SECTION 5. EXTENSION AND

MODIFICATION OF TEMPORARY RELIEF IN NOTICE 2023-55

.01 Background . On January 4, 2022, the Treasury Department and the IRS published Treasury Decision 9959 in the Federal Register (87 FR 276) (2022 FTC final regulations), which contained final regulations under §§ 901 and 903. Correcting amendments to the 2022 FTC final regulations were published in the Federal Register on July 27, 2022 (87 FR 45018). On November 22, 2022, the Treasury Department and the IRS published proposed regulations (REG-112096-22) in the Federal Register (87 FR 71271), which included proposed rules relating to the cost recovery requirement and the substitution requirement for covered withholding taxes. On April 17, 2023, the Treasury Department and the IRS published Notice 2023-31 in the Internal Revenue Bulletin (IRB 2023-16) relating to proposed § 1.903-1(c)(2)(iii)(B) (the single-country exception).

On August 7, 2023, the Treasury Department and the IRS published Notice 2023-55 in the Internal Revenue Bulletin (IRB 2023-32). Notice 2023-55 provides temporary relief in determining whether a foreign tax meets the definition of a foreign income tax under §§ 901 and 903 for foreign taxes paid in any taxable year (a relief year) beginning on or after December 28, 2021, and ending on or before December 31, 2023 (the relief period), provided that the taxpayer satisfies certain requirements.

.02 Application of Temporary Relief in Notice 2023-55 to Partnerships .

The Treasury Department and the IRS have received questions regarding the application of the temporary relief provided in Notice 2023-55 to partnerships, including whether the partnership or its partners would apply the temporary relief with respect to foreign taxes paid or otherwise required to be reported by such partnership. ⁶

This section 5.02 provides that, with respect to foreign taxes paid or otherwise required to be reported by such partnership, ⁷ which could include foreign taxes paid by a CFC (collectively, the partnership’s foreign taxes), the partnership would apply (or not apply) the temporary relief. However, if, before December 11, 2023, a partnership did not apply the temporary relief for a partnership’s relief year ending on or before December 31, 2022 (a partnership 2022 tax year), a partner may apply the temporary relief to its share of the partnership’s foreign taxes for a partnership 2022 tax year. In certain circumstances, the IRS may make adjustments relating to the foreign tax credits claimed by a partner with respect to such foreign taxes on audit of the partner.

.03 Modification and Clarification of the Consistent Application Requirement and Single-Benefit Requirement of Notice 2023-55 . Section 3 of Notice 2023-55 states that, if a taxpayer applies the temporary relief, then the taxpayer must apply the temporary relief to (1) all foreign taxes paid by the taxpayer in the taxpayer’s relief year, and (2) all foreign taxes (i) that are paid by any other person in a taxable year that begins on or after December 28, 2021 and that ends with or within the taxpayer’s relief year, and (ii) for which the taxpayer would be eligible to claim a credit, as provided in § 901 (determined without regard to the limitations described in § 1.9011(b)), if the taxpayer applied the temporary relief to such foreign taxes (the consistent application requirement). Additionally, the taxpayer may not apply the temporary

6 For purposes of this section 5, references to a partnership only include partnerships with a U.S. federal tax return filing obligation under § 6031 in a relief year.

7 For the avoidance of doubt, “required to be reported” means foreign taxes which would be required to be reported if the partnership applied the temporary relief.

8 Whether a partner controls the partnership’s application (or non-application) of the temporary relief will be determined based on the facts and circumstances, including the partnership agreement. For example, a partner may control a partnership’s application (or non-application) of the temporary relief by reason of being a general partner or owning, individually or together with related persons, a majority of the capital or profits interests in the partnership.

December 26, 2023 1588 Bulletin No. 2023–52

modifying the temporary relief is issued (or any later date specified in such notice or other guidance).

If final regulations consistent with the guidance provided in section 2 apply in a relief year, those final regulations apply regardless of whether the taxpayer applies the temporary relief described in Notice 2023-55, as modified by section 5.02 through 5.04 of this notice, for the relief year.

.05 Effect on Other Documents . Sections 3 (Temporary Relief) and 4 (Relief Period) of Notice 2023-55, 202332 I.R.B. 427, are modified.