Who Must File

Any corporation that elects the benefits of the foreign tax credit under section 901 must complete and attach Form 1118 to its income tax return. In addition, even if a corporation has not elected to credit foreign taxes, it must complete and attach Form 1118, Schedule A, and Schedule J (Form 1118) to its income tax return if it has any additions to, reductions to, or recapture of any new or existing overall foreign loss, overall domestic loss, or separate limitation loss accounts. See Regulations section 1.904(f)-1(b).

Also, even if a taxpayer has not elected to credit foreign taxes, if it has a foreign tax redetermination under section 905(c), it must complete and attach Schedule L (Form 1118) to its income tax return for the tax year in which the foreign tax redetermination occurs. Schedule L must be submitted irrespective of whether the foreign tax redetermination changed the taxpayer’s U.S. tax liability.

Also, individuals must complete and attach a Form 1118 to their income tax return if they make the election under section 962 to be taxed at corporate rates on the amount they must include in gross income under sections 951(a) and 951A from their controlled foreign corporations in order to be eligible to claim a foreign tax credit based on their share of foreign income taxes paid or accrued by the controlled foreign corporation. See sections 960 and 962 and Pub. 514 for more information on how to complete Form 1118 in this case.