Briefing Completed in PPL

[Note:  Miller & Chevalier represents amicus curiae American Electric Power Co. in this case.]

The PPL case is now fully briefed in the Third Circuit and ready for oral argument, which has been tentatively scheduled for September 22.  PPL’s response brief addresses in detail the considerable evidence presented to the Tax Court regarding the operation and effect of the U.K. windfall tax, arguing that the evidence conclusively shows that the tax operated like a typical U.S. excess profits tax and therefore should qualify for a foreign tax credit.  Amerian Electric Power Co. filed an amicus curiae brief in support of … Read More

Briefing Completed in Entergy

The government has filed its reply brief in the Fifth Circuit in Entergy.  (See our initial report on the case here.)  The reply brief puts forth a somewhat less disapproving attitude towards the examination of extrinsic evidence in foreign tax credit cases than previously advanced, stating as follows:  “The Commissioner does not contend (as he did below) that extrinsic evidence has no relevance in determining creditability under Treas. Reg. § 1.901-2(b).  Rather, our argument is that it was improper for the Tax Court to supplant an analysis of the windfall-tax statute with an analysis of extrinsic evidence.”

The bottom line, however, is the same.  … Read More

Government Brief Filed in PPL

The government has filed its brief in the Third Circuit in PPL.  The brief is virtually identical to the brief filed a few weeks ago in the Fifth Circuit in Entergy that addresses the same issue of the creditability of the U.K. Windfall Tax under Code section 901.  See our initial report here.  The only significant differences are addressing PPL’s facts instead of Entergy’s and placing more weight on Third Circuit precedent instead of Fifth Circuit precedent.  The essence of the government’s argument is that the section 901 determination should be based entirely on the text of the … Read More

Taxpayer Brief Filed in Entergy

The taxpayer has filed its answering brief in Entergy defending the Tax Court’s decision that the U.K. windfall tax is a creditable tax for purposes of the foreign tax credit under Code section 901.  See our original report here.  According to the taxpayer, the essence of the government’s argument is that “the creditability of a foreign tax can be determined only by the literal text of the foreign tax statute, and that the consideration of any other evidence is legal error.”  This position, the taxpayer argues, is rebutted by “overwhelming authority establishing that the predominant character of a foreign … Read More

Fifth Circuit Affirms in Container

The Fifth Circuit yesterday issued a short, unpublished opinion affirming the Tax Court’s decision in Container.  As discussed in more detail in our earlier post, the issue is the sourcing of guarantee fees charged by a Mexican parent to guarantee notes issued by its U.S. subsidiary.   The Fifth Circuit ruled that the issue turned to a considerable extent on the Tax Court’s factual findings concluding that the fees were payments for services, which it found were not clearly erroneous.  The Fifth Circuit concluded that the Tax Court’s ultimate characterization of the fees as foreign-source income was correct because … Read More

Government Opening Brief Filed in Entergy

The government has filed its opening brief in the Fifth Circuit in Entergy, seeking reversal of the Tax Court’s holding that the U.K. windfall tax is a “creditable” tax for purposes of the U.S. foreign tax credit.  See our previous report here.  The government argues that the Tax Court misapplied a three-part test set forth in the regulations for determining whether a foreign tax is creditable.  That test assesses whether the foreign tax has the “predominant character” of an income tax by examining whether it satisfies each of three requirements – relating to “realization,” “gross receipts,” and “net income.”  According … Read More

Briefing Schedules Line Up on UK Tax Creditability Issue

The Third Circuit has now issued a briefing schedule in the PPL case that makes the government’s opening brief due on April 5.  This schedule should have the case marching along in fairly close parallel with Entergy, the companion case presenting the same UK tax creditability issue to the Fifth Circuit.  (See our previous post here.)  In Entergy, the government recently requested an extension to file its opening brief.  The court granted an extension, but for less time than requested.  The brief is now due April 13, after a 30-day extension.   That date will likely hold, since … Read More

Two Circuits to Consider Creditability of U.K. Windfall Tax

We present here a guest post from our colleague Kevin Kenworthy, who has considerable experience representing taxpayers on the issue of creditable foreign taxes.

The Tax Court’s two companion decisions in PPL Corp. v. Commissioner, 135 T.C. No. 8 (Sept. 9, 2010) and Entergy v. Commissioner, T.C. Memo 2010-166 (Sept. 9, 2010), raise an important question  concerning whether a 1997 Windfall Tax imposed by the U.K. government on previously privatized industries is a creditable income tax under U.S. rules.  The cases were tried separately before Judge Halpern and addressed in companion opinions issued simultaneously that ruled for the … Read More

The Curious Non-Appeal of Veritas

Veritas Software Corp. v. Commissioner, 133 T.C. No. 14 (2009) was the first cost sharing buy-in case to go to trial.  The question before the court was the value to place on the transfer by Veritas to its Irish subsidiary of the right to use technical and marketing intangibles related to software development.  Veritas argued that the valuation should be based on an adjusted comparable uncontrolled transaction (CUT) analysis (involving licenses of the same or similar property).  The IRS argued that it should be based on an aggregate discounted cash flow (DCF) analysis that valued the hypothetical transfer of … Read More

Conversation with Bob Kirschenbaum Regarding Great Debate

We previously mentioned the IFA “Great Debate,” held on the campus of Stanford University on October 27, 2010, where the debaters squared off on the debatable utility of the Temporary Cost Sharing Regulations Income Method in valuing intangible transfers for transfer pricing purposes.  As forecast, the debate was extremely well-attended (notwithstanding the conflicting start of the first game of the World Series just up the road in San Francisco).   Bob Kirschenbaum and Clark Chandler drew the “pro” (i.e., you should never use the Income Method) while Jim O’Brien and Keith Reams drew the “con.”  After the debate, Bob … Read More

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