December 23, 2012
Excess Profits Taxes and § 901
This paper analyzes the U.K. Windfall Tax's creditability under § 901 of the Internal Revenue Code and its associated regulation. When this paper was originally written in the fall of 2011, the United States Tax Court had found the U.K. Windfall Tax creditable in two cases. Both were appealed to separate circuits, and while the Entergy case was affirmed, the PPL case was reversed. The Supreme Court has since granted certiorari and will resolve the circuit split this year.
This paper shows that the U.K. Windfall Tax is a creditable tax regardless of the regulation requiring litigants to demonstrate that the tax is an "income tax" for creditability. This paper will also be substantially revised before it is published due to new developments in the case. It uses historical evidence of the 1940s-era Excess Profits Tax to show that the U.K. Windfall Tax fits squarely into the definition of excess profits taxes contemplated by Congress when they passed the Revenue Act of 1918, from which the current § 901 came verbatim.
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