Proposed Rule2023-14098
Revising Consolidated Return Regulations To Reflect Statutory Changes, Modernize Language, and Enhance Clarity
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Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 7, 2023
Issuing agencies
Treasury DepartmentInternal Revenue Service
Abstract
This document contains proposed amendments to regulations applicable to affiliated groups of corporations that file consolidated Federal income tax returns. The proposed regulations would modify those regulations to reflect statutory changes, update language to remove antiquated or regressive terminology, and enhance clarity. Additionally, this document partially or completely withdraws certain notices of proposed rulemaking and proposes to withdraw certain temporary regulations. The proposed regulations would affect corporations filing consolidated returns.
Full Text
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<title>Federal Register, Volume 88 Issue 150 (Monday, August 7, 2023)</title>
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[Federal Register Volume 88, Number 150 (Monday, August 7, 2023)]
[Proposed Rules]
[Pages 52057-52082]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-14098]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 5, 301, and 602
[REG-134420-10]
RIN 1545-BJ87
Revising Consolidated Return Regulations To Reflect Statutory
Changes, Modernize Language, and Enhance Clarity
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking; withdrawal of notices of
proposed rulemaking; partial withdrawal of notices of proposed
rulemaking; and proposed withdrawal of temporary regulations.
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SUMMARY: This document contains proposed amendments to regulations
applicable to affiliated groups of corporations that file consolidated
Federal income tax returns. The proposed regulations would modify those
regulations to reflect statutory changes, update language to remove
antiquated or regressive terminology, and enhance clarity.
Additionally, this document partially or completely withdraws certain
notices of proposed rulemaking and proposes to withdraw certain
temporary regulations. The proposed regulations would affect
corporations filing consolidated returns.
DATES: As of August 7, 2023, the notices of proposed rulemaking
published on November 14, 2001 (66 FR 57021), March 12, 2002 (67 FR
11070), May 31, 2002 (67 FR 38039), May 31, 2002 (67 FR 38040), March
14, 2003 (68 FR 12324), May 7, 2003 (68 FR 24404), March 18, 2004 (69
FR 12811), August 18, 2004 (69 FR 51209), August 26, 2004 (69 FR
52462), April 10, 2007 (72 FR 17814), and June 23, 2010 (75 FR 35710)
are withdrawn. As of August 7, 2023, the notices of proposed rulemaking
published on December 30, 1992 (57 FR 62251-01), March 18, 2004 (69 FR
12281), and June 11, 2015 (80 FR 33211) are partially withdrawn (see
SUPPLEMENTARY INFORMATION for specific details). Written or electronic
comments as well as requests for a public hearing must be received by
November 6, 2023. Requests for a public hearing must be submitted as
prescribed in the ``Comments and Requests for a Public Hearing''
section.
ADDRESSES: Commenters are strongly encouraged to submit public comments
electronically. Submit electronic submissions via the Federal
eRulemaking Portal at <a href="https://www.regulations.gov">https://www.regulations.gov</a> (indicate IRS and
REG-134420-10). Once submitted to the Federal eRulemaking Portal,
comments cannot be edited or withdrawn. The Department of the Treasury
(Treasury Department) and the IRS will publish for public availability
any comment submitted to its public docket.
Send paper submissions to: CC:PA:LPD:PR (REG-134420-10), Room 5203,
Internal Revenue Service, P.O. Box 7604, Ben Franklin Station,
Washington, DC 20044.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
William W. Burhop at (202) 317-5363 or Kelton P. Frye at (202) 317-5135
(not toll-free numbers); concerning the submission of comments and/or
requests for a public hearing, Vivian Hayes by email at
<a href="/cdn-cgi/l/email-protection#8cfcf9eee0e5efe4e9edfee5e2ebffcce5feffa2ebe3fa"><span class="__cf_email__" data-cfemail="58282d3a34313b303d392a31363f2b18312a2b763f372e">[email protected]</span></a> or by phone at (202) 317-5306 (not a toll-free
number).
SUPPLEMENTARY INFORMATION:
Background
This notice of proposed rulemaking (NPRM) contains proposed
regulations under sections 1502, 1503, 1552, and 1563 of the Internal
Revenue Code of 1986 (Code). These proposed regulations primarily would
revise the Income Tax Regulations (26 CFR part 1) under section 1502
(consolidated return regulations). Section 1502 authorizes the
Secretary of the Treasury or the Secretary's delegate (Secretary) to
prescribe consolidated return regulations for an affiliated group of
corporations that join in filing (or that are required to join in
filing) a consolidated return (consolidated group) to clearly reflect
the Federal income tax liability of the consolidated group and to
prevent avoidance of such tax liability. See Sec. 1.1502-1(h)
(defining the term ``consolidated group''). For purposes of carrying
out those objectives, section 1502 also permits the
[[Page 52058]]
Secretary to prescribe rules that may be different from the provisions
of chapter 1 of the Code (chapter 1) that would apply if the
corporations composing the consolidated group filed separate returns.
Terms used in the consolidated return regulations generally are defined
in Sec. 1.1502-1.
The proposed regulations also would revise or propose to remove
other regulations under the Code. These regulations are set forth in
(i) the Income Tax Regulations (26 CFR part 1), (ii) the Temporary
Income Tax Regulations under the Revenue Act of 1978 (26 CFR part 5),
(iii) the Regulations on Procedure and Administration (26 CFR part
301), and (iv) the OMB Control Numbers under the Paperwork Reduction
Act Regulations (26 CFR part 602).
Explanation of Provisions
I. Overview
In this NPRM, the Treasury Department and the IRS have proposed
revisions to the consolidated return regulations to (i) eliminate
obsolete or otherwise outdated provisions, (ii) modernize the language
and improve the clarity of the regulations, and (iii) facilitate
taxpayer compliance. As an initial matter, the proposed regulations
would update the consolidated return regulations to reflect statutory
changes made by legislation enacted during the last 50-plus years and
remove consolidated return regulations that have no practical
applicability to taxpayers. The proposed regulations also would revise
the consolidated return regulations to eliminate obsolete or otherwise
incorrect terms and cross-references. Lastly, the proposed regulations
generally would remove transition rules for transactions occurring in
or before 2009 because the taxable years affected by such transition
rules generally are closed and the rules have no practical
applicability to taxpayers.
The proposed regulations also would update the consolidated return
regulations and the regulations under section 1563 to eliminate
antiquated or regressive terminology. For example, the proposed
regulations would replace all gender-specific pronouns and other
identifiers in the consolidated return regulations with gender-neutral
pronouns and identifiers. The proposed regulations also would revise
the consolidated regulations to identify (i) American Samoa, (ii) the
Commonwealth of the Northern Mariana Islands, (iii) the Commonwealth of
Puerto Rico, (iv) Guam, and (v) the U.S. Virgin Islands as
``territories'' of the United States rather than ``possessions.'' Each
of those jurisdictions has its own government and its own tax system.
These revisions are consistent with, and in furtherance of, the
Treasury Department's Equity Action Plan, as well as Executive Order
13985 of January 20, 2021, Advancing Racial Equity and Support for
Underserved Communities Through the Federal Government, 86 FR 7009
(January 25, 2021).
The proposed regulations also withdraw or partially withdraw
numerous NPRMs. These NPRMs include: (i) NPRMs that are incorporated,
in revised form, into these proposed regulations or that were
incorporated into final regulations in revised form; (ii) a NPRM that
became obsolete when proposed regulations provided in a subsequent,
discrete NPRM were adopted as final regulations; and (iii) NPRMs that
cross-referenced temporary regulations (the text of which served as the
text for those proposals) that were removed, have expired, or otherwise
have become obsolete. Additionally, the proposed regulations propose to
withdraw temporary regulations that (i) no longer have practical
applicability to taxpayers, or (ii) would be replaced by final
regulations proposed by this document.
With regard to each provision of the consolidated return
regulations that these proposed regulations would remove, the Treasury
Department and the IRS generally have proposed to reserve the affected
provision. This approach is intended solely to avoid cascading changes
to cross-references throughout the consolidated return regulations,
thereby preserving historical citations and reducing potential
confusion for taxpayers. Accordingly, the reserving of those provisions
does not indicate in any manner that the Treasury Department and the
IRS are studying, or intend to study, any of the one or more topics
addressed by the reserved provision.
Lastly, the proposed regulations would remove numerous provisions
that cross-reference prior-law editions of the Code of Federal
Regulations (CFR). Following adoption of the proposed regulations as
final regulations, taxpayers may consult the CFR for a particular year
to determine the rules applicable to that year.
The Treasury Department and the IRS request comments on whether any
aspect of the proposed regulations would effectuate a substantive
revision of the consolidated return regulations, as opposed to a mere
update or similar modification. Additionally, comments are requested on
whether any provision proposed to be removed or revised by this
document should be retained in its form as of August 4, 2023. Lastly,
the Treasury Department and the IRS request comments identifying any
other provision of the consolidated return regulations that should be
revised consistent with the scope of the proposed regulations, such as
additional provisions of the consolidated return regulations that are
obsolete or otherwise outdated.
II. Summary of Proposed Changes
A. Removal of Regulations That Implement Repealed Statutory Provisions
The proposed regulations would remove provisions of the
consolidated return regulations that have been rendered obsolete by
enacted legislation.
1. Section 1.1502-1 (Definitions)
Sections 1.1502-1(f)(2) and (3) currently reference section 1562 of
the Internal Revenue Code of 1954 (1954 Code), which allowed controlled
groups of corporations (as defined in section 1563(a) of the 1954 Code)
to elect multiple surtax exemptions. Section 1562 of the 1954 Code was
repealed by section 401(a)(2) of the Tax Reform Act of 1969, Public Law
91-172, 83 Stat. 487 (December 30, 1969). The proposed regulations
would remove from Sec. 1.1502-1(f)(2) and (3) all references to
section 1562 of the 1954 Code.
2. Section 1.1502-11 (Consolidated Taxable Income)
The proposed regulations would remove Sec. 1.1502-11(a)(6), which
provides that consolidated taxable income for a consolidated return
year is determined by taking into account any ``consolidated section
922 deduction.'' Section 922 of the 1954 Code (providing a deduction
for Western Hemisphere trade corporations) was repealed for taxable
years beginning after December 31, 1979, by section 1052(b) of the Tax
Reform Act of 1976, Public Law 94-455, 90 Stat. 1520 (October 4, 1976).
In 1984, a subsequent section 922 (relating to foreign sales
corporations) was added to the 1954 Code by section 801(a) of the
Deficit Reduction Act of 1984, Public Law 98-369, 98 Stat. 494 (July
18, 1984), which defined the term ``FSC'' for purposes of statutory
provisions regarding the taxation of foreign sales corporations. This
subsequent section 922 of the 1954 Code was redesignated as section 922
of the Code (by section 2(a) of the Tax Reform Act of 1986, Pub. L. 99-
514, 100 Stat. 2085 (October 22, 1986)) before its repeal by section 2
of
[[Page 52059]]
the FSC Repeal and Extraterritorial Income Exclusion Act of 2000,
Public Law 106-519, 114 Stat. 2423 (November 15, 2000). This repeal
applies to transactions after September 30, 2000. See section 5(a) of
the FSC Repeal and Extraterritorial Income Exclusion Act of 2000.
The proposed regulations also would revise Sec. 1.1502-11 to make
other minor updates. Specifically, the proposed regulations would
remove references to rules applicable to taxable years beginning before
January 1, 1977, because those rules no longer have practical
applicability to taxpayers. In addition, the proposed regulations would
remove references to prior law regulations proposed to be withdrawn by
this document.
3. Section 1.1502-12 (Separate Taxable Income)
The proposed regulations would remove Sec. 1.1502-12(m), which
provides that no deduction under now-repealed section 922 of the 1954
Code is taken into account in determining taxable income of separate
corporations (that is, separate taxable income). See part II.A.2 of
this Explanation of Provisions (describing the repeal of section 922 of
the 1954 Code). The proposed regulations also would revise Sec.
1.1502-12(n) to remove references to section 244 of the Code, which
related to a special dividends-received deduction (DRD) for dividends
received on certain preferred stock, and former section 247 of the
Code, which related to a special DRD for dividends paid on certain
preferred stock of public utilities. Sections 244 and 247 of the Code
were repealed by section 221(a)(41)(A) of Division A of the Tax
Increase Prevention Act of 2014, Public Law 113-295, 128 Stat. 4010
(December 19, 2014). Although section 13821(b)(1) of Public Law 115-97,
131 Stat. 2054 (December 22, 2017), commonly referred to as the ``Tax
Cuts and Jobs Act'' (TCJA), added a new section 247 to the Code, that
statutory provision allows deductions for certain contributions to
Alaska Native Settlement Trusts and therefore is not applicable with
regard to DRDs.
4. Section 1.1502-13 (Intercompany Transactions)
The proposed regulations would revise Sec. 1.1502-13(c)(5) to
remove a reference to section 595 of the Code, which provided
nonrecognition treatment for foreclosure on property that secured the
payment of indebtedness. Section 595 of the Code was repealed by
section 1616(b)(8) of the Small Business Jobs Protection Act of 1996,
Public Law 104-188, 110 Stat. 1755 (August 20, 1996).
5. Section 1.1502-24 (Consolidated Charitable Contributions Deduction)
Section 1.1502-24(a) sets forth a rule to determine the amount of
the consolidated charitable contributions deduction for a consolidated
group. The proposed regulations would revise Sec. 1.1502-24(c) to
remove the reference to section 242 of the 1954 Code, which allowed for
a deduction for partially tax-exempt interest for C corporations.
Section 242 of the 1954 Code was repealed by section 1901(a)(33) of the
Tax Reform Act of 1976.
6. Section 1.1502-26 (Consolidated Dividends Received Deduction)
The proposed regulations would revise Sec. 1.1502-26 by removing
paragraphs (a)(2) through (6) of that section, which provide rules to
calculate a consolidated DRD by taking into account thrift institution
members of the group (including such members that compute a deduction
based on the ``percentage of taxable income method'' under section
593(b)(2) of the Code). Section 1616(a) of the Small Business Jobs
Protection Act of 1996 added section 593(f) to the Code. Section 593(f)
provides that sections 593(a) through (d) of the Code do not apply to
any taxable year beginning after December 31, 1995.
7. Section 1.1502-27 (Consolidated Section 247 Deduction) and Related
Provisions
As discussed in part II.A.3 of this Explanation of Provisions, (i)
section 247 of the Code was repealed by section 221(a)(41)(A) of
Division A of the Tax Increase Prevention Act of 2014; and (ii) section
13821(b)(1) of the TCJA added to the Code a new section 247, which
allows deductions for certain contributions to Alaska Native Settlement
Trusts. Accordingly, the proposed regulations would remove Sec.
1.1502-27, which provides rules under the version of section 247 of the
Code repealed by the Tax Increase Prevention Act of 2014. The proposed
regulations also would (i) remove Sec. 1.1502-11(a)(8), which solely
provides a reference to a consolidated section 247 deduction computed
under Sec. 1.1502-27, and (ii) revise Sec. Sec. 1.1502-24(c) and
1.1502-43(b)(2)(iii), to remove a cross-reference to Sec. 1.1502-27 in
each respective section.
8. Section 1.1502-42 (Consolidated Returns Including Thrift
Institutions) and Related Provisions
The proposed regulations would remove Sec. 1.1502-42, which
provides rules for members of a consolidated group that are thrift
institutions (that is, any member that is described in section 593(a)
of the Code). Section 1.1502-42 became obsolete as a result of the
enactment of section 593(f) of the Code by section 1616(a) of the Small
Business Jobs Protection Act of 1996, which provides that sections
593(a) through (d) of the Code do not apply to any taxable year
beginning after December 31, 1995. The proposed regulations also would
remove Sec. 1.1502-12(q), which provides solely that a thrift
institution's deduction under section 593(b)(2) of the Code is
determined under Sec. 1.1502-42.
9. Section 5.1502-45 (At-Risk Limitation Temporary Regulations)
The Treasury Department and the IRS published Sec. 5.1502-45 as
temporary regulations relating to the application of the at-risk
limitations under section 465 of the 1954 Code to corporations that
join with their subsidiaries in filing a consolidated return. See TD
7685, published in the Federal Register (45 FR 16484) on March 14, 1980
(at-risk limitation temporary regulations). Prior to the publication of
Sec. 5.1502-45, the Treasury Department determined that consolidated
groups were actively considering transactions or plans to avoid the at-
risk limitations. See preamble to the at-risk limitation temporary
regulations, 45 FR 16484. Under the temporary regulations, if a parent
meets the stock ownership test for a personal holding company, a
subsidiary's loss from an activity to which section 465 of the Code (as
redesignated by section 2(a) of the Tax Reform Act of 1986) applies
will be allowed as a deduction on a consolidated return only to the
extent that the parent is at risk in the activity of a subsidiary,
under the principles of section 465 of the Code, as of the close of the
subsidiary's taxable year. See id.
Section 5.1502-45(a)(4) refers to section 465(c)(3)(D) of the 1954
Code, which was repealed by section 503(a) of the Tax Reform Act of
1986. The Treasury Department and the IRS understand that no proposed
regulations ever were published with regard to Sec. 5.1502-45.
Therefore, in addition to addressing the reference to repealed section
465(c)(3)(D) of the 1954 Code, this document proposes the entire text
of Sec. 5.1502-45 as proposed Sec. 1.1502-45 and proposes to withdraw
Sec. 5.1502-45. The Treasury Department and the IRS request comments
on proposed Sec. 1.1502-45.
[[Page 52060]]
B. Updates To Reflect Amended Statutory Provisions
The proposed regulations would remove or revise regulations under
section 1502 and other provisions of the Code that implement statutory
provisions that have been substantially revised since those regulations
were promulgated.
1. Section 1.167(c)-1 (Limitations on Methods of Computing Depreciation
Under Section 167(b)(2), (3), and (4))
Section 1.167(c)-1(a)(5) provides a reference to certain provisions
of the consolidated return regulations that address depreciation of
property received by a member of an affiliated group from another
member of the group during a consolidated return period. To implement
amendments made by the TCJA to section 168(k) of the Code, the
Department of the Treasury and the Internal Revenue Service published
final regulations under Sec. 1.1502-68 that provide guidance regarding
the additional first-year depreciation deduction under section 168(k).
See TD 9916, published in the Federal Register (85 FR 71734) on
November 10, 2020. See also sections 12001(b)(13), 13201, and 13204 of
the TCJA. Accordingly, the proposed regulations would revise Sec.
1.167(c)-1(a)(5) to include a reference to Sec. 1.1502-68.
2. Section 1.1502-1(g) (Definition of ``Consolidated Return Change of
Ownership'')
The proposed regulations would remove paragraph (g) of Sec.
1.1502-1, which provides rules to determine the occurrence of a
consolidated return change of ownership (CRCO). The CRCO rules
generally paralleled the ownership change rules of section 382 of the
1954 Code, as that section existed prior to enactment of the Tax Reform
Act of 1986. See preamble to the NPRM published in the Federal Register
(56 FR 4228, 4232) on February 4, 1991. Following the complete revision
of section 382 of the 1954 Code by the Tax Reform Act of 1986, the
Treasury Department and the IRS determined that the policies underlying
the CRCO rules were subsumed by the single-entity approach to the
application of section 382 of the Code to consolidated groups. See
section 621(a) of the Tax Reform Act of 1986. See also 56 FR at 4232.
Accordingly, the Treasury Department and the IRS replaced the CRCO
rules with the consolidated section 382 rules set forth in Sec. Sec.
1.1502-90 through 1.1502-99. See TD 8679, published in the Federal
Register (61 FR 33313) on June 27, 1996.
3. Section 1.1502-3 (Consolidated Tax Credits)
The proposed regulations would remove Sec. 1.1502-3(e), which
applies only to a CRCO that occurred during a consolidated return year
for which the due date of the Federal income tax return (without
extensions) is on or before March 13, 1998. See Sec. 1.1502-3(e)(3).
