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The “Original Intent” of U.S. International Taxation (with Michael O’Hear), 51 Duke Law Journal 1021 (1997)


The Sixteenth Amendment took effect on February 25, 1913, permitting Congress to tax income "from whatever source derived," and on October 3rd of that year, Congress approved a tax on the net income of individuals and corporations. The United States regime for taxing international income took shape soon thereafter, during the decade 1919-1928. In the Revenue Act of 1918, the United States enacted, for the first time anywhere in the world, a credit against U.S. income for taxes paid by a U.S. citizen or resident to any foreign government on income earned outside the United States. The Revenue Act of 1921, the first major tax enactment following World War I, introduced a limitation on this foreign tax credit (FTC) to ensure that a taxpayer's total foreign tax credits could not exceed the amount of the U.S. tax liability on the taxpayer's foreign source income. While details of the foreign tax credit have changed and the methodology for determining the foreign tax credit limitation has varied from time to time, these two provisions still constitute the linchpin of U.S. law taxing income earned abroad by U.S. citizens and residents.

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