Boycott countries list reissued – IRC Section 999 may restrict foreign tax credits and other tax benefits

The Treasury Department has reissued its list of the countries that require cooperation with or participation in an international boycott as a condition of doing business. The countries listed are Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, the United Arab Emirates, and the Republic of Yemen. The Treasury Department stated that Iraq is not included on the list but that its future status remained under review.

The listed countries are identified pursuant to IRC Section 999 which requires US taxpayers to file reports with the Treasury Department concerning operations in the boycotting countries. Such taxpayers incur adverse consequences under the IRC, including denial of US foreign tax credits for taxes paid to those countries and income inclusion under Subpart F in case of US shareholders of controlled foreign corporations that conduct operations in those countries.

It is important to review these provisions carefully before claiming foreign tax credits and other exclusions/ credits/ deductions for such taxpayers.

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