4. Section 1.1502-5 (Consolidated Estimated Tax)
The Treasury Department and the IRS published proposed regulations
in the Federal Register (57 FR 62251) on December 30, 1992, regarding
the computation of the former alternative minimum tax (Former AMT) by
consolidated groups and the allocation of related items (consolidated
Former AMT proposed regulations). The proposed regulations would
incorporate in revised form part of the consolidated Former AMT
proposed regulations that proposed to amend the consolidated estimated
tax provisions in Sec. 1.1502-5. The Treasury Department and the IRS
received no comments on Sec. 1.1502-5 as proposed in the consolidated
Former AMT proposed regulations.
The proposed regulations would revise Sec. 1.1502-5 to reflect the
amendments to section 6655, which provides penalties for corporations
failing to pay estimated income tax, made by section 10301(a) of the
Omnibus Budget Reconciliation Act of 1987, Public Law 100-203, 101
Stat. 1330 (December 22, 1987). The proposed regulations also would
remove references to section 6154 of the Code, which provided special
rules for installment payments of estimated tax by corporations prior
to the repeal of section 6154 of the Code by section 10301(b)(1) of the
Omnibus Budget Reconciliation Act of 1987, and would add a reference to
section 59A, which was added to section 6655(g)(1) by section
14401(d)(4)(A) of the TCJA.
The consolidated Former AMT proposed regulations provided guidance
on consolidated estimated taxes under the Former AMT in section 55 of
the Code and the environmental tax under former section 59A of the
Code. The Former AMT was made inapplicable to corporations by section
12001(a) of the TCJA, and former section 59A of the Code was repealed
by section 221(a)(12)(A), Division A, of the Tax Increase Prevention
Act of 2014. Current section 59A of the Code (as added by section
14401(a) of the TCJA) imposes the base erosion and anti-abuse tax,
commonly referred to as the ``BEAT.''
As a result of those amendments to the Code, the proposed
regulations would make the following revisions to Sec. 1.1502-5.
First, the proposed regulations would not incorporate provisions from
the consolidated Former AMT proposed regulations that addressed these
issues. However, section 10101 of Public Law 117-169, 136 Stat. 1818
(August 16, 2022), commonly referred to as the Inflation Reduction Act
of 2022, amended section 55 of the Code to impose a new corporate
alternative minimum tax based on adjusted financial statement income.
This new corporate alternative minimum tax is commonly referred to as
the corporate alternative minimum tax, or CAMT. Therefore, the proposed
regulations would modify the definition of the term ``tax'' in Sec.
1.1502-5(b)(5) to add a reference to section 55(a). In addition, the
proposed regulations would add a reference to section 59A (that is, the
BEAT).
The Treasury Department and the IRS are actively working on
guidance to implement the CAMT, including guidance on the application
of the CAMT to consolidated groups. Accordingly, issues regarding the
substantive operation of the CAMT will be addressed in that guidance.
However, these proposed regulations would provide guidance regarding
the computation of consolidated estimated taxes to take into account
the CAMT liability of the consolidated group.
5. Section 1.1502-9 (Consolidated Overall Foreign Losses, Separate
Limitation Losses, and Overall Domestic Losses)
The proposed regulations would revise Sec. 1.1502-9 to account for
changes made by final foreign tax credit regulations (TD 9882)
published in the Federal Register (84 FR 69022) on December 17, 2019.
The final foreign tax credit regulations provide guidance relating to
the determination of the foreign tax credit under the Code,
implementing statutory changes made by the TCJA. In particular, the
proposed regulations would revise Sec. 1.1502-9 to remove references
to the fair market value method option for interest expense
apportionment, which was repealed by section 14502 of the TCJA.
Relatedly, the proposed regulations would (1) update citations set
forth in Sec. Sec. 1.1502-9(a) and 1.1502-9(c)(2)(ii) and (iii), and
(2) add a reference to Sec. 1.861-13. In addition, the proposed
regulations would update an internal cross-reference in Sec. 1.1502-
9(b)(1).
[[Page 52061]]
6. Section 1.1502-12(g) (Deductions Under Section 167 of the 1954 Code)
and Related Provisions
Section 1.1502-12(g) was added to the consolidated return
regulations by final regulations (TD 7246) published in the Federal
Register (38 FR 758) on January 4, 1973. Section 1.1502-12(g) provides
that, in the computation of the deduction under section 167 of the 1954
Code, property does not lose its character as new property as a result
of a transfer from one member to another member during a consolidated
return year if certain conditions are satisfied. Since the date of
those final regulations, extensive changes to the depreciation rules of
the Code have made Sec. 1.1502-12(g) obsolete. See, for example,
section 201 of the Economic Recovery Tax Act of 1981, Public Law 97-34,
95 Stat. 172 (August 13, 1981) (enacting section 168 of the 1954 Code,
which provided the accelerated cost recovery system); section 201(a) of
the Tax Reform Act of 1986 (amending section 168 of the Code, as
redesignated by section 2(a) of the Tax Reform Act of 1986, to replace
generally the accelerated cost recovery system with the modified
accelerated cost recovery system).
As a result of the obsolescence of Sec. 1.1502-12(g) due to the
above-described enacted legislation, the proposed regulations would
remove that provision. Relatedly, the proposed regulations would revise
Sec. Sec. 1.57-1(b)(4)(ii) and 1.167(c)-1(a)(5) to remove cross-
references to Sec. 1.1502-12(g). The proposed regulations also would
remove the second sentence of Sec. 1.1502-17(a), which refers the
reader to Sec. 1.1502-12(g) for the treatment of depreciable property
after a transfer within the group.
7. Section 1.1502-24 (Consolidated Charitable Contributions Deduction)
As noted in part II.A.5 of this Explanation of Provisions, Sec.
1.1502-24(a) sets forth a rule to determine the amount of the
consolidated charitable contributions deduction for a group. Section
1.1502-24(a)(2) includes a reference to ``five percent'' of the
adjusted consolidated taxable income of a group, which is based on
section 170(b)(2) of the 1954 Code, as that section existed prior to
enactment of the Economic Recovery Tax Act of 1981. Section 263(a) of
the Economic Recovery Tax Act of 1981 amended section 170(b)(2) of the
1954 Code to increase the deduction limitation for corporations from 5
percent of the taxpayer's total income for a taxable year to 10 percent
of that income.
The proposed regulations would revise Sec. 1.1502-24(a)(2) to
replace the reference to ``five percent'' with a reference to the
``percentage limitation on the total charitable contribution deduction
provided in section 170(b)(2)(A).'' The Treasury Department and the IRS
have proposed this revision, as opposed to a reference to ``10
percent'' (as currently set forth in section 170(b)(2)(A) of the Code),
to reduce the need to provide future statutory updates to Sec. 1.1502-
24. See paragraph 9 of the Proposed Amendments to the Regulations, set
forth in the NPRM (REG-101652-10) published in the Federal Register (80
FR 33211) on June 11, 2015.
8. Section 1.1502-26 (Consolidated Dividends Received Deduction)
Section 1.1502-26 provides rules for determining the consolidated
DRD for the taxable year of a group. On several occasions since the
publication of the original version of Sec. 1.1502-26 in 1966,
Congress has enacted legislation that amended the corporate DRD
sections of the 1954 Code and the Code--most recently by section 13002
of the TCJA. To update Sec. 1.1502-26 to reflect the corporate DRD
provisions of the Code, the proposed regulations would revise Sec.
1.1502-26(a) to replace the reference to the 85-percent DRD (reflecting
the rate set forth in section 246(b)(1) of the 1954 Code, prior to the
enactment of section 611(a)(3) of the Tax Reform Act of 1986) with a
reference to the limitation on the aggregate amount of dividends-
received deductions described in section 246(b) of the Code.
In addition, the proposed regulations would strike the reference to
section 244 of the Code in Sec. 1.1502-26(a), and the reference to
section 247 of the Code in Sec. 1.1502-26(b), both of which were
repealed by section 221(a)(41)(A) of Division A of the Tax Increase
Prevention Act of 2014. The proposed regulations also would revise the
examples in Sec. 1.1502-26(c) to reflect the updates made to Sec.
1.1502-26.
9. Section 1.1502-34 (Special Aggregate Stock Ownership Rules)
Section 1.1502-34 provides that, for purposes of Sec. Sec. 1.1502-
1 through 1.1502-80, in determining the stock ownership of a member of
a group in another corporation (issuing corporation) for purposes of
determining the application of now-repealed section 333(b) of the 1954
Code, section 165(g)(3)(A) of the Code, section 332(b)(1) of the Code,
section 351(a) of the Code, section 732(f) of the Code, or section
904(f) of the Code, in a consolidated return year, there is included
stock owned by all other members of the group in the issuing
corporation. Section 1.1502-34 also provides that the special rule for
minority shareholders in now-repealed section 337(d) of the 1954 Code
does not apply with respect to amounts received by applicable member
shareholders in a liquidation of the issuing member.
Numerous statutory amendments have impacted the provisions
described in Sec. 1.1502-34. First, section 333 of the 1954 Code was
repealed by section 631(e)(3) of the Tax Reform Act of 1986. In
addition, section 631(a) of the Tax Reform Act of 1986 struck section
337 of the 1954 Code and replaced that provision with section 337 of
the Code, which sets forth a subsection (d) that provides the Secretary
with authority to prescribe regulations that are necessary or
appropriate to carry out the purposes of General Utilities repeal.
Lastly, section 337(c) of the Code was amended by section 10223(a) of
title X of the Omnibus Budget Reconciliation Act of 1987 to clarify
that, for purposes of section 337 of the Code, ``the determination of
whether any corporation is an 80-percent distributee shall be made
without regard to any consolidated return regulation.''
The proposed regulations would revise Sec. 1.1502-34 to reflect
those statutory amendments. Specifically, the proposed regulations
would revise Sec. 1.1502-34 to remove references to sections 333 and
337(d) of the 1954 Code. To reduce the need for future updates, the
proposed regulations also would replace the reference to ``Sec. Sec.
1.1502-1 through 1.1502-80'' with a reference to ``the consolidated
return regulations,'' as defined in proposed Sec. 1.1502-1(g). See
part II.D.1 of this Explanation of Provisions.
10. Section 1.1502-79(d) (Carryover and Carryback of Consolidated
Unused Foreign Tax)
Section 1.1502-79(d) provides rules addressing the apportionment of
carryover and carryback of consolidated unused foreign tax to separate
return years. The proposed regulations would update Sec. 1.1502-79 to
reflect changes to the foreign tax credit rules enacted since the
regulation was issued as part of the 1966 final consolidated return
regulations (TD 6894), published in the Federal Register (31 FR 11794)
on September 8, 1966.
Specifically, the proposed regulations would revise Sec. 1.1502-
79(d) to remove references to the per-country foreign tax credit
limitation that was repealed by section 1031(a) of the Tax Reform Act
of 1976, update citations from section 904(d) to section 904(c) to
reflect amendments to the 1954 Code made by section 1031(a) of the Tax
Reform Act of
[[Page 52062]]
1976, and update a cross-reference from Sec. 1.1502-4(e) to Sec.
1.1502-4(d) to reflect the revision of Sec. 1.1502-4 made by final
regulations (TD 9922) published in the Federal Register (85 FR 71998)
on November 12, 2020.
11. Section 1.1552-1 (Earnings and Profits of Members of Consolidated
Groups)
Section 1.1552-1 requires generally that, for purposes of
determining the earnings and profits of each member of an affiliated
group that is required to be included in a consolidated return for the
group filed for a taxable year beginning after December 31, 1953, and
ending after August 16, 1954, the tax liability of the group is
allocated among the members of the group in accordance with certain
elected methods under Sec. 1.1552-1(c). See Sec. 1.1552-1(a).
Currently, Sec. 1.1552-1(a)(2)(ii)(i) contains references to a
corporate surtax exemption.
However, section 301(a) of the Revenue Act of 1978, Public Law 95-
600, 92 Stat. 2763 (November 6, 1978), struck section 11 of the 1954
Code and replaced that section with a new section 11 of the 1954 Code,
which set forth a corporate income tax rather than a corporate surtax.
Accordingly, the proposed regulations would revise Sec. 1.1552-
1(a)(2)(ii)(i) to remove the reference to the repealed corporate
surtax.
12. Section 1.1563-1 (Controlled Group of Corporations and Component
Members)
Section 1563(a) and 1.1563-1 define the term ``controlled group of
corporations'' for purposes of sections 1561 through 1563 of the Code
as including a ``parent-subsidiary controlled group.'' Section
1563(a)(1) defines a parent-subsidiary controlled group. In this
regard, section 1563(d)(1) provides rules for determining stock
ownership for purposes of determining whether a corporation is a member
of a parent-subsidiary controlled group of corporations within the
meaning of section 1563(a)(1). Section 1.1563-1(a)(2) incorporates
these rules in defining a parent-subsidiary controlled group.
Prior to amendment by the Technical and Miscellaneous Revenue Act
of 1988, Public Law 100-647, 102 Stat. 3342 (November 10, 1988),
section 1563(d)(1) of the Code provided that for purposes of
determining whether a corporation is a member of a parent-subsidiary
controlled group of corporations, stock owned by a corporation means
(A) stock owned directly by such corporation, and (B) stock owned with
the application of section 1563(e)(1), which provides constructive
ownership rules related to options to acquire stock. Similarly, Sec.
1.1563-1(a)(2)(i)(A) and (B) provide that ownership of stock for
purposes of determining a parent-subsidiary controlled group takes into
account stock owned ``(directly and with the application of Sec.
1.1563-3(b)(1), relating to options).''
Section 1018(s)(3)(A) of the Technical and Miscellaneous Revenue
Act of 1988 amended section 1563(d)(1)(B) to expand the application of
the constructive ownership rules of section 1563(e) for purposes of
section 1563(d)(1) to include the constructive ownership rules of
section 1563(e)(2) relating to attribution from partnerships and
section 1563(e)(3) relating to attribution from estates or trusts.
Accordingly, the proposed regulations would revise Sec. 1.1563-
1(a)(2)(i)(A) and (B) to include references to the constructive stock
ownership rules in Sec. 1.1563-3(b)(2) that attribute ownership of
stock directly or indirectly owned by or for a partnership and the
constructive stock ownership rules in Sec. 1.1563-3(b)(3) that
attribute ownership of stock directly or indirectly owned by or for an
estate or trust, to conform with the statutory amendment to section
1563(d)(1)(B).
C. Removal of Non-Applicable Consolidated Return Regulations; Revisions
To Remove Obsolete or Outdated References or Terms
The proposed regulations would remove numerous Treasury regulations
that are obsolete because they no longer are applicable under their
stated effective or applicability dates. In addition, the proposed
regulations would revise numerous Treasury regulations that contain
references or terms that have no practical applicability to taxpayers
because they are, for example, obsoleted or otherwise outdated.
Further, the proposed regulations would replace all gender-specific
pronouns and other identifiers in the consolidated return regulations
with gender-neutral pronouns and identifiers.
1. The ``Cap A'' Consolidated Return Regulations
Certain consolidated return regulations are designated with an
``A'' in the citation (for example, Sec. 1.1502-9A). These regulations
(Cap A regulations) generally are applicable only to taxable years
ending in 1999 or earlier. The Cap A regulations provide rules
regarding overall foreign loss recapture (Sec. 1.1502-9A), built-in
deductions (Sec. 1.1502-15A), consolidated net operating losses (Sec.
1.1502-21A), consolidated capital gain or loss (Sec. Sec. 1.1502-22A
and 1.1502-41A), consolidated net ``section 1231'' gain or loss (Sec.
1.1502-23A), the agent for the group (Sec. 1.1502-77A), separate
return years (Sec. 1.1502-79A), and the application of section 382 of
the Code (Sec. Sec. 1.1502-90A through 1.1502-99A).
The Cap A regulations have been superseded, in their entirety, by
Sec. Sec. 1.1502-9, 1.1502-15, 1.1502-21 through 1.1502-23, 1.1502-77,
1.1502-79, and 1.1502-90 through 1.1502-99. Therefore, with one
exception, the proposed regulations would remove the Cap A regulations.
The proposed regulations would not remove Sec. 1.1502-77A because
that section has continuing applicability with regard to IRS
examination and audit functions. Specifically, the IRS examination
function has ongoing audits in which the years at issue are subject to
the agent for the group rules in Sec. 1.1502-77A. Because those rules
address threshold issues including which entity may act on behalf of
the group, and thus the validity of any filing by the group, Sec.
1.1502-77A continues to have practical applicability for taxpayers.
The proposed regulations also would make conforming revisions to
the consolidated return regulations due to the near-total removal of
the Cap A regulations. For example, the proposed regulations would
revise Sec. Sec. 1.1502-11, 1.1502-43, and 1.1502-44 to remove all
cross-references to the Cap A regulations. The proposed regulations
also would revise Sec. 1.382-8 (relating to controlled groups) to
remove Sec. 1.382-8(i), which provides references to the Cap A
regulations.
2. Section 1.1502-13 (Intercompany Transactions)
The proposed regulations would revise Sec. 1.1502-13 to remove
outdated transition rules and references. Specifically, the proposed
regulations would (i) revise Sec. 1.1502-13(a)(3)(i) to remove a
transition rule for consolidated return years beginning on or after
November 7, 2001; (ii) revise Sec. 1.1502-13(f)(5)(ii)(B)(2) to remove
cross-references to obsolete temporary regulations that affected
certain liquidations where the original Federal income tax return for
the year of liquidation was filed on or before November 3, 2009; and
(iii) revise Sec. 1.1502-13(f)(6)(v) to remove references to
transactions occurring before July 12, 1995.
[[Page 52063]]
3. Section 1.1502-17 (Methods of Accounting)
Section 1.1502-17 provides generally that the method of accounting
to be used by each member of the group must be determined in accordance
with the provisions of section 446 of the Code as if such member filed
a separate return. See Sec. 1.1502-17(a). Section 1.1502-17(e) refers
taxpayers to Sec. 1.1502-17 (as contained in the 26 CFR part 1 edition
revised as of April 1, 1995) for changes in method of accounting
effective for years beginning before July 12, 1995. The proposed
regulations would revise Sec. 1.1502-17(e) to strike that language
because it has no practical applicability to taxpayers.
4. Section 1.1502-18 (Inventory Adjustment)
Section 1.1502-18 provides that, if a member of a group filing a
consolidated return for the taxable year (i) was a member of the group
for its immediately preceding taxable year, and (ii) filed a separate
return for that preceding year, then the intercompany profit amount of
that corporation for that separate return year (that is, the initial
inventory amount) is added to the income of that corporation for the
consolidated return year or years in which the goods to which the
initial inventory amount is attributable are disposed of outside the
group or that corporation becomes a non-member. See Sec. 1.1502-18(b).
Section 1.1502-18(a) provides that, for purposes of Sec. 1.1502-18 and
subject to certain exceptions, the term ``intercompany profit amount''
for a taxable year means an amount equal to the profits of a
corporation arising in transactions with other members of the group
with respect to goods that are, at the close of such corporation's
taxable year, included in the inventories of any member of the group.
See Sec. 1.1502-18(a).
However, paragraphs (a) through (f) of Sec. 1.1502-18 do not apply
for taxable years beginning on or after July 12, 1995. See Sec.
1.1502-18(g). Therefore, the special rules set forth in Sec. 1.1502-18
have no practical applicability to taxpayers.
As a result, the proposed regulations would remove Sec. 1.1502-18
and make conforming revisions to other Treasury regulations. With
regard to such conforming revisions, the proposed regulations would
remove Sec. 1.279-6(d)(4), which provides that members of an
affiliated group that file a consolidated return must not apply the
provisions of Sec. 1.1502-18 dealing with inventory adjustments in
determining earnings and profits for purposes of Sec. 1.279-6. The
proposed regulations also would remove Sec. 1.1502-12(e), which
requires that, in computing the separate taxable income of a member,
inventory adjustments must be made as provided in Sec. 1.1502-18.
