[Congressional Record Volume 143, Number 1 (Tuesday, January 7, 1997)]
[Extensions of Remarks]
[Page E11]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    STATEMENT ON THE INTRODUCTION OF THE SOFTWARE EXPORT EQUITY ACT

                                 ______
                                 

                           HON. JENNIFER DUNN

                             of washington

                    in the house of representatives

                        Tuesday, January 7, 1997

  Ms. DUNN. Mr. Speaker, on this, the first day of the 105th Congress, 
I introduce the Software Export Equity Act and urge my colleagues to 
support its swift enactment. The Software Export Equity Act enjoys 
tremendous bipartisan support as demonstrated by the members that join 
me as original cosponsors, Messrs. Matsui, Herger, Jefferson, Crane, 
Neal of Massachusetts, McCrery, McDermott, English of Pennsylvania, and 
Weller.
  Today, the U.S. software industry is a vital and growing part of the 
U.S. economy, exporting more than $26 billion worth of software 
annually. U.S. software companies perform a majority of this 
development work here in the United States. This measure will do more 
to ensure the competitivess of the U.S. software industry worldwide 
than any other single legislative change we can enact.
  Congress enacted the FSC rules to assist U.S. exporters in competing 
with products made in other countries which have more favorable tax 
rules for exports. The FSC statute was carefully crafted to ensure that 
only the value-added job creating activity qualified for FSC benefits. 
When the statute was enacted in 1971, the U.S. software industry did 
not exist. However, due to a narrow IRS interpretation of the FSC 
rules, the U.S. software industry is the only U.S. industry that does 
not generally receive this export incentive. Nearly every other U.S. 
manufactured product--from airplanes to toothpaste--qualify for FSC 
benefits. Although the Treasury Department recognized the inconsistency 
in providing FSC benefits to licenses of films, tapes and records, all 
industries that were in existence when the law was created, but not to 
licenses of software, they stated their belief that this problem needed 
to be addressed in legislation rather than by regulation. Treasury has 
further stated their strong support for legislation to extend FSC 
benefits for licenses of computer software.
  To illustrate the inequitable IRS interpretation of FSC rules with 
regard to software exports, suppose we have two CD ROM's--one 
containing a musical recording, the other containing a multimedia 
software product that also provides music. If the master of the musical 
recording is exported with a right to reproduce it overseas, the export 
qualifies for FSC benefits. If the master of the computer software is 
exported with a right to reproduce it overseas, the export does not 
qualify for FSC benefits, a result that makes no sense from either a 
policy or practical perspective. The ability to export software, 
accompanied by a right to reproduce that software in the local market, 
is essential to the way the software industry does business. Denying 
the benefits of the FSC rules to software exported through established 
industry distribution networks poses an impediment to the 
competitiveness of U.S. manufactured software.
  The United States is currently the world leader in software 
development, employing hundreds of thousands of individuals in high-
wage, high-skilled U.S. jobs. Much of the expansion of the industry is 
due to the growth of exports. The software industry, like other U.S. 
exports, needs FSC benefits to remain competitive and keep U.S. jobs 
here at home. FSC benefits are extremely important in encouraging small 
and medium-sized software companies to enter the export market by 
helping them equalize the cost of exporting. In addition, FSC benefits 
are needed to help keep high-paying software development jobs in the 
United States at a time when foreign governments are actively 
soliciting software companies to move those jobs to their countries. I 
do not propose any special or unique treatment, nor seek any new or 
special tax benefit. All that I propose in this measure is fair 
treatment under existing law.
  If the goal of this Congress is to pass legislation promoting 
economic opportunity and growth in America, then common sense dictates 
that we enact the Software Export Equity Act.

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