United States

IRS removes Midco foreign tax credit transaction

TAX ALERT  | 

The IRS has withdrawn prior guidance (Notice 2004-20) to remove a listed transaction involving the sale of assets through an intermediary company Midco that generated foreign tax credits without any corresponding U.S. income, and any transaction substantially similar to this Midco transaction.  

The IRS delisted the transaction described in Notice 2004-20 because section 901(m) effectively denies the foreign tax credits claimed by taxpayers engaged in Midco transactions.   

Companies engaged in similar transactions should be aware that although a transaction may no longer be considered a ‘listed transaction’, the transaction may still be subject to the requirements of sections 6011, 6111 and 6112, as well as the regulations thereunder. This withdrawal is effective for transactions entered into after April 6, 2020.

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