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 [TD 8950] 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: Final regulations.
SUMMARY: This document contains final regulations relating to the
filing of an application for a tentative carryback adjustment. These
regulations provide guidance as to the time for filing such
application by a consolidated group and by certain corporations for
the separate return year created by their becoming a member of a
consolidated group. These final regulations may affect all
consolidated groups.
DATES: Effective Date: June 22, 2001. Applicability Date: For dates
of applicability, see §1.1502-78(e)(2)(v) of these regulations.
FOR FURTHER INFORMATION CONTACT: Christopher M. Bass or Frances L.
Kelly, (202) 622-7770 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to the Income Tax Regulations (26
CFR.2 Part 1) under section 1502 of the Internal Revenue Code of
1986 (Code), relating to the filing of an application for a
tentative carryback adjustment. The amendments 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. On January 4,
2001, a temporary regulation (TD 8919, 2001-6 I.R.B. 505) was
published in the Federal Register (66 FR 713). On this same day, a
notice of proposed rulemaking (REG-119352-00, 2001-6 I.R.B. 525)
cross-referencing the temporary regulation and a notice of public
hearing were published in the Federa Register (66 FR 747). No
comments or requests to speak were received from the public in
response to the notice of proposed rulemaking. Accordingly, the
public hearing scheduled for April 26, 2001 was canceled in the
Federal Register (66 FR 19104) on April 13, 2001. The proposed
regulation is adopted as amended by this Treasury Decision, and the
corresponding temporary regulation is removed.
Explanation of Provisions
The amendments adopted by this Treasury Decision provide a general
rule for all corporations filing consolidated returns stating that
the provisions of section 6411(a) shall apply to determine the time
for filing an application for a tentative carryback adjustment by a
consolidated group. In addition, the amendments provide a special
rule for applications filed by certain corporations that become new
members of a consolidated group, extending the period of time for
filing an application for a tentative.3 carryback adjustment
resulting from losses or credits arising in the new member's last
separate return year. For these purposes, the separate return year
is treated as ending on the same date as the end of the current
taxable year of the consolidated group.
Until Form 1139 (Application for a Tentative Carryback Adjustment)
is modified to reflect the changes made by this regulation, an
application for a tentative carryback adjustment filed under the
special rule must include additional information in the form of a
statement, "Filed pursuant to Treas. Reg. section 1.1502-78(e)(2),"
in red, at the top of the current Form 1139. In addition, the Form
1139 must state, in red, the "year end" of the consolidated group
that the new member joins. In response to the changes made by this
regulation, IRS Service Centers developed a procedure to assist in
processing applications filed under §1.1502-78(e)(2). This
procedure requires that the additional information, as set forth
above, be included on the Form 1139. This procedure supplements
existing guidelines for filing and processing Form 1139. The
proposed regulation (66 FR 747) was issued as §1.1502-78T(g).
This final regulation adopts the substance of the proposed
regulation and renumbers such provision as §1.1502-78(e).
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 is hereby
certified that this regulation will not impose a significant
economic impact on a substantial number of small entities because it
affects a relatively small.4 number of corporations and few, if any,
of those corporations are likely to be small businesses. 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, the notice of proposed rulemaking that preceded
these regulations was submitted to the Chief Counsel for Advocacy of
the Small Business Administration for comment on its impact on small
business.
Drafting Information
The principal authors of these 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.
Adoption of Amendments to the Regu ations Accordingly, 26 CFR part 1
is amended as follows:
PART 1 -- INCOME TAXES
Paragraph 1. The authority citation for part 1 is amended by
removing the entries for sections 1.1502-78(b) and 1.1502-78T and by
adding an entry 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, 6402(k), and
6411(c). * * * Par. 2. Section 1.1502-78 is amended by adding
paragraph (e) to read as follows:
§1.1502-78 Tentative carryback adjustments.
* * * * *
(e) Time for filing application--(1) General rule. The provisions of
section 6411(a) apply to the filing of an application for a
tentative carryback adjustment by a consolidated group.
(2) Special rule for new members--
(i) New member. A new member is a corporation that, in the preceding
taxable year, did not qualify as a member, as defined in
§1.1502-1(b), of the consolidated group that it now joins.
(ii) End of taxable year. Solely for the purpose of complying with
the twelve-month requirement for making an application for a
tentative carryback adjustment under section 6411(a), the separate
return year of a qualified new member shall be treated as ending on
the same date as the end of the current taxable year of the
consolidated group that the qualified new member joins.
(iii) Qualified new member. A new member of a consolidated group
qualifies for purposes of the provisions of this paragraph (e)(2)
if, immediately prior to becoming a new member, either--
(A) It was the common parent of a consolidated group; or
(B) It was not required to join in the filing of a consolidated
return.
(iv) Examples. The provisions of this paragraph (e)(2) may be
illustrated by the following examples:
Example 1. Individual A owns 100 percent of the stock of X, a
corporation that is not a member of a consolidated group and files
separate tax returns on a calendar year basis. On January 31 of year
1, X becomes a member of the Y consolidated group,.6 which also
files returns on a calendar year basis. X is a qualified new member
as defined in paragraph (e)(2)(iii)(B) of this section because,
immediately prior to becoming a new member of the Y consolidated
group, X was not required to join in the filing of a consolidated
return. As a result of its becoming a new member of Group Y, X's
separate return for the short taxable year (January 1 of year 1
through January 31 of year 1) is due September 15 of year 2 (with
extensions). See §1.1502-76(c). Group Y's consolidated return
is also due September 15 of year 2 (with extensions). See
§1.1502-76(c). Solely for the purpose of complying with the
twelve-month requirement for making an application for a tentative
carryback adjustment under section 6411(a), X's taxable year for the
separate return year is treated as ending on December 31 of year 1.
X's application for a tentative carryback adjustment is therefore
due on or before December 31 of year 2.
Example 2. Assume the same facts as in Example 1 except that
immediately prior to becoming a new member of Group Y, X was a
member of the Z consolidated group. Because X was required to join
in the filing of the consolidated return for Group Z, X is not a
qualified new member as defined in paragraph (e)(2)(iii) of this
section. X's items for the one-month period will be included in the
consolidated return for Group Z. Group Z's application for a
tentative carryback adjustment, if any, continues to be due within
12 months of the end of its taxable year, which is not affected by
X's change in status as a new member of Group Y.
(v) Effective date. The provisions of this paragraph (e)(2) apply
for applications by new members of consolidated groups for tentative
carryback adjustments resulting from net operating losses, net
capital losses, or unused business credits arising in separate
return years of new members that begin on or after January 1,
2001..§1.1502-78T
[Removed]
Par. 3. Section 1.1502-78T is removed.
Robert E. Wenzel
Deputy Commissioner of Internal Revenue
Approved: June 13, 2001
Mark A. Weinberger
Assistant Secretary of the Treasury
SEARCH:
You can search the entire Tax Professionals section, or all of Uncle Fed's Tax*Board. For a more focused search, put your search word(s) in quotes.
2001 Regulations Main | IRS Regulations Main | Home
|
