SEC. 4. PROCEDURAL

REQUIREMENTS

.01 Applications .

(1) A consolidated group that wishes to elect to discontinue filing consolidated returns pursuant to this revenue procedure must file an application with the Service. The application must be sent to the Internal Revenue Service, Associate Chief Counsel (Domestic), Attention CC:DOM:CORP:T, P.0. Box 7604, Ben Franklin Station, Washington, DC 20044. See Rev. Proc. 95– 1, 1995–1 C.B. 313, for information regarding the payment of a user fee. An electing consolidated group will be required to pay only a single user fee.

(2) Any application to elect to discontinue filing consolidated returns pursuant to this revenue procedure must be filed on or before June 30, 1996. (3) Each application under this revenue procedure must be captioned ‘‘Application to Discontinue Filing Consolidated Returns Pursuant to Rev. Proc. 95–39.’’

.02 Closing Agreement Required .

(1) Each former member of an electing consolidated group must enter into a closing agreement with the Service.

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The Service will provide a standard form closing agreement. The closing agreement will include the terms listed in section 4.03 below and any other terms that the Service determines to be necessary ( e.g., terms relating to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub. L. No. 101–73, 1990–1 C.B. 204).

(2) The closing agreement will be entered into under the authority of § 7121 and pursuant to section 2.02 of Rev. Proc. 95–1.

.03 Requirements of Closing Agreement .

The closing agreement required by section 4.02 above will include:

(1) A schedule of (a) the name, address, employer identification number, and filing jurisdiction of each former member, and (b) the location of all the District Offices that will have examination jurisdiction over the separate returns that will be filed by each former member after the electing consolidated group has elected to discontinue filing consolidated returns.

(2) A penalties of perjury statement, as described in section 8.01(13) of Rev. Proc. 95–1.

(3) An agreement to extend the statute of limitations applicable to:

(a) years for which consolidated returns were filed by the electing consolidated group and for which the statute of limitations has not expired on the date the closing agreement is executed, and

(b) years for which returns are filed during the 60-month period.

Under this agreement, the periods of limitation provided in §§ 6501 and 6502 on the making of an assessment and the collection by levy or proceeding in court, with respect to any deficiency (including interest and additions to tax) with respect to the above years, shall not expire prior to the end of two years following the later of (a) the end of the 60-month period, or (b) the date any notice required by section 4.03(4) below is received by the Service. Such assessment and collection may be made notwithstanding any provision of law or rule of law which otherwise would prevent such assessment and collection. This agreement extends a statute of limitations as provided above but will never shorten the otherwise applicable statute of limitations.

(4) An agreement to notify the Service if during the 60-month period:

(a) Any person who is not a former member becomes a successor to the former member.

(b) The former member becomes a member of a new group.

(c) The former member, while a member of a new group, acquires (in any manner, directly or indirectly) any stock or any material asset of any other member (including a new member) of the new group.

(d) The new group of which the former member is a member has a new common parent (as defined in section 4.03(5)(b) below). (5) An agreement: (a) To cause any person (other than a former member) that becomes a successor to the former member to enter into a supplemental closing agreement, as provided in section 4.04 below, prior to the acquisition by the successor of the asset(s) of the former member.

(b) To cause any corporation (if it is not a former member) that becomes the common parent of a new group (‘‘new common parent’’) after the date the former member becomes a member of such group to enter into a supplemental closing agreement, as provided in section 4.04 below, prior to the former member becoming a member of the new group.

(c) To cause the new common parent (if it is not a former member) of a new group to enter into a supplemental closing agreement, as provided in section 4.04 below, prior to becoming the new common parent of the new group.

(6) An agreement either (a) to advise any person: (i) acquiring, directly or indirectly, any equity interest in the former member, or

(ii) that would be required to enter into a supplemental closing agreement ( e.g., by becoming a successor to the former member) that the former member is a former member within the meaning of this revenue procedure prior to the time that the person acquires such equity interest or is required to enter into a supplemental closing agreement, or

(b) to permit the Service to publish a notice in the Internal Revenue Bulletin stating that the former member is a former member within the meaning of this revenue procedure.

purposes of determining whether any other subsidiary of the new group may join in a consolidated return (other than one filed by the common parent of the new group) during the 60-month period, the former member must be treated as an includible corporation.

(4) For example, assume P is the common parent of an affiliated group that has a single chain of wholly owned subsidiaries: S1, S2, S3, and S4. If the former member merges into S2, P may elect to file consolidated returns with S1. If the P group files consolidated returns, S2, S3, and S4 generally may not join in the P group consolidated returns because S2 is generally treated as not being an includible corporation for purposes of determining which corporations may join in those returns. However, if the Service permits, or requires, S2 to join in the P group consolidated returns, S3 and S4 must also join in those returns. See sections 5.03 and 5.04 below. If the Service does not permit, or require, S2 to join in the P group consolidated returns, S3 and S4 may not file consolidated returns.

.03 Permission to File Consolidated Returns .

(1) If the new group wishes to file consolidated returns with the former member during the 60-month period, it must obtain permission from the Service. Requests for rulings granting such permission will be subject to all applicable procedures and requirements in effect at the time of the request. In the request for the ruling, the new group must include the information required by section 5 of Rev. Proc. 91– 71 (pertaining to a waiver of the fiveyear restriction on reconsolidation under § 1504(a)(3)).

(2) The Service will act on the request within 6 months after the date it is received unless the new group agrees to extend the time. If the Service does not act on the request within 6 months (plus any extensions), the former member may not join in any consolidated returns filed by the new group during the 60-month period.

.04 Requirement to Join Consolidated Returns .

(1) The Service, in its sole discretion, may require the former member to

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(7) An agreement to be bound by section 5 below.

.04 Supplemental Closing Agreement .

Under section 4.03(5) above, each successor, common parent or new common parent of a new group must enter into a supplemental closing agreement that satisfies the requirements of section 4.03 above as if the successor, common parent or new common parent were the former member.

.05 Notices .

(1) Any notice required by section 4.03(4) above must (a) be sent to the Service at the address specified in section 4.01(1) above; (b) be captioned ‘‘Information Submitted Pursuant to Rev. Proc. 95–39’’; and (c) include a copy of the closing agreement or supplemental closing agreement.

(2) Any notice required by section 4.03(4)(a) above must (a) include the name, address, employer identification number and filing jurisdiction of the successor; (b) describe the transaction by which the successor will acquire the asset(s) of the former member; (c) be sent to the appropriate District Director; and (d) be filed prior to the acquisition by the successor of the asset(s) of the former member.

(3) Any notice required by section 4.03(4)(b), (c), or (d) above must (a) include the name, address, employer identification number, and filing jurisdiction of the common parent of the new group and state whether the new group files a consolidated return; (b) describe the transaction by which the former member became a member of the new group or by which the new common parent became the common parent of the new group; (c) if any member of the new group joined (or was required to join) in a consolidated return for the taxable year immediately preceding the taxable year in which the former member became a member of the new group (including a consolidated return of the new group), identify such member(s) (by name, address and employer identification number) and specify the ownership structure of the group; (d) identify by name, address, and employer identification number any member of the new group that is a former member; (e) include the information required by section 5 of Rev.

Proc. 91–71, 1991–2 C.B. 900 (pertaining to a waiver of the five-year restriction on reconsolidation under § 1504(a)(3)); and (f) be filed before 60 days after the former member (or new common parent) (i) became a member of the new group (or became the new common parent) or (ii) acquired the stock or assets of the other member of the group (whichever is applicable).