TD 9300 Guidance Necessary to Facilitate Business Electronic Filing

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Federal Register / Vol. 71, No. 236 / Friday, December 8, 2006 / Rules and Regulations

PART 602—OMB CONTROL NUMBERS
UNDER THE PAPERWORK
REDUCTION ACT
■ Par. 4. The authority citation for part
602 continues to read as follows:

Authority: 26 U.S.C. 7805.

Par. 5. In § 602.101, paragraph (b) is
amended by revising the following entry
in to the table to read as follows:

■

§ 602.101

*

OMB control numbers.

*
*
(b) * * *

*

*

CFR part or section where
identified and described
*
*
*
1.45G–1T ..............................
*

*

*

Current OMB
control No.
*

*
1545–2031

*

*

LaNita Van Dyke,
Chief, Publications and Regulations Branch,
Legal Processing Division, Associate Chief
Counsel, (Procedure and Administration).
[FR Doc. E6–20799 Filed 12–7–06; 8:45 am]
BILLING CODE 4830–01–P

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 301 and 602
[TD 9300]

Guidance Necessary to Facilitate
Business Electronic Filing
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations and removal of
temporary regulations.

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AGENCY:

SUMMARY: This document contains final
regulations designed to eliminate
regulatory impediments to the
electronic filing of certain income tax
returns and other forms. These
regulations affect business taxpayers
who file income tax returns
electronically. This document also
makes conforming changes to certain
current regulations.
DATES: Effective Date: These regulations
are effective on December 8, 2006.
Applicability Date: These regulations
apply with respect to taxable years
beginning after December 31, 2002. The
applicability of §§ 1.170A–11T, 1.556–
2T, 1.565–1T, 1.936–7T, 1.1017–1T,
1.1368–1T, 1.1377–1T, 1.1502–
21T(b)(3)(i) and (b)(3)(ii)(B), 1.1502–
75T, 1.1503–2T, 1.6038B–1T(b)(1)(ii)
and 301.7701–3T will expire on
December 8, 2006.

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FOR FURTHER INFORMATION CONTACT:

Nathan Rosen, (202) 622–4910 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information
contained in these regulations has been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)) under control
number 1545–1868. The collection of
information in these final regulations is
in § 1.170A–11(b)(2). The information
required in § 1.170A–11(b)(2)
concerning the date on which a
corporation’s board of directors
authorizes a certain type of charitable
contribution assists the IRS in
determining the deductibility of such
contributions. Responses to this
collection of information are mandatory.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless the collection of information
displays a valid control number
assigned by the Office of Management
and Budget.
The estimated annual burden per
respondent is .25 hours.
Comments concerning the accuracy of
this burden estimate and suggestions for
reducing this burden should be sent to
the Internal Revenue Service, Attn: IRS
Reports, Clearance Officer,
SE:W:CAR:MP:T:T:SP, Washington, DC
20224, and to the Office of Management
and Budget, Attn: Desk Officer for the
Department of the Treasury, Office of
Information and Regulatory Affairs,
Washington, DC 20503.
Books and 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
This document contains amendments
to 26 CFR part 1 and 26 CFR part 301
designed to eliminate regulatory
impediments to the electronic
submission of tax returns and other
forms filed by corporations,
partnerships, other business entities,
and their owners.
In 1998, Congress enacted the Internal
Revenue Service Restructuring and
Reform Act of 1998 (RRA 1998), Pub. L.
No. 105–206 (112 Stat. 685) (1998). RRA
1998 states a Congressional policy to
promote the paperless filing of Federal
tax returns. Section 2001(a) of RRA 1998
set a goal for the IRS to have at least 80

