D.C. Circuit: Foreign tax credits and totalization agreement with France

Tax credits and totalization agreement with France

The U.S. Court of Appeals for the District of Columbia Circuit today reversed and remanded a decision of the U.S. Tax Court concerning two French taxes and the social security totalization agreement between the United States and France. The D.C. Circuit concluded that the Tax Court committed legal error in its analysis.

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The case is: Eshel v. Commission, No. 14-1215 (D.C. Cir. August 5, 2016). Read the D.C. Circuit’s decision [PDF 82 KB]


The Tax Court in its 2014 opinion reported that the United States and France in 1987 entered into a totalization agreement to coordinate benefits under their respective social security systems. The individual taxpayers in 2008 and 2009 paid two taxes to the French government—la contribution sociale généralisée (CSG) and la contribution pour le remboursement de la dette sociale (CRDS)—and claimed credits for these payments under Code section 901. The IRS disallowed the claimed credits, contending that the taxpayers paid CSG and CRDS to France in accordance with the terms of the United States-France totalization agreement. 

The Tax Court granted summary judgment for the IRS, finding that CSG and CRDS—having been adopted by France after the totalization agrement—amended or supplemented the totalization agreement and thus were not creditable for U.S. income tax purposes. The Tax Court concluded that U.S. social security provisions precluded the taxpayers’ foreign tax credits for CSG and CRDS paid to France in 2008 and 2009.

Today, the D.C. Circuit reversed and remanded, finding that the Tax Court committed legal error in not analyzing the text of the totalization agreement or the understanding of the U.S. and French governments.

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