[Federal Register Volume 72, Number 245 (Friday, December 21, 2007)]
[Proposed Rules]
[Pages 72646-72648]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-24896]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-141399-07]
RIN 1545-BH13


Treatment of Overall Foreign and Domestic Losses

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 in this issue of the 
Federal Register, the IRS is issuing temporary regulations that provide 
guidance relating to the recapture of overall foreign and domestic 
losses. Changes to the applicable law were made by the American Jobs 
Creation Act of 2004, as corrected by the Gulf Opportunity Zone Act of 
2005. The temporary regulations provide guidance needed to comply with 
these changes, as well as updated guidance with respect to overall 
foreign losses and separate limitation losses, and affect individuals 
and corporations claiming foreign tax credits. The text of those 
temporary regulations published in this issue of the Federal Register 
also serves as the text of these proposed regulations. This document 
also provides a notice of public hearing on these proposed regulations.

DATES: Written or electronic comments must be received by March 20, 
2008. Outlines of topics to be discussed at the public hearing 
scheduled for April 10, 2008, at 10 a.m. must be received by March 20, 
2008.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG-141399-07), room 5203, 
Internal Revenue Service, PO 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-
141399-07), Courier's desk, Internal Revenue Service, 1111 Constitution 
Avenue, NW., Washington, DC 20044, or sent electronically, via the 
Federal eRulemaking Portal at www.regulations.gov (IRS REG-141399-07). 
The public hearing will be held in the IRS Auditorium, Internal Revenue 
Building, 1111 Constitution Avenue, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Jeffrey L. 
Parry, (202) 622-3850 (not a toll free number); concerning submissions 
of comments, the hearing, and/or to be placed on the building access 
list to attend the hearing, Richard Hurst, 
[email protected].

SUPPLEMENTARY INFORMATION:

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) providing rules relating to the recapture of overall domestic 
losses under section

[[Page 72647]]

904(g) as well as the recapture overall foreign losses and separate 
limitation losses under section 904(f). The text of those regulations 
also serves as the text of these proposed regulations. The preamble to 
the temporary regulations explains the temporary regulations and these 
proposed regulations. The regulations affect individuals and 
corporations claiming foreign tax credits.

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 has also 
been determined that section 553(b) of the Administrative Procedure Act 
(5 U.S.C. chapter 5) does not apply to these regulations, and because 
the regulations do not impose a collection of information on small 
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
apply. Pursuant to section 7805(f), these regulations have been 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small business.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any electronic or written comments (a 
signed original and eight (8) copies) that are submitted timely to the 
IRS. The Treasury Department and the IRS specifically request comments 
on the clarity of the proposed regulations and how they may be made 
easier to understand. Moreover, the Treasury Department and the IRS are 
considering providing additional guidance on overall domestic losses 
and separate limitation losses, as well as further revisions to the 
overall foreign loss provisions of the 1987 regulations. Comments are 
welcome on this ongoing project, particularly with regard to the need 
to provide for guidance on the application of the overall domestic loss 
provisions to income earned through foreign or domestic trusts, as well 
as guidance regarding the recapture of overall foreign losses and 
separate limitation losses on the disposition of property under section 
904(f)(3) and (f)(5)(F). In addition, the Treasury Department and the 
IRS are continuing to study whether additional rules to better 
coordinate the overall foreign loss and overall domestic loss regimes 
would be appropriate, including whether a netting rule should apply to 
offsetting overall foreign loss accounts and overall domestic loss 
accounts. The Treasury Department and the IRS welcome additional 
comments in this regard. All comments will be available for public 
inspection and copying.
    A public hearing has been scheduled for April 10, 2008, in the 
Auditorium, 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 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 section 
of this preamble.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments at the hearing must submit electronic or 
written comments by March 20, 2008 and an outline of the topics to be 
discussed and the time to be devoted to each topic (signed original and 
eight (8) copies) by March 20, 2008. 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 L. Parry of 
the Office of Chief Counsel (International). However, 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 is amended by adding 
an entry in numerical order to read in part as follows:

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

    Section 1.904(g)-3 also issued under 26 U.S.C. 904(g)(4) * * *

    Par. 2. Section 1.904-0 is amended by revising the entries for 
Sec.  1.904(f)-1(a), (d)(2), (d)(3), and (d)(4), and for Sec.  
1.904(f)-2(c) and (c)(1), and adding entries for Sec. Sec.  1.904(f)-7 
and 1.904(f)-8 to read as follows:


Sec.  1.904-0  Outline of regulation provisions for section 904.

* * * * *
Sec.  1.904(f)-1 Overall foreign loss and the overall foreign loss 
account.
* * * * *
    (a)(1) and (a)(2) [The text of these entries is the same as the 
text of the entries for Sec.  1.904(f)-1T(a)(1) and (a)(2) in Sec.  
1.904(f)-0T published elsewhere in this issue of the Federal 
Register.]
* * * * *
    (d)(2), (d)(3), and (d)(4) [The text of these entries is the 
same as the text of the entries for Sec.  1.904(f)-1T(d)(2), (d)(3), 
and (d)(4) in Sec.  1.904(f)-0T published elsewhere in this issue of 
the Federal Register.]
* * * * *
    Sec.  1.904(f)-2 Recapture of overall foreign losses.
* * * * *
    (c) and (c)(1) [The text of these entries is the same as the 
text of the entries for Sec.  1.904(f)-2T(c) and (c)(1) in Sec.  
1.904(f)-0T published elsewhere in this issue of the Federal 
Register.]
* * * * *
    Sec.  1.904(f)-7 Separate limitation loss and the separate 
limitation loss account.
    [The text of the entries for this section is the same as the 
text of the entries for Sec.  1.904(f)-7T(a) through (f) in Sec.  
1.904(f)-0T published elsewhere in this issue of the Federal 
Register.]

