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accelerate tax revenues relating to development of North Sea
petroleum resources.
OPINION
With limitations not here pertinent, taxpayers may claim
credits under section 901 against their Federal income taxes for,
among other things, the amount of income and excess profits taxes
paid to foreign countries. See sec. 901(b)(1). As an exemption
from tax, the credit provisions of section 901 are to be strictly
construed. See Inland Steel Co. v. United States, 230 Ct. Cl.
314, 677 F.2d 72, 79 (1982); Bank of Am. Natl. Trust & Sav.
Association v. United States, 61 T.C. 752, 762 (1974), affd.
without published opinion 538 F.2d 334 (9th Cir. 1976).
Under regulations applicable to the years in issue, foreign
levies are to be regarded as income or excess profits taxes if
they satisfy two tests: (1) The foreign levies constitute taxes,
and (2) the predominant character of the taxes is that of an
income tax in the U.S. sense. See sec. 1.901-2(a)(1), Income Tax
Regs.
Generally, governmental levies imposed by and paid to
foreign countries are to be treated as taxes if they constitute
compulsory payments pursuant to the authority of the foreign
countries to levy taxes. The regulations, however, also provide
that foreign levies will not be regarded as taxes to the extent
that payors of the levies receive specific economic benefits,
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