Bulletin No. 2023–34

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Bulletin No. 2023–34

August 21, 2023

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

ADMINISTRATIVE

Announcement 2023-23, page 569.

The Office of Professional Responsibility (OPR) announces

recent disciplinary sanctions involving attorneys, certified

public accountants, enrolled agents, enrolled actuaries,

enrolled retirement plan agents, and appraisers. These individuals are subject to the regulations governing practice

before the Internal Revenue Service (IRS), which are set out in

Title 31, Code of Federal Regulations, Part 10, and which are

published in pamphlet form as Treasury Department Circular

No. 230. The regulations prescribe the duties and restrictions relating to such practice and prescribe the disciplinary

sanctions for violating the regulations.

ESTATE TAX

Rev. Rul. 2023-15, page 559.

The 2023 interest rates to be used in computing the special use value of farm real property for which an election is

made under section 2032A of the Code are listed for estate

of decedents.

INCOME TAX

Notice 2023-57, page 560.

The notice announces the inflation adjustment factor and

phase-out amount for the enhanced oil recovery credit for taxable years beginning in the 2023 calendar year. The format

of the notice is identical to the format of previously published

Finding Lists begin on page ii.

notices on this issue. The notice concludes that because the

reference price for the 2022 calendar year ($93.97) exceeds

$28 multiplied by the inflation adjustment factor for the

2023 calendar year ($28 multiplied by 1.9998 = $55.99) by

$37.98, the enhanced oil recovery credit for qualified costs

paid or incurred in 2023 is phased-out completely.

Notice 2023-58, page 563.

The notice provides the applicable reference price for qualified natural gas production from qualified marginal wells

during taxable years beginning in calendar year 2023

for the purpose of determining the marginal well production credit under § 45I. The applicable reference price for

taxable years beginning in calendar year 2023 is $5.57

per 1,000 cubic feet. The notice also provides the credit

amount used for the purpose of determining the marginal

well production credit. The credit amount for taxable years

beginning in calendar year 2023 is $0.00 per 1,000 cubic

feet.

Notice 2023-59, page 564.

The notice announces forthcoming proposed regulations

and provides interim guidance regarding Home Energy

Audits for purposes of the § 25C energy efficient home

improvement credit, as well as a transition rule for certain

Home Energy Audits conducted during taxable years ending

in calendar year 2023.

REG-134420-10, page 571.

These proposed regulations revise the consolidated return

regulations to reflect statutory changes, modernize language, and enhance clarity.

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and

enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

on the application of the law to the pivotal facts stated in

the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

by the Department of the Treasury’s Office of the Assistant

Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index

for the matters published during the preceding months. These

monthly indexes are cumulated on a semiannual basis, and are

published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

August 21, 2023

Bulletin No. 2023–34

Part I

Section 2032A.—Valuation

of Certain Farm, Etc., Real

Property

26 CFR 20.2032A-4: Method of valuing farm real

property.

Rev. Rul. 2023-15

This revenue ruling contains a list

of the average annual effective interest

rates on new loans under the Farm Credit

System. This revenue ruling also contains

a list of the states within each Farm Credit

System Bank Territory.

Under § 2032A(e)(7)(A)(ii) of the

Internal Revenue Code, rates on new

Farm Credit System Bank loans are

used in computing the special use

value of real property used as a farm

for which an election is made under

§ 2032A. The rates in Table 1 of this

revenue ruling may be used by estates

that value farmland under § 2032A as

of a date in 2023.

Average annual effective interest

rates, calculated in accordance with

§ 2032A(e)(7)(A) and § 20.2032A-4(e)

of the Estate Tax Regulations, to be used

under § 2032A(e)(7)(A)(ii), are set forth

in the accompanying Table of Interest

Rates (Table 1). The states within each

Farm Credit System Bank Territory are

set forth in the accompanying Table of

Farm Credit System Bank Territories

(Table 2).

Rev. Rul. 81-170, 1981-1 C.B. 454,

contains an illustrative computation of

an average annual effective interest rate.

The rates applicable for valuation in 2022

are in Rev. Rul. 2022-16, 2022-35 I.R.B.

171. For rate information for years prior

to 2022, see Rev. Rul. 2021-15, 2021-35

I.R.B. 331, and other revenue rulings that

are referenced therein.

DRAFTING INFORMATION

The principal author of this revenue

ruling is Lane Damazo of the Office of the

Associate Chief Counsel (Passthroughs

and Special Industries). For further information regarding this revenue ruling, contact Lane Damazo at (202) 317-4628 (not

a toll-free number).

REV. RUL. 2023-15 TABLE 1

TABLE OF INTEREST RATES

(Year of Valuation 2023)

Farm Credit System Bank Servicing State in

Which Property is Located

Rate

AgFirst, FCB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.33

AgriBank, FCB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.83

CoBank, ACB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.83

Texas, FCB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.22

REV. RUL. 2023-15 TABLE 2

TABLE OF FARM CREDIT SYSTEM BANK TERRITORIES

Farm Credit System Bank

Location of Property

AgFirst, FCB ��

Delaware, District of Columbia, Florida, Georgia,

Maryland, North Carolina, Pennsylvania, South Carolina,

Virginia, West Virginia.

Arkansas, Illinois, Indiana, Iowa, Kentucky, Michigan,

Minnesota, Missouri, Nebraska, North Dakota, Ohio,

South Dakota, Tennessee, Wisconsin, Wyoming.

Alaska, Arizona, California, Colorado, Connecticut,

Hawaii, Idaho, Kansas, Maine, Massachusetts, Montana,

New Hampshire, New Jersey, New Mexico, New York,

Nevada, Oklahoma, Oregon, Rhode Island, Utah, Vermont,

Washington.

Alabama, Louisiana, Mississippi, Texas.