5. Section 1.1502-21 (Net Operating Losses)
Section 1.1502-21(b)(3)(i) and (ii) provide rules for consolidated
groups to make irrevocable elections to relinquish certain carryback
periods with regard to consolidated net operating losses. Elections
under each of Sec. 1.1502-21(b)(3)(i) and (ii) must be made through
statements filed pursuant to rules set forth in those provisions. Each
provision provides that, if the consolidated return year in which the
loss arises begins before January 1, 2003, the statement making the
election must be signed by the common parent. The proposed regulations
would revise Sec. 1.1502-21(b)(3)(i) and (b)(3)(ii)(B) to remove those
special instructions regarding elections for pre-2003 taxable years
because those special rules no longer have practical applicability to
taxpayers.
The proposed regulations also would remove Sec. 1.1502-21(d),
which provides coordination rules for CRCOs that occurred before
January 1, 1997. See part II.B.2 of this Explanation of Provisions
(describing the replacement of the CRCO rules with the consolidated
section 382 rules set forth in Sec. Sec. 1.1502-90 through 1.1502-99).
6. Section 1.1502-22 (Consolidated Capital Gain and Loss)
Section 1.1502-22 provides generally that determinations under
section 1222 (including capital gain and loss) with respect to members
during consolidated return years are not made separately; rather,
consolidated amounts are determined for the group as a whole. See Sec.
1.1502-22(a). The proposed regulations would remove Sec. 1.1502-22(d),
which provides coordination rules for CRCOs that occurred before
January 1, 1997. See part II.B.2 of this Explanation of Provisions.
7. Section 1.1502-24 (Consolidated Charitable Contributions Deduction)
The proposed regulations would revise Sec. 1.1502-24(c) to remove
the reference to Sec. 1.1502-25, which provided rules for groups to
compute a ``consolidated section 922 deduction.'' See part II.A.2 of
this Explanation of Provisions (describing the repeal of section 922 of
the 1954 Code by the Tax Reform Act of 1976). Section 1.1502-25 was
removed by final regulations (TD 8474) published in the Federal
Register (58 FR 25556) on April 27, 1993, which removed final and
temporary regulations relating primarily to provisions of prior law in
accordance with the Regulatory Burden Reduction Initiative of the
Treasury Department and the IRS.
8. Section 1.1502-75 (Filing of Consolidated Returns)
Section 1.1502-75(h)(2) provides that, if a group wishes to file a
consolidated return for a taxable year, then a Form 1122, Authorization
and Consent of Subsidiary Corporation To Be Included in a Consolidated
Income Tax Return, must be executed by each subsidiary. Section 1.1502-
75(h)(2) also provides that, (i) for taxable years beginning after
December 31, 2002, the group must attach either executed Forms 1122 or
unsigned copies of the completed Forms 1122 to the consolidated return;
but (ii) for taxable years beginning before January 1, 2003, the
executed Forms 1122 must be attached to the consolidated return for the
taxable year. This transition rule for taxable years beginning before
January 1, 2003, no longer has practical applicability to taxpayers.
Therefore, the proposed regulations would revise Sec. 1.1502-75(h)(2)
to provide simply that the group must attach either executed Forms 1122
or unsigned copies of the completed Forms 1122 to the consolidated
return.
9. Section 1.1502-76 (Taxable Year of Members of Group)
Section 1.1502-76 sets forth rules for the taxable year of members
of a group. The proposed regulations would revise Sec. 1.1502-
76(b)(1)(ii)(A)(2) and (b)(2)(v) to remove references to transactions
occurring before November 10, 1999, because those references have no
practical applicability to taxpayers.
10. Section 1.1502-80 (Applicability of Other Provisions of Law)
Section 1.1502-80 provides generally that (i) the Code, or other
law, is applicable to the group to the extent the consolidated return
regulations do not exclude its application; and (ii) to the extent not
excluded, other rules operate in addition to, and may be modified by,
the regulations. See Sec. 1.1502-80(a)(1). Section 1.1502-80(c)(2)
provides a cross-reference to Sec. 1.1502-36 for additional rules
relating to worthlessness of subsidiary stock on or after September 17,
2008. The proposed regulations would remove the reference to that date
because it no longer has practical applicability to taxpayers.
Section 1.1502-80 also sets forth a special rule that provides that
section
[[Page 52064]]
357(c) of the Code does not apply to any transaction to which Sec.
1.1502-13 and other specified sections of the consolidated return
regulations apply. See Sec. 1.1502-80(d).
A concern arose in response to this rule that, because Sec.
1.1502-80(d) provides that section 357(c) of the Code does not apply to
certain intragroup section 351 exchanges, no liabilities can
technically be excluded under section 357(c)(3). See preamble to
proposed regulations (REG-137519-01) published in the Federal Register
(66 FR 57021, 57022) on November 14, 2001 (proposed consolidated
section 357(c) regulations). Therefore, in such an intragroup section
351 exchange, the transferor's basis in the stock of the transferee
received in the transfer first would be reduced by liabilities assumed
by the transferee, including those liabilities described in section
357(c)(3) of the Code that would not have reduced basis had section
357(c) applied. See id. Then, the transferor's basis in the stock of
the transferee would be reduced a second time under the principles of
Sec. 1.1502-32 at the time the liability does in fact give rise to a
deduction on the part of the transferee and is taken into account on
the consolidated return. See id. This result ultimately could cause the
transferor to recognize an amount of gain on the sale of the stock of
the transferee that does not clearly reflect income. See id.
The Treasury Department and the IRS published the proposed
consolidated section 357(c) regulations to eliminate potential
duplicative stock basis reductions arising from such transactions.
Specifically, those proposed regulations were published to clarify
that, in certain transfers described in section 351 of the Code between
members of a consolidated group, a transferee's assumption of
liabilities described in section 357(c)(3)(A) of the Code, other than
those also described in section 357(c)(3)(B) of the Code, will not
reduce the transferor's basis in the transferee's stock received in the
exchange. See Explanation of Provisions to the proposed consolidated
section 357(c) regulations, 66 FR 57021.
However, upon reflection, the proposed rule is unnecessary because
Sec. Sec. 1.1502-32 and 1.1502-80 prevent any duplicative stock basis
reduction. See Sec. 1.1502-32(a)(2) (providing that a member's basis
in its subsidiary's stock ``must not be adjusted under this section and
other rules of law in a manner that has the effect of duplicating an
adjustment.''); Sec. 1.1502-80(a)(2) (``Nothing in these regulations
shall be interpreted or applied to require an adjustment, inclusion, or
other item to the extent it would have the effect of duplicating any
other adjustment, inclusion, or other item required under the Code or
other rule of law, including other provisions of these regulations.'').
Accordingly, this document withdraws those proposed regulations.
11. Section 1.1502-81T (Alaska Native Corporations)
In 1984, Congress enacted legislation to revise the affiliation
requirements under section 1504(a) of the 1954 Code to incorporate an
80-percent equity ownership test. See section 60(a) of the Deficit
Reduction Act of 1984. However, the applicability of these statutory
amendments was delayed until 1992 with respect to the affiliation of a
corporation with an Alaska Native Corporation (ANC) established under
the Alaska Native Claims Settlement Act, Public Law 92-203, 85 Stat.
688 (December 18, 1971). See section 60(b)(5) of the Deficit Reduction
Act of 1984. Moreover, section 1804(e)(4) of the Tax Reform Act of 1986
struck section 60(b)(5) of the Deficit Reduction Act of 1984 and
replaced that provision with a provision that, for any taxable year
beginning after 1984 and before 1992, relaxed the requirements for
affiliation with an ANC or with a wholly owned ANC subsidiary.
Accordingly, until 1992, the pre-1984 affiliation requirements
contained in section 1504(a) of the 1954 Code governed affiliation with
an ANC or with a wholly owned ANC subsidiary, without regard to escrow
arrangements, redemption rights, or similar provisions.
The Treasury Department and the IRS published temporary regulations
to implement those statutory provisions (ANC temporary regulations).
See TD 8130, published in the Federal Register (52 FR 8447) on March
18, 1987. Specifically, Sec. 1.1502-81T makes clear that the statutory
ANC affiliation rules resulted in no tax saving, tax benefit, or tax
loss to any person, other than the use of the losses and credits of an
ANC and its wholly owned subsidiaries. See preamble to the ANC
temporary regulations (52 FR 8447).
In particular, the ANC temporary regulations provided that, except
as approved by the Secretary, no positive adjustment under Sec.
1.1502-32(b)(1) would be made with respect to the basis of stock of a
corporation that is affiliated with an ANC through application of the
ANC affiliation rules. Id. In general, such approval by the Secretary
took into account the economic effect of the investment by the ANC in
the corporation with which it is so affiliated. Id. The proposed
regulations propose to withdraw Sec. 1.1502-81T because those special
affiliation rules no longer have practical applicability to taxpayers.
12. Section 1.1502-99 (Effective/Applicability Dates Regarding
Consolidated Return Regulations Addressing Sections 382 and 383 of the
Code)
The application of sections 382 and 383 of the Code in a
consolidated return is addressed in Sec. Sec. 1.1502-90 through
1.1502-99. In particular, Sec. 1.1502-99 provides effective and
applicability dates and transition rules for Sec. Sec. 1.1502-90
through 1.1502-99. The proposed regulations would revise Sec. 1.1502-
99 to remove transition rules for testing periods that include June 25,
1999. Those transition rules have no practical applicability to
taxpayers because taxable years subject to those transition rules
generally are closed.
13. Section 1.1552-1 (Earnings and Profits)
Section 1.1552-1(a)(1)(ii) provides that the taxable income of a
member is the separate taxable income determined under Sec. 1.1502-12,
adjusted for certain items taken into account in the computation of
consolidated taxable income. One item, set forth in Sec. 1.1552-
1(a)(1)(ii)(B), is the ``member's capital gain net income (net capital
gain for taxable years beginning before January 1, 1977) (determined
without regard to any net capital loss carryover attributable to such
member).'' The proposed regulations would revise Sec. 1.1552-
1(a)(1)(ii)(B) to remove the reference to net capital gain for taxable
years beginning before January 1, 1977, because the reference to that
date has no practical applicability to taxpayers.
14. Sections 1.1503-2 (Dual Consolidated Loss) and 1.1503(d)-8
(Effective Dates)
Section 1.1503-2 provides rules to address dual consolidated losses
incurred in taxable years beginning on or after October 1, 1992, and
before April 18, 2007 (or January 1, 2007, in limited instances). See
Sec. 1.1503-2(h) (providing October 1, 1992, applicability date) Sec.
1.1503(d)-8 (providing April 18, 2007, and January 1, 2007,
applicability dates). Dual consolidated losses incurred on or after
April 18, 2007, or January 1, 2007, are subject to the rules set forth
in Sec. Sec. 1.1503(d)-1 through 1.1503(d)-7. See Sec. 1.1503(d)-8.
Therefore, the proposed regulations would remove Sec. 1.1503-2 because
that section has no practical applicability to taxpayers. For the same
reason, the proposed regulations also
[[Page 52065]]
would make conforming changes to the effective date provisions set
forth in Sec. 1.1503(d)-8 to reflect the removal of Sec. 1.1503-2.
15. Removal of Obsolete or Gendered Terminology
The proposed regulations would make nonsubstantive changes to the
consolidated return regulations to removed obsolete or gendered
terminology the proposed regulations would replace all gender-specific
pronouns and other identifiers in the consolidated return regulations
with gender-neutral pronouns and identifiers. See part I of this
Explanation of Provisions. The proposed regulations would replace the
term ``possession'' with the defined term ``U.S. territory'' in
Sec. Sec. 1.1502-4(d)(1) and 1.1503(d)-1(b)(7). See proposed Sec.
1.1502-1(l). The proposed regulations also would replace all gender-
specific pronouns and other identifiers in the consolidated return
regulations and the regulations under section 1563 of the Code with
gender-neutral pronouns and identifiers.
D. Changes To Improve Clarity
The proposed regulations would make various revisions to the
consolidated return regulations that are intended to increase their
clarity and usability. These proposed revisions are limited to creating
defined terms, updating cross-references, correcting numbering, and
other minor, non-substantive edits.
1. Section 1.1502-1 (Definitions)
Currently, the regulations under section 1502 of the Code reference
the term ``consolidated return regulations'' in several provisions,
although that term is not defined in those regulations. In addition,
certain provisions in the regulations published under section 1502 of
the Code refer to multiple sections of the regulations. At the time of
publication, those provisions were intended to refer to all regulations
under section 1502. However, due to the publication of additional
regulations under section 1502 of the Code, those references are no
longer accurate. To avoid taxpayer confusion, the proposed regulations
would add a defined term ``consolidated return regulations'' to Sec.
1.1502-1 that would not need to be updated to account for future
additions to the regulations under section 1502 of the Code. See
proposed Sec. 1.1502-1(g).
2. Section 1.1502-13(f)(7) (Examples Regarding Intercompany
Transactions With Respect to Stock of Members)
As part of final regulations (TD 9475) addressing corporate
reorganizations and distributions under sections 368(a)(1)(D) and
354(b)(1)(B) of the Code, published in the Federal Register (74 FR
67053) on December 18, 2009, the Treasury Department and the IRS
inserted a new Example 4 into the intercompany transaction examples set
forth in Sec. 1.1502-13(f)(7). However, those final regulations did
not update internal cross-references to certain existing examples in
Sec. 1.1502-13(f)(7), which were redesignated as a result of new
Example 4. Accordingly, the proposed regulations would revise Sec.
1.1502-13(f)(7) to update those internal cross-references. More
generally, the proposed regulations would add paragraph designations to
undesignated examples throughout Sec. 1.1502-13.
3. Section 1.1502-32(b)(4) and (5) (Waiver of Loss Carryovers From
Separate Return Limitation Years and Examples)
The proposed regulations would revise Sec. 1.1502-32(b)(4) to
remove paragraphs that cross-reference provisions of the loss
disallowance regulations under Sec. 1.1502-20 that were removed by
final regulations (TD 9424) published in the Federal Register (73 FR
53934) on September 17, 2008 (final unified loss regulations). Section
1.1502-20 provided loss-disallowance rules with regard to the
disposition or deconsolidation of subsidiary stock. As provided in the
preamble to the final unified loss regulations, the Treasury Department
and the IRS do not expect that Sec. 1.1502-20 would affect any
transactions occurring on or after September 17, 2008 (the
applicability date of those final regulations). See 73 FR 53944. The
proposed regulations would replace the removed paragraphs with cross-
references to provisions set forth in Sec. 1.1502-32(b)(4), as
contained in 26 CFR part 1, revised as of April 1, 2005.
Additionally, the proposed regulations would correct an error in
Example 6 of Sec. 1.1502-32(b)(5)(ii), which (1) addressed an
intercompany reorganization described in section 368(a)(1)(A) of the
Code (and in section 368(a)(1)(D) of the Code), and (2) treats a
receipt of $10 of boot as a dividend under section 356(a)(2) of the
Code. This treatment of intercompany boot conflicts with Sec. 1.1502-
13(f)(3)(ii), which expressly provides that nonqualifying property
(that is, money or other property) received as part of such
intercompany reorganization (that is, a transaction to which section
354 of the Code would apply but for the fact that nonqualifying
property is received) is treated as received by the member shareholder
in a separate transaction occurring immediately after the transaction.
4. Section 1.1502-47 (Consolidated Returns by Life-Nonlife Groups)
The proposed regulations would revise Sec. 1.1502-47(b), (h), and
(j) to correct certain typographical errors and update certain cross-
references.
5. Section 1.1502-75 (Filing of Consolidated Returns)
The proposed regulations would revise Sec. 1.1502-75(c)(1) to set
forth the current procedures for a group to request to discontinue
filing consolidated returns. The proposed regulations would remove
Sec. 1.1502-75(d)(5), which applies to consolidated return years in
which an existing consolidated group obtains a new common parent solely
by reason of the enactment of section 833 of the Code as part of the
Tax Reform Act of 1986. This provision no longer has practical
applicability to taxpayers. In addition, the proposed regulations would
update Sec. 1.1502-75(h)(1) to reflect final regulations (TD 9715)
that revise rules regarding agency for consolidated groups under Sec.
1.1502-77, which were published in the Federal Register (80 FR 17314)
on April 1, 2015. The proposed regulations also would update Sec.
1.1502-75(h)(1) to reflect the elimination of the district director
positions by the Commissioner pursuant to section 1001 of the Internal
Revenue Service Restructuring and Reform Act of 1998, Public Law 105-
206, 112 Stat. 685 (July 22, 1998).
6. Section 1.1502-76 (Taxable Year of Members of Group)
The proposed regulations would revise Sec. 1.1502-76(a) to set
forth the current procedures for taxpayers requesting consent of the
Commissioner if at least one member of the group is on a 52-53-week
taxable year and all members of the group have taxable years ending
within the same 7-day period. The proposed regulations also would
revise several examples in Sec. Sec. 1.1502-76(c)(3) and 1.1502-77(g)
to reflect changes to the due date for Federal corporate income tax
returns set forth in section 6072(a) of the Code, as made by section
2006(a)(2) of the Surface Transportation and Veterans Health Care
Choice Improvement Act of 2015, Public Law 114-41, 129 Stat. 443 (July
31, 2015).
7. Section 1.1502-79 (Separate Return Years)
Section 1.1502-79(e)(2) provides a rule to determine the portion of
the consolidated excess charitable
[[Page 52066]]
contributions attributable to a member of a consolidated group. The
proposed regulations would make non-substantive changes to enhance the
clarity of that provision. In particular, the proposed regulations
would separate the current one-sentence rule into three sentences, the
first of which provides that the portion of the consolidated excess
charitable contributions for any year attributable to a member is an
amount equal to the consolidated excess contributions multiplied by a
fraction. The second and third sentences set forth the numerator and
denominator of that fraction, respectively.
8. Section 1.1502-100 (Corporations Exempt From Tax)
Section 1.1502-100 provides rules to compute the tax liability for
a consolidated return year of a group of exempt corporations that files
or is required to file a consolidated return for the taxable year. The
proposed regulations would revise Sec. 1.1502-100(a)(2) to replace the
reference to ``Sec. Sec. 1.1502-1 through 1.1502-80'' with a reference
to ``the consolidated return regulations'' (see the discussion in parts
II.B.9 and II.D.1 of this Explanation of Provisions.) The proposed
regulations also would revise Sec. 1.1502-100(d) to reflect the
changes proposed by this document to Sec. 1.1502-12.
9. Removal of Cross-References to Prior-Law Versions of the CFR
In general, the proposed regulations would revise numerous
provisions in the consolidated return regulations to remove cross-
references to prior-law versions of the CFR. However, the proposed
regulations would retain cross-references in the consolidated return
regulations to prior-law CFRs with continuing relevance. In particular,
the proposed regulations would retain cross-references relating to
intercompany transactions and certain separate return limitation year
issues.
E. Provisions Affected by Legislation That the Proposed Regulations Do
Not Change
The proposed regulations would not modify certain provisions in the
consolidated return regulations that have been affected by subsequent
legislation. Principally, aside from the nonsubstantive change
discussed in part II.B.3 of this Explanation of Provisions, the
proposed regulations would not revise Sec. 1.1502-3 (relating to
consolidated credits). Section 1.1502-3 provides rules for the former
investment tax credit that existed prior to its replacement by the
general business credit in section 211 of the Tax Reform Act of 1986.
The proposed regulations also would not revise Sec. 1.1502-79(c),
which provides rules for the carryover and carryback of unused
investment credits to separate return years. Because of extensive
changes to the relevant statutory provisions, substantive revisions of
Sec. Sec. 1.1502-3 and 1.1502-79(c) are beyond the scope of these
proposed regulations. However, the Treasury Department and the IRS are
considering updating Sec. Sec. 1.1502-3 and 1.1502-79(c) to reflect
current law, and the Treasury Department and the IRS request comments
on potential revisions to these regulatory provisions.
