Tax Infinity & Beyond; Savir,Galya

1
Tax Infinity & Beyond
Galya Savir*
Contents
I. Introduction.............................................................................................................................. 2
II. The Dawn of the Second Space-Age .................................................................................. 9
A. The Paradigm Shift regarding Space and Commercial Space Activities ........................... 9
B. “Show Me the Money”...................................................................................................... 18
III. The Race to Tax Space—Starting with the General Space Income Source Rule................... 28
A. 1986 First Enacted Space Activity Rule under the U.S. Tax Code—is it time to modernize
it—and how?.............................................................................................................................. 28
B. The 2005 Regulations ....................................................................................................... 45
1. Definition ...................................................................................................................... 45
2. Space Activities ............................................................................................................. 48
3. The General Rule under the Regulations (hereinafter referred to as “General Rule”)50
4. Rules Governing Activities Conducted in Space and on Land ..................................... 55
IV. More Tax Challenges.............................................................................................................. 63
A. The Space-Mining Industry............................................................................................... 63
B. Transportation in Space.................................................................................................... 71
1. Space Transportation with a Single Land-Base............................................................ 72
2. Space as Part of International Traffic .......................................................................... 76
V. Conclusion ............................................................................................................................... 86
*
Research Scholar at Michigan Grotius Research Scholar Program, the University of Michigan. I would like to
thank Professor Avi-Yonah, Irwin I. Cohn Professor of Law and Director, International Tax LL.M., the University
of Michigan, for supporting my research.

2
I. Introduction
Thirty years ago, Steven Spielberg and Robert Zemeckis thought that by 2015, every person will
have owned a hoverboard and that we would have flying-car traffic jams in sky. Unfortunately,
these hopes have not yet been realized. However, thinking about similar science-fiction tales, it
now seems that in the foreseeable future, the rapid change in technological capabilities will lead
us on a journey, ever-deeper into the cosmos. Though still in its infancy, space-travel, it would
appear, is no longer the sole privilege of professional astronauts, government agencies, or
extremely wealthy individuals1
. Space is no longer perceived solely as an arena for military
research and national security purposes, but as a platform for new, open-business markets. For
example, when we look at the sky at night and see stars, some of us see unlimited numbers—not
of stars—but of potentially valuable resources worth trillions of dollars that are embedded in
those celestial bodies; resources which are not going to fall out of the sky like “shooting stars”,
but rather, ones which will only be attained after we will invested millions of dollars in
machinery and in intellectual capabilities2
. This kind of vision is not restricted only to space or
science fiction fans (ardent readers of Jules Verne, for example, will recall that he had already
written in detail about space communities at the end of the 19th century3
). Rather, this vision
1
Freeland Steven, Fly me to the moon: how will international law cope with commercial space tourism, Melb. J.
Int'l L. 11 90, 90 (2010) [hereinafter “Freeland, Fly me to the moon”].
2
See e.g., Hackett Robert, Asteroid passing close to Earth could contain $5.4 trillion of precious metals, FORTUNE
TECH (July 29, 2015, 2:19 PM), http://fortune.com/2015/07/20/asteroid-precious-metals/. On July 2015, an asteroid
known as 2011 UW158 with platinum core worth $5.4 trillion was nearing Earth. This is one of the asteroids that
space-mining companies in the near future aim to be equipped to capture, harvest and mine, such as Planetary
Resources. See also Prindle Drew, Astronomers capture video of platinum-laden ‘trillion-dollar asteroid’ zooming
past Earth, DIGITAL TRENDS (July 28, 2015), http://www.digitaltrends.com/cool-tech/trillion-dollar-platinum-
asteroid-video .
3
Jules Verne, Off On A Comet, Paris, 1878; Jules Verne, Around The Moon, 1870.

3
belongs nowadays to the new Emerging Space-Entrepreneurs (hereinafter referred to as ESEs),
which include companies as well as individuals from the American private sector4
.
The private sector endeavors to develop technologies and capabilities that will allow it to launch
passengers and payload-operators into space on a large, commercial scale and to expand space-
based services and goods (on which part of the global economy is already dependent, e.g.,
communication satellites). These endeavors represent a landmark in the ongoing evolution of the
humankind’s space-activities5
. The belief that these evolutionary technological developments
will in fact take place by the end of this century, rather than remain the realm of science-fiction,
no longer sounds unrealistic; various bills are currently being presented to congress in order to
facilitate the ESEs’ business operations, and to lure private entities to make high-risk, potentially
high-gain investments in commercial space activities6
. The ESEs are committed to making life-
changing experiences a reality soon, and eager to make it look easy. It seems that the ESEs’
belief in their own ability to open a window of opportunities for commercial ventures in space
will soon expose humanity to breathtaking developments7
. As technological barriers are lifted,
4
NASA, Emerging Space: The Evolving Landscape of 21st
Century American Spaceflight 1, 2 (Washington, DC:
NASA, 2014), available at:http://www.nasa.gov/sites/default/files/files/Emerging_Space_Report.pdf [hereinafter
“NASA, Emerging Space”].
5
Freeland, Fly me to the moon, supra note 1, at 90-91.
6
Such as the bill dealing with asteroid mining, which calls to grant property rights over asteroids mining to the
commercial sector so that it would be their property. On November 25, 2015, President Barack Obama signed the
bill under its full name, Spurring Private Aerospace Competitiveness and Entrepreneurship Act of 2015, a bill which
gives a U.S. citizen engaged in commercial space resources the right to possess, own, transport, use, and sell the
asteroid resource or space resources. The bill is intended to spur private space exploration by limiting governmental
regulations until October 1st
, 2023. See U.S. Commercial Space Launch Competitiveness Act, H.R.2262, 114th
Congress, Pub. L. No. 114-90, 129 Stat. 721, § 51303 (November 25, 2015) (hereinafter referred to as “SPACE Act
of 2015”). Available at: https://www.congress.gov/bill/114th-congress/house-bill/2262 or
https://www.gpo.gov/fdsys/pkg/BILLS-114hr2262enr/pdf/BILLS-114hr2262enr.pdf . See also, Hackett Jennifer,
New Law Paves the Way for Asteroid Mining-but Will It Work?, SCIENTIFIC AMERICAN (December 4, 2015),
available at: http://www.scientificamerican.com/article/new-law-paves-the-way-for-asteroid-mining-but-will-it-
work/.
7
On November 24, 2015, Blue Origin was the first to successfully launch vertically a commercially-developed
rocket, named New Shepard (a reusable sub-orbital rocket with a capsule designed to carry paying passengers out of
Earth), and safely land both the rocket and the capsule back on Earth. This is an important milestone in ongoing
space evolution and is a game-changing technology, which will completely change the cost structure of space travel
and will allow, according to Jeff Bezos, owner of Blue Origin and Amazon founder, to begin flying passengers into

4
the potential of limitless economic benefits will become a strong incentive for more investors
from the private sector to invest further in space technology and in space exploration. In such
event, it is likely that more players will enter this lucrative business–a development that will
doubtless help revolutionize the space industry from a cost-prohibitive endeavor to a cost-
effective one. The presence of greater numbers of players (ESEs) means healthier competition
among them. Greater competition will inevitably lead to a greater reduction in the cost of
acquiring space access and space resources, which in turn will render access to space so
affordable as to be within the reach of even the poorest nations8
.
This turn of events is about to raise numerous legal challenges, including ones concerning tax
rules, on both the domestic and international fronts.
We are about to unlock the wealth of our solar system for the benefit of people of Earth. This is a
turning point for our civilization, reminiscent of the colonization period where an abundance of
new land became accessible to trailblazers. Interestingly enough, this comparison might also
point to a future debate re tax emancipation on, e.g., on Mars (“no taxation without
representation”); it is abundantly clear, therefore, that a myriad of legal issues must soon be
resolved, including many in the tax field.
As more space activities take place, and as commercial endeavors in space expand, governments
will eventually be forced to take a closer look at these tax challenges. In addition, the more ESEs
outer space in a couple of years. See William Harwood, Blue Origin successfully launches-and lands- rocket, CBS
NEWS (last updated November 24, 2015 2:17 PM EST), available at: http://www.cbsnews.com/news/blue-origin-
successfully-flies-and-lands-new-shepard/ .
8
White Wayne, The Space Pioneer Act, Op-ed, SPACENEWS (Nov. 1, 2014), http://spacenews.com/42436the-
space-pioneer-act/ [hereinafter “White, The Space Pioneer Act”].

5
seek opportunities to invest in commercial space activities, the greater the likelihood of conflicts
arising among competing nations’ tax jurisdictions. Therefore, now might be the right time to
review the current tax regime in order to make revisions and adjustments that will help us
embrace the development of these new, futuristic commercial space activities. While revising
said regime, we should bear in mind that the space tax regulations should be carefully crafted.
On the one hand, they should lure (rather than hinder) the ESEs into creating an almost
technologically utopian reality for humanity in outer space. On the other hand, the regulations
should accommodate for the consequences of emerging space business-models and the new
participants in the space commercialization (ESEs) in order to prevent these participants from
extracting their profits from their new, lucrative businesses out of the reach of the source-based
jurisdiction, or for that matter, any other tax jurisdiction. This Article will lay out the basis and
reasons for the need to review and rethink the tax regime regarding space activities.
In general, it appears that space-oriented policies will aim to enable the Emerging Space-Industry
(ESI) to flourish by avoiding over-regulation. It should also be noted, though, that now that the
space-age has officially begun, tax-oriented policies should also aim to preserve the tax-base of
the states which have enabled the ESEs to flourish in the first place.
In other words, the right tax regime should enable the new ESEs to reap the economic benefits of
their participation in the expansion of the commercial space economy, while securing and
allocating the tax base to the right tax jurisdiction, as well as dispensing of any potential legal
ambiguities.

