Part IV. Items — Internal Revenue Bulletin 1997-12

Notice of Proposed Rulemaking and Notice of Public Hearing

Intangibles Under Sections 1060 and 338

REG–252665–96

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary regulations and notice of public hearing.

SUMMARY: In *** T.D. 8711, page 35, the IRS amends the temporary regulations under sections 1060 and 338(b) of the Internal Revenue Code (Code) relating to purchase price allocations in taxable asset acquisitions and deemed asset purchases. The amendments revise the treatment of intangible assets in such acquisitions to take into account the enactment of section 197 by the Omnibus Budget Reconciliation Act of 1993. The regulations provide guidance to parties to taxable asset acquisitions and to deemed asset purchases resulting from elections under section 338. 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 must be received by April 16, 1997. Outlines of topics to be discussed at the public hearing scheduled for Thursday, May 22, 1997, at 10 a.m. must be received by May 1, 1997.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG 252665–96), room 5228, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. In the alternative, submissions may be hand delivered between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG 252665–96), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC. Taxpayers may also submit comments electronically via the internet by selecting the ‘‘Tax Regs’’ option on the IRS 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 will be held in the Commissioner’s Conference Room, room 3313, Internal Revenue Building, 1111 Constitution Avenue NW, Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Brendan O’Hara at (202) 622–7530; concerning submissions and the hearing, Michael Slaughter, (202) 622–7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

T.D. 8711 amends the current temporary regulations under sections 1060 (§ 1.1060–1T) and 338(b) (§§ 1.338(b)–2T and 1.338(b)–3T), and related examples in the final regulations under section 338 (§ 1.338–3), concerning the treatment of acquired intangible assets.

The text of T.D. 8711 also serves as the text of these proposed regulations. The preamble to the temporary and final regulations explains the reasons for the amendments.

The amendments only address the effect of the enactment of section 197. The IRS and Treasury also intend to study other aspects of the current regulations under sections 1060 and 338(b). The current regulations have been the subject of public comments. The IRS and Treasury welcome further comments on all issues raised by the current regulations concerning purchase price allocation under sections 338(b) and 1060.

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 also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and, because the regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Internal Revenue Code, this notice of 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 comments that are submitted timely to the IRS. All

comments will be available for public inspection and copying.

A public hearing has been scheduled for Thursday, May 22, 1997, at 10 a.m. in the Commissioner’s Conference Room, room 3313, Internal Revenue Building, 1111 Constitution Avenue NW, Washington, DC. Because of access restrictions, visitors will not be admitted beyond the Internal Revenue Service Building lobby more than 15 minutes before the hearing starts.

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

Persons that wish to present oral comments at the hearing must submit comments by April 16, 1997 and submit an outline of the topics to be discussed and the time to be devoted to each topic by May 1, 1997.

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 Brendan P. O’Hara, Office of the Assistant Chief Counsel (Corporate), IRS. However, other personnel from the IRS and Treasury Department participated in their development.

- - - -

Proposed Amendments to the Regula- tions

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

PART 1—INCOME TAXES

Paragraph 1. The authority citation for part 1 continues to read in part as follows:

Authority: 26 U.S.C. 7805 - - Par. 2. Section 1.338(b)–2 is added to read as follows: § 1.338(b)–2 Allocation of adjusted grossed-up basis among target assets.

[The text of this section is the same as the text of the amendments to § 1.338(b)–2T published in T.D. 8711.]

Par. 3. Section 1.338(b)–3 is added to read as follows:

1997–12 I.R.B. 46

A pre-submission conference will be held only if the taxpayer actually intends to file a request under the proposed revenue procedure after it is finalized, and only on a time-available basis. If the environmental cleanup issue is currently under examination or before appeals, the examining or appeals officer handling the case will be asked to participate in the conference. For the general rules for requesting a presubmission conference, see Rev. Proc. 97–1, 1997–1 I.R.B. 11 (Jan. 6, 1997), section 11.07.

The principal author of this announcement is Merrill D. Feldstein of the Office of Assistant Chief Counsel (Income Tax and Accounting). For further information regarding this announcement, contact Ms. Feldstein at (202) 622–4950 (not a toll-free call).

§ 1.338(b)–3 Subsequent adjustments to adjusted grossed-up basis.

[The text of this section is the same as the text of the amendments to § 1.338(b)–3T published in T.D. 8711.]

Par. 4. Section 1.1060–1 is added to read as follows: § 1.1060–1 Special allocation rules for certain asset acquisitions.

[The text of this section is the same as the text of the amendments to § 1.1060–1T published in T.D. 8711.]

Margaret Milner Richardson, Commissioner of Internal Revenue.

(Filed by the Office of the Federal Register on January 9, 1997, 2:53 p.m. and published in the issue of the Federal Register for January 16, 1997, 62 F.R. 2335)

Environmental Cleanup Costs; Private Letter Rulings; Pre-submission Conferences

Announcement 97–22

Taxpayers may request at this time a

Changes to Excise Taxes

Announcement 97–25

pre-submission conference in anticipation of filing a request for a private letter ruling under the revenue procedure proposed in Notice 97–7, 1997–1 I.R.B. 8 (Jan. 6, 1997). The proposed revenue procedure, when finalized, will provide special procedures for requesting private letter rulings from the Internal Revenue Service on the tax treatment of environmental cleanup costs under §§ 162 and 263 of the Internal Revenue Code in transactions that span past and future taxable years.

