SECTION 3. SPECIFIC

BACKGROUND INFORMATION REGARDING DIFFERENT MEANS OF DETERMINING A SUBSTITUTE AGENT

.01 Sections 1.1502–77(d)(1) and 1.1502–77A(d) provide for several different means of determining a substitute agent to act on behalf of a consolidated group. Each method is described below. Some can apply only to consolidated return years beginning on or after June 28, 2002, some can apply only to years beginning before June 28, 2002, and some can apply to any or all open years. If the terminating common parent is agent for any open years beginning before June 28, 2002, the Internal Revenue Service (IRS) recommends that the terminating common parent designate a substitute agent, because that is the only single procedure applicable to all open years. Designation by the terminating common parent affords the group the greatest choice as to the selection of its substitute agent and ensures the least interruption of communication with the IRS.

.02 A terminating common parent may designate a substitute agent. See §§ 1.1502–77(d)(1) and 1.1502–77A(d). Designation by a terminating common parent is available for any and all taxable years for which the terminating common parent is agent for the group. This revenue procedure provides different procedures depending on whether the terminating common parent designates its qualifying successor (see section 6 of this revenue procedure) or another corporation (see section 7 of this revenue procedure).

(1) If the terminating common parent designates its qualifying successor in accordance with the procedures of this revenue procedure, that designation is automatically approved without further communication from the IRS, and will be effective on the later of the termination of the common parent or the filing of the designation with the IRS. See section 6.02 of this revenue procedure for the definition of a qualifying successor. Designation by the terminating common par

ent of its qualifying successor as substitute agent is generally available for any consolidated return year.

(2) The terminating common parent may also designate certain corporations other than its qualifying successor as substitute agent (see section 7 of this revenue procedure). Such a designation is subject to approval by the IRS. Designation of a corporation other than the terminating common parent’s qualifying successor as substitute agent is generally available for any consolidated return year.

.03 If the terminating common parent does not designate a substitute agent, the remaining members may designate a substitute agent, but only for consolidated return years beginning before June 28, 2002. See § 1.1502–77A(d). The designation must be filed in the manner specified in section 8 of this revenue procedure, and is not effective until the IRS approves the designation.

.04 If the terminating common parent does not designate a substitute agent, its qualifying successor, if any, may notify the IRS that it is the substitute agent by default, but only for consolidated return years beginning on or after June 28, 2002. See § 1.1502–77(d)(2). IRS approval is not required, but the IRS is not required to send communications to, or act on communications from, the successor until it provides notification to the IRS of its status as a default substitute agent under section 9 of this revenue procedure.

.05 If the terminating common parent does not designate a substitute agent and has no qualifying successor, one or more members of the group may request the IRS to designate a substitute agent, but only for consolidated return years beginning on or after June 28, 2002. See § 1.1502–77(d)(3)(i). The request is made pursuant to section 10 of this revenue procedure. If the group does not request designation of a substitute agent in this situation, the IRS may nevertheless (if it has reason to believe there is no default substitute agent) designate any group member or successor of a member as the substitute agent for the group.

.06 If the IRS designated a substitute agent for consolidated return years beginning on or after June 28, 2002, one or more members of the group may request that the IRS replace the previously designated substitute with another member (or

successor of a member), in accordance with the procedures of section 11 of this revenue procedure.