Temp_Reg-135898-04

Section 1502.—Regulations
26 CFR 1.1502–20T: Disposition or deconsolidation
of subsidiary stock (temporary).

T.D. 9154
DEPARTMENT OF
THE TREASURY
Internal Revenue Service (IRS)
26 CFR Part 1
Extension of Time to Elect
Method for Determining
Allowable Loss
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Temporary regulations.
SUMMARY: This document contains
temporary regulations under section 1502
of the Internal Revenue Code of 1986.
The temporary regulations extend the time
for consolidated groups to elect to apply a method for determining allowable
loss on a disposition of subsidiary stock,
and permit consolidated groups to revoke
such elections. The temporary regulations
affect corporations filing consolidated returns, both during and after the period of
affiliation, and also affect purchasers of
the stock of members of a consolidated
group. The text of these temporary regulations serves as the text of the proposed
regulations (REG–135898–04) set forth in
the notice of proposed rulemaking on this
subject in this issue of the Bulletin.
DATES: Effective Date: These regulations
are effective August 26, 2004.
Applicability Date: For dates of applicability, see §1.1502–20T(i)(6)(v).
FOR
FURTHER
INFORMATION
CONTACT:
Theresa
Abell (202)
622–7700 or Martin Huck (202) 622–7750
(not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained
in these regulations has been previously
reviewed and approved by the Office of

October 4, 2004

Management and Budget under control
number 1545–1774. Responses to this
collection of information are required to
obtain a benefit. This collection of information is revised by these regulations.
These amended regulations are being
issued without prior notice and public
procedure pursuant to the Administrative
Procedure Act (5 U.S.C. 553). For this
reason, the revised collection of information contained in these regulations has
been reviewed and, pending receipt and
evaluation of public comments, approved
by the Office of Management and Budget
under control number 1545–1774.
An agency may not conduct or sponsor,
and a person is not required to respond to, a
collection of information unless it displays
a valid control number assigned by the Office of Management and Budget.
For further information concerning this
collection of information, and where to
submit comments on the collection of information and the accuracy of the estimated burden, and suggestions for reducing this burden, please refer to the preamble of the cross-referencing notice of proposed rulemaking published in this issue of
the Bulletin.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any Internal Revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.
Background and Explanation of
Provisions
On March 7, 2002, the IRS and Treasury Department issued regulations (the
2002 regulations) permitting consolidated
groups to calculate allowable loss or the
basis reduction required on certain dispositions and deconsolidations of subsidiary
stock by applying §1.1502–20 in its entirety, §1.1502–20 without regard to the
duplicated loss factor of the loss disallowance formula, or §1.337(d)–2T. If a
consolidated group chose to apply either
§1.1502–20 without regard to the duplicated loss factor of the loss disallowance
formula, or §1.337(d)–2T, the 2002 regulations required the consolidated group to
file an election under §1.1502–20T(i) to
apply the chosen provision. The 2002 regulations also included several correlative

560

rules to address cases in which, as a result of the election, additional losses became available to the subsidiary the stock
of which was disposed of.
Concurrently with the publication of
these temporary regulations, the IRS
and Treasury Department are publishing Notice 2004–58, 2004–39 I.R.B. 520
(September 27, 2004). That notice sets
forth a method that the IRS will accept for
determining whether subsidiary stock loss
is disallowed and subsidiary stock basis is
reduced under §1.337(d)–2T.
Given the availability of the method
described in Notice 2004–58, the IRS
and Treasury Department are publishing these temporary regulations to permit
taxpayers to make, amend, or revoke
elections under §1.1502–20T(i). These
temporary regulations give taxpayers the
ability to take the notice into account
in choosing a method for determining
allowable loss. In general these regulations allow taxpayers to elect into, or
out of, the application of §1.1502–20 in
its entirety, §1.1502–20 without regard
to the duplicated loss factor of the loss
disallowance formula, or §1.337(d)–2T.
Under these regulations, a taxpayer that
was permitted to make an election under
§1.1502–20T(i), but did not previously
make such an election, may make an
election to apply either §1.1502–20 without regard to the duplicated loss factor,
or §1.337(d)–2T. These regulations also
permit a taxpayer that previously made
an election to apply §1.1502–20 without
regard to the duplicated loss factor to revoke the election and apply §1.1502–20
in its entirety, or to amend the election
in order to apply §1.337(d)–2T. In addition, these regulations permit a taxpayer
that previously made an election to apply §1.337(d)–2T to revoke the election
and apply §1.1502–20 in its entirety or
to amend the election in order to apply
§1.1502–20 without regard to the duplicated loss factor. Finally, these regulations extend relief to acquiring groups by
amending §1.1502–32T(b)(4)(b)(vii)(C)
to change its date of applicability from
May 7, 2003, to August 26, 2004.
If a group revokes an election to apply
either §1.1502–20 without regard to the
duplicated loss factor, or §1.337(d)–2T,
and applies §1.1502–20 in its entirety,
no election under §1.1502–20(g) will be

