H. David Rosenbloom (Caplin & Drysdale; NYU) & Fadi Shaheen (Rutgers), Toulouse: No Treaty-Based Credit?, 104 Tax Notes Int’l 417 (Oct. 25, 2021):
This article maintains that the U.S. Tax Court’s decision in Toulouse [v. Commissioner, 157 T.C. No. 4 (2021)]— that U.S. tax treaties with France and Italy do not provide a treaty-based foreign tax credit against the net investment income tax — is mistaken.
There is, of course, no question that in enacting a new tax after a treaty has been signed, Congress can provide that there is no FTC allowed against the new tax by the code or any treaty. The supremacy clause of the U.S. Constitution, which gives the same legal status to treaties and statutes, so provides. However, Congress did not do that in enacting the NIIT, which can easily be harmonized with the allowance of a treaty-based FTC. The core problem with the Tax Court’s decision in Toulouse is that it did not mention, or apparently consider, that kind of harmonization as an option.