Guidance on Filing an Application for a
Tentative Carryback Adjustment in a
Consolidated Return Context

DEPARTMENT OF THE TREASURY
Internal Revenue Service 26 CFR Part 1 [REG-119352-00] RIN 1545-AY58

TITLE: Guidance on Filing an Application for a Tentative Carryback
Adjustment in a Consolidated Return Context

AGENCY: Internal Revenue Service (IRS), Treasury.

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

SUMMARY: In the rules and regulations portion of this issue of the
Federal Register, the IRS is issuing temporary regulations relating
to the filing of an application for a tentative carryback adjustment
by a consolidated group and by certain new members of a consolidated
group. The text of those temporary regulations also serves as the
text of these proposed regulations. In addition, this document
provides notice of a public hearing on these proposed regulations.

DATES: Written or electronic comments must be received by April 5,
2001. The public hearing has been scheduled for April 26, 2001.
Outlines of topics to be discussed at the public hearing scheduled
for April 26, 2001, at 10 a.m. must be received by April 5, 2001.

ADDRESSES: Send submissions to: Regulations Unit CC, room 5226
(REG-119352- 00), Internal Revenue Service, POB 7604, Ben Franklin
Station, Washington, DC 20044. Submissions may also be hand
delivered Monday through Friday between the hours of 8 a.m. and 5
p.m. to Regulations Unit CC, room 5226 (REG-119352-00), Courier's
Desk, Internal Revenue Service, 1111 Constitution Avenue, NW.,
Washington, DC. Alternatively, taxpayers may submit comments
electronically via the Internet directly to the IRS Internet site at
http://www.irs.gov/tax_regs/regslist.html. The public hearing is
scheduled for April 26, 2001, and will be held in room 4718,
Internal Revenue Building, 1111 Constitution Avenue, NW.,
Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulation,
Christopher M. Bass or Frances L. Kelly, (202) 622-7770; concerning
submissions, the hearing, and/or to be placed on the building access
list to attend the hearing, Guy Traynor, (202) 622- 7180 (not toll-
free numbers).

SUPPLEMENTARY INFORMATION:

Background

Temporary regulations in the Rules and Regulations sections of this
issue of the Federal Register amend the Income Tax Regulations (26
CFR Part 1) under section 1502 of the Internal Revenue Code of 1986
(Code). The temporary regulations provide guidance as to the time
for filing an application for a tentative carryback adjustment by a
consolidated group. The amendments also extend the time for filing
an application for a tentative carryback adjustment by certain
corporations for the separate return year created by their becoming
new members of a consolidated group. The text of those temporary
regulations also serves as the text of these proposed regulations.
The preamble to the temporary regulations explains the amendments.

Special Analyses

It has been determined that this notice of proposed rule making 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 regulations will not have a significant
economic impact on a substantial number of small entities. This
certification is based upon the fact that these regulations will
primarily affect affiliated groups of corporations that have elected
to file consolidated returns, which tend to be larger businesses,
and, moreover, that any burden on taxpayers is minimal. Therefore, 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, these regulations will be submitted to the Chief Counsel
for Advocacy of the Small Business Administration for comment on
their impact on small business.

Comments and 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
timely submitted to the IRS. The IRS and 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 made available for public inspection and copying.

A public hearing has been scheduled for April 26, 2001, beginning at
10 a.m., in room 4718, Internal Revenue Service Building, 1111
Constitution Avenue, NW., Washington DC. Due to building security
procedures, visitors must enter at the 10th Street
entrance, located between Constitution and Pennsylvania Avenues, NW.
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 area more than 15 minutes
before the hearing starts. For information about 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 request to speak,
and submit written comments and an outline of the topics to be
discussed and the time to be devoted to each topic (a signed
original and eight (8) copies) by April 5, 2001. A period of ten
minutes will be allocated 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 authors of these proposed regulations are Christopher
M. Bass and Frances L. Kelly, Office of the Associate Chief Counsel
(Corporate). However, other personnel from the IRS and Treasury
Department participated in their development.

List of Subjects in 26 CFR Part 1 Income taxes, Reporting and
recordkeeping requirements.

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 is amended by adding
the following entries in numerical order to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Section 1.1502-78 also issued under 26 U.S.C. 1502 and 6411(c).* * *

Par. 2. Section 1.1502-78, as proposed to be amended, reads as
follows:

§1.1502-78 Tentative carryback adjustments.

[The text of the amendments to this proposed section is the same as
the text of the amendments to §1.1502-78T published elsewhere
in this issue of the Federal Register.]

Robert E. Wenzel
Deputy Commissioner of Internal Revenue

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