The United States will appeal a World Trade Organization ruling that found a corporate tax break violates global trade rules, federal officials said.
A WTO panel sided with the European Union, finding that the United States remains in violation of a previous ruling that condemned tax breaks for U.S.-based exporters, despite having repealed the offending portion of the tax code last year. The repeal is not scheduled to go into effect for another year.
The appeals process could delay the imposition of sanctions by a few months.
The panel first ruled in 2002 that the tax exemption, known as the foreign-sales corporation provision, was an illegal tax subsidy. The exemption allowed U.S. exporters to exclude part of their foreign-earned income, and the WTO authorized the European Union to impose up to $4 billion in trade sanctions against U.S. goods, though the union imposed only $300 million.
Congress repealed the provision in 2004 as part of a corporate tax code overhaul, but the that the EU said that it wasn't enough, and would allow the exemptions to continue during a two-year transition period. Major U.S. exporters reportedly benefiting from the exemption included Boeing Co., Caterpillar Inc., General Electric Co. and Microsoft Corp.
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