Part IV. Items — Internal Revenue Bulletin 1998-10

Notice of Proposed Rulemaking and Notice of Public Hearing

Consolidated Returns— Limitations on the Use of Certain Losses and Credits

REG–104062–97

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. 8751, page 23 of this Bulletin, the IRS is issuing temporary regulations that will govern 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, 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–104062–97], 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 Hirschhorn (202) 622-7770; concerning amendments re

lated to foreign tax credits and foreign losses, Seth Goldstein (202) 622-3850; concerning submissions and the hearing, Mike Slaughter (202) 622-7190 (not tollfree numbers).

SUPPLEMENTARY INFORMATION:

Background

Temporary regulations in T.D. 8751 amend the Income Tax Regulations (26 CFR part 1) relating to section 1502. The temporary regulations provide rules that will govern 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. 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 persons 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 (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.

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. * * *

March 9, 1998 34 1998–10 I.R.B.

Section 1.1502–23 also issued under 26 U.S.C. 1502. * * *

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

Par. 2. In §1.1502–3, paragraph (c) is revised to read as follows:

§1.1502–3 Consolidated investment credit.

(c) [The text of the proposed paragraph (c) of this section is the same as the text of §1.1502–3T(c) published in T.D. 8751.]

Par. 3. In §1.1502–4, paragraphs (f)(3) and (g)(3) are added to read as follows:

§1.1502–4 Consolidated foreign tax credit.

(f) * * * (3) [The text of the proposed paragraph (f)(3) of this section is the same as the text of §1.1502–4T(f)(3) published in T.D. 8751.]

(g) * * * (3) [The text of the proposed paragraph (g)(3) of this section is the same as the text of §1.1502-4T(g)(3) published in T.D. 8751.]

Par. 4. In §1.1502–9, paragraph (b)(1)(v) is added to read as follows:

§1.1502–9 Application of overall foreign losses recapture rules to corporations filing consolidated returns.

(b) * * * (1) * * * (v) [The text of the proposed paragraph (b)(1)(v) of this section is the same as the text of §1.1502–9T(b)(1)(v) published in T.D. 8751.]

Par. 5. Section 1.1502–21, as proposed to be added at 61 F.R. 33394, June 27, 1996, is amended in paragraph (c)(1)(iii) by adding Example 5. to read as follows:

§1.1502–21 Net operating losses.

(1) * * * (iii) [The text of the proposed paragraph (c)(1)(iii) Example 5 of this section is the same as the text of §1.1502– 21T(c)(1)(iii) Example 5 published in T.D. 8751.]

Par. 6. Section 1.1502–23, as proposed to be added at 61 F.R. 33395, June 27, 1996, is amended by redesignating paragraphs (b) and (c) as paragraphs (c) and (d) and adding a new paragraph (b) to read as follows:

§1.1502–23 Consolidated net section 1231 gain or loss.

(b) [The text of the proposed paragraph (b) of this section is the same as the text of §1.1502–23T(b) published in T.D. 8751.]

Par. 7. Section 1.1502–55, as proposed to be added at 57 F.R. 62257, December 30, 1992, is amended by adding paragraph (h)(4)(iii) to read as follows:

§1.1502–55 Computation of alternative minimum tax of consolidated groups.

(h) * * * (4) * * * (iii) [The text of the proposed paragraph (h)(4)(iii) of this section is the same as the text of §1.1502–55T(h)(4)(iii) published in T.D. 8751.]

Michael P. Dolan, Deputy Commissioner of

Internal Revenue.

(Filed by the Office of the Federal Register on January 9, 1998, 8:45 a.m., and published in the issue of the Federal Register for January 12, 1998, 63 F.R. 1803)

Notice of Proposed Rulemaking and Notice of Public Hearing

Qualified Zone Academy Bonds

REG–119449–97

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. 8755, page 21 of this Bulletin, the IRS is issuing temporary regulations that provide guidance to holders and issuers of qualified zone academy bonds. These proposed regulations reflect changes made by the Taxpayer Relief Act of 1997, Pub. L. No. 105–34, 111 Stat. 788 (1997), and affect holders and issuers of qualified zone academy bonds. The text of those temporary regulations also serves as the text of these proposed regulations. This document also provides a notice of public hearing on these proposed regulations.

DATES: Written comments must be received by April 7, 1998. Outlines of topics to be discussed at the public hearing scheduled for May 27, 1998, must be received by May 6, 1998.

ADDRESSES: Send submissions to CC:DOM:CORP:R (REG–119449–97), 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–119449–97), Courier’s Desk, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC. Alternatively, taxpayers may submit comments electronically via the Internet by selecting the “Tax Regs” option on the IRS Home Page, or by submitting directly to the IRS Internet site at http:www.irs.ustreas.gov/ prod/taxregs/comments.html. The public hearing will be held in Room 2615, Internal Revenue Building, 1111 Constitution Ave., NW, Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Timothy L. Jones, (202) 622-3980; concerning submissions and the hearing, LaNita Van Dyke (202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

Section 1.1397E–1T, published in T.D. 8755, is issued to provide guidance to holders and issuers of qualified zone academy bonds.