6
As history has shown us, often times technological developments have unforeseen repercussions;
such developments may result in enormous, entirely unforeseen windfalls. Even Bill Gates,
Microsoft’s revolutionary co-founder, often recounts his own failure to envision the internet’s
rapid, astounding development and its profound impact on our lives and culture9
. Furthermore,
for many years now the internet–more specifically, the ability to use it in order to deliver digital
products and services–has presented tax authorities with unique challenges in the context of e-
commerce platforms10
. These tax challenges, posed at the state, national, as well as international
levels, stem from the difficulties and confusion that technology creates whenever authorities try
to identify the source-state (the state from which the income is derived; the state which has top
priority to collect tax at the international level 11
). This 21st century economic platform is still
being globally evolved and expanded; given human ingenuity, it might never cease to do so. The
9
In the spring of 1998, Bill Gates and Warren Buffett came to the campus of the University of Washington in
Seattle for a conversation with students from the business school. During the meeting, Bill Gates conveyed how he
was taken by surprise by the rapid development of the Internet as a deep phenomenon, which was not even
prioritized by his strategy. See at https://m.youtube.com/watch?v=ldPh0_zEykU, May 10, 2013 - Uploaded by
Remotely Controlled.
10
See e.g., Reuven S. Avi-Yonah, International Taxation of Electronic Commerce, 52 T AX L.REV. 507
(1997)[hereinafter “Avi-Yonah, International Taxation of Electronic Commerce”]; Doernerg, Richard, and Luc
Hinnekens, Electronic Commerce and International Taxation, 24 Suffolk Transnat’l L. Rev. 233 (2000-2001)
(discussing the notion of the Internet becoming a tax free zone). Peter A. Glicklich, United States: Internet Sales
Pose International Tax Challenges, mondaq (last updated December 14,
200),http://www.mondaq.com/unitedstates/x/9529/offshore+financial+centres/Internet+Sales+Pose+International+T
ax+Challenges (“The threshold issue arising under a typical bilateral treaty of the U.S. is whether the server used by
the seller constitutes a "permanent establishment" of the seller in the host country”).
11
Organization for Economic Cooperation and Development [OECD](2014), Addressing the Tax Challenges of the
Digital Economy, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, at 123-139
http://dx.doi.org/10.1787/9789264218789-en. “(T)he main policy challenges raised by the digital economy fall into
three broad categories: • Nexus: The continual increase in the potential of digital technologies and the reduced need
in many cases for extensive physical presence in order to carry on business…can raise questions as to whether the
current rules to determine nexus with a jurisdiction for tax purposes are appropriate. • Data: The growth in
sophistication of information technologies…raises the issues of how to attribute value created from the generation of
data through digital products and services, and of how to characterise for tax purposes a person or entity’s supply of
data in a transaction…• Characterisation: …the proper characterisation of payments made in the context of new
business models. These challenges raise questions as to whether the current international tax framework continues to
be appropriate to deal with the changes brought about…and also relate to the allocation of taxing rights between
source and residence jurisdictions. These challenges also raise questions regarding the paradigm used to determine
where economic activities are carried out and value is created for tax purposes, which is based on an analysis of the
functions performed, assets used and risks assumed”, ibid, at 126-127.

7
same symptom (the tax authorities’ confusion) may well reappear as they grapple with the
explosive economic expansion of a totally different ecosystem which is in-fact out of the reach
of any territory–the infinity of outer space. The tax challenges that outer space presents might be
analogous to the international tax issues brought about by e-commerce. These challenges might
even be more daunting, given that some of the taxable assets might be outside of any
jurisdiction—literally, out in space.
As blurry as the tax boundaries concerning revenues stemming from such digital businesses here
on Earth are, the boundaries concerning the billions of dollars which will stem from future
commercial space industries might be far blurrier. The need to overcome the difficulties involved
with determining whom should be allocated with tax liability (whether the country of residence
or the source marketplace, where there is a significant digital presence) has being addressed as a
major concern globally under the BEPS project12
. Similarly, tax boundaries of billions of dollars
stemming from future commercial space industries operating directly from space might seem
even more blurred, and the nexus of business models operating form space with another
ecosystem jurisdiction on Earth might seem to unravel further.
The development of space exploration in the hands of the private sector can result in
unfathomable profits and should not be taken lightly.
12
OECD (2013), Action Plan on Base Erosion and Profit Shifting, OECD Publishing, at 14-15
http://dx.doi.org/10.1787/9789264202719-en

8
Today, the United States (hereinafter referred to as “U.S.”) is aiming to gain a foothold in
sustainable space exploration13
. The legislator should also start preparing. At the outset of this
Second Space-Age, rethinking space tax-policies might be that one small step for the legislator
which leads to a giant leap towards an ever-broader tax base.
13
Amy Klamper, Obama’s ‘Game-changing’ NASA Plan Folds Constellation, Bets Commercial, SPACENEWS
(February 5, 2010), http://spacenews.com/obamas-game-changing-nasa%E2%80%82plan-folds-constellation-bets-
commercial/.

9
II. The Dawn of the Second Space-Age
A. The Paradigm Shift regarding Space and Commercial Space Activities
If in the past, the focus for the development of space technology has been on military and quasi-
military uses, this focus has since changed. Since the beginning of the 21st century, NASA 14
has
been offering new opportunities as well as challenges for future generations, as it readies to drive
the American economic expansion into space. It should be noted, though, that the specific shape
and rate of this economic expansion will be determined as much by NASA as by the actions of
the individuals, corporations, and foundations involved15
.
More than fifty years after NASA’s creation, the U.S. appears to have embarked on a Second
Space-Age16
. Nowadays, ingenious American entrepreneurs and innovative NASA programs are
aiming to transform the ESI. The U.S. government believes that its own efforts, combined with
those of private industry players, scientists, students, and citizens (each playing their own unique
role), will bring about a new space-ecosystem—one which will hasten our journey into the
cosmos17
.
14
The National Aeronautics and Space Administration (NASA) is the United States government agency responsible
for the civilian space program as well as aeronautics and aerospace research. See Wikipedia, NASA,
https://en.wikipedia.org/wiki/NASA (last modified on 6 April 2016).
15
NASA, Emerging Space, supra note 4, at 33.
16
NASA, Emerging Space, supra note 4, at 2 and 35.
17
NASA, Emerging Space, supra note 4, at 35. On November 2015 NASA has published a Job Announcement
seeking astronauts for future space missions, stating that: “Today, more new human spacecraft are in development in
the United States (U.S.) than at any time in history, and future Astronaut Candidates will have the opportunity to
explore farther in space than humans have ever been.
The next class of astronauts may fly on any of four different U.S. spacecraft during their careers: the International
Space Station (ISS), two new commercial spacecraft being built by U.S. companies, and NASA's Orion deep-space
exploration vehicle. NASA is in the midst of an unprecedented transition to using commercial spacecraft for its
scheduled crew and cargo transport to the ISS. For the last 15 years, humans have been living continuously aboard
the orbiting laboratory, expanding scientific knowledge and demonstrating new technologies. Future crewmembers
will continue this work.
Additionally, the Space Launch System rocket and Orion spacecraft, now in development, will launch astronauts on
missions to the proving ground of lunar orbit where NASA will learn to conduct complex operations in a deep space
environment before moving on to longer duration missions on the journey to Mars.” See USAJOBS, Astronaut
Candidate, Job Announcement Number: JS16A0001, Nov. 4, 2015, available at:
https://www.usajobs.gov/GetJob/ViewDetails/423817000.

10
To better understand the future of the ESI in the U.S. and the trends leading up to the Second
Space-Age, the reader might find the following to be of some interest.
Prior to NASA’s formation, philanthropists and successful entrepreneurs routinely invested in
space exploration and in the development of spaceflight capabilities (such as liquid-fuel
rocketry). In the US, this was the normal state of affairs. Americans were already working to
explore space, and the U.S. was already a global hub for astronomical observatories and
spaceflight technology. In fact, NASA’s core centers were formed from the National Advisory
Committee for Aeronautics (hereinafter referred to as “NACA”) facilities and research centers18
.
NACA, which was a U.S. federal agency, was founded in 1915, to undertake, promote, and
institutionalize aeronautical research19
. However, after the successful launch of the world’s first
satellite, Sputnik 1, by the Soviet Union on October 4, 1957, the U.S. felt that in order to meet
the urgent, military challenge posed by the Russian micro-satellite, a new civil space program
should be established20
. The Soviet Union’s first satellite seemed to catch the American public
off-guard, and marked the beginning of the First Space-Age, as well as the start of the American-
Soviet space race. The transmitter onboard Sputnik 1 operated for about three weeks, until its
batteries ran out. A few months later, on January 4, 1958, the tiny satellite burnt up upon
18
19
Please see Wikipedia, National Advisory Committee for Aeronautic,
https://en.wikipedia.org/wiki/National_Advisory_Committee_for_Aeronautics (last modified on 11 March 2016).
20
On January 14, 1958, Hugh Dryden, NACA’s director, published a space R&D plan titled "A National Research
Program for Space Technology," which stated: “It is of great urgency and importance to our country both from
consideration of our prestige as a nation as well as military necessity that this challenge (Sputnik) be met by an
energetic program of research and development for the conquest of space….”. See Alex Ronald, MODEL
RESEARCH, The National Advisory Committee for Aeronautics 1915-1958, NASA SP-4103, Volume 2, Appendix
H, The NASA History Series, NASA (1985), at 728. Available at:
http://ntrs.nasa.gov/archive/nasa/casi.ntrs.nasa.gov/19850015373.pdf.

11
reentry21
. Shortly thereafter, on July 29, 1958, NASA was founded under the National
Aeronautics and Space Act (hereinafter referred to as the "Space Act of 1958"). 22
Although much of the space race focused on manned space flights and military and intelligence
systems, under the Space Act of 1958, NASA holds a legislative responsibility to
“encourage, to the maximum extent possible, the fullest commercial use of space23
” .
And indeed, NASA played an important role in the advent of the first, multi-billion space
industry—the satellite industry. The industry’s substantial contribution to the development of
satellite systems rapidly led to the largest space-based communication and remote sensing
satellite market, consisting of commercial television, telephone, data, and remote sensing
services24
.
During this space race, one of NASA’s core goals was to build and develop capabilities which
will allow its astronauts and scientists to live and function in space 25
; it succeeded in achieving
its objectives through its space programs:
• Project Mercury (1959-1963) was the first human spaceflight program; through it
NASA learned how to fly to space and return safely26
.
21
Steve Garber, Sputnik and The Dawn of the Space Age, NASA's History Office, NASA History Web Curator,
Multimedia Interactive Feature on 50th
Anniversary of the Space Age, Updated October 10, 2007, available at:
http://history.nasa.gov/sputnik/. See also Wikipedia, Sputnik 1, https://en.wikipedia.org/wiki/Sputnik_1 (last
modified on 6 April 2016).
22
The National Aeronautics and Space Act, Pub. L. No. 111–314, 124 STAT. 3328 (Dec. 18, 2010).
23
Id., § 20102 at 3331 and § 20112 at 3333. Aside from military objectives, to further understand NASA’s
objectives under its national civil space research program in concordance with the objectives stated in the Space Act
of 1958, please see National Aeronautic and Space Administration, Special Committee on Space Technology
Report, Recommendations to the NASA Regarding A National Civil Space Program (October 28, 1958), NASA
Historical Reference Collection, History Office, NASA Headquarters, Washington, D.C., at 3-5 (1958),
downloadable at: http://www.history.nasa.gov/report58.html.
24
NASA, Emerging Space, supra note 4, at 14. See also Dorinda Dalmeyer & Kosta Tsipis, Heaven and Earth:
Civilian Uses of near-Earth Space, The Hague Netherland, Kluwer Law International, Vol.16 (1997), at Chapter 7:
Ross T. McNutt, The Future of Satellite Communication, 117-137.
25
26
See Wikipedia, Project Mercury, https://en.wikipedia.org/wiki/Project_Mercury (last modified on 7 April, 2016).

