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231; Rev. Rul. 69-501, 1969-2 C.B. 233; Rev. Rul. 70-645, 1970-2
C.B. 273; and Rev. Rul. 73-110, 1973-1 C.B. 454.
Petitioner agrees that in order to fall within the safe
harbor provisions, Finance had to meet the debt-to-equity ratios
as set forth in the above revenue rulings. Petitioner
nevertheless contends that "there is nothing in the 1984 Act, as
amended, or the accompanying legislative history, which suggested
that compliance with this safe harbor was the only method a
United States corporation could utilize in claiming an exemption
from U.S. withholding tax or interest paid to controlled foreign
finance subsidiaries." Accordingly, petitioner contends that
irrespective of the capital requirements set forth in the
rulings, if the situation before us falls within the terms of the
Treaty, it is not liable for the withholding tax. We agree.
The legislative history of DEFRA describes in some detail
the practice of U.S. corporations seeking access to the Eurobond
market. The legislative history notes that the offerings by
finance subsidiaries (mostly all of which were incorporated in
the Netherlands Antilles) "involve difficult U.S. tax issues in
the absence of favorable IRS rulings." S. Prt. 98-169 (Vol. I),
at 419 (1984). Indeed, the legislative history outlined the
arguments supporting the position taken by taxpayers and the
arguments supporting the Government's position with respect to
these "difficult U.S. tax issues".
Notwithstanding this, no conclusion was drawn regarding the
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