[Federal Register Volume 66, Number 216 (Wednesday, November 7, 2001)]
[Proposed Rules]
[Pages 56262-56263]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-27970]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-125161-01]
RIN 1545-BA05


Conforming Amendments to Section 446

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: On July 18, 1995, the Treasury and the IRS published final 
regulations governing the intercompany transaction system of the 
consolidated return regulations. Those regulations state that the 
timing rules of the intercompany transaction system are a method of 
accounting. At the time of the publication of those regulations, no 
amendment was made to the regulations promulgated under section 446 to 
coordinate with that statement. This document contains proposed 
regulations confirming that the timing rules of the intercompany 
transaction regulations are a method of accounting.

DATES: Written or electronic comments and requests for a public hearing 
must be received by January 7, 2002.

ADDRESSES: Send submissions to: CC:ITA:RU, room 5226 (REG-125161-01), 
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, 
DC 20044. Submissions may also be hand delivered Monday through Friday 
between the hours of 8 a.m. and 5 p.m. to: CC:ITA:RU, room 5226 (REG-
125161-01), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue, NW, Washington, DC. Alternatively, taxpayers may submit 
comments electronically via the Internet directly to the IRS Internet 
site at http://www.irs.gov/tax__regs/regslist.html.

FOR FURTHER INFORMATION CONTACT: Concerning the regulation, Marie C. 
Milnes-Vasquez or Frances Kelly, (202) 622-7770, or Jeffery G. Mitchell 
(202) 622-4930; concerning submissions and/or requests for a public 
hearing, Guy Traynor, (202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation

    On July 18, 1995, the Treasury and the IRS published in the Federal 
Register (60 FR 36671 [1995-2 C.B. 147]) final regulations under 
Sec. 1.1502-13 governing the intercompany transaction system of the 
consolidated return regulations. Included in such regulations was an 
express statement that ``[t]he timing rules of [the intercompany 
transaction regulations] are a method of accounting for intercompany 
transactions, to be applied by each member in addition to the member's 
other methods of accounting.'' Sec. 1.1502-13(a)(3)(i). At the time of 
the publication of those final regulations, no amendment was made to 
the regulations promulgated under section 446 to coordinate with the 
statement in Sec. 1.1502-13(a)(3)(i) that the timing rules of 
Sec. 1.1502-13 are a method of accounting.
    In General Motors v. Commissioner, 112 T.C. 270 (1999), the Tax 
Court determined that the timing rule of former Sec. 1.1502-13(b)(2) 
was not a method of accounting for purposes of section 446(e). The 
proposed regulations included in this document amend Sec. 1.446-1 to 
confirm the IRS's position that the timing rules of current 
Sec. 1.1502-13 are a method of accounting.

Proposed Effective Date

    The regulations in this section are proposed to apply to 
consolidated return years beginning on or after November 7, 2001.

Special Analyses

    It has been determined that this notice of proposed rule making is 
not a significant regulatory action as defined in Executive Order 
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, because the proposed 
rule does not impose a collection of information on small entities, a 
Regulatory Flexibility Analysis is not required. Pursuant to section 
7805(f) of the Internal Revenue Code, these regulations will be 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on their 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) or electronic comments that are timely submitted 
to the IRS. All comments will be made available for public inspection 
and copying. A public hearing may be scheduled if requested in writing 
by any person that timely submits written comments. If a public hearing 
is scheduled, notice of the date, time, and place for the hearing will 
be published in the Federal Register.

Drafting Information

    The principal author of these proposed regulations is Marie C. 
Milnes-Vasquez, Office of the Associate Chief Counsel (Corporate). 
However, other personnel from the IRS and Treasury Department 
participated in their development.

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 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *

[[Page 56263]]

    Par. 2. Section 1.446-1 is amended by adding paragraph (c)(2)(iii) 
to read as follows:


Sec. 1.446-1  General rule for methods of accounting.

* * * * *
    (c) * * *
    (2) * * *
    (iii) The timing rules of Sec. 1.1502-13 are a method of accounting 
for intercompany transactions (as defined in Sec. 1.1502-13(b)(1)(i)), 
to be applied by each member of a consolidated group in addition to the 
member's other methods of accounting. See Sec. 1.1502-13(a)(3)(i). This 
paragraph is applicable to consolidated return years beginning on or 
after November 7, 2001.
* * * * *
    Par. 3. In Sec. 1.1502-13, the second sentence of paragraph 
(a)(3)(i) is revised to read as follows:


Sec. 1.1502-13  Intercompany transactions.

    (a) * * *
    (3) * * *
    (i) * * * See Sec. 1.1502-17 and, with regard to consolidated 
return years beginning on or after November 7, 2001, Sec. 1.446-
1(c)(2)(iii). * * *
* * * * *

Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
[FR Doc. 01-27970 Filed 11-6-01; 8:45 am]
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