12
• The Gemini Program (1961-1966) taught NASA how to operate in space and helped
develop space travel techniques to support its other mission—to land a man on the
moon27
.
• The third U.S. human spaceflight program was the Apollo Program (1961-1975)
which marked NASA’s—and for that matter, the world’s—unimaginable leap; by
walking on the moon, Neil Armstrong and Buzz Aldrin have proven conclusively that
NASA is capable of exploring other worlds28
.
• During the Space Shuttle program (1981-2011), NASA succeeded in returning to
space on a continuous basis by using reusable space vehicles—an achievement which
helped the agency accomplish many scientific and explorative endeavors29
.
• Finally, with the International Space Station (hereinafter referred to as the “ISS”),
multiple international agencies, including NASA, were able to achieve permanent
presence in outer space; to date, the ISS has afforded us the longest continuous
human presence in space (since November 2000; ISS’ operational life has been
extended to 2020). ISS constitutes the first ecosystem in space based on a
collaboration among 15 nations, including the U.S., the Russian Federation, Japan,
Canada and participating European Space Agency (ESA) country members (Belgium,
Denmark, France, Germany, Italy, Netherlands, Norway, Spain, Sweden, Switzerland
27
See Wikipedia, Project Gemini, https://en.wikipedia.org/wiki/Project_Gemini (last modified on 1 April, 2016).
28
See Wikipedia, Apollo Program, https://en.wikipedia.org/wiki/Apollo_program(last modified on 5 April, 2016).
Apollo was later dedicated to President John F. Kennedy's national goal of “landing a man on the moon and
returning him safely to the Earth” by the end of the 1960s, which he called for during his speech to Congress in May
25, 1961. See also, Steve Garber, The Decision to Go to the Moon: President John F. Kennedy's May 25, 1961
Speech before a Joint Session of Congress, NASA History Office, NASA History Web Curator, Updated October
29, 2013, http://history.nasa.gov/moondec.html ; SPACE.com Staff, May 25, 1961: JFK's Moon Shot Speech to
Congress, SPACE.com (May 25, 2011), http://www.space.com/11772-president-kennedy-historic-speech-moon-
space.html .
29
See Wikipedia, Space Shuttle Program, https://en.wikipedia.org/wiki/Space_Shuttle_program (last modified on 21
March, 2016).

13
and the United Kingdom). It provides a platform for these partners to conduct
scientific research, design and assemble various products, as well as live in a zero-
gravity environment for a substantial length of time30
. The ISS was also designed to
accommodate research and technology capabilities in order to encourage commercial
investment in space, transportation, maintenance services, as well as serve as a
staging base for possible future manned missions to the Moon, Mars and various
asteroids31
.
Although during the last decade research has been primarily conducted by the U.S. government
and by public sectors, it seems that in the coming decades, NASA partnerships with a broader
array of private entrepreneurs will influence and shape the economic development of our planet.
Various ESEs are committed to the economic expansion in space as they seek to create new and
viable markets for space experiences and industrial activities32
.
30
NASA, Emerging Space, supra note 4, at 3 and 5. The International Space Station (ISS) had its operational life
extended from 2016 to 2020. See Anousheh’s Ansari website, ISS Life Extended, Volume 27, November 29, 2010,
available at: http://www.anoushehansari.com/newsletter/volume27.php. See also Brittany Sauser, Space Laboratory
Open for Business, MIT TECH. REV. (Nov. 17, 2010), available at:
http://www.technologyreview.com/news/421709/space-laboratory-open-for-business/ . The ISS is funded by the
United States, Russia, the European Space Agency, Canada, and Japan, but a total of 59 nations have participated in
or utilized research on the station.
31
See Memorandum of Understanding Between the National Aeronautics and Space Administration of the United
States of America and the Russian Space Agency Concerning Cooperation on the Civil International Space Station,
Signed 29 January 1998 (Retrieved 19 April 2009), Washington, DC, ARTICLE 2-General Description of the Space
Station, available at http://www.nasa.gov/mission_pages/station/structure/elements/nasa_rsa.html; Memorandum of
Understanding Between the National Aeronautics and Space Administration of the United States of America and the
European Space Agency Concerning Cooperation on the Civil International Space Station, Signed 29 January 1998,
Washington, DC, ARTICLE 2-General Description of the Space Station, available at
ftp://ftp.hq.nasa.gov/pub/pao/reports/1998/nasa_esa.html; Memorandum of Understanding Between the National
Aeronautics and Space Administration of the United States of America and the Canadian Space Agency Concerning
Cooperation on the Civil International Space Station, Signed 29 January 1998, Washington, DC, ARTICLE 2-
General Description of the Space Station, available at ftp://ftp.hq.nasa.gov/pub/pao/reports/1998/nasa_csa.html;
Memorandum of Understanding Between the National Aeronautics and Space Administration of the United States of
America and the Government of Japan Concerning Cooperation on the Civil International Space Station, Signed 24
February 1998 (Retrieved 19 April 2009), Washington, DC, ARTICLE 2-General Description of the Space Station,
available at http://www.nasa.gov/mission_pages/station/structure/elements/nasa_japan.html.
32

14
With the dawn of the new space-age, NASA’s future objectives for exploration have not changed
so much in substance as in form; the agency aims to achieve them with relatively smaller
budgets, and with the help of the expanding commercial space economy. NASA is striving to
execute the most complex space missions and challenging research projects ever attempted—
landing on asteroids and going to Mars. Indeed, even while calling for the cancellation of
NASA's Constellation program 33
, which would have sent humans back to the moon by 2020, the
Obama administration’s space goals remained the same: to send humans to an asteroid by 2025
and to Mars by the mid-2030s 34
. President Obama remained committed to manned space
exploration, but with a greater emphasis on sharing the load with commercial entities35
. The
Obama administration has been looking to encourage the development of 'game changing'
technologies which will make long-distance space travel cheaper and faster, and spur deep space
exploration as well as future space missions to asteroids and to Mars36
.
Nowadays, NASA is pursuing its mission goals by teaming up with American ESEs and
supporting them in order to develop keystone markets like Low Earth Orbit (hereinafter referred
to as LEO) transportation and cutting-edge technological capabilities, for example asteroid
mining. NASA’s motivation stems from its conviction that partnering with ESEs will expand
U.S.’ opportunities beyond Earth. NASA’s initiatives aim to help the space economy evolve so
33
See Wikipedia, Constellation Program, https://en.wikipedia.org/wiki/Constellation_program (last modified on 28
January, 2016).
34
William Harwood, Obama insists new plan will spur deep-space exploration, CNET, Sci-Tech, April 15, 2010,
available at: http://www.cnet.com/news/obama-insists-new-plan-will-spur-deep-space-exploration/. See also
Saswato R. Das, Farewell to NASA’s Glory Days, The International Herald Tribune, The New York Times, Feb. 22,
2010, available at: http://www.nytimes.com/2010/02/22/opinion/22iht-eddas.html?_r=0 [hereinafter “Saswato,
Farewell to NASA’s Glory Days”].
35
Id, at Saswato, Farewell to NASA's Glory Days.
36
Freeland , Fly me to the moon, supra note 1, at 91. See also Kenneth Chang, NASA to Review Human Spaceflight,
Todays Paper, International New York Times, Jan 27, 2010, A14, available at:
http://www.nytimes.com/2010/01/27/science/space/27nasa.html ; Editorial, 'A New Space Program', International
Herald Tribune (Paris) 9 February, 2010, p.A26, available at:
http://www.nytimes.com/2010/02/09/opinion/09tue1.html .

15
as to provide substantial economic returns to the American taxpayer through the stimulation of
new businesses, industries rich in high-tech and R&D, 21st century American jobs, etc37
.
Though it might read like a hyperbole, today's economy greatly depends on the space economy,
which today is viewed by millions as the point of intersection for many critical technologies /
industries, such as communications satellites, global positioning satellites, and imaging satellites.
The space economy extends around 36,000 kilometers (22,369 miles) from the surface of the
Earth, and represents the culmination of more than 50 years of research, development, and
investment by NASA and other government agencies38
. In order to better illustrate the
magnitude of the space economy, it is worthwhile to mention that in 2013, the space sector
employed around 900,000 persons around the world39
; this figure does not include university and
research institution employees (both of whom have a major contribution to space-related R&D),
and military personnel participating in various space programs40
. This last sector consisted of
approx. 350,000 full-time employees active in the U.S., 200,000 in the Russian Federation,
around 60,000 in Europe41
. It includes public administrations (space agencies, space departments
in civil and defense-related organizations), the space manufacturing industry (responsible for
37
NASA, Emerging Space, supra note 4, at 1. See also COMMERCIAL SPACE BILL, 114th
Congress, 1st
Session,
Vol. 161, No. 159, Cong Rec S 7584, 7585, October 28, 2015, available at:
https://www.congress.gov/congressional-record/2015/10/28/senate-section/article/S7584-
1?q=%7B%22search%22%3A%5B%22COMMERCIAL+SPACE+BILL+161+Cong+Rec+7584+Vol+159+October
+2015%22%5D%7D .
38
39
Keith Cowing, Looking At The Space Economy of Today - and Tomorrow, Space College, November 8, 2014,
available at: http://spacecollege.org/commerce/looking-at-the-space-economy-of-today---and-tomorrow.html . See
also OECD (2014), The Space Economy at a Glance 2014, OECD Publishing, at 9, 21 & 46,
http://dx.doi.org/10.1787/9789264217294-en [hereinafter “OECD, The Space Economy at a Glance 2014”]. In the
1980s, the capacity to build and launch a satellite was only on the agenda of relatively few developed countries with
massive industrial complex, co-operating and competing with each other. Since then, globalization has been
impacting all sectors of the economy, including largely protected high-technology sectors, like the space sector.
40
Id.
41
Id.

