The Internal Revenue Service (IRS) has finally issued its preliminary position with respect to the Single Rate Business Tax (Impuesto Empresarialde Tasa Única or IETU) for purposes of crediting such tax, which is paid in Mexico, in the United States. In release 2008-3, the IRS stated that itwill continue to analyze the details of the IETU in order to conclusively define if it is truly an income tax, for purposes of determining the proprietyof recognizing IETU tax payments as international credits against federal income tax due by tax residents of the United States. Such releaseprovided that until further notice, taxpayers may take the position that the IETU is an income tax that may be credited for U.S. tax purposes, thuspreventing the IRS from challenging U.S. taxpayers who take the IETU as an international tax credit. The IRS’ release concludes by stating that ifit decides to change its policy regarding IETU tax credits, such change will not be made retroactively. In Mexico, the Department of Finance andPublic Credit (Secretaria de Hacienda y Crédito Publico) in a more positive communication, indicated that it will work with the IRS so that a finalconclusion confirming the availability of international tax credits for IETU tax payments, both with respect to the current legislation creating theIETU and any future amendments. Even though the IRS’ position is not final, this news should be viewed quite favorably by U.S. taxpayers andmultinational enterprises doing business in Mexico. Mexico also stated that a large number of countries had already expressly accepted the incometax nature of the IETU and granted international tax credit status for IETU paid in Mexico, beginning January 1, 2008.