n-23-80.pdf

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing.

This collection currently includes the publisher’s available advance-release directory. Historical bulletin renditions are discovered separately; an advance-release record alone does not certify the collection archive complete.

Guidance Regarding the Foreign Tax Credit and Dual Consolidated Losses in Relation to
the GloBE Model Rules, and Extension and Modification of Temporary Relief in Notice
2023-55

Notice 2023-80

SECTION 1. OVERVIEW
.01 Purpose.
This notice announces that the Department of the Treasury (Treasury Department)
and the Internal Revenue Service (IRS) intend to issue proposed regulations under §§
59(l), 78, 704, 901, 903, 951A, 954, 960, and 1503(d) of the Internal Revenue Code
(Code)
1
to address the application of those provisions, including the foreign tax credit
rules and the dual consolidated loss rules, to certain types of taxes described in the
“Tax Challenges Arising from the Digitalisation of the Economy - Global Anti-Base
Erosion Model Rules (Pillar Two)” (GloBE Model Rules).
2
The Treasury Department
and the IRS anticipate that the proposed regulations will be consistent with the guidance
provided in sections 2 and 3 of this notice.
This notice also extends the relief period for the temporary relief described in Notice
2023-55 in determining whether a foreign tax is eligible for a foreign tax credit under §§
901 and 903. In addition, this notice addresses the application of the temporary relief

1
Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax
Regulations (26 CFR part 1).
2
Org. for Econ. Coop. & Dev. [OECD], Tax Challenges Arising from the Digitalisation of the Economy –
Gl obal Anti-Base Erosion Model Rules (Pillar Two) (Dec. 14, 2021),
https://www.oecd-
ilibrary.org/taxation/tax-challenges-arising-from-digitalisation-of-the-economy-global-anti-base-erosion-
model-rules-pillar-two_782bac33-en.

- 2 -

with respect to partnerships and their partners.
.02 Overview of the GloBE Model Rules.
The GloBE Model Rules create a coordinated system of minimum taxation intended
to ensure that Multinational Enterprise Groups (MNE Groups) with annual revenue of
EUR 750 million or more pay a minimum level of tax on the income arising in each
jurisdiction in which they operate.
3
Certain jurisdictions have enacted, and others have
proposed, legislation to implement the GloBE Model Rules for the IIR and Qualified
Domestic Minimum Top-up Tax (QDMTT), effective for Fiscal Years beginning on or
after December 31, 2023, and for the UTPR, effective for Fiscal Years beginning on or
after December 31, 2024.
4
This notice does not provide guidance regarding the UTPR,
except as provided in sections 2.03 and 3.03 of this notice. The Treasury Department
and the IRS continue to analyze issues related to the UTPR and intend to issue
additional guidance.
Under the GloBE Model Rules, an in-scope MNE Group must calculate its Effective
Tax Rate (ETR) for each jurisdiction in which it operates. The ETR determination for a
jurisdiction involves calculating the Net GloBE Income in that jurisdiction, based on the
net income or loss reflected on financial statements with certain adjustments, and
Adjusted Covered Taxes, which is a measure of taxes paid with respect to that income

3
Capitalized terms used in this notice, but not defined herein, have the meanings ascribed to such terms
under the GloBE Model Rules.
4
Under the European Union (EU) Directive requiring the adoption of the GloBE Model Rules, EU Member
States will apply the UTPR for years beginning on or after December 31, 2023 but only in limited
circumstances. See Council Directive 2022/2523, art. 50, 2022 OJ (L 328) 1, 55.

- 3 -

(including, when computing the ETR for the IIR or UTPR, cross-border taxes such as
those imposed on income of a controlled foreign corporation (CFC) or foreign branch
located in the jurisdiction). If the ETR for a jurisdiction is below the 15% Minimum Rate,
Top-up Tax may be imposed and collected under the QDMTT, IIR, and UTPR. The
amount of Top-up Tax is determined by multiplying the Top-up Tax Percentage (the
excess of 15% over the ETR in the jurisdiction) by the Excess Profits (the Net GloBE
Income in such jurisdiction that exceeds a Substance-based Income Exclusion).
A jurisdiction that enacts a QDMTT will collect tax with respect to low-taxed income
in that jurisdiction. Any Top-up Tax not collected under a QDMTT may be collected
under the IIR or UTPR. Jurisdictions enacting the QDMTT, IIR, and UTPR into their
domestic law may separately enact each such tax or may amend their existing
corporate income tax.
The GloBE Model Rules operate so that taxes are imposed on Net GloBE Income in
the following order of priority: (1) Covered Taxes (other than Controlled Foreign
Company Tax Regimes (CFC Tax Regimes) and certain cross-border taxes); (2)
QDMTT; (3) CFC Tax Regimes and certain other cross-border taxes; (4) IIR; and (5)
UTPR. Thus, for example, a QDMTT is computed without regard to taxes paid pursuant
to a CFC Tax Regime.
SECTION 2. GLOBE MODEL RULES AND THE FOREIGN TAX CREDIT
.01 Background.
Section 901 generally allows a credit for the amount of any income, war profits, and

