Tax Benefits That May Be Lost

If you cooperate with or participate in an international boycott, you may lose a portion of the following.

The foreign tax credit (section 908(a)). Deferral of taxation of earnings of a CFC (section 952(a)(3)).

Deferral of taxation of IC-DISC income (section 995(b)(1)(F)(ii)).

Exemption of foreign trade income of an FSC (section 927(e)(2), as in effect before its repeal).

Exclusion of extraterritorial income from gross income (section 941(a)(5), as in effect before its repeal).

Schedules A, B, and C Figure the loss of tax benefits on Schedules A and C or Schedules B and C (Form 5713). You must use the international boycott factor (Schedule A) to figure the reduction to foreign trade income qualifying for the extraterritorial income exclusion. To figure the loss of all other tax benefits, you can use either the international boycott factor (Schedule A) or determine taxes and income specifically attributable to boycott operations (Schedule B).

Figure the loss of tax benefits on Schedule C. For more details, see the instructions for these separate schedules.

Complete Schedule C if you are a partner. Partnerships do not complete Schedule C. But partnerships must complete parts of both Schedules A and B. However, if all partners figure the loss of their tax benefits using the boycott factor exclusively, or specifically identifiable taxes and income attributable to boycott operations exclusively, then the

Boycotting Countries A boycotting country includes the following.

Any country that is on the list maintained by the Secretary of the Treasury under section 999(a)(3). As of the date these instructions were revised, the most recent “List of Countries Requiring Cooperation with an International Boycott” (dated May 4, 2018) included Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, United Arab Emirates, and Yemen. The list is updated quarterly and is available at FEDERALREGISTER.gov . Enter “International Boycott” in the search box.

Any other country in which you (or a member of the controlled group of which you are a member) have operations and of which you know (or have reason to know) requires any person to cooperate with or participate in an international boycott. However, see Exceptions From Filing, earlier.

Boycott Request A boycott request is any request to enter into an agreement that would constitute cooperation with or participation in an international boycott.

Operations The term “operations” means all forms of business or commercial activities and transactions (or parts of transactions), whether or not productive of income, including, but not limited to: selling; purchasing; leasing; licensing; banking, financing, and similar activities; extracting; processing; manufacturing; producing; constructing; transporting; performing activities related to the activities above (for example, contract negotiating, advertising, site selecting, etc.); and performing