DT19851 | Double Taxation Relief Manual: Guidance by country: United States of America: admissible taxes

Federal taxes

The following US taxes are admissible for credit in the UK:

• the Federal income tax

• the Federal excise taxes imposed on insurance policies issued by foreign insurers is also available for credit

• the Net Investment Income Tax (NIIT)

Inadmissible

• contributions under the Federal Insurance Contributions Act (which include what are sometimes described as the 'Social Security Taxes' and the 'Medicare taxes', including the Additional Medicare tax)

• contributions under the Self-Employment Contributions Act (sometimes described as ‘Self-Employment Tax’)

• environmental insurance resolution fee (EIRF)

• environmental insurance resolution assessment (EIRA)

State Taxes

Alabama

Admissible

• general income tax

Inadmissible

• franchise tax

Alaska

Admissible

• general income tax (All claims for credit for this tax must be submitted to HMRC, Business Assets & International, Tax Treaty Team)

Inadmissible

• corporation tax (if `annual corporation tax’ which is a flat rate licence type levy)

Arizona

Admissible

• general income tax

Arkansas

Admissible

• income tax (on individuals and companies)

Inadmissible

• corporation franchise tax

California

Admissible

• corporation income tax

• personal income tax

• insurance companies tax on marine insurance companies

• bank and corporation franchise tax. This tax is charged on a ‘unitary’ or world-wide combined reporting basis.

To determine the profits of a company doing business in California, the Franchise Tax Board apportions the world-wide profits of the company according to the proportion of the company’s sales, property and payroll that is attributable to California.

Moreover, in determining the profits of the company, the Franchise Tax Board includes in its calculations a proportion of the profits of associated companies which, together with the company which does business in California, are regarded as forming a unitary group. If the company makes what is called a ‘water’s edge’ election, a more limited range of other companies is taken into account for this purpose.

If the Californian tax is paid by a company which does business in California through a branch in the United States, the profits of which are taxed in the UK as part of the profits of a UK resident company, credit should be given against the UK tax, if any, payable on the profits of the United States branch (as computed for UK tax purposes) for the lesser of

• the actual Californian tax paid by the company, and

• the amount of Californian tax which it would have paid if the tax had been imposed only on those profits of the company, and of the other companies whose profits have been taken into account by the Californian Franchise Tax Board, which arise in the United States (not just in California)

The need to look at where profits arise derives from TIOPA10/S9(1). The question of where profits arise is to be determined under UK law according to where the operations take place from which the profits in substance arise (see INTM161110).

It can be accepted that all the profits of the branch itself, as computed on an arm’s length basis for UK tax purposes, arise in the United States. However, the profits of other companies which have been included in the calculations by the Franchise Tax Board are to be regarded as arising in the United States only if the test mentioned in the previous sub-paragraph is satisfied.

Inspectors should use their judgement in deciding how far to pursue enquiries into the precise figures. Credit relief will be available for United States Federal income tax paid on the profits of the branch. If the UK tax on the profits is covered by Federal income tax and by the Californian tax that would have been paid on the profits of the Californian branch computed on an arm’s length basis, then further enquiries will not be necessary.

Refer to BAI Tax Treaty Team any claim to credit relief from a company which does not have a branch in California but whose profits have been included by the Franchise Tax Board in its calculations of Californian tax payable.

Inadmissible

• state disability insurance tax

• insurance companies tax on general insurance companies

Colorado

Admissible

• general income tax

Inadmissible

• insurance companies tax

Connecticut

Admissible

• corporation business tax (franchise tax) where it is charged on income

• income tax

Inadmissible

• corporation business tax where it is charged on value or represents a minimum levy

• insurance companies tax

Delaware

Admissible

• corporation income tax

• personal income tax

District of Columbia

Admissible

• individual income tax

• corporate income tax

Florida

Admissible

• corporation franchise (income) tax

• 2.2% emergency excise tax (component of the corporate income tax)

• emergency excise levy

Inadmissible

• general property tax

• local ‘Tourist Development taxes’ (charged on gross rentals)

• state tax on sales, use, rentals and admissions

• tangible personal property tax.

Georgia

Admissible

• general income tax

Hawaii

Admissible

• general income tax

Idaho

Admissible

• general income tax

Illinois

Admissible

• corporation replacement income tax (personal property replacement tax)

• income tax.

Inadmissible

• corporation franchise tax

• personal property tax

• sales and use tax

• filing fee

Indiana

Admissible

• adjusted gross income tax

Inadmissible

• financial institutions tax

• insurance (foreign companies) tax

• public utilities tax

Iowa

Admissible

• general income tax

Kansas

Admissible

• corporation income tax (including surtax)

• income tax (individuals)

Inadmissible

• use tax (sales tax)

Kentucky

Admissible

• general income tax.

