SECTION 3. SCOPE

.01 General.

This section provides the conditions that must be satisfied for the Service to consider requests from taxpayers for a §1.1503–2(g)(2)(iv)(B)(2)(i) closing agreement.

.02 Taxpayers Must Be In

Compliance And Must First Request Any Treas. Reg. §301.9100 Relief Needed.

Before requesting a closing agreement under §1.1503–2(g)(2)(iv)(B)(2)(i), the taxpayer should ensure that it has complied with the regulations issued under §1503(d), including having filed the req

uisite agreements, elections, and certifications under §1.1503–2(g)(2) (or §1.1503–2A(c)(3) or (d)(3) if the taxpayer is asking for relief under §1.1503–2A). See infra, section 3.07 (which provides when the Service will consider including in a §1.1503–2(g) (2)(iv)(B)(2)(i) closing agreement, DCLs covered by the temporary §1503(d) regulations). In practical terms, this means that the taxpayer should first request and secure (or at least simultaneously request) any necessary relief under §301.9100 for an extension of time to make any required election or application under the §1503(d) regulations. For example, a taxpayer that has not filed the requisite agreements and elections under §1.1503–2(g)(2)(i) must first request (or simultaneously request) §301.9100 relief to file the elections and agreements.

Under §§1.1503–2(g)(2)(iii)(A) and (iv)(B), a taxpayer must enter into a closing agreement with the Service before the taxpayer files its tax return for the taxable year of a triggering event to prevent the recapture of losses and the accompanying interest charge. Under this revenue procedure, however, a taxpayer can prevent the recapture of losses and the interest charge if the taxpayer submits its request for a closing agreement by the due date of its tax return (including extensions) for the triggering event year and specifies on its tax return that it is requesting a §1503(d) closing agreement.

.03 Statutes Of Limitations.

The Service may request a taxpayer to execute a consent to extend the period of limitations for assessment of tax for the taxable periods related to the DCLs for which the taxpayer has requested a closing agreement.

.04 When And By Whom A Closing

Agreements May Be Executed.

Treas. Reg. §1.1503–2(g)(2)(iv)(B)(1) provides that if the requirements of §1.1503–2(g)(2)(iv)(B)(2) are met, the following events will not constitute triggering events requiring the recapture of DCLs: (1) an affiliated DRC or an affiliated domestic owner becomes an unaffiliated domestic corporation or a member of a new consolidated group; (2) an unaffiliated DRC or an unaffiliated domestic

owner becomes a member of a consolidated group; (3) assets of a DRC are acquired by an unaffiliated domestic corporation or a member of a new consolidated group; or (4) a domestic owner of a separate unit transfers its interest in the separate unit to an unaffiliated domestic corporation or to a member of a new consolidated group. Treas. Reg. §1.1503–2(g)(2)(iv)(B)(2) requires (among other requirements) that the taxpayers enter into a closing agreement with the Service which provides that the taxpayers will be jointly and severally liable for the total amount of the recapture of the DCLs and an interest charge upon any subsequent triggering event.

The Service may execute a closing agreement under §1.1503–2(g)(2)(iv) (B)(2)(i) and §7121 with the following taxpayers: (1) the consolidated group (i.e., the parent on behalf of the consolidated group), the unaffiliated DRC, or the unaffiliated domestic owner that filed the §1.1503–2(g)(2)(i) agreement for the relevant DCLs, and (2) the unaffiliated domestic corporation or the new consolidated group, provided the requirements of §1.1503–2(g)(2)(iv)(B) are satisfied. This revenue procedure will refer to these taxpayers as the “Taxpayer Parties.” Authorized officers of the Taxpayer Parties must sign the closing agreement (generally two originals per party to the agreement).

The Service will not execute a §1.1503–2(g)(2)(iv)(B)(2)(i) closing agreement with foreign entities/transferees, individuals, or partnerships. Section 1.1503–2 does not provide for closing agreements with such taxpayers.

.06 Losses Must Be DCLs.

The Service will not execute a closing agreement with taxpayers for net operating losses (NOLs) that are not DCLs. Therefore, taxpayers must represent that the losses at issue are DCLs.

.07 Closing Agreements For Losses

Under The Temporary Regulations.

The final regulations provide for taxpayers to enter into a §1.1503–2(g)(2)

.05 Taxpayers That Cannot Execute A

Closing Agreement.

October 23, 2000 396 2000–43 I.R.B.

(iv)(B)(2)(i) closing agreement with the Service to prevent certain events from resulting in recapture and an interest charge; the temporary regulations do not contain such a provision. In appropriate circumstances, taxpayers may elect to apply the final regulations to DCLs which are otherwise subject to §1.1503–2A. Treas. Reg. §1.1503–2(h). If a taxpayer files a request to enter into a closing agreement for losses covered by the final regulations, under this revenue procedure, the Service will consider a request to include in the closing agreement DCLs otherwise covered by §1.1503–2A for which the taxpayer has not made a §1.1503–2(h) election to apply the final regulations. This revenue procedure’s reference to “representations and citations as appropriate under §1.1503–2A,” means representations and citations related to a DCL covered by §1.1503–2A.