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percent of all Federal tax and
information returns filed electronically
by 2007. Section 2001(b) of RRA 1998
requires the IRS to establish a 10-year
strategic plan to eliminate barriers to
electronic filing.
Finalization of December 2003
Regulations Facilitating Electronic
Filing
On December 19, 2003, the IRS and
Treasury published in the Federal
Register (TD 9100, 2004–1 C.B. 297 [68
FR 70701]) temporary and final
regulations modifying the regulations
under sections 170, 556, 565, 936, 1017,
1368, 1377, 1502, 1503, 6038B and 7701
of the Internal Revenue Code. In the
same issue of the Federal Register, the
IRS and Treasury published a notice of
proposed rulemaking (REG–116664–01,
2004–1 C.B. 319 [68 FR 70747])
proposing to amend regulations under
the code sections noted in the previous
sentence. The temporary, final, and
proposed regulations published on
December 19, 2003, are collectively
referred to as the December 2003
Regulations.
The December 2003 Regulations
generally affect taxpayers who must file
any of the following forms: Form 926,
‘‘Return by a U.S. Transferor of Property
to a Foreign Corporation’’; Form 972,
‘‘Consent of Shareholder To Include
Specific Amount in Gross Income’’;
Form 973, ‘‘Corporation Claim for
Deduction for Consent Dividends’’;
Form 982, ‘‘Reduction of Tax Attributes
Due to Discharge of Indebtedness (and
Section 1082 Basis Adjustment)’’; Form
1120, ‘‘U.S. Corporation Income Tax
Return’’; Form 1120S, ‘‘U.S. Income Tax
Return for an S Corporation’’; Form
1122, ‘‘Authorization and Consent of
Subsidiary Corporation To Be Included
in a Consolidated Income Tax Return’’;
Form 5471, ‘‘Information Return of U.S.
Persons With Respect To Certain
Foreign Corporations’’; Form 5712–A,
‘‘Election and Verification of the Cost
Sharing or Profit Split Method Under
Section 936(h)(5)’’; and Form 8832,
‘‘Entity Classification Election.’’
Prior to the changes adopted by the
December 2003 Regulations, certain
regulations under the code sections
cited above impeded electronic filing of
returns. Some of these regulations, for
example, impeded electronic filing by
requiring taxpayers to include thirdparty signatures on their tax returns or
by requiring taxpayers to attach
documents or statements generated by a
third party. Other regulations required a
taxpayer to sign an IRS form and file it
as an attachment to the taxpayer’s
income tax return. To address certain
situations in which regulations required

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Federal Register / Vol. 71, No. 236 / Friday, December 8, 2006 / Rules and Regulations

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taxpayers to attach documents or
statements to their tax returns, for
example, the December 2003
Regulations allowed taxpayers to retain
such items in their books and records.
Taxpayers would be obligated, of
course, to make the items available for
inspection by the IRS.
The IRS received no comments
responding to the December 2003
Regulations, and no public hearing
regarding the proposed regulations was
requested or held. Accordingly, the
temporary and proposed regulations are
adopted with no substantive change by
this Treasury decision, and the
corresponding temporary regulations are
removed. These final regulations make
certain non-substantive changes to the
December 2003 Regulations as described
below.
Section 556 was repealed by the
American Jobs Creation Act, Pub. L. No.
108–357 (118 Stat. 1418), effective for
taxable years of foreign corporations
beginning after December 31, 2004, and
effective for taxable years of United
States shareholders with or within
which such taxable years of foreign
corporations end. The provision in the
December 2003 Regulations eliminating
an electronic filing impediment under
section 556 applied to tax years ending
before the repeal of section 556.
Therefore, these final regulations amend
section 1.556–2 of the Income Tax
Regulations despite the repeal of section
556 itself.
These final regulations remove certain
portions of section 1.1502–21T and
place such language in sections 1.1502–
21(b)(3)(i) and (b)(3)(ii)(B), so as to
eliminate impediments to the electronic
filing of Form 1120. Other portions of
that temporary regulation, however,
predate the December 2003 Regulations
or relate to matters other than electronic
filing, and this document does not
revise those portions.
The regulations as finalized by this
Treasury decision clarify that references
in the following regulations to tax return
due dates include extensions of such
due dates: See 1.565–1(b)(3), 1.936–7(b),
Q. & A. 1, 1.1368–1(f)(5)(iii) and
(g)(2)(iii) and 1.1503–2(g)(2)(i) and
(iv)(B)(3)(iii).
January 2006 Final Regulations
Facilitating Electronic Filing
On January 23, 2006, the IRS and
Treasury released TD 9243, (TD 9243,
2006–8 I.R.B. 475 [71 FR 4276]) (the
January 2006 Final Regulations) which,
among other things, removed an
impediment to electronic filing of Form
926. In the December 2003 Regulations,
the IRS and Treasury had previously
amended both sections 1.6038B–

