International Tax

Export Tax Incentives (Portfolio 934)

  • The IC DISC rules are a remnant from the DISC rules, which were originally enacted by the Revenue Act of 1971 and then significantly revised by the Deficit Reduction Act of 1984.

Description

The IC DISC rules are a remnant from the DISC rules, which were originally enacted by the Revenue Act of 1971 and then significantly revised by the Deficit Reduction Act of 1984.

Two other former regimes are also discussed. The first is the foreign sales corporation (FSC) rules, an export tax incentive which was enacted by the Deficit Reduction Act of 1984 and repealed by the FSC Repeal and Extraterritorial Income Exclusion Act of 2000. By utilizing a FSC, a U.S. exporter typically was able to obtain a tax benefit equal to a 15% exemption (or more) from federal tax (and, in many cases, state income tax) on its export profits.

Lastly, the portfolio discusses the extraterritorial income (ETI) rules, an export tax incentive which was enacted by the FSC Repeal and Extraterritorial Income Exclusion Act of 2000 and repealed by the American Jobs Creation Act of 2004. The ETI rules provided a tax benefit generally similar to that provided under the FSC rules. The repeal of the ETI regime was generally effective for transactions occurring after December 31, 2004, but transition rules provided for a two-year phase-out of the provisions, as well as continued benefits applicable to exports sold under existing binding contracts. The ETI (and FSC) binding contract provisions were repealed by the Tax Increase Prevention and Reconciliation Act of 2005.

 

Table of Contents

I. Prior Export Tax Incentives Under the Code
II. The Current Export Tax Incentive – Interest-Charge DISCs (IC DISCs)
III. The FSC Rules (1984-2000)
IV. The ETI Rules (2000-2004)

thompson-mark-2015
Mark Thompson
Tax Partner
Deloitte Tax LLP
Terri_Larae
Terri LaRae
Tax Partner
Deloitte Tax LLP
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