[Federal Register Volume 67, Number 105 (Friday, May 31, 2002)]
[Proposed Rules]
[Pages 38039-38040]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-13577]


-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-122564-02]
RIN 1545-BA73


Carryback of Consolidated Net Operating Losses to Separate Return 
Years

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: This document contains proposed regulations under section 1502 
that affect corporations filing consolidated returns. In the Rules and 
Regulations section of this issue of the Federal Register, the IRS is 
issuing temporary regulations permitting certain acquiring consolidated 
groups to elect to waive all or a portion of the pre-acquisition 
portion of the 5-year carryback period under section 172(b)(1)(H) for 
certain losses attributable to certain acquired members. The text of 
those regulations also serves as the text of these proposed 
regulations.

DATES: Written or electronic comments and requests for a public hearing 
must be received by July 30, 2002.

ADDRESSES: Send submissions to: CC:ITA:RU, Room 5226 (REG-122564-02), 
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-
122564-02), 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 www.irs.gov/regs.

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

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in this notice of proposed 
rulemaking has been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)). Comments on the collection of information should be 
sent to the Office of Management and Budget, Attn: Desk Officer for the 
Department of the Treasury, Office of Information and Regulatory 
Affairs, Washington, DC 20503, with copies to the Internal Revenue 
Service, Attn: IRS Reports Clearance Officer, W:CAR:MP:FP:S, 
Washington, DC 20224. Comments on the collection of information should 
be received by July 30, 2002. Comments are specifically requested 
concerning:
    Whether the proposed collection of information is necessary for the 
proper performance of the functions of the Internal Revenue Service, 
including whether the information will have practical utility;
    The accuracy of the estimated burden associated with the proposed 
collection of information (see below);
    How the quality, utility, and clarity of the information to be 
collected may be enhanced;
    How the burden of complying with the proposed collections of 
information may be minimized, including through the application of 
automated collection techniques or other forms of information 
technology; and
    Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of service to provide information.
    The collection of information in this proposed regulation is in 
Sec. 1.1502-21(b)(3)(ii)(C). This information is required to document 
the taxpayer's election to relinquish portions of its carryback period 
for 2001 and 2002 losses attributable to acquired members. The data 
will be used by the Internal Revenue Service to ensure that taxpayers 
are preparing their returns in accordance with their elections. The 
collection of information is required to obtain a benefit. The likely 
respondents are businesses.
    Estimated total annual reporting burden: 1,000 hours.
    Estimated average annual burden hours per respondent: 15 minutes.
    Estimated number of respondents: 4,000.
    Estimated annual frequency of responses: Once.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    Books or records relating to a 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.

Background and Explanation

    Temporary regulations in the Rules and Regulations section of this 
issue of the Federal Register amend the Income Tax Regulations (26 CFR 
part 1) relating to section 1502. The temporary regulations provide 
rules permitting certain acquiring consolidated groups to elect to 
waive all or a portion of the pre-acquisition portion of the 5-year 
carryback period under section 172(b)(1)(H) for certain losses 
attributable to certain acquired members. The text of those regulations 
also serves as the text of these proposed regulations. The preamble to 
the temporary regulations explains the amendments.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
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 principally affect persons 
filing consolidated Federal income tax returns. Available data 
indicates that most consolidated return filers are large companies (not 
small 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, 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

[[Page 38040]]

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 * * *

    Par. 2. Section 1.1502-21 is amended by adding paragraph 
(b)(3)(ii)(C) to read as follows:


Sec. 1.1502-21  Net operating losses.

    [The text of proposed Sec. 1.1502-21(b)(3)(ii)(c) is the same as 
the text of Sec. 1.1502-21T(b)(3)(ii)(c) published elsewhere in this 
issue of the Federal Register].

David A. Mader,
Acting Deputy Commissioner of Internal Revenue.
[FR Doc. 02-13577 Filed 5-30-02; 8:45 am]
BILLING CODE 4830-01-P