Today, Treasury and the IRS issued temporary regulations regarding when controlled foreign corporations (CFCs) are considered to derive rents and royalties in the active conduct of a trade or business for purposes of the subpart F rules.  The regulations modify the “active development” test to require that the CFC perform the relevant activities, such as production or development, through its own officers and employees.  This requirement is effective for payments of rents or royalties received or accrued during taxable years of CFCs ending on or after September 2, 2015, and taxable years of United States shareholders in which or with which such taxable years end, but only with respect to property manufactured, produced, developed, or created, or, in the case of acquired property, property to which substantial value has been added, on or after September 2, 2015.  The regulations also provide that cost-sharing transaction (CST) and platform contribution transaction (PCT) payments will not cause the CFC’s officers and employees to be treated as undertaking the activities of the controlled participant to which the payments are made, for purposes of both the “active development” and “active marketing” tests.  This cost-sharing rule applies to rents or royalties received or accrued during taxable years of CFCs ending on or after September 2, 2015, and to taxable years of U.S. shareholders in which or with which such taxable years end, to the extent the rents or royalties are received or accrued on or after September 2, 2015.  The temporary regulations also address the subpart F treatment of certain transactions involving partnerships.