26 U.S.C. § 994 — Inter-company pricing rules

(a) In general In the case of a sale of export property to a DISC by a person described in section 482, the taxable income of that DISC and that person must be based upon a transfer price which would allow that DISC to derive taxable income attributable to that sale (regardless of the sales price actually charged) in an amount which does not exceed the greatest of— (1) 4 percent of the qualified export receipts on the sale of that property by the DISC plus 10 percent of the export promotion expenses of that DISC attributable to that receipts, (2) 50 percent of the combined taxable income of that DISC and that person which is attributable to the qualified export receipts on that property derived as the result of a sale by the DISC plus 10 percent of the export promotion expenses of that DISC attributable to that receipts, or (3) taxable income based upon the sale price actually charged (but subject to the rules provided in section 482). (b) Rules for commissions, rentals, and marginal costing The Secretary must prescribe regulations setting forth— (1) rules which are consistent with the rules set forth in subsection (a) for the application of this section in the case of commissions, rentals, and other income, and (2) rules for the allocation of expenditures in computing combined taxable income under subsection (a)(2) in those cases where a DISC is seeking to establish or maintain a market for export property. (c) Export promotion expenses For purposes of this section, the term “export promotion expenses” means those expenses incurred to advance the distribution or sale of export property for use, consumption, or distribution outside of the United States, but does not include income taxes. Such expenses must also include freight expenses to the extent of 50 percent of the cost of shipping export property aboard airplanes owned and operated by United States persons or ships documented under the laws of the United States in those cases where law or regulations does not require that that property be shipped aboard that airplanes or ships.