Schedule I (Form 1118): Reduction of Foreign Oil and Gas Taxes

Schedule I (Form 1118), Reduction of Foreign Oil and Gas Taxes, is a corporate schedule attached to Form 1118, the corporate foreign tax credit form. The IRS About page says it is used "to compute reductions of taxes paid, accrued, or deemed paid on foreign oil and gas income."

The schedule's instructions say that if the corporation claims a credit for income taxes paid, accrued, or deemed paid during the tax year on combined foreign oil and gas income, the amount of those taxes eligible for credit may be reduced, and point to section 907(a) and Regulations section 1.907(a)-1. A separate Schedule I is used for each applicable category of income, and all amounts are reported in U.S. dollars.

The PDF carries its own instructions. This page has the December 2021 revision. The PDF can be filled out free in the browser on this page and downloaded without an account.

What's on Schedule I (Form 1118)

Header and lines a to c

The tax year, the corporation's name and EIN, the separate category code on line a, a sanctioned country code on line b if code 901j is used, and a treaty country code on line c for an RBT code.

Part I: income columns 1 to 6

For rows A to F: EIN or reference ID, the country or possession code, gross foreign oil and gas extraction income, related income, section 951(a)(1) and 951A inclusions, other income and the total.

Part I: deductions and taxes, columns 7 to 13

Allocable and apportioned deductions, taxable income (column 6 minus column 9), and foreign oil and gas taxes paid or accrued and deemed paid, with a schedule attached.

Part II: Reduction Under Section 907(a)

Four lines: combined foreign oil and gas income, that amount multiplied by the highest rate under section 11(b), total taxes from Part I, and the reduction carried to Schedule G, line B of Form 1118.

Part III: taxes available this year

Three lines: the excess section 907(a) limitation, any carryover of foreign oil and gas tax, and the smaller of the two, included on Schedule B, Part II, line 5.

How to fill out Schedule I (Form 1118)

1
Codes at the top
The instructions say to enter on line a the same separate category code shown on the attached Form 1118, and on line b or c, if applicable, the same country code shown on that Form 1118.
2
Columns 1(a) and 1(b)
Column 1(a) follows Identifying Numbers in the Instructions for Form 1118. Column 1(b) takes the two-letter codes from www.irs.gov/CountryCodes. For section 863(b) income, 1(a) is left blank and "863(b)" is entered in 1(b).
3
Columns 2 to 5
Column 2 is extraction income and column 3 is processing, transportation, distribution and related income, per section 907(c). Column 4 is section 951(a) or 951A amounts. The instructions say not to include passive dividend or interest income.
4
Columns 7 to 13
Enter allocated and apportioned deductions, subtract column 9 from column 6 for each country, and attach a schedule showing how the taxes in columns 11 and 12 were figured.
5
Part II
Line 1 is the Part I column 10 total minus any section 907(c)(4) recapture. The instructions say that at the time the schedule went to print, the highest rate under section 11(b) for line 2 was 21%.
6
Part III
Enter any carryover on line 2 with a detailed schedule. The instructions encourage a schedule similar to Schedule K (Form 1118), using its line 3, column (xiv) amount.

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Where it goes and what to attach

Attach to Form 1118

The schedule says "Attach to Form 1118." The Part II reduction goes on Schedule G, line B, and the Part III amount on Schedule B, Part II, line 5 of Form 1118.

U.S. dollars

The instructions say to report all amounts in U.S. dollars and, if a foreign currency conversion is needed, to attach a statement explaining how the rate was determined.

Supporting schedules

Columns 11 and 12 and Part III, line 2 each call for an attached schedule showing the computation.

Carryover rules

The instructions say special rules apply to carrybacks and carryovers of these taxes, and that section 907(f) is applied before section 904(c). They point to Regulations section 1.907(f)-1.

Who files Schedule I (Form 1118)?

Corporations claiming the foreign tax credit
The About page says corporations use Form 1118 to compute their foreign tax credit for certain taxes paid or accrued to foreign countries or U.S. possessions. Schedule I is attached to it.
Corporations with foreign oil and gas income
The instructions cover taxes paid, accrued, or deemed paid on combined foreign oil and gas income, including extraction income and related income from processing, transportation and sale.
One schedule per income category
The schedule says to use a separate Schedule I (Form 1118) for each applicable category of income, with the same separate category code as the Form 1118 it is attached to.
Not for individuals
The name line asks for the name of the corporation and its employer identification number. The About page lists Form 1118 for corporations.

A corporation completes it and attaches it to its Form 1118. It is not a form for individuals.

Official sources and the blank

Official IRS form page
The agency’s own page for Form 1118 Sch. I.
Official instructions
How the IRS says to fill out and file Form 1118 Sch. I.
Blank PDF
The official blank form, to print or fill by hand.

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Questions about Form 1118 Sch. I

What is Schedule I (Form 1118) used for?

The About page says it is used to compute reductions of taxes paid, accrued, or deemed paid on foreign oil and gas income.

Is it filed on its own?

No. The schedule says "Attach to Form 1118," and its line a code matches the Form 1118 it is attached to.

How many Schedules I are needed?

The schedule says to use a separate Schedule I (Form 1118) for each applicable category of income.

What rate is used on Part II, line 2?

The line multiplies Part II, line 1 by the highest rate of tax under section 11(b). The instructions say that rate was 21% at the time the schedule went to print.

Where do the results go on Form 1118?

Part II, line 4 goes on Schedule G, line B, and Part III, line 3 is included on Schedule B, Part II, line 5 of the corresponding Form 1118.

Schedule I (Form 1118): Reduction of Foreign Oil and Gas Taxes