In Uncategorized on 12/22/2015 at 22:30

OK, but when we do, how will Tax Court deal with it? And that’s not Berry Gordy, Hal Davis and Willie Hutch asking, but rather Usman Bhutta, 145 T. C. 14, filed 12/22/15.

Usman claims benefit of the U.S. – Pakistan Tax Treaty, because his purpose in coming to the Land of the Free was to teach; IRS says it was to advance his medical training, and Judge Marvel agrees. The treaty makes tax-free (for US purposes) earnings by foreign teachers, which Usman wasn’t, although he did do some incidental teaching, because teaching wasn’t his principal purpose.

And the University of Oklahoma, where Usman was studying during the year at issue, is not a US instrumentality for purposes of the treaty (or at least Usman can’t prove it was), so Usman doesn’t get the $10K free kick a student-trainee at such an instrumentality gets from the treaty. Aside to a son-in-law: no “Boomer Sooner” for Usman.

To answer the question that leads off this blogpost, here’s Judge Marvel: “When interpreting a treaty, we begin with the text of the treaty and the context in which the written words are used. E. Airlines, Inc. v. Floyd, 499 U.S. 530, 534 (1991); Sumitomo Shoji Am., Inc. v. Avagliano, 457 U.S. 176, 179-180 (1982). The plain meaning of the language of a treaty controls unless its effect is contrary to the intent or expectations of the signatories. Sanchez-Llamas v. Oregon, 548 U.S. 331, 346 (2006) (citing 1 Restatement (Third) of Foreign Relations Law of the United States sec. 325(1) (1986)); Sumitomo Shoji Am., Inc., 457 U.S. at 180; Amaral v. Commissioner, 90 T.C. 802, 812 (1988). Because treaties are contracts between sovereigns, we construe them more liberally than private agreements to give effect to the signatories’ intent. See United States v. Stuart, 489 U.S. 353, 365-366 (1989); Air France v. Saks, 470 U.S. 392, 396 (1985); Factor v. Laubenheimer, 290 U.S. 276, 293 (1933); Estate of Silver v. Commissioner, 120 T.C. 430, 434 (2003) (citing Nw. Life Assurance Co. of Can. v. Commissioner, 107 T.C. 363, 378-379 (1996)). Where appropriate, we may ascertain the meaning of a treaty with an eye toward the treaty’s legislative history and the parties’ negotiations, diplomatic correspondence, and practical construction they have adopted. See Air France, 470 U.S. at 396; Factor, 290 U.S. at 294-295; Estate of Silver v. Commissioner, 120 T.C. at 434; Rust v. Commissioner, 85 T.C. 284, 288-289 (1985). We also give weight to how the departments of the respective governments charged with negotiating and enforcing a treaty interpret that treaty. See Kolovrat v. Oregon, 366 U.S. 187, 194 (1961); Rust v. Commissioner, 85 T.C. at 288.” 145 T. C. 14, at pp. 16-17.

Of course, the only part of this learned disquisition that appears at all relevant in Judge Marvel’s opinion is the plain meaning of the word “purpose,” and for that we go to Hank Black and Merriam-Webster. Neither the treaty itself nor the legislative history, diplomatic correspondence and departments of the respective governments say anything to the point except “plain meaning.”

So I include all these tips to interpreting treaties solely as a checklist. And, of course, for string-cites in your memoranda of law.

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