A taxpayer may request a presubmission conference to discuss the procedures for submitting a letter ruling request and/or the substantive issues relating to the taxpayer’s environmental cleanup transaction. However, any discussion of substantive issues at a presubmission conference is advisory only, is not binding on the Service, and cannot be relied upon as a basis for obtaining retroactive relief under the provisions of § 7805(b).

Purpose To announce excise tax changes made by recent legislation:

The air transportation taxes are reinstated ;
The tax rates on aviation fuel (other than gasoline) and aviation gasoline are increased; and
Floor stocks fuel taxes on aviation fuel (other than gasoline) and aviation gasoline are imposed.

Effective date All changes listed in this announcement are effective March 7, 1997.

Note: For the first quarter of 1997, taxpayers must use the tax rate changes in this announcement to report liabilities beginning March 7, 1997, on Form 720, Quarterly Federal Excise Tax Return.

Air transportation taxes The table below shows the reinstated taxes and the applicable rates. The tax rates apply to all amounts paid for transportation after March 6, 1997, regardless of the transportation date.

IRS No. Type of tax Rate

26 Transportation of persons by air 10%

28 Transportation of property by air 6.25%

27 Use of international air travel facilities $6 per person

Fuel taxes The table below shows the increased rates.

IRS No. Type of fuel Tax rate per gallon

14 Aviation gasoline $.193

69 Aviation fuel (other than gasoline) .218

47 1997–12 I.R.B.

Fuel floor stocks taxes Floor stocks taxes are imposed on previously taxed aviation fuel (other than gasoline) or aviation gasoline held on March 7, 1997. The person holding the fuel on March 7, 1997, must pay the tax by August 1, 1997, and report it on the Form 720 for the third quarter of 1997.

The floor stocks taxes do not apply to:

Aviation fuel (other than gasoline) or aviation gasoline held exclusively for use in foreign trade

or in military aircraft;

Aviation fuel (other than gasoline) held exclusively for use in domestic commercial aviation;

and

Fuel held by a person or related group of persons on March 7, 1997, if the aggregate amount of

fuel is not more than 2,000 gallons. Fuel held for an exempt use is not taken into account for purposes of calculating the 2,000 gallons.

The table below shows the rates for the new fuel floor stocks taxes.

IRS No. Type of fuel Rate per gallon

95 Aviation fuel (other than gasoline) $.175

96 Aviation gasoline .15

Revising forms The changes will be reflected on the Form 720 for the second quarter of 1997, as well as on the next revision of Form 8849, Claim for Refund of Excise Taxes, and the 1997 Form 4136, Credit for Federal Tax Paid on Fuels.

How to get forms IRS forms can be obtained by:

- Calling 1–800–829–3676 or

- Using your personal computer by connecting to

- File Transfer Protocol - ftp://irs.ustreas.gov

- World Wide Web - http://www.irs.ustreas.gov

- IRIS at FedWorld - 703–321–8020

Dallas Black Chamber of Commerce

Foundations Status of Certain Organizations

Announcement 97–26

Agricultural Historical Foundation, Inc.,

Hill City, KS AIDS Referral Services, Inc., Wichita,

Collins, CO Downtown Boulder Performance Arts

Foundation, Inc., Dallas, TX Doctors in Christ for Missions, Fort

Inc., Boulder, CO East Austin Health Coalition Inc.,

The following organizations have failed to establish or have been unable to maintain their status as public charities or as operating foundations. Accordingly, grantors and contributors may not, after this date, rely on previous rulings or designations in the Cumulative List of Organizations (Publication 78), or on the presumption arising from the filing of notices under section 508(b) of the Code. This listing does not indicate that the organizations have lost their status as organizations described in section 501(c)(3), eligible to receive deductible contributions.

Former Public Charities . The following organizations (which have been treated as organizations that are not private foundations described in section 509(a) of the Code) are now classified as private foundations: African Culture and Education, Inc.,

Colorado Springs, CO Agape Farms, Inc., Bay City, TX

KS Aikido Dojo Ai To Hei Wa, Denver, CO Albuquerque Lighthouse, Inc.,

Aurora, CO Daily Bread Ministries Inc., Oklahoma

City, OK Daily Bread Ministry Inc., Garland, TX

Albuquerque, NM All Children, Inc., Provo, UT All-1 Charities, Inc., Kennedale, TX Alumni Association of Cedar Ridge,

Affairs Inc., Tyler, TX Educational Resources Associates,

Austin, TX East Texas Council on African-American

Inc., Shawnee Mission, KS Battle of Britain Memorial Society,

Dallas, TX Bay Area Turning Point, Inc., Webster,

TX Bears That Care Den, North Salt Lake,

Longmont, CO El Paso Chapter of the Douglas High

School Alumni Association Inc., El Paso, TX Encore Aftercare Ministry Inc.,

UT Best Little Region Convention,

Lubbock, TX Camelot Academy Child Care, Inc., W.