F. Withdrawal of Proposed Regulations; Proposed Withdrawal of Temporary
Regulations
1. Notices of Proposed Rulemaking Incorporated Into the Proposed
Regulations or Into Final Regulations
This document withdraws the portions of two NPRMs that, in revised
form, (i) have been incorporated into final regulations, or (ii) are
incorporated into these proposed regulations in revised form.
a. Consolidated Former Alternative Minimum Tax Proposed Regulations
As discussed in part II.B.4 of this Explanation of Provisions, the
Treasury Department and the IRS published the consolidated Former AMT
proposed regulations on December 30, 1992, regarding the computation of
the Former AMT by consolidated groups and the allocation of related
items. This document withdraws proposed amendments to Sec. 1.1502-2,
regarding the computation of a consolidated group's tax liability, set
forth in the consolidated Former AMT proposed regulations. These
proposed amendments were incorporated, in revised form, into the base
erosion and anti-abuse tax final regulations (TD 9885), published in
the Federal Register (84 FR 66968) on December 6, 2019 (BEAT final
regulations). However, the proposed amendments to Sec. 1.1502-2 set
forth in the consolidated Former AMT proposed regulations were not
withdrawn by the BEAT final regulations. Accordingly, this document
withdraws the revisions to Sec. 1.1502-2 proposed by the consolidated
Former AMT proposed regulations.
The consolidated Former AMT proposed regulations also would provide
rules under Sec. 1.1552-1(h) governing the allocation of the
environmental tax imposed by section 59A of the Code (as in effect at
the time) to members for purposes of computing earnings and profits.
Section 59A of the Code was repealed by section 221(a)(12)(A), Division
A, of the Tax Increase Prevention Act of 2014. As a result, this
document withdraws proposed Sec. 1.1552-1(h), as contained in the
consolidated Former AMT proposed regulations.
b. Proposed Regulations Regarding Absorption of Members' Losses and To
Eliminate Circular Basis Adjustments
The Treasury Department and the IRS published a NPRM (REG-101652-
10) in the Federal Register (80 FR 33211) on June 11, 2015 (circular
basis proposed regulations). The circular basis proposed regulations
would provide guidance regarding the absorption of members' losses in a
consolidated return year, and provide guidance to eliminate circular
adjustments to the basis of a group member. These circular basis
proposed regulations would have (i) revised Sec. Sec. 1.1502-11(a) and
1.1502-24 to remove references to repealed statutes or obsolete
regulations, and (ii) removed Sec. Sec. 1.1502-21A, 1.1502-22A, and
1.1502-23A. Because this document would (i) make the same revisions to
Sec. Sec. 1.1502-11(a) and 1.1502-24, and (ii) remove Sec. Sec.
1.1502-21A, 1.1502-22A, and 1.1502-23A, this document withdraws the
proposed revisions to Sec. Sec. 1.1502-11(a), 1.1502-21A, 1.1502-22A,
1.1502-23A, and 1.1502-24 set forth in the circular basis proposed
regulations.
2. NPRM That Became Obsolete as a Result of Incorporation of Subsequent
NPRM Into Final Regulations
On March 18, 2004, the Treasury Department and the IRS published in
the Federal Register (69 FR 12811) a NPRM (REG-153172-03) under Sec.
1.1502-80(c) (proposed loss limitation rules). The proposed loss
limitation rules set forth guidance regarding (i) the deductibility of
losses recognized on dispositions of subsidiary stock by members of a
consolidated group, (ii) the consequences of treating subsidiary stock
as worthless, and (iii) when stock of a member of a consolidated group
may be treated as worthless. The proposed loss limitation rules cross-
referenced temporary regulations (TD 9118) published in the Federal
Register (69 FR 12799) on the same day, the text of which served as the
text for those proposals.
On July 18, 2007, the Treasury Department and the IRS published in
the Federal Register (72 FR 39313) final regulations (TD 9341), which
finalized a version of Sec. 1.1502-80(c) that had been proposed by an
NPRM (REG-157711-02) published in the Federal Register (72 FR 2964) on
January 23, 2007. Those
[[Page 52067]]
final regulations removed Sec. 1.1502-80T(c) but did not withdraw the
proposed loss limitation rules. Accordingly, this document withdraws
the proposed loss limitation rules.
3. NPRMs That Cross-Reference Temporary Regulations That Have Been
Removed, Have Expired, or Otherwise Have Become Obsolete
a. NPRMs Under Sec. 1.1502-20
The Treasury Department and the IRS published four NPRMs under
Sec. 1.1502-20, which cross-referenced temporary regulations under
Sec. 1.1502-20T published in the Federal Register on the same day, the
text of which served as the text for those proposals. On September 17,
2008, the Treasury Department and the IRS published final regulations
(TD 9424) in the Federal Register (73 FR 53934) that included the final
unified loss rule under Sec. 1.1502-36. As a result of these final
regulations, the Treasury Department and the IRS removed Sec. Sec.
1.1502-20 and 1.1502-20T. However, the four NPRMs under Sec. 1.1502-20
were not withdrawn by those final regulations.
Accordingly, this document withdraws the four NPRMs under Sec.
1.1502-20, which consist of the following:
(1) An NPRM (REG-102740-02) published in the Federal Register (67
FR 11070) on March 12, 2002, which cross-referenced the text of
temporary regulations (TD 8984) published in the Federal Register (67
FR 11034) on the same day (March 12 unified loss proposed regulations).
(2) An NPRM (REG-102305-02) published in the Federal Register (67
FR 38040) on May 31, 2002, which clarified and revised aspects of the
March 12 unified loss proposed regulations and cross-referenced the
text of temporary regulations (TD 8998) published in the Federal
Register (67 FR 37998) on the same day.
(3) An NPRM (REG-152524-02) published in the Federal Register (68
FR 24404) on May 7, 2003, which cross-referenced the text of temporary
regulations (TD 9057) published in the Federal Register (68 FR 24351)
on the same day.
(4) An NPRM (REG-135898-04) published in the Federal Register (69
FR 52462) on August 26, 2004, which cross-referenced the text of
temporary regulations (TD 9154) published in the Federal Register (69
FR 52419) on the same day.
b. NPRMs Under Sec. 1.1502-21
The Treasury Department and the IRS published three NPRMs under
Sec. 1.1502-21, which cross-referenced temporary regulations under
Sec. 1.1502-21T published in the Federal Register on the same day, the
text of which served as the text for those proposals. These NPRMs also
contained proposed regulations under Sec. 1.1502-32 (see part II.F.3.c
of this Explanation of Provisions).
Each of these temporary regulations under Sec. 1.1502-21T has
expired or has been removed. However, the Treasury Department and the
IRS have not yet withdrawn the three NPRMs under Sec. 1.1502-21.
Accordingly, this document withdraws three NPRMs under Sec.
1.1502-21, which consist of the following:
(1) An NPRM (REG-122564-02) published in the Federal Register (67
FR 38039) on May 31, 2002, which addressed elections for consolidated
groups to waive the carryback of certain losses arising in 2001 or 2002
and cross-referenced the text of temporary regulations (TD 8997)
published in the Federal Register (67 FR 38000) on the same day.
(2) An NPRM (REG-131478-02) published in the Federal Register (68
FR 12324) on March 14, 2003, which addressed losses treated as expired
under Sec. 1.1502-35T(f)(1) on and after March 7, 2002, and on or
before March 11, 2006 (including corresponding basis adjustments), and
cross-referenced the text of temporary regulations (TD 9048) published
in the Federal Register (68 FR 12287) on the same day.
(3) An NPRM (REG-151605-09) published in the Federal Register (75
FR 35710) on June 23, 2010, which addressed elections by consolidated
groups to elect to extend a net operating loss carryback period arising
in a single taxable year ending after December 31, 2007, and beginning
before January 1, 2010, and cross-referenced the text of now-expired
temporary regulations (TD 9490) published in the Federal Register (75
FR 35643) on the same day.
c. NPRMs Under Sec. 1.1502-32
The Treasury Department and the IRS published five NPRMs under
Sec. 1.1502-32 that cross-referenced temporary regulations under Sec.
1.1502-32T published in the Federal Register on the same day, the text
of which served as the text for those proposals. Each of these
temporary regulations under Sec. 1.1502-32T has expired or have been
removed. However, the Treasury Department and the IRS have not yet
withdrawn the corresponding five NPRMs under Sec. 1.1502-32.
Accordingly, this document withdraws the five NPRMs under Sec.
1.1502-32, which consist of the following:
(1) An NPRM (REG-129274-04) published in the Federal Register (69
FR 51208) on August 18, 2004, which addressed elections for
consolidated groups to waive the carryback of certain losses arising in
2001 or 2002 and cross-referenced the text of temporary regulations (TD
9155) published in the Federal Register (69 FR 51175) on the same day.
(2) An NPRM (REG-156420-06) published in the Federal Register (72
FR 17814) on April 10, 2007 (proposed anti-avoidance and anti-loss
reimportation regulations), which proposed an anti-avoidance rule and
revised an anti-loss reimportation rule, and cross-referenced the text
of temporary regulations (TD 9322) published in the Federal Register
(72 FR 17804) on the same day. The proposed anti-avoidance and anti-
loss importation regulations also contained proposed regulations under
Sec. 1.1502-35 (see part II.F.3.d of this Explanation of Provisions).
(3) Each NPRM described in part II.F.3.b of this Explanation of
Provisions.
d. NPRM Under Sec. 1.1502-35
The Treasury Department and the IRS published two NPRMs under Sec.
1.1502-35, which cross-referenced temporary regulations under Sec.
1.1502-35T published in the Federal Register on the same day, the text
of which served as the text for those proposals. The temporary
regulations under Sec. 1.1502-35T have expired or have been removed.
However, the Treasury Department and the IRS have not yet withdrawn the
corresponding two NPRMs under Sec. 1.1502-35.
Accordingly, this document withdraws the two NPRMs under Sec.
1.1502-35, which consist of the following:
(1) An NPRM (REG 153172-03) published in the Federal Register (69
FR 12811) on March 18, 2004, which proposed guidance regarding
worthless subsidiary stock, and cross-referenced the text of temporary
regulations (TD 9118) published in the Federal Register (69 FR 12799)
on the same day.
(2) The proposed anti-avoidance and anti-loss reimportation
regulations, described in part II.F.3.c of this Explanation of
Provisions.
Proposed Applicability Date
Pursuant to section 1503(a) of the Code, these proposed regulations
would apply to consolidated return years for which the due date of the
return (without regard to extensions) is after
[[Page 52068]]
the date of publication of the Treasury decision adopting these rules
as final regulations in the Federal Register.
Special Analyses
I. Regulatory Planning and Review
Executive Orders 13563 and 12866 direct agencies to assess costs
and benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). Executive Order 13563
emphasizes the importance of quantifying both costs and benefits,
reducing costs, harmonizing rules, and promoting flexibility.
Pursuant to the Memorandum of Agreement, Review of Treasury
Regulations under Executive Order 12866 (June 9, 2023), tax regulatory
actions issued by the IRS are not subject to the requirements of
section 6 of Executive Order 12866, as amended. Therefore, a regulatory
impact assessment is not required.
II. Paperwork Reduction Act
These regulations update the regulations under section 1502 of the
Code (that is, the consolidated return regulations) by revising and
removing outdated and obsolete provisions, such as cross-references to
temporary regulations, regulations, and statutes that have been
repealed, removed, expired, renumbered, or otherwise have become
obsolete. Therefore, the proposed regulations would not impose
additional reporting burden beyond what is otherwise required by
existing statutes, regulations, and forms. The total burden associated
with the proposed regulations, if finalized in their current form,
would be $0.
III. Regulatory Flexibility Act
The proposed regulations would not impose a collection of
information on small entities. Further, pursuant to the Regulatory
Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that the
proposed regulations would not have a significant economic impact on a
substantial number of small entities. This certification is based on
the fact that the proposed regulations would apply only to corporations
that file consolidated Federal income tax returns, and that such
corporations tend to be larger businesses. Therefore, the proposed
regulations would not create additional obligations for, or impose an
economic impact on, small entities.
Pursuant to section 7805(f) of the Code, the proposed regulations
have been submitted to the Chief Counsel for the Office of Advocacy of
the Small Business Administration for comment on its impact on small
business.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 requires
that agencies assess anticipated costs and benefits and take certain
other actions before issuing a final rule that includes any Federal
mandate that may result in expenditures in any one year by a State,
local, or tribal government, in the aggregate, or by the private
sector, of $100 million in 1995 dollars, updated annually for
inflation. In 2022, that threshold is approximately $190 million. The
proposed regulations do not propose any rule that would include any
Federal mandate that may result in expenditures by State, local, or
tribal governments, or by the private sector in excess of that
threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism) prohibits an agency from
publishing any rule that has federalism implications if the rule either
imposes substantial, direct compliance costs on State and local
governments, and is not required by statute, or preempts State law,
unless the agency meets the consultation and funding requirements of
section 6 of the Executive order. The proposed regulations do not
propose rules that would have federalism implications, impose
substantial direct compliance costs on State and local governments, or
preempt State law within the meaning of the Executive order.
Comments and Requests for a Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any comments that are submitted timely
to the IRS as prescribed in this preamble under the ADDRESSES heading.
The Treasury Department and the IRS request comments on all aspects of
the proposed regulations, including comments on any consolidated return
rules not addressed in these proposed regulations that require revision
or removal as a result of amendments to the Code or regulations made
after such rules were promulgated. All commenters are strongly
encouraged to submit comments electronically. The Treasury Department
and the IRS will publish for public availability any comment submitted
electronically or on paper to its public docket on <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
A public hearing will be scheduled if requested in writing by any
person who timely submits electronic or written comments. Requests for
a public hearing are encouraged to be made electronically. If a public
hearing is scheduled, a notice of the date and time for the public
hearing will be published in the Federal Register. Announcement 2023-
16, 2023-20 IRB 854, provides that, following the end of the national
emergency concerning the Coronavirus Disease 2019 (COVID-19) pandemic,
the IRS no longer will conduct public hearings on notices of proposed
rulemaking solely by telephone for proposed regulations published in
the Federal Register after May 11, 2023. A telephonic option will
remain available for those who prefer to attend or testify at a public
hearing by telephone. Any telephonic hearing will be made accessible to
people with disabilities.
Statement of Availability of IRS Documents
Announcement 2023-16, 2023-20 IRB 854, is published in the Internal
Revenue Bulletin and is available from the Superintendent of Documents,
U.S. Government Publishing Office, Washington, DC 20402, or by visiting
the IRS website at <a href="https://www.irs.gov">https://www.irs.gov</a>.
Drafting Information
The principal authors of this document are Kelton P. Frye and
William W. Burhop of the Office of Associate Chief Counsel (Corporate).
Other personnel from the Treasury Department and the IRS participated
in its development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 5
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, the Treasury Department and the IRS propose to amend
26 CFR parts 1, 5, 301, and 602 as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 is amended by removing
the
[[Page 52069]]
entries for Sec. Sec. 1.1503-2, 1.1502-9A, 1.1502-15A, 1.1502-21A,
1.1502-22A, 1.1502-23A, 1.1502-41A, 1.1502-79A, 1.1502-91A, 1.1502-92A,
1.1502-93A, 1.1502-94A, 1.1502-95A, 1.1502-96A, 1.1502-98A, and 1.1502-
99A to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Sec. 1.57-1 [Amended]
0
Par. 2. Section 1.57-1 is amended by removing the text ``and Sec.
1.1502-12(g)'' from paragraph (b)(4)(ii).
0
Par. 3. Section 1.167(c)-1 is amended by revising paragraph (a)(5) to
read as follows:
Sec. 1.167(c)-1 Limitations on methods of computing depreciation
under section 167(b)(2), (3), and (4).
(a) * * *
(5) See Sec. Sec. 1.1502-13 and 1.1502-68 for provisions dealing
with depreciation of property received by a member of an affiliated
group from another member of the group during a consolidated return
period.
* * * * *
Sec. 1.279-6 [Amended]
0
Par. 4. Section 1.279-6 is amended by:
0
1. Removing the text ``and'' from the end of paragraph (d)(1).
0
2. Adding the text ``and'' to the end of paragraph (d)(2).
0
3. Removing the text ``, and'' from the end of paragraph (d)(3) and
adding the text ``.'' in its place.
0
4. Removing paragraph (d)(4).
Sec. 1.382-8 [Amended]
0
Par. 5. Section 1.382-8 is amended by removing and reserving paragraph
(i).
0
Par. 6. Section 1.1502-0 is revised to read as follows:
Sec. 1.1502-0 Effective/Applicability dates.
(a) In general. Except as provided in paragraph (b) of this
section, the consolidated return regulations (as defined in Sec.
1.1502-1(g)) are applicable to taxable years beginning after December
31, 1965.
(b) Exceptions. The applicability date described in paragraph (a)
of this section does not apply to any provision of the consolidated
return regulations with an applicability or effective date different
than the date provided by paragraph (a) of this section.
0
Par. 7. Section 1.1502-1 is amended by:
0
1. Adding introductory text.
0
2. Removing the text ``,'' from the end of paragraph (f)(2)(iii) and
adding the text ``.'' in its place.
0
3. Removing the undesignated paragraph after paragraph (f)(2)(iii).
0
4. Removing the text ``and for which section 1562 was not effective''
from the last sentence of paragraph (f)(3).
0
5. Revising paragraph (g).
0
6. Redesignating paragraph (l) as paragraph (m).
0
7. Adding a new paragraph (l).
The revision and addition read as follows:
Sec. 1.1502-1 Definitions.
For purposes of the consolidated return regulations:
* * * * *
(g) Consolidated return regulations. The term consolidated return
regulations means the regulations under section 1502.
* * * * *
(l) U.S. territory. The term U.S. territory means--
(1) American Samoa;
(2) The Commonwealth of the Northern Mariana Islands;
(3) The Commonwealth of Puerto Rico;
(4) Guam; and
(5) The Virgin Islands of the United States.
* * * * *
Sec. 1.1502-3 [Amended]
0
Par. 8. Section 1.1502-3 is amended by removing and reserving paragraph
(e).
Sec. 1.1502-4 [Amended]
0
Par. 9. Section 1.1502-4 is amended by removing the text ``possession''
from paragraph (d)(1) and adding the text ``U.S. territory'' in its
place.
0
Par. 10. Section 1.1502-5 is revised to read as follows:
Sec. 1.1502-5 Estimated tax.
(a) General rule--(1) Consolidated estimated tax. If a group files
a consolidated return for two consecutive taxable years, it must make
payments of estimated tax on a consolidated basis for each subsequent
taxable year until separate returns are filed. When filing on a
consolidated basis, the group is generally treated as a single
corporation for purposes of section 6655 (relating to payment of
estimated tax by corporations). If separate returns are filed by the
members for a taxable year, the amount of any estimated tax payments
made with respect to a consolidated estimated tax for the year is
credited against the separate tax liabilities of the members in any
reasonable manner designated by the common parent.
(2) First two consolidated return years. For its first two
consolidated return years, a group may make payments of estimated tax
on either a consolidated or a separate member basis. The amount of any
separate estimated tax payments is credited against the consolidated
tax liability of the group.
(b) Addition to tax for failure to pay estimated tax under section
6655--(1) Consolidated return filed. For its first two consolidated
return years, a group may compute the amount of the penalty (if any)
under section 6655 on a consolidated basis or a separate member basis,
regardless of the method of payment. Thereafter, the group must compute
the penalty for any consolidated return year on a consolidated basis.
(2) Computation of penalty on consolidated basis. (i) This
paragraph (b)(2) provides rules for computing the penalty under section
6655 on a consolidated basis.
(ii) The tax shown on the return for the preceding taxable year
referred to in section 6655(d)(1)(B)(ii) is, if a consolidated return
was filed for that preceding year, the tax shown on the consolidated
return for that preceding year or, if a consolidated return was not
filed for that preceding year, the aggregate of the taxes shown on the
separate returns of the common parent and any other corporation that
was a member of the same affiliated group as the common parent for that
preceding year.
(iii) If estimated tax was not paid on a consolidated basis, the
amount of the group's payments of estimated tax for the taxable year is
the aggregate of the payments made by all members for the year.
(iv) If the common parent is otherwise eligible to use the section
6655(d)(1)(B)(ii) required annual payment rule, that rule applies only
if the group's consolidated return, or each member's separate return if
the group did not file a consolidated return, for the preceding taxable
year was a taxable year of 12 months.
