Third circuit holds that UK windfall tax is not a creditable tax under section 901

January 2012


The Third Circuit recently held that PPL Corporation was not entitled to a foreign tax credit for amounts paid under the so-called UK "windfall tax," thus reversing a Tax Court decision that had found the tax creditable. Though the UK windfall tax only affects 32 taxpayers directly, the PPL Corp. Third Circuit decision has larger ramifications regarding creditability of foreign taxes in its emphasis on a formalistic application of the test under Treas. Reg. ยง 1.901-2.

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