19
hire its nationals, assign them to NATO's international staff,
and pay their salaries from its own funds at a scale fixed by it.
By entering into such an arrangement, a member state could still
tax the amounts it so paid its nationals. The United States
entered into such an arrangement (the London Agreement). We have
determined that the United States retained the power to subject
its nationals to its taxing jurisdiction by complying with the
mechanism provided in Article 19. We have also found that
Article 19 gave the United States the ability to tax U.S.
nationals, rather than directly imposing the tax itself. Amaral
v. Commissioner, 90 T.C. 802, 815-816 (1988).
Prior to 1981, the relevant language limiting section 911
excludability referred to amounts "paid by the United States or
any agency thereof." In 1981, ERTA broadened the potential
section 911 exclusion by narrowing the definition of amounts
excluded from foreign earned income. Effective for taxable years
beginning after December 31, 1981, ERTA changed "paid by the
United States or an agency thereof" to "paid by the United States
or an agency thereof to an employee of the United States or an
agency thereof". ERTA sec. 111(a), 95 Stat. 190; Matthews v.
Commissioner, 907 F.2d 1173 (D.C. Cir. 1990), affg. 92 T.C. 351
(1989).
Petitioner acknowledges that before the ERTA amendment,
there would have been little doubt that he would not qualify for
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