Modifications to determination of deemed paid credit for taxes properly attributable to tested income

(a) Increase in deemed paid credit (1) In general Section 960(d)(1) is amended by striking 80 percent and inserting 90 percent. (2) Gross up for deemed paid foreign tax credit Section 78 is amended— (A) by striking subsections (a), (b), and (d) and inserting subsections (a) and (d), and (B) by striking 80 percent and inserting 90 percent. (b) Disallowance of foreign tax credit with respect to distributions of previously taxed net CFC tested income Section 960(d) is amended by adding at the end the following new paragraph: (4) Disallowance of foreign tax credit with respect to distributions of previously taxed net CFC tested income No credit shall be allowed under section 901 for 10 percent of any foreign income taxes paid or accrued (or deemed paid under subsection (b)(1)) with respect to any amount excluded from gross income under section 959(a) by reason of an inclusion in gross income under section 951A(a).. (c) Effective dates (1) In general The amendments made by subsection (a) shall apply to taxable years beginning after December 31, 2025. (2) Disallowance The amendment made by subsection (b) shall apply to foreign income taxes paid or accrued (or deemed paid under section 960(b)(1) of the Internal Revenue Code of 1986) with respect to any amount excluded from gross income under section 959(a) of such Code by reason of an inclusion in gross income under section 951A(a) of such Code after June 28, 2025.

(a) Increase in deemed paid credit (1) In general Section 960(d)(1) is amended by striking 80 percent and inserting 90 percent. (2) Gross up for deemed paid foreign tax credit Section 78 is amended— (A) by striking subsections (a), (b), and (d) and inserting subsections (a) and (d), and (B) by striking 80 percent and inserting 90 percent. (b) Disallowance of foreign tax credit with respect to distributions of previously taxed net CFC tested income Section 960(d) is amended by adding at the end the following new paragraph: (4) Disallowance of foreign tax credit with respect to distributions of previously taxed net CFC tested income No credit shall be allowed under section 901 for 10 percent of any foreign income taxes paid or accrued (or deemed paid under subsection (b)(1)) with respect to any amount excluded from gross income under section 959(a) by reason of an inclusion in gross income under section 951A(a).. (c) Effective dates (1) In general The amendments made by subsection (a) shall apply to taxable years beginning after December 31, 2025. (2) Disallowance The amendment made by subsection (b) shall apply to foreign income taxes paid or accrued (or deemed paid under section 960(b)(1) of the Internal Revenue Code of 1986) with respect to any amount excluded from gross income under section 959(a) of such Code by reason of an inclusion in gross income under section 951A(a) of such Code after June 28, 2025.