Source: http://vt.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20180509_0000304.CFC.htm/qx
Timestamp: 2019-12-13 05:30:53
Document Index: 780992509

Matched Legal Cases: ['§ 5', '§ 5', '§ 114', '§ 101', '§ 102', '§ 114', '§ 101']

FindACase™ | DWA Holdings LLC v. United States
Before Prost, Chief Judge, O'Malley and Taranto, Circuit Judges.
This appeal concerns the scope of section 101(d) of the American Jobs Creation Act of 2004 ("AJCA"), Pub. L. No. 108-357, 118 Stat. 1418 (2004), a "transitional rule" that places a limit on "the amount includible in gross income" for "transactions during 2005 and 2006." DWA Holdings, LLC ("DWA") appeals from the U.S. Court of Federal Claims' ("Claims Court") summary judgment ruling that income DWA earned overseas after 2006 pursuant to a 2006 transaction was not entitled to transitional benefits under section 101(d).
In this case, as in many other cases involving statutory construction, the history underlying Congress's decision to enact the statute at issue merits discussion. We discuss some of that history briefly before turning to the factual and procedural history of this case.
Although the possibility of "double taxation" of foreign income is a concern both in the United States and abroad, countries take different measures to address it. Id. The United States generally provides credits for taxes paid to foreign governments on income earned abroad, while European and other systems typically exempt from taxation income earned abroad. Id. Congress has long believed that the exemption method used in Europe and elsewhere puts American companies at a disadvantage in terms of exports. See Staff of Joint Comm. on Internal Revenue Taxation, 92d Cong., General Explanation of the Revenue Act of 1971, at 85-86 (1972); see also id. at 86 (noting that "other major trading nations encourage foreign trade by domestic producers in one form or another, " and describing common methods used); H.R. Rep. No. 106-845, at 13-14 (describing the rationale for the enactment of the extraterritorial income regime).
One example of such transitional relief appeared in the FSC Repeal and Extraterritorial Income Exclusion Act of 2000 ("ETI Act"), Pub. L. No. 106-519, 114 Stat. 2423 (2000), enacted on November 15, 2000. While the ETI Act applied generally to "transactions after September 30, 2000, " ETI Act § 5(a), the Act allowed previously established Foreign Sales Corporations ("FSCs") to continue receiving favorable tax treatment for any "transactions" that occurred before January 1, 2002, more than a year after the passage of the FSC repeal, ETI Act § 5(c)(1)(A). Specifically, the law provided that, "[i]n 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" either "before January 1, 2002" or "after December 31, 2001, pursuant to a binding contract . . . between the FSC (or any related person) and any person which is not a related person; and . . . in effect on September 30, 2000, and at all times thereafter." Id. (emphasis added).
The European Union challenged the ETI regime-in particular, its transitional rules-in the World Trade Organization ("WTO"). The WTO ruled against the United States, and, in October 2004, Congress responded by repealing the ETI Act and enacting the AJCA, the tax scheme before us in this appeal. See H.R. Rep. No. 108-548(I), at *7 (June 16, 2004) (repealing the exclusion for extraterritorial income set forth in 26 U.S.C. § 114); AJCA § 101(a). In this go-round, Congress did not enact a regime specific to exports; instead, it created a more diffuse benefit for all "domestic production activities, " regardless of whether they resulted in export sales. AJCA § 102. The House Report accompanying the AJCA explained that the reason for the repeal was to comply with the WTO's decisions: "The Committee believes it is important that the United States, and all members of the WTO, comply with WTO decisions and honor their obligations under WTO agreements. Therefore, the Committee believes that the ETI regime should be repealed." H.R. Rep. No. 108-548(I), at 114 (2004).
Section 101 of the AJCA, titled "Repeal of Exclusion for Extraterritorial Income, " contains a number of provisions that operate together to "phase out" the relevant portions of the ETI Act and help domestic companies transition to a new regime. First, section 101(a) expressly repeals 26 U.S.C. § 114, the provision in the ETI Act that excluded extraterritorial income from taxation. AJCA § 101(a). And section 101(c), titled "Effective Date, " provides that the repeal is effective for ...