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1(b)(1)(i) and 1.6038B–1(b)(1)(ii) of the
Income Tax Regulations to eliminate an
impediment to electronic filing of Form
926. The January 2006 Final Regulations
amended section 1.6038B–1(b)(1)(i) and
removed temporary regulations section
1.6038B–1T(b)(1)(i). Therefore, because
the amendment in the December 2003
Regulations to 1.6038B–1T(b)(1)(i) has
already been adopted in final
regulations, these final regulations
amend 1.6038B–1(b)(1)(ii) and remove
1.6038B–1T(b)(1)(ii), but do not address
section 1.6038B–1(b)(1)(i).
May 2006 Regulations Facilitating
Electronic Filing
On May 26, 2006, the IRS and
Treasury Department released TD 9264
(the May 2006 Regulations), which
contained numerous temporary
regulations amending or replacing final
regulations. Some of these final
regulations had required taxpayers to
provide detailed information about a
transaction. In other cases, the scope of
various reporting requirements was not
clear. The May 2006 Regulations
simplified, clarified or, in some cases,
eliminated these reporting burdens.
The May 2006 Regulations also
eliminated regulatory impediments to
the electronic filing of certain
statements that taxpayers are required to
include on or with their Federal income
tax returns. In some cases, this
impediment was removed by deleting
the requirement that the taxpayer sign
such statement. In other cases, where
the taxpayer and a third party were both
required to sign such statement, this
impediment was removed by requiring
each party to indicate on such statement
that it had entered into an agreement
with the other party addressing the
substantive matters covered by the final
regulations. Requiring such a statement
from the parties in place of the dual
signatures eliminates an e-file
impediment, but to protect the Service’s
interests, the May 2006 regulations
require each party to keep either the
original or a copy of the underlying
agreement in its records.
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. It
also has been determined that section
553(b) of the Administrative Procedure
Act (5 U.S.C. chapter 5) does not apply
to these regulations. It is hereby
certified that the collection of
information in these regulations will not
have a significant economic impact on
a substantial number of small entities.

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71041

This certification is based on the fact
that the collection of information in
these regulations involves an
insignificant expenditure of time by
taxpayers, as noted above under the
heading ‘‘Paperwork Reduction Act.’’
Accordingly, a Regulatory Flexibility
Analysis under the Regulatory
Flexibility Act (5 U.S.C. chapter 6) is
not required. Pursuant to section 7805(f)
of the Code, the December 2003
Regulations and the December 2003
notice of proposed rulemaking were
submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on their
impact on small business.
Drafting Information
The principal author of these
regulations is Nathan Rosen, Office of
Associate Chief Counsel (Procedure and
Administration), Administrative
Provisions and Judicial Practice
Division.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes,
Excise taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping
requirements.
26 CFR Part 602
Reporting and recordkeeping
requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 1, 301 and
602 are 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 1.170A–11 is amended
by revising paragraph (b)(2) to read as
follows:

§ 1.170A–11 Limitation on, and carryover
of, contributions by corporations.

*

*
*
*
*
(b) * * *
(2) The election must be made at the
time the return for the taxable year is
filed, by reporting the contribution on
the return. There shall be attached to the
return when filed a written declaration
stating that the resolution authorizing
the contribution was adopted by the
board of directors during the taxable

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Federal Register / Vol. 71, No. 236 / Friday, December 8, 2006 / Rules and Regulations

year. For taxable years beginning before
January 1, 2003, the declaration shall be
verified by a statement signed by an
officer authorized to sign the return that
it is made under penalties of perjury,
and there shall also be attached to the
return when filed a copy of the
resolution of the board of directors
authorizing the contribution. For taxable
years beginning after December 31,
2002, the declaration must also include
the date of the resolution, the
declaration shall be verified by signing
the return, and a copy of the resolution
of the board of directors authorizing the
contribution is a record that the
taxpayer must retain and keep available
for inspection in the manner required by
§ 1.6001–1(e).
*
*
*
*
*
§ 1.170A–11T

[Removed]

■ Par. 3. Section 1.170A–11T is
removed.
■ Par. 4. Section 1.556–2 is amended by
revising paragraphs (e)(2)(vii) and (e)(3)
to read as follows:

§ 1.556–2

Adjustments to taxable income.

*

*
*
*
*
(e) * * *
(2) * * *
(vii) In the case of a return for a
taxable year beginning before January 1,
2003, a copy of the contract, lease, or
rental agreement;
*
*
*
*
*
(3) If the statement described in
§ 1.556–2(e)(2) is attached to a
taxpayer’s income tax return for a
taxable year beginning after December
31, 2002, a copy of the applicable
contract, lease or rental agreement is not
required to be submitted with the
return, but must be retained by the
taxpayer and kept available for
inspection in the manner required by
§ 1.6001–1(e).
*
*
*
*
*
§ 1.556–2T

[Removed]

Par. 5. Section 1.556–2T is removed.
■ Par. 6 Section 1.565–1 is amended by
revising paragraph (b)(3) to read as
follows:
■

§ 1.565–1

General rule.

