History
Former section 114 of the United States Internal Revenue Code excluded "extraterritorial income" which constituted "qualifying foreign trade income" under former section 941 from income. The effect of these provisions was a reduced tax burden in exchange for increased exports, creating an incentive for individuals and businesses within the United States to export. In August 2001, a panel of the World Trade Organization ruled that former section 114 of the United States Internal Revenue Code constituted a violation of the Agreement on Subsidies and Countervailing Measures as a prohibited export subsidy, and a WTO Appellate Body affirmed the finding in January 2002. The finding was based on the fact the provision resulted in the United States government forgoing revenue to which it was otherwise entitled and the fact the resulting subsidy was conditioned on export performance. The United States Congress repealed the exclusion in 2004. To offset the loss of the section 114 benefit, Congress enacted Section 199 regarding qualified production activities income.
Read more about this topic: Qualified Production Activities Income
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