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  1. IRC
  2. Subtitle A
  3. Chapter 1
  4. Subchapter N
  5. Part III
  6. Subpart C
  7. § 921

Sec. 921. Exempt Foreign Trade Income Excluded From Gross Income [Repealed]

I.R.C. § 921(a) Exclusion [Repealed] —
Exempt foreign trade income of a FSC shall be treated as foreign source income which is not effectively connected with the conduct of a trade or business within the United States.
I.R.C. § 921(b) Proportionate Allocation Of Deductions To Exempt Foreign Trade Income [Repealed] —
Any deductions of the FSC properly apportioned and allocated to the foreign trade income derived by a FSC from any transaction shall be allocated between—
I.R.C. § 921(b)(1) —
the exempt foreign trade income derived from such transaction, and
I.R.C. § 921(b)(2) —
the foreign trade income (other than exempt foreign trade income) derived from such transaction, on a proportionate basis.
I.R.C. § 921(c) Denial Of Credits [Repealed] —
Notwithstanding any other provision of this chapter, no credit (other than a credit allowable under section 27(a), 33, or 34) shall be allowed under this chapter to any FSC.
I.R.C. § 921(d) Foreign Trade Income, Investment Income, And Carrying Charges Treated As Effectively Connected With United States Business [Repealed] —
For purposes of this chapter—
I.R.C. § 921(d)(1) —
all foreign trade income of a FSC other than—
I.R.C. § 921(d)(1)(A) —
exempt foreign trade income, and
I.R.C. § 921(d)(1)(B) —
section 923(a)(2) non-exempt income,
I.R.C. § 921(d)(2) —
all interest, dividends, royalties, and other investment income received or accrued by a FSC, and
I.R.C. § 921(d)(3) —
all carrying charges received or accrued by a FSC, shall be treated as income effectively connected with a trade or business conducted through a permanent establishment of such corporation within the United States. Income described in paragraph (1) shall be treated as derived from sources within the United States.
(Added Pub. L. 98-369, div. A, title VIII, 801(a), July 18, 1984, 98 Stat. 985; repealed, Pub. L. 106-519, Sec. 2, Nov. 15, 2000.)
BACKGROUND NOTES
AMENDMENT
2000 - Pub. L. 106-519, Sec. 2, repealed Sec. 921.
EFFECTIVE DATE OF REPEAL
Section 5 of Pub. L. 106-519 provided:
“(a) IN GENERAL.--The amendments made by this Act shall apply to transactions after September 30, 2000.
“(b) NO NEW FSCs; TERMINATION OF INACTIVE FSCs.--
“(1) No NEW FSCS.-- No corporation may elect after September 30, 2000, to be a FSC (as defined in section 922 of the Internal Revenue Code of 1986, as in effect before the amendments made by this Act).
“(2) TERMINATION OF INACTIVE FSCS.-- If a FSC has no foreign trade income (as defined in section 923(b) of such Code, as so in effect) for any period of 5 consecutive taxable years beginning after December 31, 2001, such FSC shall cease to be treated as a FSC for purposes of such Code for any taxable year beginning after such period.
“(c) TRANSITION PERIOD FOR EXISTING FOREIGN SALES CORPORATIONS.--
Editor's Note: Sec. 513(a) of Pub. L. 109-222 amended Sec. 5(c)(1) of Pub. L. 106-519, effective on the date of the enactment of Pub. L. 109-222 [Enacted: May 17, 2006]. Before amendment, Sec. 5(c)(1) read as follows:
“(1) IN GENERAL.-- In the case of a FSC (as so defined) in existence on September 30, 2000, and at all times, thereafter, the amendments made by this Act shall not apply to any transaction in the ordinary course of trade or business involving a FSC which occurs--
“(A) before January 1, 2002; or
“(B) after December 31, 2001, pursuant to a binding contract
“(i) which is between the FSC (or any related person) and any person which is not a related person; and
“(ii) which is in effect on September 30, 2000, and at all times thereafter.