AgriBank, FCB ��

CoBank, ACB ��

Texas, FCB ��

Bulletin No. 2023–34

559

August 21, 2023

Part III

2023 Section 43 Inflation

Adjustment

Notice 2023-57

Section 43(a) of the Internal Revenue

Code provides that for purposes of section 38, the enhanced oil recovery credit

for any taxable year is an amount equal

to 15 percent of the taxpayer’s qualified

enhanced oil recovery costs for such taxable year.

Section 43(b)(1) provides that the

amount of the credit determined under

subsection (a) for any taxable year shall

be reduced by an amount which bears the

same ratio to the amount of such credit

August 21, 2023

(determined without regard to this paragraph) as — (A) the amount by which

the reference price for the calendar year

preceding the calendar year in which the

taxable years begins exceeds $28, bears to

(B) $6.

Section 43(b)(3)(B) requires the

Secretary to publish an inflation adjustment factor. The enhanced oil recovery

credit under § 43 for any taxable year is

reduced if the “reference price,” determined under § 45K(d)(2)(C), for the calendar year preceding the calendar year in

which the taxable year begins is greater

than $28 multiplied by the inflation adjustment factor the current calendar year.

The term “inflation adjustment factor”

means, with respect to any calendar year,

560

a fraction the numerator of which is the

GNP implicit price deflator for the preceding calendar year and the denominator of

which is the GNP implicit price deflator

for 1990.

Because the reference price for the

2022 calendar year ($93.97) exceeds $28

multiplied by the inflation adjustment factor for the 2023 calendar year ($28 multiplied by 1.9998 = $55.99) by $37.98, the

enhanced oil recovery credit for qualified

costs paid or incurred in 2023 is phased

out completely.

Table 1 contains the GNP implicit price

deflator used for the 2022 calendar year,

as well as the previously published GNP

implicit price deflators used for the 1991

through 2021 calendar years.

Bulletin No. 2023–34

Calendar Year

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Notice 2023-57 TABLE 1

GNP IMPLICIT PRICE DEFLATORS

GNP Implicit Price Deflator

112.9

(used for 1991)

117.0

(used for 1992)

120.9

(used for 1993)

124.1

(used for 1994)

126.0

(used for 1995)*

107.5

(used for 1996)

109.7

(used for 1997)**

112.35 (used for 1998)

112.64 (used for 1999)***

104.59 (used for 2000)

106.89 (used for 2001)

109.31 (used for 2002)

110.63 (used for 2003)

105.67 (used for 2004)****

108.23 (used for 2005)

112.129 (used for 2006)

116.036 (used for 2007)

119.656 (used for 2008)

122.407 (used for 2009)

109.764 (used for 2010)*****

110.654 (used for 2011)

113.347 (used for 2012)******

115.387 (used for 2013)

106.710 (used for 2014)*******

108.407 (used for 2015)********

109.868 (used for 2016)

111.528 (used for 2017)

113.500 (used for 2018)

110.308 (used for 2019)*********

112.257 (used for 2020)

113.586 (used for 2021)

118.586 (used for 2022)**********

127.194 (used for 2023)

* Beginning in 1995, the GNP implicit price deflator was rebased relative to 1992. The 1990 GNP implicit price deflator used to compute the 1996

§ 43 inflation adjustment factor is 93.6.

** Beginning in 1997, two digits follow the decimal point in the GNP implicit price deflator. The 1990 GNP price deflator used to compute the

1998 § 43 inflation adjustment factor is 93.63.

*** Beginning in 1999, the GNP implicit price deflator was rebased relative to 1996. The 1990 GNP implicit price deflator used to compute the

2000 § 43 inflation adjustment factor is 86.53.

**** Beginning in 2003, the GNP implicit price deflator was rebased, and the 1990 GNP implicit price deflator used to compute the 2004 § 43

inflation adjustment factor is 81.589.

***** Beginning in 2009, the GNP implicit price deflator was rebased, and the 1990 GNP implicit price deflator used to compute the 2010 § 43

inflation adjustment factor is 72.199.

****** Beginning in 2011, the 1990 GNP implicit price deflator used to compute the 2012 § 43 inflation adjustment factor is 72.260.

******* Beginning in 2013, the GNP implicit price deflator was rebased, and the 1990 GNP implicit price deflator used to compute the 2014 § 43

inflation adjustment factor is 66.803.

******** Beginning in 2014, the 1990 GNP implicit price deflator used to compute the 2015 § 43 inflation adjustment factor is 66.732.

********* Beginning in 2018, the 1990 GNP implicit price deflator used to compute the 2019 § 43 inflation adjustment factor is 63.637.

********** Beginning in 2021, the 1990 GNP implicit price deflator used to compute the 2022 § 43 inflation adjustment factor is 63.604.

Bulletin No. 2023–34

561

August 21, 2023

Table 2 contains the inflation adjustment factor and the phase-out amount

for taxable years beginning in the 2023

Calendar Year

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

DRAFTING INFORMATION

The principal author of this notice

is John M. Deininger of the Office of

August 21, 2023

calendar year as well as the previously

published inflation adjustment factors

and phase-out amounts for taxable years

beginning in the 1991 through 2022 calendar years.

Notice 2023-57 TABLE 2

INFLATION ADJUSTMENT FACTORS AND

PHASE-OUT AMOUNTS

Inflation Adjustment Factor

Phase-out Amount

1.0000

1.0363

1.0708

1.0992

1.1160

1.1485

1.1720

1.1999

1.2030

1.2087

1.2353

1.2633

1.2785

1.2952

1.3266

1.3743

100 percent

1.4222

100 percent

1.4666

100 percent

1.5003

100 percent

1.5203

100 percent

1.5326

100 percent

1.5686

100 percent

1.5968

100 percent

1.5974

100 percent

1.6245

100 percent

1.6464

1.6713

1.7008

1.069 percent

1.7334

100 percent

1.7640

100 percent

1.7849

1.8607

100 percent

1.9998

100 percent

Associate Chief Counsel (Passthroughs

and Special Industries). For further information regarding this notice, contact Mr.