(3) Computation of penalty on separate member basis. To compute any
penalty under section 6655 on a separate member basis, for purposes of
section 6655(d)(1)(B)(i), the ``tax shown on the return'' for the
taxable year is the portion of the tax shown on the consolidated return
allocable to the member under paragraph (b)(6) of this section. If the
member was included in the consolidated return filed by the group for
the preceding taxable year, for purposes of section 6655(d)(1)(B)(ii),
the ``tax shown on the return'' for the preceding taxable year for any
member is the portion of the tax shown on the consolidated return for
the preceding
[[Page 52070]]
year allocable to the member under paragraph (b)(6) of this section.
(4) Consolidated payments if separate returns filed. If the group
does not file a consolidated return for the taxable year but makes
payments of estimated tax on a consolidated basis, for purposes of
section 6655(b)(1)(B), the ``amount (if any) of the installment paid''
by any member is an amount apportioned to the member in any reasonable
manner designated by the common parent. If a member was included in the
consolidated return filed by the group for the preceding taxable year,
the amount of the member's penalty under section 6655 is computed on
the separate member basis described in paragraph (b)(3) of this
section.
(5) Tax defined. For purposes of this section, the term ``tax''
means the excess of--
(i) The sum of--
(A) The consolidated tax imposed by section 11 or subchapter L of
chapter 1, whichever applies;
(B) The tax imposed by section 55(a); plus
(C) The tax imposed by section 59A; over
(ii) The credits against tax provided by part IV of subchapter A of
chapter 1 of the Internal Revenue Code.
(6) Allocation of consolidated tax liability for determining
earnings and profits. For purposes of this section, the tax shown on a
consolidated return is allocated to the members of the group by
allocating any tax described in paragraph (b)(5)(i) of this section,
net of allowable credits under paragraph (b)(5)(ii) of this section,
under the method that the group has elected pursuant to section 1552
and Sec. 1.1502-33(d).
(c) Examples. The provisions of this section are illustrated by the
following examples.
(1) Example 1. Corporations P and S1 file a consolidated return for
the first time for calendar year 2021. P and S1 also file consolidated
returns for calendar year 2022 and calendar year 2023. Under paragraph
(a)(2) of this section, for the 2021 and 2022 taxable years, P and S1
may pay estimated tax on either a separate or consolidated basis. Under
paragraph (a)(1) of this section, for the 2023 taxable year, the group
must pay its estimated tax on a consolidated basis. In determining
whether P and S1 come within the exception provided in section
6655(d)(1)(B)(ii) for 2023, the ``tax shown on the return'' is the tax
shown on the consolidated return for the 2022 taxable year.
(2) Example 2. Corporations P, S1, and S2 file a consolidated
return for the first time for calendar year 2021 and file their second
consolidated return for calendar year 2022. S2 ceases to be a member of
the group on September 15, 2023. Under paragraph (b)(2) of this
section, in determining whether the group (which no longer includes S2)
comes within the exception provided in section 6655(d)(1)(B)(ii) for
2023, the ``tax shown on the return'' is the tax shown on the
consolidated return for calendar year 2022.
(3) Example 3. Corporations P and S1 file a consolidated return for
the first time for calendar year 2021 and file their second
consolidated return for calendar year 2022. Corporation S2 becomes a
member of the group on July 1, 2023, and joins in the filing of the
consolidated return for calendar year 2023. Under paragraph (b)(2) of
this section, in determining whether the group (which now includes S2)
comes within the exception provided in section 6655(d)(1)(B)(ii) for
2023, the ``tax shown on the return'' is the tax shown on the
consolidated return for calendar year 2022. Any tax of S2 for any
separate return year is not included as a part of the ``tax shown on
the return'' for purposes of applying section 6655(d)(1)(B)(ii).
(4) Example 4. Corporations X and Y file consolidated returns for
the calendar years 2021 and 2022 and separate returns for calendar year
2023. Under paragraph (b)(3) of this section, in determining whether X
or Y comes within the exception provided in section 6655(d)(1)(B)(ii)
for 2023, the ``tax shown on the return'' is the amount of tax shown on
the consolidated return for 2022 allocable to X and to Y in accordance
with paragraph (b)(6) of this section.
(d) Cross-references--(1) For provisions relating to quick refunds
of corporate estimated tax payments, see Sec. Sec. 1.1502-78 and
1.6425-1 through 1.6425-3.
(2) For provisions relating to depositing estimated taxes, see
Sec. 1.6302-1(b).
(e) Applicability date. This section applies to any taxable year
for which the due date of the income tax return (without regard to
extensions) is on or after [the date final regulations are published in
the Federal Register]. For prior years, see Sec. 1.1502-5 (as
contained in the 26 CFR edition revised as of April 1, 2023).
Sec. 1.1502-6 [Amended]
0
Par. 11. Section 1.1502-6 is amended by removing the text ``he'' from
paragraph (b) and adding the text ``the Commissioner'' in its place.
0
Par. 12. Section 1.1502-9 is amended by:
0
1. Removing the text ``Sec. 1.904-4(m)'' from paragraph (a) and adding
the text ``Sec. 1.904-5(a)(4)(v)'' in its place.
0
2. Removing the text ``(a)(8)'' from the first sentence of paragraph
(b)(1) and adding the text ``(a)(6)'' in its place.
0
3. Removing the text ``Sec. Sec. 1.861-9T(g)(3) and 1.861-12T'' from
the second sentence of paragraph (c)(2)(ii) and adding the text
``Sec. Sec. 1.861-9T(g)(3), 1.861-12, and 1.861-13'' in its place.
0
4. Removing the text ``Sec. 1.861-9T(g)(1)'' from paragraph (c)(2)(ii)
wherever it appears and adding the text ``Sec. 1.861-9(g)(1)'' in its
place.
0
5. Removing the text ``, fair market value,'' from the sixth sentence
of paragraph (c)(2)(ii).
0
6. Removing the text ``Sec. 1.861-9T(g)(2))'' from paragraph
(c)(2)(ii) wherever it appears and adding the text ``Sec. 1.861-
9(g)(2))'' in its place.
0
7. Removing the text ``If the group uses the tax book value method,
the'' from the eighth sentence of paragraph (c)(2)(ii) and adding the
text ``The'' in its place.
0
8. Revising the heading of paragraph (c)(2)(iii).
0
9. Removing the text ``a group uses the tax book value method of
valuing assets for purposes of paragraph (c)(2)(ii) of this section
and'' from the first sentence of paragraph (c)(2)(iii).
Sec. 1.1502-9 Consolidated overall foreign losses, separate
limitation losses, and overall domestic losses.
* * * * *
(c) * * *
(2) * * *
(iii) Limitation on member's portion. * * *
* * * * *
0
Par. 13. Section 1.1502-11 is amended by:
0
1. Revising the introductory text in paragraph (a).
0
2. Revising paragraphs (a)(2) through (4).
0
3. Adding the text ``and'' at the end of paragraph (a)(5).
0
4. Removing paragraph (a)(6).
0
5. Redesignating paragraph (a)(7) as paragraph (a)(6).
0
6. In newly redesignated paragraph (a)(6), removing the text ``; and'',
and adding the text ``.'' in its place.
0
7. Removing paragraph (a)(8).
0
8. In paragraph (b)(2)(iii), designating Examples 1 through 3 as
paragraphs (b)(2)(iii)(A) through (C), respectively.
0
9. In newly redesignated paragraphs (b)(2)(iii)(A) through (C), further
redesignating the paragraphs in the first column as the paragraphs in
the second column:
[[Page 52071]]
------------------------------------------------------------------------
Old paragraphs New paragraphs
------------------------------------------------------------------------
(b)(2)(iii)(A)(a), (b), and (c)........ (b)(2)(iii)(A)(1), (2), and
(3).
(b)(2)(iii)(B)(a), (b), (c), and (d)... (b)(2)(iii)(B)(1), (2), (3),
and (4).
(b)(2)(iii)(C)(a), (b), (c), (d), and (b)(2)(iii)(C)(1), (2), (3),
(e). (4), and (5).
------------------------------------------------------------------------
0
10. Removing the text ``(or 1.1502-79A, as appropriate)'' from newly
redesignated paragraphs (b)(2)(iii)(A)(3) and (b)(2)(iii)(B)(4).
0
11. Removing the last sentence of paragraph (c)(7).
The revisions read as follows:
Sec. 1.1502-11 Consolidated taxable income.
(a) In general. The consolidated taxable income (CTI) for a
consolidated return year is determined by taking into account:
* * * * *
(2) Any consolidated net operating loss (CNOL) deduction (see Sec.
1.1502-21 for the computation of the CNOL deduction);
(3) Any consolidated capital gain net income (see Sec. 1.1502-22
for the computation of consolidated capital gain net income);
(4) Any consolidated section 1231 net loss (see Sec. 1.1502-23 for
the computation of consolidated section 1231 net loss);
* * * * *
0
Par. 14. Section 1.1502-12 is amended by:
0
1. Revising paragraph (b).
0
2. Removing and reserving paragraphs (e), (g), and (m).
0
3. Revising paragraph (n).
0
4. Removing and reserving paragraph (q).
The revisions read as follows:
Sec. 1.1502-12 Separate taxable income.
* * * * *
(b) Any deduction that is disallowed under Sec. 1.1502-15 must be
taken into account as provided in that section.
* * * * *
(n) No deduction under section 243(a)(1) or section 245 (relating
to deductions with respect to dividends received) is taken into
account;
* * * * *
0
Par. 15. Section 1.1502-13 is amended by:
0
1. Revising the second sentence of paragraph (a)(3)(i).
0
2. Revising paragraph (a)(6)(ii).
0
3. Adding the text ``of this section'' after the text ``paragraph
(c)(4)(i)(A)'' in the first sentence of paragraph (c)(4)(i)(B).
0
4. Revising the last sentence of paragraph (c)(5).
0
5. In paragraph (d)(3), designating Examples 1 through 5 as paragraphs
(d)(3)(i) through (v), respectively.
0
6. In newly redesignated paragraphs (d)(3)(i) through (v), further
redesignating paragraphs in the first column as paragraphs in the
second column:
------------------------------------------------------------------------
Old paragraphs New paragraphs
------------------------------------------------------------------------
(d)(3)(i)(a), (b), (c), (d), (e), (f), (d)(3)(i)(A), (B), (C), (D),
and (g). (E), (F), and (G).
(d)(3)(ii)(a), (b), and (c)............ (d)(3)(ii)(A), (B), and (C).
(d)(3)(iii)(a) and (b)................. (d)(3)(iii)(A) and (B).
(d)(3)(iv)(a), (b), and (c)............ (d)(3)(iv)(A), (B), and (C).
(d)(3)(v)(a) and (b)................... (d)(3)(v)(A) and (B).
------------------------------------------------------------------------
0
7. In paragraph (d)(3), for each newly redesignated paragraph listed in
the ``Paragraph'' column, removing the text indicated in the ``Remove''
column and adding in its place the text indicated in the ``Add''
column:
----------------------------------------------------------------------------------------------------------------
Paragraph Remove Add
----------------------------------------------------------------------------------------------------------------
(d)(3)(i)(E)............................ paragraph (a) of this Example 1. paragraph (d)(3)(i)(A) of this
section (Example 1).
(d)(3)(i)(F)............................ paragraph (a) of this Example 1. paragraph (d)(3)(i)(A) of this
section (Example 1).
(d)(3)(i)(G)............................ paragraph (a) of this Example 1. paragraph (d)(3)(i)(A) of this
section (Example 1).
(d)(3)(ii)(C)........................... paragraph (a) of this Example 2. paragraph (d)(3)(ii)(A) of this
section (Example 2).
----------------------------------------------------------------------------------------------------------------
0
8. In paragraph (e)(1)(v), designating Examples 1 through 3 as
paragraphs (e)(1)(v)(A) through (C), respectively.
0
9. In newly redesignated paragraphs (e)(1)(v)(A) through (C), further
redesignating paragraphs in the first column as paragraphs in the
second column:
------------------------------------------------------------------------
Old paragraphs New paragraphs
------------------------------------------------------------------------
(e)(1)(v)(A)(a), (b), (c)(i), (c)(ii), (e)(1)(v)(A)(1), (2), (3)(i),
(d), and (e). (3)(ii), (4), and (5).
(e)(1)(v)(B)(a), (b)(i), (b)(ii), and (e)(1)(v)(B)(1), (2)(i),
(c). (2)(ii), and (3).
(e)(1)(v)(C)(a) and (b)................ (e)(1)(v)(C)(1) and (2).
------------------------------------------------------------------------
0
10. In paragraph (e)(1)(v), for each newly redesignated paragraph
listed in the ``Paragraph'' column, removing the text indicated in the
``Remove'' column and adding in its place the text indicated in the
``Add'' column:
----------------------------------------------------------------------------------------------------------------
Paragraph Remove Add
----------------------------------------------------------------------------------------------------------------
(e)(1)(v)(A)(4)......................... paragraph (a) of this Example 1. paragraph (e)(1)(v)(A)(1) of this
section (Example 1).
(e)(1)(v)(A)(5)......................... paragraph (a) of this Example 1. paragraph (e)(1)(v)(A)(1) of this
section (Example 1).
(e)(1)(v)(B)(1)......................... Example 1....................... paragraph (e)(1)(v)(A)(1) of this
section (Example 1).
[[Page 52072]]
(e)(1)(v)(B)(3)......................... paragraph (a) of this Example 2. paragraph (e)(1)(v)(B)(1) of this
section (Example 2).
----------------------------------------------------------------------------------------------------------------
0
11. Removing the second sentence from paragraph (f)(5)(ii)(B)(2).
0
12. Removing the text ``In either case, the'' from the third sentence
of paragraph (f)(5)(ii)(B)(2) and adding the text ``The'' in its place.
0
13. Revising paragraph (f)(5)(ii)(F).
0
14. Revising paragraphs (f)(6)(ii) and (v).
0
15. In paragraph (f)(7), designating Examples 1 through 7 as paragraphs
(f)(7)(i) through (vii), respectively.
0
16. In newly redesignated paragraphs (f)(7)(i) through (vii), further
redesignating paragraphs in the first column as paragraphs in the
second column:
------------------------------------------------------------------------
Old paragraphs New paragraphs
------------------------------------------------------------------------
(f)(7)(i)(a), (b), (c), (d), and (e)... (f)(7)(i)(A), (B),(C), (D), and
(E).
(f)(7)(ii)(a), (b), (c), (d), (e), (f), (f)(7)(ii)(A), (B), (C), (D),
and (g). (E), (F), and (G).
(f)(7)(iii)(a), (b), (c), and (d)...... (f)(7)(iii)(A), (B), (C), and
(D).
(f)(7)(iv)(a) and (b).................. (f)(7)(iv)(A) and (B).
(f)(7)(v)(a), (b), (c), and (d)........ (f)(7)(v)(A), (B), (C), and
(D).
(f)(7)(vi)(a), (b), and (c)............ (f)(7)(vi)(A), (B), and (C).
(f)(7)(vii)(a), (b), (c), and (d)...... (f)(7)(vii)(A), (B), (C), and
(D).
------------------------------------------------------------------------
0
17. In paragraph (f)(7), for each newly redesignated paragraph listed
in the ``Paragraph'' column, removing the text indicated in the
``Remove'' column and adding in its place the text indicated in the
``Add'' column:
----------------------------------------------------------------------------------------------------------------
Paragraph Remove Add
----------------------------------------------------------------------------------------------------------------
(f)(7)(i)(D)............................ paragraph (a) of this Example 1. paragraph (f)(7)(i)(A) of this
section (Example 1).
(f)(7)(i)(E)............................ paragraph (a) of this Example 1. paragraph (f)(7)(i)(A) of this
section (Example 1).
(f)(7)(ii)(D)........................... paragraph (a) of this Example 2. paragraph (f)(7)(ii)(A) of this
section (Example 2).
(f)(7)(ii)(D)........................... paragraph (c) of this Example 2. paragraph (f)(7)(ii)(C) of this
section (Example 2).
(f)(7)(ii)(E)........................... paragraph (a) of this Example 2. paragraph (f)(7)(ii)(A) of this
section (Example 2).
(f)(7)(ii)(F)........................... paragraph (a) of this Example 2. paragraph (f)(7)(ii)(A) of this
section (Example 2).
(f)(7)(ii)(F)........................... paragraph (c) of this Example 2. paragraph (f)(7)(ii)(C) of this
section (Example 2).
(f)(7)(ii)(F)........................... paragraph (d) of this Example 2. paragraph (f)(7)(ii)(D) of this
section (Example 2).
(f)(7)(ii)(G)........................... paragraph (a) of this Example 2. paragraph (f)(7)(ii)(A) of this
section (Example 2).
(f)(7)(ii)(G)........................... paragraph (c) of this Example 2. paragraph (f)(7)(ii)(C) of this
section (Example 2).
(f)(7)(iii)(C).......................... paragraph (a) of this Example 3. paragraph (f)(7)(iii)(A) of this
section (Example 3).
(f)(7)(iii)(C).......................... paragraph (b) of this Example 3. paragraph (f)(7)(iii)(B) of this
section (Example 3).
(f)(7)(v)(C)............................ paragraph (a) of this Example 4. paragraph (f)(7)(v)(A) of this
section (Example 5).
(f)(7)(v)(C)............................ paragraph (b) of this Example 4. paragraph (f)(7)(v)(B) of this
section (Example 5).
(f)(7)(v)(D)............................ paragraph (a) of this Example 4. paragraph (f)(7)(v)(A) of this
section (Example 5).
(f)(7)(vi)(C)........................... paragraph (a) of this Example 5. paragraph (f)(7)(vi)(A) of this
section (Example 6).
(f)(7)(vii)(C).......................... paragraph (a) of this Example 6. paragraph (f)(7)(vii)(A) of this
section (Example 7).
(f)(7)(vii)(C).......................... paragraph (b) of this Example 6. paragraph (f)(7)(vii)(B) of this
section (Example 7).
(f)(7)(vii)(D).......................... paragraph (c) of this Example 6. paragraph (f)(7)(vii)(C) of this
section (Example 7).
----------------------------------------------------------------------------------------------------------------
0
18. In paragraph (g)(7)(ii), designating Examples 1 through 11 as
paragraphs (g)(7)(ii)(A) through (K), respectively.
0
19. In newly redesignated paragraphs (g)(7)(ii)(A) through (K), further
redesignating paragraphs in the first column as paragraphs in the
second column:
------------------------------------------------------------------------
Old paragraphs New paragraphs
------------------------------------------------------------------------
(g)(7)(ii)(A)(i), (ii), (iii), and (iv) (g)(7)(ii)(A)(1), (2), (3), and
(4).
(g)(7)(ii)(B)(i), (ii), (iii), (iv), (g)(7)(ii)(B)(1), (2), (3),
(v), (vi), (vii), and (viii). (4), (5), (6), (7), and (8).
(g)(7)(ii)(C)(i), (ii), (iii), and (iv) (g)(7)(ii)(C)(1), (2), (3), and
(4).
(g)(7)(ii)(D)(i), (ii), (iii), (iv), (g)(7)(ii)(D)(1), (2), (3),
and (v). (4), and (5).
(g)(7)(ii)(E)(i) and (ii).............. (g)(7)(ii)(E)(1) and (2).
(g)(7)(ii)(F)(i) and (ii).............. (g)(7)(ii)(F)(1) and (2).
(g)(7)(ii)(G)(i) and (ii).............. (g)(7)(ii)(G)(1) and (2).
(g)(7)(ii)(H)(i) and (ii).............. (g)(7)(ii)(H)(1) and (2).
(g)(7)(ii)(I)(i) and (ii).............. (g)(7)(ii)(I)(1) and (2).
(g)(7)(ii)(J)(i), (ii), (iii), and (iv) (g)(7)(ii)(J)(1), (2), (3), and
(4).
(g)(7)(ii)(K)(i), (ii), and (iii)...... (g)(7)(ii)(K)(1), (2), and (3).
