Consolidated ReturnsLimitations on the Use of Certain Credits and Related Tax Attributes

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-104062-97]

RIN 1545-AV88

Consolidated Returns--Limitations on the Use of Certain Credits

and Related Tax Attributes

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary

regulations and notice of public hearing.

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SUMMARY: In the Rules and Regulations section of this issue of the

Federal Register, the IRS is issuing temporary regulations that relate

to the use of certain tax credits and losses of a consolidated group

and its members. The text of those temporary regulations also serves as

the text of these proposed regulations. This document also provides

notice of a public hearing on these proposed regulations.

DATES: Written comments and outlines of topics to be discussed at the

public hearing scheduled for May 7, 1998, at 10 a.m., must be received

by April 13, 1998.

ADDRESSES: Send submissions to: CC:DOM:CORP:R [REG-104062-97], room

5226, Internal Revenue Service, POB 7604, Ben Franklin Station,

Washington, DC 20044. Submissions may be hand delivered between the

hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R [REG-104005-98], Courier's

Desk, Internal Revenue Service, 1111 Constitution Avenue NW.,

Washington, DC. Alternatively, taxpayers may submit comments

electronically via the Internet by selecting the ``Tax Regs'' option on

the Home Page or by submitting comments directly to the IRS Internet

site at: http://www.irs.ustreas.gov/prod/tax__regs/comments.html. The

public hearing has been scheduled for May 7, 1998, at 10 a.m., in room

2615, Internal Revenue Building, 1111 Constitution Avenue NW.,

Washington DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,

in general, Roy A. Hirschhorn (202) 622-7770; concerning submissions

and the hearing, Mike Slaughter (202) 622-7190 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

Temporary regulations in the Rules and Regulations section of this

issue of the Federal Register amend the Income Tax Regulations (26 CFR

part 1) relating to section 1502. The temporary regulations provide

rules that relate to the use of certain tax credits and related tax

attributes of a consolidated group and its members. The text of those

temporary regulations also serves as the text of these proposed

regulations. The preamble to the temporary regulations explains the

temporary regulations.

Special Analyses

It has been determined that this notice of proposed rulemaking is

not a significant regulatory action as defined in EO 12866. Therefore,

a regulatory assessment is not required.

It is hereby certified that these regulations do not have a

significant economic impact on a substantial number of small entities.

This certification is based on the fact that these regulations

principally affect corporations filing consolidated federal income tax

returns that have carryover or carryback of credits from separate

return limitation years. Available data indicates that many

consolidated return filers are large companies (not small businesses).

In addition, the data indicates that an insubstantial number of

consolidated return filers that are smaller companies have credit

carryovers or carrybacks, and thus even fewer of these filers have

credit carryovers or carrybacks that are subject to the separate return

limitation year rules. Therefore, a Regulatory Flexibility Analysis

under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not

required. Pursuant to section 7805(f) of the Internal Revenue Code,

this notice of proposed rulemaking will be submitted to the Chief

Counsel for Advocacy of the Small Business Administration for comment

on its impact on small business.

Comments and Public Hearing

Before these proposed regulations are adopted as final regulations,

consideration will be given to any written comments (preferably a

signed original and eight (8) copies) that are submitted timely to the

IRS. All comments will be made available for public inspection and

copying.

A public hearing has been scheduled for May 7, 1998, at 10 a.m., in

room 2615. Because of access restrictions, visitors will not be

admitted beyond the Internal Revenue Building lobby more than 15

minutes before the hearing starts.

The rules of 26 CFR 601.601(a)(3) apply to the hearing.

Persons who wish to present oral comments at the hearing must

submit written comments and an outline of the topics (signed original

and eight (8) copies) to be discussed by April 13, 1998.

A period of 10 minutes will be allotted to each person for making

comments.

An agenda showing the scheduling of the speakers will be prepared

after the deadline for receiving outlines has passed. Copies of the

agenda will be available free of charge at the hearing.

Drafting Information

The principal author of these regulations is Roy A. Hirschhorn of

the Office of Assistant Chief Counsel (Corporate). Other personnel from

the IRS and Treasury participated in their development.

List of Subjects in 26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

Paragraph 1. The authority citation for 26 CFR part 1 is amended by

adding entries in numerical order to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Section 1.1502-3 also issued under 26 U.S.C. 1502.

Section 1.1502-4 also issued under 26 U.S.C. 1502.

Section 1.1502-9 also issued under 26 U.S.C. 1502. * * *

Section 1.1502-55 also issued under 26 U.S.C. 1502. * * *

Par. 2. Section 1.1502-3, as proposed to be amended at 63 FR 1804,

January 12, 1998, is amended by revising paragraphs (c)(3) and (d)(2)

and adding paragraph (c)(4) to read as follows:

Sec. 1.1502-3 Consolidated investment credit.

* * * * *

(c) * * *

(3) and (4) [The text of proposed paragraphs (c) (3) and (4) of

this section is the same as the text of Sec. 1.1502-3T(c) (3) and (4)

published elsewhere in this issue of the Federal Register.]

(d) * * *

(2) [The text of proposed paragraph (d)(2) of this section is the

same as the

[[Page 12718]]

text of Sec. 1.1502-3T(d)(2) published elsewhere in this issue of the

Federal Register.]

* * * * *

Par. 3. Section 1.1502-4, as proposed to be amended at 63 FR 1804,

January 12, 1998, is amended by revising paragraphs (f)(3) and (g)(3)

to read as follows:

Sec. 1.1502-4 Consolidated foreign tax credit.

* * * * *

(f) * * *

(3) [The text of proposed paragraph (f)(3) of this section is the

same as the text of Sec. 1.1502-4T(f)(3) published elsewhere in this

issue of the Federal Register.]

(g) * * *

(3) [The text of proposed paragraph (g)(3) of this section is the

same as the text of Sec. 1.1502-4T and (g)(3) published elsewhere in

this issue of the Federal Register.]

* * * * *

Par. 4. Section 1.1502-9, as proposed to be amended at 63 FR 1804,

January 12, 1998, is amended by revising paragraph (b)(1)(v) to read as

follows:

Sec. 1.1502-9 Application of overall foreign losses recapture rules to

corporations filing consolidated returns.

* * * * *

(b) * * *

(1) * * *

(v) [The text of proposed paragraph (b)(1)(v) of this section is

the same as the text of Sec. 1.1502-9T(b)(1)(v) published elsewhere in

this issue of the Federal Register.]

* * * * *

Par. 5. Section 1.1502-55, as proposed to be added at 57 FR 62257,

December 30, 1992, and amended at 63 FR 1804, January 12, 1998, is

further amended by revising paragraph (h)(4)(iii)(C) to read as

follows:

Sec. 1.1502-55 Computation of alternative minimum tax of consolidated

groups.

* * * * *

(h) * * *

(4) * * *

(iii) * * *

(C) [The text of proposed paragraph (h)(4)(iii)(C) of this section

is the same as the text of Sec. 1.1502-55T(h)(4)(iii)(C) published

elsewhere in this issue of the Federal Register.]

* * * * *

Michael P. Dolan,

Deputy Commissioner of Internal Revenue.

[FR Doc. 98-6562 Filed 3-13-98; 8:45 am]

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