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to treat the ACT as a separate tax only until the corporate
offset was used; thereafter, the ACT must be viewed as subsumed
into the mainstream tax. See id. at 467-468. The Claims Court
further held that once a corporation allocated the corporate
offset to its subsidiary, the subsidiary was to be considered the
payor of the ACT for foreign tax credit purposes. See id. at
468.
On appeal, the U.S. Court of Appeals for the Federal Circuit
reversed the Claims Court. The Court of Appeals held that the
language of the U.S.-U.K. Convention was clear and allowed a
foreign tax credit for the unrefunded portion of the ACT without
regard to the use of the corporate offset. See Xerox Corp. v.
United States, 41 F.3d at 660. The Court of Appeals also noted
that various statements made by parties negotiating the treaty
supported its reading of the treaty language. See id. at 654.
As discussed in further detail below, we agree with the holding
of the Court of Appeals for the Federal Circuit that the plain
meaning of the treaty language provides that the payor of the ACT
is the corporation that pays the dividend and the corresponding
ACT, and that the subsequent use or allocation of the corporate
offset does not alter this conclusion.
Regarding the interpretation of treaties, the Supreme Court
has stated that "[T]reaties are the subject of careful
consideration before they are entered into, and are drawn by
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