- 32 -
In the course of discussions, one idea that was raised, but
quickly dismissed, was to have a law passed entitling EGPC to a
credit for taxes paid directly by Amoco Egypt. Amoco left the
first negotiating session having agreed to look into the U.S. tax
consequences of allowing EGPC a tax credit for Egyptian taxes
paid directly by Amoco Egypt, by inserting language to such
effect into the MCA. Amoco also considered amending the language
of Article IV(f)(6).
Following the September 1980 meetings in the ARE, Amoco
officials met with Nordberg, who reiterated to Amoco that Article
IV(f)(6) should be deleted from the agreement and, moreover,
advised that a continuation of EGPC's credit practice could
jeopardize U.S. tax creditability. Nordberg advised that
allowing EGPC a tax credit would severely jeopardize a favorable
ruling from the IRS. The advice was based on Nordberg's analysis
of Rev. Rul. 78-258, 1978-1 C.B. 239, and the proposed
regulations under section 901, under which, he thought, allowing
EGPC a credit would constitute an indirect subsidy. Amoco
accepted Nordberg's advice. Nordberg advised that it would not
jeopardize U.S. creditability if EGPC got relief in a manner not
related to the amount of Amoco Egypt's tax payments, including if
EGPC were forgiven a fixed fraction of its taxes, or EGPC's
royalty obligation were eliminated.
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