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In The Marketplace

By ALM Staff | Law Journal Newsletters |

Conference Committee Approves FSC/ETI Legislation: On Oct. 7, 2004, a House-Senate conference committee gave final approval to a $145 billion tax measure containing key provisions affecting the leasing industry. The conference agreement on the $145 billion Foreign Sales Corporation/Extraterritorial Income (FSC/ETI) reform legislation (H.R. 4520) provides transitional relief for FSC/ETI leases in light of the repeal of FSC/ETI. Under the terms of the conference agreement, full transitional relief will be afforded for those FSC/ETI leases subject to a binding contract as of Sept. 17, 2003. A binding contract includes purchase options, renewal options and replacement options, which are included in the contract and which are enforceable against the seller or lessor. In addition, the legislation contains a number of depreciation changes, a passive loss regime that addresses the monetization of lease obligations, equity investment, and risk of loss, as well as a provision addressing like kind exchanges of certain leases and lease property.

The conference agreement also provides a special rule for qualified technological equipment (QTE) leases so that standard renewal options of no more than an additional 24 months do not count against the “5 year” rule for purposes of the 125% depreciation rule. This rule will be particularly helpful in the medical and telecom fields and would encompass such diagnostic imaging equipment as MRIs, CT scanners and ultra sound equipment as well as high-tech microprocessors.

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