199 - American Jobs Creation Act
A little over six years ago Congress passed the American Jobs Creation Act of 2004 (“Jobs Creation Act”). Title I of the Jobs Creation Act had two purposes: first, it repealed the Exclusion for Extraterritorial Income (“ETI”) as required by a decision of the World Trade Organization and second, it added § 199 to the Internal Revenue Code of 1986. Section 199 was intended, in part, to compensate U.S. exporters for the tax benefits they would lose as a result of the repeal of the exclusion for ETI and also to encourage certain businesses to create jobs. Unfortunately, the IRS has interpreted § 199 in a manner that effectively vitiates the ability of scrap recyclers to claim the deduction, despite the fact that the scrap recycling industry is, and has been for decades, one of the United States largest net exporters, subjecting a large number of recyclers to huge deficiency assessments upon audit.