• occupational licence fee (Lexington-Fayette Urban County and Louisville and Jefferson County)

Louisiana

Admissible

• general income tax

Inadmissible

• corporation franchise tax

• sales tax

• use tax

Maine

Admissible

• general income tax

Maryland

Admissible

• corporation income tax

• Maryland state income tax

Inadmissible

• insurance companies tax

Massachusetts

Admissible

• corporate excise (income) tax, where charged on net income but not where charged on any other basis

• personal income tax

Inadmissible

• sales and use tax

• sales and use tax registration

Michigan

Admissible

• personal income tax

• single business tax

• income tax (City of Detroit)

• income tax (City of Grand Rapids)

Inadmissible

• filing fee.

• intangibles tax

• sales and use tax

Minnesota

Admissible

• income tax (on corporations and individuals)

Mississippi

Admissible

• general income tax

Inadmissible

• corporation franchise tax

• use tax

Missouri

Admissible

• corporation income tax

• intangible personal property tax

• income tax (Kansas City and St Louis)

Inadmissible

• corporation franchise tax

• annual licence tax

Montana

Admissible

• corporation licence (income) tax

• corporation income tax

• personal income tax

Nebraska

Admissible

• personal income tax

• corporation income tax

Inadmissible

• occupational tax

New Hampshire

Admissible

• business profits tax

New Jersey

Admissible

• corporation franchise tax except where it represents a minimum levy or is charged on amounts other than net income.

• corporation business tax on net income (not on net worth)

• insurance companies tax on marine insurance companies

• personal income tax

Inadmissible

• bank stock tax

• excise tax

• financial business excise tax

• insurance companies tax on general and life insurance companies

• corporation business tax charged on net worth

New Mexico

Admissible

• general income tax

Inadmissible

• corporation franchise tax.

• real property transfer tax

• compensating tax

• gross receipts tax

New York City

Admissible

• earnings tax on non-residents where it is charged on salaries

• financial corporation income tax where it is charged on income, but not where it is charged on any other basis

• general corporate (income) tax, where charged on net income, but not where charged on any other basis

• personal income tax on residents where it is charged on salaries

• unincorporated business tax

Inadmissible

• gross receipts tax

• occupancy tax

• vault tax

• real estate tax

New York State

Admissible

• personal income tax.

• unincorporated business income tax

• corporation franchise tax except where it represents a minimum levy or is a charge based on capital or is charged on amounts other than net income

• transfer gains tax (real property gains tax)

• metropolitan commuter transportation district surcharge

Inadmissible

• additional charge on corporation franchise tax

• realty transfer tax

• sales and use tax

North Carolina

Admissible

• general income tax

• financial institutions excise tax except where it represents a minimum levy

Inadmissible

• corporation franchise tax

• insurance companies tax

• intangible property tax

North Dakota

Admissible

• general income tax

Ohio

Admissible

• corporation franchise (income) tax when charged on net income

• city income taxes (various)

• Cleveland net profits tax

• Village of Mariemont business earnings tax

Inadmissible

• use tax

• excise tax

Oklahoma

Admissible

• general income tax

Inadmissible

• corporation franchise tax

Oregon

Admissible

• corporate (excise) income tax

• personal income tax.

Pennsylvania

Admissible

• corporate net income tax except where it is charged on amounts other than net income

• personal income tax

• Chester County income tax

• school district corporate income tax (Philadelphia)

• net profits tax and wages tax (Philadelphia - see Note 1)

• school district investment income tax where charged on income or, where the UK charge is to capital gains tax, where charged on capital gains

• Philadelphia City income tax

Inadmissible

• foreign corporations franchise tax

• county personal property tax

• sales and use tax

• foreign corporation excise tax

• business privilege tax, when charged on gross income (Philadelphia - see Note 1)

Note 1: The Philadelphia Business privilege tax (BPT) has two elements. That charged on gross income is inadmissible. The other component of the BPT is the tax on net profits which, as shown above, is admissible for unilateral relief.

Rhode Island

Admissible

• business corporate tax where charged on net income, but not where charged on any other basis

South Carolina

Admissible

• personal income tax

• corporation income tax

Tennessee

Admissible

• corporation excise (income) tax

Inadmissible

• corporation franchise tax

• business tax

Texas

Admissible

• corporation franchise tax (to the extent that it is charged on income)

Inadmissible

• corporation franchise tax (to the extent that it is charged on capital)

Utah

Admissible

• corporation franchise tax when charged on net income

Inadmissible

• educational funding tax

Vermont

Admissible

• personal income tax

• corporate income tax (when charged on banks, savings banks, trust companies and other financial concerns, this is replaced by franchise tax)

Inadmissible

• minimum tax (represents a flat filing fee)

Virginia

Admissible

• corporate income tax

• personal income tax

Inadmissible

• insurance companies tax

• litter control tax

Washington, State of

Inadmissible

• business and occupation tax

• corporation annual licence tax

• corporation franchise tax

• insurance companies premium tax

• litter tax

• gross receipts tax

• use tax

• Seattle business tax

West Virginia

Admissible

• corporation income tax

Inadmissible

• licence tax.

Wisconsin

Admissible

• corporate franchise tax

• income tax

Any claim for credit in respect of a tax not mentioned should be referred to BAI Tax Treaty Team in accordance with the general guidance at INTM161310.