SECTION 4. REQUEST FOR

COMMENTS

The following paragraphs describe the issues the Service and Treasury Department are considering in connection with promulgating regulations implementing the good faith and inadvertence exceptions. The Service and Treasury Department request comments on these issues as well as any other issues that are relevant to regulations implementing these exceptions.

.01 Scope . The interim relief set forth in this notice applies only to corporations that are members of a consolidated group (including corporations that are members of a consolidated group by virtue of being entitled to the interim relief set forth in this notice). The Service and Treasury Department request comments regarding whether the good faith and inadvertence exceptions should, by regulation, permit a corporation that is not a member of a consolidated group to treat its ownership of the stock of another corporation as satisfying the value

May 24, 2004 948 2004-21 I.R.B.

affiliated group cures the value deficiency within a certain period of time after the deficiency arose or the affiliated group became aware of it. In that regard, the Service and Treasury Department are considering whether the inadvertence exception should be available only if the value deficiency is cured by the end of the taxable year in which the affiliated group became aware of the value deficiency, by the date the original return (without extensions) for the taxable year in which the affiliated group became aware of the value deficiency, or by the end of the taxable year following the taxable year in which the group became aware of the value deficiency.

Finally, the Service and Treasury Department are considering what events, such as the designated events, should terminate the availability of the inadvertence exception.

The Service and Treasury Department are considering whether, in cases in which the inadvertence exception applies, the failure to satisfy the value requirement should not be disregarded for certain purposes. In particular, in the consolidated group context, the failure to satisfy the value requirement should not be disregarded to the extent treating that requirement as satisfied permits the group to obtain excess tax benefits. One possible approach to prevent a consolidated group from obtaining excess tax benefits would be to limit the use of losses (for example, to prevent creating or increasing an excess loss account in the stock of the corporation) and credits of the corporation to offset income of other members of the consolidated group or to reduce the tax liability of the consolidated group for a taxable year during which the value requirement is not satisfied. Comments are requested regarding whether such an approach is appropriate and what the terms of such an approach should be.

.04 Application To Different Provisions . The Service and Treasury Department request comments regarding whether the parameters of the good faith and inadvertence exceptions should vary for purposes of determining whether corporations are affiliated for different provisions of the Internal Revenue Code. That is, the Service and Treasury Department request comments regarding whether the policies underlying the various provisions of the

Code for which affiliated status is relevant suggests that the good faith and inadvertence exceptions should be interpreted differently for these various provisions.

.05 Comments . Comments should refer to Notice 2004–37, and should be submitted by July 31, 2004, to:

Internal Revenue Service P.O. Box 7604 Ben Franklin Station Washington, DC 20044 Attn: CC:PA:LPD:PR Room 5203

or electronically via the Service internet site at: Notice.Comments@irscoun- sel.treas.gov . All comments will be available for public inspection and copying.