[Federal Register Volume 71, Number 103 (Tuesday, May 30, 2006)]
[Proposed Rules]
[Pages 30640-30642]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-4872]



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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-134317-05]
RIN 1545-BF16


Guidance Necessary To Facilitate Business Electronic Filing and 
Burden Reduction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary 
regulations.

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SUMMARY: In the Rules and Regulations section of this issue of the 
Federal Register, the IRS is issuing temporary regulations that 
simplify, clarify, or eliminate reporting burdens. Those regulations 
also eliminate regulatory impediments to the electronic filing of 
certain statements that taxpayers are required to include on or with 
their Federal income tax returns. The text of those regulations also 
serves as the text of these proposed regulations.

DATES: Written or electronic comments, and a request for a public 
hearing, must be received by August 28, 2006.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-134317-05), Room 
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
134317-05), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue, NW., Washington, DC, or sent electronically, via the IRS 
Internet site at http://www.irs.gov/regs or via the Federal eRulemaking 
Portal at http://www.regulations.gov (indicate IRS and REG-134317-05).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Grid Glyer, (202) 622-7930, concerning submissions of comments, Kelly 
Banks (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, SE:W:CAR:MP:T:T:SP, 
Washington, DC 20224. Comments on the collection of information should 
be received by August 28, 2006. 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 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 service to provide information.

    The collection of information in these proposed regulations is in 
each of the corresponding temporary regulations.
    The proposed regulations simplify, clarify, or eliminate reporting 
burdens. These regulations also eliminate regulatory impediments to the 
electronic filing of certain statements that taxpayers are required to 
include on or with their Federal income tax returns.
    The collection of information is mandatory. The likely respondents 
are large corporations, many of which will be members of a consolidated 
group and/or component members of a controlled group.
    Estimated total annual reporting burden: 262,500 hours.
    Estimated average annual burden hours per respondent: 0.75 hours.
    Estimated number of respondents: 350,000.
    Estimated frequency of responses: Annually.
    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 26 CFR part 1 to add Sec. Sec.  
1.302-2T, 1.302-4T, 1.331-1T, 1.332-6T, 1.338-10T, 1.351-3T, 1.355-5T, 
1.368-3T, 1.381(b)-1T, 1.382-8T, 1.382-11T, 1.1081-11T, 1.1221-2T, 
1.1502-13T, 1.1502-31T, 1.1502-32T, 1.1502-33T, 1.1502-35T, 1.1502-76T, 
1.1502-95T, 1.1563-1T, 1.1563-3T, and amend part 602 to add Sec.  
1.6012-2T. The text of those temporary regulations also serves as the 
text of these proposed regulations. The preamble to the temporary 
regulations explains the amendments.

Special Analysis

    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 has also 
been determined that section 553(b) of the Administrative Procedure Act 
(5 U.S.C. chapter 5) does not apply to the following proposed 
regulations: Sec. Sec.  1.302-2, 1.302-4, 1.331-1, 1.332-6, 1.351-3, 
1.355-5, 1.368-3, 1.381(b)-1, 1.1081-11, 1.1563-1, 1.1563-3, and 
1.6012-2. With respect to the collections of information in such 
regulations, and with respect to the following proposed regulations, 
Sec. Sec.  1.338-10, 1.382-8, 1.382-11, 1.1221-2, 1.1502-13, 1.1502-31, 
1.1502-32, 1.1502-33, 1.1502-35, 1.1502-76 and 1.1502-95, it is hereby 
certified that these provisions will not have a significant economic 
impact on a substantial number of small entities. This certification is 
based on the fact that these regulations primarily affect large 
corporations (which are members of either controlled or consolidated 
groups) and in the case of all corporations will substantially reduce 
or eliminate the existing reporting burden. Therefore, a regulatory 
flexibility analysis is not required. Pursuant to section 7805(f) of 
the Internal Revenue Code, these proposed regulations have been 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on their impact on small business.

Comments and Requests for a 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 submitted timely 
to the IRS. All comments will be available for public

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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 public hearing will be published in the Federal Register.