562

Deininger at (202) 317-6853 (not a tollfree number).

Bulletin No. 2023–34

Reference Price for Section

45I Credit for Production of

Natural Gas from Marginal

Wells During Taxable Years

Beginning in Calendar Year

2023

Notice 2023-58

SECTION 1. PURPOSE

This notice provides the applicable

reference price for qualified natural gas

production from qualified marginal wells

during taxable years beginning in calendar year 2023 for the purpose of determining the marginal well production

credit (MWC) under § 45I of the Internal

Revenue Code. The applicable reference

price for taxable years beginning in calendar year 2023 is $5.57 per 1,000 cubic

feet (Mcf).

This notice also provides the credit

amount used for the purpose of determining the MWC for taxable years beginning in calendar year 2023. The credit

amount is determined using the 2023

inflation adjustment factor of 1.4993 and

the applicable reference price of $5.57 per

Mcf. The credit amount for taxable years

beginning in calendar year 2023 is $0.00

per Mcf.

SECTION 2. BACKGROUND

Section 45I(a), as it relates to qualified natural gas production, provides that,

for purposes of § 38, the MWC for any

taxable year is an amount equal to the

product of (1) the credit amount and (2)

the qualified natural gas production that is

attributable to the taxpayer.

Section 45I(c)(1) provides that “qualified natural gas production” means

domestic natural gas produced from a

qualified marginal well. Section 45I(c)(3)

(A) provides that a qualified marginal well

is a domestic well (i) the production from

which during the taxable year is treated as

marginal production under § 613A(c)(6),

or (ii) which, during the taxable year (I)

has average production of not more than

25 barrel-of-oil equivalents per day, and

(II) produces water at a rate not less than

95 percent of total well effluent.

Section 613A(c)(6)(D) and (E) provide that “marginal production” means

domestic natural gas produced during

any taxable year from a property which

is a stripper well property for the calendar

year in which the taxable year begins. A

“stripper well property” is, with respect to

any calendar year, any property producing

not more than 15 barrel equivalents per

day, determined by dividing the average

daily production of domestic crude oil

and domestic natural gas from producing

wells on the property for such calendar

year by the number of such wells.

Section 45I(c)(2)(A) provides that

generally only the first 1,095 barrels or

barrel-of-oil equivalents (as defined in

§ 45K(d)(5)) produced during the taxable

year qualify for the MWC. This limitation

is proportionately reduced in the case of a

short taxable year or in the case of a well

that is not capable of production each day

of a taxable year. See § 45I(c)(2)(B). The

number of wells on which a taxpayer may

claim the MWC is not limited.

Section 45I(d)(2) provides that to claim

the credit a taxpayer must hold an operating interest in the qualified marginal well

producing the natural gas to which the

credit relates. Under § 45I(d)(1) if a well

is owned by more than one owner and the

natural gas production exceeds the limitation under § 45I(c)(2), the qualifying

natural gas production attributable to the

taxpayer is determined on the basis of the

ratio which the taxpayer’s revenue interest

in the production bears to the aggregate

of the revenue interests of all operating

interest owners in the production. Finally,

§ 45I(d)(3) provides that the MWC is not

allowable if the taxpayer is also eligible to

claim the § 45K nonconventional sources

credit for the taxable year, unless the taxpayer elects not to claim the credit under

§ 45K for the well.

For purposes of § 45I(a)(1), the credit

amount is 50 cents (adjusted for inflation)

per Mcf of qualified natural gas production (tentative credit amount). See § 45I(b)

(1)(B) and (b)(2)(B).

Section 45I(b)(2)(A) and (B) provide

that the tentative credit amount (adjusted

for inflation) is reduced (but not below

zero) to the extent that the applicable

reference price exceeds $1.67 (adjusted

for inflation). More specifically, § 45I(b)

(2)(A) provides that the tentative credit

amount (adjusted for inflation) is reduced

by an amount which bears the same ratio

to the tentative credit amount (adjusted

for inflation) as the excess (if any) of

the applicable reference price over $1.67

(adjusted for inflation), bears to $0.33

(adjusted for inflation). As a result, the

MWC is not available if the applicable

reference price for qualified natural gas

production is $2.00 (adjusted for inflation)

or more.

Section 45I(b)(2)(A) also provides that

the applicable reference price for a taxable

year is the reference price for the calendar

year preceding the calendar year in which

the taxable year begins. Section 45I(b)(2)

(C)(ii) provides that the term “reference

price” means, with respect to any calendar

year, in the case of qualified natural gas

production, the Secretary’s estimate of the

annual average wellhead price per Mcf for

all domestic natural gas.

Section 45I(b)(2)(B) provides that in

the case of any taxable year beginning in a

calendar year after 2005, each of the dollar

amounts contained in § 45I(b)(2)(A) will

be increased to an amount equal to such

dollar amount multiplied by the inflation

adjustment factor for such calendar year

(determined under § 43(b)(3)(B) by substituting “2004” for “1990”).

SECTION 3. INFLATION

ADJUSTMENT FACTOR AND

REFERENCE PRICE

.1 Inflation Adjustment. The inflation

adjustment factor under § 45I(b)(2)(B) for

calendar year 2023 is 1.4993.

.2 Reference Price. The Secretary’s

estimate of the calendar year 2022 annual

average wellhead price per Mcf for all

domestic natural gas under § 45I(b)(2)

(C)(ii) was calculated by applying the

Producer Price Index commodity index

for “Natural Gas from the Wellhead”

(WPU053101051)1 published by the

https://data.bls.gov/cgi-bin/srgate. The BLS publishes indexes and not actual or average prices.

