Ppl Corporation V. Commissioner of Internal Revenue
PPL Corporation v. Commissioner of Internal Revenue
Business Income Tax, Northwestern Oklahoma State University
ShaLyn Schaefer
March 7, 2013
I chose this court case because the decision will have effects on many businesses in the United States who own foreign companies. A holding for the Commissioner of Internal Revenue may subject taxpayers in PPL’s position to double taxation. However, a holding for PPL threatens to undermine the consistency and uniformity of the U.S. tax code as well as curtailing the power of the Commissioner of Internal Revenue to interpret the law. The main issue in the case is whether or not a U.S. company receives a U.S. tax credit for paying the United Kingdom’s windfall tax. Along with the issue comes the question on whether or not the courts should employ a formalistic approach that looks solely at the form of the foreign tax statue and ignores how the tax actually operates, or should employ a substance based approach that considers factors such as the practical operation and intended effect of the foreign tax. Section 901 of the Internal Revenue Code allows U.S. Corporations a tax credit for income, war profits, and excess profits taxes paid to another country to avoid double taxation. This case involves the application of section 901 to a “winfall tax” (a one-time twenty three percent tax imposed by the United Kingdom on privatized companies). Petitioner PPL Corporation is an energy company in Allentown, Pennsylvania that provides electricity and natural gas to consumers in the United States and the United Kingdom. PPL Corporation owned a 25% share in South Western Electricity Board that the Government privatized in the 1980’s. In 1997, the U.K. Government imposed a windfall tax on companies based on the difference between a company’s value and the “flotation value”, or the amount at which the U.K. Government sold the company. After paying the tax, PPL then filed a tax claim with the IRS
Business Income Tax, Northwestern Oklahoma State University
ShaLyn Schaefer
March 7, 2013
I chose this court case because the decision will have effects on many businesses in the United States who own foreign companies. A holding for the Commissioner of Internal Revenue may subject taxpayers in PPL’s position to double taxation. However, a holding for PPL threatens to undermine the consistency and uniformity of the U.S. tax code as well as curtailing the power of the Commissioner of Internal Revenue to interpret the law. The main issue in the case is whether or not a U.S. company receives a U.S. tax credit for paying the United Kingdom’s windfall tax. Along with the issue comes the question on whether or not the courts should employ a formalistic approach that looks solely at the form of the foreign tax statue and ignores how the tax actually operates, or should employ a substance based approach that considers factors such as the practical operation and intended effect of the foreign tax. Section 901 of the Internal Revenue Code allows U.S. Corporations a tax credit for income, war profits, and excess profits taxes paid to another country to avoid double taxation. This case involves the application of section 901 to a “winfall tax” (a one-time twenty three percent tax imposed by the United Kingdom on privatized companies). Petitioner PPL Corporation is an energy company in Allentown, Pennsylvania that provides electricity and natural gas to consumers in the United States and the United Kingdom. PPL Corporation owned a 25% share in South Western Electricity Board that the Government privatized in the 1980’s. In 1997, the U.K. Government imposed a windfall tax on companies based on the difference between a company’s value and the “flotation value”, or the amount at which the U.K. Government sold the company. After paying the tax, PPL then filed a tax claim with the IRS
Cited: The Oyez Project, PPL Corporation v. Commissioner of Internal Revenue (Jan. 18, 2013) Jonathan Stempel & Patrick Temple-West, Thomson Reuters News & Insight, Supreme Court Accepts PPL Appeal in British Tax Case (Oct. 29, 2012) Business Income Tax