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Guidance Regarding Foreign Base Company Sales Income; Correction

Document Details

Information about this document as published in the Federal Register.

Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

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AGENCY:

Internal Revenue Service (IRS), Treasury.

ACTION:

Correction to final and temporary regulations.

SUMMARY:

This document contains corrections to final and temporary regulations that were published in the Federal Register on Monday, December 29, 2008 (73 FR 79334) relating to foreign base company sales income.

DATES:

The corrections are effective July 1, 2009.

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FOR FURTHER INFORMATION CONTACT:

Ethan Atticks, (202) 622-3840 (not a toll-free number).Start Printed Page 11844

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SUPPLEMENTARY INFORMATION:

Background

The final and temporary regulations that are subject to these corrections are under section 954 of the Internal Revenue Code.

Need for Correction

As published the final and temporary regulations (TD 9438) contain errors that may prove to be misleading and are in need of correction.

Correction of Publication

Accordingly, the publication of the final and temporary regulations (TD 9438) that were the subject of FR Doc. E8-30727 is corrected as follows:

1. On page 79340, column 2, in the preamble under paragraph caption Determination of Hypothetical Effective Tax Rate, the first paragraph, line 8 of the paragraph, the language “effective tax rate of tax.” is corrected to read “effective tax rate.”.

2. On page 79340, column 3, in the preamble under paragraph caption Determination of Hypothetical Effective Tax Rate, lines 2, 3, and 4, the language “In contrast, if a sales affiliate in the country of manufacturing can theoretically receive certain tax relief by” is corrected to read “In contrast, if a manufacturing branch could receive tax relief with respect to sales income derived from sources within the country in which the manufacturing branch is located by”.

3. On page 79341, column 3, in the preamble, the first paragraph, the language “Under the temporary regulations, if a demonstrably greater amount of manufacturing activity with respect to the personal property occurs in jurisdictions without tax rate disparity relative to the sales or purchase branch, the location of the sales or purchase branch will be deemed to be the location of manufacture of the personal property. In that case, the purchase or sales activities with respect to the property purchased or sold by or through the sales or purchase branch of the CFC will not, for purposes of determining FBCSI in connection with the sale of that property, be deemed to have substantially the same tax effect as if a branch were a wholly owned subsidiary corporation of the CFC. Otherwise, the location of manufacture of the personal property will be deemed to be the location of a manufacturing branch (or remainder) that has tax rate disparity relative to the sales or purchase branch. In that case, the purchase or sales activities with respect to the property purchased or sold by or through the sales or purchase branch of the CFC will be deemed to have substantially the same tax effect as if a branch were a wholly owned subsidiary corporation of the CFC, and that branch will be treated as a separate corporation for purposes of applying the regulations.” is corrected to read “Under the temporary regulations, if a demonstrably greater amount of manufacturing activity with respect to the income derived by a sales or purchase branch with respect to the personal property occurs in jurisdictions without tax rate disparity relative to that sales or purchase branch, the location of that sales or purchase branch will be deemed to be the location of manufacture of the personal property with respect to the income derived by that sales or purchase branch from the purchase or sale of the property. In that case, the use of the purchase or sales branch for purchase or sales activities with respect to the property purchased or sold by or through that sales or purchase branch of the CFC will not, for purposes of determining FBCSI in connection with the income derived by that sales or purchase branch from the purchase or sale of that property, be deemed to have substantially the same tax effect as if a branch were a wholly owned subsidiary corporation of the CFC. Otherwise, the location of manufacture of the personal property with respect to the income derived by that sales or purchase branch from the purchase or sale of that property will be deemed to be the location of a manufacturing branch (or remainder) that has tax rate disparity relative to that sales or purchase branch. In that case, the use of the purchase or sales branch for purchase or sales activities with respect to the property purchased or sold by or through that sales or purchase branch of the CFC will, for purposes of determining FBCSI in connection with the income derived by that sales or purchase branch from the purchase or sale of that property, be deemed to have substantially the same tax effect as if a branch were a wholly owned subsidiary corporation of the CFC, and that branch will be treated as a separate corporation for purposes of applying the regulations.”.

4. On page 79342, column 1, in the preamble under the paragraph caption Clarifying Application of the Rule for Determining the Remainder of the CFC When Activities are Performed in Multiple Locations, the first paragraph, line 18 of the paragraph, the language “the CFC when activities are preformed” is corrected to read “the CFC when activities are performed”.

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5. On page 79344, column 1, under amendatory instruction paragraph 2, item 3, line 5, the language “

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6. On page 79345, column 3, paragraph (a)(4)(iv)(d),

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7. On page 79346, column 1, paragraph (a)(4)(iv)(d),

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8. On page 79346, column 1, paragraph (a)(4)(iv)(d),

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9. On page 79346, column 1, paragraph (a)(4)(iv)(d),

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10. On page 79346, column 2, paragraph (a)(4)(iv)(d),

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11. On page 79346, column 3, paragraph (a)(4)(iv)(d),

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12. On page 79346, column 3, paragraph (a)(4)(iv)(d),

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13. On page 79347, column 1, paragraph (a)(4)(iv)(d),

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14. On page 79347, column 2, paragraph (a)(4)(iv)(d),

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15. On page 79347, column 2, paragraph (a)(4)(iv)(d),

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16. On page 79347, column 2, paragraph (a)(4)(iv)(d),

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17. On page 79347, column 3, paragraph (a)(4)(iv)(d),

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18. On page 79348, column 1, paragraph (a)(4)(iv)(d),

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19. On page 79348, column 1, paragraph (b)(2)(i)(

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20. On page 79348, column 2, following the language “

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21. On page 79348, column 2, following the new language “

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22. On page 79348, column 2, paragraph (d), the last two lines, the language “subsequent taxable years of the taxpayer.” is corrected to read “subsequent taxable years.”.

