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imposed by the United Kingdom within the meaning of section
1.901-2(a)(2)(i), Income Tax Regs., and that PRT does not
constitute a soak-up tax within the meaning of section 1.901-
2(c), Income Tax Regs. The only issues before us are whether PRT
paid by Exxon is to be treated as a tax (as opposed to payment
for specific economic benefits) and whether the predominant
character of PRT may be regarded as an income tax in the U.S.
sense and thereby as satisfying the net income test.8
PRT and Compensation for Specific Economic Benefits
The evidence in these cases establishes that PRT paid by
Exxon does not constitute compensation in exchange for license
rights or other specific economic benefits received by Exxon.
Upon enactment of PRT and upon or in exchange for payment of PRT,
Exxon was granted no additional rights, under its licenses or
otherwise, with respect to North Sea petroleum resources.
8 Of the total �3.2 billion in PRT that Exxon paid for 1983
through 1988 respondent would allow approximately �1.2 billion
as creditable taxes for U.S. tax purposes under the United
States-United Kingdom Income Tax Treaty, Dec. 31, 1975, 31 U.S.T.
5668 (U.S./U.K. Tax Treaty). Respondent contends that the �2
million balance does not qualify under secs. 901 or 903 for
credit against Exxon’s Federal income tax liability. Neither
party herein makes any argument that what amount of PRT is or is
not creditable under the U.S./U.K. Tax Treaty is in any way
relevant to the issue addressed in this Opinion (namely, the
amount, if any, of PRT that is creditable under the provisions of
secs. 901 or 903). If the issue herein is resolved in favor of
respondent, the parties have reserved for subsequent resolution
the question as to the appropriate amount of PRT that would be
creditable under the U.S./U.K. Tax Treaty.
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