PPL Corp. v. Commissioner

569 U.S. 329 (2013)

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PPL Corp. v. Commissioner

United States Supreme Court
569 U.S. 329 (2013)

Facts

PPL Corporation (PPL) (plaintiff) owned an electric utility company in the United Kingdom (UK). Before becoming privatized and owned by PPL, the electric utility company was owned by the UK government. When the electric utility company was privatized, the UK used a formulaic calculation to impose a one-time 23 percent tax on PPL, which the UK government characterized as a windfall tax, that was applied to the difference between PPL’s profit-making value and the price paid for privatizing the electric utility company. PPL claimed a foreign tax credit based on the amount paid on the UK windfall tax. After the Internal Revenue Service (IRS) (defendant) disallowed PPL’s foreign-tax-credit claim, PPL filed suit. The tax court ruled in favor of PPL, finding that the UK windfall tax was intended to achieve, and did in fact achieve, a net income in the UK’s tax receipts and thus constituted a creditable foreign tax. The IRS appealed. The intermediate appellate court reversed the trial court, concluding that PPL was not entitled to a foreign tax credit because the UK windfall tax failed to satisfy the net income and realization tests under the applicable Treasury regulations. PPL appealed.

Rule of Law

Issue

Holding and Reasoning (Thomas, J.)

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