Election to Accrue Foreign Taxes

§ 905. Applicable rules(a) Year in which credit takenThe credits provided in this subpart may, at the option of the taxpayer and irrespective of the method of accounting employed in keeping his books, be taken in the year in which the taxes of the foreign country or the possession of the United States accrued, subject, however, to the conditions prescribed in subsection (c). If the taxpayer elects to take such credits in the year in which the taxes of the foreign country or the possession of the United States accrued, the credits for all subsequent years shall be taken on the same basis, and no portion of any such taxes shall be allowed as a deduction in the same or any succeeding year. (b) Proof of creditsThe credits provided in this subpart shall be allowed only if the taxpayer establishes to the satisfaction of the Secretary—(1) the total amount of income derived from sources without the United States, determined as provided in part I, (2) the amount of income derived from each country, the tax paid or accrued to which is claimed as a credit under this subpart, such amount to be determined under regulations prescribed by the Secretary, and (3) all other information necessary for the verification and computation of such credits. (c) Adjustments to accrued taxes(1) In generalIf—(A) accrued taxes when paid differ from the amounts claimed as credits by the taxpayer, (B) accrued taxes are not paid before the date 2 years after the close of the taxable year to which such taxes relate, or (C) any tax paid is refunded in whole or in part, the taxpayer shall notify the Secretary, who shall redetermine the amount of the tax for the year or years affected. (2) Special rule for taxes not paid within 2 years(A) In generalExcept as provided in subparagraph (B), in making the redetermination under paragraph (1), no credit shall be allowed for accrued taxes not paid before the date referred to in subparagraph (B) of paragraph (1). (B) Taxes subsequently paidAny such taxes if subsequently paid—(i) shall be taken into account for the taxable year to which such taxes relate, and (ii) shall be translated as provided in section 986(a)(2)(A). (3) AdjustmentsThe amount of tax (if any) due on any redetermination under paragraph (1) shall be paid by the taxpayer on notice and demand by the Secretary, and the amount of tax overpaid (if any) shall be credited or refunded to the taxpayer in accordance with subchapter B of chapter 66 (section 6511 et seq.). (4) Bond requirementsIn the case of any tax accrued but not paid, the Secretary, as a condition precedent to the allowance of the credit provided in this subpart, may require the taxpayer to give a bond, with sureties satisfactory to and approved by the Secretary, in such sum as the Secretary may require, conditioned on the payment by the taxpayer of any amount of tax found due on any such redetermination. Any such bond shall contain such further conditions as the Secretary may require.