Deadlines for amending cost sharing arrangements and filing required cost sharing arrangement states.

• Author: Ugai, Brian C.

March 10, 2009

On March 10, 2009, Tax Executives Institute urged the government to extend the deadlines for amending existing cost sharing arrangements and for filing CSA statements. The following letter was prepared under the aegis of the International Tax Committee, whose chair is Brian C. Ugai of Starbucks Coffee Company. Contributing materially to the preparation of the letter were Janice L. Lucchesi of Akzo Nobel Inc, James G. Schreiter of ExxonMobil Corporation, and Brian Snay of Millipore Corporation. TEI General Counsel Mary L. Fahey served as staff liaison on this project.

Tax Executives Institute recommends that the government extend the deadline for amending existing cost sharing arrangements (CSAs) under Temp. Reg. [section] 1.482-7T from July 6, 2009, to January 6, 2010. In addition, we recommend that the deadline for submitting CSA statements to the IRS be moved from September 2, 2009, until April 2, 2010. These later deadlines are necessary to permit taxpayers time to ensure compliance with the new rules, including seeking agreement on the revisions from their cost-sharing partners and, in some cases, foreign taxing authorities.

Background

On December 31, 2008, the U.S. Department of Treasury and Internal Revenue Service issued temporary and re-proposed regulations under section 482 of the Internal Revenue Code, relating to the methods to be used to determine taxable income in connection with a CSA (hereinafter the "2008 regulations"). The re-proposed regulations revise the 2005 proposed regulations (hereinafter the "2005 regulations"), and make material changes to the regulations now in effect, which were issued in 1995 (the "existing" or "1995" regulations).

TEI commends the government for its efforts to improve the 2005 regulations. The 2008 regulations represent a general improvement over the 2005 regulations, especially in respect of the grandfather rules. TEI is concerned, however, that the deadlines set for amending current CSAs and filing CSA statements under the grandfather rules do not provide taxpayers with sufficient time to comply. Because compliance with the new rules may require (i) revisiting contracts that may be decades old and include multiple parties, (ii) seeking advice from outside counsel, and (iii) obtaining agreement for the changes from foreign taxing authorities, the deadlines for action should be extended.

Obtaining Grandfather Status

Temp. Reg. [section] 1.482-7T(m) sets forth the requirements for...