Dual Capacity Taxpayer Rules
RSS Issue FeedBACKGROUND
A dual capacity taxpayer is a multinational company that pays a levy to a foreign country and also receives a specific economic benefit from that foreign country. Nearly all dual capacity taxpayers are U.S. based oil and gas companies that have operations in foreign countries. U.S. tax rules allow a foreign tax credit for income taxes paid by dual capacity taxpayers to foreign countries. This is in accordance with U.S. tax policy that prevents double taxation of foreign earnings so that U.S. companies are not disadvantaged when trying to develop foreign opportunities.
U.S. tax rules deny a foreign tax credit on payments made by dual capacity taxpayers to a foreign country in exchange for an economic benefit. The United States has an effective set of rules that place the full burden of proof on dual capacity taxpayers to demonstrate that payments claimed as income taxes are not in reality payments made to a foreign government for an economic benefit.
CHAMBER POSITION
Limiting the creditability of foreign taxes paid by dual capacity taxpayers would impose double taxation on these taxpayers and make them uncompetitive in the global market. Overseas operations of U.S. based oil and gas companies are supported by well-paying jobs in the United States. If current operations and growth opportunities cannot continue, it will mean fewer employment positions for U.S. workers and supporting businesses.
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