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*

*
*
*
*
(b) * * *
(3) A consent may be filed at any time
not later than the due date (including
extensions) of the corporation’s income
tax return for the taxable year for which
the dividends paid deduction is
claimed. With such return, and not later
than the due date (including extensions)
thereof, the corporation must file Forms
972 for each consenting shareholder,

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and a return on Form 973 showing by
classes the stock outstanding on the first
and last days of the taxable year, the
dividend rights of such stock,
distributions made during the taxable
year to shareholders, and giving all the
other information required by the form.
For taxable years beginning before
January 1, 2003, the Form 973 filed with
the corporation’s income tax return
shall contain or be verified by a written
declaration that is made under the
penalties of perjury and the Forms 972
filed with the return must be duly
executed by the consenting
shareholders. For taxable years
beginning after December 31, 2002, the
Form 973 filed with the corporation’s
income tax return shall be verified by
signing the return and the Forms 972
filed with the return must be duly
executed by the consenting shareholders
or, if unsigned, must contain the same
information as the duly executed
originals. If the corporation submits
unsigned Forms 972 with its return for
a taxable year beginning after December
31, 2002, the duly executed originals are
records that the corporation must retain
and keep available for inspection in the
manner required by § 1.6001–1(e).
*
*
*
*
*
§ 1.565–1T

[Removed]

Par. 7. Section 1.565–1T is removed.
■ Par. 8. Section 1.936–7 is amended by
revising paragraph (b), Q. & A. 1, to read
as follows:
■

§ 1.936–7 Manner of making election under
section 936(h)(5); special election for export
sales; revocation of election under section
936(a).

*

*
*
*
*
(b) Manner of making election.
Q. 1: How does a possessions
corporation make an election to use the
cost sharing method or profit split
method?
A. 1: A possessions corporation makes
an election to use the cost sharing or
profit split method by filing Form 5712–
A (‘‘Election and Verification of the Cost
Sharing or Profit Split Method Under
Section 936(h)(5)’’) and attaching it to
its tax return. Form 5712–A must be
filed on or before the due date
(including extensions) of the tax return
of the possessions corporation for its
first taxable year beginning after
December 31, 1982. The electing
corporation must set forth on the form
the name and the taxpayer identification
number or address of all members of the
affiliated group (including foreign
affiliates not required to file a U.S. tax
return). All members of the affiliated
group must consent to the election. For
elections filed with respect to taxable

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years beginning before January 1, 2003,
an authorized officer of the electing
corporation must sign the statement of
election and must declare that he has
received a signed statement of consent
from an authorized officer, director, or
other appropriate official of each
member of the affiliated group.
Elections filed for taxable years
beginning after December 31, 2002,
must incorporate a declaration by the
electing corporation that it has received
a signed consent from an authorized
officer, director, or other appropriate
official of each member of the affiliated
group and will be verified by signing the
return. The election is not valid for a
taxable year unless all affiliates consent.
A failure to obtain an affiliate’s written
consent will not invalidate the election
out if the possessions corporation made
a good faith effort to obtain all the
necessary consents or the failure to
obtain the missing consent was
inadvertent. Subsequently created or
acquired affiliates are bound by the
election. If an election out is revoked
under section 936(h)(5)(F)(iii), a new
election out with respect to that product
area cannot be made without the
consent of the Commissioner. The
possessions corporation shall file an
amended Form 5712–A with its timely
filed (including extensions) income tax
return to reflect any changes in the
names or number of the members of the
affiliated group for any taxable year after
the first taxable year to which the
election out applies. By consenting to
the election out, all affiliates agree to
provide information necessary to
compute the cost sharing payment
under the cost sharing method or
combined taxable income under the
profit split method, and failure to
provide such information shall be
treated as a request to revoke the
election out under section
936(h)(5)(F)(iii).
*
*
*
*
*
§ 1.936–7T

[Removed]

Par. 9. Section 1.936–7T is removed.
Par. 10. Section 1.1017–1 is amended
by revising paragraph (g)(2)(iii)(B) to
read as follows:

■
■

§ 1.1017–1 Basis reductions following a
discharge of indebtedness.

*

*
*
*
*
(g) * * *
(2) * * *
(iii) * * *
(B) Taxpayer’s requirement. For
taxable years beginning before January
1, 2003, statements described in
§ 1.1017–1(g)(2)(iii)(A) must be attached
to a taxpayer’s timely filed (including
extensions) Federal income tax return

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Federal Register / Vol. 71, No. 236 / Friday, December 8, 2006 / Rules and Regulations
for the taxable year in which the
taxpayer has COD income that is
excluded from gross income under
section 108(a). For taxable years
beginning after December 31, 2002,
taxpayers must retain the statements
and keep them available for inspection
in the manner required by § 1.6001–1(e),
but are not required to attach the
statements to their returns.
*
*
*
*
*
§ 1.1017–1T

[Removed]

Par. 11. Section 1.1017–1T is
removed.
■ Par. 12. Section 1.1368–1 is amended
by revising paragraphs (f)(5)(iii) and
(g)(2)(iii) to read as follows:
■

§ 1.1368–1 Distributions by S
corporations.

