USA Law and Practice Contributed by: Devon M. Bodoh, Joseph M. Pari and Blake D. Bitter, Weil, Gotshal & Manges LLP
Weil, Gotshal & Manges LLP 2001 M Street NW Suite 600 Washington, DC 20036 USA
Tel: +1 202 682 7000 Web: www.weil.com
1. Sources and Principles 1.1 Domestic Sources of International Tax Law The US constitution governs all sources of US law and the US Constitution, acts of congress (ie, US fed - eral legislation) and treaties (negotiated by the execu - tive branch and approved by the US senate) are the “supreme Law of the Land”. Accordingly, the principal sources of US international tax law are the Internal Revenue Code of 1986, as amended (the “Code”) and income tax treaties. The US Treasury Department (the “Treasury”) and the Internal Revenue Service (the “IRS”), which is a government agency within the Treasury, also implement and interpret the Code and income tax treaties by issuing regulations (“Treasury Regulations”) and other administrative guidance (eg, revenue rulings, notices, technical memorandums). The Treasury Regulations have broad application while other administrative guidance may only reflect the current position of the IRS with respect to the interpretation or application of the Code or Treasury Regulations. In addition to the legislative and administrative sourc - es of US tax law, case law from US federal courts is also a source of tax law as such courts interpret and apply the US Constitution, the Code and treaties. As the courts apply the US Constitution and interpret and apply other sources of US tax law, the courts and case law may override and invalidate legislation, Treasury Regulations, or other administrative guidance. The US currently has 58 income tax treaties covering 66 jurisdictions. Three income tax treaties are current -
ly awaiting US senate approval; specifically treaties with Hungary (replacing a terminated treaty), Poland (replacing a treaty in force) and Vietnam (entering into a treaty for the first time). 1.2 Hierarchy of Sources The US Supreme Court has held that when US fed - eral law or a treaty conflict with the US Constitution, the US Constitution prevails. US federal legislation (ie, the Code) and income tax treaties are on equal footing under the US Constitution and, accordingly, a later-in-time rule generally applies. Nevertheless, US courts first attempt to interpret the law to give effect to both the US federal law and a treaty. Although widely believed not to be required, some courts appear to require a clear and manifest legislative intent to over - ride a treaty with US federal law. 1.3 OECD Model/United Nations Influence on Treaty Practice US treaties do not generally follow the OECD Model Convention or the UN Model Double Taxation Con - vention. The US uses its own model treaty, the current iteration of which was issued in 2016 (the “2016 Model Treaty”). However, the 2016 Model Treaty was original - ly developed from the OECD Model Convention and generally parallels its purpose and structure. Similar to the OECD Model Convention, the 2016 Model Treaty’s underlying policy is to eliminate double taxation with - out creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance. Despite the similarities between the 2016 Model Treaty and the OECD Model Convention, there are important differences. For example, a person other
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