Abstract
Three court decisions have recently addressed the interaction of the Net Investment Income Tax (NIIT) and US tax treaties. The issue was whether the treaty provided an independent basis for crediting a foreign tax against the NIIT, because no such credit is available under the Code. First, in Toulouse, the Tax Court held that there was no treaty based credit. Second, in Christensen, the Court of Federal Claims held that a treaty-based credit was available, distinguishing Toulouse. Third, in Bruyea, the Court of Federal Claims issued a broader opinion that allowed the credit. Importantly, Bruyea addressed an issue that was missing from the first two opinions, namely whether the NIIT was a treaty override. This issue has wider implications than on the NIIT, because the court`s opinion raises the possibility that no 21st century tax legislation overrode US tax treaties. In particular, it raises doubts about the applicability of the BEAT to taxpayers who are residents in a treaty country. Because of the significant revenue implications of holding that the BEAT does not apply in treaty situations, Congress should fix the problem in this year's tax legislation.
Disciplines
International Law | Law and Economics | Taxation-Transnational | Tax Law
Date of this Version
3-18-2025
Working Paper Citation
Avi-Yonah, Reuven S., "Was the NIIT A Treaty Override?" (2025). Law & Economics Working Papers. 289.
https://repository.law.umich.edu/law_econ_current/289
Included in
International Law Commons, Law and Economics Commons, Taxation-Transnational Commons, Tax Law Commons