Albuquerque, NM Environmental Education Institute,

Boulder, CO Environmental Research Network Inc.,

Jordan, UT Coalition of Lesbian-Gay Student

Groups, Inc., Dallas, TX Colorado Advanced Life Support,

Los Alamos, NM Eternity Builders Inc., Keene, TX El Paso Inter-Faith Community

Development Corporation, El Paso, TX Ellen Terry Real Estate Charitable

Foundation, Dallas, TX

1997–12 I.R.B. 48

Friends of the El Paso History Museum,

Ministers and Christian Workers

Association, Grand Prairie, TX National Institute for Technology in

El Paso, TX Friends of the Kemp Public Library,

Safety Resource Council of New

Wichita Falls, TX Friends of Smokey Bear Balloon,

Mexico, Albuquerque, NM Saltos Support Group, Inc., Tucson, AZ San Antonio Bowl Association, Inc., San

Albuquerque, NM Groupo Ballet Folklorico Maya Inc.,

Houston, TX Heart of Texas Swimmers Inc., Waco,

Education, Mancos, CO National Small Business Quality and

Development Foundation, Inc., Denver, CO Native American Preparatory School,

Antonio, TX Tender Mercies, Inc., Dallas, TX Terral Senior Citizens Center, Terral,

OK Texans for a Healthy Environment, Inc.,

Houston, TX Texas Adolescent & Family Substance

TX Hellenic American Cultural Society Inc.,

Rowe, NM NE Food Bank Charities Inc., Fountain

Hills, AZ New Mexico Veterans Assistance

San Antonio, TX India Association of Southeast Texas,

Foundation Inc., Albuquerque, NM North Boulder Little League, Boulder,

Abuse Academy, Inc., Longview, TX Texas Association of Student Assistance

Beaumont, TX International Childrens Haven, Inc.,

Professionals, Austin, TX Texas Bluebonnet Harvest Conference,

Project, Phoenix, AZ Veronica Karaman Ministries, Inc.,

Tulsa, OK International Linen Registry Foundation,

CO Northeast Child Nutrition, Huffman, TX North Hood County Volunteer Fire

Irving, TX Valley-Community Revitalization

Tulsa, OK Kansans for Safe Pest Control,

Lawrence, KS Kansas Business Hall of Fame, Inc.,

Dept., Granbury, TX North San Isidro Community Center,

Ilfeld, NM North Texas International Youth Cultural

Chesapeake, VA VET HELP, Albuquerque, NM Wichita Toy Run Association, Wichita,

Emporia, KS Kansas Low Vision Clinic, Inc.,

Wichita, KS Kansas Pacific Railroad Association,

Exchange, Frisco, TX One Good Turn, Inc., Sedona, AZ One World One People Foundation,

KS Wilderness Community Education

Foundation, Inc., Lawrence, KS Youth Services Council Corporation,

Englewood, CO Yuchi Tribal Organization, Inc., Sapulpa,

Hays, KS K C Art Exhibitions, Inc., Leawood, KS Kidoodles, Inc., Dodge City, KS Kids-Are-Worth-It, Inc., Arlington, TX Kids in Divorce Situations KIDS

Englewood, CO Players Company of Topeka, Topeka,

Equality & Representation, Rockport, TX Post Abortion Recovery Ministries, Inc.,

KS PODER Persons Organized Desiring

OK Zee Cares About Kids, Houston, TX

If an organization listed above submits information that warrants the renewal of its classification as a public charity or as a private operating foundation, the Internal Revenue Service will issue a ruling or determination letter with the revised classification as to foundation status. Grantors and contributors may thereafter rely upon such ruling or determination letter as provided in section 1.509(a)–7 of the Income Tax Regulations. It is not the practice of the Service to announce such revised classification of foundation status in the Internal Revenue Bulletin.

Services, Inc., Austin, TX Kids N Care, Inc., Ellinwood, KS KLA, Inc., Roswell, NM Korean American Parents Association,

Inc., Colorado Springs, CO Korean American Young Activity, Inc.,

Colorado Springs, CO Kroger Associates Reaching Everyone

Katy, TX Preserve Our Parks and Public Spaces,

Inc., Fort Worth, TX Promise Productions, Inc., Glen Rose,

Network Texas-Louisiana, Keller, TX Kyl Country House, Inc., Houston, TX Let God Fight Your Battles, Beasley, TX Liberty Riding Center, Inc., Peyton, CO Metroplex Military Charitable Trust,

TX Pro Neo, Inc., Salt Lake City, UT Provision Asia, Inc., Cedar Hill, TX PTM Public Training and Management,

Phoenix, AZ Public Medical Information & Learning

Center, Arvada, CO Reach, Inc., Shawnee, OK Reading Ranch, Inc., Phoenix, AZ

Dallas, TX Mexico Missions Inc., Norman, OK

49 1997–12 I.R.B.