16
building rockets, satellites, and ground systems), direct suppliers to this industry (components),
and the wider space services sector (mainly commercial satellite telecommunications). Through
the years, this space economy has been affected by globalization; the process is expected to have
an ever-growing impact on the space economy in the coming years—from R&D and design, to
manufacturing processes and services.
Part and parcel of this globalization trend—more countries and international players from a wide
array of commercial, space-related fields are expected to inhabit this space-economy sphere, as
was the case with the satellite industry.
According to OECD research on Global Value Chains (GVCs), this globalization trend will lead
to a rapid internationalization of product and service supply chains for space systems42
.
Following the shift from governmental to commercial space activities, such as transporting
cargos to space and ultimately launching crews of astronauts to LEOs, the expansion of the space
economic sphere will be highly dependent on the performance of privately owned firms43
. The
combined efforts of the American government and private sector will hasten humankind’s next
journeys into the heavens, while catalyzing new industries and economic growth44
.
Alongside NASA’s initiatives, space tourism activities are being developed, particularly in North
America and Europe, with zero-gravity/ parabolic flights, sub-orbital flights and short-term
orbital space travel offered to private consumers (long-term travel is expected further down the
42
Id.
43
Id., at 64 .
44

17
line45
). Blue Origin, Virgin Galactic, and many other ESEs, are fiercely competing to achieve
their first, commercial suborbital flight. Less than two decades into the 21st century, and the
concept of “space tourism” is slowly becoming a reality46
. It would appear that ever greater
numbers of individuals will be able to go into space on suborbital flights, orbital flights, or high-
altitude balloons. As of 2015, seven individuals have purchased a total of eight orbital flight
tickets (one passenger flew twice) for approximately 20-35 million USD per ticket47
.
The clientele purchasing suborbital and orbital flight tickets is expected to diversify well beyond
its current make-up of wealthy individuals, sponsored researchers, and celebrities. On a larger,
growing scale, the space travel industry is likely to have major economic benefits not only by
generating revenues in the billions of dollars, but also by dramatically reducing launching costs
to rates rarely seen outside privatized industries48
.
In this new space-age, it is expected that the U.S. will transform from a Spacefaring Nation to a
Nation of Spacefarers; who knows, perhaps further down the line, the human species might turn
into the human “Space-ies” (a multi-planetary species)49
. The ESEs are aiming to hasten this
transformation. It comes as no surprise then that Elon Musk, the billionaire founder of one of
45
OECD, The Space Economy at a Glance 2014, supra note 39, at 64.
46
Kenneth Chang, Blue Origin Launches Bezos’s Space Dreams and Lands a Rocket, Today’s Paper, The New
York Times, November 25, 2015, p. A21, available at: http://www.nytimes.com/2015/11/25/science/space/blue-
origins-rocket-launches-and-lands.html. The successful launch and landing on November 23, 2015, of Blue Origin’s
reusable sub-orbital rocket and capsule (designed to fly tourist on commercial basis to space) is a milestone and a
breakthrough in human space travel. According to Jeff Bezos, the owner of Blue Origin and Amazon founder, this
success could allow Blue Origin to begin flying passengers into space in a couple of years (in 2018). See also
Kenneth Chang, Jeff Bezos Lifts Veil on His Rocket Company, Blue Origin, The New York Times, March 8, 2016,
available at: http://www.nytimes.com/2016/03/09/science/space/jeff-bezos-lifts-veil-on-his-rocket-company-blue-
origin.html?_r=0.
47
48
Patrick Collins, Space Activities, Space Tourism and Economic Growth, Proceeding of Second ISST (International
Symposium of Space Tourism), Revised May 1999, also available at:
http://www.spacefuture.com/archive/space_activities_space_tourism_and_economic_growth.shtml [hereinafter
“Patrick, Space Activities, Space Tourism and Economic Growth”].
49
Eligar Sadeh, Space Strategy in the 21st
Century, Theory and policy, Routledge, 1-368, 30 (2013).
See also Testimony of Dr. Robert Zubrin at the Senate Commerce, Science and Transportation Committee, 1-10, at
9 (Oct 29, 2003), available at: http://www.commerce.senate.gov/pdf/zubrin102903.pdf.

18
these emerging space-companies—SpaceX (which has a major role in launching cargos
designated for the ISS)—dreams about creating colonies on Mars and turning humanity into a
“multi-planetary species” 50
. When this final frontier finally opens up, new commercial markets
will be created and dramatically expanded, as will completely novel branches of markets and
space-based goods and services.
B. “Show Me the Money”51
In the Second Space-Age, which is expected to be mainly a commercial space-age, the efforts
and investments of the ESEs will probably have achieved liftoff—figuratively as well as
literally—and new types of space-businesses will have been developed.
Currently, multiple new privately owned companies and businesses are aiming to become
engaged in innovative space exploration activities.
Consider the following: Alphabet is Google’s parent-company, and incidentally, as of February
2016, the highest valued company in the world52
. Google’s Lunar XPRIZE (hereinafter referred
to as “GLXP”) calls on privately-funded space / aeronautics teams to enter a competition to
50
Alan Boyle, ‘Close, But No Cigar’: SpaceX Rocket Lifts Off and Lands with a Crash, NBC NEWS, Sunday,
January 10, 2015, http://www.nbcnews.com/science/space/close-no-cigar-spacex-rocket-lifts-lands-crash-n283401.
See also Todd Leopold, Elon Musk’s New Idea: Nuke Mars, CNN website, September 11, 2015,
http://www.cnn.com/2015/09/11/us/elon-musk-mars-nuclear-bomb-colbert-feat/ ; Samantha Masunaga, What
Scientists Say About Elon Musk’s Idea to Nuke Mars, Los Angeles Times, September 10, 2015,
http://www.latimes.com/business/la-fi-elon-musk-mars-20150910-htmlstory.html .
51
JERRY MAGUIRE (Cameron Crowe production, 1996) – “SHOW ME THE MONEY!” a popular quotation said
by Jerry Maguire (stars Tom Cruise).
52
See Paul R. La Monica, Sorry, Apple. Alphabet now the most valuable company, CNN Money, February 2, 2016,
http://money.cnn.com/2016/02/02/investing/google-more-valuable-apple-alphabet-earnings/

19
launch, by late 2017, a robotic spacecraft that will be able to land on the moon and travel a short
distance across its surface 53
. As of September 2015, some 16 teams from around the world have
signed up54
. The goal of the GLXP is similar to that set by the Ansari X Prize, which was
awarded to a team that managed to build and launch a suborbital aircraft back in 200455
. The
intention is to inspire and spur a new generation of private investors and entrepreneurs to
develop innovative solutions to emerging technological problems, which will in turn lead to
more cost-effective technologies and materials; these will ultimately allow us to overcome the
numerous limitations posed to us by space exploration. Such space-age technologies will help in
ultimately opening the door to commercial spaceflights and space tourism by pioneering low-
cost space travel and facilitating unfettered human expansion into the solar system.
In addition, following the retirement of the space shuttle fleet, NASA has selected several
commercial firms to develop new spacecraft capable of carrying astronauts to the ISS by 2017-
18. These are SpaceX, Boeing, Sierra Nevada and Blue Origin56
. NASA has also contracted
these commercial firms to deliver cargo, supplies, and crew members to the ISS. In 2014,
53
See Wikipedia, Google Lunar X Prize, https://en.wikipedia.org/wiki/Google_Lunar_X_Prize (last modified on 19
February, 2016) [hereinafter “Wikipedia, Google Lunar X Prize”]. In 2015, Google extended the deadline for
winning the prize from December 2015 to December 2017. See also, OECD, The Space Economy at a Glance 2014,
supra note 39, at 62.
54
See id, at Wikipedia, Google Lunar X Prize. As of October 2015, SpaceIL, which is an Israeli team, and Moon
Express, an American privately held company aiming to offer commercial lunar robotic transportation and data
services with a long-term goal of mining the Moon for resources, are currently the only teams to have announced
launch contracts.
55
See Wikipedia, Ansari X Prize, https://en.wikipedia.org/wiki/Ansari_X_Prize (last modified on 28 March, 2016).
More than $100 million was invested in new technologies in pursuit of the prize, which was $10 million award.
56
OECD, The Space Economy at a Glance 2014, supra note 39, at 64. In parallel, NASA is working on the
development of a new heavy-lift launcher with a capsule dubbed Orion, capable of carrying astronauts beyond the
earth’s orbit, with long-term missions to asteroids and Mars. For comparison, China has also started building a 30-
ton space station, to be completed in the 2016-23 time frame.

20
SpaceX and Orbital were awarded resupply contracts worth USD 1.6 billion and USD 1.9
billion, respectively57
.
The current trend by federal government to begin contracting privately-held companies to deliver
cargo into orbit could nurture a nascent market for civilian spaceflight in much the same way that
air mail contracts from the Post Office spurred the birth of the commercial aviation industry and
fostered the development of civil aviation a century ago58
.
To date, taxpayers have paid nearly $1 trillion for civil space activities; approximately one-half
of this sum was spent on manned space activities. For example, for the Apollo program to reach
the moon, American taxpayers had to incur a cost of around $100 billion—funds which were
consumed in less than a decade. Later on, NASA would go on to spend billions of dollars on
Human space exploration, which ultimately resulted in negative progress59
. If this type of an
investment went towards promoting the civil-aviation industry, then by today’s standards, it
57
Id. Few available means to deliver cargo and crew supplies to the station were left: the Russian Progress (several
flights a year), the European Automated Transfer Vehicle (the fifth and last was launched in 2014), the Japanese H-
II Transfer Vehicle (five launches have taken place and four more are planned for between 2016-2019, one launch
each year) and commercial U.S. capsules, SpaceX’s dragon and Orbital’s Cygnus.
58
Chris Taylor, Profits set to soar in outer space, Business 2.0 Magazine, CNN Money, February 27, 2006,
downloadable at: http://money.cnn.com/2006/02/27/technology/business2_guidetospaceintro/ [hereinafter “Chris,
Profits set to soar in outer space”]. See also Anne Milbrooke with Patrick Andrus, Jody Cook & David B.
Whipple, NATIONAL REGISTER BULLETIN, GUIDELINES FOR EVALUATING AND DOCUMENTING
HISTORIC AVIATION PROPERTIES, U.S. Department of the Interior; National Park Service; National Register of
Historic Places, 1-54, at 9 (1998), also available at: http://www.nps.gov/nr/publications/bulletins/pdfs/NRB43.pdf
[hereinafter “Milbrooke, NATIONAL REGISTER BULLETIN”]. And Wikipedia, United States government role
in civil aviation, https://en.wikipedia.org/wiki/United_States_government_role_in_civil_aviation (last modified
January 15, 2016).
59
Following the retirement of the Space Shuttle program, there are only two states that can launch humanity into
space: China and Russia. Since the end of the space shuttle missions in 2011, the only way for crews to reach the
station is by using the Russian Soyuz capsules, at $70 million a flight. In addition, the operational Chinese
Tiangong-1 space station serves as a technology testbed, visited in June 2013 by Taikonauts for two weeks, China's
longest manned space mission to date. See OECD, The Space Economy at a Glance 2014, supra note 39, at 64. See
also Patrick, Space Activities, Space Tourism and Economic Growth, supra note 48; Dinan Stephen, Congress Oks
Space Act, paves way for companies to own resources mined from asteroids, The Washington Times, November 16,
2015, downloadable at: http://www.washingtontimes.com/news/2015/nov/16/congress-approves-space-act-paves-
way-private-comp/?page=all; The Future of Asteroid Mining, Asteroid Mining and Space Resources: Transitioning
to Economic Viability and The Economic Potential of Space Mineral Resources, DaVinci Institute, Nov 11, 2014,
published on Nov 20, 2014, available at: http://www.youtube.com/watch?v=FzDxKMlWXeo&sns=em [hereinafter
“The Future of Asteroid Mining”].

