Senate Approves Legislation to Ensure Level Playing Field for U.S. Companies in the Global Marketplace
WASHINGTON -- The Senate today approved by unanimous consent H.R. 4986, the "FSC Repeal and Extraterritorial Income Exclusion Act of 2000". The legislation is a House-Senate compromise version that was originally included in the conference report to H.R. 2614, the Small Business Investment Act.
"This bill passed by the Senate satisfies the United States' WTO obligations and ensures that U.S. companies will compete on a level playing field in the global marketplace," stated Senate Finance Committee Chairman William V. Roth, Jr. (R-DE).
"By enacting this legislation, we will avoid a needless trade dispute, protect the American economy, and satisfy our international obligations to our trading partners. This bill also represents a continuation of this Senate's outstanding record of accomplishment in promoting free trade. This legislation is the third significant piece of trade legislation passed by the Senate this year. I believe you would have to search long and hard to find a better record of trade legislation.
"I don't believe it is necessary to go through the extended history of the dispute between the United States and the European Union that gave rise to the need for the bill before us. The bill represents a good faith attempt to comply with the WTO's ruling that the current FSC provisions constitute an illegal export subsidy. This bill withdraws the current FSC provisions and, in their place, makes fundamental adjustments to the Internal Revenue Code that incorporate territorial features akin to those of several European tax systems. The bill not only addresses the specific concerns raised by the WTO, it also takes into account the comments received from the EU in the course of consultations over the last eight months.
"I want to stress the need to pass this bill. Failure to do so could result in the imposition of retaliatory duties against American exports to the European Union. Under the WTO rules, the EU will have the right to retaliate against U.S. exports as of today unless this legislation is passed. A failure to enact this legislation would prove costly for the American worker, the American farmer, and for American business.
"So it is with a great sense of satisfaction that we pass this bill today. I compliment the Senate on its farsighted vote for the passage of this legislation.
"Mr. President, I ask unanimous consent to insert in the record a technical explanation of H.R. 4986, prepared by the Joint Committee of Taxation."
Explanation of Versions of H.R. 4986
The "FSC Repeal and Extraterritorial Income Exclusion Act of 2000"
H.R. 4986: As originally passed by the House
This version included a provision that allowed a U.S. corporation to claim a 100 percent dividends received deduction with respect to any dividend distributed out of the earnings and profits of a controlled foreign corporation, but only if the dividend is attributable to qualifying foreign trade income.
H.R. 4986: Bill approved by the Senate Finance Committee
An amendment by Sen. Charles Grassley removed the above-described dividends received deduction from the bill. This version of the bill was not approved by the Senate's unanimous consent agreement.
H.R. 4986: Bill included in H.R. 5542: the Taxpayer Relief Act of 2000, as incorporated by reference in the Conference Agreement for H.R. 2614, the Small Business Investment Act
This version of the bill does not contain the dividends received deduction.
This version also contains revised transition rules that exclude from U.S. tax the historical foreign earnings and profits of certain foreign corporations that elect to become subject to U.S. tax under the new U.S. extraterritorial tax regime. This grandfathering rule removes a potential impediment for foreign corporations that seek to participate in the new extraterritorial tax regime, and is similar to a current law provision that applies to foreign insurance companies which elect to become subject to U.S. taxation (sec. 953(d)). The grandfathering rule would apply only to earnings and profits accumulated in taxable years ending before October 1, 2000.
H.R. 2614 and the incorporated bills were passed by the House, but have not yet passed the Senate.
H.R. 4986: Bill approved by the United States Senate under Unanimous Consent
The version passed under unanimous consent was the version included in the Taxpayer Relief Act of 2000. The Senate agreed to strike the version approved by the Senate Finance Committee and substitute the version included in the Taxpayer Relief Act of 2000.
Next Article Previous Article