PPL Corporation and Subsidiaries, Petitioners v. Commissioner of Internal Revenue (569 U.S. 329)
U.S. Supreme Court · decided May 20, 2013 · Supreme Court Database (Spaeth)
- Citation
- 569 U.S. 329 · 133 S. Ct. 1897
- Decided
- May 20, 2013
- Term
- October Term 2012
- Vote
- 9–0
- Majority author
- Justice Thomas
- Issue area
- Federal Taxation
- Disposition
- Reversed
- Outcome
- Petitioning party won
- Ideological direction
- Liberal
Opinion excerpt
Justice THOMAS delivered the opinion of the Court. In 1997, the United Kingdom (U.K.) imposed a one-time "windfall tax" on 32 U.K. companies privatized between 1984 and 1996. This case addresses whether that tax is creditable for U.S. tax purposes. Internal Revenue Code § 901(b)(1) states that any "income, war profits, and excess profits taxes" paid overseas are creditable against U.S. income taxes. 26 U.S.C. § 901(b)(1). Treasury Regulations interpret this section to mean that a foreign tax is creditable if its "predominant character" "is that of an income tax in the U.S. sense." Treas. Reg. § 1.901-2(a)(1)(ii), 26 C.F.R. § 1.901-2(a)(1) (1992). Consistent with precedent and the Tax Court's analysis below, we apply the predominant character test using a commonsense approach that considers the substantive effect of the tax. Under this approach, we hold that the U.K. tax is creditable under § 901 and reverse the judgment of the Court of Appeals for the Third Circuit. I A During the 1980's and 1990's, the U.K.'s Conservative Party controlled Parliament and privatized a number of government-owned companies. These companies were sold to private parties through an initial sale of shares, known as a "flotation." As part of privatization, many companies were required to continue providing services at the same rates they had offered under government control for a fixed period,…
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