[Federal Register Volume 61, Number 125 (Thursday, June 27, 1996)]
[Proposed Rules]
[Pages 33393-33395]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15826]


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DEPARTMENT OF THE TREASURY
26 CFR Part 1

[CO-24-96]
RIN 1545-AU31


Consolidated Returns--Limitations on the Use of Certain Losses 
and Deductions

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Withdrawal of prior proposed rule, notice of proposed 
rulemaking by cross-reference to temporary regulations, and notice of 
public hearing.

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SUMMARY: On January 29, 1991, proposed rules under section 1502 were 
filed with the Office of the Federal Register (CO-78-90; see 56 FR 
4228; 1991-1 C.B. 757). A public hearing was held on April 8, 1991. The 
IRS and Treasury published Notice 91-27 (1991-2 C.B. 629) to advise of 
intended modifications to the proposed regulations. The January, 1991, 
proposed rules are withdrawn, and these proposed rules are issued in 
their place.
    In the Rules and Regulations section of this issue of the Federal 
Register, the IRS is issuing temporary regulations relating to the 
carryover and carryback of losses to consolidated and separate return 
years. The text of those temporary regulations also serves as the text 
of these proposed regulations. This document also provides a notice of 
public hearing on these proposed regulations.
DATES: Written comments must be received by September 25, 1996. 
Outlines of topics to be discussed at the public hearing scheduled for 
Thursday, October 17, 1996, at 10 a.m. must be received by Thursday, 
September 26, 1996.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (CO-24-96), room 5228, 
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, 
DC 20044. In the alternative, submissions may be hand delivered between 
the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (CO-24-96), Courier's 
Desk, Internal Revenue Service, 1111 Constitution Avenue NW., 
Washington, DC. The public hearing will be held in the NYU Classroom, 
Room 2615, Internal Revenue Building, 1111 Constitution Avenue NW., 
Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, David B. 
Friedel, (202) 622-7550; concerning submissions and the hearing, 
Evangelista Lee, (202) 622-7190 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in this notice of proposed 
rulemaking has been reviewed and approved by the Office of Management 
and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 
3507) under the control number 1545-1237. Section 1.1502-21(b)(3) 
requires a response from certain consolidated groups. The IRS requires 
the information to assure that an election to relinquish a carryback 
period is properly documented.
    Comments concerning the collection of information should be sent to 
the Office of Management and Budget, Attn: Desk Officer for the 
Department of Treasury, Office of Information and Regulatory Affairs, 
Washington, DC, 20503, with copies to the Internal Revenue Service, 
Attn: IRS Reports Clearance Officer, T:FP. Washington, DC, 20224. 
Comments on the collection of information should be received by August 
26, 1996.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid control number.
    The collection of information is in Proposed Sec. 1.1502-21(b)(3). 
That section permits an election to relinquish a carryback period with 
respect to a consolidated net operating loss. The common parent of the 
group files the statement evidencing the election with the income tax 
return of the group. This information is required by the IRS to assure 
that an election to relinquish a carryback period is properly 
documented. The likely respondents

[[Page 33394]]

and/or recordkeepers are certain consolidated groups of corporations. 
Responses to this collection of information are required to obtain a 
benefit (relating to the carryover of losses which would otherwise be 
carried back).
    Books or records relating to this collection of information must be 
retained as long as their contents may become material in the 
administration of any Internal Revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.
    Estimated total annual reporting burden: 1,000 hours. The estimated 
annual burden per respondent varies from five to thirty minutes, 
depending on individual circumstances, with an estimated average of ten 
minutes. Estimated number of respondents: 6,000. Estimated annual 
frequency of responses: 1.

Background

    Temporary regulations in the Rules and Regulations section of this 
issue of the Federal Register amend the Income Tax Regulations (26 CFR 
par. 1) relating to deductions and losses of members. The temporary 
amendments concern the method for computing the limitations with 
respect to separate return limitation year (SRLY) losses. They also 
concern the rules relating to carryover and carryback of losses to 
consolidated and separate return years and to the built-in deductions 
rules. The final regulations that are proposed to be based on these 
proposed regulations would be added to part 1 of title 26 of the Code 
of Federal Regulations. Those final regulations would provide rules for 
computing the limitations with respect to separate return limitation 
year (SRLY) losses. They also concern the rules relating to carryover 
and carryback of losses to consolidated and separate return years and 
to the built-in deductions rules.
    For the text of these new temporary regulations, see TD 8677. The 
preamble to the temporary regulations explains the regulations.