Bulletin No. 2023–34

563

August 21, 2023

Bureau of Labor Statistics (BLS) as part

of its Producer Price Index program, to

the 2021 annual average wellhead price

($3.43) published in Notice 2023-41,

2023-23 I.R.B. 905. The annual Producer

Price Index commodity index for natural

gas published by the BLS was 106.8 in

2021 and 173.206 in 2022, which implies

a ratio of 2022 to 2021 average wellhead prices of 1.622 (173.206/106.801).

Therefore, the Secretary’s estimate of the

calendar year 2022 annual average wellhead price per Mcf for all domestic natural gas is $5.57 per Mcf (1.622 × $3.43

per Mcf). The one cent difference is due

to rounding.

For years after 2022, the Secretary

intends to continue calculating the

reference price by application of the

Producer Price Index commodity index

for “Natural Gas from the Wellhead”

(WPU053101051) published by the BLS

to the previous year’s reference price.

SECTION 4. CALCULATION OF

CREDIT AMOUNT

Under § 45I(b)(1)(B) and (2)(B), the

tentative credit amount used to calculate

the MWC for taxable years beginning

in calendar year 2023 is $0.75 per Mcf

($0.50 × 1.4993 inflation adjustment

factor). Pursuant to the reduction specified in § 45I(b)(2)(A), the tentative

credit amount for taxable years beginning in calendar year 2023 is reduced to

zero.

Specifically, pursuant § 45I(b)(2)(A),

the tentative credit amount is reduced

(but not below zero) by an amount (the

Reduction Amount) which bears the same

ratio to such amount as (i) the excess (if

any) of the applicable reference price over

$2.50 ($1.67 × 1.4993 inflation adjustment factor), bears to (ii) $0.49 ($0.33 ×

1.4993 inflation adjustment factor). The

Reduction Amount (as adjusted for inflation) is computed as follows:

Reduction Amount

Applicable Reference Price − $2.50

Tentative Credit Amount

$0.49

Reduction Amount $5.57 − $2.50

$0.75

$0.49

The Reduction Amount is $4.70

(($5.57 - $2.50) ÷ $0.49 × $0.75) and

it exceeds the tentative credit amount

($0.75). Therefore, the credit amount used

to calculate the MWC for taxable years

beginning in calendar year 2023 is $0.00

per Mcf.

SECTION 5. EFFECTIVE DATE

This notice is effective for qualified

natural gas production during taxable

years beginning in calendar year 2023.

SECTION 6. DRAFTING AND

CONTACT INFORMATION

The principal author of this notice is

Boris Kukso of the Office of Associate

Chief Counsel (Passthroughs & Special

Industries). For further information

regarding this notice contact Mr. Kukso at

(202) 317-6853 (not a toll-free number).

Guidance on Requirements

for Home Energy Audits

for Purposes of the

Energy Efficient Home

Improvement Credit under

Section 25C

Notice 2023-59

SECTION 1. PURPOSE

This notice announces that the

Department of the Treasury (the Treasury

Department) and the Internal Revenue

Service (IRS) intend to propose regulations (forthcoming proposed regulations)

addressing the requirements for home

energy audits with respect to the energy

efficient home improvement credit under

§ 25C of the Internal Revenue Code

(Code),1 as amended by § 13301 of Public

Law 117-169, 136. Stat. 1818 (August 16,

2022), commonly known as the Inflation

Reduction Act of 2022 (IRA). Sections

2 and 3 of this notice provide relevant

background and definitions, respectively,

with respect to the energy efficient home

improvement credit allowed under § 25C

(§ 25C credit). Section 4 of this notice

specifies the requirements that the forthcoming proposed regulations would set

forth for qualifying as a home energy

auditor for purposes of the § 25C credit.

Sections 5 and 6 of this notice specify the

substantiation requirement and transition

rule, respectively, that the forthcoming

proposed regulations would establish for

taxpayers claiming the § 25C credit with

respect to home energy audits. Section 7

addresses the application of the Paperwork

Reduction Act to this notice. The Treasury

Department and the IRS also intend to

propose that the forthcoming proposed

regulations would apply to taxable years

ending after December 31, 2022. Until the

issuance of the forthcoming proposed regulations, taxpayers may rely on the rules

Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).

August 21, 2023

564

Bulletin No. 2023–34

described in sections 3 through 6 of this

notice.

SECTION 2. BACKGROUND

.01 Energy Efficient Home Improvement

Credit

Section 25C was originally enacted

by § 1333(a) of the Energy Policy Act

of 2005, Pub. L. 109-58, 119 Stat. 594,

1026 (August 8, 2005), to provide a tax

credit for the purchase and installation of

certain energy efficient improvements in

taxpayers’ principal residences. Congress

has amended § 25C several times since its

original enactment, most recently under

§ 13301 of the IRA, which renamed this

provision the “energy efficient home

improvement credit” and provided that

§ 25C, as amended by the IRA, applies to

property placed in service prior to January

1, 2033.

Section 13301(b) and (f) of the IRA

amended § 25C(a) to allow a credit

amount equal to 30 percent of the sum

of the amounts that individual taxpayers

pay or incur during a taxable year for (1)

qualified energy efficiency improvements

installed during the year, (2) residential

energy property expenditures, and (3)

home energy audits.

As amended by § 13301(c) of the

IRA, the § 25C credit is generally limited

to an annual cap of $1,200. Within this

$1,200 limitation, § 25C(b) sets forth further annual caps for certain categories of

improvements. The caps and categories of

improvements under these limitations are

as follows: $600 for any item of qualified

energy property, as defined in § 25C(d)

(2); $600 for exterior windows and skylights; $250 for any single exterior door

and $500 in the aggregate for all exterior

doors; and $150 for home energy audits.