2004–40 I.R.B.

available, even if the group had previously
made an election under §1.1502–20(g)
to reattribute losses of the subsidiary the
stock of which was disposed of.
Pursuant to these regulations, an election under §1.1502–20T(i) must be made,
amended, or revoked by including the
statement required with a timely filed (including extensions) original return for a
taxable year that includes any date on or
before August 26, 2004, or with or as part
of an amended return filed before the date
the original return for the taxable year that
includes August 26, 2004, is due (including any extensions). The new election or
the revocation or amendment of a prior
election, however, only will affect open
years.
Special Analyses
It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. These temporary regulations provide relief to consolidated groups
by extending the time to elect a method
for determining allowable loss. The extension of time allows taxpayers to take
into account concurrent guidance in choosing a method for determining allowable
loss. It is necessary to provide the extension of time immediately. Accordingly,
good cause is found for dispensing with
prior notice and comment pursuant to 5
U.S.C. 553(b) and for dispensing with a
delayed effective date pursuant to 5 U.S.C.
553(d). For applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6),
see the notice of proposed rulemaking on
this subject in this issue of the Bulletin.
The IRS and Treasury Department request
comments from small entities that believe
they might be adversely affected by these
regulations. Pursuant to section 7805(f) of
the Internal Revenue Code, these temporary regulations will be submitted to the
Chief Counsel for the Advocacy of the
Small Business Administration for comment on their impact.
Drafting Information
The principal authors of these regulations are Theresa Abell and Martin Huck
of the Office of Associate Chief Counsel (Corporate). However, other personnel

2004–40 I.R.B.

from the Treasury Department and the IRS
participated in their development.
*****
Amendments to the Regulations
Accordingly, 26 CFR part 1 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 1.1502–20T(i) is
amended by:
1. Revising the first sentence of paragraph (i)(4).
2. Redesignating paragraph (i)(6) as
(i)(7).
3. Adding new paragraph (i)(6).
The revision and addition read as follows:
§1.1502–20T Disposition or
deconsolidation of subsidiary stock
(temporary).
*****
(i) * * *
(4) Time and manner of making the
election. An election to determine allowable loss or basis reduction by applying the
provisions described in paragraph (i)(2)(i)
or (ii) of this section is made by including
the statement required by this paragraph
with or as part of any timely filed (including any extensions) original return for a
taxable year that includes any date on or
before August 26, 2004, or with or as part
of an amended return filed before the date
the original return for the taxable year that
includes August 26, 2004, is due (including any extensions). * * *
*****
(6) Revocation or amendment of prior
elections—(i) In general. Notwithstanding anything to the contrary in this paragraph (i), if a consolidated group made an
election under paragraph (i) of this section
to apply the provisions described in paragraph (i)(2)(i) or (ii) of this section, the
consolidated group may revoke or amend
that election as provided in this paragraph
(i)(6).
(ii) Time and manner of revoking or
amending an election. An election to apply the provisions described in paragraph

