Proof of Credits

Form 1118 must be carefully filled in with all the information called for and with the calculations of credits indicated.

Important: Documentation (that is, receipts of payments or a foreign tax return for accrued taxes) is not required to be attached to Form 1118. However, proof must be presented upon request by the IRS to substantiate the credit. See Regulations section 1.905-2.

No Credit or Deduction No foreign tax credit (or deduction) is allowed for certain taxes including:

• Taxes on mineral income that were reduced under section 901(e).

• Certain taxes paid on distributions from corporations organized in a U.S. territory (section 901(g)).

• Taxes on combined foreign oil and gas income that were reduced under section 907(a).

• Taxes attributable to income excluded under section 814(a) (relating to contiguous country branches of domestic life insurance companies).

• Taxes paid or accrued to a foreign country or U.S. territory with respect to income excluded from gross income on Form 8873, Extraterritorial Income Exclusion. However, see section 943(d) for an exception for certain withholding taxes.

• The applicable percentage of taxes paid or deemed paid with respect to an amount included in income under section 965 (section 965(g)).

• Taxes paid with respect to the amount treated as included under section 965(b).

6 Instructions for Form 1118 (Rev. 12-2025)

If the corporation claims a foreign tax credit for tax accrued but not paid, the IRS may require a bond to be furnished on Form 1117, Income Tax Surety Bond, before the credit is allowed. See Regulations section 1.905-2(c).