[Federal Register Volume 71, Number 88 (Monday, May 8, 2006)]
[Proposed Rules]
[Pages 26721-26722]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-6888]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-131264-04]
RIN 1545-BD55


Withdrawal of Proposed Regulations Regarding Intercompany 
Transactions; Manufacturer Incentive Payments

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Withdrawal of notice of proposed rulemaking.

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SUMMARY: This document withdraws a notice of proposed rulemaking (REG-
131264-04) regarding the treatment of manufacturer incentive payments. 
The proposed regulations were published in the Federal Register on 
August 13, 2004 (69 FR 50112). After consideration of additional 
issues, the IRS and Treasury Department have decided to withdraw the 
proposed regulations.

DATES: These proposed regulations are withdrawn May 8, 2006.

FOR FURTHER INFORMATION CONTACT: Frances Kelly, (202) 622-7770 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    On August 13, 2004, the IRS and Treasury Department published a 
notice of proposed rulemaking (REG-131264-04) in the Federal Register 
(69 FR 50112) proposing regulations to address additional transactions 
involving

[[Page 26722]]

manufacturer incentive payments and to clarify the proper treatment of 
such incentive payments under the intercompany transaction regulations.
    On April 25, 2005, the IRS and Treasury Department published Rev. 
Rul. 2005-28 (2005-19 IRB 997), which suspends, in part, Rev. Rul. 76-
96 (1976-1 CB 23). Rev. Rul. 2005-28 states that the IRS will not 
apply, and taxpayers may not rely upon, the conclusion reached in Rev. 
Rul. 76-96 that certain rebates made by a manufacturer to retail 
customers are ordinary and necessary business expenses deductible under 
section 162, pending the IRS's reconsideration of the issue and 
publication of subsequent guidance.
    The example in paragraph (c) of the proposed regulations relies, in 
part, upon the premise that the manufacturer incentive payment is an 
ordinary and necessary business expense deductible under section 162. 
To the extent that this premise is correct, paragraph (d) of the 
proposed regulations illustrates the proper application of the 
intercompany transaction regulations. However, because Rev. Rul. 2005-
28 suspends Rev. Rul. 76-96, in pertinent part, these paragraphs of the 
proposed regulations are withdrawn pending further guidance on the 
section 162 issue considered in Rev. Rul. 76-96.
    The example in paragraph (e) of the proposed regulations 
illustrates the application of the original issue discount rules to the 
facts described in paragraph (e) and, based on these facts, concludes 
that the transaction is not an intercompany transaction. This 
conclusion is not dependent upon the issue being reconsidered in Rev. 
Rul. 76-96. Nevertheless, because the example in paragraph (e), 
standing alone, does not provide guidance with respect to the 
application of the intercompany transaction regulations to an 
intercompany transaction, paragraph (e) of the proposed regulations is 
also withdrawn.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Withdrawal of Notice of Proposed Rulemaking

    Accordingly, under the authority of 26 U.S.C. 7805, the notice of 
proposed rulemaking (REG-131264-04) that was published in the Federal 
Register on August 13, 2004 (69 FR 50112) is withdrawn.

Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
 [FR Doc. E6-6888 Filed 5-5-06; 8:45 am]
BILLING CODE 4830-01-P