If a taxpayer cannot use foreign taxes available for credit, how many tax years can they carry them back?

When a taxpayer is unable to utilize foreign taxes that qualify for a credit against their U.S. tax liability, they have the option to carry those taxes back to offset taxes from prior years. The correct answer indicates that the foreign tax credit can be carried back for one tax year. This provision allows taxpayers to potentially receive a refund for taxes paid in the previous year if they are unable to apply the current year's foreign taxes to reduce their tax liability.

The limitation to one year is important because it underscores the IRS's intention to encourage the timely use of credits while still providing a safety net for taxpayers who may not be able to apply those credits immediately. While some tax attributes can be carried forward for multiple years, the specific rule for foreign tax credits is structured to allow only a single-year carryback. This distinction helps maintain clarity in tax planning for individuals and businesses that frequently deal with foreign income and associated taxation.