[Federal Register Volume 73, Number 249 (Monday, December 29, 2008)]
[Proposed Rules]
[Pages 79421-79423]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-30729]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-150066-08]
RIN 1545-BI45


Guidance Regarding Foreign Base Company Sales Income

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary 
regulations and notice of public hearing.

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SUMMARY: In the Rules and Regulations section of this issue of the 
Federal Register, the IRS and Treasury Department are issuing temporary 
regulations relating to foreign base company sales income, in cases in 
which personal property sold by a controlled foreign corporation (CFC) 
is manufactured, produced, or constructed pursuant to a contract 
manufacturing arrangement or by one or more branches of the CFC. The 
temporary regulations modify the foreign base company sales income 
regulations to address current business structures and practices, 
particularly the growing importance of contract manufacturing and other 
manufacturing arrangements. The temporary regulations, in general, will 
affect CFCs and their United States shareholders. The text of the 
temporary regulations also serves as the text of the proposed 
regulations. This document also provides notice of a public hearing.

DATES: Written or electronic comments must be received by March 30, 
2009. Outlines of the topics to be discussed at

[[Page 79422]]

the public hearing scheduled for April 20, 2009, at 10 a.m. must be 
received by April 2, 2009.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-150066-08), room 5203 
Internal Revenue Service, PO Box 7604 Ben Franklin Station, Washington, 
DC 20044. Submissions may be hand-delivered Monday through Friday 
between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-150066-08), 
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW., 
Washington, DC 20224. Alternatively, taxpayers may submit electronic 
comments via the Federal eRulemaking Portal at http://www.regulations.gov (IRS-REG-150066-08).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Ethan Atticks, (202) 622-3840; concerning submissions of comments, 
hearing, and/or to be placed on the building access list to attend the 
hearing, Richard A. Hurst at [email protected] or 
(202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provision

    The temporary regulations in the Rules and Regulations section of 
this issue of the Federal Register amend the Income Tax Regulations (26 
CFR part 1) relating to foreign base company sales income, in cases in 
which personal property sold by a controlled foreign corporation (CFC) 
is manufactured, produced, or constructed pursuant to a contract 
manufacturing arrangement or by one or more branches of the CFC. These 
regulations, in general, will affect CFCs and their United States 
shareholders. The text of those temporary regulations also serves as 
the text of these proposed regulations. The preamble to the temporary 
regulations explains these proposed regulations.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It has also been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to these regulations and because the 
regulations do not impose a collection of information on small 
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
apply. Pursuant to section 7805(f) of the Code, these regulations have 
been submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on their impact on small business.

Comments and Public Hearing

    Before the proposed regulations are adopted as final regulations, 
consideration will be give to any written comments (a signed original 
and eight (8) copies) or electronic comments that are submitted timely 
to the IRS. The IRS and the Treasury Department specifically request 
comments on the clarity of the proposed rules and how they may be made 
easier to understand. All comments will be available for public 
inspection and copying.
    A public hearing has been scheduled for April 20, 2009, beginning 
at 10 a.m. in the IRS Auditorium, Internal Revenue Building, 1111 
Constitution Avenue, NW., Washington, DC. Due to building security 
procedures, visitors must enter at the Constitution Avenue entrance. In 
addition, all visitors must present photo identification to enter the 
building. Because of access restrictions, visitors will not be admitted 
beyond the Constitution Avenue entrance area more than 30 minutes 
before the hearing starts. For information about having your name 
placed on the building access list to attend the hearing, see the FOR 
FURTHER INFORMATION CONTACT section of this preamble.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments at the hearing must submit written 
comments or electronic comments by March 30, 2009, and an outline of 
the topics to be discussed and the time to be devoted to each topic 
(signed original and eight (8) copies) by April 2, 2009. A period of 10 
minutes will be allotted to each person for making comments. An agenda 
showing the scheduling of the speakers will be prepared after the 
deadline for receiving outlines has passed. Copies of the agenda will 
be available free of charge at the hearing.

Drafting Information

    The principal author of these regulations is Ethan Atticks of the 
Office of Associate Chief Counsel (International). However, other 
personnel from the IRS and the Treasury Department participated in 
their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for 26 CFR part 1 continues to 
read in part as follows:

    Authority: 26 U.S.C. 7805 * * *.

