Introduction of the Software Export Equity Act - Jan. 7, 1997

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 competitiveness 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.

Speech from http://gos.sbc.edu/d/dunn4.html.