561

(i)(2)(i) or (ii) of this section is revoked
or amended by including the statement required by paragraph (i)(6)(iii) of this section with or as part of any timely filed (including any extensions) original return for
a taxable year that includes any date on or
before August 26, 2004, or with or as part
of an amended return filed before the date
the original return for the taxable year that
includes August 26, 2004, is due (including any extensions).
(iii) Required statement—(A) Revocation. To revoke an election to apply
the provisions described in paragraph
(i)(2)(i) or (ii) of this section, the consolidated group must file a statement
entitled “Revocation of Election Under
Section 1.1502–20T(i).” The statement
must include the name and employer identification number (E.I.N.) of the subsidiary
and of the member(s) that disposed of the
subsidiary stock.
(B) Amendment. To amend an election
to apply the provisions described in paragraph (i)(2)(i) or (ii) of this section, the
consolidated group must file a statement
entitled “Amendment of Election Under
Section 1.1502–20T(i).” The statement
must include the following information—
(1) The name and employer identification number (E.I.N.) of the subsidiary and
of the member(s) that disposed of the subsidiary stock; and
(2) The provision the taxpayer elects to
apply to determine allowable loss or basis
reduction (described in paragraph (i)(2)(i)
or (ii) of this section).
(iv) Special rule. If a consolidated
group revokes an election made under
paragraph (i) of this section, an election
described in §1.1502–20(g) to reattribute
losses will not be respected, even if such
election was filed with the group’s return
for the year of the disposition.
(v) This paragraph (i)(6) is applicable
on and after August 26, 2004.
*****
Par. 3. Section §1.1502–32T(b)(4)(vii)
(C) is amended by removing the language
“May 7, 2003” and adding the language
“August 26, 2004” each time it appears.
Mark E. Matthews,
Deputy Commissioner for
Services and Enforcement.
Approved August 19, 2004.

October 4, 2004

Gregory F. Jenner,
Acting Assistant Secretary of the
Treasury (Tax Policy).
(Filed by the Office of the Federal Register on August 25,
2004, 8:45 a.m., and published in the issue of the Federal
Register for August 26, 2004, 69 F.R. 52419)

26 CFR 1.1502–32T: Investment adjustments (temporary).

T.D. 9155
DEPARTMENT OF
THE TREASURY
Internal Revenue Service
26 CFR Part 1
Guidance Under Section
1502; Treatment of Loss
Carryovers From Separate
Return Limitation Years
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Temporary regulations.
SUMMARY: This document contains temporary regulations under section 1502 that
provide guidance regarding the treatment
of certain losses available to acquired subsidiaries as a result of an election made
under the section 1502 regulations. The
text of these temporary regulations also
serves as the text of the proposed regulations (REG–129274–04) set forth in the
notice of proposed rulemaking on this subject in this issue of the Bulletin. These regulations apply to corporations filing consolidated returns.
DATES: Effective Date: These regulations
are effective August 18, 2004.
Applicability Date: For dates of applicability, see §1.1502–32T(b)(4)(v)(C).
FOR
FURTHER
INFORMATION
CONTACT: Sean McKeever at (202)
622–7750 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
Under §1.1502–32(b)(4), if a subsidiary of a consolidated group has a loss

October 4, 2004

carryover from a separate return limitation year when it becomes a member of
the group, the group may make an irrevocable election to treat all or any portion
of the loss carryover as expiring for all
Federal income tax purposes immediately
before the subsidiary becomes a member of the group. If the subsidiary was
a member of another group immediately
before it became a member of the group,
the expiration is also treated as occurring
immediately after it ceases to be a member
of the prior group. Waiving losses of an
acquired subsidiary is desirable in cases
in which it is anticipated that the losses of
the subsidiary may expire unused in that
it prevents a negative basis adjustment in
the stock of the subsidiary.
In March of 2002, in response to the
decision of the United States Court of Appeals for the Federal Circuit in Rite Aid
Corp. v. United States, 255 F.3d 1357
(Fed. Cir. 2001), the Treasury Department
and the IRS issued guidance regarding
the treatment of certain losses realized on
dispositions and deconsolidations of stock
of a member of a consolidated group.
Those rules permitted groups to calculate
allowable loss on the sale of subsidiary
stock by applying §1.1502–20 in its entirety, §1.1502–20 without regard to the
duplicated loss factor of the loss disallowance formula, or §1.337(d)–2T. If a
group that made an election described in
§1.1502–20(g) to reattribute to the common parent losses of the subsidiary elected
to determine allowable loss by applying
either §1.1502–20 without regard to the
duplicated loss factor of the loss disallowance formula, or §1.337(d)–2T, the
amount of loss treated as reattributed could
be reduced. As a result, losses that were
previously treated as reattributed would
be treated as available for use by the subsidiary or any other group of which the
subsidiary is a member, subject to any applicable limitations (e.g., section 382). To
prevent a purchasing consolidated group
from being unfairly disadvantaged in the
event that the amount of losses treated
as reattributed to the common parent of
the selling group were decreased and the
amount of losses treated as available to
the subsidiary were increased (excess
losses), §1.1502–32T(b)(4)(v) was added
to provide that, to the extent that the subsidiary’s loss carryovers are increased by
reason of an election to apply one of the

