IRS issues final cost sharing regulations and temporary and proposed regulations on the application of the income method

Tax Insights ()

As noted in our prior alert, "PKN Stop Press United States - IRS issues final cost sharing regulations," on December 16, 2011, the Internal Revenue Service ("IRS") and the Treasury Department issued final cost sharing regulations ("Final Regulations") that were previously issued as temporary and proposed regulations on December 31, 2008 ("2008 Temporary Regulations"). The Final Regulations provide guidance on the determination of and compensation for the economic contributions made by controlled participants in connection with a cost sharing agreement ("CSA") under the arm’s length standard. The Final Regulations largely continue the guidance contained in the 2008 Temporary Regulations, which were set to expire on December 30, 2011, under the statutory three-year sunset rule applicable to temporary regulations.