Rev. Rul. 57-153

The Internal Revenue Service recognizes a need for clarification of the administrative requirements of section 901 of the Internal Revenue Code of 1954 (formerly section 131(a) of the Internal Revenue Code of 1939) with respect to the evidence which is acceptable from an alien resident of the United States or Puerto Rico in a case requiring a determination by the Service as to his entitlement to credit against his United States income tax for taxes paid to a particular foreign country.

In each case where a taxpayer claims credit against his United States income tax for taxes paid or accrued during the taxable year to any foreign country or to any possession of the United States, as provided in section 901 of the Code, a determination must be made whether the tax imposed by such foreign country or possession is an income, war profits, or excess profits tax. Section 903 of the Code provides that "the term 'income, war profits, and excess profits taxes' shall include a tax paid in lieu of a tax on income, war profits, or excess profits otherwise generally imposed by any foreign country or by any possession of the United States."

With respect to an alien resident of the United States or Puerto Rico, section 901(b) of the Code provides:

(b) AMOUNT ALLOWED.--Subject to the limitation of section 904, the following amounts shall be allowed as the credit under subsection (a):

* * * * * * *

(3) * * * In the case of an alien resident of the United States and in the case of an alien individual who is a bona fide resident of Puerto Rico during the entire taxable year, the amount of any such taxes paid or accrued during the taxable year to any foreign country, if the foreign county of which such alien resident is a citizen or subject, in imposing such taxes, allows a similar credit to citizens of the United States residing in such country; * * *

Accordingly, when an alien resident of the United States or Puerto Rico claims a tax credit under section 901 of the Code, in addition to determining whether the tax for which credit is claimed is an income or profits tax within the purview of section 901 or 903 of the Code, the Service must also determine whether the foreign country, of which such alien resident is a citizen or subject, in imposing an income or profits tax satisfies the similar credit requirements of section 901(b)(3) of the Code.

Under section 901(b)(3) of the Code, a credit may be allowed against the United States income tax liability of an alien resident of the United States or Puerto Rico for income or profits taxes paid or accrued to any foreign country, i. e., his own or any other foreign country. In order for an alien residing in the United States or Puerto Rico to receive a credit for a tax paid to a foreign country other than his own country, the country of which he is a citizen or subject, and not the country to which the tax is paid, must allow a similar credit against its income or profits tax to a United States citizen residing in the country of which the alien is a national for a tax paid to the other country. See Charles W. Bowring v. Commissioner, 27 B. T. A. 449; Max Freudmann et al. v. Commissioner, 10 T. C. 775.

O. D. 253, C. B. 1, 162 (1919), dealing with the somewhat similar administrative requirements with respect to the credit for personal exemption and dependents allowed by section 216 of the Revenue Act of 1918, provides:

In order that a nonresident alien may prove that his country satisfies the similar credit requirement of the income tax law, he should submit to the Commissioner a copy of the income tax laws of his native country, or an official communication from an accredited diplomatic representative of such country, showing that the country imposes no income tax, or in doing so grants similar credits required by statute.

In any case involving a determination under section 901(b)(3) of the Code as to the entitlement of an alien resident of the United States or Puerto Rico to credit against his United States income tax for taxes paid or accrued during the taxable year to the foreign country of which such taxpayer is a citizen or subject, the Service will require that such alien taxpayer furnish a certified copy of a translation of the pertinent provisions of the current tax law of such foreign country as evidence that the tax imposed by the statutes of such foreign country comes within the United States concept of an "income, war profits, or excess profits tax." Where a determination is required as to the entitlement of such an alien resident to credit against his United States income tax for taxes paid or accrued during the taxable year to a foreign country other than his own, it will also be necessary for him to furnish such evidence that the tax imposed by such other country is an income or profits tax. For the purpose of determining whether the similar credit requirements of section 901(b)(3) of the Code are met, the Service will accept either a certified translated copy of the pertinent provisions of the law providing for allowance of similar credit by the country of which the alien resident is a citizen or subject; an official statement from an accredited diplomatic representative of such foreign country, containing excerpts of the pertinent current laws of the country and evidence of the country's current practice with respect to the allowance of a similar credit to a United States citizen residing in that country; or such other official document originating from the alien resident's country containing matter of sufficient scope and quality to enable the Service to ascertain whether such country meets the similar credit requirements.

Since the provisions of law under which O. D. 253, C. B. 1, 162 (1919), was issued are no longer in effect, O. D. 253 is hereby revoked.