562

alternative regimes and such loss carryovers expire, or would have been properly
used to offset income, in a closed year,
the purchasing group will be deemed to
have made an election to treat all of such
expired loss carryovers as expiring for all
Federal income tax purposes immediately
before the subsidiary became a member of
the purchasing group (the deemed waiver
rule). Accordingly, no basis reduction
under §1.1502–32 would result from the
expiration of, or failure to use, such losses.
The Treasury Department and the
IRS have become aware that the deemed
waiver rule may deny the use of excess
losses in cases in which such denial was
not intended, particularly in cases in which
the excess losses would have been properly used to offset income in a closed year
and the use of such losses in the closed
year would make losses that were used in
the closed year available to offset income
in an open year. Accordingly, one commentator has asked that relief from the
deemed waiver rule be afforded in these
cases. These temporary regulations provide that relief by making the application
of the deemed waiver rule optional. This
relief is applicable on and after August 18,
2004. In addition, groups may apply this
relief before August 18, 2004, and on and
after March 7, 2002.
Special Analyses
It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. These temporary regulations are necessary to provide taxpayers with immediate guidance regarding the
treatment of certain subsidiary losses. Accordingly, good cause is found for dispensing with notice and public procedure pursuant to 5 U.S.C. 553(b) and with a delayed effective date pursuant to 5 U.S.C.
553(d)(3). For applicability of the Regulatory Flexibility Act, please refer to the
cross-reference notice of proposed rulemaking published elsewhere in this issue
of the Bulletin. Pursuant to section 7805(f)
of the Code, these temporary regulations
will be submitted to the Chief Counsel for
Advocacy of the Small Business Administration for comment on their impact on
small business.

2004–40 I.R.B.

Drafting Information
The principal author of these regulations is Sean McKeever, Office of Associate Chief Counsel (Corporate). However, other personnel from the IRS and
Treasury Department participated in their
development.
*****
Amendments to the Regulations
Accordingly, 26 CFR part 1 is 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 1.1502–32T is amended
by revising paragraph (b)(4)(v)(A) and
(C).
§1.1502–32T Investment adjustments
(temporary).
***

2004–40 I.R.B.

(b) * * *
(4) * * *
(v) Special rule for loss carryovers of a subsidiary acquired in a
transaction for which an election under §1.1502–20T(i)(2) is made—(A)
Expired losses.
Notwithstanding
§1.1502–32(b)(4)(iv), unless a group
otherwise chooses, to the extent that S’s
loss carryovers are increased by reason
of an election under §1.1502–20T(i)(2)
and such loss carryovers expire or would
have been properly used to offset income
in a taxable year for which the refund of
an overpayment is prevented by any law
or rule of law as of the date the group
files its original return for the taxable
year in which S receives the notification
described in §1.1502–20T(i)(3)(iv) and
at all times thereafter, the group will be
deemed to have made an election under
§1.1502–32(b)(4) to treat all of such loss
carryovers as expiring for all Federal income tax purposes immediately before
S became a member of the consolidated
group. A group may choose not to apply
the rule of the previous sentence to all

563

of such loss carryovers of S by taking a
position on an original or amended tax
return for each relevant taxable year that is
consistent with having made such choice.
***
(C) Effective date.
Paragraph
(b)(4)(v)(A) of this section is applicable on
and after August 18, 2004. Groups, however, may apply paragraph (b)(4)(v)(A) of
this section before August 18, 2004, and
on and after March 7, 2002. Otherwise,
see paragraph (b)(4)(v)(A) of §1.1502–32.
Paragraph (b)(4)(v)(B) of this section is
applicable on and after March 7, 2002.
*****
Mark E. Matthews,
Deputy Commissioner for
Services and Enforcement.
Approved July 29, 2004.
Gregory F. Jenner,
Acting Assistant Secretary of the Treasury.
(Filed by the Office of the Federal Register on August 17,
2004, 8:45 a.m., and published in the issue of the Federal
Register for August 18, 2004, 69 F.R. 51175)

October 4, 2004

Notice of Proposed
Rulemaking by
Cross-Reference to
Temporary Regulations

submissions of comments, Robin Jones,
(202) 622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act