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*

*
*
*
*
(f) * * *
(5) * * *
(iii) Corporate statement regarding
elections. A corporation makes an
election for a taxable year under
§ 1.1368–1(f) by attaching a statement to
a timely filed (including extensions)
original or amended return required to
be filed under section 6037 for that
taxable year. In the statement, the
corporation must identify the election it
is making under § 1.1368–1(f) and must
state that each shareholder consents to
the election. In the case of elections for
taxable years beginning before January
1, 2003, an officer of the corporation
must sign under penalties of perjury the
statement on behalf of the corporation.
In the case of elections for taxable years
beginning after December 31, 2002, the
statement described in this paragraph
(f)(5)(iii) shall be verified by signing the
return. A statement of election to make
a deemed dividend under § 1.1368–1(f)
must include the amount of the deemed
dividend that is distributed to each
shareholder.
*
*
*
*
*
(g) * * *
(2) * * *
(iii) Time and manner of making
election. A corporation makes an
election under § 1.1368–1(g)(2)(i) for a
taxable year by attaching a statement to
a timely filed (including extensions)
original or amended return required to
be filed under section 6037 for a taxable
year (without regard to the election
under § 1.1368–1(g)(2)(i)). In the
statement, the corporation must state
that it is electing for the taxable year
under § 1.1368–1(g)(2)(i) to treat the
taxable year as if it consisted of separate
taxable years. The corporation also must
set forth facts in the statement relating
to the qualifying disposition (e.g., sale,

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gift, stock issuance, or redemption), and
state that each shareholder who held
stock in the corporation during the
taxable year (without regard to the
election under § 1.1368–1(g)(2)(i))
consents to this election. For purposes
of this election, a shareholder of the
corporation for the taxable year is a
shareholder as described in section
1362(a)(2). A single election statement
may be filed for all elections made
under § 1.1368–1(g)(2)(i) for the taxable
year. An election made under § 1.1368–
1(g)(2)(i) is irrevocable. In the case of
elections for taxable years beginning
before January 1, 2003, the statement
through which a corporation makes an
election under § 1.1368–1(g)(2)(i) must
be signed by an officer of the
corporation under penalties of perjury.
In the case of elections for taxable years
beginning after December 31, 2002, the
statement described in the preceding
sentence shall be verified by signing the
return.
*
*
*
*
*

71043

21(b)(3)(ii)(B), the election may not be
made separately for any member
(whether or not it remains a member),
and must be made in a separate
statement entitled ‘‘THIS IS AN
ELECTION UNDER § 1.1502–21(b)(3)(i)
TO WAIVE THE ENTIRE CARRYBACK
PERIOD PURSUANT TO SECTION
172(b)(3) FOR THE [insert consolidated
return year] CNOLs OF THE
CONSOLIDATED GROUP OF WHICH
[insert name and employer
identification number of common
parent] IS THE COMMON PARENT.’’
The statement must be filed with the
group’s income tax return for the
consolidated return year in which the
loss arises. If the consolidated return
year in which the loss arises begins
before January 1, 2003, the statement
making the election must be signed by
the common parent. If the consolidated
return year in which the loss arises
begins after December 31, 2002, the
election may be made in an unsigned
statement.
(ii) * * *
(B) Acquisition of member from
§ 1.1368–1T [Removed]
another consolidated group. If one or
■ Par. 13. Section 1.1368–1T is
more members of a consolidated group
removed.
becomes a member of another
■ Par. 14. Section 1.1377–1 is amended
consolidated group, the acquiring group
by revising paragraph (b)(5)(i)(C) to read may make an irrevocable election to
as follows:
relinquish, with respect to all
consolidated net operating losses
§ 1.1377–1 Pro rata share.
attributable to the member, the portion
*
*
*
*
*
of the carryback period for which the
(b) * * *
corporation was a member of another
(5) * * *
group, provided that any other
(i) * * *
corporation joining the acquiring group
(C) The signature on behalf of the S
that was affiliated with the member
corporation of an authorized officer of
immediately before it joined the
the corporation under penalties of
acquiring group is also included in the
perjury, except that for taxable years
waiver. This election is not a yearly
beginning after December 31, 2002, the
election and applies to all losses that
election statement described in
would otherwise be subject to a
§ 1.1377–1(b)(5)(i) of this section shall
carryback to a former group under
be verified, and the requirement of this
paragraph (b)(5)(i)(C) is satisfied, by the section 172. The election must be made
in a separate statement entitled ‘‘THIS
signature on the Form 1120S filed by
IS AN ELECTION UNDER § 1.1502–
the S corporation.
21(b)(3)(ii)(B)(2) TO WAIVE THE PRE*
*
*
*
*
[insert first taxable year for which the
member (or members) was not a member
§ 1.1377–1T [Removed]
of another group] CARRYBACK PERIOD
■ Par. 15. Section 1.1377–1T is
FOR THE CNOLs attributable to [insert
removed.
names and employer identification
■ Par. 16. Section 1.1502–21 is
amended by revising paragraphs (b)(3)(i) number of members].’’ The statement
must be filed with the acquiring
and (b)(3)(ii)(B) to read as follows:
consolidated group’s original income
§ 1.1502–21 Net operating losses.
tax return for the year the corporation
(or corporations) became a member. If
*
*
*
*
*
the year in which the corporation (or
(b) * * *
(3) Special rules—(i) Election to
corporations) became a member begins
relinquish carryback. A group may make before January 1, 2003, the statement
an irrevocable election under section
must be signed by the common parent
172(b)(3) to relinquish the entire
and each of the members to which it
carryback period with respect to a
applies. If the year in which the
CNOL for any consolidated return year.
corporation (or corporations) became a
Except as provided in § 1.1502–
member begins after December 31, 2002,

