The IRS has confirmed in a document published recently (Letter 2014-0006) that the IRS will not challenge the claim that Puerto Rico’s manufacturers excise tax is a tax that can be credited against United States federal income tax. In October 2010, the US Administration enacted Law 154 to establish a source income rule to determine the proportionate amount of the income derived by multinationals. The 4 percent excise tax would apply where a manufacturer is allocated more than USD75m in gross receipts.
The confirmation issued by the IRS also states that any change in the foreign tax credit treatment of the excise tax will not apply to excise tax paid or accrued before the date that further guidance may be issued. The letter gives guidance on the IRS position but does not have the same legal status as a ruling.