    Par. 2. Section 1.954-3 is amended by revising paragraphs 
(b)(1)(i)(c), (b)(1)(ii)(a), (b)(1)(ii)(c), (b)(2)(i)(b), (b)(2)(i)(d), 
(b)(2)(ii)(a), (b)(2)(ii)(b), (b)(2)(ii)(e), (b)(4) Example (3), (c), 
and (d), and adding Examples 8 and 9 to paragraph (b)(4), and adding 
paragraphs (e), (f) and (g) to read as follows:


Sec.  1.954-3  Foreign base company sales income.

* * * * *
    (b) * * * (1) * * * (i) * * *
    (c) [The text of the proposed amendments to Sec.  1.954-
3(b)(1)(i)(c) is the same as the text of Sec.  1.954-3T(b)(1)(i)(c) 
published elsewhere in this issue of the Federal Register].
    (ii) * * * (a) [The text of the proposed amendments to Sec.  1.954-
3(b)(1)(ii)(a) is the same as the text of Sec.  1.954-3T(b)(1)(ii)(a) 
published elsewhere in this issue of the Federal Register].
* * * * *
    (c) [The text of the proposed amendments to Sec.  1.954-
3(b)(1)(ii)(c) is the same as the text of Sec.  1.954-3T(b)(1)(ii)(c) 
published elsewhere in this issue of the Federal Register].
    (2) * * * (i) * * *
    (b) [The text of the proposed amendments to Sec.  1.954-
3(b)(2)(i)(b) is the same as the text of Sec.  1.954-3T(b)(2)(i)(b) 
published elsewhere in this issue of the Federal Register].
* * * * *
    (d) [The text of the proposed amendments to Sec.  1.954-
3(b)(2)(i)(d) is the same as the text of Sec.  1.954-3T(b)(2)(i)(d) 
published elsewhere in this issue of the Federal Register].
* * * * *
    (ii) * * *
    (a) [The text of the proposed amendments to Sec.  1.954-
3(b)(2)(ii)(a) is the same as the text of Sec.  1.954-3T(b)(2)(ii)(a) 
published elsewhere in this issue of the Federal Register].
    (b) [The text of the proposed amendments to Sec.  1.954-
3(b)(2)(ii)(b) is the same as the text of Sec.  1.954-3T(b)(2)(ii)(b) 
published elsewhere in this issue of the Federal Register].
* * * * *
    (e) [The text of the proposed amendments to Sec.  1.954-
3(b)(2)(ii)(e) is the same as the text of Sec.  1.954-3T(b)(2)(ii)(e) 
published elsewhere in this issue of the Federal Register].
* * * * *
    (4) * * *

[[Page 79423]]

    Example (3). [The text of the proposed amendments to Sec.  1.954-
3(b)(4) Example 3 is the same as the text of Sec.  1.954-3T(b)(4) 
Example 3 published elsewhere in this issue of the Federal Register].
* * * * *
    Example 8. [The text of the proposed amendments to Sec.  1.954-
3(b)(4) Example 8 is the same as the text of Sec.  1.954-3T Example 8 
published elsewhere in this issue of the Federal Register].
    Example 9. [The text of the proposed amendments to Sec.  1.954-
3(b)(4) Example 9 is the same as the text of Sec.  1.954-3T Example 9 
published elsewhere in this issue of the Federal Register].
    (e) [The text of the proposed amendments to Sec.  1.954-3(e) is the 
same as the text of Sec.  1.954-3T(e) published elsewhere in this issue 
of the Federal Register].
    (f) [The text of the proposed amendments to Sec.  1.954-3(f) is the 
same as the text of Sec.  1.954-3T(f) published elsewhere in this issue 
of the Federal Register].
    (g) [The text of the proposed amendments to Sec.  1.954-3(g) is the 
same as the text of Sec.  1.954-3T(g) published elsewhere in this issue 
of the Federal Register].

Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
[FR Doc. E8-30729 Filed 12-24-08; 8:45 am]
BILLING CODE 4830-01-P