“For purposes of this paragraph, a binding contract shall include a purchase option, renewal option, or replacement option which is included in such contract and which is enforceable against the seller or lessor.
Editor's Note: Sec. 513(a) of Pub. L. 109-222 amended Sec. 5(c)(1) of Pub. L. 106-519, effective May 17, 2006, to read as follows:
“(1) IN GENERAL.-- In the case of a FSC (as so defined) in existence on September 30, 2000, and at all times, thereafter, the amendments made by this Act shall not apply to any transaction in the ordinary course of trade or business involving a FSC which occurs before January 1, 2002.
“(2) ELECTION TO HAVE AMENDMENTS APPLY EARLIER.-- A taxpayer may elect to have the amendments made by this Act apply to any transaction by a FSC or any related person to which such amendments would apply but for the application of paragraph (1). Such election shall be effective for the tmxable year for which made and all subsequent taxable years, and, once made, may be revoked only with the consent of the Secretary of the Treasury.
“(3) EXCEPTION FOR OLD EARNINGS AND PROFITS OF CERTAIN CORPORATIONS.--
“(A) IN GENERAL.-- In the case of a foreign corporation to which this paragraph applies--
“(i) earnings and profits of such corporation accumulated in taxable years ending before October 1, 2000, shall not be included in the gross income of the persons holding stock in such corporation by reason of section 943(e)(4)(B)(i), and
“(ii) rules similar to the rules of clauses (ii), (iii), and (iv) of section 953(d)(4)(B) shall apply with respect to such earnings and profits.
“The preceding sentence shall not apply to earnings and profits acquired in a transaction after September 30, 2000, to which section 381 applies unless the distributor or transferor corporation was immediately before the transaction a foreign corporation to which this paragraph applies.
“(B) EXISTING FSCS.--This paragraph shall apply to any controlled foreign corporation (as defined in section 957) if--
“(i) such corporation is a FSC (as so defined) in existence on September 30, 2000.
“(ii) such corporation is eligible to make the election under section 943(e) by reason of being described in paragraph (2)(B) of such section, and
“(iii) such corporation makes such election not later than for its first taxable year beginning after December 31, 2001
“(C) OTHER CORPORATIONS.--This paragraph shall apply to any controlled foreign corporation (as defined in section 957), and such corporation shall (notwithstanding any provision of section 943(e)) be treated as an applicable foreign corporation for purposes of section 943(e), if--
“(i) such corporation is in existence on September 30, 2000,
“(ii) as of such date, such corporation is wholly owned (directly or indirectly) by a domestic corporation (determined without regard to any election under section 943(e)),
“(iii) for each of the 3 taxable years preceding the first taxable year to which the election under section 943(e) by such controlled foreign corporation applies--
“(I) all of the gross income of such corporation is subpart F income (as defined in section 952), including by reason of section 954(b)(3)(B), and
“(II) in the ordinary course of such corporation's trade or business, such corporation regularly sold (or paid commissions) to a FSC which on September 30, 2000, was a related person to such corporation,
“(iv) such corporation has never made an election under section 922(a)(2) (as in effect before the date of the enactment of this paragraph) to be treated as a FSC, and
“(v) such corporation makes the election under section 943(e) not later than for its first taxable year beginning after December 31, 2001.
“The preceding sentence shall cease to apply as of the date that the domestic corporation referred to in clause (ii) ceases to wholly own (directly or indirectly) such controlled foreign corporation.
“(4) RELATED PERSON.--For purposes of this subsection, the term related person has the meaning given to such term by section 943(b)(3).
“(5) SECTION REFERENCES.--Except as otherwise expressly provided, any reference in this subsection to a section or other provision shall be considered to be a reference to a section or other provision of the Internal Revenue Code of 1986, as amended by this Act.
