Details on House and Senate Passed Legislation to Repeal the FSC/ETI Tax Regime, Extend MPF and Other User Fees, Etc
As the House and Senate had previously passed different versions of legislation to repeal the Foreign Sales Corporation/Extraterritorial Income Exclusion Act (FSC/ETI) tax regime, a House-Senate conference was held to resolve the differences. The conference version of H.R. 4520 was passed by the House on October 7, 2004, and by the Senate on October 11, 2004. The conference version of H.R. 4520 has been cleared for the White House, but it has not yet been received.
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This is Part II of a multi-part series of summaries highlighting the conference version of H.R. 4520, and covers provisions on the repeal of the FSC/ETI tax regime, duty suspensions for ceiling fans, steam generators, and reactor vessel heads, and the election of a tonnage tax. See ITT's Online Archives or 10/13/04 news, 04101310, for Part I. See future issues for additional summaries.
Repeal of the FSC/ETI Tax Regime
According to a House Ways and Means Committee summary, the conference version of H.R. 4520 would repeal the FSC/ETI tax regime and provide more than $8 billion of transition relief over three years (2004-2006).
(Since March 1, 2004, the EU has imposed additional customs duties on imports of certain U.S.-origin products in connection with the EU's World Trade Organization (WTO) dispute over the U.S. FSC/ETI tax regime. As of October 1, 2004, the level of the additional duties is 12% and is scheduled to increase another 1%, to 13%, on November 1, 2004.)
According to European Union (EU) Trade Commissioner Lamy, the EU will carefully study the conference version of H.R. 4520, in particular its transition periods, grandfathering clauses, as well as other relevant fiscal provisions.)
Temporary Duty-Free Treatment for Certain Ceiling Fans
The conference version of H.R. 4520 would create a new HTS Chapter 99 provision (HTS 9902.84.14) to provide Column 1 duty-free treatment for ceiling fans for permanent installation (provided for in HTS 8414.51.00) through December 31, 2006.
Temporary Duty-Free Treatment for Certain Steam Generators and Reactor Vessel Heads Used in Nuclear Facilities
The conference version of H.R. 4520 would amend HTS 9902.84.02 in order to extend the duty-free treatment provided for watertube boilers with a steam production exceeding 45 t per hour, for use in nuclear facilities (provided for in HTS 8402.11.00) through December 31, 2008. (Such duty-free treatment is currently scheduled to end after December 31, 2006.) The conference version of H.R. 4520 would also create a new HTS Chapter 99 provision (HTS 9902.84.03) that would provide duty-free treatment for reactor vessel heads and pressurizers for nuclear reactors (provided for in HTS 8401.40.00) through December 31, 2008.
Election to Determine Taxable Income from Certain International Shipping Activities using Per Ton Rate
According to the joint explanatory statement of the House-Senate conference committee, the conference version of H.R. 4520 would allow corporations to elect a "tonnage tax" in lieu of the corporate income tax on taxable income from certain shipping activities. Accordingly, an electing corporation's gross income does not include its income from qualifying shipping activities, and electing corporations are only subject to tax on these activities at the maximum corporate tax rate on their notational shipping income, which is based on the net tonnage of the corporation's qualifying vessels. An electing corporation is treated as a separate trade or business activity distinct from all other activities conducted by such corporations.
The joint explanatory statement further states that generally, any qualifying vessel operator may elect into the tonnage tax regime and such election is made in the form prescribed by the Treasury. An election is only effective if made before the due date (including extensions) for filing the corporation's return for such taxable year. However, a qualifying vessel operator, which is a member of a controlled group, may only make an election into the tonnage tax regime if all qualifying vessel operators that are members of the controlled group make such an election. Once made, an election is effective for the taxable year in which it was made and for all succeeding taxable years of the entity until the election is terminated.
Information on the Conference version of H.R. 4520, including conference report text etc., available at http://waysandmeans.house.gov/Links.asp?section=1559.