------------------------------------------------------------------------
0
20. In paragraph (g)(7)(ii), for each newly redesignated paragraph
listed in the ``Paragraph'' column, removing the text indicated in the
``Remove'' column and adding in its place the text indicated in the
``Add'' column:
[[Page 52073]]
----------------------------------------------------------------------------------------------------------------
Paragraph Remove Add
----------------------------------------------------------------------------------------------------------------
(g)(7)(ii)(A)(3)........................ paragraph (i) of this Example 1. paragraph (g)(7)(ii)(A)(1) of this
section (Example 1).
(g)(7)(ii)(A)(3)........................ paragraph (ii) of this Example 1 paragraph (g)(7)(ii)(A)(2) of this
section (Example 1).
(g)(7)(ii)(A)(4)........................ paragraph (i) of this Example 1. paragraph (g)(7)(ii)(A)(1) of this
section (Example 1).
(g)(7)(ii)(A)(4)........................ paragraph (ii) of this Example 1 paragraph (g)(7)(ii)(A)(2) of this
section (Example 1).
(g)(7)(ii)(B)(3)........................ paragraph (i) of this Example 2. paragraph (g)(7)(ii)(B)(1) of this
section (Example 2).
(g)(7)(ii)(B)(3)........................ paragraph (ii) of this Example 2 paragraph (g)(7)(ii)(B)(2) of this
section (Example 2).
(g)(7)(ii)(B)(4)........................ paragraph (i) of this Example 2. paragraph (g)(7)(ii)(B)(1) of this
section (Example 2).
(g)(7)(ii)(B)(4)........................ paragraph (iii) of this Example paragraph (g)(7)(ii)(B)(3) of this
2. section (Example 2).
(g)(7)(ii)(B)(5)........................ paragraph (i) of this Example 2. paragraph (g)(7)(ii)(B)(1) of this
section (Example 2).
(g)(7)(ii)(B)(6)........................ same as paragraph (i) of this same as in paragraph
Example 2. (g)(7)(ii)(B)(1) of this section
(Example 2).
(g)(7)(ii)(B)(6)........................ paragraph (ii) of this Example 2 paragraph (g)(7)(ii)(B)(2) of this
section (Example 2).
(g)(7)(ii)(B)(7)........................ paragraph (i) of this Example 2. paragraph (g)(7)(ii)(B)(1) of this
section (Example 2).
(g)(7)(ii)(B)(8)........................ paragraph (i) of this Example 2. paragraph (g)(7)(ii)(B)(1) of this
section (Example 2).
(g)(7)(ii)(C)(3)........................ paragraph (i) of this Example 3. paragraph (g)(7)(ii)(C)(1) of this
section (Example 3).
(g)(7)(ii)(C)(3)........................ paragraph (ii) of this Example 3 paragraph (g)(7)(ii)(C)(2) of this
section (Example 3).
(g)(7)(ii)(C)(4)........................ paragraph (i) of this Example 3. paragraph (g)(7)(ii)(C)(1) of this
section (Example 3).
(g)(7)(ii)(C)(4)........................ paragraph (ii) of this Example 3 paragraph (g)(7)(ii)(C)(2) of this
section (Example 3).
(g)(7)(ii)(C)(4)........................ paragraph (ii) of this Example 3 paragraph (g)(7)(ii)(C)(2) of this
section (Example 3).
(g)(7)(ii)(D)(3)........................ paragraph (i) of this Example 4. paragraph (g)(7)(ii)(D)(1) of this
section (Example 4).
(g)(7)(ii)(D)(4)........................ paragraph (i) of this Example 4. paragraph (g)(7)(ii)(D)(1) of this
section (Example 4).
(g)(7)(ii)(D)(5)........................ paragraph (i) of this Example 4. paragraph (g)(7)(ii)(D)(1) of this
section (Example 4).
(g)(7)(ii)(J)(2)........................ paragraph (iii) of Example 1 of paragraph (g)(7)(ii)(A)(3) of this
this paragraph (g)(7). section (Example 1).
(g)(7)(ii)(J)(3)........................ paragraph (i) of this Example 10 paragraph (g)(7)(ii)(J)(1) of this
section (Example 10).
(g)(7)(ii)(K)(3)........................ paragraph (i) of this Example 11 paragraph (g)(7)(ii)(K)(1) of this
section (Example 11).
----------------------------------------------------------------------------------------------------------------
0
21. Redesignating paragraphs (h)(2)(v)(a) and (b) as paragraphs
(h)(2)(v)(A) and (B).
0
22. In paragraph (j)(9), designating Examples 1 through 7 as paragraphs
(j)(9)(i) through (vii), respectively.
0
23. In newly redesignated paragraphs (j)(9)(i) through (vii), further
redesignating paragraphs in the first column as paragraphs in the
second column:
------------------------------------------------------------------------
Old paragraphs New paragraphs
------------------------------------------------------------------------
(j)(9)(i)(a), (b), (c), (d), and (e)... (j)(9)(i)(A), (B), (C), (D),
and (E).
(j)(9)(ii)(a) and (b).................. (j)(9)(ii)(A) and (B).
(j)(9)(iii)(a), (b), and (c)........... (j)(9)(iii)(A), (B), and (C).
(j)(9)(iv)(a), (b), (c), (d), and (e).. (j)(9)(iv)(A), (B), (C), (D),
and (E).
(j)(9)(v)(a) and (b)................... (j)(9)(v)(A) and (B).
(j)(9)(vi)(a) and (b).................. (j)(9)(vi)(A) and (B).
(j)(9)(vii)(a) and (b)................. (j)(9)(vii)(A) and (B).
------------------------------------------------------------------------
0
24. In paragraph (j)(9), for each newly redesignated paragraph listed
in the ``Paragraph'' column, removing the text indicated in the
``Remove'' column and adding in its place the text indicated in the
``Add'' column:
----------------------------------------------------------------------------------------------------------------
Paragraph Remove Add
----------------------------------------------------------------------------------------------------------------
(j)(9)(i)(E)............................ paragraph (a) of this Example 1. paragraph (j)(9)(i)(A) of this
section (Example 1).
(j)(9)(iv)(D)........................... paragraph (a) of this Example 4. paragraph (j)(9)(iv)(A) of this
section (Example 1).
(j)(9)(iv)(E)........................... paragraph (a) of this Example 4. paragraph (j)(9)(iv)(A) of this
section (Example 1).
----------------------------------------------------------------------------------------------------------------
0
25. Revising paragraph (l)(6).
0
26. Redesignating paragraph (m) as paragraph (l)(7).
0
27. Revising newly redesignated paragraph (l)(7).
0
28. Adding paragraphs (l)(8) and (9).
The revisions and additions read as follows:
Sec. 1.1502-13 Intercompany transactions.
(a) * * *
(3) * * *
(i) * * * See Sec. Sec. 1.1502-17 and 1.446-1(c)(2)(iii). * * *
* * * * *
(6) * * *
(ii) Table of examples. This section contains the following
examples:
----------------------------------------------------------------------------------------------------------------
Rule General location Paragraph Example
----------------------------------------------------------------------------------------------------------------
(A) Matching rule................... Sec. 1.1502- (A).................. Example 1. Intercompany
13(c)(7)(ii). sale of land followed by
sale to a nonmember.
(B).................. Example 2. Dealer
activities.
(C).................. Example 3. Intercompany
section 351 transfer.
(D).................. Example 4. Depreciable
property.
(E).................. Example 5. Intercompany
sale followed by
installment sale.
[[Page 52074]]
(F).................. Example 6. Intercompany
sale of installment
obligation.
(G).................. Example 7. Performance of
services.
(H).................. Example 8. Rental of
property.
(I).................. Example 9. Intercompany
sale of a partnership
interest.
(J).................. Example 10. Net operating
losses subject to section
382 or the SRLY rules.
(K).................. Example 11. Section 475.
(L).................. Example 12. Section 1092.
(M).................. Example 13. [Reserved].
(N).................. Example 14. Source of
income under section 863.
(O).................. Example 15. Section 1248.
(P).................. Example 16. Intercompany
stock distribution
followed by section 332
liquidation.
(Q).................. Example 17. Intercompany
stock sale followed by
section 355 distribution.
(R).................. Example 18. Redetermination
of attributes for section
250 purposes.
(B) Acceleration rule............... Sec. 1.1502-13(d)(3) (i).................. Example 1. Becoming a
nonmember--timing.
(ii)................. Example 2. Becoming a
nonmember--attributes.
(iii)................ Example 3. Selling member's
disposition of installment
note.
(iv)................. Example 4. Cancellation of
debt and attribute
reduction under section
108(b).
(v).................. Example 5. Section 481.
(C) Simplifying rules--inventory.... Sec. 1.1502- (A).................. Example 1. Increment
13(e)(1)(v). averaging method.
(B).................. Example 2. Increment
valuation method.
(C).................. Example 3. Other reasonable
inventory methods.
(D) Stock of members................ Sec. 1.1502-13(f)(7) (i).................. Example 1. Dividend
exclusion and property
distribution.
(ii)................. Example 2. Excess loss
accounts.
(iii)................ Example 3. Intercompany
reorganization.
(iv)................. Example 4. All cash
intercompany
reorganization under
section 368(a)(1)(D).
(v).................. Example 5. Stock
redemptions and
distributions.
(vi)................. Example 6. Intercompany
stock sale followed by
section 332 liquidation.
(vii)................ Example 7. Intercompany
stock sale followed by
section 355 distribution.
(E) Obligations of members.......... Sec. 1.1502- (A).................. Example 1. Interest on
13(g)(7)(ii). intercompany obligation.
(B).................. Example 2. Intercompany
obligation becomes
nonintercompany
obligation.
(C).................. Example 3. Loss or bad debt
deduction with respect to
intercompany obligation.
(D).................. Example 4. Intercompany
nonrecognition
transactions.
(E).................. Example 5. Assumption of
intercompany obligation.
(F).................. Example 6. Extinguishment
of intercompany
obligation.
(G).................. Example 7. Exchange of
intercompany obligations.
(H).................. Example 8. Tax benefit
rule.
(I).................. Example 9. Issuance at off-
market rate of interest.
(J).................. Example 10. Nonintercompany
obligation becomes
intercompany obligation.
(K).................. Example 11. Notional
principal contracts.
(F) Anti-avoidance rules............ Sec. 1.1502-13(h)(2) (i).................. Example 1. Sale of a
partnership interest.
(ii)................. Example 2. Transitory
status as an intercompany
obligation.
(iii)................ Example 3. Corporate mixing
bowl.
(iv)................. Example 4. Partnership
mixing bowl.
(v).................. Example 5. Sale and
leaseback.
(vi)................. Example 6. Section 163(j)
interest limitation.
(G) Miscellaneous operating rules... Sec. 1.1502-13(j)(9) (i).................. Example 1. Intercompany
sale followed by section
351 transfer to member.
(ii)................. Example 2. Intercompany
sale of member stock
followed by
recapitalization.
(iii)................ Example 3. Back-to-back
intercompany transactions--
matching.
(iv)................. Example 4. Back-to-back
intercompany transactions--
acceleration.
(v).................. Example 5. Successor group.
(vi)................. Example 6. Liquidation--80%
distributee.
(vii)................ Example 7. Liquidation--no
80% distributee.
----------------------------------------------------------------------------------------------------------------
* * * * *
(c) * * *
(5) * * * For other special status issues, see, for example,
sections 818(b) (life insurance company treatment of capital gains and
losses) and 1503(c) (limitation on absorption of certain losses).
* * * * *
(f) * * *
(5) * * *
(ii) * * *
(F) Applicability date. Paragraphs (f)(5)(ii)(B)(1) and (2) of this
section apply to transactions in which old T's
[[Page 52075]]
liquidation into B occurs on or after October 25, 2007.
(6) * * *
(ii) Gain stock. For dispositions of P stock, see Sec. 1.1032-3.
* * * * *
(v) Applicability date. This paragraph (f)(6) applies to gain or
loss taken into account on or after July 12, 1995, and to transactions
occurring on or after July 12, 1995.
* * * * *
(l) * * *
(6) Applicability date regarding paragraph (f)(7)(iv) of this
section (Example 4). Paragraph (f)(7)(iv) of this section (Example 4)
applies to transactions occurring on or after December 18, 2009.
(7) Election to apply paragraph (f)(5)(ii) of this section to an
intercompany transaction. Paragraph (f)(5)(ii)(E) of this section
applies to any original consolidated Federal income tax return due
(without extensions) after June 14, 2007.
(8) Election to reduce basis of parent stock under paragraph (f)(6)
of this section. Paragraph (f)(6)(i)(C)(2) of this section applies to
any original consolidated Federal income tax return due (without
extensions) after June 14, 2007.
(9) Certain qualified stock dispositions. Paragraph (f)(5)(ii)(C)
of this section applies to any qualified stock disposition (as defined
in Sec. 1.336-1(b)(6)) for which the disposition date (as defined in
Sec. 1.336-1(b)(8)) is on or after May 15, 2013.
Sec. 1.1502-17 [Amended]
0
Par. 16. Section 1.1502-17 is amended by removing the last sentence of
paragraph (a) and the second sentence of paragraph (e).
Sec. 1.1502-18 [Removed]
0
Par. 17. Section 1.1502-18 is removed.
0
Par. 18. Section 1.1502-21 is amended by:
0
1. In paragraph (b)(3)(i), removing the fourth sentence and revising
the last sentence.
0
2. In paragraph (b)(4), removing the fifth sentence and revising the
last sentence.
0
3. Removing and reserving paragraph (d).
0
4. Removing the last three sentences of paragraph (h)(6).
0
5. Removing the second sentence of paragraph (h)(8).
The revisions read as follows:
Sec. 1.1502-21 Net operating losses.
* * * * *
(b) * * *
(3) * * *
(i) * * * The election may be made in an unsigned statement.
(ii) * * *
(B) * * * The election may be made in an unsigned statement.
* * * * *
Sec. 1.1502-22 [Amended]
0
Par. 19. Section 1.1502-22 is amended by removing and reserving
paragraph (d).
0
Par. 20. Section 1.1502-24 is amended by:
0
1. Revising paragraph (a)(2).
0
2. Removing the text ``section 242, section 243(a)(2) and (3), Sec.
1.1502-25, Sec. 1.1502-26, and Sec. 1.1502-27,'' from paragraph (c)
and adding the text ``section 243(a)(2) and (3) and Sec. 1.1502-26,''
in its place.
The revision reads as follows:
Sec. 1.1502-24 Consolidated charitable contributions deduction.
(a) * * *
(2) The percentage limitation on the total charitable contribution
deduction provided in section 170(b)(2)(A) applied to adjusted
consolidated income as determined under paragraph (c) of this section.
* * * * *
0
Par. 21. Section 1.1502-26 is amended by:
0
1. Revising paragraph (a).
0
2. Designating Examples 1 and 2 in paragraph (c) as paragraphs (c)(1)
and (2), respectively.
0
3. Revising newly designated paragraphs (c)(1) and (2).
The revisions read as follows:
Sec. 1.1502-26 Consolidated dividends received deduction.
(a) In general. The consolidated dividends received deduction for
the taxable year is the lesser of--
(1) The aggregate of the deduction of the members of the group
allowable under sections 243(a)(1), 245(a) and (b), and 250 (computed
without regard to the limitations provided in section 246(b)), or
(2) The aggregate amount described in section 246(b), determined by
substituting, wherever it appears--
(i) The term consolidated taxable income for taxable income,
(ii) The term consolidated net operating loss for net operating
loss, and
(iii) The term consolidated net capital loss for capital loss.
* * * * *
(c) * * *
(1) Example 1. Corporations P, S, and S-1 filed a consolidated
return for the calendar year 2023 showing consolidated taxable income
of $100,000 (determined without regard to the consolidated net
operating loss deduction, and the consolidated dividends received
deduction). These corporations received dividends during such year from
less than 20-percent owned domestic corporations as follows:
Table 1 to Paragraph (c)(1)
------------------------------------------------------------------------
Corporation Dividends
------------------------------------------------------------------------
P....................................................... $6,000
S....................................................... 10,000
S-1..................................................... 34,000
---------------
Total................................................. 50,000
------------------------------------------------------------------------
The dividends received deduction allowable to each member under section
243(a)(1) (computed without regard to the limitation in section
246(b)) is as follows: P has $3,000 (50 percent of $6,000), S has
$5,000 (50 percent of $10,000), and S-1 has $17,000 (50 percent of
$34,000), or a total of $25,000. Since $25,000 is less than $50,000
(50 percent of $100,000), the consolidated dividends received
deduction is $25,000.
(2) Example 2. Assume the same facts as in paragraph (c)(1) of this
section (Example 1), except that consolidated taxable income (computed
without regard to the consolidated net operating loss deduction and the
consolidated dividends received deduction) was $40,000. The aggregate
of the dividends received deductions, $42,500, computed without regard
to section 246(b), results in a consolidated net operating loss of
$2,500. See section 172(d)(5). Therefore, paragraph (a)(2) of this
section does not apply and the consolidated dividends received
deduction is $42,500.
Sec. 1.1502-27 [Removed]
0
Par. 22. Section 1.1502-27 is removed.
0
Par. 23. Section 1.1502-32 is amended by:
0
1. Revising paragraphs (b)(4)(v) and (vii).
0
2. In paragraph (b)(5)(ii), designating Examples 1 through 10 as
paragraphs (b)(5)(ii)(A) through (J), respectively.
0
3. In newly redesignated paragraphs (b)(5)(ii)(A) through (J), further
redesignating paragraphs in the first column as paragraphs in the
second column:
[[Page 52076]]
------------------------------------------------------------------------
Old paragraphs New paragraphs
------------------------------------------------------------------------
(b)(5)(ii)(A)(a), (b), and (c)......... (b)(5)(ii)(A)(1), (2), and (3).
(b)(5)(ii)(B)(a), (b), (c), and (d).... (b)(5)(ii)(B)(1), (2), (3), and
(4).
(b)(5)(ii)(C)(a) and (b)............... (b)(5)(ii)(C)(1) and (2).
(b)(5)(ii)(D)(a), (b), (c), and (d).... (b)(5)(ii)(D)(1), (2), (3), and
(4).
(b)(5)(ii)(E)(a), (b), and (c)......... (b)(5)(ii)(E)(1), (2), and (3).
(b)(5)(ii)(F)(i) and (ii).............. (b)(5)(ii)(F)(1) and (2).
(b)(5)(ii)(H)(a), (b), and (c)......... (b)(5)(ii)(H)(1), (2), and (3).
(b)(5)(ii)(I)(a), (b), and (c)......... (b)(5)(ii)(I)(1), (2), and (3).
(b)(5)(ii)(J)(a), (b), and (c)......... (b)(5)(ii)(J)(1), (2), and (3).
------------------------------------------------------------------------
0
4. Removing the text ``is treated as a dividend under section
356(a)(2)'' from the last sentence of newly designated paragraph
(b)(5)(ii)(F)(1) and adding the text ``is treated as received by M in a
separate transaction occurring immediately after the merger of T into
S'' in its place.
0
5. In paragraph (b)(5), for each newly redesignated paragraph listed in
the ``Paragraph'' column, removing the text indicated in the ``Remove''
column and adding in its place the text indicated in the ``Add''
column:
----------------------------------------------------------------------------------------------------------------
Paragraph Remove Add
----------------------------------------------------------------------------------------------------------------
(b)(5)(ii)(A)(2)........................ paragraph (a) of this Example 1. paragraph (b)(5)(ii)(A)(1) of this
section (Example 1).
(b)(5)(ii)(A)(3)........................ paragraph (b) of this Example 1. paragraph (b)(5)(ii)(A)(2) of this
section (Example 1).
(b)(5)(ii)(B)(2)........................ paragraph (a) of this Example 2. paragraph (b)(5)(ii)(B)(1) of this
section (Example 2).
(b)(5)(ii)(B)(3)........................ paragraph (a) of this Example 2. paragraph (b)(5)(ii)(B)(1) of this
section (Example 2).
(b)(5)(ii)(B)(4)........................ paragraph (a) of this Example 2. paragraph (b)(5)(ii)(B)(1) of this
section (Example 2).