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71044

Federal Register / Vol. 71, No. 236 / Friday, December 8, 2006 / Rules and Regulations

the election may be made in an
unsigned statement.
*
*
*
*
*
■ Par. 17. Section 1.1502–21T is
amended by revising paragraphs (a)
through (b)(3)(ii)(B) to read as follows:
§ 1.1502–21T
(temporary).

Net operating losses

(a) through (b)(3)(ii)(B) [Reserved]. For
further guidance, see § 1.1502–21(a)
through (b)(3)(ii)(B).
*
*
*
*
*
■ Par. 18. Section 1.1502–75 is
amended by revising paragraph (h)(2) to
read as follows:
§ 1.1502–75

Filing of consolidated returns.

*

*
*
*
*
(h) * * *
(2) Filing of Form 1122 for first year.
If, under the provisions of paragraph
(a)(1) of this section, a group wishes to
file a consolidated return for a taxable
year, then a Form 1122 (‘‘Authorization
and Consent of Subsidiary Corporation
To Be Included in a Consolidated
Income Tax Return’’) must be executed
by each subsidiary. For taxable years
beginning before January 1, 2003, the
executed Forms 1122 must be attached
to the consolidated return for the
taxable year. For taxable years beginning
after December 31, 2002, the group must
attach either executed Forms 1122 or
unsigned copies of the completed Forms
1122 to the consolidated return. If the
group submits unsigned Forms 1122
with its return, it must retain the signed
originals in its records in the manner
required by § 1.6001–1(e). Form 1122 is
not required for a taxable year if a
consolidated return was filed (or was
required to be filed) by the group for the
immediately preceding taxable year.
*
*
*
*
*
§ 1.1502–75T

[Removed]

Par. 19. Section 1.1502–75T is
removed.
■ Par. 20. Section 1.1503–2 is amended
by revising paragraphs (g)(2)(i),
(g)(2)(iv)(B)(3)(iii) and (g)(2)(vi)(B) to
read as follows:
■

§ 1.1503–2

Dual consolidated loss.

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*

*
*
*
*
(g) * * *
(2) * * *
(i) In general. Paragraph (b) of this
section shall not apply to a dual
consolidated loss if the consolidated
group, unaffiliated dual resident
corporation, or unaffiliated domestic
owner elects to be bound by the
provisions of this paragraph (g)(2). In
order to elect relief under this paragraph
(g)(2), the consolidated group,

