A DISC must satisfy two ongoing requirements that are substantially more difficult to satisfy than the initial requirements described in chapter 2. This chapter provides an overview of these requirements and examines the consequences of failure to meet either or both of them. Chapters 4 through 9 examine in detail the specific aspects of the ongoing requirements. I
Overview of the Assets Test and the Receipts Test
Each taxable year, a DISC must satisfy two requirements: 95 percent of its gross receipts must constitute qualified export receipts1 and 95 percent of its assets must constitute qualified export assets.2 The purpose of these requirements is to ensure that substantially all of the DISC's revenues are derived from exporting and that substantially all its assets are devoted to exporting.
The gross-receipts test must be met on an annual basis.3 Thus, all revenues throughout the taxable year are taken into account. Each year stands on its own, unlike the three-year gross-income tests in the Western Hemisphere Trade Corporation provisions.4 The term "gross receipts" is a fundamental aspect of this requirement and is examined in detail later.5
1. § 992 (a) ( 1) (A) ;
Reg. §§ 1.992-1 (a) (2), 1.992-1 (b).
2. § 992 (a) ( 1) (B ) ; Reg. §§ 1.992-1 (a) ( 3) , 1.992-1 ( c) .
3. §992(a) (1) (A); Reg. §§ 1.992-1 (a) (2), 1.992-1 (b).
4. §§921(1),921(2);Reg.§§ 1.921-1(a)(2),1.921-1(a)(3).
5. §993(f);Prop.Reg.§ 1.993-6.