Opinion ID: 619605
Heading Depth: 1
Heading Rank: 8

Heading: Tax = 23% × [2.25 × P ].

Text: PPL's two proposed simplifications boil down to this formula. Even accepting those simplifications, this tax base would violate the gross receipts requirement under the following logic:  The tax base that PPL's two simplifications produce is 2.25 times profit;  Profit equals gross receipts minus expenses;  Thus the tax base that PPL's two simplifications produce is 2.25 times gross receipts minus 2.25 times expenses;  The gross receipts requirement addresses the income portion of a tax base, whereas the net income requirement addresses the expense portion of a tax base; and  Hence the income portion of this tax base2.25 times gross receiptsviolates the gross receipts requirement, which limits the basis of a tax to gross receipts or an approximation thereof likely to produce an amount that is not greater than [their] fair market value. Treas. Reg. § 1.901-2(b)(3)(B) (emphasis added). PPL attempts to skirt this logic by changing the tax rate. A 23% tax on 2.25 times profit, PPL observes, is mathematically identical to a 51.75% tax on profit, because 23% times 2.25 equals 51.75%. PPL Br. at 25-26. In other words, returning to our formula, PPL would make one last modification: