Briefing Underway in Barnes as Second Circuit Considers Application of Step-Transaction Doctrine to Impose Dividend Treatment on Movement of Foreign Cash

February 21, 2014 by  
Filed under Barnes, International, Penalties

In Barnes Group v. Commissioner, the Tax Court (Goeke, J.) looked askance at the taxpayer’s strategy for minimizing the tax consequences of a movement of foreign cash to U.S. affiliates.  As the taxpayer explained it, its foreign subsidiary in Singapore had excess cash and borrowing capacity that Barnes wanted to use to finance international acquisitions.  For the time being, however, there was no suitable acquisition target, and the cash was earning only 3% in short-term deposit accounts while it could have been used more profitably in the U.S. to reduce Barnes’s expensive long-term debt.  Barnes hired PricewaterhouseCoopers to help … Read More

Fifth Circuit Rules for Government in Rodriguez

July 12, 2013 by  
Filed under International, Rodriguez

The Fifth Circuit has issued its opinion in Rodriguez, unanimously affirming the Tax Court in an opinion authored by Judge Prado.  As forecasted in our earlier report on the oral argument (see here), the Court saw no way for the taxpayer to get around the technical obstacle that a section 951 inclusion is neither an actual dividend nor expressly denominated by Congress to be a “deemed dividend.”  On the first point, the court stated that “actual dividends require a distribution by a corporation and receipt by the shareholder; there must be a change in ownership of something … Read More

Both Parties Questioned Extensively at Rodriguez Oral Argument

June 28, 2013 by  
Filed under International, Rodriguez

The Fifth Circuit held oral argument in the Rodriguez case before Circuit Judges DeMoss, Dennis, and Prado.  As we have previously reported here and here, the issue in this case is whether the taxpayers can receive qualified dividend income treatment for amounts included in their income under section 951.  Taxpayers’ counsel stated that he had three main arguments:  (1) section 951 is just an anti-deferral statute, not concerned with characterizing the income as dividend or ordinary income; (2) Private Letter Rulings and other Executive Branch announcements had previously characterized section 951 inclusions as “deemed dividends”; and (3) it was … Read More

Supreme Court Rules for Taxpayer in PPL

[Note: Miller & Chevalier filed a brief in this case in support of PPL on behalf of American Electric Power Co.]

The Supreme Court this morning unanimously ruled in favor of PPL in its case involving the creditability of the U.K. Windfall tax.  See our prior coverage here.  The opinion was authored by Justice Thomas, with Justice Sotomayor adding a separate concurring opinion.

The Court’s opinion is fairly succinct.  Viewing the government’s position as more formalistic, the Court stated that it would “apply the predominant character test [of the foreign tax credit regulations] using a commonsense approach that considers … Read More

Justices Explore a Variety of Topics in PPL Oral Argument

February 25, 2013 by  
Filed under International, PPL, Supreme Court

[Note: Miller & Chevalier filed a brief in this case in support of PPL on behalf of American Electric Power Co.]

Seven Justices (all but Justices Thomas and Alito) asked questions in the oral argument in PPL on February 20, but they did not obviously coalesce around any particular view of the case. Even in cases where the questioning can be more neatly categorized, it is always hazardous to try to predict the outcome based on the questioning at oral argument. At this point, the parties’ work is done, and they are reduced to waiting for a decision, which is … Read More

Briefing Complete in PPL

February 13, 2013 by  
Filed under International, PPL, Supreme Court

[Note:  Miller & Chevalier filed an amicus brief in this case on behalf of American Electric Power Co. in support of PPL.]

PPL has filed its reply brief in the Supreme Court, thus completing the briefing.  The brief responds at length to the government’s contention that the U.K. Windfall Tax should be viewed as a tax on value because it assertedly resembles “familiar” and “well-established” methods of measuring value.  In fact, the reply brief maintains, the tax “is a tax on value in name only.”  The reply brief observes that the tax involves “a backward-looking calculation driven entirely by actual, … Read More

Amicus Brief Filed in Support of the Government in PPL

February 3, 2013 by  
Filed under International, PPL, Supreme Court

[Note:  Miller & Chevalier filed amicus briefs in this case on behalf of American Electric Power Co. in support of PPL in both the Third Circuit and the Supreme Court.]

A group of legal academics, led by Professor Michael Graetz of Columbia who authored the brief, has filed an amicus brief in PPL in support of the government.  The brief argues that the UK tax should be treated as a tax on value, in line with the labels attached to it by Parliament, because it “was designed to redress both undervaluation at privatization . . . and subsequent lax regulation.”  … Read More

Government Brief Filed in PPL

January 15, 2013 by  
Filed under International, PPL, Supreme Court

[Note:  Miller & Chevalier filed amicus briefs in this case on behalf of American Electric Power Co. in support of PPL in both the Third Circuit and the Supreme Court.]

The government has filed its response brief in the Supreme Court in PPL.  The arguments in the brief do not closely track the analysis of the Third Circuit’s opinion.  Indeed, the government pointedly distances itself from the Third Circuit’s heavy reliance on Treas. Reg. § 1.901-2(b)(3)(ii), Ex. 3.  The Third Circuit had suggested that PPL’s position was foreclosed by Example 3, but the government’s Supreme Court brief suggests only … Read More

Supreme Court Briefing Underway in PPL

January 4, 2013 by  
Filed under International, PPL, Supreme Court

[Note:  Miller & Chevalier filed amicus briefs in this case on behalf of American Electric Power Co. in both the Third Circuit and the Supreme Court.]

The taxpayer has filed its opening brief in the Supreme Court in PPL Corp. v. Commissioner, No. 12-43, a foreign tax credit case that we have covered extensively on its journey to the Court.  PPL’s brief heavily criticizes the formalism of the government’s position, stating that “the Commissioner would have the labels and form a foreign country employs, and not the substance of the tax it imposes, determine how the tax should be … Read More

Opening Briefs Filed in Rodriguez

November 21, 2012 by  
Filed under International, Rodriguez

The parties have now filed their opening briefs in the Fifth Circuit in Rodriguez, an appeal from the Tax Court’s decision that section 951 inclusion income is not to be taxed at the lower rate applicable to qualified dividends.  See our prior report here.

As they argued in the Tax Court, the taxpayers emphasize a policy argument, stating that “Subpart F’s general purpose and mechanics should govern” and “Subpart F treats the amount included in the U.S. shareholder’s gross income essentially like a dividend.”  The taxpayer also invokes substance vs. form principles and statements in the legislative history … Read More

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