Drafting Information

    The principal author of these regulations is Grid Glyer of the 
Office of Associate Chief Counsel (Corporate). Other personnel from the 
Treasury Department and the IRS 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 1.302-2 is amended by:
    1. Redesignating paragraph (b) as paragraph (b)(1).
    2. Revising newly designated paragraph (b)(1).
    3. Adding paragraphs (b)(2) and (d).
    The additions and revisions read as follows:


Sec.  1.302-2  Redemptions not taxable as dividends.

    [The text of the proposed amendment to Sec.  1.302-2 is the same as 
the text for Sec.  1.302-2T published elsewhere in this issue of the 
Federal Register].
    Par. 3. Section 1.302-4 is amended by revising paragraph (a) and 
adding paragraph (h) to read as follows:


Sec.  1.302-4  Termination of shareholder's interest.

    [The text of the proposed amendment to Sec.  1.302-4 is the same as 
the text for Sec.  1.302-4T published elsewhere in this issue of the 
Federal Register].
    Par. 4. Section 1.331-1 is amended by revising paragraph (d) and 
adding paragraph (f) to read as follows:


Sec.  1.331-1  Corporate liquidations.

    [The text of the proposed amendment to Sec.  1.331-1 is the same as 
the text for Sec.  1.331-1T published elsewhere in this issue of the 
Federal Register].
    Par. 5. Section 1.332-6 added to read as follows:


Sec.  1.332-6  Records to be kept and information to be filed with 
return.

    [The text of the proposed Sec.  1.332-6 is the same as the text for 
Sec.  1.332-6T published elsewhere in this issue of the Federal 
Register].
    Par. 6. Section 1.338-10 is amended by revising paragraph 
(a)(4)(iii) and adding paragraph (c) to read as follows:


Sec.  1.338-10  Filing of returns.

    [The text of the proposed amendment to Sec.  1.338-10 is the same 
as the text for Sec.  1.338-10T published elsewhere in this issue of 
the Federal Register].
    Par. 7. Section 1.351-3 is added to read as follows:


Sec.  1.351-3  Records to be kept and information to be filed.

    [The text of the proposed Sec.  1.351-3 is the same as the text for 
Sec.  1.351-3T published elsewhere in this issue of the Federal 
Register].
    Par. 8. Section 1.355-5 is added to read as follows:


Sec.  1.355-5  Records to be kept and information to be filed.

    [The text of the proposed Sec.  1.355-5 is the same as the text for 
Sec.  1.355-5T published elsewhere in this issue of the Federal 
Register].
    Par. 9. Section 1.368-3 is added to read as follows:


Sec.  1.368-3  Records to be kept and information to be filed with 
returns.

    [The text of the proposed Sec.  1.368-3 is the same as the text for 
Sec.  1.368-3T published elsewhere in this issue of the Federal 
Register].
    Par. 10. Section 1.381(b)-1 is amended by revising paragraph (b)(3) 
and adding paragraph (e) to read as follows:


Sec.  1.381(b)-1  Operating rules applicable to carryovers in certain 
corporate acquisitions.

    [The text of the proposed amendment to Sec.  1.381(b)-1 is the same 
as the text for Sec.  1.381(b)-1T published elsewhere in this issue of 
the Federal Register].
    Par. 11. Section 1.382-8 is amended by:
    1. Revising paragraphs (c)(2) and (h).
    2. Redesignating paragraph (e)(4) as paragraph (e)(5).
    3. Adding new paragraphs (e)(4) and (j)(4).
    The additions and revisions read as follows:


Sec.  1.382-8  Controlled groups.

    [The text of the proposed amendment to Sec.  1.382-8 is the same as 
the text for Sec.  1.382-8T published elsewhere in this issue of the 
Federal Register].
    Par. 12. Section 1.382-11 is added to read as follows:


Sec.  1.382-11  Reporting requirements.

    [The text of the proposed Sec.  1.382-11 is the same as the text 
for Sec.  1.382-11T published elsewhere in this issue of the Federal 
Register].
    Par. 13. Section 1.1081-11 is added to read as follows:


Sec.  1.1081-11  Records to be kept and information to be filed with 
returns.

    [The text of the proposed Sec.  1.1081-11 is the same as the text 
for Sec.  1.1081-11T published elsewhere in this issue of the Federal 
Register].
    Par. 14. Section 1.1221-2 is amended by revising paragraph 
(e)(2)(iv) and adding paragraphs (i) through (j) to read as follows:


Sec.  1.1221-2  Hedging transactions.

