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December 2005 Plain Language Regulations

Determination of Surrogate Foreign Corporation Status
Internal Revenue Code section 7874 provides that in the case of an inversion transaction involving a domestic entity, the acquiring foreign corporation will be a surrogate corporation. Section 7874 also sets forth the tax consequences of being a surrogate foreign corporation. An inversion transaction occurs when a foreign corporation acquires either substantially all of the assets held directly or indirectly by a domestic corporation, or substantially all of the assets of a domestic partnership's trade or business.  REG-143244-05.  Published December 28, 2005.
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Determination of Surrogate Foreign Corporation Status
Internal Revenue Code section 7874 provides that in the case of an inversion transaction involving a domestic entity, the acquiring foreign corporation will be a surrogate foreign corporation. Section 7874 also sets forth the tax consequences being a surrogate foreign corporation.  An inversion transaction occurs when a foreign corporation acquires either substantially all of the assets held directly or indirectly by a domestic corporation, or substantially all of the assets of a domestic partnership's trade or business.  TD 9238.  Published December 28, 2005.
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Normalization
These proposed regulations provide guidance on the normalization accounting requirements applicable to utilities that benefit (or have benefited) from accelerated depreciation methods or from the investment tax credit permitted under pre-1991 law.  The proposed regulations permit a utility whose assets cease to be public utility property to return to its ratepayers the normalization reserve for excess deferred income taxes (EDFIT) with respect to those assets and, in certain circumstances, also permit the return of part or all of the reserve for accumulated deferred investment tax credits (ADITC) with respect to those assets.
REG-104385-01.  Published December 21, 2005.
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Effective Dates of C - to - S Corporation Gain Recognition Rules
These regulations provide guidance to S corporations that have converted from C corporations or that, while S corporations, acquire carryover basis property from C corporations.  Specifically, the regulations provide that (1) an S corporation may recognize corporate-level gain after receiving carryover basis property on or after December 27, 1994 regardless of the date of the corporation's S election, and (2) a corporation's most recent S election, not an earlier election that has been revoked or terminated, determines whether or not it may be required to recognize corporate-level gain after it has converted from a C corporation. 
TD 9236.  Published December 21, 2005.
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Obligations of States and Political Subdivisions
Generally, gross income does not include the interest on any State or local bond.  The exclusion does not apply to private activity bonds, other than certain qualified private activity bonds.  Comprehensive regulations were issued in 1997 providing guidance on the application of the private activity bond rules, but the provisions applying the rules to refunding issues were reserved.  These final regulations provide guidance to issuers of tax-exempt bonds in the application of the private activity bond tests to refunding issues. TD 9234.  Published December 19, 2005.
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Classification of Certain Foreign Entities
The entity classification regulations list certain business entities that are always classified as corporations (per se corporations) and, therefore, are not eligible to check the box to change their classification.  These final regulations add certain foreign entities to the list of per se corporations.
TD 9235. Published December 16, 2005.
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Sickness or Accident Disability Payments
Under current law, payments to an employee or any of the employee's dependents on account of sickness or accident disability are subject to social security taxes, for the first six months the employee is out of work, unless the payments are received under a workers' compensation law.  The final regulations explain that a workers' compensation law includes a statute that is in the nature of a workers' compensation law.  TD 9233.  Published December 15, 2005.
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Corporate Estimated Tax
Treasury and the IRS are issuing proposed regulations that provide guidance to corporations on the requirements to make estimated tax payments under section 6655 and that withdraw proposed regulations under section 6655 that the Service issued in 1984.  The proposed regulations also contain proposed amendments to reflect the current definition of "income tax liability" in section 6425(c).  Section 6655 provides rules for corporations that are required to make payments of estimated tax.  Section 6655 allows corporate taxpayers to use various methods when determining the amount of estimated tax they are required to pay in each installment.  These proposed regulations clarify the rules imposed by section 6655 and the available methods for computing quarterly installments of estimated tax under section 6655.  These proposed regulations reflect changes in the law since 1984 and address abuses that are inherent in the current regulations. REG-107722-00.  Published December 12, 2005.
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Guidance on Necessary to Facilitate Electronic Tax Administration
This document contains proposed regulations to update the rules regarding the disclosure and use of tax return information by tax return preparers.  The proposed regulations announce new and additional rules for taxpayers to consent electronically to the disclosure or use of their tax return information by tax return preparers.
REG-137243-02.  Published December 8, 2005.
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Guidance on Passive Foreign Investment Company Purging Elections
These temporary regulations will provide guidance for making certain elections for taxpayers that continue to be subject to the passive foreign investment company ("PFIC") excess distribution regime of section 1291 even though the foreign corporation in which they own stock is no longer treated as a PFIC under section 1297(e) or section 1298(b)(1).  These regulations also contain rules for making retroactive purging elections.
TD 9232.  Published December 8, 2005.
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Guidance on Passive Foreign Investment Company Purging Elections
These final regulations will provide guidance for making certain elections for taxpayers that continue to be subject to the passive foreign investment company ("PFIC") excess distribution regime of section 1291 even though the foreign corporation in which they own stock is no longer treated as a PFIC under section 1297(e) or section 1298(b)(1).  These regulations also contain rules for making retroactive purging elections. 
TD 9231.  Published December 8, 2005.
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Guidance on Passive Foreign Investment Company Purging Elections
These proposed regulations will provide guidance for making certain elections for taxpayers that continue to be subject to the passive foreign investment company ("PFIC") excess distribution regime of section 1291 even though the foreign corporation in which they own stock is no longer treated as a PFIC under section 1297(e) or section 1298(b)(1).  These regulations also contain rules for making retroactive purging elections. 
REG-133446-03.  Published December 8, 2005.
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Information Reporting Relating to Taxable Stock Transactions
These final regulations require a domestic corporation involved in an acquisition of control or substantial change in capital structure to file Form 8806, Statement of Acquisition of Control or Change in Capital Structure, within 45 days following the transaction (or, if earlier, by January 5th of the year following the calendar year in which such event occurred) if the reporting corporation or any shareholder is required to recognize gain as a result of the application of I.R.C. section 367(a) and the regulations.  The final regulations also require a domestic corporation involved in these transactions to issue a Form 1099-CAP, Changes in Corporate Control and Capitol Structure, reporting the amount of any cash plus shareholder.  The final regulations also require a broker who, as the record holder of stock, receives a Form 1099-CAP from a corporation pursuant to the reporting requirements of Treas. Reg. section 1.6043-4, to file a Form 1099-CAP and furnish such Form 1099-CAP to the actual owner. 
TD 9230.  Published December 2, 2005.
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Updated Mortality Tables for Determining Current Liability
These proposed regulations provide guidance regarding the mortality tables to be used in determining the current liability of a qualified defined benefit plan under section 4(l)(7) of the Internal Revenue Code for certain purposes in determining the plan's minimum funding requirements and maximum deductible contribution.
REG-124988-05.  Published December 2, 2005.
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