Section 25C(b) also provides that residential energy property expenditures for heat

pumps, heat pump water heaters, biomass

stoves, and biomass boilers are not subject

to the annual cap of $1,200 or to the $600

limitation for any item of qualified energy

property. Instead, residential energy

property expenditures for these items are

subject to a separate aggregate annual limitation of $2,000. Section 25C(d) provides

that the term “residential energy property

expenditures” includes expenditures for

labor costs properly allocable to the onsite

Bulletin No. 2023–34

preparation, assembly, or original installation of the property.

.02 Credit for Home Energy Audit

Expenditures

Section 13301(f) of the IRA amended

§ 25C to expand the types of expenditures

eligible for the § 25C credit to include

expenditures for home energy audits.

Section 25C(e) defines the term “home

energy audit” as an inspection and written report with respect to a dwelling unit

located in the United States and owned

or used by the taxpayer as the taxpayer’s

principal residence (within the meaning

of § 121). The audit must (1) identify the

most significant and cost-effective energy

efficiency improvements with respect

to such dwelling unit, including an estimate of the energy and cost savings with

respect to each such improvement, and

(2) be conducted and prepared by a home

energy auditor that meets the certification or other requirements specified by

the Secretary of the Treasury or her delegate (Secretary) in regulations or other

guidance. The IRA also imposed two limitations on this credit. First, as described

above, § 25C(b)(6)(A) limits the credit

allowed for amounts paid or incurred by

the taxpayer during the taxable year for

home energy audits up to $150. Under

this limit, for example, a taxpayer that

pays $1000 for a home energy audit

during the taxable year may only claim a

$150 credit for such taxable year for this

expenditure, and not the full 30 percent of

the amount of the expenditure, even if the

taxpayer does not have any other expenditures eligible for the § 25C credit during

the taxable year. Second, § 25C(b)(6)(B)

imposes a substantiation requirement,

requiring taxpayers claiming the credit to

include with their tax returns “such information or documentation as the Secretary

may require”.

In Notice 2022-48, 2022-43 I.R.B.

305, the Treasury Department and the IRS

requested comments on various questions

arising from the IRA’s energy efficiency

provisions. Among other questions, the

notice requested comments on what certification or other requirements the Treasury

Department and the IRS should require

for home energy auditors that conduct the

inspection and provide the written report

that constitutes a “home energy audit” that

qualifies for the § 25C credit.

565

The Treasury Department and the IRS

published a Fact Sheet (FS-2022-40) on

December 22, 2022, addressing “frequently asked questions about energy

efficient home improvements and residential clean energy property credits.”

This Fact Sheet provides that a qualifying home energy audit “must include

an inspection of a dwelling, including

condominiums and certain manufactured

homes, located in the United States that

is owned or used by the taxpayer as the

taxpayer’s principal residence. The home

energy auditor must provide a written

report (to the taxpayer) that identifies the

most significant and cost-effective energy

efficiency improvements for that dwelling, including an estimate of the energy

and cost savings for each such improvement. The auditor must meet the certification or other requirements specified by

the Department of the Treasury and the

Internal Revenue Service in forthcoming

guidance.” The Fact Sheet also clarifies

that the § 25C credit with respect to home

energy audits may be claimed by a taxpayer renting a home as their principal

residence provided such home is located

in the United States.

SECTION 3. DEFINITIONS

.01 Home Energy Audit Credit. The

term “Home Energy Audit Credit” means

the § 25C credit allowed to individuals by

reason of § 25C(a)(3) equal to 30 percent

of the amount paid or incurred for Home

Energy Audits in the taxable year, up to

$150 per taxable year.

.02 Home Energy Audit. The term

“Home Energy Audit” means an inspection and written report (audit) with respect

to a dwelling unit located in the United

States and owned or used by the taxpayer

as the taxpayer’s principal residence

(within the meaning of § 121) that meets

each of the following requirements.

(1) The audit identifies the most significant and cost-effective energy efficiency improvements with respect to such

dwelling unit, including an estimate of the

energy and cost savings with respect to

each such improvement,

(2) The inspection is conducted either

by a Qualified Home Energy Auditor or

under the supervision of a Qualified Home

Energy Auditor,

August 21, 2023

(3) The written report is prepared

and signed by a Qualified Home Energy

Auditor, and

(4) The audit is consistent with the

most recent Department of Energy

(DOE)-led and industry-validated Jobs

Task Analysis.2

.03 Qualified Home Energy Auditor.

The term “Qualified Home Energy

Auditor” means an individual who is a

home energy auditor that is certified by

a Qualified Certification Program at the

time of the Home Energy Audit.

.04 Qualified Certification Program.

The term “Qualified Certification

Program” means a certification program

described in section 4.03 of this notice.

SECTION 4. CERTIFICATIONS

AND OTHER REQUIREMENTS

FOR QUALIFIED HOME ENERGY

AUDITORS.

.01 In General. Except as otherwise

provided in section 6 of this notice, the

forthcoming proposed regulations would

provide that a taxpayer may claim the

Home Energy Audit Credit for a taxable

year only if the taxpayer pays or incurs

amounts for a Home Energy Audit.

.02 Written Report. The forthcoming

proposed regulations would require the

Qualified Home Energy Auditor to provide the following information in the written report:

(1) The Qualified Home Energy

Auditor’s name and the relevant employer

identification number (EIN) or other type

of relevant taxpayer identifying number as referenced in § 301.6109-1(a)(1)

(i) of the Procedure and Administration

Regulations (26 CFR part 301) in lieu of

an EIN,3

(2) An attestation that the Qualified

Home Energy Auditor is certified by a

Qualified Certification Program, and

(3) The name of such Qualified

Certification Program.

.03 Qualified Certification Program. A

Qualified Certification Program is a certification program that satisfies the criteria

described in section 4.03(1) and (2) of this

notice for certifying home energy auditors

and that is included in the list described in

section 4.04 of this notice.

