This page contains information about data sources and limitations for SOI's Corporate Foreign Tax Credit Study.
Please visit Corporate Foreign Tax Credit Statistics to access articles and tables from the study.
Internal Revenue Code Section 901 specifies the provisions for the foreign tax credit. Corporations report the foreign income and taxes related to the credit on Form 1118, Computation of Foreign Tax Credit-Corporations and attach it to their corporate tax return. The statistics in these publications are based on information reported on Forms 1118 and related corporate tax forms for those corporation income tax returns with a foreign tax credit that were included in the Statistics of Income sample of returns. These returns were selected after administrative processing but prior to any amendments or audit examination. The statistics do not include any foreign tax credit data filed specifically for the computation of the alternative minimum tax (AMT), even if the corporation reported both the regular and AMT foreign tax credits.
There are small discrepancies between the more complete foreign tax credit data presented in these publications and those published for corporations (business tax). Some of the differences can be attributed to returns selected for the Statistics of Income sample that were received too late to be included in the corporation income tax statistics. Also, additional data were requested for the foreign tax credit statistics from some corporations who submitted preliminary data on their original returns because they lacked complete information on their foreign operations at the time of filing.
Foreign income and taxes available for credit are understated to the extent that they were not reported on the Form 1118 filed with the Form 1120. Because amended returns are not included, these statistics do not contain foreign taxes carried back from subsequent tax years. Likewise, corporations who could not claim a foreign tax credit because they did not have a U.S tax liability, are not included. Finally, some corporations may have deducted their foreign taxes from their gross income rather than claim a foreign tax credit.
Because the estimates are based on a sample, they are subject to sampling error. Coefficients of Variation (CV’s) are used to measure the magnitude of this sampling error. The CV’s for each major industrial grouping are published annually in the data limitation section of the bulletin article or data release.
Other sources of error include taxpayer reporting errors and inconsistencies and processing errors. To minimize such errors, data are subject to validation checks that verify proper relationships among tax return items and consistency with tax law provisions, acceptable reporting practices, and generally accepted accounting principles. Records failing the tests are subjected to further review and correction.
In some cases, not all of the data are available from the tax returns as originally filed. Sometimes the missing data can be imputed, either electronically or manually. When imputation was not possible, SOI requested the taxpayer for the missing data.