[Federal Register Volume 74, Number 112 (Friday, June 12, 2009)]
[Proposed Rules]
[Pages 27947-27948]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-13769]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-112994-06]
RIN 1545-BF47


Guidance Under Section 7874 Regarding Surrogate Foreign 
Corporations

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Withdrawal of notice of proposed rulemaking and 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 and the Treasury Department are issuing 
temporary regulations concerning the treatment of a foreign corporation 
as a surrogate foreign corporation under section 7874(a)(2)(B) of the 
Internal Revenue Code (Code). The temporary regulations primarily 
affect domestic corporations and partnerships (and certain parties 
related thereto), and certain foreign corporations that acquire 
substantially all of the properties of such domestic corporations or 
partnerships. The text of the temporary regulations serves as the text 
of these proposed regulations.

DATES: Written or electronic comments and requests for a public hearing 
must be received by September 10, 2009.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG-112994-06), 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-
112994-06), Courier's Desk, Internal Revenue

[[Page 27948]]

Service, 1111 Constitution Avenue, NW., Washington, DC 20224, or sent 
electronically via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG-112994-06).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
S. James Hawes at (202) 622-3860; concerning submissions of comments 
and a request for a public hearing, contact Funmi Taylor at (202) 622-
7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION: 

Background and Explanation of Provisions

    The 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 7874 of the Code. The temporary 
regulations address certain issues relating to the treatment of a 
foreign corporation as a surrogate foreign corporation under section 
7874(a)(2)(B). The text of the temporary regulations serves as the text 
of these proposed regulations, and the preamble to the temporary 
regulations explains these proposed regulations.

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. These 
regulations do not impose a collection of information. Pursuant to the 
Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified 
that this regulation will not have a significant economic impact on a 
substantial number of small entities. The complexity and cost of a 
transaction to which section 7874 may apply make it unlikely that a 
substantial number of small entities will engage in such a transaction. 
In addition, any economic impact to entities affected by section 7874, 
large or small, is derived from the operation of the statute or its 
intended application, not the regulations in this notice of proposed 
rulemaking. Pursuant to section 7805(f) of the Code, 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 Request for a 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. The IRS and the Treasury Department request comments on the 
clarity of the proposed rules and how they can be made easier to 
understand. All comments will be available for public inspection and 
copying. A public hearing may be scheduled if requested by any person 
who timely submits 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 proposed regulations is S. James 
Hawes of the Office of Associate Chief Counsel (International). 
However, other personnel from the IRS and the Treasury Department 
participated in their development.

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 USC 7805, the notice of 
proposed rulemaking (E6-8698) that was published in the Federal 
Register on June 6, 2006 (71 FR 32495) is withdrawn.

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 * * *
    Section 1.7874-2 is also issued under 26 U.S.C. 7874(c)(6) and 
(g). * * *

    Par. 2. Section 1.7874-1 is amended by revising paragraphs (e) and 
(g) to read as follows:


Sec.  1.7874-1  Disregard of affiliate-owned stock.

* * * * *
    (e) [The text of the proposed amendments to Sec.  1.7874-1(e) is 
the same as the text of Sec.  1.7874-1T(e) published elsewhere in this 
issue of the Federal Register.]
* * * * *
    (g) [The text of the proposed amendment to Sec.  1.7874-1(g) is the 
same as the text of Sec.  1.7874-1T(g) published elsewhere in this 
issue of the Federal Register.]
    Par. 3. Section 1.7874-2 is added to read as follows:


Sec.  1.7874-2  Surrogate foreign corporation.

    [The text of proposed Sec.  1.7874-2 is the same as the text of 
Sec.  1.7874-2T(a) through (o) published elsewhere in this issue of the 
Federal Register.]

 Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
[FR Doc. E9-13769 Filed 6-9-09; 11:15 am]
BILLING CODE 4830-01-P