(1) The certification program must be

reviewed and evaluated through the most

recent DOE-led and industry-validated

Jobs Task Analysis, demonstrating substantial alignment with key duties, tasks,

knowledge, skills, and abilities of home

energy auditors.

(2) The certification program must satisfy one of following standards development processes:

(a) The credentials are developed and

maintained in accordance with industry standards using criteria such as those

cited in the Department of Labor (DOL)

Training and Employment Notice No.

25-194, Attachment I, section b., or the

most recent guidance from DOL on characteristics of credentials; or

(b) The program is accredited by the

American National Standards Institute

(ANSI),

International Accreditation

Service, or other qualified accreditation

bodies that are in compliance with ISO/

IEC 17024:2012, Conformity assessment

– General requirements for bodies operating certification of persons.

.04 Qualified Certification Programs

List. The list of Qualified Certification

Programs is maintained by the DOE at

the following web address: https://www.

energy.gov/eere/buildings/25c-energyefficient-home-improvement-credit. The

listed Qualified Certification Programs

are the exclusive certification programs

through which an auditor can qualify as a

Qualified Home Energy Auditor, and that

will allow a taxpayer to claim the Home

Energy Audit Credit. DOE intends to

update the list on a rolling basis as it identifies additional Qualified Certification

Programs.

SECTION 5. SUBSTANTIATION

REQUIREMENT

The forthcoming proposed regulations

would provide that taxpayers claiming

the Home Energy Audit Credit would

be in compliance with the substantiation

requirement under § 25C(b)(6)(B) if they

(1) maintain the written report signed by

the Qualified Home Energy Auditor as

a record, pursuant to the general recordkeeping and retention requirements under

§ 6001 and §1.6001-1, and (2) comply

with the instructions for Form 5695,

Residential Energy Credits, or any successor form required by the IRS.

SECTION 6. TRANSITION RULE

With respect to home energy audits

conducted during taxable years ending

after December 31, 2022, and conducted

on or before December 31, 2023, a home

energy auditor is not required to be a

Qualified Home Energy Auditor as defined

in section 3.03 of this notice. Therefore,

taxpayers that paid or incurred expenses

for a home energy audit that meets the

requirements of § 25C, and that was conducted during taxable years ending after

December 31, 2022, and conducted on or

before December 31, 2023, may claim a

Home Energy Audit Credit for such audit

even if the auditor who conducted the

home energy audit was not a Qualified

Home Energy Auditor, as defined in section 3.03 of this notice, at the time of the

home energy audit. However, taxpayers may not claim a Home Energy Audit

Credit for home energy audits conducted

after December 31, 2023, that were not

conducted by a Qualified Home Energy

Auditor.

SECTION 7. PAPERWORK

REDUCTION ACT

The Paperwork Reduction Act of 1995

(44 U.S.C. 3501-3520) (“PRA”) generally

requires that a federal agency obtain the

approval of the Office of Management

and Budget (OMB) before collecting

information from the public, whether such

collection of information is mandatory,

voluntary, or required to obtain or retain

a benefit. An agency may not conduct or

The Single-Family Energy Auditor Job Task Analysis and a Multifamily Energy Auditor Job/Task Analysis and Report were developed by the National Renewable Energy Laboratory. Public

comment informed the development of these documents. See Workforce Guidelines for Home Energy Upgrades, 75 FR 68781 (Nov. 9, 2010), available at: https://www.federalregister.gov/

documents/2010/11/09/2010-28289/workforce-guidelines-for-home-energy-upgrades.

If the Qualified Home Energy Auditor is acting in his or her capacity as a partner in a partnership, or as an employee of any person, whether an individual, corporation, or partnership, the

relevant EIN is the EIN of the partnership or the person who employs the Qualified Home Energy Auditor.

Employment & Training Administration Training and Employment Notice No. 25-19 (Jun. 08, 2020) available at: https://www.dol.gov/agencies/eta/advisories/training-and-employmentnotice-no-25-19.

August 21, 2023

566

Bulletin No. 2023–34

sponsor, and a person is not required to

respond to, a collection of information

unless the collection of information displays a valid OMB control number.

The collection of information contained in this notice includes recordkeeping requirements, as detailed in section

5 of this notice. These recordkeeping

requirements are approved by OMB under

1545-0074.

Additionally, the notice includes a

third-party disclosure requirement for

Qualified Home Energy Auditors to

Bulletin No. 2023–34

provide a written report (to the taxpayer)

that identifies the most significant and

cost-effective energy efficiency improvements for that dwelling, including an

estimate of the energy and cost savings

for each such improvement. The disclosure of these reports is considered a usual

and customary business practice provided

during the normal course of business in

conducting a Home Energy Audit. This

customary business practice imposes no

additional burden on respondents.

567

SECTION 8. CONTACT

INFORMATION

The principal author of this notice is

the Office of Associate Chief Counsel

(Passthroughs & Special Industries).

For further information regarding this

notice contact the Office of Associate

Chief Counsel (Passthroughs & Special

Industries) at (202) 317-6853 (not a tollfree number).

August 21, 2023

Part IV

Announcement of

Disciplinary Sanctions

From the Office of

Professional Responsibility

Announcement 2023-23

The

Office

Professional

Responsibility

(OPR)

announces

recent disciplinary sanctions involving attorneys, certified public accountants,

enrolled

agents,

enrolled

actuaries, enrolled retirement plan

agents, appraisers, and unenrolled/

unlicensed return preparers (individuals who are not enrolled to practice

and are not licensed as attorneys or

certified public accountants). Licensed

or enrolled practitioners are subject

to the regulations governing practice

before the Internal Revenue Service

(IRS), which are set out in Title 31,

Code of Federal Regulations, Subtitle

A, Part 10, and which are released as

Treasury Department Circular No. 230.

