As we’ve been reporting, four cases cases being argued at the Federal Circuit in March attracted amicus briefs. One of these cases is Christensen v. United States, a tax case. In it, the United States is appealing a decision by the Court of Federal Claims allowing two American citizens residing in France to claim a foreign tax credit. This is our argument preview.
In its opening brief, the United States argued the “text and context” of the relevant article of the tax Treaty between the United States and France “restricting the foreign tax credit” applies to cases where the individual is a resident of France and U.S. citizen. In concluding otherwise, the government contended, the lower court provided a “foreign tax credit that is unmoored from the Internal Revenue Code” and rendered a relevant provision “entirely superfluous.” The United States further argued the lower court’s reading “leads to other anomalous results making” its “interpretation implausible.” One anomalous result, the United States says, would be the ability of American citizens residing in France to “claim a double tax benefit by excluding their ‘foreign earned income’ from U.S. tax.” The United States argued that, though the “Treaty aims to relieve double taxation,” it was not intended to “eliminate double taxation in all circumstances.”
In their response brief, the Christensens argued a “principal purpose of the French Treaty” was the “avoidance of double taxation.” The Treaty, they contended, “provides certain taxes imposed by each country are eligible for a foreign tax credit.” In the Christensen’s view, that tax credit is still available “even if otherwise not provided for by statute.” They further argue the “plain language” of the relevant
Treaty article “provides for a treaty-based foreign tax credit,” and that text “accords with a
principal purpose of the Treaty.” Any conclusion otherwise, the Christensens argue, “is not supported by the Treaty’s text, its purpose or any of the caselaw.”
In its reply brief, the United States argued “a foreign tax credit cannot be taken against the tax on net investment income.” According to the government, any “attempt to conjure up some other explanation,” like the Christensens did, “falls flat.” The United States further argued that the position that the tax Treaty or the Code were “meant to provide absolute protection from double taxation” would violate the treaty’s purpose of “preventing fiscal evasion of tax.”
An amicus brief was filed by H. David Rosenbloom and Fadi Shaheen in support of the Christensens and affirmance. In it, the amici argued “the very purpose of a tax treaty is to establish legal rules that do
not appear in a tax statute.” They suggest treaties act as “contracts between sovereign nations.” Consequently, they say, when nations enter tax treaties, those agreements “invariably change or supplement statutory tax rules that would apply” otherwise. They argued those changes are intentional and meant “to provide benefits that do not appear in the statute.”
Oral argument is scheduled to be heard on Tuesday, March 3 at 10:00 a.m. in Courtroom 402.