Part IV. Items — Internal Revenue Bulletin 2008-6

Notice of Proposed Rulemaking by Cross-Reference to Temporary Regulations

Calculating and Apportioning the Section 11(b)(1) Additional Tax Under Section 1561 for Controlled Groups

REG–104713–07

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary regulations.

SUMMARY: In this issue of the Bulletin, the IRS is issuing temporary regulations that affect component members of a controlled group of corporations and consolidated groups filing life-nonlife Federal income tax returns. These temporary regulations provide guidance for calculating and apportioning between component members any amount of additional tax and any reduction in the amount exempted from the alternative minimum tax. These temporary regulations also update and clarify the allocation of tax-benefit items in the case in which a component member has a short taxable year not including a December 31 ^st date. Finally, these temporary regulations provide explanations of two concepts: a group’s testing date and a member’s testing period for use in determining which members of the group and which taxable years of those members are subject to the controlled group rules. The text of those regulations (T.D. 9369) also serves as the text of these proposed regulations.

DATES: Written or electronic comments and a request for a public hearing must be received by March 25, 2008.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–104713–07), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday

between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG–104713–07), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC, or sent electronically via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG–104713–07).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulation, Grid Glyer, (202) 622–7930, concerning submissions of comments and requests for public hearings, Richard A. Hurst (202) 622–7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

Temporary regulations in this issue of the Bulletin amend 26 CFR Part 1 to add §§1.1502–47T and 1.1561–0T, remove §1.1561–2, and amend §§1.1561–2T and 1.1563–1T. The text of those regulations also serves as the text of these proposed regulations. The preamble to the final and temporary regulations explains these proposed regulations.

Special Analyses

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 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. With respect to §1.1502–47, it is hereby certified that these regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that these regulations primarily affect affiliated groups of corporations that have elected to file consolidated returns, which tend to be larger businesses. Further, these regulations do not require any additional collection of information under §1.1502–47 because these regulations simply add a section that had been inadvertently removed from the Code of Federal

Regulations. Therefore, a regulatory flexibility analysis is not required. Pursuant to section 7805(f) of the Internal Revenue Code, these regulations have been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.

Comments and Requests for a 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) or electronic comments that are submitted timely to the IRS. The IRS and the Treasury Department specifically request comments on the clarity of the proposed regulations and how they can be made easier to understand. All comments will be available for public inspection and copying. A public hearing may be scheduled if requested in writing by any person that timely submits written or electronic comments. If a public hearing is scheduled, notice of the date, time and place for the public hearing will be published in the Federal Register .

Drafting Information

The principal author of these regulations is Grid Glyer of the Office of Associate Chief Counsel (Corporate). Other personnel from the Treasury Department and the IRS participated in their development.

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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 part 1 continues to read, in part, as follows:

Authority: 26 U.S.C. 7805 * * * Par. 2. Section 1.1561–0 is added to read as follows:

February 11, 2008 409 2008–6 I.R.B.

which provide rules relating to the reduction of the number of separate foreign tax credit limitation categories under section 904(d). The text of those regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the temporary regulations and these proposed regulations. The regulations affect individuals and corporations claiming foreign tax credits.

Special Analyses

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 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), these regulations have been 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 electronic or written comments (a signed original and eight (8) copies) that are submitted timely to the IRS. The Treasury Department and the IRS specifically request comments on the clarity of the proposed regulations and how they may be made easier to understand, as well as comments on additional guidance that may be needed to implement changes made by the AJCA. All comments will be available for public inspection and copying.

A public hearing has been scheduled for April 22, 2008, in the auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance more than 30 minutes before the hearing starts. For information about

§1.1561–0 Table of contents .

[The text of the proposed §1.1561–0 is the same as the text for §1.1561–0T published elsewhere in this issue of the Bulletin].

Par. 3. Section 1.1561–2 is added to read as follows:

§1.1561–2 Special rules for allocating reductions to certain section 1561(a) tax-benefit items .

[The text of the proposed §1.1561–2 is the same as the text for §1.1561–2T(a) through (f)(1) published elsewhere in this issue of the Bulletin].

Par. 4. Section 1.1563–1 is amended to read as follows:

§1.1563–1 Definition of controlled group of corporations and component members and related concepts .

[The text of the proposed §1.1563–1 is the same as the text for §1.1563–1T published elsewhere in this issue of the Bulletin].

Linda E. Stiff, Deputy Commissioner for Services and Enforcement.

(Filed by the Office of the Federal Register on December 21, 2007, 8:45 a.m., and published in the issue of the Federal Register for December 26, 2007, 72 F.R. 72970)

Notice of Proposed Rulemaking by Cross-Reference to Temporary Regulations

Reduction of Foreign Tax Credit Limitation Categories Under Section 904(d)

REG–114126–07

AGENCY: Internal Revenue Service (IRS), Treasury.

