- 29 -
The U.S. Court of Claims held in Inland Steel Co. v. United
States, supra, that the OMT was not creditable and that, for 1964
and 1965, the OMT paid by Caland Ore Co. did not fit the U.S.
concept of an income tax primarily because there were significant
nonrecoverable expenses (i.e., land expenses, rent, and private
royalties). Id. at 85, 87. In Inland Steel, the U.S. Court of
Claims evaluated Caland data for 1964 and 1965. In 1964, Caland
could not claim a processing allowance because it sold only
unprocessed ore. Id. at 79, 81. In 1965, Caland could claim a
processing allowance equal to not less than 15 percent or more
than 65 percent of the profits of the combined mining and
processing operations because it sold both unprocessed ore and
processed iron pellets. Id. at 81. Caland reported the minimum
15 percent of combined profits processing allowance on its OMT
return for 1965. Id. The record in that case did not include
OMT returns for any other OMT taxpayers or any other years.
The U.S. Court of Claims decided Inland Steel before the
1983 regulations were issued. In Inland Steel, the U.S. Court of
Claims analyzed the history and purpose of the OMT and held that
a foreign tax was creditable only if it was the “substantial
equivalent” of an income tax in the United States. Id. at 79;
see also New York & Honduras Rosario Mining Co. v. Commissioner,
168 F.2d at 749. The 1979 proposed regulations included a form
of the substantial equivalence test. Sec. 1.901-2(c), Proposed
Page: Previous 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 NextLast modified: May 25, 2011