Proposed Effective Date

    For dates of application and special transition rules, see the 
discussion of Effective Dates under SUPPLEMENTARY INFORMATION relating 
to the temporary regulations, published elsewhere in this issue of the 
Federal Register.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in EO 12866. Therefore, 
a regulatory assessment is not required. It is hereby certified that 
these regulations do not have a significant economic impact on a 
substantial number of small entities. This certification is based on 
the fact that these regulations will primarily affect affiliated groups 
of corporations that have elected to file consolidated returns, which 
tend to be larger businesses. Therefore, a Regulatory Flexibility 
Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is 
not required. Pursuant to section 7805(f) of the Internal Revenue Code, 
this notice of proposed rulemaking will be submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on its impact on small business.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) that are submitted timely to the IRS. All 
comments will be available for public inspection and copying.
    A public hearing has been scheduled for Monday, September 16, 1996, 
at 10 a.m. in the NYU Classroom, Room 2615, Internal Revenue Building, 
1111 Constitution Avenue NW., Washington, DC. Because of access 
restrictions, visitors will not be admitted beyond the building lobby 
more than 15 minutes before the hearing starts.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing.
    Persons that wish to present oral comments at the hearing must 
submit written comments by September 25, 1996 and submit an outline of 
the topics to be discussed and the time to be devoted to each topic 
(signed original and eight (8) copies) by Thursday, September 26, 1996.
    A period of 10 minutes will be allotted to each person for making 
comments.
    An agenda showing the scheduling of the speakers will be prepared 
after the deadline for receiving outlines has passed. Copies of the 
agenda will be available free of charge at the hearing.

Drafting Information

    The principal author of these regulations is David B. Friedel, 
Office of Assistant Chief Counsel (Corporate), IRS. However, other 
personnel from the IRS and Treasury Department participated in their 
development.

Withdrawal of Notice of Proposed Rulemaking

    Accordingly, under the authority of 26 U.S.C. 7805, the notice of 
proposed rulemaking that was published on January 29, 1991 (56 FR 4228) 
is withdrawn.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for Part 1 is amended in part 
by adding citations in numerical order to read as follows:

    Authority: 26 U.S.C. 7805
* * * * *
    Section 1.1502-15 also issued under 26 U.S.C. 1502.
* * * * *
    Section 1.1502-21 also issued under 26 U.S.C. 1502.
    Section 1.1502-22 also issued under 26 U.S.C. 1502.
    Section 1.1502-23 also issued under 26 U.S.C. 1502.
    Section 1.1502-79 also issued under 26 U.S.C. 1502.
    Section 1.1502-15A also issued under 26 U.S.C. 1502.
    Section 1.1502-21A also issued under 26 U.S.C. 1502.
    Section 1.1502-22A also issued under 26 U.S.C. 1502.
    Section 1.1502-23A also issued under 26 U.S.C. 1502.
    Section 1.1502-41A also issued under 26 U.S.C. 1502.
    Section 1.1502-79A also issued under 26 U.S.C. 1502.
* * * * *
    Par. 2. Section 1.1502-15 is added to read as follows:


Sec. 1.1502-15  SRLY limitation on built-in losses.

[The text of this proposed section is the same as the text of 
Sec. 1.1502-15T published elsewhere in this issue of the Federal 
Register.]
    Par. 3. Section 1.1502-21 is added to read as follows:


Sec. 1.1502-21  Net operating losses.

[The text of this proposed section is the same as the text of 
Sec. 1.1502-21T published elsewhere in this issue of the Federal 
Register.]
    Par. 4. Section 1.1502-22 is added to read as follows:


Sec. 1.1502-22  Consolidated capital gain and loss.

[The text of this proposed section is the same as the text of 
Sec. 1.1502-22T published elsewhere in this issue of the Federal 
Register.]

[[Page 33395]]

    Par. 5. Section 1.1502-23 is added to read as follows:


Sec. 1.1502-23  Consolidated net section 1231 gain or loss.

[The text of this proposed section is the same as the text of 
Sec. 1.1502-23T published elsewhere in this issue of the Federal 
Register.]
Margaret Milner Richardson,
Commissioner of Internal Revenue.
[FR Doc. 96-15826 Filed 6-26-96; 8:45 am]
BILLING CODE 4830-01-U