Chartering vessel to decommission oil and gas wells is ECI

The Tax Court held that a U.K. limited liability company's charter income from decommissioning oil and gas wells and removing debris on the U.S. outer continental shelf (OCS) was effectively connected income (ECI) and subject to U.S. income tax based on Sec. 638 and the U.S.-U.K. tax treaty. In the Gulf of Mexico, the OCS extends up to 200 nautical miles from the U.S. coastline. Because EPIC did not have :he proper marine vessel to do the job, i: leased the M.V. Adams Challenge (Challenge Vessel) with its crew from Adams Challenge Ltd. (Adams Challenge), a U.K. company. [...]any income earned from chartering the Challenge Vessel would be taxable only in the U.K. 4.