Document: 493 U.S. 132 110 S.Ct. 462 107 L.Ed.2d 449 UNITED STATES, Petitionerv.GOODYEAR TIRE AND RUBBER COMPANY and Affiliates. No. 88-1474. Argued Nov. 1, 1989. Decided Dec. 11, Rehearing Denied Feb. 20, 1990. See 1095, 1172. Syllabus In 1970 1971, Goodyear Tyre Rubber Company (Great Britain) Limited (Goodyear G.B.), a wholly owned subsidiary of Tire (Goodyear), domestic corporation, filed income tax returns in, paid taxes to, the United Kingdom Republic Ireland. It also distributed dividends to Goodyear, its sole shareholder, which reported on federal return. Thereafter sought an indirect credit for portion foreign by G.B. as permitted § 902 Internal Revenue Code (Code), 26 U.S.C. (1970 ed.), limits parent corporation's amount attributable dividend issued. The is calculated multiplying total that subsidiary's after-tax "accumulated profits" actually issued in form taxable dividend. After carried back net loss 1973 British return offset portions 1971 income, taxing authorities recalculated liability, company received refund those years. Pursuant 905(c) Code—which permits redetermination whenever any refunded—the Commissioner available lowering reflect refund. However, he refused lower accumulated profits years authorities' because, applying States principles, G.B.'s would not have been allowable had corporation filing Thus, assessed, paid, deficiencies 1971. subsequently Claims Court, rejected Goodyear's claim law principles govern calculation 902's credit, finding instead purposes underlying favored accordance with concepts. Court Appeals reversed, holding "plain meaning" required be determined under law. held congressional purpose eliminate international double taxation defeated if taxes, but profits," were Held: "Accumulated term appears are principles. Pp. 138-145. (a) Section text does resolve how calculated, since it relates such both subsidiary, law, 138-139. (b) No definitional approach uniformly unqualifiedly satisfies credit's dual purposes, clearly demonstrated history, protecting from treating branches subsidiaries alike terms credits they generate their companies. correctly claims calculating according can result situations statutory goal avoiding will disserved. Government contends, defining unfairly advantage companies operate through over unincorporated branches. 138-143. (c) Government's interpretation more faithful intent. risk less substantial than unequal treatment. offers no basis suggestion only when sourced year concepts recognize little or yet pays tax—commonly occurs. On other hand, leads treatment authority calculates generously States, difficult square express ensuring parity between corporations supported administrative interpretations canon provisions should generally read incorporate absent clear expression control, Biddle v. Commissioner, 302 573, 578, 58 379, 381, 82 L.Ed. 431. 143-145. 856 F.2d 170, (CA Fed 1988), reversed remanded. MARSHALL, J., delivered opinion unanimous Court. Alan I. Horowitz, Washington, D.C., petitioner. Barring Coughlin, Cleveland, Ohio, respondents. Justice MARSHALL 1 this case, we must decide whether provision 1954, measured We conclude 2 * G.B.) corporation. brought suit seeking collected During years, shareholder. these return, §§ 301, 316 ed.). thereafter specified 902.1 3 provides "indirect" "deemed paid" subsidiary. protects same income: first jurisdiction, earned second parent. some circumstances, may choose distribute profit For reason, cannot automatically all subsidiary: parent's deemed (T) (AP - T) (D).2 4 1973, income. Based carried-back losses, liability payments. 5 response refunds, pursuant "any refunded whole part," lowered He refused, however, (AP) deductions created, computation App. 19-29 (Stipulation Facts). Commissioner's view, principles; accordingly, regarded unaffected allowed 6 view reduced assessed and, following IRS' denial claim, action averring credit. Calculating maintained insufficient cover circumstance, requires that, computing excess out preceding year. If remaining exceeds profits, remainder allocated "sourced" next most recent year, until exhausted.3 argued prior 1968 1969, covered dividends. Through sourcing mechanism, would, G.B., receive 1969. Because allocation yield £1 million, four times greater paid. defined advocated, fully exhausted resulting £247,124. 7 claim. 14 Cl.Ct. 23 (1987). Viewing definition 902(c)(1)(A) inconclusive, id., at 28-29, court turned found concepts, 29-31. Federal Circuit reversed. 