- 4 -

excess profits taxes (collectively, foreign income taxes) paid or accrued during the
taxable year to any foreign country or to any territory of the United States, and in the
case of a domestic corporation, the taxes deemed to have been paid under § 960.
Section 903 provides that foreign income taxes include a tax paid in lieu of a generally-
imposed foreign income tax.
This section 2 describes rules that would address the treatment of certain taxes,
including IIRs, UTPRs, and QDMTTs, under §§ 59(l), 78, 275, 704, 901, 903, 951A,
954, and 960. For purposes of section 2 of this notice, the term IIR, the term UTPR,
and the term QDMTT mean a tax imposed under a foreign tax law
5
that is consistent
with the IIR, UTPR, and QDMTT, respectively, described in the GloBE Model Rules.
.02 Final Top-up Tax.
(1) In general. The Treasury Department and the IRS intend to issue proposed
regulations consistent with the guidance provided in this section 2.02, which describes
the treatment of final top-up taxes under §§ 59(l), 78, 275, 704, 901, 903, 951A, 954,
and 960.
(2
) Definition of final top-up tax. A foreign income tax (tested tax) is a final top-up
tax if, in computing the tested tax, the foreign tax law takes into account:
(a) the amount of tax imposed on the direct or indirect owners of the entity
subject to the tested tax by other countries (including the United States) with respect to
the income subject to the tested tax, or

5
The term “foreign tax law” in this notice has the meaning in § 1.901-2(g)(4).

- 5 -

(b) in the case of an entity subject to the tested tax on income attributable to its
branch in the foreign country imposing the tested tax, the amount of tax imposed on the
entity by its country of residence with respect to such income.
(3) Treatment of a final top-up tax under §§ 901 and 59(l). No credit is allowed
under §§ 901 or 59(l) to a person for a final top-up tax if, under the foreign tax law, any
amount of United States federal income tax liability of the person would be taken into
account in computing the final top-up tax (without regard to whether the person has any
amount of United States federal income tax liability that, in fact, is taken into account in
such computation).
(4) Treatment of a final top-up tax paid by a partnership or CFC. In general, a final
top-up tax is treated as if it were a creditable tax at the partnership and CFC level, with
the disallowance of the credit pursuant to section 2.02(3) of this notice applying at the
level of the partner or U.S. shareholder, as applicable. This treatment is intended to
facilitate appropriate results where a final top-up tax is creditable as to one partner or
U.S. shareholder of a partnership or CFC, as applicable, but not as to another. Further,
a final top-up tax is not taken into account in determining whether the high-tax exception
to foreign base company income in § 1.954-1(d) or the high-tax exclusion from tested
income in § 1.951A-2(c)(7) applies.
(a) Creditable foreign tax expenditure. A final top-up tax is treated as a
creditable foreign tax expenditure under § 1.704-1(b)(4)(viii)(b).
(b) Eligible current year tax. A final top-up tax is treated as an eligible current

- 6 -

year tax under § 1.960-1(b)(5).
(c) Application of the high-tax exceptions under §§ 951A and 954(b)(4). In
computing the effective rate of foreign income tax under § 1.954-1(d)(2) and § 1.951A-
2(c)(7)(vi), a final top-up tax is excluded from the amount of foreign income taxes
described in § 1.954-1(d)(2)(i) and § 1.951A-2(c)(7)(vi)(A), and increases the amount of
the net item of income described in § 1.951-1(d)(2)(ii) and the amount of the tentative
tested income item described in § 1.951A-2(c)(7)(vi)(B), as applicable.
(5
) Application of §§ 78 and 275(a)(4). If a taxpayer chooses with respect to any
taxable year to claim a credit for foreign income taxes, absent a specific statutory
provision to the contrary (such as § 901(j)(3)), the gross-up rule of § 78 and the
deduction disallowance rule of § 275(a)(4) apply to any foreign income tax paid or
accrued in such taxable year regardless of whether a foreign tax credit is allowed for the
particular tax. The guidance in this section would confirm that result in the case of a
final top-up tax, such as an IIR that is a foreign income tax. As a result, a taxpayer who
chooses to credit foreign income taxes would be required to include in gross income
under § 78 an amount equal to the amount of a final top-up tax deemed paid by the
taxpayer under §§ 960(a), (b), and (d), and would not be able to claim a deduction for a
final top-up tax under § 275(a)(4).
(a) S
ection 78 gross-up amount. Section 78 applies to a final top-up tax deemed
paid by a domestic corporation that chooses to have the benefits of subpart A of part III
of subchapter N for any taxable year.

