The Fabulous New "Substantial Contribution" Test

Journal of International Taxation, October 2008

Whether the activities of a contract manufacturer can be attributed to a controlled foreign corporation (“CFC”) for purposes of avoiding the foreign base company sales income (“FBCSI”) rules of Subpart F has been one of the more controversial U.S. international tax issues for over two decades. Lewis Greenwald, Douglas Stransky and Tenley Oldak wrote an article entitled "The Fabulous New 'Substantial Contribution' Test," which discusses the much-anticipated Proposed Treasury Regulations that address when a CFC will be able to claim the manufacturing exception to FBCSI if the facts and circumstances indicate that the CFC has made a “substantial contribution” to the manufacturing process.