IRS issues revised subpart F contract manufacturing regs.

• Author: Sherr, Eileen Reichenberg

In late December 2008, the IRS issued final, temporary, and revised proposed regulations on contract manufacturing (T.D. 9438). The final regulations define "manufacturing" and cover how the subpart F foreign base company sales income (FBCSI) rules apply to controlled foreign corporations (CFCs) that hire a "contract manufacturer." The temporary regulations adopt, with modifications, proposed changes to the subpart F branch rules and affect CFCs that conduct selling, purchasing, or manufacturing operations outside their country of incorporation.

These new regulations, which revise the proposed effective date, generally apply to CFC tax years beginning after June 30, 2009. The temporary regulations will expire on or before December 23, 2011. Taxpayers generally may apply the final and temporary regulations, in their entirety...