United States · Administrative guidance
IRS drafts revised Form 8993 instructions for FDDEI and NCTI
On 26 October 2026, the US Internal Revenue Service posted draft Form 8993 instructions reflecting the renamed FDDEI and NCTI regimes and revised section 250 calculations for tax years beginning after 2025.
- Official document:
- Draft Instructions for Form 8993 (Rev. December 2026), posted 26 October 2026
- Development date:
- 2026-10-26
New names and deduction percentages
The draft implements terminology introduced by Public Law 119-21: foreign-derived intangible income becomes foreign-derived deduction eligible income (FDDEI), while global intangible low-taxed income becomes net controlled foreign corporation tested income (NCTI). The section 250 deduction is generally 33.34% of a domestic corporation’s FDDEI and 40% of its NCTI plus the related section 78 gross-up. The existing taxable-income limitation continues to apply before the section 246(b) limitation.[1]
The FDDEI calculation changes
FDDEI is calculated without the former deemed intangible income, deemed tangible income return and qualified business asset investment mechanics. Interest expense and research or experimental expenditure are not allocated or apportioned to deduction eligible income or FDDEI. The draft also reflects additional exclusions from deduction eligible income for gain on specified dispositions of intangible property and depreciable, amortisable or depletable property after 16 June 2025.[1]
Form 1120 and partnership inputs
The redesigned instructions align the calculation with amounts reported on Form 1120. Taxpayers sort return amounts between deduction eligible income, exclusions, FDDEI and residual deduction eligible income. Domestic corporate partners must include their shares of partnership income, deductions and foreign-derived items, using Schedule K-3 data where available, and attach a partnership-by-partnership statement identifying the entity and allocated amounts.[1]
Draft status matters
The document is an early-release draft marked not for filing and remains subject to Office of Management and Budget approval and possible revision. It explains changes for 2026 and later returns but is not the final filing instruction. Groups should use it to prepare data mappings and review section 250 workpapers, while monitoring the IRS final-forms page before filing or changing controlled procedures.[1][2]
Official sources
- [1] Draft Instructions for Form 8993 (Rev. December 2026)
US Department of the Treasury and Internal Revenue Service · Document date: 2026-10-20
Complete eight-page draft read. Cover and page 1 state draft/not-for-filing status and OMB/final-revision qualification; page 2 'What's New', deduction percentages, effective periods and filing scope; pages 3–5 DEI/FDDEI definitions, deduction allocation, Form 1120 and partnership K-3 mechanics; remaining pages line instructions.
- [2] IRS draft tax forms index
Internal Revenue Service · Document date: 2026-10-26
Current posted-date index read; lists Instructions 8993, December 2026 revision, with 26 October 2026 posted date. Index warning states draft forms must not be filed or relied upon as final instructions.