Foreign-Derived Deduction Eligible Income (FDDEI) Deduction

§ 250. Foreign-derived deduction eligible income and net CFC tested income(a) Allowance of deduction(1) In generalIn the case of a domestic corporation for any taxable year, there shall be allowed as a deduction an amount equal to the sum of—(A) 33.34 percent of the foreign-derived deduction eligible income of such domestic corporation for such taxable year, plus (B) 40 percent of—(i) the net CFC tested income amount (if any) which is included in the gross income of such domestic corporation under section 951A for such taxable year, and (ii) the amount treated as a dividend received by such corporation under section 78 which is attributable to the amount described in clause (i). (2) Limitation based on taxable income(A) In generalIf, for any taxable year—(i) the sum of the foreign-derived deduction eligible income and the net CFC tested income amount otherwise taken into account by the domestic corporation under paragraph (1), exceeds (ii) the taxable income of the domestic corporation (determined without regard to this section), then the amount of the foreign-derived deduction eligible income and the net CFC tested income amount so taken into account shall be reduced as provided in subparagraph (B). (B) ReductionFor purposes of subparagraph (A)—(i) foreign-derived deduction eligible income shall be reduced by an amount which bears the same ratio to the excess described in subparagraph (A) as such foreign-derived deduction eligible income bears to the sum described in subparagraph (A)(i), and (ii) the net CFC tested income amount shall be reduced by the remainder of such excess. (b) Foreign-derived deduction eligible incomeFor purposes of this section—(1) Foreign-derived deduction eligible incomeThe term “foreign-derived deduction eligible income” means, with respect to any taxpayer for any taxable year, any deduction eligible income of such taxpayer which is derived in connection with—(A) property—(i) which is sold by the taxpayer to any person who is not a United States person, and (ii) which the taxpayer establishes to the satisfaction of the Secretary is for a foreign use, or (B) services provided by the taxpayer which the taxpayer establishes to the satisfaction of the Secretary are provided to any person, or with respect to property, not located within the United States. (2) Rules relating to foreign use property or servicesFor purposes of this subsection—(A) Foreign useThe term “foreign use” means any use, consumption, or disposition which is not within the United States. (B) Property or services provided to domestic intermediaries(i) PropertyIf a taxpayer sells property to another person (other than a related party) for further manufacture or other modification within the United States, such property shall not be treated as sold for a foreign use even if such other person subsequently uses such property for a foreign use.