Tax Treaty Case Law around the Globe 2024

1.1. Introduction

This case involves fundamental questions about the United States (US) treaty obligations to allow foreign tax credits and the relationship between these obligations and the domestic foreign tax credit provisions.

1.2. Facts of the case

Plaintiffs Matthew and Katherine Kaess Christensen (“the Christensens”) filed a complaint with the United States (US) Court of Federal Claims seeking a refund of USD 3,851 paid to the Internal Revenue Service (IRS) as a net investment income tax (NIIT) for tax year 2015. The Christensens are a married couple, both US citizens residing in France. They claimed a credit based on article 24 (relief from double taxation) of the 1994 US-France tax treaty in effect.

The subject of discussion was the NIIT, which was originally created in 2010, when the Health Care and Education Reconciliation Act of 2010 inserted §1411 into the Internal Revenue Code (IRC). The NIIT was located in a different IRC chapter than the normal income tax.

The Christensens argued that the NIIT should be characterized as an income tax since it was imposed using concepts identical to those of the normal income tax provisions and that it meets the IRC definition of a tax on...