21
would have been worth billions of dollars60
. Unfortunately, space industry revenues are not
nearly as impressive; for a potential return on investment to occur, humanity will need to invest
billions of dollars towards the developing manned space flights, among other space capabilities
and technologies. To date, however, the enormous investments that the governments have made
in developing space technologies have neither yielded substantial economic returns, nor reached
wide commercial use—not because these technologies cannot inherently be used to create such
commercial activities, but because the purposes for which these investments have been made
were, to begin with, non-commercial 61
.
As the commercial space economy evolves, it is more likely that progress is going to be
measured in money rather than time, i.e., that progress will become a function of investment of
money and commitment, and not of time (for example, by stating that “we are $100-$200B away
from landing on Mars” rather than “one or two decades away” 62
).
The development of an economic space transportation network has the potential to result in a
positive and stimulating influence on the national economic growth, both as a new transportation
system, and through the opening of new territories and a geographical frontiers for business
activities; its advent offers an enormous range of genuinely new employment opportunities and
an even wider range of space-based services and goods63
.
60
To demonstrate the potential of the space industry to produce very high commercial turnover, please see how
Planetary Resources anticipates the trend in water and fuel consumption in the space industry can be achieved in a
similar way to the growth of the fuel consumption in the commercial aviation industry; growth from zero to 1M tons
in 35 years. See Planetary Resources, The Trillion Dollar Market: Fuel in Space from Asteroids, Video Feature,
published on June 10, 2014, available at: https://www.youtube.com/watch?v=Q5nBURsyPBs.
61
Patrick, Space Activities, Space Tourism and Economic Growth, supra note 48. See also Milbrooke, NATIONAL
REGISTER BULLETIN, supra note 58, at 9-10. Comparing to aircrafts, the possibility of manufacturing spaceships
for private and sport pilots might also become popular.
62
See The Future of Asteroid Mining, supra note 59.
63
Patrick Collins, Space Activities, Space Tourism and Economic Growth, supra note 48.

22
The growth of new space industries—which the general public will voluntarily choose to
support, especially in light of the projections of limited sources on Earth, and from which human
space activities and terrestrial networks will evolve—is a promising step towards an economic
expansion into space, and the creation of a viable circle of renewed economic growth that will
lead to the creation of new employment, both on Earth and in Space. This prospect of future
economic expansion may sustain the growth of middle classes everywhere and greatly enrich the
world economy by creating new fields of dynamic growth in advanced economies; this in turn
will help such economies overcome the global deflation caused by the overly-populated older
industries, and raise the former’s growth-rates. At the very least, such developments will spur
developing economies through reducing protectionist pressures64
.
It is expected that short and long-term orbital flights will soon be on offer. It has been
consistently predicted that by the year 2030, annual traffic volumes approximating five million
space passengers will have been achieved, and that sophisticated space tourism infrastructure
will have been developed, including co-orbital hotels, orbital sports centers, daily scheduled
lunar flights to a variety of lunar orbits, and lunar pole hotels65
. Although these specific ventures
64
Id. The question of whether the growth of space economy activity will be of a substantial rate and can reach an
apocalyptic scale, as to have a positive impact on the inequality that exists today in society, might need to be
analyzed in the future. The answer to this question might lead to a new rethinking of the space tax regime again,
likewise the need of a less (or even the elimination of) progressive tax regime, when the ratio between the economic
growth rate and the rate of the return on capital will reduce the socio-economic gaps in society. Admittedly, to date
these questions might sound hypothetical and better fit a utopian world, thus, they will not be covered in this article.
For further discussion on how inequality depends on the ratio between the rate of return on capital and economic
growth (r>g), please see: Thomas Piketty, Capital in the Twenty-First Century (translated by Arthur Goldhammer),
Cambridge, MA and London: The Belknap Press of Harvard University Press, 1-696, 2014. Piketty argues that as
long as the return to wealth exceeds an economy’s growth rate, wealth-to-income ratios will tend to rise, leading to
increased inequality.
65
Freeland, Fly me to the moon, supra note 1, at 91-93. See also, Patrick Collins, Towards Space Tourism: The
Challenge for British Space Policy, 55 Journal of the British Interplanetary Society 148, at 148-149 (2002),
available at:
http://www.spacefuture.com/archive/towards_space_tourism_the_challenge_for_british_space_policy.shtml; Patrick
Collins, The Space Tourism Industry in 2030, Proceedings of Space 2000, American Society of Civil Engineers
(ASCE), 594-603 (2000), available at:
http://www.spacefuture.com/archive/the_space_tourism_industry_in_2030.shtml.

23
and deadlines are not etched in stone, there is little doubt that the ESEs are aiming to meet them,
as well as many others.
In 1998 the private sector’s spending on space applications first exceeded the government’s. This
trend has remained unchanged since, and the gap is expected to widen in the coming decades. A
critical mass of entrepreneurs has probably been reached. Numerous trailblazers–Jeff Bezos,
Elon Musk and Richard Branson, to name a few–have been backing space-related companies for
years. Some of the markets they are targeting, e.g. the multi-billion satellite launch business, are
ripe for competition. Other markets, e.g. asteroid-mining, suborbital tourism, space hotels, space
solar plants and solar satellites, do not yet exist. It should be noted, though, that some of these
markets are in advanced planning and infrastructure building stages, and that it is expected that
they will have reached their full potential in the foreseeable future, generating astronomical
returns in the process66
.
A handful of companies among the ESEs are getting ready to mature their investments in space
by harvesting its resources; robotic missions will probably be the first step. Companies such as
Planetary Resources, Inc. (hereinafter referred to as “Planetary Resources”) and Deep Space
Industries (hereinafter referred to as “DSI”), are interested in mining the moon and asteroids for
precious metals, minerals, and other resources67
. It is well-known that commercially significant
66
Chris, Profits set to soar in outer space, supra note 58. See also Kimberly Adams, Asteroid mining not so far in the
future, MARKETPLACE, November 19, 2015, available at:
http://www.marketplace.org/2015/11/19/business/asteroid-mining-not-so-far-future. As an example for the expected
returns see also, The future of Asteroid Mining, supra note 59.
67
Nancy Atkinson, PLANETARY RESOURCES GROUP WANTS TO MINE ASTEROIDS, Universe Today, April
24, 2012, available at: http://www.universetoday.com/94787/planetary-resources-group-wants-to-mine-asteroids/.

24
resources and highly desirable mineral-based resources are to be found in space68
. Among these,
for example, are lunar helium-3 and noble metals in stony iron asteroids–both of which involve
extraction of trace constituents from regolith. It is most likely that space resources will first be
used in space, and that the minerals most easily and reliably obtained will be the first to be
utilized. Following that, if transportation costs dramatically decrease, it might become
economically viable to ship such resources back to Earth; the first such commodities will be rare
minerals such as platinum group metals (abbreviated as, and hereinafter referred to as “PGMs”)
and other valuable minerals that can be sold for fairly high profits on Earth, rather than other,
cheaper minerals. Among the most significant resources and minerals are water, oxygen for
propellant, metals and silicate minerals for construction or manufacturing, silicon for solar cells,
etc. Perhaps with the exception of water and oxygen, these resources are often found in trace
amounts on Earth, yet in significantly higher concentrations within asteroids. Some asteroids
contain high concentrations of water, methane and other hydrocarbons, while others contain high
concentrations of gold, silver, nickel-iron and platinum69
.
In order to calculate or modify possible scenarios related to the economic and financial
feasibility of a specific space resource development project, different tools and analyses have
already been developed, including a quantitative analysis of a private venture’s financial
68
According to the Chief Scientist at DSI, Dr. John S. Lewis, after analyzing the high consumption rates of energy
resources and minerals of modern Americans during an average lifetime, he concluded that the inner solar system-
which includes the asteroid belt between Mars and Jupiter, the Moon and Mars, contain resources that can support
100 trillion humans, i.e. ten thousand times the current size of human race (current population is approximately 10
billion). See John S. Lewis, Mining The Sky: Untold Riches from the Asteroids, Comets, And Planets, Reading
Mass: Addison-Wesley Pub. CO., c1996. 1 (1996) [hereinafter “Lewis, Mining The Sky”].
69
Sarah Scoles, Can You Own Part of an Asteroid? How Asteroid Mining Is Changing Space Law, Published by
Singularity University, Dec 9, 2015, available at: http://singularityhub.com/2015/12/09/can-you-own-part-of-an-
asteroid/ [hereinafter “Sarah, Can You Own Part of an Asteroid?”].

25
viability70
. In addition, potential markets for space resources which may benefit from such tools
have already been identified, and are expected to grow with the economic expansion into space.
These include: NASA’s science divisions, various military missions, debris management teams,
satellite servicing and refueling, the International Space Station, human exploration teams, space
solar power industries, self-sustaining colonies, space hotels, etc71
.
It has already been boldly claimed that space-based resources are the answer to the threat of
resource depletion on Earth, and that such resources may add trillions of dollars to the global
GDP and create a “multi-trillion-dollar market”, as well as a new definition of natural
resources72
.
Two small pieces of data might help better illustrate the anticipated development of a “multi-
trillion-dollar market”:
•Consider that the ESEs estimate the cost of 1 liter of water in space at around $20K–
greater than the cost of a single pound of gold here on Earth.
•As of 2015, there are 1,305 satellites (civil, commercial, government and military)
orbiting the Earth; the total number of U.S. satellites is 54973
. Planetary Resources,
70
Brad R. Blair, et al., Space Resource Economic Analysis Toolkit: The Case for Commercial Lunar Ice Mining,
Final Report to the NASA Exploration Team (December 20, 2002), at 4 and 8, available at:
http://www.nss.org/settlement/moon/library/2002-CaseForCommercialLunarIceMining.pdf.
71
The Future of Asteroid Mining, supra note 59.
72
In 2006 Dr. Lewis, currently the chief scientist at DSI, predicted that the value of the inner solar system’s minerals
is “equivalent to about 100 billion dollars for every person on Earth today”. See Lewis, Mining The Sky, supra note
68. In 2012, the founder of Planetary Resources claimed that his company can “add trillions of dollars to the global
GDP” and “create a new industry and a new definition of ‘natural resources’”. See also John Aziz, How asteroid
mining could add trillions to the world economy, YAHOO NEWS, June 25, 2013, available at:
http://news.yahoo.com/asteroid-mining-could-add-trillions-world-economy-161200809.html. See also Video
Feature, Asteroid Mining Mission Revealed By Planetary Resources, Inc., wimp Family Friendly Content, April 25,
2012, available at: http://www.wimp.com/asteroidmission/.
73
See UCS Satellite Database, Union of Concerned Scientists, Science for a healthy planet and safer world,
available at: http://www.ucsusa.org/nuclear-weapons/space-weapons/satellite-database#.Vp2eqxUrIU0. The
Satellite Database Downloads is for 9/1/15, includes launches through 8/31/15.

