[Federal Register Volume 68, Number 88 (Wednesday, May 7, 2003)]
[Proposed Rules]
[Pages 24404-24405]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-11210]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-152524-02]
RIN 1545-BB38


Guidance Under Section 1502; Amendment of Waiver of Loss 
Carryovers From Separate Return Limitation Years

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary 
regulations and notice of public hearing.

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SUMMARY: In the Rules and Regulations section of this issue of the 
Federal Register, the IRS is issuing temporary regulations under 
section 1502 that permit the amendment of certain elections to waive 
the loss carryovers of an acquired subsidiary. The text of the 
temporary regulations published in this issue of the Federal Register 
also serves as the text of these proposed regulations. This document 
also provides notice of a public hearing on these proposed regulations.

DATES: Written or electronic comments must be received by August 5, 
2003. Outlines of topics to be discussed at the public hearing 
scheduled for August 6, 2003, at 10 a.m., must be received by July 16, 
2003.

ADDRESSES: Send submissions to: CC:ITA:RU (REG-152524-02), room 5226, 
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, 
DC 20044. Submissions may be hand-delivered Monday through Friday 
between the hours of 8 a.m. and 5 p.m. to CC:ITA:RU (REG-152524-02), 
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, 
NW., Washington, DC 20044. Alternatively, taxpayers may submit comments 
electronically directly to the IRS Internet site at www.irs.gov/regs. 
The public hearing will be held in room 6718, Internal Revenue Service 
Building, 1111 Constitution Avenue, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Alison G. Burns or Jeffrey B. Fienberg, (202) 622-7930; concerning 
submission of comments, the hearing, and/or to be placed on the 
building access list to attend the hearing, Sonya Cruse, (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 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:T:T:SP, Washington, DC 
20224. Comments on the collection of information should be received by 
July 7, 2003. Comments are specifically requested concerning:
    Whether the proposed collection of information is necessary for the 
proper performance of the functions of the IRS, 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 collection 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 services to provide information.
    The collection of information in this proposed regulation was 
previously approved and reviewed by the Office of Management and Budget 
under control number 1545-1774. The collection of information is 
required to allow the taxpayer to make certain elections to determine 
the amount of allowable loss under Sec.  1.337(d)-2T, Sec.  1.1502-20 
as currently in effect, or under Sec.  1.1502-20 modified so that the 
amount of allowable loss determined pursuant to Sec.  1.1502-20(c)(1) 
is computed by taking into account only the amounts computed under 
Sec.  1.1502-20(c)(1)(i) and (ii); to allow the taxpayer to reapportion 
a section 382 limitation in certain cases; to allow the taxpayer to 
waive certain loss carryovers; and to ensure that loss is not 
disallowed under Sec.  1.337-2T and basis is not reduced under Sec.  
1.337(d)-2T to the extent that the taxpayer establishes that the loss 
or basis is not attributable to the recognition of built-in gain on the 
disposition of an asset.
    This collection of information is modified with respect to 
Sec. Sec.  1.1502-20T and 1.1502-32T. Regarding Sec.  1.1502-20T, the 
collection of information also is necessary to allow the common parent 
of the selling group to reapportion a separate, subgroup or 
consolidated section 382 limitation when the acquiring group amends its 
Sec.  1.1502-32(b)(4) election. With respect to Sec.  1.1502-32T, the 
collection of information also is necessary to allow the acquiring 
group to amend its previous Sec.  1.1502-32(b)(4) election, so that it 
may use previously waived losses of its subsidiary.
    The collection of information is required to obtain a benefit. The 
likely

[[Page 24405]]

respondents are corporations that file consolidated income tax returns.
    Estimated total annual reporting and/or recordkeeping burden: 
30,400 hours.
    Estimated average annual burden per respondent: 2 hours.
    Estimated number of respondents: 15,200.
    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 of Provisions

    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 text of those regulations also 
serves as the text of these proposed regulations. The preamble to the 
temporary regulations contains a full explanation of the reasons 
underlying the issues of the proposed regulations.

Proposed Effective Date

    These proposed regulations will be effective on the date they are 
published as final regulations in the Federal Register.

Special Analyses

    It has been determined that this Treasury decision 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 primarily will affect 
affiliated groups of corporations that have elected to file 
consolidated returns, which tend to be larger businesses, and, 
moreover, that any burden on taxpayers is minimal. Therefore, a 
Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 
U.S.C. chapter 6) is not required. Pursuant to Sec.  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 (a signed original and eight 
(8) copies) or electronic comments that are submitted timely to the 
IRS. All comments will be available for public inspection and copying.
    A public hearing has been scheduled for August 6, 2003, beginning 
at 10 a.m. in room 6718, Internal Revenue Building, 1111 Constitution 
Avenue, NW., Washington, DC. Due to building security procedures, 
visitors must enter at the Constitution Avenue entrance. In addition, 
all visitors must present photo identification to enter the building. 
Because of access restrictions, visitors will not be admitted beyond 
the immediate entrance area more than 30 minutes before the hearing 
starts. For information about having your name placed on the building 
access list to attend the hearing, see the FOR FURTHER INFORMATION 
CONTACT portion of this preamble.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments must submit written or electronic 
comments and an outline of the topics to be discussed and the time to 
be devoted to each topic (a signed original and eight (8) copies) by 
July 16, 2003. 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 Jeffrey B. Fienberg, 
Office of 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

    Par. 1. The authority citation for part 1 continues to read in part 
as follows:

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

    Par. 2. Section 1.1502-20 is amended by redesignating paragraph 
(i)(5) as (i)(6) and by adding paragraphs (i)(3)(viii) and (i)(5) to 
read as follows:


Sec.  1.1502-20  Disposition or deconsolidation of subsidiary stock.

    [The text of this proposed section is the same as the text of Sec.  
1.1502-20T(i)(3)(viii) and (i)(5) published elsewhere in this issue of 
the Federal Register.]
    Par. 3. Section 1.1502-32 is amended by adding paragraph 
(b)(4)(vii) to read as follows:


Sec.  1.1502-32  Investment adjustments.

[The text of this proposed section is the same as the text of Sec.  
1.1502-32T(b)(4)(vii) published elsewhere in this issue of the Federal 
Register].
* * * * *

David A. Mader,
Assistant Deputy Commissioner of Internal Revenue.
[FR Doc. 03-11210 Filed 5-6-03; 8:45 am]
BILLING CODE 4830-01-P