US Supreme Court Unanimously Chooses Substance over Form in Foreign Tax Credit Case: Implications of the PPL Decision for the Creditability of Cash-flow Taxes

This paper examines the effects of a U.S. Supreme Court ruling that a one-time retroactive British “Windfall Tax” levied on 32 public utilities that were privatized between 1984 and 1996 was eligible for the US foreign tax credit (FTC). The decision could have far-reaching implications for the creditability of taxes that are not ordinarily thought to be income taxes, including various cash-flow business taxes that are key elements of several proposals recommending replacement of the income tax with a consumption-based tax.

A revised version of this paper is forthcoming in the journal International Tax and Public Finance.

By George R. Zodrow (Corresponding Author), Rice University's Baker Institute for Public Policy; Charles E. McLure, Jr, Hoover Institution; and Jack Mintz, University of Calgary