SEC. 2. BACKGROUND

.01 On November 15, 2000, the Act was signed into law, repealing the FSC provisions of §§ 921 through 927 effective October 1, 2000, and amending the definition of gross income to exclude certain extraterritorial income.

.02 The amendments to the Code made by the Act apply to all transactions entered into after September 30, 2000. Section 943(b)(1) defines the term “transaction” as “any sale, exchange, or other disposition . . . any lease or rental, and . . . any furnishing of services.”

.03 Section 5(c)(1) of the Act provides a transition rule for FSCs in existence on September 30, 2000, whereby the FSC provisions remain applicable to FSC transactions for a limited transition period.

.04 The Act contains several taxpayer elections. First, a taxpayer may elect to exclude the gross receipts from a transaction or transactions from its “foreign trading gross receipts” in any taxable year under § 942(a)(3). Second, certain foreign corporations may elect to be treated as domestic corporations under § 943 (e)(1). Third, a taxpayer may elect under § 5(c)(2) of the Act to apply the ETI exclusion provisions in lieu of the FSC provisions to certain transactions otherwise covered by the transition rules.