Vanderbilt Law Review

First Page



The existing complexity involved in the taxation of corporate income derived from sources without the United States has motivated Congress to undertake an extensive review of our governmental policy pertaining to this area of taxation. The particular provisions of the Internal Revenue Code of 1954 relating to this subject are merely an ad hoc accumulation, noticeably void of any systematic design. The intended purpose of the present congressional inquiry is to determine whether or not incentive taxation is a proper method by which this nation's foreign policies can be implemented. If it be deemed advisable to offer tax benefits to induce private participation in foreign economic development, Congress will be confronted with the task of completely revising the present Code sections dealing with taxation of foreign source income. Several varied programs are presently before Congress for its consideration.' In light of the immediacy of the situation, it seems proper to consider the intended effect and the actual application of the only effective preferential tax treatment extended by the 1954 Code to corporate income derived from non-domestic sources. The favorable treatment referred to is provided for by section 921. Previous bills have already undertaken to extend this preference to all corporations receiving income from foreign sources. The purpose of this note is to evaluate the effectiveness of this particular tax preference, keeping in mind that our nation's future taxation of foreign source income might well follow a similar pattern.