    Sec.  1.904(f)-8 Recapture of separate limitation loss accounts.
    [The text of the entries for this section is the same as the 
text of the entries for Sec.  1.904(f)-8T(a) through (c) in Sec.  
1.904(f)-0T published elsewhere in this issue of the Federal 
Register.]

    Par. 3. In Sec.  1.904(f)-1, paragraph (a)(2) is added, and 
paragraph (d)(4) is revised, to read as follows:


Sec.  1.904(f)-1  Overall foreign loss and the overall foreign loss 
account.

    (a)(1) * * *
    (2) [The text of the proposed amendments to Sec.  1.904(f)-1(a)(2) 
is the same as the text of Sec.  1.904(f)-1T(a)(2) published elsewhere 
in this issue of the Federal Register.]
* * * * *
    (d) * * *
    (4) [The text of the proposed amendments to Sec.  1.904(f)-1(d)(4) 
is the same as the text of Sec.  1.904(f)-1T(d)(4) published elsewhere 
in this issue of the Federal Register.]
* * * * *
    Par. 4. Section 1.904(f)-2(c)(1) and (c)(5) Example 4. are revised 
to read as follows:

[[Page 72648]]

Sec.  1.904(f)-2  Recapture of overall foreign losses.

* * * * *
    (c) * * * (1) [The text of the proposed amendments to Sec.  
1.904(f)-2(c)(1) is the same as the text of Sec.  1.904(f)-2T(c)(1) 
published elsewhere in this issue of the Federal Register.]
* * * * *
    (5) * * *
    Example 4. [The text of the proposed amendments to Sec.  
1.904(f)-2(c)(5) Example 4. is the same as the text of Sec.  
1.904(f)-2T(c)(5) Example 4. published elsewhere in this issue of 
the Federal Register.]
* * * * *
    Par. 5. Sections 1.904(f)-7 and 1.904(f)-8 are added to read as 
follows:


Sec.  1.904(f)-7  Separate limitation loss and the separate limitation 
loss account.

    [The text of proposed Sec.  1.904(f)-7 is the same as the text of 
Sec.  1.904(f)-7T(a) through (f) published elsewhere in this issue of 
the Federal Register.]


Sec.  1.904(f)-8  Recapture of separate limitation loss accounts.

    [The text of proposed Sec.  1.904(f)-8 is the same as the text of 
Sec.  1.904(f)-8T(a) through (c) published elsewhere in this issue of 
the Federal Register.]

    Par. 6. Section 1.904(g)-0 is added to read as follows:


Sec.  1.904(g)-0  Outline of regulation provisions.

* * * * *
Sec.  1.904(g)-1 Overall domestic loss and the overall domestic loss 
account.
    [The text of the entries for this section is the same as the 
text for Sec.  1.904(g)-1T(a) through (f) in Sec.  1.904(g)-0T 
published elsewhere in this issue of the Federal Register.]

Sec.  1.904(g)-2 Recapture of overall domestic losses.
    [The text of the entries for this section is the same as the 
text for Sec.  1.904(g)-2T(a) through (d) in Sec.  1.904(g)-0T 
published elsewhere in this issue of the Federal Register.]

Sec.  1.904(g)-3 Ordering rules for the allocation of net operating 
losses, net capital losses, U.S. source losses, and separate 
limitation losses, and for recapture of separate limitation losses, 
overall foreign losses, and overall domestic losses.
    [The text of the entries for this section is the same as the 
text for Sec.  1.904(g)-3T(a) through (i) in Sec.  1.904(g)-0T 
published elsewhere in this issue of the Federal Register.]

    Par. 7. Sections 1.904(g)-1, 1.904(g)-2, and 1.904(g)-3 are added 
to read as follows:


Sec.  1.904(g)-1  Overall domestic loss and the overall domestic loss 
account.

    [The text of proposed Sec.  1.904(g)-1 is the same text of Sec.  
1.904(g)-1T(a) through (f) published elsewhere in this issue of the 
Federal Register.]


Sec.  1.904(g)-2  Recapture of overall domestic losses.

    [The text of proposed Sec.  1.904(g)-2 is the same text of Sec.  
1.904(g)-2T(a) through (d) published elsewhere in this issue of the 
Federal Register.]


Sec.  1.904(g)-3  Ordering rules for the allocation of net operating 
losses, net capital losses, U.S. source losses, and separate limitation 
losses, and for recapture of separate limitation losses, overall 
foreign losses, and overall domestic losses.

    [The text of proposed Sec.  1.904(g)-3 is the same text of Sec.  
1.904(g)-3T(a) through (i) published elsewhere in this issue of the 
Federal Register.]

Par. 8. Section 1.1502-9 is revised to read as follows:


Sec.  1.1502-9  Consolidated overall foreign losses and separate 
limitation losses.

    [The text of proposed Sec.  1.1502-9 is the same as the text of 
Sec.  1.1502-9T(a) through (e) published elsewhere in this issue of the 
Federal Register.]

Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
[FR Doc. E7-24896 Filed 12-20-07; 8:45 am]
BILLING CODE 4830-01-P