26
one of the would-be space mining companies, calculated back in 2014 that of these,
nearly 400 satellites are active and rely on fuel74
. Since satellites have relatively short
life spans (approximately 15 years), refueling them may afford their owners with the
possibility to extend their life span and dramatically reduce the TCOs (Total Costs of
Ownership), which routinely exceed $10 million per year75
. Those satellites make
about $50 million per year to cover the TCO, what turns this market into $20 billion
market per additional year for the companies that can provide it low cost fuel
alternative76
.
Therefore, space mining companies are aiming to develop capabilities that will enable them to
mine ice from asteroids and process it into liquid oxygen and hydrogen; these will then be used
to re-supply fuel depots and enable various servicing companies to refuel active satellites, boost
dead satellites to parking orbits, clear orbits of debris, and fuel transportation77
.
Multiple other uses for water in space can also be found: drinking, watering space plants,
radiation shields (radiation is one of the gravest concerns regarding such excursions), recharging
life-support systems, etc. Water’s products may also be used to fuel not only satellites, but
rockets; this will help us deepen our journeys into deep space without the need to resort to Earth-
74
See Planetary Resources, The Trillion Dollar Market: Fuel in Space from Asteroids, Video Feature, published on
June 10, 2014, available at: https://www.youtube.com/watch?v=Q5nBURsyPBs.
75
Total cost of ownership of satellites includes costs associated with building, launching and operating satellites,
and can reach between 169-180 million dollars per satellite for 15 years. See C. Robert Welti, Satellite Basics for
Everyone: An Illustrated Guide to Satellites for Non-Technical and Technical People, iUniverse, US, 1-148, at 18
(2012).
76
Id, at 74.
77
White, The Space Pioneer Act, supra note 8. See also The Future of Asteroid Mining, supra note 59.

27
based launches, whether through robotic missions, or through a mix of large and complex
spacecraft and small but sophisticated micro-satellites and probes78
.
It seems that not only does the road to harvest precious metals in space hinge on producing
water, but that water (and its myriad uses) is the very key that will unlock the space economy.
The space mining companies plan to use their resources, primarily, to build further
infrastructure: habitats for future astronauts, solar-power arrays, and rocket fuel depots. The
companies also hope to create a market in which they sell the parts and resources to manufacture
off-Earth hotels, orbital research stations, space power plants, and deep-space rockets79
. A
natural next-step of this upcoming, in-space industry will most likely be the mining of other
lucrative metals and minerals, such as Platinum80
. It is further predicted that a heavy industry
will be developed in space once propellants and reusable engines have become commonplace. In
a more futuristic scenario, Earth will turn into a park of sorts to which valuable resources are
exported from space, while all the heavy industry operations are conducted away from its
surface. By the time this transpires, it is anticipated that the international space trade community
will have become viable and, most likely, extremely profitable81
.
78
One of the premises of the space mining companies, of both DSI and Planetary Resources, is that a Mars colony
with a population of 10,000 will exist by 2070. See The Future of Asteroid Mining, supra note 59.
79
Sarah, Can You Own Part of an Asteroid?, supra note 69.
80
Létourneau, Alex, Asteroid Mining Becoming More Of A Reality, Kitco News, Forbes, January 25, 2013, available
at: http://www.forbes.com/sites/kitconews/2013/01/25/asteroid-mining-becoming-more-of-a-
reality/#2715e4857a0b45d9391162ba [ hereinafter “Alex, Asteroid Mining Becoming More of a Reality”].
81
The future of Asteroid Mining, supra note 59.

28
III. The Race to Tax Space—Starting with the General Space Income Source Rule
A. 1986 First Enacted Space Activity Rule under the U.S. Tax Code—is it time to modernize
it—and how?
Different challenges in the legal arena arise on the way to achieving the promising scenario of
economic expansion in space, among them—tax challenges. While U.S. states are trying to
modernize their tax rules in order to lure ESEs to operate in their territory (by granting them
various tax incentives), it is time to rethink and review the tax rules on the federal level and
within the international context so as to ensure that such rules sustain a justifiable policy, in the
public’s best interest.
Some cynics will claim that—in order to prevent the ESEs from morphing into an elite,
monopolistic group which saps governments’ political influence over this new realm—the space
tax regime should be modernized and equipped with a robust set of rules. The more
optimistically inclined will probably advocate a tax regime which will provide some economic
certainty (read: return on investment) to the entrepreneurial members of the private sector. This
will ensure that they will embrace and promote the Second Space-Age while maintaining the
peaceful state of affairs, and encourage the participation of multinational corporations and
nongovernmental entities in the exploration of space and its commercial uses.
The acknowledgement of the potential to derive major incomes in space and for the need for tax
regime in space started in 198682
. At that time, the sole commercial use of space was in the hands
of the satellite and telecommunication industries. The Congress enacted the generic rule to
82
Tax Reform Act of 1986, Pub. L. No. 99-514, 100 STAT. 2085, 2540.

29
govern the source of income derived from certain space activities (“Source Rule”)83
. The same
rule applies to income generated in Antarctica or on the high seas, outside territorial waters.
From the outset, those who drafted the Source Rule were treating incomes derived from space,
the oceans, and Antarctica in an analogous manner. The Source Rule’s main intent was to avoid
a situation whereby incomes derived from activities conducted in these three domains would be
regarded as country-less, and thus nontaxable.
Broadly, section 863(d) of the Internal Revenue Code (hereinafter referred to as “the Code”)84
is
based on citizenship and residency (hereinafter referred to as “Source Rule”) and states that:
•income derived from space or ocean activities conducted by a U.S. person85
shall be
deemed U.S. source income;
•income from space or ocean activities conducted by a non-U.S. person shall be
considered foreign source income.
However, three types of activities are excluded under this section:
(1) any activity that gives rise to transportation income as defined in section 863(c);
83
Staff of the Joint Committee on Taxation, General Explanation of the Tax Reform Act of 1986, H.R. 3838,
1st Sess., 99th
Congress, Public Law 99-514, at 932-937 (1987), available at:
http://www.archive.org/stream/generalexplanati00jcs1087/generalexplanati00jcs1087_djvu.txt;
https://archive.org/stream/generalexplanati00jcs1087#page/934/mode/2up [hereinafter “General Explanation of
the Tax Reform Act of 1986”]. See also Cowan, Jeffrey P., The Taxation of Space, Ocean, and Communications
Income Under the Proposed Treasury Regulations, The Tax Lawyer 133-183, at 134-135 (2001) [hereinafter
“Cowan, The Taxation of Space, Ocean, and Communications Income”].
84
All Section references are to the Internal Revenue Code of 1986 (as amended), and the Treasury Regulations
promulgated thereunder, unless otherwise indicated.
85
I.R.C. § 7701(a)(30) defines a U.S. person as: a citizen or resident of the United States; a domestic partnership; a
domestic corporation; any estate (other than a foreign estate), and any trust if a court within the United States is able
to exercise primary supervision over the administration of the trust, and one or more United States persons have the
authority to control all substantial decisions of the trust; Holders of U.S. residence visa "Green Card" (until
cancelled with the Internal Revenue Service).

30
(2) any activity giving rise to international communications income86
;
(3) any activity with respect to mines, oil and gas wells, or other natural deposits, to
the extent the mines, wells or natural deposits are located within the jurisdiction
(as recognized by the U.S.) of any country, including the U.S. and its possessions.
As a result, Ocean and Space activities appear to be residual categories designated for activities
(which do not qualify as transportation, communication, or mineral extraction income) taking
place outside a particular (foreign country’s) jurisdiction.
In light of the legislation history, the purpose of the Source Rule is to preserve the U.S.’s primary
taxing jurisdiction over income earned by a U.S. person from activities that do not come to rest
in another taxing jurisdiction, and to put an end to some loopholes and other tax planning
opportunities that had existed prior to the 1986 Act.
Prior to the 1986 Act, the source of space and "high-seas" income depended on the type of
activity performed, as is common. For example, lease income was generally sourced in the place
of use; personal service income was generally sourced in the location in which the services were
performed; and manufacturing and other business income was generally sourced where the
86
I.R.C. §863(e) applies to international communications income (i.e. communications income between the U.S. and
a non-U.S. end point). According to I.R.C. §863(e) international communications income earned by a U.S. person
shall be considered to be 50 percent U.S. source income and 50 percent foreign source income; and international
communications income earned by a non-U.S. person shall be considered to be entirely foreign source income
except to the extent such income is attributable to an office or fixed place of business in the US. However, income
from transmitting communication between two points in space or international waters (space/ocean communications
income) is sourced under the space and ocean rules of I.R.C. § 863(d) and the Regs. §§ 1.863-9 (effective December
27, 2006, and without major change). In addition, income which is not derived from the “transmission of
communications” but rather from the rental of the property utilized in providing transmission of communications,
such as leasing of a satellite or cable, does not appear to be International Communication Income.