(b)(5)(ii)(D)(3)........................ paragraph (a) of this Example 4. paragraph (b)(5)(ii)(D)(1) of this
section (Example 4).
(b)(5)(ii)(E)(2)........................ paragraph (a) of this Example 5. paragraph (b)(5)(ii)(E)(1) of this
section (Example 5).
(b)(5)(ii)(E)(3)........................ paragraph (a) of this Example 5. paragraph (b)(5)(ii)(E)(1) of this
section (Example 5).
(b)(5)(ii)(H)(2)........................ paragraph (a) of this Example 8. paragraph (b)(5)(ii)(H)(1) of this
section (Example 8
(b)(5)(ii)(I)(3)........................ paragraph (a) of this Example 9. paragraph (b)(5)(ii)(I)(1) of this
section (Example 9).
----------------------------------------------------------------------------------------------------------------
0
6. Removing the last sentence of paragraph (h)(2)(i).
0
7. Removing paragraph (h)(5)(i).
0
8. Redesignating paragraph (h)(5)(ii) as paragraph (h)(5).
0
9. Removing the last sentence of paragraphs (h)(6), (h)(7), and (h)(8).
0
10. Removing the text ``(b)(5)(ii) Example 6 of this section'' from
paragraph (h)(8) and adding the text ``(b)(5)(ii)(F) of this section
(Example 6)'' in its place.
0
11. Redesignating paragraph (j) as paragraph (h)(10).
0
12. Revising the heading of newly designated paragraph (h)(10).
0
13. Removing the last sentence of newly designated paragraph (h)(10).
0
14. Removing paragraph (k).
The revisions read as follows:
Sec. 1.1502-32 Investment adjustments.
* * * * *
(b) * * *
(4) * * *
(v) Special rule for loss carryovers of a subsidiary acquired in a
transaction for which an election under Sec. 1.1502-20(i)(2) is made.
See paragraph (b)(4)(v) of this section as contained in 26 CFR part 1
revised as of April 1, 2005.
* * * * *
(vii) Special rules for amending waiver of loss carryovers from
separate return limitation year relating to the acquisition of a
subsidiary in a transaction subject to Sec. 1.1502-20. See paragraph
(b)(4)(vii) of this section as contained in 26 CFR part 1 revised as of
April 1, 2005.
* * * * *
(h) * * *
(10) Election to treat loss carryover as expiring. * * *
* * * * *
0
Par. 24. Section 1.1502-34 is revised to read as follows:
Sec. 1.1502-34 Special aggregate stock ownership rules.
(a) Determination of stock ownership--(1) Aggregation rule. For
purposes of the consolidated return regulations, in determining the
stock ownership of a member of a group in another corporation (issuing
corporation) for purposes of determining the application of section
165(g)(3)(A), section 332(b)(1), section 351(a), section 732(f), or
section 904(f) in a consolidated return year, stock in the issuing
corporation owned by all other members of the group is included. For
the determination of whether a member of the group is an 80-percent
distributee, see section 337(c) (providing that, for purposes of
section 337, the determination of whether any corporation is an 80-
percent distributee is made without regard to any consolidated return
regulation).
(2) Example regarding liquidation of member. The following example
illustrates the stock ownership aggregation rule set forth in paragraph
(a)(1) of this section.
(i) Facts. P wholly owns A, B, and C, each of which is a member of
the P group. A, B, and C each owns 33\1/3\ percent of the stock of D. D
liquidates in a transaction purported to qualify under section 332.
(ii) Analysis. For purposes of determining satisfaction of the 80-
percent stock ownership requirement under section 332(b)(1), under the
stock ownership aggregation rule set forth in paragraph (a)(1) of this
section: A is treated as owning all of the D stock owned by B and C; B
is treated as owning all of the D stock owned by A and C; and C is
treated as owning all of the D stock owned by A and B. Therefore, each
of A, B, and C is treated as owning 100 percent of the stock of D and
thus meeting the 80-percent stock ownership requirement for purposes of
section 332. However, none of A, B, or C is treated as an 80-percent
distributee for purposes of section 337. See section 337(c). Therefore,
section 337(a) does not apply.
(b) [Reserved]
Sec. 1.1502-42 [Removed]
0
Par. 25. Section 1.1502-42 is removed.
0
Par. 26. Section 1.1502-43 is amended by:
0
1. Revising paragraphs (b)(2)(iii) through (vi), the last sentence of
[[Page 52077]]
paragraph (b)(2)(vii), and paragraph (b)(2)(viii).
0
2. Removing the last two sentences of paragraph (e).
The revisions read as follows:
Sec. 1.1502-43 Consolidated accumulated earnings tax.
* * * * *
(b) * * *
(2) * * *
(iii) Under section 535(b)(3), the deduction determined under Sec.
1.1502-26 is not allowed.
(iv) Under section 535(b)(4), the consolidated net operating loss
deduction described in Sec. 1.1502-21(a) is not allowed.
(v) Under section 535(b)(5), there is allowed as a deduction the
consolidated net capital loss, determined under Sec. 1.1502-22(a).
(vi) Under section 535(b)(6), there is allowed as a deduction an
amount equal to--
(A) The consolidated capital gain net income for the taxable year
(determined under Sec. 1.1502-22(a) and without the consolidated net
capital loss carryovers and carrybacks to the taxable year), minus
(B) The taxes attributable to such gain.
(vii) * * * See Sec. 1.1502-22(b).
(viii) Section 1.1502-15 does not apply.
* * * * *
0
Par. 27. Section 1.1502-44 is amended by:
0
1. Removing the text ``.'' from the end of paragraph (b)(1) and adding
the text ``;'' in its place.
0
2. Revising paragraphs (b)(2) and (3).
The revisions read as follows:
Sec. 1.1502-44 Percentage depletion for independent producers and
royalty owners.
* * * * *
(b) * * *
(2) Any consolidated net operating loss carryback to the
consolidated return year under Sec. 1.1502-21; and
(3) Any consolidated net capital loss carryback to the consolidated
return year under Sec. 1.1502-22.
* * * * *
0
Par. 28. Section 1.1502-45 is added to read as follows:
Sec. 1.1502-45 Limitation on losses to amount at risk.
(a) In general--(1) Scope. This section applies to a loss of any
subsidiary if the common parent's stock meets the stock ownership
requirement described in section 465(a)(1)(B.
(2) Limitation on use of losses. Except as provided in paragraph
(a)(4) of this section, a loss from an activity of a subsidiary during
a consolidated return year is includible in the computation of
consolidated taxable income (or consolidated net operating loss) and
consolidated capital gain net income (or consolidated net capital loss)
only to the extent the loss does not exceed the amount that the parent
is at risk in the activity at the close of that subsidiary's taxable
year. In addition, the sum of a subsidiary's losses from all its
activities is includible only to the extent that the parent is at risk
in the subsidiary at the close of that year. Any excess may not be
taken into account for the consolidated return year but will be treated
as a deduction allocable to that activity of the subsidiary in the
first succeeding taxable year.
(3) Amount parent is at risk in subsidiary's activity. The amount
the parent is at risk in an activity of a subsidiary is the lesser of
the amount the parent is at risk in the subsidiary, or the amount the
subsidiary is at risk in the activity. These amounts are determined
under paragraph (b) of this section and the principles of section 465.
See section 465 and the regulations thereunder and the examples in
paragraph (e) of this section.
(4) Excluded activities. The limitation on the use of losses in
paragraph (a)(2) of this section does not apply to a loss attributable
to an activity described in section 465(c)(4).
(5) Substance over form. Any transaction or arrangement between
members (or between a member and a person that is not a member) which
does not cause the parent to be economically at risk in an activity of
a subsidiary will be treated in accordance with the substance of the
transaction or arrangement notwithstanding any other provision of this
section.
(b) Rules for determining amount at risk--(1) Excluded amounts. The
amount a parent is at risk in an activity of a subsidiary at the close
of the subsidiary's taxable year does not include any amount that would
not be taken into account under section 465 were the subsidiary not a
separate corporation. Thus, for example, if the amount a parent is at
risk in the activity of a subsidiary is attributable to nonrecourse
financing, the amount at risk is not more than the fair market value of
the property (other than the subsidiary's stock or debt or assets)
pledged as security.
(2) Guarantees. If a parent guarantees a loan by a person other
than a member to a subsidiary, the loan increases the amount the parent
is at risk in the activity of the subsidiary.
(c) Application of section 465. This section applies in a manner
consistent with the provisions of section 465. Thus, for example, the
recapture of losses provided in section 465(e) applies if the amount
the parent is at risk in the activity of a subsidiary is reduced below
zero.
(d) Other consolidated return provisions unaffected. This section
limits only the extent to which losses of a subsidiary may be used in a
consolidated return year. This section does not apply for other
purposes, such as Sec. Sec. 1.1502-32 and 1.1502-19, relating to
investment in stock of a subsidiary and excess loss accounts,
respectively. Thus, a loss which reduces a subsidiary's earnings and
profits in a consolidated return year, but is disallowed as a deduction
for the year by reason of this section, may nonetheless result in a
negative adjustment to the basis of an owning member's stock in the
subsidiary or create (or increase) an excess loss account.
(e) Examples. The provisions of this section may be illustrated by
the examples in this paragraph (e). In each example, the stock
ownership requirement of section 465(a)(1)(B) is met for the stock of
the parent (P), and each affiliated group files a consolidated return
on a calendar year basis and comprises only the members described.
(1) Example 1. In 2022, P forms S with a contribution of $200 in
exchange for all of S's stock. During the year, S borrows $400 from a
commercial lender and P guarantees $100 of the loan. S uses $500 of its
funds to acquire a motion picture film. S incurs a loss of $120 for the
year with respect to the film. At the close of 2022, the amount P is at
risk in S's activity is $300 ($200 contribution plus $100 guarantee).
If S has no gain or loss in 2023, and there are no contributions from
or distributions to P, at the close of 2023 P's amount at risk in S's
activity will be $180.
(2) Example 2. P forms S-1 with a capital contribution of $1 on
January 1, 2023. On February 1, 2023. S-1 borrows $100 with full
recourse and contributes all $101 to its newly formed subsidiary S-2.
S-2 uses the proceeds to explore for natural oil and gas resources. S-2
incurs neither gain nor loss from its explorations during the taxable
year. As of December 31, 2023, P is at risk in the exploration activity
of S-2 only to the extent of $1.
(f) Applicability date. This section applies to consolidated return
years ending on or after [the date of publication of the Treasury
decision adopting these rules as final regulations in the Federal
Register].
0
Par. 29. Section 1.1502-47 is amended by:
[[Page 52078]]
0
1. Italicizing the text ``Nonlife insurance company'' in the heading of
paragraph (b)(2).
0
2. Italicizing the text ``separate return limitation year'' wherever it
appears in paragraph (b)(11).
0
3. Adding the text ``,'' after the text ``base period'' in paragraph
(b)(12)(i).
0
4. Removing the extra space between the text ``paragraphs (b)(12)'' and
the text ``(iii) through (vi)'' in paragraph (b)(12)(i)(A).
0
5. Removing the extra space between the text ``paragraphs (b)(12)'' and
the text ``(v) and (vi)'' in the first sentence of paragraphs
(b)(12)(iii) and (iv).
0
6. Removing the text ``subdivision (iv)'' from the last sentence of
paragraph (b)(12)(iv) and adding the text ``paragraph (b)(12)(iv)'' in
its place.
0
7. Removing the extra space between the text ``1.1502-75'' and the text
``(d)(2) or (d)(3)'' in paragraph (b)(12)(vi).
0
8. Removing the extra space between the text ``paragraph (b)(12)'' and
the text ``(ii) through (iv)'' in paragraph (b)(12)(vi).
0
9. Adding a period after the heading in paragraph (b)(14).
0
10. Removing the text ``subparagraph (b)(12)(v)(B) and (E)'' from
paragraph (b)(14)(iii) and adding the text ``paragraphs (b)(12)(v)(B)
and (D)'' in its place.
0
11. Removing the extra space between the text ``351'' and the text
``(a)'' in paragraph (b)(14)(iii).
0
12. Removing the text ``the result'' from paragraph (b)(14)(vi) and
adding the text ``The result'' in its place.
0
13. Revising paragraph (c)(2)(ii).
0
14. Removing the text ``subdivision (ix) of this paragraph (h)(3)''
from paragraph (h)(3)(i) and adding the text ``paragraph (h)(3)(ix) of
this section'' in its place.
0
15. Removing the text ``paragraph (g)(4)'' from paragraph (h)(3)(ii)
and adding the text ``paragraph (g)(3)'' in its place.
0
16. Designating the first and second sentences of the undesignated
paragraph after paragraph (h)(3)(x) as paragraphs (h)(3)(x)(A) and (B),
respectively.
0
17. Removing the text ``(as defined in paragraph (j) of this section)''
from newly designated paragraph (h)(3)(x)(B).
0
18. Removing the text ``paragraph (f)'' from paragraph (h)(4) and
adding the text ``paragraph (h)'' in its place.
0
19. Removing the text ``paragraph (f)(4)(i)'' from the first sentence
of paragraph (h)(4)(ii)(A) and adding the text ``paragraph (h)(4)(i)''
in its place.
0
20. Removing the text ``paragraph (f)(3)(vi)'' from the third sentence
of paragraph (h)(4)(ii)(A) and adding the text ``paragraph (h)(3)(vi)''
in its place.
0
21. Removing the text ``paragraph (f)(3)(x)'' from the fifth sentence
of paragraph (h)(4)(ii)(A) and adding the text ``paragraph (h)(3)(x)''
in its place.
0
22. Removing the text ``paragraph (f)(2)(ii)'' from the seventh
sentence of paragraph (h)(4)(ii)(A) and adding the text ``paragraph
(h)(2)(ii)'' in its place.
0
23. Removing the text ``paragraph (f)(4)(ii)'' from the first sentence
of paragraph (h)(4)(iii) and adding the text ``paragraph (h)(4)(ii)''
in its place.
0
24. Removing the text ``paragraph (f)(3)(vi)'' from the fourth sentence
of paragraph (h)(4)(iii) and adding the text ``paragraph (h)(3)(vi)''
in its place.
0
25. Removing the text ``paragraph (f)(3)(ii)'' from the fifth sentence
of paragraph (h)(4)(iii) and adding the text ``paragraph (h)(3)(ii)''
in its place.
0
26. Italicizing the text ``In'' in the heading of paragraph (j)(1).
0
27. In paragraph (m)(1)(i), removing the text ``or'', and adding the
text ``or any successor form'' at the end of the paragraph.
0
28. Adding the text ``or any successor form,'' before the text
``whether filed'' in paragraphs (m)(1)(iv) and (m)(1)(v).
The revision reads as follows:
Sec. 1.1502-47 Consolidated returns by life-nonlife groups.
* * * * *
(c) * * *
(2) * * *
(ii) Special rule. Notwithstanding the general rule, however, if
the nonlife members in the group filed a consolidated return for the
immediately preceding taxable year and had executed and filed a Form
1122 (or successor form) that is effective for the preceding year, then
such members will be treated as if they filed a Form 1122 (or successor
form) when they join in the filing of a consolidated return under
section 1504(c)(2) and they will be deemed to consent to the
regulations under this section. However, an affiliation schedule (Form
851, or any successor form) must be filed by the group and the life
members must execute a Form 1122 (or successor form) in the manner
prescribed in Sec. 1.1502-75(h)(2).
* * * * *
0
Par. 30. Section 1.1502-75 is amended by:
0
1. Adding the text ``(or successor form)'' after the text ``Form 1122''
wherever it appears in paragraph (b)(1).
0
2. Adding the text ``(or successor form'') after the text ``Form 851''
in paragraph (b)(2)(iii).
0
3. Adding the text ``(or successor form)'' after the text ``Form 1122''
wherever it appears in paragraph (b)(3)
0
4. Revising the second sentence of paragraph (c)(1)(i).
0
5. Removing the text ``his'' from paragraphs (c)(2)(i) and (ii) and
adding the text ``the Commissioner's'' in its place.
0
6. Removing paragraph (d)(5).
0
7. Revising paragraph (h)(1).
0
8. Adding the text ``, or any successor form,'' before the text ``must
be executed'' in the first sentence of paragraph (h)(2), removing the
second sentence and revising the third sentence.
0
9. Adding the text ``(or successor forms)'' after the text ``Forms
1122'' in the fourth sentence of paragraph (h)(2).
0
10. Adding the text ``(or any successor form)'' after the text ``Form
1122'' in the last sentence of paragraph (h)(2).
The revisions read as follows:
Sec. 1.1502-75 Filing of consolidated returns.
* * * * *
(c) * * *
(1) * * *
(i) * * * Any such application must be made through a letter ruling
request filed not later than the 90th day before the due date of the
consolidated return for the taxable year (including extensions). * * *
* * * * *
(h) Method of filing returns and forms--(1) Consolidated return
made by common parent or agent. The consolidated return must be made on
Form 1120, U.S. Corporation Income Tax Return (or any successor form),
for the group by the common parent or the agent for the group as
provided in Sec. 1.1502-77(c). The consolidated return, with Form 851,
Affiliations Schedule (or any successor form), attached, must be filed
with the service center with which the common parent would have filed a
separate return.
(2) * * * The group must attach either executed Forms 1122 (or
successor forms) or unsigned copies of the completed Forms 1122 (or
successor forms) to the consolidated return. * * *
* * * * *
0
Par. 31. Section 1.1502-76 is amended by:
0
1. Revising the last sentence of paragraph (a).
0
2. Removing the last sentence from paragraphs (b)(1)(ii)(A)(2) and
(b)(2)(v).
0
3. Revising paragraph (b)(6).
0
4. Designating Example 1 and 2 in paragraph (c)(3) as paragraphs
(c)(3)(i) and (ii), respectively.
0
5. In newly designated paragraph (c)(3)(i), removing the text ``June
15'' wherever it appears and adding the text ``July 15'' in its place,
and removing the text ``March 15'' wherever it appears and adding the
text ``April 15'' in its place.
0
6. In newly redesignated paragraph (c)(3)(i), removing the text
``1966''
[[Page 52079]]
wherever it appears and adding the text ``2022'' in its place.
0
7. In newly redesignated paragraphs (c)(3)(i), removing the text
``1967'' wherever it appears and adding the text ``2023'' in its place.
0
8. In newly redesignated paragraphs (c)(3)(i), removing the text
``1968'' wherever it appears and adding the text ``2024'' in its place.
0
9. In newly redesignated paragraph (c)(3)(ii), removing the text ``June
15'' wherever it appears and adding the text ``July 15'' in its place,
and removing the text ``March 15'' wherever it appears and adding the
text ``April 15'' in its place.
0
10. In newly redesignated paragraph (c)(3)(ii), removing the text
``1967'' wherever it appears and adding the text ``2023'' in its place.
0
11. In newly redesignated paragraph (c)(3)(ii), removing the text
``1968'' wherever it appears and adding the text ``2024'' in its place.
0
12. Revising paragraph (d).
The revisions read as follows:
Sec. 1.1502-76 Taxable year of members of group.
(a) * * * Any request for such consent must be requested at the
time and in the manner that the Commissioner of Internal Revenue may
prescribe by Internal Revenue Service forms and instructions or by
publication in the Internal Revenue Bulletin (see Sec.
601.601(d)(2)(ii) of this chapter).
(b) * * *
(6) Applicability date. Except as provided in paragraphs
(b)(1)(ii)(A)(2) and (b)(2)(v) of this section, this paragraph (b)
applies to corporations becoming or ceasing to be members of
consolidated groups on or after January 1, 1995.
* * * * *
(d) Applicability date--(1) Taxable years of members of group
applicability date. Paragraph (a) of this section applies to any
original consolidated Federal income tax return due (without
extensions) after July 20, 2007.
(2) Election to ratably allocate items applicability date.
Paragraph (b)(2)(ii)(D) of this section applies to any original
consolidated Federal income tax return due (without extensions) after
July 20, 2007.
