Compaq Computer Corporation and Subsidiaries - Page 12




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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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