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ARE and reviewed EGPC's tax returns which reflected that EGPC was
claiming such credit, and reported this information to
respondent. This was the first instance in which Amoco informed
respondent that EGPC was taking the credit.
On May 11, 1988, EGPC sent a letter to Amoco Egypt
confirming that EGPC claimed a credit. EGPC explained that its
method of computing its tax was a combination of general Egyptian
income tax principles and special provisions found in the
production sharing agreement. On May 31, 1988, Amoco submitted a
memo to respondent, in which it explained EGPC's credit practice
as follows:
It now appears, however, that the Arabic version
of Article IV(f)(6) contains some additional words
which, according to some translators, provide that EGPC
is allowed to deduct from its income taxes the taxes it
pays on Amoco Egypt's behalf plus the royalties it pays
on its own behalf. That is, under this interpretation,
EGPC is allowed an intragovernmental tax credit for the
Amoco Egypt taxes (as well as for the EGPC royalty)
that reduces EGPC's tax liability.
The memo further stated an understanding that EGPC had
claimed a tax credit for 1979, the year then in issue.
Section 901(i)
In 1986, section 901(i) was added to the Code. Tax Reform
Act of 1986, Pub. L. 99-514, sec. 1204(a), 100 Stat. 2085, 2532.
Section 901(i) provides:
(i) Taxes Used to Provide Subsidies.--Any income,
war profits, or excess profits tax shall not be treated
as a tax for purposes of this title to the extent--
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