The Internal Revenue Code allows taxpayers to take a credit for certain types of taxes paid in foreign countries. However there is a list maintained of nations that are so hostile to us that giving a credit for taxes paid in those countries would amount to giving stipends to an enemy. Taxes paid in those countries are not eligible for the credit.
Iraq has just been taken off the list.
On September 27, 2004, the Treasury Department announced that the foreign tax credit restrictions no longer apply to income and taxes attributable to Iraq (TAXDAY 2004/09/28, T.2). Therefore, the IRS has updated Rev. Rul. 95-63, which lists countries subject to the special foreign tax credit rules and other restrictions by adding an ending date of June 27, 2004 for Iraq. As of that date, the Code Sec. 901(j) restrictions ceased to apply to that country.
Wouldn't it have been more productive for the rebuilding process if we'd done this a year ago?
Oddly, though I can't find the story right now, I'm pretty sure that we took Libya off the list the day before. I understand why, given that countries recent (apparently genuine) change of heart on WMDs and terrorism, we'd be giving them a break. I just find it strange that we'd take Libya off the list before Iraq.