§ 971.
(a)
Export trade corporations
For purposes of this subpart, the term “export trade corporation” means—
(1)
In general
A controlled foreign corporation (as defined in section 957) which satisfies the following conditions:
(A)
90 percent or more of the gross income of such corporation for the 3–year period immediately preceding the close of the taxable year (or such part of such period subsequent to the effective date of this subpart during which the corporation was in existence) was derived from sources without the United States, and
(B)
75 percent or more of the gross income of such corporation for such period constituted gross income in respect of which such corporation derived export trade income.
(b)
Export trade income
For the purposes of this subpart, the term “export trade income” means net income from—
(1)
the sale to an unrelated person for use, consumption, or disposition outside the United States of export property (as defined in subsection (e)), or from commissions, fees, compensation, or other income from the performance of commercial, industrial, financial, technical, scientific, managerial, engineering, architectural, skilled, or other services in respect to such sales or in respect of the installation or maintenance of such export property;
(2)
commissions, fees, compensation, or other income from commercial, industrial, financial, technical, scientific, managerial, engineering, architectural, skilled, or other services performed in connection with the use by an unrelated person outside the United States of patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property acquired or developed and owned by the manufacturer, producer, grower, or extractor of export property in respect of which the export trade corporation earns export trade income under paragraph (1);
(3)
commissions, fees, rentals, or other compensation or income attributable to the use of export property by an unrelated person or attributable to the use of export property in the rendition of technical, scientific, or engineering services to an unrelated person; and
(4)
interest from export trade assets described in subsection (c)(4).
(c)
Export trade assets
For purposes of this subpart, the term “export trade assets” means—
(1)
working capital reasonably necessary for the production of export trade income,
(2)
inventory of export property held for use, consumption, or disposition outside the United States,
(3)
facilities located outside the United States for the storage, handling, transportation, packaging, or servicing of export property, and
(4)
evidences of indebtedness executed by persons, other than related persons, in connection with payment for purchases of export property for use, consumption, or disposition outside the United States, or in connection with the payment for services described in subsections (b)(2) and (3).
(d)
Export promotion expenses
For purposes of this subpart, the term “export promotion expenses” means the following expenses paid or incurred in the receipt or production of export trade income—
(1)
a reasonable allowance for salaries or other compensation for personal services actually rendered for such purpose,
(2)
rentals or other payments for the use of property actually used for such purpose,
(3)
a reasonable allowance for the exhaustion, wear and tear, or obsolescence of property actually used for such purpose, and
(4)
any other ordinary and necessary expenses of the corporation to the extent reasonably allocable to the receipt or production of export trade income.
No expense incurred within the United States shall be treated as an export promotion expense within the meaning of the preceding sentence, unless at least 90 percent of each category of expenses described in such sentence is incurred outside the United States.
(Added [Pub. L. 87–834, § 12(a)], Oct. 16, 1962, [76 Stat. 1029]; amended [Pub. L. 92–178, title V, § 505(c)], Dec. 10, 1971, [85 Stat. 553].)