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to a subsidiary corporation reduces the amount of the subsidiary
corporation's mainstream tax which would be creditable but does
not act as a subsidy.
Additionally, we are unable to conclude that the corporate
offset is the type of benefit which was intended to be covered by
the subsidy rules of section 901(i). The House of
Representatives Committee on Ways and Means in H. Rept. 99-426,
at 351 (1985), 1986-3 C.B. (Vol. 2) 1, 351, explained the reason
for the enactment of section 901(i) as follows:
As indicated above, a Treasury regulation denies a
foreign tax credit for foreign taxes used directly or
indirectly as a subsidy to the taxpayer. Absent this
rule, the U.S. Treasury would, in effect, bear the cost
of tax subsidy programs instituted by foreign countries
for the direct or indirect benefit of their residents
and certain nonresidents who do business with their
residents. The committee is informed that some U.S.
lenders and other U.S. taxpayers take tax return
positions that are inconsistent with this rule. The
committee does not believe that foreign tax credits
should be allowed for foreign taxes which, while
ostensibly imposed, are effectively rebated by the
levying country by means of a government subsidy to the
taxpayer, a related party, or a party to a transaction
with the taxpayer. To eliminate any uncertainty in
this area, the committee believes that the Treasury
regulation disallowing foreign tax credits for taxes
used as a subsidy to the taxpayer should be codified.
In the instant case, the U.S. Treasury does not bear the cost of
ACT corporate offset. To the contrary, to the extent that the
ACT corporate offset reduces the mainstream tax of a U.K.
corporation, a U.S. taxpayer will be entitled to a lower foreign
tax credit with respect to the mainstream tax. Accordingly,
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