Sec. 1.1502-77 [Amended]
0
Par. 32. Section 1.1502-77 is amended by:
0
1. Designating Examples 1 through 15 in paragraph (g) as paragraphs
(g)(1) through (15), respectively.
0
2. In paragraph (g), for each newly redesignated paragraph listed in
the ``Paragraph'' column, removing the text indicated in the ``Remove''
column and adding in its place the text indicated in the ``Add''
column:
------------------------------------------------------------------------
Paragraph Remove Add
------------------------------------------------------------------------
(g)(2)(i)................... Example 1........... paragraph (g)(1)(i)
of this section
(Example 1).
(g)(4)(i)................... Example 3........... paragraph (g)(3)(i)
of this section
(Example 3).
(g)(5)(i)................... Example 4........... paragraph (g)(4) of
this section
(Example 4).
(g)(11)(i)(B)(1)............ his................. the Commissioner's.
(g)(11)(ii)(A).............. paragraph (i)(A) of paragraph
this Example 11. (g)(11)(i)(A) of
this section.
(g)(12)(i).................. paragraph (ii)(A) of paragraph
Example 11. (g)(11)(ii)(A) of
this section
(Example 11).
(g)(13)(i).................. March 15............ April 15.
------------------------------------------------------------------------
Sec. 1.1502-77A [Amended]
0
Par. 33. Section 1.1502-77A is amended by removing the text ``he may,
if he deems it advisable,'' from the last sentence of paragraph (d) and
adding the text ``the Commissioner may'' in its place.
Sec. 1.1502-77B [Amended]
0
Par. 34. Section 1.1502-77B is amended by:
0
1. Removing the text ``he may, if he deems it advisable,'' from the
last sentence of paragraph (a)(6)(i) and adding the text ``the
Commissioner may'' in its place.
0
2. Removing the text ``he'' from paragraph (a)(6)(ii) and adding the
text ``the Commissioner'' in its place.
0
Par. 35. Section 1.1502-78 is amended by revising paragraph (f) to read
as follows:
Sec. 1.1502-78 Tentative carryback adjustments.
* * * * *
(f) Applicability date. This section applies to taxable years to
which a loss or credit may be carried back and for which the due date
(without extensions) of the original return is after June 28, 2002,
except that the provisions of paragraph (e)(2) of this section apply
for applications by new members of consolidated groups for tentative
carryback adjustments resulting from net operating losses, net capital
losses, or unused business credits arising in separate return years of
new members that begin on or after January 1, 2001.
0
Par. 36. Section 1.1502-79 is amended by:
0
1. Revising paragraphs (a), (b), and (d).
0
2. Removing the text ``(or Sec. Sec. 1.1502-79A(a)(1) and (2), as
appropriate)'' from paragraph (e)(1).
0
3. Revising paragraph (e)(2).
The revisions read as follows:
Sec. 1.1502-79 Separate return years.
(a) Carryover and carryback of consolidated net operating losses to
separate return years. For rules regarding the carryover and carryback
of consolidated net operating losses to separate return years, see
Sec. 1.1502-21(b).
(b) Carryover and carryback of consolidated net capital loss to
separate return years. For rules regarding the carryover and carryback
of consolidated net capital losses to separate return years, see Sec.
1.1502-22(b).
* * * * *
(d) Carryover and carryback of consolidated unused foreign tax--(1)
In general. If a consolidated unused foreign tax can be carried under
the principles of section 904(c) and Sec. 1.1502-4(d) to a separate
return year of a corporation (or could have been so carried if such
corporation were in existence) that was a member of the group in the
year in which the unused foreign tax arose, then the portion of the
consolidated unused foreign tax attributable to the corporation (as
determined under paragraph (d)(2) of this section) is apportioned to
the corporation (and any successor to that corporation in a transaction
to which section 381(a) applies) under the principles of Sec. 1.1502-
21(b) and is deemed paid or accrued in such separate return year to the
extent provided in section 904(c).
(2) Portion of consolidated unused foreign tax attributable to a
member. The portion of a consolidated unused foreign tax for any year
attributable to a member is an amount equal to the consolidated unused
foreign tax multiplied by a fraction. The numerator of the fraction is
the foreign taxes paid or accrued by the member for the year (including
those taxes deemed paid or accrued, other than by reason of section
904(c)). The denominator of the fraction
[[Page 52080]]
is the aggregate of all such taxes paid or accrued for the year
(including those taxes deemed paid or accrued, other than by reason of
section 904(c)) by all members of the group.
(e) * * *
(2) Portion of consolidated excess charitable contributions
attributable to a member. The portion of the consolidated excess
charitable contributions for any year attributable to a member is an
amount equal to the consolidated excess contributions multiplied by a
fraction. The numerator of the fraction is the charitable contributions
paid by the member for the year. The denominator of the fraction is the
aggregate of all charitable contributions paid for the year by all
members of the group.
* * * * *
Sec. 1.1502-80 [Amended]
0
Par. 37. Section 1.1502-80 is amended by removing the text ``on or
after September 17, 2008'' from paragraph (c)(2).
Sec. 1.1502-81T [Removed]
0
Par. 38. Section 1.1502-81T is removed.
0
Par. 39. Section 1.1502-90 is amended by revising the entry in the
table of contents for Sec. 1.1502-99, in numerical order, to read as
follows:
Sec. 1.1502-90 Table of contents.
* * * * *
Sec. 1.1502-99 Effective/applicability dates.
(a) In general.
(b) Reattribution of losses under Sec. 1.1502-36(d)(6).
(c) Application to section 163(j).
(1) Sections 1.382-2 and 1.382-5.
(2) Sections 1.382-6 and 1.383-1.
Sec. 1.1502-91 [Amended]
0
Par. 40. Section 1.1502-91 is amended by removing paragraph (b)(3).
Sec. 1.1502-92 [Amended]
0
Par. 41. Section 1.1502-92 is amended by:
0
1. Designating Examples 1 through 3 in paragraph (b)(3)(iii) as
paragraphs (b)(3)(iii)(A) through (C), respectively.
0
2. In newly redesignated paragraphs (b)(3)(iii)(A) through (C), further
redesignating paragraphs in the first column as paragraphs in the
second column:
------------------------------------------------------------------------
Old paragraphs New paragraphs
------------------------------------------------------------------------
(b)(3)(iii)(A)(i) and (ii)............. (b)(3)(iii)(A)(1) and (2).
(b)(3)(iii)(B)(i), (ii), (iii), and (b)(3)(iii)(B)(1), (2), (3),
(iv). and (4).
(b)(3)(iii)(C)(i) and (ii)............. (b)(3)(iii)(C)(1) and (2).
------------------------------------------------------------------------
0
3. Removing the text ``his'' from newly redesignated paragraph
(b)(3)(iii)(B)(2) and adding the text ``its'' in its place.
0
Par. 42. Section 1.1502-99 is amended by:
0
1. Revising paragraphs (a) and (b).
0
2. Removing paragraph (c).
0
3. Redesignating paragraph (d) as paragraph (c).
The revisions read as follows:
Sec. 1.1502-99 Effective/applicability dates.
(a) In general. Sections 1.1502-91 through 1.1502-96 and Sec.
1.1502-98 apply to any testing date that is on or after June 25, 1999.
Sections 1.1502-94 through 1.1502-96 also apply to a corporation that
becomes a member of a group or ceases to be a member of a group (or
loss subgroup) on or after June 25, 1999.
(b) Reattribution of losses under Sec. 1.1502-36(d)(6). Section
1.1502-96(d) applies to reattributions of net operating loss
carryovers, capital loss carryovers, and deferred deductions in
connection with a transfer of stock to which Sec. 1.1502-36 applies,
and the election under Sec. 1.1502-96(d)(5) (relating to an election
to reattribute section 382 limitation) can be made with an election
under Sec. 1.1502-36(d)(6) to reattribute a loss to the common parent
that is filed at the time and in the manner provided in Sec. 1.1502-
36(e)(5)(x).
* * * * *
0
Par. 43. Section 1.1502-100 is amended by:
0
1. Removing the text ``Sec. 1.1502-1 through Sec. 1.1502-80'' from
paragraph (a)(2) wherever it appears and adding the text ``the
consolidated return regulations'' in its place.
0
2. Removing the text ``1.1502-21A or'' and the text ``(as
appropriate)'' from paragraph (c)(2).
0
3. Revising paragraph (d).
The revision reads as follows:
Sec. 1.1502-100 Corporations exempt from tax.
* * * * *
(d) Separate unrelated business taxable income--(1) In general. The
separate unrelated business taxable income of a member of an exempt
group must be computed in accordance with the provisions of section 512
covering the determination of unrelated business taxable income of
separate corporations, except that:
(i) The provisions of paragraphs (a) through (d), (f) through (k),
and (o) of Sec. 1.1502-12 apply; and
(ii) No charitable contributions deduction is taken into account
under section 512(b)(10).
(2) Section 501(c)(2) organizations. See sections 511(c) and
512(a)(3)(C) for special rules applicable to organizations described in
section 501(c)(2).
Sec. Sec. 1.1502-9A, 1.1502-15A, 1.1502-21A, 1.1502-22A, 1.1502-23A,
1.1502-41A, 1.1502-79A, 1.1502-90A, 1.1502-91A, 1.1502-92A, 1.1502-93A,
1.1502-94A, 1.1502-95A, 1.1502-96A, 1.1502-97A, 1.1502-98A, 1.1502-99A,
and 1.1503-2 [Removed]
0
Par. 44. Sections 1.1502-9A, 1.1502-15A, 1.1502-21A, 1.1502-22A,
1.1502-23A, 1.1502-41A, 1.1502-79A, 1.1502-90A, 1.1502-91A, 1.1502-92A,
1.1502-93A, 1.1502-94A, 1.1502-95A, 1.1502-96A, 1.1502-97A, 1.1502-98A,
1.1502-99A, and 1.1503-2 are removed.
Sec. 1.1503-2 [Removed]
0
Par. 45. Section 1.1503-2 is removed.
Sec. 1.1503(d)-1 [Amended]
0
Par. 46. Section 1.1503(d)-1 is amended by removing the text
``possession of the United States'' from paragraph (b)(7) and adding
the text ``U.S. territory (as defined in Sec. 1.1502-1(l))'' in its
place.
0
Par. 47. Section 1.1503(d)-8 is amended by:
0
1. Revising the last sentence of paragraph (a).
0
2. Removing and reserving paragraphs (b)(1), (b)(2), (b)(3)(ii),
(b)(3)(iii), and (b)(4).
The revision reads as follows:
Sec. 1.1503(d)-8 Effective dates.
(a) * * * Section 1.1503-2, as contained in 26 CFR part 1, revised
as of April 1, 2023, applies for dual consolidated losses incurred in
taxable
[[Page 52081]]
years beginning on or after October 1, 1992, and before the application
date.
* * * * *
0
Par. 48. Section 1.1552-1 is amended by:
0
1. Redesignating paragraphs (a)(1)(ii)(a) through (d) as paragraphs
(a)(1)(ii)(A) through (D), respectively.
0
2. Revising newly redesignated paragraph (a)(1)(ii)(B).
0
3. Redesignating paragraphs (a)(2)(ii)(a) through (i) as paragraphs
(a)(2)(ii)(A) through (I), respectively.
0
4. Removing and reserving newly redesignated paragraph (a)(2)(ii)(B).
0
5. Revising paragraph (a)(2)(ii)(I).
The revisions read as follows:
Sec. 1.1552-1 Earnings and Profits.
(a) * * *
(1) * * *
(ii) * * *
(B) Such member's capital gain net income (determined without
regard to any net capital loss carryover attributable to such member);
* * * * *
(2) * * *
(ii) * * *
(I) For purposes of subtitle A of the Code, if two or more taxable
income brackets are set forth in section 11(b) of the Code, the amount
in each taxable income bracket is divided by the number of members (or
such portion of each bracket which is apportioned to the member
pursuant to a schedule attached to the consolidated return for the
consolidated return year). However, if for the taxable year some or all
of the members are component members of a controlled group of
corporations (within the meaning of section 1563) and if there are
other such component members which do not join in filing the
consolidated return for such year, the amount to be divided among the
members filing the consolidated return is (in lieu of the taxable
income brackets) the sum of the amounts apportioned to the component
members which join in filing the consolidated return.
* * * * *
Sec. 1.1563-1 [Amended]
0
Par. 49. Section 1.1563-1 is amended by:
0
1. Removing the text ``(directly and with the application of Sec.
1.1563-3(b)(1), relating to options)'' from paragraph (a)(2) wherever
it appears and adding the text ``(directly and with the application of
Sec. 1.1563-3(b)(1), (2), and (3))'' in its place.
0
2. Removing the text ``his'' from paragraph (a)(6) wherever it appears
and adding the text ``the shareholder's'' in its place.
0
3. In paragraph (b)(4), designating Examples 1 through 4 as paragraphs
(b)(4)(i) through (iv), respectively.
0
4. Removing the text ``he'' from the third sentence of newly designated
paragraph (b)(4)(i) and adding the text ``B'' in its place.
Sec. 1.1563-2 [Amended]
0
Par. 50. Section 1.1563-2 is amended by:
0
1. Removing the text ``his'' from each of paragraphs (b)(2)(iii) and
(b)(4)(ii), and adding the text ``the employee's'' in its place.
0
2. In paragraph (b)(7), designating Examples 1 through 3 as paragraphs
(b)(7)(i) through (iii), respectively.
0
3. In newly designated paragraph (b)(7)(iii), removing the text ``he''
wherever it appears and adding the text ``Davis'' in its place;
removing the text ``his'' wherever it appears and adding the text
``Davis's'' in its place; and removing the text ``wife'' from the last
sentence and adding the text ``spouse'' in its place.
Sec. 1.1563-3 [Amended]
0
Par. 51. Section 1.1563-3 is amended by:
0
1. Removing the text ``his'' from paragraph (b)(2)(i) and adding the
text ``the partner's'' in its place.
0
2. Removing the text ``The provisions of this subparagraph may be
illustrated by the following example:'' from paragraph (b)(2)(ii).
0
3. Removing the text ``his'' from the fourth sentence of paragraph
(b)(2)(ii) and adding the text ``Green's'' in its place.
0
4. In the sixth sentence of paragraph (b)(2)(ii), removing the text
``he'' and adding the text ``Jones'' in its place, and removing the
text ``his'' and adding the text ``Jones's'' in its place.
0
5. Removing the text ``he'' from the last sentence of paragraph
(b)(2)(ii) and adding the text ``White'' in its place.
0
6. In paragraph (b)(3)(i), removing the text ``his'' from the second
sentence and adding the text ``the beneficiary's'' in its place, and
removing the text ``he'' and ``him'' from the second-to-last sentence
and adding the text ``that beneficiary'' in its place.
0
7. In paragraph (b)(3)(ii), removing the text ``his'' and adding the
text ``the decedent's'' in its place, and removing the text ``he'' and
``him'' wherever it appears and adding the text ``the person'' in its
place.
0
8. Removing the text ``The provisions of this subparagraph may be
illustrated by the following example:'' from paragraph (b)(4)(ii).
0
9. In paragraph (b)(4)(ii), removing the text ``he'' from the fifth
sentence and adding the text ``Smith'' in its place, and removing the
text ``Smith's wife'' and ``his wife'' from the last sentence wherever
it appears and adding the text ``Smith's spouse'' in its place.
0
10. Removing the text ``his'' from paragraphs (b)(5)(i) and (ii) and
(b)(6)(i) and (ii) wherever it appears and adding the text ``the
individual's'' in its place.
0
11. Removing the text ``The provisions of this subparagraph may be
illustrated by the following example:'' from paragraph (b)(6)(iv).
0
12. Redesignating paragraphs (b)(6)(iv)(a) through (d) as paragraphs
(b)(6)(iv)(A) through (D).
0
13. In newly redesignated paragraph (b)(6)(iv)(A), removing the text
``F'' and adding the text ``B'' in its place, and removing the text
``His son'' and ``his son'' and adding the text ``B's child'' in its
place.
0
14. In newly redesignated paragraph (b)(6)(iv)(B), removing the text
``F'' wherever it appears and adding the text ``B'' in its place,
removing the text ``subdivision (ii) of this subparagraph'' and adding
the text ``paragraph (b)(6)(ii) of this section'' in its place,
removing the text ``he'' and adding the text ``B'' in its place, and
removing the text ``his adult son'' and adding the text ``B's adult
child'' in its place.
0
15. In the first sentence of newly redesignated paragraph
(b)(6)(iv)(C), removing the text ``son'' and adding the text ``child''
in its place, and removing the text ``by his father, F'' and adding the
text ``by B'' in its place.
0
16. In the second sentence of newly redesignated paragraph
(b)(6)(iv)(C), removing the text ``his brother'' and adding the text
``M's sibling'' in its place, removing the text ``F'' wherever it
appears and adding the text ``B'' in its place, removing the text
``him'' and adding the text ``B'' in its place, and removing the text
``his'' and adding the text ``B's'' in its place.
0
17. In newly redesignated paragraph (b)(6)(iv)(D), removing the text
``son'' and adding the text ``child'' in its place, removing the text
``he'' wherever it appears and adding the text ``A'' in its place, and
removing the text ``his father'' and adding the text ``B'' in its
place.
0
18. Removing the text ``him'' from paragraph (c)(2) and adding the text
``the individual'' in its place.
0
19. In paragraph (c)(4), designating Examples 1 through 3 as paragraphs
(c)(4)(i) through (iii), respectively.
0
20. In newly designated paragraph (c)(4)(ii), removing the text
``brother'' from the second sentence and adding the text ``sibling'' in
its place, and removing the text ``father'' from the
[[Page 52082]]
third sentence and adding the text ``parent'' in its place.
0
21. Removing the text ``his son,'' from the first sentence of newly
designated paragraph (c)(4)(iii).
0
22. In paragraph (d)(3), designating Examples 1 through 3 as paragraphs
(d)(3)(i) through (iii), respectively.
0
23. In newly designated paragraph (d)(3)(i), removing the text ``he''
from the third sentence and adding the text ``Smith'' in its place, and
removing the text ``his stock in corporation Z'' from the fifth
sentence and adding the text ``the corporation Z stock'' in its place.
0
24. In newly designated paragraph (d)(3)(ii), removing the text ``H''
wherever it appears and adding the text ``A'' in its place, and
removing the text ``W'' wherever it appears and adding the text ``B''
in its place.
0
25. Removing the text ``wife'' from the first sentence of newly
designated paragraph (d)(3)(ii) and adding the text ``spouse'' in its
place.
0
26. Removing the text ``subparagraph (2)(iii) of this paragraph'' from
the fifth sentence of newly designated paragraph (d)(3)(ii) and adding
the text ``paragraph (d)(2)(iii) of this section'' in its place.
PART 5--TEMPORARY INCOME TAX REGULATIONS UNDER THE REVENUE ACT OF
1978
0
Par. 52. The authority citation for part 5 continues to read as
follows:
Authority: 26 U.S.C. 7805.
Sec. 5.1502-45 [Removed]
0
Par. 53. Section 5.1502-45 is removed.
PART 301--PROCEDURE AND ADMINISTRATION
0
Par. 54. The authority citation for part 301 continues to read in part
as follows:
Authority: 26 U.S.C. 7805. * * *
Sec. 301.6402-7 [Amended]
0
Par. 55. Section 301.6402-7 is amended by removing the text
``Sec. Sec. 1.1502-21(b) or 1.1502-21A(b) (as appropriate)'' from
paragraph (g)(2)(iii) and adding the text ``Sec. 1.1502-21(b)'' in its
place.
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
0
Par. 56. The authority citation for part 602 continues to read as
follows:
Authority: 26 U.S.C. 7805.
Sec. 602.101 [Amended]
0
Par. 57. Section 602.101(b) is amended by removing the entries for
Sec. Sec. 1.1502-9A, 1.1502-18, 1.1502-76T, 1.1502-95A, 1.1503-2, and
1.1503-2A from the table.
Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2023-14098 Filed 8-4-23; 8:45 am]
BILLING CODE 4830-01-P
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</html>Indexed from Federal Register on August 7, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.