- 20 -
Section 1.901-2(e)(4), Income Tax Regs., discusses the
treatment of multiple levies, which are not considered subsidies,
and provides:8
(4) Multiple levies--(i) In general. If, under
foreign law, a taxpayer's tentative liability for one
levy (the "first levy") is or can be reduced by the
amount of the taxpayer's liability for a different levy
(the "second levy"), then the amount considered paid by
the taxpayer to the foreign country pursuant to the
second levy is an amount equal to its entire liability
for that levy, and the remainder of the amount paid is
considered paid pursuant to the first levy. This rule
applies regardless of whether it is or is not likely
that liability for one such levy will always exceed
liability for the other such levy. * * *
We do not disagree with the regulation's prescription that
substance rather than form controls the determination of whether
a credit is a subsidy. Accordingly, we conclude that, under the
rules of section 1.901-2(e)(4), Income Tax Regs., the ACT is
comparable to a second levy, and the U.K. mainstream tax is
comparable to a first levy. The amount paid by a corporation to
the United Kingdom as ACT is therefore fully creditable, and the
mainstream tax incurred by a U.K. corporation would be creditable
only to the extent that it exceeded the ACT already paid. By
analogy, we conclude that the allocation of the corporate offset
8 We note that sec. 1.901-2(e)(4)(ii), Income Tax Regs., is
reserved for integrated tax systems. The inclusion of such
reserved space within the section on multiple levies instead of
within the section on subsidies indicates that Treasury must also
believe that such systems are closer to multiple levies than
subsidies.
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011