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We agree with Exxon that if a company-by-company approach is
used to analyze the effect of uplift and other allowances, some
particular focus should be given to those companies which earn
excess profits from North Sea oil production and which pay PRT.
This is the type of empirical and particular industry data that
would seem particularly relevant. Of the 45 companies which
through 1988 paid approximately 98 percent of total PRT paid to
the United Kingdom, 34 companies or 76 percent (and accounting
for 91 percent of total PRT paid through 1988) had uplift
allowance in excess of nonallowed interest expense. If the oil
allowance is factored into the data, 39 of 45 companies or 87
percent (and accounting for 94 percent of total PRT paid through
1988) had allowances in excess of nonallowed interest expense.
We conclude that PRT constitutes a tax, that the predominant
character of PRT constitutes an excess profits or income tax in
the U.S. sense, and that PRT paid by Exxon to the United Kingdom
for the years in issue is creditable under section 901 against
Exxon’s U.S. Federal income tax liability.
In light of our resolution of the above issues, we need not
address Exxon’s alternative argument that PRT qualifies under
section 903 as a creditable tax in lieu of an income tax.
To reflect the foregoing,
Decisions will be entered
under Rule 155.
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