Court Can't Use American Dictionary to Interpret French Tax

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By Erin McManus

Aug. 5 — The U.S. Tax Court must refer to the language of a U.S.-French agreement instead of a dictionary to determine whether U.S. taxpayers can claim a credit against a French tax ( Eshel v. Commissioner, 2016 BL 253610, D.C. Cir., No. 14-01215, 8/5/16 ).

A federal appeals court on Aug. 5 sent a case back to the Tax Court with instructions for it to look at the full text of the totalization agreement between the U.S. and France and their governments' shared expectations to determine whether two French taxes were “social security” taxes for which U.S. taxpayers couldn't claim a credit.

Judge Patricia A. Millett said the Tax Court committed legal error when it determined the status of the French laws “by resorting to American dictionaries” to determine whether the two taxes adopted after the signing of the U.S.-French agreement constituted amendments or supplements to French social security taxes covered in the agreement.

Unreliable Statements

The U.S. Court of Appeals for the District of Columbia Circuit decision reversed a 2014 Tax Court ruling that Ory and Linda Eshel, dual U.S.-French citizens, couldn't claim a U.S. foreign tax credit for the French General Social Contribution and Contribution for the Repayment of Social Debt they paid while living and working in France.

Millett said the Internal Revenue Service built its “argument with the wrong tools,” by relying on only a declaration of a Social Security Administration official and a 1997 letter from the U.S. Embassy to assert that the U.S. government had consistently considered the two taxes to be covered by the agreement.

The appeals court also criticized the Eshels for providing no sound basis for the court to conclude as a matter of law that statements by officials in the French government represented “the view of the French government on either the proper interpretation” of the agreement or whether the two taxes amend, supplement or have any other legal relationship to the French laws covered in the agreement.

Other Undefined Taxes

In a potentially related case pending in the U.S. Court of Federal Claims, currency trader John McManus—an Irish citizen and Swiss resident—is arguing that the IRS can't rely on a statement by an unidentified Irish tax official as to whether the Irish domicile levy constitutes an income tax under the U.S.-Ireland tax treaty. If the domicile levy is an income tax under the treaty, McManus is exempt from U.S. tax on his U.S. gambling winnings.

Judges Thomas B. Griffith and Cornelia T.L. Pillard joined Millett on the appeals panel.

Stuart Horwich represented the Eshels. Julie Ciamporcero Avetta argued for the commissioner.

To contact the reporter on this story: Erin McManus in Washington at

To contact the editor responsible for this story: Cheryl Saenz at

For More Information

Text of the decision is at

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