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Abstract: 

On October 22, 2004, President Bush signed into law The American Jobs Creation Act of 2004. Although far-reaching in its scope, the impetus for the 2004 Act was the World Trade Organization’s ruling in January 2002 that the extra-territorial income (ETI) exclusion regime of prior law was a prohibited export subsidy. When members of the House Ways and Means Committee first began discussing how to structure legislation and provide incentives to repeal and replace the ETI regime, they wanted to provide incentives that fostered job creation in the manufacturing industry, which is the primary beneficiary of the ETI exclusion. One of the key provisions of the 2004 Act is new Internal Revenue Code Section 199 which provides a deduction relating to income attributable to certain domestic manufacturing activities. However, the statutory language of Section 199 provides benefits to a much broader group of taxpayers than those traditionally considered to be “manufacturers.” This new deduction, which phases in over six years and is designed to reduce the effective corporate tax rate for eligible taxpayers from 35% to 32% in 2010, is effective for taxable years beginning after December 31, 2004.

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Affiliations:  1: Texas Tech University.