DUBLIN: The Washington DC-based US court of federal claims rejected McManus’ claim for a refund of the tax, which was deducted from $17.4m he won when playing US billionaire Alec Gores in a three day backgammon match in 2012. McManus claims citizenship in Ireland but lives in Switzerland. He said he was exempt from US income tax under the US-Ireland double taxation treaty because in 2012 he paid the €200,000 (£173,200) domicile levy. This is the Irish government’s charge for Irish-domiciled individuals who own property in Ireland valued at more than €5m, whose worldwide income exceeds €1m, and whose liability for Irish income tax in the relevant tax year was less than €200,000. McManus argued that the US tax on gambling winnings violated the tax treaty’s non-discrimination provisions, which he argued apply to nationals of the US and Ireland regardless of residence status under the tax treaty. The US government argued that McManus could not benefit from the 1997 treaty because he was not a resident of Ireland for tax purposes in 2012.
Relying on correspondence received from the Irish tax authorities, the US government argued that individuals like McManus who pay only Ireland’s domicile levy do not qualify as ‘residents’ of Ireland for purposes of the tax treaty. The government further argued that McManus’s non-discrimination argument was barred under the doctrine of ‘substantial variance,’ which precludes a tax payer from making arguments based on theories that were not presented in the administrative proceeding before the Internal Revenue Service. Instead, the government argued that the US tax applicable to McManus’s gambling winnings did not violate the non-discrimination provisions of the tax treaty. The ruling concluded: ‘In sum, none of Mr. McManus’s arguments regarding his claim for a refund based on articles 4 and 22 of the tax treaty have merit. The court finds that Mr. McManus’s payment of the domicile levy alone did not make him a resident of Ireland in 2012 for the purposes of Article 4 of the tax treaty and thus his claim for a refund based on Article 22 is denied.’ The US Court of Federal Claims ruling, John P. McManus vs United States, No. 15-946T is here.
