Christensen v. United States: the France treaty and the NIIT

Matthew and Katherine Christensen are US citizens who lived in Paris in 2015. That year they sold shares of a French company at a profit and, as both countries require, paid income tax to France and to the United States — including $3,851 of net investment income tax to the IRS. In 2020 they sued for a refund of the $3,851 in the Court of Federal Claims, arguing that Article 24 of the 1994 Convention gave them a credit for their French tax that should have offset it. In 2023 the trial court agreed, on the strength of Article 24(2)(b). The government appealed.

What the court held

The Federal Circuit reversed. Its reasoning runs in two steps.

Article 24(2)(a). The court agreed with the trial court that this clause — which allows the French income tax "as a credit against the United States income tax" "in accordance with the provisions and subject to the limitations of the law of the United States" — provides a credit only against chapter 1 tax, not against the chapter 2A NIIT. It adopted the reasoning of its companion opinion in Bruyea: the Code gives no credit against the NIIT, and a treaty credit expressly made subject to the Code's provisions and limitations cannot escape them.

Article 24(2)(b). This clause, specific to "an individual who is both a resident of France and a citizen of the United States", does not repeat the limiting words. The trial court had read that silence as freedom from §§27 and 901(a). The Federal Circuit did not. Reading paragraph 2 as a whole, it held that the U.S. Law Limitation "appears in the very first part of paragraph 2" and "serves as an overarching qualifier to both subparagraphs (a) and (b)" — presented once, up front, rather than repeated for each category of taxpayer. Three further points supported that reading.

• Structure. Subsections of one provision are read together, not as standalone rules; the trial court had "treated paragraphs 2(a) and 2(b) as divorced from one another".
• Re-sourcing. Article 24(2)(b)(ii) treats certain US-source income as French-source "to the extent necessary to give effect to" the credit — a rule that exists only because the credit operates inside §904(a)'s source limit. If the treaty credit stood outside the Code, the re-sourcing rule would be superfluous, and readings that render a provision superfluous are avoided.
• Anomalous results. On the taxpayers' reading, a citizen in Paris could credit French tax against the NIIT while a similarly situated citizen in New York could not; and the Paris resident could stack that credit on top of the §911 exclusion in a way §911(d)(6) forbids everyone else. The court saw no basis to conclude the treaty partners intended to treat citizens abroad better than citizens at home.

Who is affected

A US citizen resident in France, with modified adjusted gross income over $200,000 (single or head of household), $250,000 (joint) or $125,000 (separate), who has net investment income — dividends from a CTO, gains in a PEA, coupons on bonds, rent, a property or a business sold — and who paid French tax on it. The French tax still credits against the regular US income tax on Form 1116; it does not credit against the 3.8%, and the decision confirms that no reading of the treaty makes it do so.

It reaches, in particular, anyone who claimed a treaty-based credit against Form 8960 on a filed return — usually with a Form 8833 disclosure citing the trial-court decision — and anyone holding a protective refund claim for the same position.

What did not change

Two scenarios

A PEA with a large gain. Single, resident in Bordeaux, $95,000 of excluded salary, a $110,000 gain on PEA funds after five years — exempt from French income tax, subject to 17.2% social charges. MAGI $205,000; excess $5,000; NIIT $190. Little French income tax to credit against the regular tax either, because the PEA gain is exempt in France; the credit question and the NIIT question both come out small. The PFIC question on the funds inside the PEA is the larger one.

A business sold. Married filing jointly, resident in Lyon, $1,000,000 gain on the sale of a French company's shares, French flat tax paid. MAGI well over $250,000; NIIT 3.8% of the gain — $38,000 — against which none of the French tax counts. The Form 1116 credit against the regular US tax on the same gain is likely to be complete.

What to review

1. Returns for open years on which a treaty-based credit was taken against Form 8960: discuss an amended return with the preparer, and the interest that runs from the original due date.
2. Any protective claim or pending refund suit built on the trial-court decision.
3. The Form 1116 computation for the same years — the credit against regular tax should be intact, with re-sourcing applied where the treaty lets France tax first.
4. Going forward, the 3.8% as a planned cost of French investment income above the threshold; and, where funds are involved, the Form 8621 work that decides what the income is.

Reviewed against the opinions on 2026-09-15. Rehearing and certiorari windows are open as of 2026-09-15 (rehearing petition due within 45 days of the August 31, 2026 judgment; certiorari within 90 days of judgment or of a rehearing denial). No petition had been docketed when this record was last checked. The docket is re-checked by 2026-10-16; if the status changes, this page changes with it.

This page explains a court decision; it is not legal advice. Atamatax computes the NIIT and the Form 1116 credit separately, never applies one to the other, and cites this decision in the record it produces for France.