[Federal Register Volume 61, Number 125 (Thursday, June 27, 1996)]
[Proposed Rules]
[Pages 33391-33393]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15828]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[CO-26-96]
RIN 1545-AU33
Regulations Under Section 382 of the Internal Revenue Code of
1986; Application of Section 382 in Short Taxable Years and With
Respect to Controlled Groups
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 382 of the
Internal Revenue Code of 1986 (relating to limitations on net operating
loss carryforwards and certain built-in losses following an ownership
change) were filed with the Office of the Federal Register (CO-77-90;
see 56 FR 4183; 1991-1 C.B. 749). 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withdrawn and these proposed rules are issued in their place.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
application of section 382 in short taxable years and with respect to
controlled groups. These regulations comply with the statutory
direction under section 382(m) to prescribe such regulations.
Additional rules amend certain aspects of Sec. 1.382-2T relating
principally to the separate tracking of the stock ownership of loss
corporations that cease to exist following a merger or similar
transactions.
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
[[Page 33392]]
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-26-96), 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-26-96), 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 1545-1434. Proposed Sec. 1.382-8(h)
requires a response from certain corporations that are members of
controlled groups. The IRS requires this information to assure
compliance with section 382(m)(5) so that the value of a loss
corporation that is a member of a controlled group is not taken into
account more than once in computing a section 382 limitation.
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.
Proposed Sec. 1.382-8(h) provides that the loss corporation must
file a statement signed by it and any other member of the controlled
group that elects to restore value to it indicating relevant
information regarding the election. The likely respondents and/or
recordkeepers are corporations that are members of certain controlled
groups. Responses to this collection of information are required to
obtain a benefit (relating to the restoration of value for section 382
purposes).
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: 875 hours. The estimated
annual burden per respondent varies from ten to thirty minutes,
depending on individual circumstances, with an estimated average of
fifteen minutes. Estimated number of respondents: 21,000. Estimated
frequency of responses: once every six years.
Background
Temporary regulations in the Rules and Regulations section of this
issue of the Federal Register amend the Income Tax Regulations (26 CFR
Part 1) under section 382 of the Internal Revenue Code of 1986. Among
other changes, those regulations add temporary regulations Secs. 1.382-
5T and 1.382-8T, and amend Sec. 1.382-2T(f). 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 relating to limitations on net
operating loss carryforwards and certain built-in losses following an
ownership change under section 382.
For the text of these new temporary regulations, see TD 8679. The
preamble to the temporary regulations explains the regulations.
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 also has been determined
that section 553(b) of the Administrative Procedure Act (5 U.S.C.
chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do
not apply to these regulations, and, therefore, a Regulatory
Flexibility Analysis 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 Thursday, October 17, 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 the temporary
regulations is David B. Friedel of the Office of Assistant Chief
Counsel (Corporate), IRS. Other personnel from the IRS and Treasury
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 4183)
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 by
revising the entry for Sec. 1.382-2T and adding citations for
Secs. 1.382-5 and 1.382-8 in numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
[[Page 33393]]
Section 1.382-2T also issued under 26 U.S.C. 382(g)(4)(C), (i),
(k)(1) and (6), (l)(3), (m), and 26 U.S.C. 383.* * *
Section 1.382-5 also issued under 26 U.S.C. 382(m).* * *
Section 1.382-8 also issued under 26 U.S.C. 382(m).* * *
Par. 2. Section 1.382-1 is amended by revising the entry for
Sec. 1.382-2(a)(1)(iv), and adding Secs. 1.382-5 and 1.382-8 to read as
follows:
Sec. 1.382-1 Table of contents.
* * * * *
Sec. 1.382-2 General rules for ownership change.
(a) * * *
(1) * * *
(iv) End of separate accounting for losses and credits of
distributor or transferor loss corporation.
* * * * *
Sec. 1.382-5 Section 382 limitation.
(a) Scope.
(b) Computation of value.
(c) Short taxable year.
(d) Successive ownership changes and absorption of a section 382
limitation.
(1) In general.
(2) Recognized built-in gains and losses.
(3) Effective date.
(e) Controlled groups.
(f) Effective date.
* * * * *
Sec. 1.382-8 Controlled groups.
(a) Introduction.
(b) Controlled group loss and controlled group with respect to a
controlled group loss.
(c) Computation of value.
(1) Reduction in value.
(2) Restoration of value.
(3) Reduction in value by the amount restored.
(4) Appropriate adjustments.
(5) Certain reductions in the value of members of a controlled
group.
(d) No double reduction.
(e) Definitions and nomenclature.
(1) Definitions in Sec. 1.382-2T.
(2) Controlled group.
(3) Component member.
(4) Predecessors and successors.
(f) Coordination between consolidated groups and controlled
groups.
(g) Examples.
(h) Time and manner of filing election to restore.
(1) Statement required.
(2) Revocation of election.
(3) Filing by component member.
(i) [Reserved]
(j) Effective date.
(1) In general.
(2) Transition rule.
(3) Corporations that are not members on January 29, 1991.
(4) Amended returns.
Par. 3. Section 1.382-2 is amended as follows:
Sec. 1.382-2 General rules for ownership change.
[The text of the proposed amendments to paragraphs (e)(2)(iv),
(f)(1)(i), (ii) and (iii), (f)(4), (f)(5), and (f)(18)(i) is the same
as the text of the amendments to paragraphs (e)(2)(iv), (f)(1)(i), (ii)
and (iii), (f)(4), (f)(5), and (f)(18)(i) of Sec. 1.382-2T, published
elsewhere in this issue of the Federal Register.]
Par. 4. Sections 1.382-5 and 1.382-8 are added to read as follows:
[The text of these proposed sections is the same as the text of
Secs. 1.382-5T and 1.382-8T published elsewhere in this issue of the
Federal Register.]
Margaret Milner Richardson,
Commissioner of Internal Revenue.
[FR Doc. 96-15828 Filed 6-26-96; 8:45 am]
BILLING CODE 4830-01-U