Western Hemisphere Trading Corporation

Summary of Western Hemisphere Trading Corporation

A domestic U.S. corporation which was entitled to certain tax advantages under Sections 921-22 of the Internal Revenue Code. To qualify, a U.S.- chartered corporation must (1) derive at least 95 percent of its gross income for the three-year period immediately preceding the taxable year (or throughout the corporation's existence if less than three years) from sources outside the United States; (2) derive virtually all income from business activities within the Western Hemisphere (other than U.S. sources); and (3) derive at least 90 percent of its income from the active conduct of a trade or business. Originally, a WHTC was entitled to a deduction computed by deriving the tax the corporation would otherwise pay, then multiplying this figure by a fraction whose numerator was 14 percent and whose denominator equaled the highest rate applicable in Section 115 of the Internal Revenue Code (i.e., the normal tax, not including the surcharge). Beginning with taxable years ending December 31, 1975, the deduction was phased out by reducing the numerator percentage as follows:

1976 11%

1977 8%

1978 5%

1979 2%

The tax deduction for WHTC was completely phased out for taxable years beginning after December 31, 1979, as a result of P.L. 94-455, Section 1052(a).

(Main Author: William J. Miller)