- 7 -

(b) Section 275(a)(4) deduction disallowance. Section 275 applies to deny a
deduction for a final top-up tax to any person that chooses to take to any extent the
benefits of § 901.
(6
) Examples. The following examples illustrate the application of this section
2.02.
(a) Example 1—IIR that is a foreign income tax.
(i) Facts. Country X imposes an IIR on certain entities resident in Country X.
The IIR imposed by Country X is a foreign income tax within the meaning of § 1.901-
2(a) and (b). Under Country X tax law, in computing the amount of the IIR, the foreign
tax liability of the direct and indirect owners of the Country X taxpayers that relates to
income subject to the IIR is taken into account if those owners are part of the same
MNE Group (as defined under Country X tax law) as the Country X taxpayers. USP is a
domestic corporation that owns all the stock of CFCX, a CFC that is organized in, and is
a tax resident of, Country X. CFCX owns all the stock of CFCY, a CFC that is
organized in, and is a tax resident of, Country Y. Under Country X tax law, USP is
considered part of the same MNE Group as CFCX and CFCY, and, therefore, any U.S.
tax liability of USP that relates to income subject to the IIR is taken into account in
computing the IIR. In 2024, CFCX is liable for 5u (units of Country X currency) of the
Country X IIR. At all relevant times, 1u = $1. USP is deemed to pay $4 of the Country X
IIR under § 960(d). USP chooses to credit foreign income taxes for 2024.
(ii) Analysis. The Country X IIR is a final top-up tax because it is a foreign

- 8 -

income tax that takes into account the amount of tax imposed by other countries on the
direct or indirect owners of the entity subject to the Country X IIR with respect to the
income subject to the Country X IIR. No credit is allowed under § 901 to USP for the $4
of Country X IIR that USP is deemed to pay because, under Country X tax law, USP’s
U.S. federal income tax liability may be taken into account in computing the Country X
IIR. This result does not depend on whether USP has any amount of U.S. federal
income tax liability or whether any of that liability is, in fact, taken into account in
computing the Country X IIR. The amount included in USP’s income by reason of § 78
and § 1.78-1(a) is $5.
(b) Example 2—Minority U.S. shareholder.
(i) Facts. The facts are the same as in Example 1, except that: (i) USP and
USM, a domestic corporation, own 70% and 30%, respectively, of the stock of HoldCo,
a CFC that is organized in, and is a tax resident of, Country A, and HoldCo owns all the
stock of CFCX, (ii) USM is not considered part of the same MNE Group as USP, CFCX
and CFCY under Country X tax law, (iii) CFCX is liable for 6.5u of the Country X IIR,
and (iv) under § 960(d), USP is deemed to pay $3.64 of the Country X IIR, and USM is
deemed to pay $1.56 of the Country X IIR.
(ii) An
alysis. Similar to the analysis in Example 1, the Country X IIR is a final
top-up tax, and no credit is allowed under § 901 to USP for the $3.64 of Country X IIR
that USP is deemed to pay because, under Country X tax law, USP’s U.S. federal
income tax liability may be taken into account in computing the Country X IIR. USM,

- 9 -

however, may be allowed a credit under § 901 for the $1.56 of the Country X IIR that
USM is deemed to pay under § 960(d) because, under Country X tax law, no amount of
USM’s U.S. federal income tax liability can be taken into account in computing the
Country X IIR as USM is not considered part of the same MNE Group as CFCX. Under
§ 78 and § 1.78-1(a), the amount included in USP’s income is $4.55, and the amount
included in USM’s income is $1.95.
(c) Example 3—QDMTT that is a foreign income tax.
(i) Facts. The facts are the same as in Example 1, except that Country Y
imposes a QDMTT. The QDMTT imposed by Country Y is a foreign income tax within
the meaning of § 1.901-2(a) and (b). Under Country Y tax law, in computing the amount
of the QDMTT, the foreign tax liability of direct and indirect owners of the entity subject
to the QDMTT is not taken into account. Therefore, any U.S. tax liability of USP is not
taken into account in computing the QDMTT. In 2024, CFCX is liable for no amount of
Country X IIR, and CFCY is liable for 10y (units of Country Y currency) of Country Y
QDMTT. At all relevant times, 1y= $1. USP is deemed to pay $8 of the Country Y
QDMTT under § 960(d).
(ii) Analysis. The Country Y QDMTT is not a final top-up tax because Country
Y tax law does not take into account in computing the Country Y QDMTT the amount of
tax imposed by other countries on the direct and indirect owners of the entity subject to
the Country Y QDMTT. Therefore, USP may be allowed a credit under § 901 for the $8
of Country Y QDMTT deemed paid under § 960(d). The amount included in USP’s

- 10 -

income by reason of § 78 and § 1.78-1(a) is $10.
.03 Separate Levy Rules.
(1) In general. The Treasury Department and the IRS intend to issue proposed
regulations consistent with the guidance provided in this section 2.03, which describes
how the separate levy rules of § 1.901-2(d) apply with respect to an IIR, UTPR, and
QDMTT. This treatment would reflect that the amount of tax imposed under an IIR,
UTPR, or QDMTT is computed separately from any other levy imposed by a foreign
country, and would ensure consistent treatment of an IIR, UTPR, and QDMTT
regardless of the manner in which a foreign country enacts an IIR, UTPR, or QDMTT
under its foreign tax law.
(2
) Application of separate levy rules. Each of an IIR, UTPR, and QDMTT imposed
by a foreign country is a separate levy within the meaning of § 1.901-2(d) from any
other levy imposed by that country, even if the country imposes the IIR, UTPR, or
QDMTT by adjusting the base of any other levy (such as through an addition to income
or denial of deductions).
.
04 Determining the Taxpayer for a QDMTT.
(1) In general. The Treasury Department and the IRS intend to issue proposed
regulations consistent with the guidance provided in this section 2.04, which describes
rules for determining the person by whom a QDMTT is considered paid under § 1.901-
2(f) when a QDMTT is computed by reference to the income of two or more persons.
(2) QDMTT on income of two or more persons. The legal lability for a QDMTT

