MedChem, a Puerto Rico corporation, claimed a tax credit under IRC Section 936 but the Tax Court ruled against them. The court found that MedChem P.R. did not actively conduct its own trade or business—it lacked independent operations and control over manufacturing. This matters to subcontractors because it shows courts will scrutinize whether your company actually performs work or just exists on paper to claim tax benefits.
If you claim tax credits or deductions based on business operations, you must prove you actually control and conduct those operations independently, not just on paper.