26 U.S.C. § 970 : US Code - Section 970: Reduction of subpart F income of export trade corporations

Search 26 U.S.C. § 970 : US Code - Section 970: Reduction of subpart F income of export trade corporations

(a) Export trade income constituting foreign base company income
(1) In general
In the case of a controlled foreign corporation (as defined in
section 957) which for the taxable year is an export trade
corporation, the subpart F income (determined without regard to
this subpart) of such corporation for such year shall be reduced
by an amount equal to so much of the export trade income (as
defined in section 971(b)) of such corporation for such year as
constitutes foreign base company income (as defined in section
954), but only to the extent that such amount does not exceed
whichever of the following amounts is the lesser:
(A) an amount equal to 1 1/2 times so much of the export
promotion expenses (as defined in section 971(d)) of such
corporation for such year as is probably allocable to the
export trade income which constitutes foreign base company
income of such corporation for such year, or
(B) an amount equal to 10 percent of so much of the gross
receipts for such year (or, in the case of gross receipts
arising from commissions, fees, or other compensation for its
services, so much of the gross amount upon the basis of which
such commissions, fees, or other compensation is computed)
accruing to such export trade corporation from the sale,
installation, operation, maintenance, or use of property in
respect of which such corporation derives export trade income
as is properly allocable to the export trade income which
constitutes foreign base company income of such corporation for
such year.
The allocations with respect to export trade income which
constitutes foreign base company income under subparagraphs (A)
and (B) shall be made under regulations prescribed by the
Secretary.
(2) Overall limitation
The reduction under paragraph (1) for any taxable year shall
not exceed an amount which bears the same ratio to the increase
in the investments in export trade assets (as defined in section
971(c)) of such corporation for such year as the export trade
income which constitutes foreign base company income of such
corporation for such year bears to the entire export trade income
of such corporation for such year.
(b) Inclusion of certain previously excluded amounts
Each United States shareholder of a controlled foreign
corporation which for any prior taxable year was an export trade
corporation shall include in his gross income under section
951(a)(1)(A)(ii), as an amount to which section 955 (relating to
withdrawal of previously excluded subpart F income from qualified
investment) applies, his pro rata share of the amount of decrease
in the investments in export trade assets of such corporation for
such year, but only to the extent that his pro rata share of such
amount does not exceed an amount equal to -
(1) his pro rata share of the sum of (A) the amounts by which
the subpart F income of such corporation was reduced for all
prior taxable years under subsection (a), and (B) the amounts not
included in subpart F income (determined without regard to this
subpart) for all prior taxable years by reason of the treatment
(under section 972 as in effect before the date of the enactment
of the Tax Reform Act of 1976) of two or more controlled foreign
corporations which are export trade corporations as a single
controlled foreign corporation, reduced by
(2) the sum of the amounts which were included in his gross
income under section 951(a)(1)(A)(ii) under the provisions of
this subsection for all prior taxable years.
(c) Investments in export trade assets
(1) Amount of investments
For purposes of this section, the amount taken into account
with respect to any export trade asset shall be its adjusted
basis, reduced by any liability to which the asset is subject.
(2) Increase in investments in export trade assets
For purposes of subsection (a), the amount of increase in
investments in export trade assets of any controlled foreign
corporation for any taxable year is the amount by which -
(A) the amount of such investments at the close of the
taxable year, exceeds
(B) the amount of such investments at the close of the
preceding taxable year.
(3) Decrease in investments in export trade assets
For purposes of subsection (b), the amount of decrease in
investments in export trade assets of any controlled foreign
corporation for any taxable year is the amount by which -
(A) the amount of such investments at the close of the
preceding taxable year (reduced by an amount equal to the
amount of net loss sustained during the taxable year with
respect to export trade assets), exceeds
(B) the amount of such investments at the close of the
taxable year.
(4) Special rule
A United States shareholder of an export trade corporation may,
under regulations prescribed by the Secretary, make the
determinations under paragraphs (2) and (3) as of the close of
the 75th day after the close of the years referred to in such
paragraphs in lieu of on the last day of such years. A United
States shareholder of an export trade corporation may, under
regulations prescribed by the Secretary, make the determinations
under paragraphs (2) and (3) with respect to export trade assets
described in section 971(c)(3) as of the close of the years
following the years referred to in such paragraphs, or as of the
close of such longer period of time as such regulations may
permit, in lieu of on the last day of such years and in lieu of
on the day prescribed in the preceding sentence. Any election
under this paragraph made with respect to any taxable year shall
apply to such year and to all succeeding taxable years unless the
Secretary consents to the revocation of such election.