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

Last reviewed: 2025‑10‑26

Use the Schedule I (Form 1118i) Tax Form Calculator Schedule I (Form 1118i) as a stand alone tax form calculator to quickly calculate specific amounts for your 2026 1118i state tax return. Alternatively, you can use one of our Combined Federal and State Tax Estimators to quickly calculate your salary, tax, and take-home pay.

Corporations with foreign oil or gas extraction income must file Schedule I (Form 1118) to conform with the requirements of IRC §907(a)—which mandates special treatment of foreign income taxes on oil and gas operations. This schedule is attached to the corporate FTC form and is essential to compute allowable reductions of foreign taxes paid or accrued on foreign oil‑and‑gas income.

Key points before you fill out Schedule I:

Separate category: Only foreign oil and gas extraction or related income falls within this category; other foreign‑source income must be reported elsewhere.
Income components: Part I aggregates gross extraction income, processing and sales income, inclusions from controlled foreign corporations (CFCs), and other specified income streams. Deductions are then applied to compute taxable foreign oil & gas income.
Tax reduction calculation: Part II computes a maximum tax‑reduction allowance by multiplying the taxable oil & gas income by the highest U.S. corporate rate and comparing it to the total foreign oil & gas tax paid/accrued. The excess must then be carried according to rules.
Carryover rule: If foreign oil & gas taxes exceed the calculated cap, the excess may be carried forward or applied to another year—but only within this category. Planning this correctly preserves valuable tax credits.

Reduction of Foreign Oil and Gas Taxes
Use a separate Schedule I (Form 1118) for each applicable category of income listed below. Check only one box on each schedule.
Passive Category Income			Section 901(j) Income: Name of Sanctioned Country ▸
General Category Income			Income Re-sourced by Treaty: Name of Countrys ▸
Report all amounts in U.S. dollars.
Part I Combined Foreign Oil and Gas Income and Taxes
	1. Name of foreign country (Use a separate line for each country.)*	Gross Foreign Oil and Gas Income From Sources Outside the United States and its Possessions (see instructions)
		2. Gross foreign oil and gas extraction income	3. Gross foreign oil related income	4. Certain dividends from foreign corporations	5. Constructive distributions under section 951(a)	6. Other	7. Total (add columns 2 through 6
A
B
C
D
E
F
Totals (add lines A through F)
* For section 863(b) income, use a single line (see instructions).
	Deductions			11. Taxable income (column 7 minus column 10)	Foreign Oil and Gas Taxes (attach schedule)
	8. Definitely allocable deductions	9. Apportioned deductions not definitely allocable	10. Total (add columns 8 and 9)	11. Taxable income (column 7 minus column 10)	12. Paid or accrued	13. Deemed paid	14. Total (add columns 12 and 13)
A
B
C
D
E
F
Totals
Part II Reduction Under Section 907(a)
1	Combined foreign oil and gas income. (See the instructions for line 1 below.)
2	Multiply line 1 by the highest rate of tax under section 11(b). (See the instructions for line 2 below.)
3	Total taxes (from Part I, column 14, “Totals” line)
4	Reduction (subtract line 2 from line 3; if zero or less, enter -0-). Enter here and on Schedule G, line B of the corresponding Form 1118
Part III Foreign Oil and Gas Taxes Available For Use in the Current Tax Year
1	Excess section 907(a) limitation. Subtract Schedule I, Part II, line 3 from line 2. If zero or less, enter -0- and do not complete the remainder of Part III
2	Enter the sum of any carryover of foreign oil and gas tax to the current year. Attach a schedule showing the computation in detail
3	Enter the smaller of lines 1 and 2 here and include on Schedule B, Part II, line 5

While completing Schedule I, focus on these detailed considerations:

Country breakdown: Each country of source must be listed separately for income and taxes paid, with U.S. dollars as the reporting currency.
Related‑party inclusions: Income items such as IRC §951A inclusions are required components when coming from foreign oil & gas operations tied to ownership structures.
Deductions reporting: Allocated and apportioned deductions must reflect only those connected to oil & gas income, not broader foreign operations; mis‑apportionment may trigger adjustments or disallowed credits.
Audit risk: Foreign oil & gas tax credits are high scrutiny items. Supporting documentation must include foreign tax statements, detailed income allocations, and reconciliations.

Last reviewed: 2025‑10‑26: If you believe this form requires an update, please contact us.

In practice, many multinational energy operations overlook this schedule until the final drops of return preparation—but that delay creates unplanned tax exposure. Use the following best‑practice steps:

During the fiscal year, maintain a dedicated ledger for foreign oil & gas extraction income, related tax‑paid/accrued records, and entity breakdowns by country.
At year‑end, run a Schedule I preview to test whether your foreign tax payments will exceed the U.S.‑rate cap—if so, track the excess as a forward‑carry item.
Coordinate foreign‑entity tax offices and U.S. tax operations to ensure timely currency conversion, correct country codes, and alignment with your separate limitation categories under the FTC regime.

This ensures Schedule I complements your broader global tax compliance rather than becoming a post‑closing compliance burden.

Frequently Asked Questions

Can I estimate the General Business Credit?

Start with Form 3800 and then reflect the credit here.

How much would a 401(k) contribution change my net?

Model it with the 401(k) Calculator then rerun this page with your pre-tax amount.

Considering an IRS Offer in Compromise?

Read through Form 656-B to understand eligibility and steps.

What does FICA include?

FICA includes Social Security and Medicare payroll taxes withheld from employee wages.

Is there a quick pay-frequency comparison?

Yes—switch frequency on this page; for employer filings see 941 vs 944.

Important Notes

All calculations are estimates for guidance only. Always review your return and consider professional advice when submitting official filings.