Extension of Time to Elect
Method for Determining
Allowable Loss
REG–135898–04
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
by cross-reference to temporary regulations.
SUMMARY: This document contains proposed regulations under section 1502 of
the Internal Revenue Code of 1986. The
proposed regulations extend the time for
consolidated groups to elect to apply a
method for determining allowable loss
on a disposition of subsidiary stock, and
permit consolidated groups to revoke such
elections. The proposed regulations affect
corporations filing consolidated returns,
both during and after the period of affiliation, and also affect purchasers of the
stock of members of a consolidated group.
The text of the temporary regulations (T.D.
9154) published in this issue of the Bulletin serves as the text of these proposed
regulations.
DATES: Written or electronic comments
must be received by November 24, 2004.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–135898–04), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washington, DC 20044. Submissions may be
hand-delivered between the hours of 8
a.m. and 4 p.m. to CC:PA:LPD:PR
(REG–135898–04), Courier’s Desk, Internal Revenue Service, 1111 Constitution
Avenue, NW, Washington, DC, or sent
electronically, via the IRS Internet site at
www.irs.gov/regs or via the Federal eRulemaking Portal at www.regulations.gov
(IRS and REG–135898–04).
FOR
FURTHER
INFORMATION
CONTACT: Concerning the proposed regulations, Theresa Abell (202) 622–7700 or
Martin Huck (202) 622–7750; concerning

October 4, 2004

The collection of information contained
in this notice of proposed rulemaking has
been submitted to the Office of Management and Budget for review in accordance
with the Paperwork Reduction Act of 1995
(44 U.S.C. 3507(d)). Comments on the
collection of information should be sent to
the Office of Management and Budget,
Attn: Desk Officer for the Department of
Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503,
with copies to the Internal Revenue Service, Attn: IRS Reports Clearance Officer,
SE:W:CAR:MP:T:T:SP, Washington, DC
20224. Comments on the collection of information should be received by October
25, 2004. Comments are specifically requested concerning:
Whether the proposed collection of information is necessary for the proper performance of the functions of the IRS, including whether the information will have
practical utility;
The accuracy of the estimated burden
associated with the proposed collection of
information (see below);
How the quality, utility, and clarity of
the information to be collected may be enhanced;
How the burden of complying with the
proposed collection of information may be
minimized, including through the application of automated collection techniques
or other forms of information technology;
and
Estimates of capital or start-up costs
and costs of operation, maintenance, and
purchase of services to provide information.
The collection of information in this
proposed regulation was previously approved and reviewed by the Office of Management and Budget under control number
1545–1774. The collection of information
is required to allow the taxpayer to make
certain elections to determine the amount
of allowable loss under §1.1502–20 in its
entirety, §1.1502–20 without regard to the
duplicated loss factor, or §1.337(d)–2T; to
allow the taxpayer to reapportion a section
382 limitation in certain cases; to allow the

568

taxpayer to waive certain loss carryovers;
and to ensure that loss is not disallowed
under §1.337–2T and basis is not reduced
under §1.337(d)–2T to the extent that the
taxpayer establishes that the loss or basis
is not attributable to the recognition of
built-in gain on the disposition of an asset.
This collection of information is modified with respect to §§1.1502–20T and
1.1502–32T. Regarding §1.1502–20T, the
collection of information also is necessary to allow the common parent of the
selling group to reapportion a separate,
subgroup or consolidated section 382 limitation when the acquiring group amends
its §1.1502–32(b)(4) election. With respect to §1.1502–32T, the collection of
information also is necessary to allow the
acquiring group to amend its previous
§1.1502–32(b)(4) election, so that it may
use previously waived losses of its subsidiary.
The collection of information is required to obtain a benefit. The likely
respondents are corporations that file consolidated income tax returns.
Estimated total annual reporting and/or
recordkeeping burden: 36,720 hours.
Estimated average annual burden per
respondent: 2 hours.
Estimated number of respondents:
18,360.
Estimated annual frequency of responses: once.
An agency may not conduct or sponsor,
and a person is not required to respond to, a
collection of information unless it displays
a valid control number assigned by the Office of Management and Budget.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.
Background and Explanation of
Provisions
Temporary regulations in this issue of
the Bulletin amend the Income Tax Regulations (26 CFR Part 1) relating to section
1502. The temporary regulations extend
the time for consolidated groups to elect to
apply a method for determining allowable
loss on a disposition of subsidiary stock,
and permit consolidated groups to revoke

2004–40 I.R.B.

such elections. The temporary regulations
affect corporations filing consolidated returns, both during and after the period of
affiliation, and also affect purchasers of the
stock of members of a consolidated group.
The text of those regulations serves as the
text for these proposed regulations. The
preamble to the temporary regulations explains the amendments and these proposed
regulations.