170 (1988). "requires [accumulated profits] law." Id., 172. fundamental 902, " 'elimination taxation,' ibid. (quoting H.H. Robertson Co. 59 T.C. 53, 74 (1972), aff'd, 500 1399 (CA3 1974)), F.2d, 8 Appeals' decision has important consequences parents abroad. To clarify operation applies,4 granted certiorari, 490 1045, 109 1952, 104 421 (1989), now reverse. II 9 Our starting point, cases involving interpretation, "must language employed Congress." Reiter Sonotone Corp., 442 330, 337, 99 2326, 2330, 60 931 (1979). find 10 true, emphasized, 902(a)(1) link imposed forged describing "on respect to" profits. also, "dividends" pool 316(a), turn, makes control payment "dividend" subject tax. link, leading treatise concluded "[a]ccumulated . are, general, equated earnings principles." B. Bittker & J. Eustice, Income Taxation Corporations Shareholders ¶ 17.11, p. 17-44 (5th ed. 1987) ("Adoption virtue correlating denominator (the numerator), thus possible distortions could arise different approaches used numerator fraction"). unpersuaded dispositive. therefore look beyond statute's legislative III A. 11 history demonstrates was intended protect Congress established 240(c) Act 1918, 40 Stat. 1082, permitting during This described protection against taxation. American Chicle 450, 452, 62 1144, 1145, 86 1591 (1942); see supra, 17-40. 12 reflects intent equalize 238(e) 1921, 42 259, amended permit Prior amendment, U.S., 453, S.Ct., because limited "during year" amendment corrected deficiency relating 13 defending version one sponsor securing, subsidiaries, sort deduction 61 Cong.Rec. 7184 (1921).5 equalized reflected well testimony regarding before Senate Committee Finance, spokesperson Department Treasury proposal "to give about conducting branch." Hearings H.R. 8245 67th Cong., 1st Sess., pt. 2, 389 (1921). More recently, Report 1962 amendments confirms Congress' treat S.Rep. 1881, 87th 2d 66-67 (1962), U.S.Code Cong. Admin.News 1962, 3297.6 B Given turn contends failure calculate subjects undesirable occurs, disconnect relationship formula A incurs proportion recover If, terms, scenario, credited avoid mismatching tax, imposition tax: 15 contests characterization case "double taxation." do so altogether domestically Under rules, sufficient That recognized not, prevent recognizing rules. According Government, 1969 G.B.—the seeks source dividends—relates chose Goodyear. undistributed concludes, inequitable provide favorable vis-a-vis use 16 attempts force analysis exploring hypothetical rules presents plausible case. example, earns equal regard being timing govern. anomalous where amounts remains constant. effect divergence particularly given zero. none there 17 hypotheticals persuade us Equally persuasive, operating C 18 nonetheless believe informed significantly our assessment outlined cited Government. Defining results commonly 19 approach, States. pay branch never received. 20 902. predecessor stated "[i]t establishing based principle upon distribution shareholders country not." I.T. 2676, XII-1 Cum.Bull. 48, 50 (1933) (emphasis added). position formal regulation promulgated 1965, Treas.Reg. 1.902-3(c)(1), CFR 1.902-3(c)(1) defines "the sum [t]he [the subsidiary] gains, attributable." "earnings context concept. 21 Lastly, support adopted 431 (1938), control. strong application here contrary leave varying policies authorities. IV 22 judgment remanded further proceedings consistent opinion. ordered. 902(a) provides: "For subpart, owns least percent voting stock receives shall— "(1) extent (as subsection (c)(1)(A)) developed war possession (determined without section 78) bears (other paid). ." follows: (_____Dividends (D)_____) Credit = Foreign Taxes Paid (t) x (Accumulated Profits (minus (T)) General Foods Corp. 209, 215 (1944). Calculation beginning after 1986 governed Tax Reform 1986, 100 2528, (1982 ed., Supp. V). substantially overhauls method removes controversy profits." current 902(c)(1) replaces "undistributed earnings," (computed sections 964 986)." 964(a) shall similar applicable corporations." Senator Smoot stated: "[A] much like branch, include entitled deduct countries question. Without special legislation, obtained incorporated laws." addresses preference satisfy obligations. (1942), including addressed problem differently, requiring "gross up" 69 (1962). Report, removing "unjustified advantage" parents, illustrates treated unequally "grossing requirement, even rule. 66-67.

Category: 11