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investment in depreciable property at as low a
cost to the Treasury as possible. [Quoting H.
Conf. Rept. 97-760, at 505 (1982), 1982-2 C.B.
600, 617.]
* * * * * * *
To meet its concerns, Congress incorporated a
requirement for “real” investment into subsection (h). At
this point, Congress inserted the requirement at issue that
in order for a possessions corporation to be eligible to
elect one of the favorable income allocation methods when
intangibles were involved, the corporation had to meet the
significant business presence test. The activities
necessary to meet this test were to prompt “real and
significant business activity” [id. at 507, supra, 1982-2
C.B. at 618-619] in the possessions.
The quoted items appear in the conference committee report; the
quoted language “real and significant business activity” is part
of the following explanation by the conference committee:
Significant business presence
For an island affiliate to be eligible to elect cost
sharing for a product or type of service, it must have and
maintain a significant business presence in the possession
with respect to that product or type of service. This test
is intended to require real and significant business
activity in the possessions.
The island affiliate satisfies this requirement with
respect to a product or type of service if (1) more than 25
percent of the value added by the affiliated group to the
product is added by the island affiliate in a possession or
(2) at least 65 percent of the direct labor costs of the
affiliated group for the product or service (or in
connection with the purchase and sale of goods not produced
by the affiliated group) are incurred by the island
affiliate and are compensation for services rendered in the
possession. In general, the figures to be used for these
calculations will be those used by the island affiliate and
its affiliates in their required inventory calculations.
The Secretary may prescribe regulations providing
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