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23. On page 79349, column 2, in paragraph (b)(1)(ii)(

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24. On page 79349, column 3, paragraph (b)(1)(ii)(

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25. On page 79350, column 2, line 2, in paragraph (b)(1)(ii)(

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26. On page 79350, column 2, line 15, in paragraph (b)(1)(ii)(

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27. On page 79350, column 2, the second full sentence, in paragraph (b)(1)(ii)(

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28. On page 79350, column 2, the last line, in paragraph (b)(1)(ii)(

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29. On page 79350, column 3, lines 13, 14, and 15, in paragraph (b)(1)(ii)(

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30. On page 79351, column 1, line 4, in paragraph (b)(1)(ii)(

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31. On page 79351, column 2, paragraph (b)(1)(ii)(

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32. On page 79351, column 3, paragraph (b)(1)(ii)(

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33. On page 79351, column 3, paragraph (b)(1)(ii)(

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34. On page 79351, column 3, paragraph (b)(1)(ii)(

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35. On page 79351, column 3, paragraph (b)(1)(ii)(

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36. On page 79352, column 1, paragraph (b)(1)(ii)(

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37. On page 79352, column 1, paragraph (b)(1)(ii)(

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38. On page 79352, column 1, in paragraph (b)(1)(ii)(

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39. On page 79352, column 1, paragraph (b)(1)(ii)(

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40. On page 79352, column 1, paragraph (b)(1)(ii)(

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41. On page 79352, column 2, paragraph (b)(1)(ii)(

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42. On page 79352, column 3, paragraph (b)(2)(i)(

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“(b) Activities treated as performed on behalf of the remainder of corporation. (1) With respect to purchasing or selling activities performed by or through the branch or similar establishment, such purchasing or selling activities will, with respect to personal property manufactured, produced, constructed, grown, or extracted by the remainder of the controlled foreign corporation, be treated as performed on behalf of the remainder of the controlled foreign corporation.

(2) With respect to purchasing or selling activities performed by or through the branch or similar establishment, such purchasing or selling activities will, with respect to personal property (other than property described in paragraph (b)(2)(i)(b)(1) of this section) purchased or sold, or purchased and sold, by the remainder of the controlled foreign corporation (or any branch treated as the remainder of the controlled foreign corporation), be treated as performed on behalf of the remainder of the controlled foreign corporation.”.

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43. On page 79352, column 3, paragraph (b)(2)(i)(

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44. On page 79352, column 3, paragraph (b)(2)(i)(

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45. On page 79353, column 1, paragraph (b)(2)(i)(

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46. On page 79353, columns 1 and 2, paragraph (b)(2)(ii)(

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“(b) Activities treated as performed on behalf of the remainder of corporation. (1) With respect to purchasing or selling activities performed by or through the branch or similar establishment, such purchasing or selling activities will, with respect to personal property manufactured, produced, constructed, grown, or extracted by the remainder of the controlled foreign corporation, be treated as performed on behalf of the remainder of the controlled foreign corporation.

(2) With respect to purchasing or selling activities performed by or through the branch or similar establishment, such purchasing or selling activities will, with respect to personal property (other than property described in paragraph (b)(2)(ii)(b)(1) of this section) purchased or sold, or purchased and sold, by the remainder of the controlled foreign corporation (or any branch treated as the remainder of the controlled foreign corporation), be treated as performed on behalf of the remainder of the controlled foreign corporation.”.

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47. On page 79353, column 3, paragraph (b)(4),

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48. On page 79353, column 3, paragraph (b)(4),

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49. On page 79354, column 1, paragraph (b)(4),

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50. On page 79354, column 1, paragraph (b)(4),

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51. On page 79354, column 1, paragraph (b)(4),

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52. On page 79354, column 1, paragraph (b)(4),

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53. On page 79354, column 1, paragraph (b)(4),

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54. On page 79354, column 1, paragraph (b)(4),

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55. On page 79354, columns 1 and 2, paragraph (b)(4),

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56. On page 79354, column 2, paragraph (b)(4),

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57. On page 79354, column 2, paragraph (b)(4),

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58. On page 79354, column 2, paragraph (b)(4),

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59. On page 79354, column 2, paragraph (b)(4),

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60. On page 79354, column 2, paragraph (b)(4),

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Guy R. Traynor,

Federal Register Liaison, Publications & Regulations Br., Associate Chief Counsel, Procedure & Administration.

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[FR Doc. E9-5894 Filed 3-19-09; 8:45 am]

BILLING CODE 4830-01-P