Hastings International and Comparative Law Review


In 1984, the United States Congress enacted the Foreign Sales Corporation (FSC) provisions of the Internal Revenue Code in an effort to promote the export of U.S. produced goods by means of exempting from taxation a portion of income derived from the sale, lease or rental of "export property" for use abroad. The Internal Revenue Service has, however, denied the computer software industry access to this benefit by excluding software from the definition of "export property." This Note examines the congressional intent underlying the enactment of the FSC legislation and the evolution of the interpretation of the term "export property" to conclude that the Service's denial of the FSC benefit to the software industry represents an unwarranted and invalid interpretation of the FSC statute. It, therefore, urges Congress to amend the FSC provisions to explicitly extend the FSC benefit to the software industry, which has evolved into one of the United States most significant export industries.