According to Law360, the Internal Revenue Service updated internal guidance for how the agency should account for deferred compensation expenses for purposes of calculating the deduction available for foreign-derived intangible income. (FDII)Companies that claim the FDII deduction should account for deferred compensation expenses, or DCE, by applying them in the taxable year when they claim the deduction even if those expenses relate "to personal services performed for the taxpayer" in years prior, according to the IRS memo dated May 3, 2022 and published May 6, 2022
The memo is a reconsideration of a generic legal advice memo, or GLAM, that the IRS issued in 2009 indicating DCE could be accounted for in years prior to the taxable year for when a deduction was claimed under Internal Revenue Code Section 199. Section 199 was repealed by the 2017 Tax Cuts and Jobs Act.
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