By James J. Tobin, Esq.*
Ernst & Young LLP, New York, NY
A recent General Legal Advice Memorandum, AM 2015-002, is yet another effort by the IRS to explain the arcane mechanics of the manufacturing branch rule of Reg. §1.954-3(b)(1)(i)(b). Several PLRs over recent years have provided guidance in this area (PLR 200945034, PLR 200945036, and PLR 201002024) and this commentator and others have written extensively about the prior guidance. (This commentator alone contributed three earlier rants on the subject and this piece will make it an even four: The Proposed Contract Manufacturing Regulations: A Journey of a Thousand Miles Begins with a Single Step, 37 Tax Mgmt. Int'l J. 407 (July 11, 2008); Branching Out: The Subpart F Contract Manufacturing Regulations v2.0, 38 Tax Mgmt. Int'l J. 295 (May 8, 2009); Bringing Some Truth to the Fiction That Is the Branch Rules, 39 Tax Mgmt. Int'l J. 29 (Jan. 8, 2010).) The AM provides some further explanation and takes a new step, but in my view the result is a further departure from practical guidance allowing sensible application of the manufacturing branch rule in the real world.