- 11 -

imposed on the income of two or more persons is determined under the rules of this
section 2.04(2) through (4) rather than under § 1.901-2(f)(3) (regarding taxes imposed
on combined income of two or more persons). If a QDMTT is computed by reference to
the income of two or more persons, foreign tax law is considered to impose legal liability
for the QDMTT on each person in proportion to the person’s QDMTT Allocation Key, as
determined under this section 2.04(2). A person’s QDMTT Allocation Key is the product
of (i) the excess (if any) of the QDMTT Rate over the person’s Separate Pre-QDMTT
ETR, and (ii) the person’s Separate QDMTT Income (such terms as defined in section
2.04(3)). If a person’s Separate QDMTT Income is zero or less than zero, then the
person's QDMTT Allocation Key will be treated as zero. The rules of this section 2.04
apply regardless of how the foreign tax law allocates the QDMTT liability among two or
more persons, which person is obligated to remit the tax, which person actually remits
the tax, or which person the foreign country could proceed against to collect the tax in
the event all or a portion of the tax is not paid.

(3) Definitions. The following definitions apply for purposes of this section 2.04.
(a) Person. Person means an individual or an entity (including a disregarded
entity described in § 301.7701-2(c)(2)(i)) that is subject to a QDMTT imposed by a
foreign country. In determining the amount of the QDMTT paid by an owner of a
partnership or a disregarded entity, the rule described in section 2.04(2) first applies to
determine the amount of the QDMTT paid by the partnership or disregarded entity, and
then § 1.901-2(f)(4) applies to allocate the amount of such QDMTT to the owner.

- 12 -

(b) QDMTT Rate. QDMTT Rate means the minimum effective tax rate (ETR), as
stated in the foreign tax law, to which the actual ETR of a person or persons is
compared for purposes of computing the QDMTT.
(c) S
eparate Pre-QDMTT Taxes. A person’s Separate Pre-QDMTT Taxes
means the taxes (whether positive or negative) of the person that are taken into account
under the foreign tax law for purposes of computing the QDMTT.
(d) Separate QDMTT Income. A person’s Separate QDMTT Income means the
income or loss of the person that is taken into account under the foreign tax law for
purposes of computing the QDMTT.
(e) Separate Pre-QDMTT ETR. A person’s Separate Pre-QDMTT ETR means
the person’s Separate Pre-QDMTT Taxes (whether positive or negative) divided by the
person’s Separate QDMTT Income.
(4
) Separate QDMTT Income and Separate Pre-QDMTT Taxes. A person’s
Separate QDMTT Income and a person’s Separate Pre-QDMTT Taxes are determined
by reference to the relevant amounts (not reduced by negative amounts attributable to
any other person) provided on any return, schedule or other document that, under the
foreign tax law, must be filed or maintained for purposes of the QDMTT. If no return,
schedule, or other document that provides a person’s Separate QDMTT Income and a
person’s Separate Pre-QDMTT Taxes is required to be filed or maintained, then, a
person’s Separate QDMTT Income and a person’s Separate Pre-QDMTT Taxes are
determined by reference to the relevant amounts provided in the books of account

- 13 -

regularly maintained by or on behalf of the person and used for purposes of computing
the QDMTT.
(5) Examples. The following examples illustrate the application of this section
2.04(2) through (4).
(a) Example 1—QDMTT imposed on two or more persons.
(i) Facts. Country X has enacted a QDMTT. Under Country X tax law, entities
that are resident in, or have a taxable presence in, Country X and that are members of
the same MNE Group, are jointly and severally liable for the QDMTT. USP is a United
States person that owns all of the stock of each of CFC1 and CFC2, each of which is a
CFC that is a tax resident of Country X. CFC1 and CFC2 are members of the same
MNE Group under Country X tax law. In Year 1, CFC1’s Separate QDMTT Income is
100u (units of Country X currency) and CFC1’s Separate Pre-QDMTT Taxes is 5u. In
the same year, CFC2’s Separate QDMTT Income is 50u, and CFC2’s Separate Pre-
QDMTT Taxes is 5u. The QDMTT Rate in Country X is 15%. Country X imposes 12.5u
of QDMTT with respect to CFC1 and CFC2 collectively.
(
ii) Analysis. Under Country X tax law, the amount of the QDMTT is computed
by reference to the income of both CFC1 and CFC2. Under section 2.04(2) through (4)
of this notice, the 12.5u of the Country X QDMTT is allocated between CFC1 and CFC2
in proportion to each person’s QDMTT Allocation Key. CFC1’s QDMTT Allocation Key
is 10u ((15% - (5u / 100u)) x 100u), and CFC2’s QDMTT Allocation Key is 2.5u ((15% -
(5u / 50u)) x 50u). Accordingly, 10u of the Country X QDMTT (12.5u x (10u / 12.5u)) is

