On December 24, 2008, the U.S. Treasury Department and the Internal Revenue Service released final, temporary and proposed regulations providing comprehensive guidance on the treatment of contract manufacturing arrangements under the foreign base company sales income (FBCSI) rules of subpart F. These regulations are based on proposed regulations that were released on February 27, 2008, which were the subject of several public comments and a public hearing. The new regulations include many important clarifications and other changes to the approach set forth in the proposed regulations and present a range of new opportunities and risks for taxpayers operating under modern global business models. The vast majority of U.S.-based multinational companies that sell products abroad will find it necessary or advantageous to revisit their structures in light of these new regulations, in order to seize these opportunities and reduce these risks.
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