1998–10 I.R.B. 35 March 9, 1998

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 has also 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 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 (a signed original and eight (8) copies) or electronic 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 May 27, 1998, at 10:00 a.m. in Room 2615, Internal Revenue Building, 1111 C Constitution Avenue NW, Washington, DC. Because of access restrictions, visitors will not be admitted beyond the building lobby more than 15 minutes before the hearing starts.

The rules of 26 C.F.R. 601.601(a)(3) apply to the hearing.

Persons that wish to present oral comments at the hearing must submit written comments by April 7, 1998, and submit an outline of the topics to be discussed and time to be devoted to each topic (signed original and eight (8) copies) by May 6, 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

Several persons from the Office of Chief Counsel and the Treasury Department participated in the development and drafting of these regulations.

Proposed Amendment 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 part 1 is amended by adding an entry in numerical order to read as follows:

Authority: 26 U.S.C. 7805 * * * Section 1.1397E–1 also issued under 26 U.S.C. 1397E(b) and 1397E(d). * * *

Par. 2. Sections 1.1397E–1 is added to read as follows:

§ 1.1397E–1 Qualified zone academy bonds.

[The text of this proposed section is the same as the text of §1.1397E-1T published in T.D. 8755.]

Michael P. Dolan, Deputy Commissioner of

Internal Revenue.

withholding certificates, will be effective January 1, 1999.

Form W–8 (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding) would be provided to a withholding agent or payer by a beneficial owner of certain types of income to establish foreign status, to claim that such person is the beneficial owner of the income for which the form is being furnished, and if applicable, to claim a reduced rate of, or exemption from, withholding as a resident of a foreign country with which the United States has an income tax treaty.

Form W–8A (Foreign Person’s Claim of Income Effectively Connected With the Conduct of a Trade or Business in the United States) would be provided to a withholding agent or payer by a foreign person claiming that certain income is effectively connected with the conduct of a trade or business in the United States.

Form W–8B (Certification for United States Tax Withholding for Foreign Governments and Other Foreign Organizations) would be provided to a withholding agent or payer by a foreign government, international organization, foreign central bank of issue, or foreign tax-exempt organization to claim that such organization is the beneficial owner of the income for which the form is being furnished, and if applicable, to claim a reduced rate of, or exemption from, withholding as a resident of a foreign country with which the United States has an income tax treaty.

Form W–8C (Certificate of Intermediary for United States Tax Withholding) would be provided to a withholding agent or payer by an intermediary either to make representations regarding the status of beneficial owners of the amount paid or to transmit appropriate documentation to the withholding agent.

This announcement provides draft copies of proposed Forms W–8, W–8A, W–8B, and W–8C. The forms are being issued without the instructions so that withholding agents can adapt their systems to comply with the regulations. Based on comments, the forms may be revised, and together with instructions, will be re-issued for further comment as part of the OMB approval process.

The IRS would like to receive comments on these proposed draft forms from all interested persons by April 8, 1998. Please send comments to Chairman, Tax

Approved December 19, 1997.

Donald C. Lubick, Acting Assistant Secretary of

the Treasury.

(Filed by the Office of the Federal Register on January 6, 1998, 8:45 a.m., and published in the issue of the Federal Register for January 7, 1998, 63 F.R. 671)

Proposed Forms W–8, W–8A, W–8B, and W–8C

Announcement 98–15

The Internal Revenue Service announces that it is requesting comments from the public on proposed new Forms W–8, W–8A, W–8B, W–8C. These forms are being developed as a result of final regulations published on October 14, 1997, relating to the withholding of income tax under sections 1441, 1442, and 1443 on certain U.S. source income paid to foreign persons. T.D. 8734, 62 F.R. 53387; 1997–44 I.R.B. 5. These regulations, which provide for the use of several

March 9, 1998 36 1998–10 I.R.B.

Forms Coordinating Committee, Internal Revenue Service, T:FP, Room 5577, 1111 Constitution Avenue, NW, Washington, DC 20224.

1998–10 I.R.B. 37 March 9, 1998

March 9, 1998 38 1998–10 I.R.B.

Exhibit 2

1998–10 I.R.B. 39 March 9, 1998

March 9, 1998 40 1998–10 I.R.B.

Exhibit 3 (Continued)

1998–10 I.R.B. 41 March 9, 1998

Exhibit 4

March 9, 1998 42 1998–10 I.R.B.

Exhibit 4 (Continued)

1998–10 I.R.B. 43 March 9, 1998

of announcement in the Internal Revenue Bulletin that an organization no longer qualifies. However, the Service is not precluded from disallowing a deduction for any contributions made after an organization ceases to qualify under section 170(c)(2) if the organization has not timely filed a suit for declaratory judgment under section 7428 and if the contributor (1) had knowledge of the revocation of the ruling or determination letter, (2) was aware that such revocation was imminent, or (3) was in part responsible for or was aware of the activities or omissions of the organization that brought about this revocation.