The regulations prescribe the duties and

restrictions relating to such practice and

prescribe the disciplinary sanctions for

violating the regulations. Unenrolled/

unlicensed return preparers are subject

to Revenue Procedure 81-38 and superseding guidance in Revenue Procedure

2014-42, which govern a preparer’s eligibility to represent taxpayers before the

IRS in examinations of tax returns the

preparer both prepared for the taxpayer

and signed as the preparer. Additionally,

unenrolled/unlicensed return preparers who voluntarily participate in the

Annual Filing Season Program under

Revenue Procedure 2014-42 agree to be

subject to the duties and restrictions in

Circular 230, including the restrictions

on incompetent or disreputable conduct.

The disciplinary sanctions to be

imposed for violation of the applicable

standards are:

Disbarred from practice before the

IRS—An individual who is disbarred

is not eligible to practice before the IRS

as defined at 31 C.F.R. § 10.2(a)(4) for a

minimum period of five (5) years.

August 21, 2023

Suspended from practice before the

IRS—An individual who is suspended is

not eligible to practice before the IRS as

defined at 31 C.F.R. § 10.2(a)(4) during

the term of the suspension.

Censured in practice before the

IRS—Censure is a public reprimand.

Unlike disbarment or suspension, censure

does not affect an individual’s eligibility

to practice before the IRS, but OPR may

subject the individual’s future practice

rights to conditions designed to promote

high standards of conduct.

Monetary penalty—A monetary penalty may be imposed on an individual who

engages in conduct subject to sanction,

or on an employer, firm, or entity if the

individual was acting on its behalf and it

knew, or reasonably should have known,

of the individual’s conduct.

Disqualification of appraiser—An

appraiser who is disqualified is barred

from presenting evidence or testimony in

any administrative proceeding before the

Department of the Treasury or the IRS.

Ineligible for limited practice—An

unenrolled/unlicensed return preparer

who fails to comply with the requirements

in Revenue Procedure 81-38 or to comply

with Circular 230 as required by Revenue

Procedure 2014-42 may be determined

ineligible to engage in limited practice as

a representative of any taxpayer.

Under the regulations, individuals

subject to Circular 230 may not assist, or

accept assistance from, individuals who

are suspended or disbarred with respect

to matters constituting practice (i.e., representation) before the IRS, and they may

not aid or abet suspended or disbarred

individuals to practice before the IRS.

Disciplinary sanctions are described in

these terms:

Disbarred by decision, Suspended

by decision, Censured by decision,

Monetary penalty imposed by decision,

and Disqualified after hearing—An

administrative law judge (ALJ) issued a

decision imposing one of these sanctions

after the ALJ either (1) granted the government’s summary judgment motion

or (2) conducted an evidentiary hearing

upon OPR’s complaint alleging violation

of the regulations. After 30 days from the

568

issuance of the decision, in the absence of

an appeal, the ALJ’s decision becomes the

final agency decision.

Disbarred by default decision,

Suspended by default decision,

Censured by default decision, Monetary

penalty imposed by default decision,

and Disqualified by default decision—

An ALJ, after finding that no answer to

OPR’s complaint was filed, granted OPR’s

motion for a default judgment and issued a

decision imposing one of these sanctions.

Disbarment by decision on appeal,

Suspended by decision on appeal,

Censured by decision on appeal,

Monetary penalty imposed by decision

on appeal, and Disqualified by decision

on appeal—The decision of the ALJ was

appealed to the agency appeal authority,

acting as the delegate of the Secretary

of the Treasury, and the appeal authority

issued a decision imposing one of these

sanctions.

Disbarred by consent, Suspended

by consent, Censured by consent,

Monetary penalty imposed by consent,

and Disqualified by consent—In lieu of

a disciplinary proceeding being instituted

or continued, an individual offered a consent to one of these sanctions and OPR

accepted the offer. Typically, an offer of

consent will provide for: suspension for

an indefinite term; conditions that the

individual must observe during the suspension; and the individual’s opportunity, after a stated number of months, to

file with OPR a petition for reinstatement

affirming compliance with the terms of

the consent and affirming current fitness

and eligibility to practice (i.e., an active

professional license or active enrollment

status, with no intervening violations of

the regulations).

Suspended indefinitely by decision in

expedited proceeding, Suspended indefinitely by default decision in expedited

proceeding, Suspended by consent in

expedited proceeding—OPR instituted

an expedited proceeding for suspension

(based on certain limited grounds, including loss of a professional license for cause,

and criminal convictions).

Determined ineligible for limited practice—There has been a final

Bulletin No. 2023–34

determination that an unenrolled/unlicensed return preparer is not eligible for

limited representation of any taxpayer

because the preparer violated standards of

conduct or failed to comply with any of

the requirements to act as a representative.

A practitioner who has been disbarred

or suspended under 31 C.F.R. § 10.60, or

suspended under § 10.82, or a disqualified

appraiser may petition for reinstatement

before the IRS after the expiration of 5

years following such disbarment, suspension, or disqualification (or immediately

following the expiration of the suspension

or disqualification period if shorter than 5

years). Reinstatement will not be granted

unless the IRS is satisfied that the petitioner is not likely to engage thereafter in

conduct contrary to Circular 230, and that

granting such reinstatement would not be

contrary to the public interest.

City & State

Name

Reinstatement decisions are published

at the individual’s request, and described

in these terms:

Reinstated to practice before the

IRS—The individual’s petition for

reinstatement has been granted. The

agent, and eligible to practice before the

IRS, or in the case of an appraiser, the

individual is no longer disqualified.

Reinstated to engage in limited practice before the IRS—The individual’s

petition for reinstatement has been granted.

The individual is an unenrolled/unlicensed

return preparer and eligible to engage in

limited practice before the IRS, subject to

requirements the IRS has prescribed for

limited practice by tax return preparers.

