBBBA.
• IRC 864 ECI, FDAP, and U.S. Trade or Business -- Source rules, ECI vs. FDAP classification, and withholding mechanics for inbound foreign persons and foreign corporations with U.S.-connected income.
• IRC 884 Branch Profits Tax: DEA and Inbound Structuring -- Branch profits tax on dividend equivalent amount, branch interest withholding, treaty rate reductions, and inbound structuring considerations for foreign corporations with U.S. branches.
• IRC 1503(d) Dual Consolidated Loss and Pillar Two GloBE Coordination -- DCL mechanics, domestic use agreement election, DPL rules (T.D. 10026 finalized; Notice 2025-44 withdrawal announced), and Pillar Two transitional DCL relief through TY beginning before 2028.
• IRC 901(m) Covered Asset Acquisitions, DTP, and RFA Tracking -- DTP denial mechanics, RFA tracking under T.D. 9895, Form 1118 Schedule B reduction, and five OBBBA open questions for post-acquisition FTC planning.

International Tax Compliance Software for Professional Preparers

Americas Tax has supported enrolled agents, CPAs, and tax attorneys handling complex international tax returns, CFC structures, and FTC computations since 2001. Our team understands the Form 1116 and Form 1118 workflows, the NCTI basket mechanics under OBBBA, and the per-basket FTC limitation rules practitioners face on 2026 returns.