The U.S. Supreme Court’s decision to grant certiorari in PPL offers it a unique opportunity to change the law regarding foreign tax credits that has significantly impeded the ability of other countries to engage in meaningful tax reform. In 1938 the Court said in dicta that to qualify for the FTC a tax had to be an income or excess profits tax (or a tax imposed in lieu thereof) under U.S. tax principles. This statement has led to an elaborate set of regulations defining what is an income tax, which has significantly hampered the ability of foreign countries to adopt tax reforms for fear that their taxes would not be creditable. It is time for the Court to declare that any tax whose burden falls on the taxpayer — that is, any direct tax — is a creditable tax, and do away with the cumbersome structure of the section 901 regulations.
Avi-Yonah, Reuven S. "Should the US Dictate World Tax Policy? Reflections on PPL." Tax Notes 138 (2013): 871-3.
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