830 CMR 63.00: TAXATION OF CORPORATIONS
830 CMR 63.00 is hereby repealed and replaced with the following:
830 CMR 63.38G.2: Foreign Sales Corporation
(1) Statement of Purpose. This regulation, 830 CMR 63.38G.2, sets forth the treatment, for purposes of Massachusetts taxation, of foreign sales corporations (FSCs) within the meaning of §§ 921 through 927 of the Internal Revenue Code.
For purposes of this regulation, 830 CMR 63.38G.2, the following terms shall have the following meanings:
Commissioner, the Commissioner of Revenue or the Commissioner's representative duly authorized to perform the duties of the Commissioner.
DISC, a DISC as defined in M.G.L. c. 63, § 30.
FSC, a foreign sales corporation as defined in § 922 of the Internal Revenue Code.
Exempt foreign trade income, exempt foreign trade income as defined in § 923 of the Internal Revenue Code, and as modified by any other provision of the Internal Revenue Code, including but not limited to § 291.
(3) General Rules.
(a) Treatment of FSCS.
1. Exempt foreign trade income of a FSC shall not be included in gross income for purposes of M.G.L. c. 63, § 30(5)(a).
2. For purposes of M.G.L. c. 63, §§ 33 and 39A, the Commissioner will follow § 925 of the Internal Revenue Code with respect to transactions between FSCs and shareholder corporations subject to Massachusetts corporate excise taxation.
3. Except to the extent expressly provided in this regulation, 830 CMR 63.38G.2, FSCs are subject to taxation in Massachusetts to the same extent as other foreign corporations.
4. The Commissioner shall have authority to determine whether an entity is a FSC, and whether income qualifies as exempt foreign trade income, without regard to any administrative determinations of the Internal Revenue Service. In determining the tax liability of a particular taxpayer, however, the Commissioner shall ordinarily follow the conclusion of any advance ruling, binding on the Internal Revenue Service with respect to that taxpayer, concerning whether a corporation is a FSC and whether income of a FSC constitutes exempt foreign trade income. Because federal rulings should provide adequate guidance to taxpayers, the Department of Revenue will not rule whether a corporation is a FSC or whether income of a FSC constitutes exempt foreign trade income.
(b) Interest charge DISCs. The Massachusetts tax statutes contain rules of specific application to DISCs. These statutes (which include, but are not limited to, c. 63, §§ 38(a)(1)(ii) and 38G) govern the taxation of all DISCs, including DISCs subject, for purposes of federal taxation, to the interest charge of I.R.C. § 995(f).
(c) Transfers of assets from DISCs to FSCS. With respect to transfers from DISCs to FSCs prior to January 1, 1986 (or, if later, the date one year after the date on which the transferring corporation ceases to be a DISC), the Commissioner shall consider § 805(b)(4) of Pub. L. 98-369 to have the effect of a regulation promulgated under § 367 of the Internal Revenue Code. With respect to transfers from DISCs to FSCs which are not within the operation of § 805(b)(4) of Pub. L. 98-369, the Commissioner shall follow federal regulations (including temporary regulations) promulgated under § 367 of the Internal Revenue Code.
Date of Promulgation: 5/15/87
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