“(d) SPECIAL RULES RELATING TO LEASING TRANSACTIONS.--
“(1) SALES INCOME.--If foreign trade income in connection with the lease or rental of property described in section 927(a)(1)(B) of such Code (as in effect before the amendments made by this Act) is treated as exempt foreign trade income for purposes of section 921(a) of such Code (as so in effect), such property shall be treated as property described in section 941(c)(1)(B) of such Code (as added by this Act) for purposes of applying section 941(c)(2) of such Code (as so added) to any subsequent transaction involving such property to which the amendments made by this Act apply.
“(2) LIMITATION ON USE OF GROSS RECEIPTS METHOD.--If any person computed its foreign trade income from any transaction with respect to any property on the basis of a transfer price determined under the method described in section 925(a)(1) of such Code (as in effect before the amendments made by this Act), then the qualifying foreign trade income (as defined in section 941(a) of such Code, as in effect after such amendment) of such person (or any related person) with respect to any other transaction involving such property (and to which the amendments made by this Act apply) shall be zero.”
EFFECTIVE DATE
Section 805(a) of title VIII of div. A of Pub. L. 98-369, as amended by Pub. L. 99-514, 2, title XVIII, 1876(i), (o), (p)(4), Oct. 22, 1986, 100 Stat. 2095, 2900-2902, provided that:
“(1) In general.--Except as provided in this subsection, the amendments made by this title [enacting sections 921 to 927 of this title, amending sections 245, 246, 274, 275, 441, 901, 904, 906, 934, 936, 951, 956, 992, 993, 995, 996, 999, 1248, 6011, 6072, 6501, 6686, and 7651 of this title, and enacting provisions set out as notes under sections 921 and 991 of this title] shall apply to transactions after December 31, 1984, in taxable years ending after such date.
“(2) Special rule for certain contracts.--To the extent provided in regulations prescribed by the Secretary of the Treasury or his delegate, any event or activity required to occur or required to be performed, before January 1, 1985, by section 924(c) or (d) or 925(c) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] shall be treated as meeting the requirements of such section if such event or activity is with respect to--
“(A) any lease of more than 3 years duration which was entered into before January 1, 1985,
“(B) any contract with respect to which the taxpayer uses the completed contract method of accounting which was entered into before January 1, 1985, or
“(C) in the case of any contract other than a lease or contract described in subparagraph (A) or (B), any contract which was entered into before January 1, 1985; except that this subparagraph shall only apply to the first 3 taxable years of the FSC ending after January 1, 1985, or such later taxable years as the Secretary of the Treasury or his delegate may prescribe.
“(3) Section 801(d)(10).--The amendment made by section 801(d)(10) [amending section 996 of this title] shall apply to distributions on or after June 22, 1984.
“(4) Section 803.--The amendments made by section 803 [amending section 441 of this title] shall apply to taxable years beginning after December 31, 1984.”
SUBMISSION OF BI—ANNUAL REPORTS TO CONGRESS
Section 804(a) of title VIII of div. A of Pub. L. 98-369, as amended by Pub. L. 100-647, title VI, 6252(b)(2)(A), Nov. 10, 1988, 102 Stat. 3753, provided that: “The Secretary of the Treasury shall, during 1990 and each fourth calendar year thereafter, submit a report to the Congress (using the most recent information available) setting forth an analysis of the operation and effect of the provisions of this title [see Effective Date note above for classification].”
[Section 6252(b)(2)(B) of Pub. L. 100-647 provided that: “The amendment made by subparagraph (A) [amending section 804(a) of Pub. L. 98-369, set out above] shall take effect as if included in the amendments made by section 804(a) of the Tax Reform Act of 1984 [Pub. L. 98-369, set out above]."]
PRIOR PROVISIONS
A prior section 921, acts Aug. 16, 1954, ch. 736, 68A Stat. 290; Oct. 4, 1976, Pub. L. 94-455, title XIX, 1901(a)(116), 90 Stat. 1784, which defined Western Hemisphere trade corporation, was repealed by Pub. L. 94-455, title X, 1052(b), Oct. 4, 1976, 90 Stat. 1648, effective with respect to taxable years beginning after Dec. 31, 1979.