If on the other hand a suit for declaratory judgment has been timely filed, contributions from individuals and organizations described in section 170(c)(2) that are otherwise allowable will continue to be deductible. Protection under section 7428(c) would begin on March 9, 1998, and would end on the date the court first determines that the organization is not described in section 170(c)(2) as more particularly set forth in section 7428(c)(1). For individual contributors, the maximum deduction protected is $1,000, with a husband and wife treated as one contributor. This benefit is not extended to any individual who was responsible, in whole or in part, for the acts or omissions of the organization that were the basis for revocation. Adopt-A-Pet, Inc.

Section 7428(c) Validation of Certain Contributions Made During Pendency of Declaratory Judgment Proceedings

This announcement serves notice to potential donors that the organization listed below has recently filed a timely declaratory judgment suit under section 7428 of the Code, challenging revocation of its status as an eligible donee under section 170(c)(2). Protection under section 7428(c) of the Code begins on the date that the notice of

Conversion to the Euro by Members of the European Union

Announcement 98–18

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Solicitation for comments.

SUMMARY: The Treasury Department and the IRS are soliciting comments on the tax issues raised by the conversion of certain European countries’ currencies to a single European currency (euro).

SUPPLEMENTARY INFORMATION:

Background

The Treaty on European Union and Final Act of Feb. 7, 1992, 31 I.L.M. 247 (entered into force Nov. 1, 1993), sets forth a plan to replace the national currencies of participating members (legacy currencies) that meet certain economic criteria with a single European currency (euro). Pursuant to directives of the European Council, the process of converting the legacy currencies into the euro will take place in three phases.

On January 1, 1999, the conversion rates from the legacy currencies to the euro are scheduled to become fixed. Thereafter, each of the legacy currencies will remain in circulation but will cease to have independent value apart from the euro. On January 1, 2002, euro bills and coins will be introduced into circulation. Finally, by July 1, 2002, the legacy currencies will no longer be accepted as legal tender.

The conversion of a legacy currency to the euro raises a number of tax issues for U.S. taxpayers operating, investing or otherwise conducting business in a legacy currency. For example, U.S. federal tax considerations include:

Whether a qualified business unit (QBU), as defined in section 989(a), with a legacy functional currency that is converted to the euro will have changed its functional currency under section 985 and regulations thereunder and the implications of any such change (e.g., whether Treas. Reg. §1.985–5 adequately addresses necessary adjustments, the treatment of unrealized currency gains and losses, and the appropriate timing of any such change).
Whether the conversion of a legacy currency to the euro creates a realization event with respect to a financial instrument denominated in a legacy currency and the appropriate time to recognize any resulting gain or loss.

Comments

The Treasury Department and the IRS are studying issues arising from conversion to the euro to determine the appropriate scope and content of published guidance and invite interested persons to submit comments regarding, but not limited to, the issues described above.

Comments are requested on or before April 30, 1998. Send written comments to: Internal Revenue Service, Attn: CC: DOM:CORP:R (Announcement 98-18), room 5226, POB 7604, Ben Franklin Station, Washington, DC 20044. Alternatively, taxpayers may submit comments in writing, by hand delivery to CC:DOM: CORP:R (Announcement 98–18), Courier’s Desk, Internal Revenue Service, 1111 Constitution Ave., NW, Washington, DC, or, electronically, via the IRS Internet site at: http://www.irs.ustreas. gov/prod/taxregs/comments.html. If a respondent is submitting written comments, a signed original and eight (8) copies are requested. All comments will be available for public inspection and copying in their entirety.

DRAFTING INFORMATION

For further information regarding this announcement, contact Howard Wiener of the Office of Associate Chief Counsel (International) at 202-622-3870 (not a toll-free number)

Deletions From Cumulative List of Organizations Contributions to Which Are Deductible Under Section 170 of the Code

Announcement 98–19

The names of organizations that no longer qualify as organizations described in section 170(c)(2) of the Internal Revenue Code of 1986 are listed below.

Generally, the Service will not disallow deductions for contributions made to a listed organization on or before the date

Tulsa, OK Cavalier Manor Little League

Portsmouth, VA Fountain of Life, Inc.

Fayetteville, NC Health Plan Associates, PA

Baltimore, MD

March 9, 1998 44 1998–10 I.R.B.

revocation is published in the Internal Revenue Bulletin and ends on the date on which a court first determines that an organization is not described in section 170(c)(2), as more particularly set forth in section 7428(c)(1). In the case of individual contributors, the maximum amount of contributions protected during this period is limited to $1,000.00, with a husband

and wife being treated as one contributor. This protection is not extended to any individual who was responsible, in whole or in part, for the acts or omissions of the organization that were the basis for the revocation. This protection also applies (but without limitation as to amount) to organizations described in section 170(c)(2) which are exempt from tax

under section 501(a). If the organization ultimately prevails in its declaratory judgment suit, deductibility of contributions would be subject to the normal limitations set forth under section 170.

Muscular Dystrophy Aid Society, Inc.

Houston, TX

1998–10 I.R.B. 45 March 9, 1998