I
105TH CONGRESS
1ST SESSION
H. R. 143
To amend the Internal Revenue Code of 1986 to provide equity to exports
of software.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 7, 1997
Ms. DUNN (for herself, Mr. MATSUI, Mr. HERGER, Mr. JEFFERSON, Mr.
CRANE, Mr. NEAL of Massachusetts, Mr. MCCRERY, Mr. MCDERMOTT,
Mr. ENGLISH of Pennsylvania, and Mr. WELLER) introduced the follow-
ing bill; which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide
equity to exports of software.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Software Export Eq-
uity Act’’.
SEC. 2. PROVIDING EQUITY TO EXPORTS OF SOFTWARE.
(a) FINDINGS.—
(1) In 1971, well before the emergence of the
United States software industry, Congress enacted
legislation to encourage domestic economic activity,
create jobs, and improve the balance of trade by pro-
viding an incentive to export from the United States.
(2) Through the enactment of the Foreign
Sales Corporation (FSC) statute, Congress intended
to level the playing field so all United States indus-
tries could compete more fairly and effectively with
foreign competitors, who often receive favorable tax
treatment for exports.
(3) In today’s increasingly competitive global
marketplace, one of the most important steps a
United States company can take to reduce the cost
of exporting and thereby increase its opportunities in
the export market is to set up a FSC.
(4) A FSC is established by a United States
corporation to obtain a corporate tax benefit on a
portion of its earnings generated by the sale or lease
of export property.
(5) The statute is carefully crafted to ensure
that only the United States job creating activity
(property manufactured or produced in the United
States and sold or leased outside the United States)
qualifies as export property eligible for FSC bene-
fits.
(6) Today the United States software industry
is an important and growing part of the United
States economy; in an increasingly competitive glob-
al economy, incentives to encourage firms to develop
their products in the United States, and export from
the United States, are more important than ever.
(7) The United States currently has more than
2,000,000 software developers, and those numbers
are growing rapidly. The United States software in-
dustry is a world-wide competitor, exporting more
than $26,000,000,000 worth of software annually.
United States software companies currently perform
a majority of their software development work in the
United States.
(8) As a result of a narrow Internal Revenue
Service interpretation of the law, the United States
software industry, which is at the cutting edge of the
information age, a multitrillion dollar United States
job and economic growth opportunity, does not gen-
erally qualify for the FSC export incentive, which is
available to virtually all United States exports.
(9) The global explosion of technology, driven
by the Internet and the Worldwide Web, is a once
in a lifetime opportunity for the United States soft-
ware industry to expand its global competitiveness.
(b) PURPOSE.—It is the purpose of this Act to clarify
that software qualifies for FSC benefits.
SEC. 3. CLARIFICATION OF APPLICATION OF FOREIGN
SALES CORPORATION RULES TO SOFTWARE.
Subparagraph (B) of section 927(a)(2) of the Inter-
nal Revenue Code of 1986 (relating to property excluded
from eligibility as FSC export property) is amended by
inserting ‘‘, and software, whether or not patented’’ after
‘‘for commercial or home use’’.
Æ