    [The text of the proposed amendment to Sec.  1.1221-2 is the same 
as the text for Sec.  1.1221-2T published elsewhere in this issue of 
the Federal Register].
    Par. 15. Section 1.1502-13 is amended by revising paragraphs 
(f)(5)(ii)(E) and (f)(6)(i)(C)(2) and adding paragraph (m) to read as 
follows:


Sec.  1.1502-13  Intercompany transactions.

    [The text of the proposed amendment to Sec.  1.1502-13 is the same 
as the text for Sec.  1.1502-13T published elsewhere in this issue of 
the Federal Register].
    Par. 16. Section 1.1502-31 is amended by revising paragraph (e)(2) 
and adding paragraphs (i) through (j) to read as follows:


Sec.  1.1502-31  Stock basis after a group structure change.

    [The text of the proposed amendment to Sec.  1.1502-31 is the same 
as the text for Sec.  1.1502-31T published elsewhere in this issue of 
the Federal Register].
    Par. 17. Section 1.1502-32 is amended by revising paragraph 
(b)(4)(iv) and adding paragraphs (i) through (j) as follows:


Sec.  1.1502-32  Investment adjustments.

    [The text of the proposed amendment to Sec.  1.1502-32 is the same 
as the text for Sec.  1.1502-32T published elsewhere in this issue of 
the Federal Register].
    Par. 18. Section 1.1502-33 is amended by revising paragraph 
(d)(5)(i)(D) and adding paragraph (k) to read as follows:


Sec.  1.1502-33  Earnings and profits.

    [The text of the proposed amendment to Sec.  1.1502-33 is the same 
as the text for Sec.  1.1502-33T published elsewhere in this issue of 
the Federal Register].
    Par. 19. Section 1.1502-35 is amended by revising paragraph 
(c)(4)(i) and adding paragraph (k) to read as follows:

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Sec.  1.1502-35  Transfers of subsidiary stock and deconsolidations of 
subsidiaries.

    [The text of the proposed amendment to Sec.  1.1502-35 is the same 
as the text of Sec.  1.1502-35T published elsewhere in this issue of 
the Federal Register].
    Par. 20. Section 1.1502-76 is amended by revising paragraph 
(b)(2)(ii)(D) and adding paragraph (d) to read as follows:


Sec.  1.1502-76  Taxable year of members of group.

    [The text of the proposed amendment to Sec.  1.1502-76 is the same 
as the text for Sec.  1.1502-76T published elsewhere in this issue of 
the Federal Register].
    Par. 21. Section 1.1502-95 is amended by revising paragraphs (e)(8) 
and (f) and adding paragraph (g) to read as follows:


Sec.  1.1502-95  Rules on ceasing to be a member of a consolidated 
group (or loss subgroup).

    [The text of the proposed amendment to Sec.  1.1502-95 is the same 
as the text for Sec.  1.1502-95T published elsewhere in this issue of 
the Federal Register].
    Par. 22. Section 1.1563-1 is amended by revising paragraph (c)(2) 
and adding paragraph (e) to read as follows:


Sec.  1.1563-1  Definition of controlled group of corporations and 
component members.

    [The text of the proposed amendment to Sec.  1.1563-1 is the same 
as the text for Sec.  1.1563-1T published elsewhere in this issue of 
the Federal Register].
    Par. 23. Section 1.1563-3 is amended by revising paragraph 
(d)(2)(iv) and adding paragraph (e) to read as follows:


Sec.  1.1563-3  Rules for determining stock ownership.

    [The text of the proposed amendment to Sec.  1.1563-3 is the same 
as the text for Sec.  1.1563-3T published elsewhere in this issue of 
the Federal Register].
    Par. 24. Section 1.6012-2 is amended by revising paragraph (c) and 
adding paragraph (k) to read as follows:


Sec.  1.6012-2  Corporations required to make returns of income.

    [The text of the proposed section Sec.  1.6012-2 is the same as the 
text for Sec.  1.6012-2T published elsewhere in this issue of the 
Federal Register].

Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 06-4872 Filed 5-26-06; 8:45 am]
BILLING CODE 4830-01-P