[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withdrawn and these proposed rules are issued in their place.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