Internal Revenue Bulletin: 2006-28
July 10, 2006
Guidance Under Section 1502; Amendment of Tacking Rule Requirements of Life-Nonlife Consolidated Regulations; and Guidance Necessary to Facilitate Business Electronic Filing and Burden Reduction; Correction
Table of Contents
- FOR FURTHER INFORMATION CONTACT:
- SUPPLEMENTARY INFORMATION:
- Need for Correction
- Correction of Publication
- PART 1—INCOME TAXES
- §1.1502-76T Taxable year of members of group (temporary).
- §1.1502-76T [Removed]
- §1.1563-1 Definition of controlled group of corporations and component members.
- PART 602—OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
- §602.101 [Amended]
This document contains corrections to temporary regulations (T.D. 9258, 2006-20 I.R.B. 886) that were published in the Federal Register on Tuesday April 25, 2006 (71 FR 23856) relating to guidance regarding amendments to tacking rule requirements of Life-Nonlife consolidated regulations under section 1502; and final and temporary regulations (T.D. 9264, 2006-26 I.R.B. 1150), that were published in the Federal Register on Tuesday, May 30, 2006 (71 FR 30591) relating to guidance necessary to facilitate business electronic filing and burden reduction.
The amendment to §1.1502-76T that was published April 25, 2006, is effective April 25, 2006. The amendments to §§1.1563-1 and 602.101 and the removal of §1.1502-76T that was published on May 30, 2006, is effective May 30, 2006.
The temporary regulations (T.D. 9258) and final and temporary regulations (T.D. 9264) that are the subject of these corrections are under sections 332, 351, 355, 368, 1081, 1502, and 1563 of the Internal Revenue Code.
As published, T.D. 9258 and T.D. 9264 contain errors that may prove to be misleading and are in need of clarification. T.D. 9264 added §1.1502-76T in error, as §1.1502-76T was previously codified by T.D. 9258. This correcting amendment amends §1.1502-76T as codified by T.D. 9258, and removes §1.1502-76T as codified by T.D. 9264.
* * * * *
Accordingly, 26 CFR parts 1 and 602 are corrected by making the following correcting amendments:
Paragraph 1. The authority citation for part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.1502-76T published on April 25, 2006, as T.D. 9258 is amended by revising paragraphs (b) through (c)(3) and adding paragraph (d) to read as follows:
* * * * *
(b) through (b)(2)(ii)(C) [Reserved]. For further guidance, see §1.1502-76(b) through (b)(2)(ii)(C).
(D) Election—(1) Statement. The election to ratably allocate items under paragraph (b)(2)(ii) of §1.1502-76 must be made in a separate statement entitled, “THIS IS AN ELECTION UNDER §1.1502-76(b)(2)(ii) TO RATABLY ALLOCATE THE YEAR’S ITEMS OF [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER OF THE MEMBER].” The election must be filed by including a statement on or with the returns including the items for the years ending and beginning with S’s change in status. If two or more members of the same consolidated group, as a consequence of the same plan or arrangement, cease to be members of that group and remain affiliated as members of another consolidated group, an election under this paragraph (b)(2)(ii)(D)(1) may be made only if it is made by each such member. Each statement must also indicate that an agreement, as described in paragraph (b)(2)(ii)(D)(2) of this section, has been entered into. Each party signing the agreement must retain either the original or a copy of the agreement as part of its records. See §1.6001-1(e).
(2) Agreement. For each election under §1.1502-76 (b)(2)(ii), the member and the common parent of each affected group must sign and date an agreement. The agreement must—
(i) Identify the extraordinary items, their amounts, and the separate or consolidated returns in which they are included;
(ii) Identify the aggregate amount to be ratably allocated, and the portion of the amount included in the separate and consolidated returns; and
(iii) Include the name and employer identification number of the common parent (if any) of each group that must take the items into account.
(b)(2)(iii) through (c) [Reserved]. For further guidance, see §1.1502-76(b)(2)(iii) through (c).
(d) Effective date—(1) Applicability date—(i) Paragraph (a) of this section applies to any original consolidated Federal income tax return due (without extensions) on or after April 25, 2006.
(ii) Paragraph (b)(2)(ii)(D) of this section applies to any original consolidated Federal income tax return due (without extensions) after May 30, 2006. However, a consolidated group may apply this section to any original consolidated Federal income tax return (including any amended return filed on or before the due date (including extensions) of such original return) timely filed on or after May 30, 2006.
(2) Expiration date—(i) The applicability of paragraph (a) of this section will expire on April 25, 2009.
(ii) The applicability of paragraph (b)(2)(ii)(D) of this section will expire on May 26, 2009.
Par. 3. Section 1.1502-76T published on May 30, 2006, as T.D. 9264 is removed.
Par. 4. Section 1.1563-1 is amended by adding paragraph (c)(2)(iv) and revising paragraph (e) to read as follows:
* * * * *
(c) * * *
(2) * * *
(iv) The provisions of this paragraph (c)(2) may be illustrated by the following examples (in which it is assumed that all the individuals are unrelated):
Example 1. On each day of 1970 all the outstanding stock of corporations M, N, and P is held in the following manner:
Since the more-than-50-percent stock ownership requirement of section 1563(a)(2)(B) is met with respect to corporations M and N and with respect to corporations N and P, but not with respect to corporations M, N, and P, corporation N would, without the application of this paragraph (c)(2), be a component member on December 31, 1970, of overlapping groups consisting of M and N and of N and P. If N does not file an election in accordance with §1.1563-1T (c)(2)(i), the Internal Revenue Service will determine the group in which N is to be included.
Example 2. On each day of 1970, all the outstanding stock of corporations S, T, W, X, and Z is held in the following manner:
On December 31, 1970, the more-than-50-percent stock ownership requirement of section 1563(a)(2)(B) may be met with regard to any combination of the corporations but all five corporations cannot be included as component members of a single controlled group because the inclusion of all the corporations in a single group would be dependent upon taking into account the stock ownership of more than five persons. Therefore, if the corporations do not file a statement in accordance with §1.1563-1T(c)(2)(ii), the Internal Revenue Service will determine the group in which each corporation is to be included. The corporations or the Internal Revenue Service, as the case may be, may designate that three corporations be included in one group and two corporations in another, or that any four corporations be included in one group and that the remaining corporation not be included in any group.
(d) * * *
(e) [Reserved]. For further guidance, see §1.1563-1T(e)(1).
Par. 5. The authority citation for part 602 continues to read in part as follows:
Authority: 26 U.S.C. 7805.
Par. 6. Section 602.101, paragraph (b) is amended by removing the entries for 1.332-6, 1.351-3, 1.355-5, 1.368-3, and 1.1081-11.
Cynthia E. Grigsby,
Senior Federal Register Liaison Officer,
Publications and Regulations Branch,
Associate Chief Counsel
(Procedure and Administration).
(Filed by the Office of the Federal Register on June 8, 2006, 3:47 p.m., and published in the issue of the Federal Register for June 13, 2006, 71 F.R. 34009)
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