- 44 -
underlying a manufacturing contract may be imputed to a taxpayer
only to the extent that the performance of those services is
adequately supervised by the taxpayer’s own employees.
We ask ourselves in this case whether MedChem P.R.
participated regularly, continually, extensively, and actively in
the management and operation of Avitene’s manufacturing in Puerto
Rico throughout the requisite 3-year period. Under the facts at
hand, we must answer that question in the negative. Indeed, we
are not even able to find that MedChem P.R. had any meaningful
business activity in Puerto Rico during that period. MedChem
P.R.’s investment in the economy of Puerto Rico during that
period was almost nonexistent in the sense that it placed in that
possession only one employee and established in that possession
only a one-room office. Moreover, MedChem P.R. abandoned the
office and terminated the employee on June 30, 1990. Although
MedChem P.R.’s decision to have Avitene manufactured in Puerto
Rico did result in the use of some of that possession’s work
force, and thus ostensibly harmonize with Congress’ intent for
the possessions tax credit to produce employment in that
possession, we are unable to find that more than a few if any of
the individuals who worked in Puerto Rico on Avitene-related
matters were hired as a result of the Avitene contract. All the
same, we do not believe that the creation of jobs in Puerto Rico
Page: Previous 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 NextLast modified: May 25, 2011