Q:   When can I begin to claim ETI benefits?

A:  The ETI exclusion and FSC repeal legislation is effective September 30, 2000.  Thus, companies can begin claiming the ETI exclusion for qualified sales on or after October 1, 2000.  For calendar year companies, including sole proprietorships and members of S corporations or U.S. partnerships, these provisions will reduce the U.S. tax liability on qualified foreign trade income earned during the fourth quarter, or October, November and December of 2000.  As indicated above, the ETI exclusion is not elective, unless the company has filed a FSC election.

No new FSC elections can be filed after September 30.  For companies with a FSC, transition rule relief is available until December 31, 2001.  FSC shareholders can elect to claim the ETI exclusion after October 1, 2000, in lieu of FSC tax benefits.  An IRS revenue procedure is expected before the end of the year (2000) to clarify when and how to make the ETI election.  Before making this election, companies with an active or dormant FSC must determine which regime provides them with the best tax benefits.