Instructions For Schedule I (Form 1120-F) - 2017 (Page 3 of 10) in pdf

assets, Step 2 (lines 6 through 7c) to

section 1.861-10T(b) or (c) is reported

regulated banking requirements in its

determine its U.S.-connected liabilities,

on line 22.

trade or business within the United

and Step 3 (lines 8 and 9) to determine

States. The section 585(a)(2) standard

Line 23. Summary of Regulations

its U.S.-booked liabilities under

must also be satisfied at the

section 1.882-5 allocation. The

Regulations section 1.882-5(d)(2) and

corporation's U.S. trade or business

amount of interest expense allocable to

its related U.S.-booked interest

level for purposes of electing the

effectively connected income under

expense. The total on line 9, column (c)

deposit liability safe harbor applicable to

Regulations section 1.882-5 is the sum

is also used for purposes of determining

the reduction of excess interest under

of the amount allocated under either the

the corporation's branch interest under

Regulations section 1.884-4(a)(2)(iii).

AUSBL or Separate Currency Pools

section 884(f)(1)(A) and Regulations

method on line 15 or 20, and the

Lines 1 Through 9: All

section 1.884-4(b), and in the

amount directly allocated to ECI and

calculation of the corporation's

Foreign Corporations

reportable on line 22. The resulting

branch-level interest tax on excess

amount allocable and reported on

Lines 1 Through 5. Step 1:

interest under section 884(f)(1)(B) and

line 23 is also reconciled and reported

Regulations section 1.884-4(a)(2).

Determination of Total Value of

on Form 1120-F, Section III, Part II,

Line 8, column (c), and line 9, column

U.S. Assets

line 7c (branch-level interest tax).

Assets includible on lines 1 through 5

expense allocation computation in Step

Line 24. Deferrals and

are the U.S. assets of the corporation as

3 of the AUSBL method if elected by the

disallowances under other Code

defined in Regulations sections

corporation.

sections. The interest expense

1.882-5(b) and 1.884-1(d). The U.S.

allocation reportable on line 23 is

Lines 1 through 9 must be

assets are valued on an average basis

determined under Regulations section

completed by all corporations

for interest expense allocation

1.882-5 before application of other

required to file Schedule I,

purposes.

Code sections that defer or disallow the

CAUTION

regardless of whether the corporation

interest deduction in whole or in part.

Frequency of averaging. The

allocates interest expense under the

See Regulations section 1.882-5(a)(5).

average value of assets for this step is

AUSBL or Separate Currency Pools

to be computed at the most frequent,

method for the applicable year.

regular intervals for which data is

Specific Instructions

reasonably available. For foreign banks,

Lines 10 through 20. Allocations, di-

Item A. Foreign banks. Check the box

the minimum averaging period is

rect interest allocations, deferrals

in item A if the foreign corporation is a

monthly (beginning of tax year and

and other disallowances. Step 3 of

bank as defined in Regulations section

monthly thereafter). For corporations

the AUSBL method is provided on lines

1.882-5(c)(4). The term “bank” is

other than a bank, the minimum

10 through 15. Step 3 of the Separate

defined in the regulation as a bank that

averaging period is semi-annually

Currency Pools method is provided on

meets the statutory definition applicable

(beginning, middle, and end of the tax

lines 16a through 20. These Step 3

to domestic banks (except for the fact

year). See Regulations section

methods are mutually exclusive and

that the corporation is foreign) and

1.882-5(b)(3).

cannot both apply to the corporation in

without regard to whether the

the same year. The methods are subject

Line 1. Indicate whether the

corporation's required banking activities

to the general five-year minimum period

corporation values its U.S. assets on the

are effectively connected with its trade

election rules of Regulations section

adjusted basis method (see Regulations

or business within the United States.

1.882-5(a)(7).

section 1.882-5(b)(2)(i)) or whether it

The required banking activities need

has elected the fair market value

AUSBL method filers. AUSBL

only be conducted on a worldwide

method (see Regulations section

method filers complete all columns on

basis. To qualify as a bank for interest

1.882-5(b)(2)(ii)). The adjusted basis

lines 1 through 15 and lines 21 through

expense allocation purposes, the

method election is subject to the

25. Do not complete lines 16a through

foreign corporation must be subject to

minimum five-year period described in

20.

bank regulatory supervision and

Regulations section 1.882-5(a)(7). In

examination in its home country of a

Separate currency pools method

order to elect the fair market value

type similar to that required of domestic

filers. Separate Currency Pools

method, the corporation must also use

banks by a State or Federal authority

method filers complete all columns on

the actual ratio method (rather than the

having supervision over banking

lines 1 through 9 and lines 16a through

fixed ratio) under Step 2. Once elected,

institutions, and a substantial amount of

25. Do not complete lines 10 through

the fair market value method must be

the corporation's business must consist

15.

used for Step 1 and Step 2 of the

of receiving deposits and making loans

three-step formula under Regulations

Lines 21 through 25. Summary – In-

and discounts, or of exercising fiduciary

section 1.882-5 and may not be

terest expense allocation and de-

powers similar to those permitted to

changed back to the adjusted basis

duction under Regulations section

national banks under authority of the

method without advance consent from

1.882-5. All corporations required to file

Comptroller of the Currency. See

the Commissioner or his delegate.

Schedule I must report the summary

sections 581 and 585(a)(2).

amounts requested on lines 21 through

Line 2, column (a). Total assets per

25.

Note. The reference to the definition of

books. Enter the total average assets

the term “bank” for purposes of

derived from the combined set or set(s)

Line 22. Direct interest

determining the U.S.-booked liabilities

of books that are reportable on

allocations. Interest expense that is

of banks under Regulations section

Schedule L. The total average assets

directly allocable under Regulations

1.882-5(d)(2)(iii) requires that the

includes interbranch balances with other

section 1.882-5(a)(1)(ii) in accordance

corporation meet the section 585(a)(2)

with the rules of Temporary Regulations

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Instructions For Schedule I (Form 1120-F) - 2017 Page 3

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