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fails to provide an allowance that “mimics” interest expense, and
that the relationship of PRT allowances to nonrecoverable
expenses is not sufficiently “predictable”. We reject these
labels as merely argumentative and as without merit.
We note statements in respondent’s pretrial brief, in
respondent’s counsel’s opening statement, and in a number of
respondent’s experts’ reports or testimony that in essence
acknowledge the “income” or “profits” nature of PRT. One of
respondent’s experts testified contrary to prior published
statements he has made regarding PRT and its nature as an “excess
profits tax”.
In Texasgulf, Inc. & Subs. v. Commissioner, 107 T.C. 51
(1996), affd. 172 F.3d 209 (2d Cir. 1999), we held that the
Ontario Mining Tax (OMT) satisfied the net income test of the
section 901 regulations and constituted a creditable income tax.
Among other things, we relied on industry data showing that a
special processing allowance available to taxpayers in computing
OMT liability adequately compensated for significant nonallowed
costs, including interest. The evidence, among other things,
indicated that the processing allowance, in the aggregate for the
industry, exceeded the amount of significant nondeductible costs.
See id. at 66.
On appeal, the Court of Appeals for the Second Circuit
focused on how OMT applied to the mining industry as a whole and
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