Plaintiff Bank of America conducted a general banking business in the Kingdom of Thailand, the Republic of the Philippines, and the Republic of Argentina. With respect to this business, Bank of America paid the three jurisdictions various types of taxes. Bank of America demanded a credit for most of these assessments either on its federal income tax returns or by refund claim.
The Internal Revenue Service disallowed a number of the credits claimed, and Bank of America appealed to a trial commissioner. The trial commissioner held for the Bank of America with respect to the Thailand Business Tax, Type 1 and Type 2; the Philippine Tax of Banks; and the City of Buenos Aires Tax on Profit-Making Activities. Bank of America appealed the matter to the Court of Claims.
1. Do U.S. courts accept foreign nations' designation of a tax as being on "gross" or "net" receipts? Is this second-guessing a foreign judgment? Does the Act of State Doctrine apply?
2. Was the foreign law at issue structured like U.S. tax law? Did the court try to re-characterize the foreign tax law so that it could be analyzed in terms of U.S. tax categories?
3. How complicated would tax compliance be for a bank operating in many nations? Why?