Description of Expiring Tax Provisions : Scheduled for a Hearing Before the Subcommittee On Taxation And Debt Management of the Senate Committee On Finance On March 28, 1988 Jcs-8-88
Description of Expiring Tax Provisions : Scheduled for a Hearing Before the Subcommittee On Taxation And Debt Management of the Senate Committee On Finance On March 28, 1988 Jcs-8-88
United States. Congress. Joint Committee On Taxation
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source gross income, rhis suspension was initially established by the Economic Recovery Tax Act of 1981 (ERTA), covering any taxpayer's first 2 taxable ^ears beginning within 2 years after August 13, 1981. In the tax- able years governed by this aspect of ERTA, all U.S.-incurred R&D expenses were allocated to U.S.-source income. This scheme was ex- tended by the Deficit Reduction Act of 1984 (DEFRA) and the Con- solidated Omnibus Budget Reconciliation Act of 1985 (COBRA) through taxable years b...eginning on or before August 1, 1986. For taxable years beginning after August 1, 1986 and on or before August 1, 1987, the Tax Reform Act of 1986 (TRA) intro- duced a modified scheme under which 50 percent of such expenses (other than amounts incurred to meet certain legal requirements, and thus allocable to one geographical source) were allocated to U.S. source income, with the remainder allocated and apportioned either on the basis of sales or gross income. In contrast with the R&D regulation, the temporary rule of TRA (a) gave taxpayers using the gross sales method of apportionment an automatic place- ofperformance allocation, for U.S.-incurred R&D, of 50 (rather than 30) percent; (b) allowed taxpayers using the gross income ap- portionment method to use the automatic place-of-performance rule; and (c) imposed no limit on the extent to which use of the gross income method could result in decreasing the amount of R&D expenses that would otherwise be allocated to foreign source income using the gross sales method.
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