31
activity took place87
. Therefore, because the equipment was generally used, the services
generally performed, and the activities generally conducted outside the U.S., the predominant
part of income from space and high-seas activities was generally treated as foreign source
income under prior law. However, since the Congress noted that foreign countries had no
apparent right to tax incomes generated in space and the ocean, and generally did not tax the
income, the Congress decided to reexamine the application of the above general source rules to
space and ocean activities, especially when being conducted by U.S. taxpayers88
.
The Congress concluded that asserting primary tax jurisdiction only over income generated
within the U.S. and its territorial waters was inappropriate, and decided to assert primary tax
jurisdiction over income (derived by U.S. residents) that is not found within any foreign
country’s taxing jurisdiction (i.e., a foreign country's boundaries and its territorial waters) in
order to dissuade taxpayers from sheltering their incomes from U.S. tax authorities89
. In addition,
with the enactment of the foreign tax credit basket regime in 1986, the Congress’ major concern
was that the ability to generate foreign source income from space and ocean activities allowed
the taxpayers to artificially increase their foreign tax credit limitations. The Congress noted that
the purpose of establishing the foreign tax credit was not to allow offsetting U.S. tax on U.S.
source income, but rather to avoid double taxation on U.S. and foreign countries. Based on the
87
General explanation of the Tax Reform Act of 1986, supra note 83, at 932-933.
There also existed a special rule for income from leasing vessels, aircrafts, or spacecrafts according to which the
leasing income was considered as U.S. source if the vessel, aircraft or spacecraft was leased to U.S. persons, was
eligible for the investment tax credit, and was manufactured or constructed in the United States. This special rule
had limited application for spacecrafts, since most tangible property used predominantly outside the U.S. was not
eligible for the investment tax credit. Though, there were also some exceptions for the predominant use test, such as
vessels documented under the U.S. laws, certain communications satellites and other certain property used in the
Outer Continental Shelf or in certain international waters.
88
General explanation of the Tax Reform Act of 1986, supra note 83, at 932-933.
89
Id, at 933. Please note that the General Explanation referred to ‘U.S. residents’, though the Code adopted the term
U.S. person.

32
legislative history, it seems that there was a concern that the artificial foreign tax credit derived
from space and ocean income would allow taxpayers to inflate their foreign tax limitation by
income that was not within any foreign country’s taxing jurisdiction, or similarly, inappropriately
reduce their foreign tax limitation in case their other operations were incurring losses90
.
Another fundamental shortcoming of the prior law was that U.S. taxpayers could choose to
funnel such incomes through controlled foreign subsidiaries—subsidiaries which are generally
organized under jurisdictions which impose little or no tax on such types of income. This had
allowed U.S. taxpayers to enjoy a complete deferral of U.S. taxation, until the earnings were
repatriated in the form of, e.g., a dividend91
. U.S. Congress obviously opposed that notion,
stating that “U.S. persons should (not) be able to defer all tax on such income for an indefinite
period by earning it through a foreign corporation.” 92
The enactment of the special Source Rule under the 1986 Act was designed to eliminate these
loopholes. The Act provides that all income derived from space or ocean activities is sourced in
the country of residence of the person generating the income.
The big question nowadays is whether the general Source Rule can continue to be relevantly
viable, while still complying with the Congress’ aim to prevent such tax deferrals, loopholes.
The similar precedents set by the shipping industry are a constant cause of concern.
90
Lebowitz, Michael S. & Stacy Paz., IRS Reproposes Regulations for Taxing the “Final Frontier”, 84 Taxes 21-28,
21 (Jan 2006) [hereinafter “Lebowitz, IRS Reproposes Regulations”] ; J.L. Rubinger, “Revised Rules on Source of
Income From Space, Oceans, and International Communications,” 104 J. Tax'n 39 (Jan. 2006);
General explanation of the Tax Reform Act of 1986, supra note 83, at 933.
91
Kelly, Christopher, "Federal Income Taxation of Space and Ocean Activities."Int'l Tax J. 14 (1988): 69, p.70.
92

33
At the time the Act was being enacted, the Congress noted that the activities conducted in space,
and on or beneath the oceans’ surface were not very prevalent, and “[w]ith this in mind, believed
that the Code’s general source rules needed reexamination in their application to space and
ocean activities… (m)oreover, when a U.S. taxpayer conducted activities in space or
international waters”93
. The commercial uses of space have changed dramatically over the last
three decades, and will continue to evolve alongside a variety of space activities. The U.S. tax
authorities’ major concerns are no longer focused solely on the best standards that will better
serve the policy of the foreign tax credits, but also on other policies, such as the business
methodology of U.S. corporations and multinationals in U.S. and over world. Now might be the
time to reexamine the need to adapt and modernize the Source Rule, so that it comfortably
accommodates space activities.
In today’s globalized world, with dramatically changing economic platforms, the issue of a
growing group of major corporations and multinational enterprises (MNEs) fleeing the U.S. in
order to avoid paying taxes seems to have an ever greater impact on the net income from taxes in
the U.S. 94
. It might be the right time to rethink the current Source Rule as applied to space
income. In order to close any possible, unpatriotic tax loopholes and prevent future tax-
avoidance planning, it is time to rethink whether the current rule can keep the small group of
ESEs from building their business models in a way that enables them to keep most of their
operations inside the U.S. while placing their future profits offshore.
93
94
See in general, President Obama week’s address on Closing Corporate Tax Loopholes, published on July 26 2014,
https://www.youtube.com/watch?v=qMd4GHT7XRc [hereinafter “President Obama week’s address”].

34
It is important to secure NASA’s and the nation’s opportunity to capitalize on, what could
potentially be, multi-trillion dollar industries. To that end, the taxing methodology which will
eventually be applied to the ESEs should be one which allows all those who participate, work,
study, and strive to pursue the American dream, to be properly compensated—whether directly
or indirectly involved.
For the past five decades, at the expense of U.S. taxpayers, NASA’s hard-working scientists,
engineers, and astronauts (who always played by the rules and paid their taxes95
) have
painstakingly accumulated priceless data and technologies. Allowing the private sector to harvest
these fruits of knowledge is a major step for the American nation and for all humankind. Thus,
the entire nation should benefit from such a measure. The U.S. should prevent situations which
might enable the new participants in the burgeoning space economy from keeping most of their
businesses inside the U.S. while at the same time avoiding paying their fair share of taxes by
renouncing their citizenships, or by declaring that their base of operations is located outside U.S.
borders, possibly in space96
. In light of the high expectations for substantial revenues from the
commercialization of space, this kind of development can deal a significant blow to U.S.’s (and
other governments’) economies. Various governments have collectively invested billions, if not
trillions, of dollars in space so that their nations, indeed humankind, will gain from space
95
Astronauts have always needed to prepare their tax filings by April 15 each year before launching into space,
either by paying their taxes early or by filling for an extension and sometimes even during orbiting hundreds of
miles above Earth on a long-term mission. “Taxes have long stressed out astronauts -- Jack Swigert, a last-minute
addition to the Apollo 13 crew, even radioed Houston's mission control center for tax help while the mission was
underway.” See Sophia Yan, Nobody escapes U.S. taxes - even astronauts, CNN Money, February 13, 2015,
available at: http://money.cnn.com/2014/12/07/pf/astronaut-taxes-irs/. See also Tariq Malik, Even
Astronauts in Space Pay Taxes, April 15, 2010, SPACE.COM, available at: http://www.space.com/8227-astronauts-
space-pay-taxes.html.
96
President Obama week’s address, supra note 94.

35
exploration. It is time to prevent the ESEs and other fortunate few able to take part in the
commercialization of space, from later-on “cherry-picking” their own taxes by moving certain
business operations and assets out of the U.S., as is the case today in many other economic
arenas97
.
We need to ensure that the new and future participants in the Second Space-Age, which NASA
embraces and with whom it collaborates, will pay their fair share of taxes. We are obligated to
eliminate tax avoidance through profit-shifting to tax havens—a maneuver rife among maritime
companies. Space might be the right arena in which to enforce a new and different tax approach.
Beyond merely incrementally different approaches, fundamentally different approaches can be
adopted, such as the Sales Factor Apportionment (SFA) tax method98
, the Formula-Based Profit
Split System of Apportionment99
, or the Unitary Tax (UT) system.
97
BBC, Obama accuses firms of "cherry-picking" over tax rules, BBC NEWS, 25 July 2014, available at:
http://www.bbc.com/news/business-28477890 . See also a joint Report by The White House and the Department of
the Treasury, THE PRESIDENT’S FRAMEWORK FOR BUSINESS TAX REFORM, February 2012, at p.13-14
98
Jerry Wegman, Bill Parks & Walt Minnick ,Sales Factor Formulary Apportionment of Global Profits as an
Alternative System of Taxation of to the Current U.S. Federal Corporate Income Tax, To attn. of Subcommittee on
Business Income Tax, 1-20, April 13, 2015, available at:
http://www.finance.senate.gov/legislation/download/?id=32197638-a2cc-4420-8a72-744eb30efc25 [hereinafter
“Wegman, Sales Factor Formulary Apportionment of Global Profits”].
99
Reuven S. Avi-Yonah, Kimberly A. Clausing & Michael C. Durst, Allocating Business Profits for Tax Purposes:
A Proposal to Adopt a Formulary Profit Split, 9 Fla. Tax Rev. 497-553, at 498 and 507-508 (2009). According to
the system of formulary apportionment the U.S. tax base for multinational corporations would be calculated based
on a fraction of their worldwide incomes. This fraction would be the sum of (1) a fixed return on their expenses in
the United States and (2) the share of their worldwide sales that occur in the United States. This approach meant to
replace and avoid the unnecessary usage of Arm's Length, which is the competing transfer pricing standard in the
international tax practice, with formulary apportionment that gives the sales factor greater weight than property and
payroll. However, Formulary apportionment, by design is not pursuing to reach any "correct" allocations results
between tax bases. In general, all source rules are designed to substantiate some acceptable fair (or perceivably fair)
framework for the division of tax bases among competing tax jurisdictions. See Yariv Brauner, Daniel N. Shaviro's
Fixing U.S. International Taxation, Jerusalem Review of Legal Studies, Vol. 9, No. 1 116-124, at 121-122 (2014).

