## Facts

- Amoco Corporation filed consolidated U.S. returns claiming foreign tax credits under I.R.C. § 901 for Egyptian income taxes imposed on the income of its Egyptian subsidiary, Amoco Egypt Oil Company.
- The subsidiary operated in Egypt under a concession agreement with the Egyptian General Petroleum Corporation (EGPC), a government-owned and government-controlled entity.
- The concession agreement had the force of law in Egypt and placed responsibility on EGPC to pay the subsidiary’s Egyptian income tax liability.
- EGPC paid amounts to the Egyptian tax authorities that corresponded to the subsidiary’s Egyptian income tax.
- EGPC initially treated those payments as credits against EGPC’s own Egyptian tax liability.
- The Egyptian Tax Department later determined EGPC was not entitled to such credits and could only deduct the payments; it assessed back taxes against EGPC for certain years.
- Collection of some assessed back taxes was barred by Egypt’s statute of limitations.
- The IRS issued deficiency determinations disallowing part of Amoco’s claimed foreign tax credits, arguing the arrangement functioned as a subsidy or refund and that EGPC was a separate entity whose tax position affected creditability.

## Issues

1. Whether Egyptian income taxes paid by EGPC with respect to the subsidiary’s income were “taxes paid or accrued” to a “foreign country” for purposes of I.R.C. § 901.
2. Whether EGPC’s attempted (and later disallowed) Egyptian tax credits and the subsequent limitations bar constituted a “refund” of foreign taxes to or for Amoco’s account, affecting U.S. foreign tax credits.
3. Whether EGPC should be treated as part of the “foreign country” for § 901 purposes given its governmental ownership, control, and role under the concession.

## Decision

- The Tax Court held EGPC was not authorized under Egyptian law to credit the subsidiary-related tax payments against EGPC’s own Egyptian tax liability; EGPC could only deduct those payments.
- The court held there was no refund of Egyptian taxes to or for Amoco’s account.
- The court held EGPC should be included within the term “foreign country” for purposes of I.R.C. § 901.
- The court sustained Amoco’s entitlement to the claimed foreign tax credits for the Egyptian income taxes at issue.

## Legal Principles

- For I.R.C. § 901, a wholly government-owned and government-controlled entity functioning as a state instrumentality, including under arrangements having the force of law, may be treated as part of the “foreign country.”
- The characterization of foreign tax consequences may rely on the foreign tax authority’s authoritative determination of the proper treatment under foreign law, rather than an entity’s initial reporting position.
- A “refund” (or similar event requiring adjustment of foreign tax credits) requires a substantive return of tax to or for the U.S. taxpayer’s account; a foreign limitations bar on collecting tax from a state instrumentality does not, by itself, create a refund to the U.S. taxpayer.

## Conclusion

The Tax Court allowed Amoco’s foreign tax credits for Egyptian income taxes paid through EGPC, treating EGPC as part of the foreign country, relying on Egypt’s determination that EGPC could not claim a credit for the payments, and rejecting the IRS’s refund or subsidy theory.


Amoco Corp. v. Commissioner, T.C. Memo. 1996-159 (1996)