Drafting Information

Special Analyses

Proposed Amendments to the
Regulations

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 is hereby
certified that these proposed regulations
will not have a significant economic impact on a substantial number of small
entities. This certification is based on the
fact that the regulations provide relief to
consolidated groups by extending the time
in which a group may make, or allowing
a group to revoke, certain elections of
methods for determining allowable loss.
In addition, members of consolidated
groups are generally large corporations
rather than small businesses. Therefore,
the Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Nevertheless,
the IRS and Treasury Department request
comments from small entities that believe
they might be adversely affected by these
regulations. Pursuant to section 7805(f)
of the Internal Revenue Code, this notice
of proposed rulemaking will be submitted
to the Chief Counsel for Advocacy of the
Small Business Administration for comment on the impact of these regulations.
Comments and Public Hearing
Before the 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 Treasury
Department request comments on the clarity of the proposed rules and how they can
be made easier to understand. All comments will be made available for public
inspection and copying. A public hearing
may be scheduled. If a public hearing is
scheduled, notice of the date, time, and
place for the public hearing will be published in the Federal Register.

2004–40 I.R.B.

The principal authors of these regulations are Theresa Abell and Martin Huck
of the Office of Associate Chief Counsel (Corporate). However, other personnel from the IRS and Treasury Department
participated in their development.
*****

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 1.1502–20 is amended
by:
1. Revising the first sentence of paragraph (i)(4).
2. Redesignating paragraph (i)(6) as
(i)(7).
3. Adding new paragraph (i)(6).
The revisions and addition read as follows:
§1.1502–20 Disposition or
deconsolidation of subsidiary stock.
*****
(i) * * *
(4)
[The
text
of
proposed
§1.1502–20(i)(4) is the same as the
text of §1.1502–20T(i)(4) published
elsewhere in this issue of the Bulletin.]
*****
(6)
[The
text
of
proposed
§1.1502–20(i)(6) is the same as the
text of §1.1502–20T(i)(6) published
elsewhere in this issue of the Bulletin.]
Par. 3. Section §1.1502–32(b)(4)(vii)
(C) is amended by removing the language
“May 7, 2003” and adding the language
“August 26, 2004” each time it appears.
Mark E. Matthews,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on August 25,
2004, 8:45 a.m., and published in the issue of the Federal
Register for August 26, 2004, 69 F.R. 52462)

569

Request for Comments on
Revenue Procedure for
the Staggered Remedial
Amendment Period System
Announcement 2004–71
This announcement includes as an Appendix a draft revenue procedure that
contains the Service’s procedures for issuing determination letters under a staggered
remedial amendment period system that
establishes regular, five-year cycles under
§ 401(b) of the Internal Revenue Code
(Code) for plan amendments and determination letter renewals for individually
designed plans (that is, plans that have
not been pre-approved) qualified under
§ 401(a). In addition, under this system,
pre-approved plans (that is, master and
prototype (M&P) and volume submitter plans) will generally have a regular,
six-year remedial amendment cycle. The
Service seeks public input before finalizing these procedures and invites interested
persons to submit comments.
Background
The Service has maintained an Employee Plans determination letter program
for many years, essentially in its present
form. Under this program, the Employee
Plans (EP) component of Tax Exempt
and Government Entities (TE/GE) issues
letters of determination regarding the
qualified status of retirement plans under
§ 401(a) and the tax-exempt status of related trusts under § 501(a). Determination
letters provide assurance to plan sponsors,
participants and other interested parties
that the terms of employer-sponsored retirement plans satisfy the qualification
requirements of the Code. Qualified plans
offer significant tax advantages to employers and participants.
In recent years, the Service has undertaken a comprehensive review of its policies and procedures for issuing determination letters on the qualified status of retirement plans. The impetus for this review
was a need for the Service to strike a more
effective balance in the application of its
limited resources among the EP determinations, examinations, voluntary compliance and customer education and outreach
programs. The current determination letter
program has been subject to significant pe-

October 4, 2004