36
According to the SFA method100
, the exact location at which the income was earned (as long it
was derived from space activity), or the question whether the income has been earned by a U.S.
person or a foreigner, would be rendered irrelevant, and will not have any impact on the tax
liability. The U.S. taxable income would be based solely on the proportion and percentage of the
space company’s worldwide sales made to U.S. customers.
Under the International Space Regime101
(hereinafter referred to as the “International Space
Law”), this tax regime could also trickle down to foreign MNEs and might contribute to a more
equitable system (as discussed below). A worldwide, fair and just enforcement of this tax method
on incomes derived from space activities will level the playing field for both domestic businesses
and multinational enterprises, and might reduce tax incentives to relocate facilities, jobs, and
corporate headquarters offshore. These kinds of tax incentives will not be completely eliminated,
since the SFA tax is applied only to the corporations’ net income basis, as long as they are
profitable. However, it might prevent some U.S. and foreign multinationals from avoiding U.S.
taxes by shifting profits offshore.
100
Wegman, Sales Factor Formulary Apportionment of Global Profits, supra note 98, at .3-5.
101
The law of outer space has developed as a discrete body of law within public international law. The
international space law is governed by five United Nations (U.N.) declarations and legal principles that guide the
conduct of space activities, and is based mainly on five U.N. Treaties negotiated and drafted in the Committee on
the Peaceful Uses of Outer Space (‘COPUOS’) during the 1960s and 1970s. Reflecting that era, these treaties mainly
were agreements and compromises between the United States and the Soviet Union, the two major space powers of
that era. On Space Law see, e.g., Wikipedia, Space Law, available at: https://en.wikipedia.org/wiki/Space_law (last
modified on 8 April 2016) [hereinafter “Wikipedia, Space Law”]; and United Nations Office for Outer Space
Affairs, Space Law, UNOOSA (2016), available at: http://www.unoosa.org/oosa/en/ourwork/spacelaw/index.html.
See also United Nations Treaties and Principles on Outer Space, related General Assembly resolutions and other
documents, United Nations Office for Outer Space Affairs, ST/SPACE/61/Rev.1, available at:
http://www.unoosa.org/pdf/publications/ST_SPACE_061Rev01E.pdf.

37
This kind of “territorial” system might sound very much appropriate and efficient when dealing
with space activities, where the concern of country-less income being left out of the reach of any
terrestrial jurisdiction and hence untaxed is the major factor influencing tax policies and the way
their rules are being devised. A system that applies income tax on economic space activity
apportioned by sales, whether it is being derived by U.S. multinationals or foreign MNEs, might
be found very useful and beneficial, especially as space technologies become more affordable to
greater numbers of countries.
By deploying various tax schemes, companies might try to manipulate their sales figures by
selling their products to an “independent” entity, only to import the goods back into the U.S. As
the trading of space commodities evolves, the burden of proof for documenting the location of
the sales may be shifted to the corporations. Enforcing the burden of proof on the corporations
will greatly reduce the government’s administrative onus. It is also possible to require that the
MNEs sell a certain minimum percentage of their product in the U.S., and then credit them only
for sales that were made outside the U.S. (to the extent that they can demonstrate such an
exchange)102
. Space-based goods and products will require more processes and production steps,
and will involve more intermediate products; it is important to emphasize that no higher tax rates
will be applied under the SFA system, since SFA taxes will be applied only to the net income
basis of each firm, meaning that those firms will not have to face higher tax burdens or double
taxation (assuming all countries adopt this tax system).
102
Please note that the suggested threshold might be based on the functional analysis set in the Regulations, as
discussed below under Chapter III.B.. See also Wegman, Sales Factor Formulary Apportionment of Global Profits,
supra note 98, at 6-8.

38
Like the SFA, other fundamental approaches may be adopted for the space economic platform.
In this context, it is possible that harmonizing the various tax systems in space will prove
significantly useful.
A Unitary Tax System103
(UT system, also known as “formulary apportionment”) will be neutral
in the way it refers to space commerce; it might even be better suited to outer-space than it is to
Earth, especially as interstellar commerce and trade evolve. It seems reasonable that at this early
point in time it will be relatively easy to reach a consensus among the developed and developing
countries since the latter are currently less involved in space-based commerce / activities.
Adopting a UT system will be far more coherent with the obligation of the participating space
powers since they are committed to the international space law which defines space as the
province of all humankind104
. A UT policy governing the commercial activities of the ESEs
103
On UT system see, e.g., Reuven S. Avi-Yonah, and Pouga Tinhaga, Zachee, Unitary Taxation and International
Tax Rules. U of Michigan Public Law Research Paper No. 369; U of Michigan Law & Econ Research Paper No. 13-
020 (November 3, 2014); ICTD Working Paper No. 26. Available at SSRN:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2351920.
104
Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the
Moon and Other Celestial Bodies, adopted January 27, 1967, 18 U.S.T. 2410, 610 U.N.T.S. 205 (opened for
signature January 27, 1967; entered into force October 10, 1967; retrieved 2013-04-18) [hereinafter ‘Outer Space
Treaty’]. Available at http://www.unoosa.org/oosa/en/ourwork/spacelaw/treaties/outerspacetreaty.html. Art. I of the
Outer Space Treaty declares that states are to explore and use outer space ‘for the benefit and in the interests of all
countries’ and that outer space ‘shall be the province of all mankind.’ Article II prohibits any means of appropriating
outer space. Art. III states that the exploration and use of outer space is to be in accordance with international law in
order to maintain ‘international peace and security’ and to promote ‘international co-operation and understanding’.
In addition, Article 11 of Agreement Governing Activities of States on the Moon and Other Celestial Bodies, opened
for signature December 18, 1979, 18 I.L.M. 1434 [entered into force July 11, 1984; retrieved May 16, 2013]
[hereinafter ‘Moon Treaty’] states that “[t]he Moon and its natural resources are the common heritage of mankind”.
However, the US refrained to sign on the Moon Treaty stating that no sovereignty claims of any kinds were made on
the moon. See Urbano Fuentes, Understanding the legal status of the Moon, The Space Review, March 2, 2015,
available at: http://www.thespacereview.com/article/2703/1.
In a similar way, the UN Convention on the Law of the Sea, opened for signature December 10, 1982, UN Doc.
A/CONF. 62/122 (entered into force on November 16, 1994) [hereinafter ‘UNCLOS’], available at:
http://www.un.org/depts/los/convention_agreements/texts/unclos/unclos_e.pdf , set the concept of the ‘common
heritage of mankind’ to govern the deep seabed under article 136 of UNCLOS. The US accepted all UNCLOS but
Part XI as customary international law. Part XI of the UNCLOS establishes an International Seabed Authority (ISO)
to authorize seabed exploration and mining and collect and distribute the seabed mining royalty. One of the reasons
that the US objected to this regime (relating to minerals on the seabed outside any state’s territorial waters) was the
concern that such regime would harm the American economic and securities interests. Some American

39
might comply with International Space Law and mitigate one of the gravest concerns of space
commercialization—the monopolization of space resources105
. It should be noted that at the time
the Outer Space Treaty was ratified in the U.S. Senate, it was “the understanding of the
Committee on Foreign Relations that nothing in Article I [of the Outer Space Treaty] diminishes
or alters the right of the United States to determine how…it shares the benefits and results of its
space activities” and that the Outer Space Treaty is a treaty of a “general principles” and
“subject to further refinement”106
.
Applying a UT system can also harmonize the interests of developed and developing countries in
the economic and technological benefits accruable from state activities in outer space. Some
might even argue that this harmonization is not merely a matter of voluntary requirement or
luxury with which the space powers can dispense, but that our very survival as a race depends on
it, as does Earth’s107
. This notion of humankind’s survival may be anchored in the tax system,
and should shape the way economic benefits are distributed among all participating.
commentators, including former Secretary of Defense Donald Rumsfeld, even warned that ratification of the Law of
the Sea Treaty might lead to its taxing authority being extended to cover the resources of outer space.
See Wikipedia, United Nations Convention on the Law of the Sea,
https://en.wikipedia.org/wiki/United_Nations_Convention_on_the_Law_of_the_Sea#Part_XI_and_the_1994_Agree
ment (last modified March 29, 2016); Wikipedia, List of the parties to the United Nations Convention on the Law of
the Sea,
https://en.wikipedia.org/wiki/List_of_parties_to_the_United_Nations_Convention_on_the_Law_of_the_Sea, at FN
11 (last modified on March 23, 2016). See also Edward Guntrip, The Common Heritage of Mankind: An Adequate
Regime for Managing the Deep Seabed?, 4(2) Melbourne Journal of International Law 376 (2003).
In addition, article 1 of the Antarctic Treaty, adopted December 1, 1959, 12 U.S.T 794/402 U.N.T.S 71 [entered into
force in June 23, 1961] outlines that ‘Antarctica shall be used for peaceful purposes only.’ Please note that the
international space law and the way its notions might be enshrined in the space income tax rule will not be
elaborated in this article.
105
See Wikipedia, Space Law, supra note 101.
106
Treaty on Outer Space: Hearings Before the Senate Committee on Foreign Relations, 90th
Cong., 1st
Sess. 1, 12-
14 and 74 (1967), available at: http://babel.hathitrust.org/cgi/pt?id=uc1.$b643624;view=1up;seq=5. See also Eric
Husby, Sovereignty and Property Rights in Outer Space, 3 J Intl L & Prac 359-372, 364 (1994) [hereinafter “Husby,
Sovereignty and Property Rights in Outer Space”].
107
Gbenga Oduntan, The Never Ending Dispute: Legal Theories on the Spatial Demarcation Boundary Plane
between Airspace and Outer Space, Hertfordshire Law Journal 1(2), 64-84, 84 (2003). Available at:

40
Another question is whether or not this goal should be achieved on a “first come, first served”
basis as long as equitable access to space is guaranteed to all nations108
. The space income tax
source rules and the space tax regime should be shaped in accordance with the answer to this
question. Maybe a UT system which takes into consideration the developing countries’ interests
and financial benefits can play a better leading role in the exploration and exploitation of outer-
space, and contribute to hasten humanity’s journey into the heavens.
A UT system might also best fit the equality principle embodied in international space law,
particularly as it is penned under the Declaration of Legal Principles Governing the Activities of
States in the Exploration and Use of Outer Space (hereinafter referred to as the “Declaration of
Principles”) 109
, which formed the basis for most of the discussions concerning Space Law110
.
According to the Declaration of Principles “outer space and celestial bodies are free for
exploration and use by all States on a basis of equality and in accordance with international
law”111
. Another expression of the equality principle was recently mentioned in a 2015 UN
Resolution which emphasized the interest “in promoting and expanding the exploration and use
of outer space, as the province of all humankind, for peaceful purposes and in continuing efforts
to extend to all States the benefits derived therefrom”, while “taking into account the concerns of
https://www.herts.ac.uk/__data/assets/pdf_file/0010/38629/HLJ_V1I2_Oduntan.pdf [hereinafter, “Gbenga, The
Never Ending Dispute”].
108
Id., 76-77.
109
Declaration of Legal Principles Governing the Activities of States in the Exploration and Use of Outer Space,
G.A.Res. 1962, U.N. GAOR, 18th Sess., Supp. No. 15, U.N. Doc. A/5515, at 15 (1963), available at:
http://www.un-documents.net/a18-5515.pdf [hereinafter “Declaration of Principles”].
110
Husby, Sovereignty and Property Rights in Outer Space, supra note 106, at 363. See also Andrews, William
Lee., The taxation of space commerce, Kluwer Academic Publishers Group, 54-55 (2001) [hereinafter “William
Lee, The taxation of space commerce”].
111
Declaration of Principles, supra note 109.

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