Credits for foreign taxes
PPL Corporation and Subsidiaries v. Commissioner of Internal Revenue
In brief
PPL won: the Supreme Court ruled that the U.K. windfall tax qualifies for a U.S. tax credit.
- Where it stands
- Decided
Decided 9-0 · May 20, 2013 · Opinion by Justice Thomas
- What it’s about
- PPL claimed a U.S. tax credit for its share of a one-time U.K. windfall tax paid by a utility in which it owned 25%; the IRS denied the credit. The Supreme Court ruled that the tax qualified for a credit under §901 and overturned the Third Circuit.
- Who it affects
- PPL’s share of the U.K. tax qualifies for a U.S. foreign-tax credit.
Summary: written with AI from the case record.
What it's about
PPL owned 25% of a U.K. utility that paid the one-time tax. The IRS rejected PPL’s request to claim a U.S. tax credit for its share.
The dispute turned on whether the U.K. levy qualified under the U.S. foreign-tax-credit law, §901.
Question presented
Should courts use a formalistic approach or a substance-based approach that takes into account how the tax actually operates when determining the creditability of a foreign tax?
What the Court decided
Holding
The U. K. tax is creditable under §901. 665 F. 3d 60, reversed.
- Result
- Reversed
The Court's reasoning
The Court looked at how the tax worked in practice, rather than relying on a formal reading of its structure, and concluded it qualifies for a U.S. foreign-tax credit under §901.
The vote
What's next
The decision resolves whether this U.K. tax qualifies for a credit in PPL’s case; the record does not specify any further proceedings.
Documents
Opinions
Audio
Docket activity
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AI analysis generated: Case Briefing
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Audio Recording added: Oral Arguments - PPL Corporation and Subsidiaries v. Commissioner of Internal Revenue
Opinion added: Commissioner
More questions
- What percentage of the utility did PPL own?
- PPL owned 25% of the utility.
- What U.S. tax provision was at issue?
- Section 901, which covers U.S. tax credits for certain foreign taxes.
- What concern did Justice Sotomayor raise separately?
- She said including five companies with different rate-regulation periods might make the tax look like a tax on value. She left that question for another case and joined the Court’s opinion.
Sources
Primary materials plus reporting. Best-effort analysis: this explainer relies on a mix of primary materials and trusted secondary sources. Official filings and opinions remain authoritative.