- 37 -
this case. By applying that standard, we hold that the temporary
regulation is valid. Our holding is based upon the following.
(1) The temporary regulation harmonizes8 with the purpose of
the statute by specifically excluding intangibles from the
definition of export property. The purpose of the DISC/FSC
provisions was to increase U.S. exports and U.S. jobs by excluding
from Federal income tax certain property sold by an FSC or a DISC
that was produced, manufactured, or created in the United States.
See Staff of Joint Comm. on Taxation, General Explanation of the Tax
Reform Act of 1976, at 290-291 (J. Comm. Print 1976). The temporary
regulation allows computer software to be entitled to this
exclusion, as long as the software is not accompanied by a right to
reproduce abroad.
On the other hand, exporting a computer software master with a
right to reproduce abroad sends adaptation, localization, and
manufacturing jobs offshore. Thus, granting FSC benefits to
copyrighted computer software with the right to reproduce abroad
would undermine the basic policy of withholding tax incentives from
export transactions that create manufacturing or production jobs
overseas.
8 Petitioner acknowledges that, in the event we hold that
the parenthetical is restricted to motion pictures and sound
recordings (as we have), respondent’s construction of the
temporary regulation harmonizes with the statute’s plain meaning.
Page: Previous 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 NextLast modified: May 25, 2011