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16:20 Dec 07, 2006

Jkt 211001

unaffiliated dual resident corporation,
or unaffiliated domestic owner must
attach to its timely filed (including
extensions) U.S. income tax return for
the taxable year in which the dual
consolidated loss is incurred an
agreement described in paragraph
(g)(2)(i)(A) of this section. The
agreement must be signed under
penalties of perjury by the person who
signs the return. For taxable years
beginning after December 31, 2002, the
agreement attached to the income tax
return of the consolidated group,
unaffiliated dual resident corporation or
unaffiliated domestic owner pursuant to
the preceding sentence may be an
unsigned copy. If an unsigned copy is
attached to the return, the consolidated
group, unaffiliated dual resident
corporation, or unaffiliated domestic
owner must retain the original in its
records in the manner specified by
§ 1.6001–1(e). The agreement must
include the following items, in
paragraphs labeled to correspond with
the items set forth in paragraph
(g)(2)(i)(A) through (F) of this section.
(A) A statement that the document
submitted is an election and an
agreement under the provisions of
paragraph (g)(2) of this section.
(B) The name, address, identifying
number, and place and date of
incorporation of the dual resident
corporation, and the country or
countries that tax the dual resident
corporation on its worldwide income or
on a residence basis, or, in the case of
a separate unit, identification of the
separate unit, including the name under
which it conducts business, its principal
activity, and the country in which its
principal place of business is located.
(C) An agreement by the consolidated
group, unaffiliated dual resident
corporation, or unaffiliated domestic
owner to comply with all of the
provisions of § 1.1503–2(g)(2)(iii)-(vii).
(D) A statement of the amount of the
dual consolidated loss covered by the
agreement.
(E) A certification that no portion of
the dual resident corporation’s or
separate unit’s losses, expenses, or
deductions taken into account in
computing the dual consolidated loss
has been, or will be, used to offset the
income of any other person under the
income tax laws of a foreign country.
(F) A certification that arrangements
have been made to ensure that no
portion of the dual consolidated loss
will be used to offset the income of
another person under the laws of a
foreign country and that the
consolidated group, unaffiliated dual
resident corporation, or unaffiliated
domestic owner will be informed of any

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such foreign use of any portion of the
dual consolidated loss.
*
*
*
*
*
(iv) * * *
(B) * * *
(3) * * *
(iii) The unaffiliated domestic
corporation or new consolidated group
must file, with its timely filed
(including extensions) income tax
return for the taxable year in which the
event described in paragraph
(g)(2)(iv)(B)(1) or (2) of this section
occurs, an agreement described in
paragraph (g)(2)(i) of this section (new
(g)(2)(i) agreement), whereby it assumes
the same obligations with respect to the
dual consolidated loss as the
corporation or consolidated group that
filed the original (g)(2)(i) agreement
with respect to that loss. The new
(g)(2)(i) agreement must be signed under
penalties of perjury by the person who
signs the return and must include a
reference to this paragraph
(g)(2)(iv)(B)(3)(iii). For taxable years
beginning after December 31, 2002, the
agreement attached to the return
pursuant to the preceding sentence may
be an unsigned copy. If an unsigned
copy is attached to the return, the
corporation or consolidated group must
retain the original in its records in the
manner specified by § 1.6001–1(e).
*
*
*
*
*
(vi) * * *
(B) Annual certification. Except as
provided in § 1.1503–2(g)(2)(vi)(C), until
and unless Form 1120 or the Schedules
thereto contain questions pertaining to
dual consolidated losses, the
consolidated group, unaffiliated dual
resident corporation, or unaffiliated
domestic owner must file with its
income tax return for each of the 15
taxable years following the taxable year
in which the dual consolidated loss is
incurred a certification that the losses,
expenses, or deductions that make up
the dual consolidated loss have not been
used to offset the income of another
person under the tax laws of a foreign
country. For taxable years beginning
before January 1, 2003, the annual
certification must be signed under
penalties of perjury by a person
authorized to sign the agreement
described in § 1.1503–2(g)(2)(i). For
taxable years beginning after December
31, 2002, the certification is verified by
signing the return with which the
certification is filed. The certification
for a taxable year must identify the dual
consolidated loss to which it pertains by
setting forth the taxpayer’s year in
which the loss was incurred and the
amount of such loss. In addition, the
certification must warrant that

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Federal Register / Vol. 71, No. 236 / Friday, December 8, 2006 / Rules and Regulations
arrangements have been made to ensure
that the loss will not be used to offset
the income of another person under the
laws of a foreign country and that the
taxpayer will be informed of any such
foreign use of any portion of the loss. If
dual consolidated losses of more than
one taxable year are subject to the rules
of this paragraph (g)(2)(vi)(B), the
certifications for those years may be
combined in a single document but each
dual consolidated loss must be
separately identified.
*
*
*
*
*
§ 1.1503–2T

[Removed]

Par 21. Section 1.1503–2T is removed.
Par. 22. Section 1.6038B–1 is
amended by revising paragraph (b)(1)(ii)
to read as follows:

■
■

§ 1.6038B–1 Reporting of certain transfers
to foreign corporations.

*

*
*
*
*
(b) * * *
(1) * * *
(ii) Reporting by corporate transferor.
For transfers by corporations in taxable
years beginning before January 1, 2003,
Form 926 must be signed by an
authorized officer of the corporation if
the transferor is not a member of an
affiliated group under section 1504(a)(1)
that files a consolidated Federal income
tax return and by an authorized officer
of the common parent corporation if the
transferor is a member of such an
affiliated group. For transfers by
corporations in taxable years beginning
after December 31, 2002, Form 926 shall
be verified by signing the income tax
return to which the form is attached.
*
*
*
*
*
■ Par. 23. Section 1.6038B–1T is
amended by revising paragraphs (a)
through (b)(3) to read as follows:
§ 1.6038B–1T Reporting of certain
transactions to foreign corporations
(Temporary).

