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1 Chris Atkins, FSC/ETI Transition Relief in the New JOBS Act: Does the U.S. Have to Quit Cold Turkey 1 (2005)

handle is hein.taxfoundation/srbddxz0001 and id is 1 raw text is: Marcb12005
No. 133
ds dt &  IntoducionDespite the reasonableness of these measure.,
The U..poiy ntaigexotshsaenmr                                  from a U.S. tax policy perspective, the EU il
7 x~ ~   ~   ~   tit and ttivhe u.S rolcnstnaxminexportsihtnmoe challenging the transition relief as a separate
twists anThemrnscan  obseatM inhAt    lation of WTO law. Some U.S. lawmakers, I
(hakan.  TBSArican obs Crepal)rcntAly Senator Max Baucus (D-MT), think the EU
paased bCo F/EIrese  pe l retentlyt  use this new challenge as leverage in a separa
passd b Cogres wa suposd tobe he ast WTO dispute over EU subsidies for Airbus
scene of the movie. Like a villain in a bad horror  industries.2
thriller, however, the export tax issue just will not  Based on previous WTO decisions on tra.
die. The European Union (EU) challenged the  tion relief, it seems likely that the EU will pri
transition relief in the JOBS Act (soon after its  If the U.S. fails to persuade the WTO that t]
passage) as a violation of World Trade        transition relief is legal, the EU could re-imp
Organization (WTO) law.1 Though the U.S. has  trade sanctions on U.S. goods sold in Europc
tried to block the challenge, it is almost certain  putting us back to square one with regard to
that a new WTO panel will review and rule on  making our export tax policy competitive wii
the transition relief by the end of the year.  Europe. Although this would be unfortunate
The JOBS Act eliminated Extraterritorial   Congress would do well to respond by accele
Income (ETI) tax benefits that the WTO had    ing the tax cuts in the JOBS Act and otherw'
branded as illegal export subsidies. The JOBS  seek to shield U.S. exporters (and all U.S.-ba
Act allowed those benefits to continue, howev-  companies) from the potential damage of an
er, for certain companies that entered into con-  adverse WO decision on transition relief.
tracts for long-term sale, lease and delivery of
goods and services. The JOBS Act also slowly  ASnpi        ftePolm           ihU
phases out ETI benefits over a two-year period,
meaning that new transactions can still partially  Expr_ axPlc
benefit from ETI benefits until full repeal in  The Foreign Sales Corporation (FSC) and
2007.                                         Extraterritorial Income (ETI) tax regimes, lil
1 See United States - Tax Treatment for Foreign Sales Corporations, WT/DS 108/29, Request for the Establishn
of a Panel, January 14th, 2005.
2 See Joe Kirwin, Alison Bennett, and Daniel Pruzin, EU to End Sanctions in Wake of Export Bill But Plans Appi
Grandfather Provisions, International Trade Reporter Current Reports (October 28, 2004) (Senate Finance Commi
olkn                   eortMxBuu Mn. oel rtczdtepa oapa, oeeadsi h                      uoenUi

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