May 12,2004

Grassley on the Contract Manufacturing Provision

M E M O R A N D U M

To: Reporters and Editors
Re: Contract manufacturing
Da: Wednesday, May 12, 2004

The following comment is from Sen. Chuck Grassley, chairman of the Committee onFinance, on why he and Sen. Max Baucus, ranking member, took the contract manufacturingprovision out of the JOBS bill.

“The contract manufacturing provision that was taken out of the JOBS bill would havecodified guidance issued by the IRS in 1997. We have learned, however, that this position may notbe sustainable under current case law and that the 1997 announcement is under review. We alsohave learned that taxpayers have been complying with the case law to the extent it conflicts with theannouncement by the IRS. Accordingly we agreed to defer action on this issue until we couldconduct a more complete review of it. It should be noted, however, that this is likely not our finalword on contract manufacturing. While we remain committed to the competitiveness of Americancompanies, we remain equally committed to ensuring that our international tax rules are not misusedto obtain unintended benefits.”