Peter Barnes Comments on Foreign Tax Credit Issues in Law360

Calculating and allocating foreign tax credits — an issue that, in theory, the new federal tax law ought to have minimized — could prove to be a tricky sticking point in enacting the massive 2017 tax overhaul.

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Peter Barnes, a professor of tax law at Duke University School of Law and of counsel at Caplin & Drysdale Chtd., said an annual calculation gives taxpayers less time to smooth out mistakes or miscalculations, and will lead to mismatches when foreign tax authorities have later filing dates, or conduct subsequent audits that result in a different amount of taxes paid.

"It's just the nature of doing it on an annual basis; you're going to get difficult results," Barnes said.

This could prove especially cumbersome if foreign audits push a taxpayer above the 13.125 percent limit for GILTI in years past.

"The problem is, in trying to pay a 13 percent tax on my foreign income, I don't really know because there are going to be audits, and audits go both ways," Barnes said.

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Excerpt taken from the article “Foreign Tax Credit Issues Lie On Horizon Following TCJA” by Alex M. Parker for Law360.