Compaq Computer Corporation and Subsidiaries - Page 16




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          time as the subsidiary applies the offset against its own                   
          liability for mainstream tax, payment by the subsidiary of the              
          unrefunded portion of the ACT.                                              
               The Technical Explanation was not available to both                    
          contracting parties in the negotiation of the U.S.-U.K.                     
          Convention.  Rather, it was prepared by the Department of the               
          Treasury (Treasury) to aid Congress during the ratification                 
          process in understanding the U.S.-U.K. Convention.  With regard             
          to the Technical Explanation's approach to the ACT, S. Exec.                
          Rept. 95-18, supra at 36-37, 1980-1 C.B. at 429, states:                    
                    The Treasury's technical explanation also set                     
               forth a complex set of rules and examples intended to                  
               be used for purposes of determining the earnings to                    
               which ACT payments by a U.K. corporation are to be                     
               attributed for purposes of computing the indirect U.S.                 
               foreign tax credit.                                                    
                        *     *     *     *     *     *     *                         
               These rules raise difficult and complex issues.  In                    
               recommending the ratification of the proposed treaty,                  
               the Committee does not intend that these rules                         
               necessarily serve as a model for future treaties.                      
               Further, in recommending the ratification of the                       
               treaty, the Committee does not intend to adopt or                      
               reject the amplifications of the foreign tax credit                    
               rules contained in the Treasury technical explanation.                 
               * * *                                                                  
          As to the Technical Explanation, the Court of Appeals for the               
          Federal Circuit, in Xerox Corp. v. United States, 41 F.3d at 655-           
          656, commented:  "One may debate the meaning of this cool                   
          treatment of the Technical Explanation.  What is clear, however,            







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