OPR has authority to disclose the

grounds for disciplinary sanctions in these

situations: (1) an ALJ or the Secretary’s

delegate on appeal has issued a final

decision; (2) the individual has settled a

disciplinary case by signing OPR’s “consent to sanction” agreement admitting to

one or more violations of the regulations

and consenting to the disclosure of the

admitted violations (for example, failure

to file Federal income tax returns, lack of

due diligence, conflict of interest, etc.); (3)

OPR has issued a decision in an expedited

proceeding for indefinite suspension; or

(4) OPR has made a final determination

(including any decision on appeal) that an

unenrolled/unlicensed return preparer is

ineligible to represent any taxpayer before

the IRS.

Announcements of disciplinary sanctions appear in the Internal Revenue

Bulletin at the earliest practicable date.

The sanctions announced below are alphabetized first by state and second by the last

names of the sanctioned individuals.

Professional

Designation

Disciplinary Sanction

Effective Date(s)

Suspended by default decision

in expedited proceeding under

31 C.F.R. § 10.82(b)

Indefinite from

May 30, 2023

Alabama

Sumner, Elizabeth, see

Mississippi

Arizona

Goodyear

Plimley, Rise H.

Enrolled Agent

California

Larkspur

Blecka, John C.

CPA

Colorado

Erie

Devaney, Cathleen A.

CPA

Suspended by default decision

in expedited proceeding under

31 C.F.R. § 10.82(b)

Indefinite from

May 30, 2023

Illinois

Kingston

Jensen, Cynthia (Cyndi)

CPA

Suspended by default decision

in expedited proceeding under

31 C.F.R. § 10.82(b)

Indefinite from

May 30, 2023

Louisiana

Baton Rouge

Triche, Wayne A.

CPA

Suspended by default decision

in expedited proceeding under

31 C.F.R. § 10.82(b)

Indefinite from

June 6, 2023

Maryland

Baltimore

Dailey, Mitzi E.

Attorney

Suspended by default decision

in expedited proceeding under

31 C.F.R. § 10.82(b)

Indefinite from

May 3, 2023

Bulletin No. 2023–34

Reinstated to practice

before the IRS, effective

04/19/2023

569

August 21, 2023

City & State

Name

Professional

Designation

Disciplinary Sanction

Effective Date(s)

Massachusetts

Wrentham

Hubbell, Scott C.

Attorney

Suspended by default decision

in expedited proceeding under

31 C.F.R. § 10.82(b)

Indefinite from

May 30, 2023

Mississippi

Meridian

Sumner, Elizabeth R.

CPA

Suspended by default decision

in expedited proceeding under

31 C.F.R. § 10.82(b)

Indefinite from

June 27, 2023

New Hampshire

Manchester

Dunn, David C.

Attorney

Suspended by default decision

in expedited proceeding under

31 C.F.R. § 10.82(b)

Indefinite from

June 21, 2023

North Carolina

Charlotte

Attorney

Suspended by default decision

in expedited proceeding under

31 C.F.R. § 10.82(b)

Indefinite from

June 21, 2023

Rives, II, Leon L.

CPA

Suspended by default decision

in expedited proceeding under

31 C.F.R. § 10.82(b)

Indefinite from

June 27, 2023

Fairfax

James, Andre

CPA

Suspended by default decision

in expedited proceeding under

31 C.F.R. § 10.82(b)

Indefinite from

April 17, 2023

Washington

Bellevue

Shimizu, Steven G.

CPA

Suspended by default decision

in expedited proceeding under

31 C.F.R. § 10.82(b)

Indefinite from

May 30, 2023

Caviness, Elizabeth J.

James, Andre, see Virginia

Lexington

Virginia

August 21, 2023

570

Bulletin No. 2023–34

Notice of Proposed

Rulemaking

Revising Consolidated

Return Regulations to

Reflect Statutory Changes,

Modernize Language, and

Enhance Clarity

REG-134420-10

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.

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 6225101), March 18, 2004 (69 FR 12281), and

June 11, 2015 (80 FR 33211) are partially

withdrawn (see SUPPLEMENTARY

INFORMATION for specific details).

Bulletin No. 2023–34

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 https://www.regulations.gov (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) 3175135 (not toll-free numbers); concerning the submission of comments and/

or requests for a public hearing, Vivian

Hayes by email at publichearings@irs.

gov 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

571

liability of the consolidated group and to

prevent avoidance of such tax liability.

See §1.1502-1(h) (defining the term “consolidated group”). For purposes of carrying out those objectives, section 1502 also

permits the 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

§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

August 21, 2023

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

August 21, 2023

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 §1.1502-1(f)

(2) and (3) all references to section 1562

of the 1954 Code.

572

2. Section 1.1502-11 (consolidated

taxable income)

The proposed regulations would

remove §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, Public Law 99-514, 100 Stat. 2085

(October 22, 1986)) before its repeal

by section 2 of 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 §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 §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

Bulletin No. 2023–34

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 §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 113295, 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

§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 §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.

Bulletin No. 2023–34

6. Section 1.1502-26 (consolidated

dividends received deduction)

The proposed regulations would revise

§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 §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

§1.1502-11(a)(8), which solely provides

a reference to a consolidated section 247

deduction computed under §1.1502-27,

and (ii) revise §§1.1502-24(c) and 1.150243(b)(2)(iii), to remove a cross-reference

to §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 §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

573

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

§1.1502-12(q), which provides solely

that a thrift institution’s deduction under

section 593(b)(2) of the Code is determined under §1.1502-42.

9. Section 5.1502-45 (at-risk limitation

temporary regulations)

The Treasury Department and the IRS

published §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 §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 §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 §5.1502-45 as proposed

§1.1502-45 and proposes to withdraw

§5.1502-45. The Treasury Department

and the IRS request comments on proposed §1.1502-45.

August 21, 2023

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

§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.