- 14 -

allocated to CFC1, and 2.5u of the Country X QDMTT (12.5u x (2.5u / 12.5u)) is
allocated to CFC2.
(b) Example 2—Effect of SBIE.
(i) Facts. The facts are the same as in Example 1, except that CFC1 and
CFC2 collectively have 15u of Substance-based Income Exclusion (SBIE) which, under
Country X tax law, can reduce an MNE Group’s QDMTT liability. After taking into
account the SBIE, Country X imposes 11.25u of QDMTT with respect to CFC1 and
CFC2 collectively.
(
ii) Analysis. The amount of SBIE (if any), and the entity to which it may be
attributable, is not taken into account in the calculation of each person’s QDMTT
Allocation Key. The QDMTT Allocation Key for each of CFC1 (10u) and CFC2 (2.5u)
remains the same as in Example 1 because each of CFC1 and CFC2 has the same
Separate QDMTT Income and Separate Pre-QDMTT Taxes as in Example 1.
Accordingly, 9u of the Country X QDMTT (11.25u x (10u / 12.5u)) is allocated to CFC1,
and 2.25u of the Country X QDMTT (11.25u x (2.5u / 12.5u)) is allocated to CFC2.
(c) Ex
ample 3—Negative Separate QDMTT Income.
(i) Facts. The facts are the same as in Example 1, except that USP also owns
all of the stock of CFC3, which is a CFC that is a tax resident of Country X. CFC3 is a
member of the same MNE Group as CFC1 and CFC2 under Country X tax law. In Year
1, CFC3’s Separate QDMTT Income is a net loss of 50u, and its Separate Pre-QDMTT
Taxes is zero. Country X imposes 5u of QDMTT with respect to CFC1, CFC2, and

- 15 -

CFC3 collectively.
(ii) Analysis. Under Country X tax law, the amount of the QDMTT is computed
by reference to the income of CFC1, CFC2, and CFC3. Under section 2.04(2) through
(4) of this notice, the 5u of Country X QDMTT is allocated among CFC1, CFC2, and
CFC3 in proportion to each person’s QDMTT Allocation Key. The QDMTT Allocation
Key for CFC1 (10u) and for CFC2 (2.5u) remain the same as in Example 1 because
they have the same Separate QDMTT Income and Separate Pre-QDMTT Taxes as in
Example 1. CFC3’s QDMTT Allocation Key is treated as zero because its Separate
QDMTT Income is less than zero. Accordingly, 4u of the Country X QDMTT (5u x (10u /
12.5u)) is allocated to CFC1, 1u of the Country X QDMTT (5u x (2.5u / 12.5u)) is
allocated to CFC2, and none of the Country X QDMTT (5u x 0u / 12.5u) is allocated to
CFC3.
(d) E
xample 4—Negative Separate Pre-QDMTT Taxes.
(i) Facts. The facts are the same as in Example 1, except that: (i) in Year 1,
CFC1’s Separate Pre-QDMTT Taxes is -5u, representing a negative amount of income
tax expense (a tax benefit), and (ii) Country X imposes 22.5u of QDMTT with respect to
CFC1 and CFC2 collectively.
(
ii) Analysis. As in Example 1, under Country X tax law, the amount of the
QDMTT is computed by reference to the income of both CFC1 and CFC2. Under
section 2.04(2) through (4) of this notice, the 22.5u of Country X QDMTT is allocated
between CFC1 and CFC2 in proportion to each person’s QDMTT Allocation Key. The

- 16 -

QDMTT Allocation Key for CFC2 (2.5u) remains the same as in Example 1 because
CFC2 has the same Separate QDMTT Income and Separate Pre-QDMTT Taxes as in
Example 1. However, CFC1’s QDMTT Allocation Key is now 20u ((15% - (-5x / 100u)) x
100u), reflecting the change in CFC1’s Separate Pre-QDMTT Taxes. Accordingly, 20u
of the Country X QDMTT (22.5u x (20u / 22.5u)) is allocated to CFC1, and 2.5u of the
Country X QDMTT (22.5u x (2.5u / 22.5u)) is allocated to CFC2.
.05 The Non-duplication Requirement for In Lieu of Taxes.
(1) In general. The Treasury Department and the IRS intend to amend the non-
duplication requirement in § 1.903-1(c)(1)(ii) as described in this section 2.05.
(2
) Non-duplication requirement. A foreign tax, in order to qualify as an in lieu of
tax, need only be in substitution for a generally-imposed net income tax and not in
substitution for all net income taxes imposed by that country. Accordingly, the first
sentence of the non-duplication requirement in § 1.903-1(c)(1)(ii) would be revised as
follows: “The generally-imposed net income tax for which the tested foreign tax is
imposed in substitution is not also imposed, in addition to the tested foreign tax, on any
persons with respect to any portion of the income to which the amounts (such as sales
or units of production) that form the base of the tested foreign tax relate (the ‘excluded
income’).” Conforming changes to the second sentence of § 1.903-1(c)(1)(ii) and the
examples in § 1.903-1(d) would be made as appropriate.
(3
) Example.
(a) Facts. Country X imposes a net income tax within the meaning of § 1.901-

