Where in the regulation does it say how to deal with excess damage?

The rules regarding excess damage are primarily addressed in the context of Combat Resolution and the Combat Damage Step.

According to Rule 443.1.d.4:

"Units cannot have more damage assigned to them than the minimum required to constitute lethal damage unless no further units remain to have damage assigned to them."

This implies that "excess damage" (damage beyond what is required to kill a unit) can only be assigned to subsequent units once all preceding units in the assignment order have been assigned lethal damage.

Additionally, the FAQ in the retrieved context provides a specific clarification on how this functions in practice:

• Regarding the order of assignment: You must assign lethal damage to a unit (equal to its Might) before you can assign any remaining damage to other units.
• Regarding "excess" calculation: Excess damage is only considered once all defending units have been assigned lethal damage. If you have damage remaining after all defending units have been assigned lethal damage, that remaining amount is considered excess.

Summary of the sequence:

1. Assign damage to the first defending unit until it reaches its Might (lethal).
2. If there is remaining damage, assign it to the next defending unit until it reaches its Might (lethal).
3. Repeat until all defending units have been assigned lethal damage.
4. Any damage remaining after all defending units have been assigned lethal damage is then considered "excess."