MINOR MEMOS. A group of power companies is pressing the IRS to relax technical restrictions that could limit their ability to claim tax benefits from “domestic manufacturing.” US companies that manufacture at home are not taxed on 6% of income from such manufacturing through 2009 and 9% after.However, the annual deduction is capped at 50% of wages paid to employees engaged in such manufacturing. Generating electricity is considered manufacturing. Transmitting or distributing it is not. The power companies want the IRS to make clear that employees count as engaged in manufacturing if they are in a separate entity that operates and maintains a project under an O&M contract with the project company. They are asking that wages paid to employees of the contract operator should count as good wages in cases where all the income from both the power project and the contract operator gets folded into the same consolidated tax return . . . . Most large companies use the accrual method of accounting to determine their taxable income. That means they report income or deductions when they “accrue” rather than waiting for cash to change hands. The IRS ruled in late December that an accrual taxpayer who signs a contract in December 2006 for services that will be performed in January 2007 or for insurance that will run from January to December 2007 cannot deduct its payments until they are actually made in January 2007. Three things must have occurred before a deduction can be taken under the accrual method. The taxpayer must be legally obligated to make the payment, the amount must be at least reasonably ascertainable, and “economic performance” must have occurred. The IRS said economic performance occurs under the service contract when the services are performed in January 2007. It said economic performance occurs under the insurance contract when the premium is paid. The ruling is Revenue Ruling 2007-3.