- 17 -

2(a)(3) on the income of nonresident companies that is attributable to the nonresident’s
activities within Country X (NRCIT) and that constitutes a generally-imposed net income
tax. The NRCIT applies to all nonresident corporations that engage in business in
Country X except for nonresident corporations that engage in activities related to
Industry B, which are instead subject to the Industry B Tax. The NRCIT and the
Industry B Tax were enacted contemporaneously, and the statutory language of the
NRCIT expressly excludes gross income derived by corporations engaged in activities
related to Industry B. Country X enacts a QDMTT that is a net income tax within the
meaning of § 1.901-2(a)(3). The Country X QDMTT is imposed with respect to gross
income that is also included in the base of the Industry B Tax.
(b) Analysis. The Industry B Tax meets the requirement in § 1.903-1(c)(1)(i)
because Country X has a generally-imposed net income tax, the NRCIT. In addition,
the Industry B Tax meets the requirement in § 1.903-1(c)(1)(ii), modified as described in
section 2.05(2), because the generally-imposed net income tax for which the tested
foreign tax is imposed in substitution, the NRCIT, is not also imposed, in addition to the
Industry B Tax, on any persons with respect to any portion of the income to which the
amounts that form the base of the Industry B Tax relate (“excluded income”). It is not
relevant that the Country X QDMTT is also imposed on the excluded income.
(4
) Additional changes to § 1.903-1. The Treasury Department and the IRS are
considering whether additional changes to § 1.903-1 would be needed to ensure that
foreign taxes continue to be creditable only where consistent with the scope and

- 18 -

purposes of § 903. These additional changes may include defining a generally-imposed
net income tax.
.06 Applicability Date and Reliance.
(1) Applicability date. It is anticipated that the proposed regulations will provide that
rules consistent with the rules described in section 2 of this notice apply to taxable years
ending after December 11, 2023.
(2) Reliance. A taxpayer may rely on the guidance described in sections 2.02
through 2.05 of this notice for taxable years that end after December 11, 2023, and on
or before the date proposed regulations are published in the Federal Register, provided
that the taxpayer consistently follows the guidance in its entirety for all those taxable
years. Additionally, for taxable years that begin on or after December 28, 2021, and
end on or before December 11, 2023, a taxpayer may rely on the guidance described in
section 2.05 of this notice.
SECTION 3. GLOBE MODEL RULES AND DUAL CONSOLIDATED LOSSES
.01 Background.
Section 1503(d) and the regulations thereunder (DCL rules) prevent “double dipping”
of losses, which occurs when the same economic loss offsets or reduces both income
subject to U.S. tax (but not a foreign jurisdiction's tax) and income subject to the foreign
jurisdiction's tax (but not U.S. tax). See S. Rep. 313, 99th Cong., 2d Sess., at 419-20
(1986). A dual consolidated loss (DCL) is defined as a net operating loss of a dual
resident corporation and a net loss of a domestic corporation that is attributable to

- 19 -

certain foreign branches or interests in hybrid entities (separate units). See §
1.1503(d)-1(b)(5). Under the DCL rules, a DCL cannot offset the income of a domestic
affiliate (a domestic use), subject to certain exceptions. See § 1.1503(d)-4(b).
Under one exception, a domestic use of a DCL is permitted if the taxpayer makes a
domestic use election, which requires the taxpayer to certify that there has not been,
and will not be, a foreign use of the DCL. See § 1.1503(d)-6(d) and § 1.1503(d)-
1(b)(20). In general, a foreign use of a DCL occurs when any portion of the DCL is
made available under the income tax laws of a foreign country to offset or reduce,
directly or indirectly, any income that under U.S. tax principles is income of a foreign
corporation or a direct or indirect owner of certain interests in hybrid entities. See §
1.1503(d)-3(a)(1). In the event of a foreign use (or other triggering event) during the
certification period, the taxpayer must recapture the DCL as ordinary income and pay
an interest charge. § 1.1503(d)-6(e)(1). However, among other exceptions, a foreign
use is not considered to occur if the laws of a foreign country provide an election that
would enable a foreign use and such election is not made. § 1.1503(d)-3(c)(2). Under
this domestic use election, a taxpayer effectively has the choice to put a DCL to a
domestic use or a foreign use (but not both).
.02 Interaction with GloBE Model Rules.
Under the GloBE Model Rules, an MNE Group whose ETR for a jurisdiction is below
the 15% Minimum Rate must compute the amount of Jurisdictional Top-up Tax owed
with respect to the jurisdiction. That Jurisdictional Top-up Tax is based on, among other

- 20 -

factors such as Adjusted Covered Taxes, the Net GloBE Income of Constituent Entities
within the jurisdiction. For this purpose, the GloBE Model Rules take a jurisdictional
blending approach under which all income and loss of Constituent Entities in the same
jurisdiction are generally aggregated. This aggregation can be viewed as giving rise to
double dipping concerns that the DCL rules were intended to address. For example, if,
in determining Net GloBE Income of a jurisdiction, a loss giving rise to a DCL is
aggregated with items that under U.S. tax principles are items of a foreign corporation in
that jurisdiction, the loss would be available to reduce both U.S. tax (if a domestic use
election were permitted) and the Jurisdictional Top-up Tax. These concerns could exist
with respect to a DCL incurred in a taxable year ending before the time at which the
GloBE Model Rules are anticipated to be effective (for instance, a taxable year ending
on December 31, 2023) if timing differences between U.S. tax law and applicable
financial accounting standards result in a portion of the loss comprising the DCL being
taken into account as an expense under the GloBE Model Rules in a later year.
Additionally, the GloBE Model Rules include certain features that may differ from
traditional foreign income tax systems. For example, the GloBE Model Rules do not
include a mechanism through which a taxpayer can decline aggregation, with the result
that the taxpayer might effectively be required to put a DCL to a foreign use (thereby
removing what otherwise may have been a choice between a domestic use and a
foreign use). In addition, a loss may never produce a benefit under the Jurisdictional
Top-up Tax, for example, if the ETR in the jurisdiction is at or above the Minimum Rate

