Daily Tax Update - September 3, 2013: Treasury Issues Final Regulations Regarding Withholding Tax in Foreign Tax Credit Transactions

Treasury Issues Final Regulations Regarding Withholding Tax in Foreign Tax Credit Transactions:  Treasury has finalized regulations under section 901 to provide additional guidance relating to foreign tax credits for structured passive investment arrangements.  On July 18, 2011, proposed and temporary regulations were issued, and the final regulations adopt the proposed regulations with no substantive changes.  The structured passive investment regulations generally disallow foreign tax credits claimed by a U.S. taxpayer if certain conditions are met.  These final regulations clarify that for one of those conditions, a foreign payment attributable to income of the entity includes a withholding tax imposed on a dividend or other distribution with respect to the equity of the entity.  The regulations also provide that the rule applies to distributions made by a pass-through entity or a disregarded entity.