Government grants that supplement operating income are taxable, the IRS said.

The US government imposes duties on imports that foreign manufacturers are found to be “dumping” in the US market.  Dumping is selling goods at less than their market value.  By law, any such duties collected are distributed by the government to the affected industries in the United States as compensation for injury.  The IRS is insisting on audit that such payments must be reported as income by the US companies that receive them.  A “technical advice memorandum,” or ruling, released by the IRS national office in one of the audits in late August explains the IRS reasoning.  The ruling is TAM 200434019.

Keith Martin