- 21 -

(without regard to the loss) and the loss is not carried over in determining Jurisdictional
Top-Up Tax in another year.
Accordingly, the Treasury Department and the IRS are studying the extent to which
the DCL rules should apply with respect to the GloBE Model Rules, including the extent
to which aggregation should result in a foreign use of a DCL, and the extent to which
the GloBE Model Rules should cause an entity that is not otherwise subject to an
income tax of a foreign jurisdiction to be a dual resident corporation or a hybrid entity
under § 1.1503(d)-1(b)(2) or (3), or should prevent such an entity from being a
transparent entity under § 1.1503(d)-1(b)(16). The Treasury Department and the IRS
are also studying similar issues in the context of other provisions (for example, the
interaction of the anti-hybrid rules under §§ 245A(e) and 267A with the GloBE Model
Rules).
.03 Treatment of Legacy DCLs.
In the interest of providing certainty while the Treasury Department and the IRS
develop guidance addressing the interaction of the DCL rules with the GloBE Model
Rules, the Treasury Department and the IRS intend to issue proposed regulations with
respect to DCLs incurred in (i) taxable years ending on or before December 31, 2023, or
(ii) provided the taxpayer’s taxable year begins and ends on the same dates as the
Fiscal Year of the MNE Group that could take into account as an expense any portion of
a deduction or loss comprising such a DCL, taxable years beginning before January 1,
2024, and ending after December 31, 2023 (collectively, legacy DCLs). Under this

- 22 -

proposed rule, a foreign use would not be considered to occur with respect to a legacy
DCL solely because all or a portion of the deductions or losses that comprise the legacy
DCL are taken into account in determining the Net GloBE Income for a particular
jurisdiction. However, this proposed rule would not apply to any DCL that was incurred
or increased with a view to reducing the Jurisdictional Top-Up Tax or qualifying for the
proposed rule described in this notice.
.04 Reliance.
Taxpayers may rely on the guidance described in this section 3 until proposed
regulations are published in the Federal Register.
SECTION 4. REQUEST FOR COMMENTS
.01 Comments.
The Treasury Department and the IRS request comments on the rules described in
sections 2 and 3 of this notice. The Treasury Department and the IRS specifically solicit
comments on the interaction of the DCL rules with the GloBE Model Rules, including
Article 3.2.7 of the GloBE Model Rules (relating to Intragroup Financing Arrangements).
.02 Procedures for Submitting Comments.
(1) Deadline. Written comments should be submitted by February 9, 2024.
Consideration will be given, however, to any written comment submitted after February
9, 2024, if such consideration will not delay the issuance of proposed regulations.

- 23 -

(2) Form and manner. The subject line for the comments should include a
reference to Notice 2023-80. All commenters are strongly encouraged to submit
comments electronically. However, comments may be submitted in one of two ways:
(a) Electronically via the Federal eRulemaking Portal at www.regulations.gov
(type IRS-2023-0060 in the search field on the regulations.gov homepage to find this
notice and submit comments); or
(b) By mail to: Internal Revenue Service, CC:PA:LPD:PR (Notice 2023-80),
Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, D.C., 20044.
(3) Publication of comments. The Treasury Department and the IRS will publish
for public availability any comment submitted electronically and on paper to its public
docket on regulations.gov.
SECTION 5. EXTENSION AND MODIFICATION OF TEMPORARY RELIEF IN NOTICE
2023-55
.01 Background.
On January 4, 2022, the Treasury Department and the IRS published Treasury
Decision 9959 in the Federal Register (87 FR 276) (2022 FTC final regulations), which
contained final regulations under §§ 901 and 903. Correcting amendments to the 2022
FTC final regulations were published in the Federal Register on July 27, 2022 (87 FR
45018). On November 22, 2022, the Treasury Department and the IRS published
proposed regulations (REG-112096-22) in the Federal Register (87 FR 71271), which
included proposed rules relating to the cost recovery requirement and the substitution

- 24 -

requirement for covered withholding taxes. On April 17, 2023, the Treasury Department
and the IRS published Notice 2023-31 in the Internal Revenue Bulletin (IRB 2023-16)
relating to proposed § 1.903-1(c)(2)(iii)(B) (the single-country exception).
On August 7, 2023, the Treasury Department and the IRS published Notice 2023-55
in the Internal Revenue Bulletin (IRB 2023-32). Notice 2023-55 provides temporary
relief in determining whether a foreign tax meets the definition of a foreign income tax
under §§ 901 and 903 for foreign taxes paid in any taxable year (a relief year) beginning
on or after December 28, 2021, and ending on or before December 31, 2023 (the relief
period), provided that the taxpayer satisfies certain requirements.
.
02 Application of Temporary Relief in Notice 2023-55 to Partnerships.
The Treasury Department and the IRS have received questions regarding the
application of the temporary relief provided in Notice 2023-55 to partnerships, including
whether the partnership or its partners would apply the temporary relief with respect to
foreign taxes paid or otherwise required to be reported by such partnership.
6

