Cross-border Tax Talks

March 25, 2022

The Final FTC Regs: Credibility for Creditability?

Doug McHoney (PwC's US International Tax Services Co-Leader) is joined by PwC’s Washington National Tax Services International Tax Leader Michael DiFronzo, former Deputy Associate Chief Tax Counsel International at the IRS. They discuss some of the practicalities of the creditability rules in the Final FTC regulations (see  February 2022 CBTT episode with Wade Sutton for an overview of the regulations), particularly cost recovery, attribution requirements, an unintended incentive to offshore IP, and foreign jurisdiction considerations


  • 3:30 - What is the scope of these Final Regulations specifically related to creditability and their impact?
  • 5:15 - There are four requirements for creditability - realization, gross receipts, cost recovery, and attribution requirements. What will the big changes in cost recovery and attribution requirements mean for companies that do business in jurisdictions with different rules regarding IP?
  • 9:10 - The new cost recovery rule requires that a tax base be reduced by significant cost attributable under reasonable principles to gross receipts consistent with the US code. This is really relevant for most of the income taxes around the globe, including IP. What are some of the issues and questions around this?
  • 11:40 - How closely do the interest limitation rules of a foreign jurisdiction need to mirror the interest limitation rules in the US?
  • 13:35 - Another requirement is that the tax must be based on the arm’s-length standard when determining the tax base. Will there be exceptions?
  • 16:10 - How do tax treaties fit in with these FTC regs?
  • 18:30 - There are a number of bigger picture and industry specific pieces in the tax press relating to the validity of the regulations, what are some of the comments?
  • 20:15 - Will these credibility changes be an incentive for companies to move IP offshore?
  • 22:35 - Will the US Government issue any revenue rulings or procedures relating to the administration of these regulations? Will we get the ‘magic list’ that articulates what Treasury has in mind?
  • 26:05 - These regulations have a significant impact in the industry sectors, particularly energy where there is a risk of double tax. How are those taxes imposed?
  • 30:45 - What questions are coming up in the Financial Services industry particularly related to partnerships?
  • 34:20 - What should taxpayers be doing right now?

View full podcast series


Doug McHoney

International Tax Services Global Leader, PwC US


Michael DiFronzo

Washington National Tax Services International Tax Leader, PwC US


Contact us

Doug McHoney

International Tax Services Global Leader, PwC US

Geoff Jacobi

ITS, Knowledge Management Managing Director, PwC US

Follow us