A recent Tax Court decision – which arguably is wrongheaded – could cause many suppliers of production parts to original equipment manufacturers to lose federal income tax credits. Suppliers are well advised to consider reviewing and redrafting their supply agreements to avoid leaving tax credits on the table.
In Tangel v. Commissioner, T.C. Memo. 2021-1 (2021), the Tax Court applied a regulation that Treasury finalized after the 1983 Supreme Court decision in Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983).