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

SUMMARY: In this issue of the Bulletin, the IRS is issuing temporary regulations that provide guidance relating to the reduction of the number of separate foreign

tax credit limitation categories under section 904(d) of the Internal Revenue Code. Changes to the applicable law were made by the American Jobs Creation Act of 2004 (AJCA) reducing the number of section 904(d) separate categories from eight to two, effective for taxable years beginning after December 31, 2006. The temporary regulations provide guidance needed to comply with these changes and affect individuals and corporations claiming foreign tax credits. The text of those temporary regulations (T.D. 9368) published in this issue of the Bulletin also serves as the text of these proposed regulations. This document also provides a notice of public hearing on these proposed regulations.

DATES: Written or electronic comments must be received by March 20, 2008. Outlines of topics to be discussed at the public hearing scheduled for April 22, 2008, at 10:00 a.m. must be received by April 1, 2008.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG–114126–07), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG–114126–07), Courier’s desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC 20044, or sent electronically, via the Federal eRulemaking Portal at www.regulations.gov (IRS REG–114126–07). The public hearing will be held in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Jeffrey L. Parry, (202) 622–3850; concerning submissions of comments, the hearing, and/or to be placed on the building access list to attend the hearing, Kelly Banks, (202) 622–7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

Temporary regulations in this issue of the Bulletin contain amendments to the Income Tax Regulations (26 CFR Part 1)

2008–6 I.R.B. 410 February 11, 2008

§1.904–5 Look-through rules as applied to controlled foreign corporations and other entities .

- - - (h) - * (3) [The text of the proposed amendment to §1.904–5(h)(3) is the same as the text of §1.904–5T(h)(3) published elsewhere in this issue of the Bulletin.]
- - - (o) - * (3) [The text of proposed §1.904–5(o)(3) is the same as the text of §1.904–5T(o)(3) published elsewhere in this issue of the Bulletin.]

Par. 5. Section 1.904–7(g) is added to read as follows:

§1.904–7 Transition rules .

- - - (g) [The text of proposed §1.904–7(g) is the same as the text of §1.904–7T(g)(1) through (6) published elsewhere in this issue of the Bulletin.]

Par. 6. §1.904(f)–12(h) is added to read as follows:

§1.904(f)–12 Transition rules.

- - - (h) [The text of proposed §1.904–12(h) is the same as the text of §1.904–12T(h)(1) through (h)(6) published elsewhere in this issue of the Bulletin.]

Linda E. Stiff, Deputy Commissioner for Services and Enforcement.

(Filed by the Office of the Federal Register on December 20, 2007, 8:45 a.m., and published in the issue of the Federal Register for December 21, 2007, 72 F.R. 72645)

having your name placed on the building access list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section of this preamble.

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 electronic or written comments by March 20, 2008, and an outline of the topics to be discussed and the time to be devoted to each topic (signed original and eight (8) copies) by April 1, 2008. 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 Jeffrey L. Parry of the Office of Chief Counsel (International). However, other personnel from the Treasury Department and the IRS participated in their development.

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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 part 1 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * * Par. 2. Section 1.904–2(i) is added to read as follows:

§1.904–2 Carryback and carryover of unused foreign tax .

- - - (i) [The text of proposed §1.904–2(i) is the same as the text of §1.904–2T(i)(1) through (3) published elsewhere in this issue of the Bulletin.]

Par. 3. In §1.904–4, paragraphs (a), (b), (h)(3), and (l) are revised and paragraph (n) is added to read as follows:

§1.904–4 Separate application of section 904 with respect to certain categories of income .

(a) [The text of the proposed amendment to §1.904–4(a) is the same as the text of §1.904–4T(a) published elsewhere in this issue of the Bulletin.]

(b) [The text of the proposed amendment to §1.904–4(b) is the same as the text of §1.904–4T(b) published elsewhere in this issue of the Bulletin.]

- - - (h) - - (3) [The text of the proposed amendment to §1.904–4(h)(3) is the same as the text of §1.904–4T(h)(3) published elsewhere in this issue of the Bulletin.]
- - - (l) [The text of the proposed amendment to §1.904–4(l) is the same as the text of §1.904–4T(l) published elsewhere in this issue of the Bulletin.]
- - - (n) [The text of proposed §1.904–4(n) is the same as the text of §1.904–4T(n) published elsewhere in this issue of the Bulletin.]

Par. 4. In §1.904–5, paragraph (h)(3) is revised and paragraph (o)(3) is added to read as follows:

February 11, 2008 411 2008–6 I.R.B.