This section 5.02 provides that, with respect to foreign taxes paid or otherwise
required to be reported by such partnership,
7
which could include foreign taxes paid by
a CFC (collectively, the partnership’s foreign taxes), the partnership would apply (or not
apply) the temporary relief. However, if, before December 11, 2023, a partnership did
not apply the temporary relief for a partnership’s relief year ending on or before

6
For purposes of this section 5, references to a partnership only include partnerships with a U.S. federal
tax return filing obligation under § 6031 in a relief year.
7
For the avoidance of doubt, “required to be reported” means foreign taxes which would be required to be
reported if the partnership applied the temporary relief.

- 25 -

December 31, 2022 (a partnership 2022 tax year), a partner may apply the temporary
relief to its share of the partnership’s foreign taxes for a partnership 2022 tax year. In
certain circumstances, the IRS may make adjustments relating to the foreign tax credits
claimed by a partner with respect to such foreign taxes on audit of the partner.
.03 Modification and Clarification of the Consistent Application Requirement and
Single-Benefit Requirement of Notice 2023-55.
Section 3 of Notice 2023-55 states that, if a taxpayer applies the temporary relief,
then the taxpayer must apply the temporary relief to (1) all foreign taxes paid by the
taxpayer in the taxpayer’s relief year, and (2) all foreign taxes (i) that are paid by any
other person in a taxable year that begins on or after December 28, 2021 and that ends
with or within the taxpayer’s relief year, and (ii) for which the taxpayer would be eligible
to claim a credit, as provided in § 901 (determined without regard to the limitations
described in § 1.901-1(b)), if the taxpayer applied the temporary relief to such foreign
taxes (the consistent application requirement). Additionally, the taxpayer may not apply
the temporary relief in a relief year to claim a credit, as provided under § 901, for any
amount of foreign tax for which a deduction is allowed in the relief year or any other
taxable year (the single-benefit requirement). This section 5.03 modifies and clarifies
the consistent application requirement and the single-benefit requirement in Notice
2023-55 with respect to partnerships and their partners.
Partnerships and their partners are each subject to the consistent application
requirement. Therefore, a partnership that applies the temporary relief to a relief year

- 26 -

must apply the temporary relief to all the partnership’s foreign taxes (as defined in
section 5.02 of this notice). For a partnership’s taxable year beginning after December
31, 2022, a partnership’s application (or non-application) of the temporary relief for a
relief year will cause a partner to be required to apply (or to be precluded from applying)
the temporary relief for the relief year to all other foreign taxes for which the partner
would be eligible to claim a credit as provided in § 901 (determined without regard to the
limitations described in § 1.901-1(b)), unless the partner does not control whether the
partnership applies (or does not apply) the temporary relief for the relief year.
8

Furthermore, partnerships and their partners are each subject to the single-benefit
requirement. Therefore, a partnership cannot apply the temporary relief to report any
amount of foreign tax as a creditable foreign tax expenditure if the partnership reports
the amount as a deduction in the relief year or any other taxable year.
.04 Extension of Temporary Relief.
Section 4 of Notice 2023-55 defines the relief period as taxable years beginning on
or after December 28, 2021, and ending on or before December 31, 2023, and defines
relief year as any taxable year within the relief period. This section 5.04 modifies the
relief period to mean taxable years beginning on or after December 28, 2021, and
ending before the date that a notice or other guidance withdrawing or modifying the

8
Whether a partner controls the partnership’s application (or non-application) of the temporary relief will
be determined based on the facts and circumstances, including the partnership agreement. For example,
a partner may control a partnership’s application (or non-application) of the temporary relief by reason of
being a general partner or owning, individually or together with related persons, a majority of the capital or
profits interests in the partnership.

- 27 -

temporary relief is issued (or any later date specified in such notice or other guidance).
If final regulations consistent with the guidance provided in section 2 apply in a relief
year, those final regulations apply regardless of whether the taxpayer applies the
temporary relief described in Notice 2023-55, as modified by section 5.02 through 5.04
of this notice, for the relief year.
.05 Effect on Other Documents.
Sections 3 (Temporary Relief) and 4 (Relief Period) of Notice 2023-55, 2023-32
I.R.B. 427, are modified.
SECTION 6. DRAFTING AND CONTACT INFORMATION
The principal author of this notice is the Office of Associate Chief Counsel
(International). For further information concerning section 3 of this notice, contact Brady
Plastaras at (202) 317-6937. For further information regarding section 5 of this notice,
contact Moshe Dlott at (202) 317-4967 or Larry Pounders at (202) 317-5465. For all
other sections, contact Jeffrey Cowan at (202) 317-4924 or Hayley Rassuchine at (202)
317-5282 (not toll-free calls).