In the context of a Cost Sharing Arrangement (“CSA”), Treas. Reg. §1.482-7(c)(1) defines a platform contribution (“PCT”) to be “any resource, capability, or right that a controlled participant has developed, maintained, or acquired externally to the intangible development activity (whether prior to or during the course of the CSA) that is reasonably anticipated to contribute to developing cost shared intangibles.” Treas. Reg. §1.482-7(g)(2)(viii) defines subsequent PCTs as those whose date occurs subsequent to the inception of the CSA. Treas. Reg. §1.482-7(g)(1) explains that “a value for the compensation obligation of each PCT Payor” has to be “consistent with the product of the combined pre-tax value to all controlled participants of the platform contribution that is the subject of the PCT and the PCT Payor’s RAB share.” Treas. Reg. §1.482-7(e)(1)(i) notes further that “RAB shares must be updated to account for changes in economic conditions, the business operations and practices of the participants, and the ongoing development of intangibles under the CSA.”
While requiring that the RAB shares be updated, the regulations provide little guidance as to how this is to be accomplished. In particular, the regulations do not specify whether the Payors’ obligations with regard to the prior PCT and the subsequent PCT should be calculated on a combined basis, or whether separate RAB shares, and separate PCT obligations, are appropriate. Whether a combined or separate RAB share will be more appropriate after any subsequent PCT will therefore depend on facts and circumstances of the specific PCTs contributed to the CSA over the life of the CSA.