Par. 28. In § 602.101, paragraph (b) is
amended by removing the entry for
‘‘1.170A–11T’’ and revising the entry for
‘‘1.170A–11’’ to read as follows:

■

Par. 24. The authority citation for part
301 continues to read, in part, as
follows:
Authority: 26 U.S.C. 7805 * * *

Par. 25. Section 301.7701–3 is
amended by revising paragraph (c)(1)(ii)
to read as follows:

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*

*

VerDate Aug<31>2005

*

PART 602—OMB CONTROL NUMBERS
UNDER THE PAPERWORK
REDUCTION ACT

Authority: 26 U.S.C. 7805.

■

*

[Removed]

Par. 26. Section 301.7701–3T is
removed.

■

Par. 27. The authority citation for part
602 continues to read as follows:

PART 301—PROCEDURE AND
ADMINISTRATION

§ 301.7701–3 Classification of certain
business entities.

§ 301.7701–3T

■

(a) through (b)(3) [Reserved]. For
further guidance, see § 1.6038B–1(a)
through (b)(3).
*
*
*
*
*

■

(c) * * * (1) * * *
(ii) Further notification of elections.
An eligible entity required to file a
Federal tax or information return for the
taxable year for which an election is
made under § 301.7701–3(c)(1)(i) must
attach a copy of its Form 8832 to its
Federal tax or information return for
that year. If the entity is not required to
file a return for that year, a copy of its
Form 8832 (‘‘Entity Classification
Election’’) must be attached to the
Federal income tax or information
return of any direct or indirect owner of
the entity for the taxable year of the
owner that includes the date on which
the election was effective. An indirect
owner of the entity does not have to
attach a copy of the Form 8832 to its
return if an entity in which it has an
interest is already filing a copy of the
Form 8832 with its return. If an entity,
or one of its direct or indirect owners,
fails to attach a copy of a Form 8832 to
its return as directed in this section, an
otherwise valid election under
§ 301.7701–3(c)(1)(i) will not be
invalidated, but the non-filing party
may be subject to penalties, including
any applicable penalties if the Federal
tax or information returns are
inconsistent with the entity’s election
under § 301.7701–3(c)(1)(i). In the case
of returns for taxable years beginning
after December 31, 2002, the copy of
Form 8832 attached to a return pursuant
to this paragraph (c)(1)(ii) is not
required to be a signed copy.
*
*
*
*
*

§ 602.101

*

OMB Control numbers.

*
*
(b) * * *

*

*
*
*
1.170A–11 ............................

Current OMB
control No.
*

*

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*

*

*

Current OMB
control No.
*

*

Linda Kroening,
Deputy Commissioner for Services and
Enforcement.
Approved: December 1, 2006.
Eric Solomon,
Acting Deputy Assistant Secretary of the
Treasury (Tax Policy).
[FR Doc. E6–20734 Filed 12–7–06; 8:45 am]
BILLING CODE 4830–01–P

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
[TD 9286]
RIN 1545–BE91

Railroad Track Maintenance Credit;
Correction
Internal Revenue Service (IRS),
Treasury.
ACTION: Correction to temporary
regulations.
AGENCY:

SUMMARY: This document contains
corrections to temporary regulations (TD
9286) that were published in the
Federal Register on Friday, September
8, 2006 (71 FR 53009) providing rules
for claiming the railroad track
maintenance credit under section 45G of
the Internal Revenue Code for qualified
railroad track maintenance expenditures
paid or incurred by a Class II railroad or
Class III railroad and other eligible
taxpayers during the taxable year.
DATES: This correction is effective
September 8, 2006.
FOR FURTHER INFORMATION CONTACT:
Winston H. Douglas, (202) 622–3110
(not a toll-free number).
SUPPLEMENTARY INFORMATION:

Background
The correction notice that is the
subject of this document is under
section 45G of the Internal Revenue
Code.
Need for Correction

*

CFR part or section where
identified and described

CFR part or section where
identified and described

Sfmt 4700

*
1545–0123
1545–0074
1545–1868

As published, temporary regulations
(TD 9286) contain errors that may prove
to be misleading and are in need of
clarification.
Correction of Publication
Accordingly, the publication of the
temporary regulations (TD 9286), which
was the subject of FR Doc. E6–14858, is
corrected as follows:

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08DER1