The FAT reinstatement rules likely are more restrictive than the underlying policy intent

The original intent of the foreign accrual tax reinstatement rules may have been to ensure that FAT - representing compensatory payments made to other members of the same U.S. (or other foreign) consolidated group for use of their losses - which has been denied because those losses are business losses, generally will be reinstated when those losses are fully utilized against the active business income of the group. If that is the object, there is a litany of instances where this has not or may not have been achieved under the wording of Regs. 5907(1.5) and (1.6).

More generally, it is not clear whether, in promulgating these Regulations, there was an intention to change the multi-year perspective which previously had been brought to bear by CRA in determining eligible FAT deductions, under which the taxpayer was permitted to judge what its tax payment each year related to by considering taxable income in other years.

Neal Armstrong. Summary of Adam Freiheit, "Reinstated Foreign Accrual Tax and the Multi-Period Perspective", Canadian Tax Journal, (2015) 63:2, 521-42, p. 521 under Reg. 5907(1.6).