Allocation of Controlled Group Research Credit, 18096-18099 [2015-07331]
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Federal Register / Vol. 80, No. 64 / Friday, April 3, 2015 / Rules and Regulations
III. Findings and Certification
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)
(5 U.S.C. 601 et seq.) generally requires
an agency to conduct a regulatory
flexibility analysis of any rule subject to
notice and comment rulemaking
requirements, unless the agency certifies
that the rule will not have a significant
economic impact on a substantial
number of small entities. Because HUD
has determined that good cause exists to
issue this rule without prior public
comment, this rule is not subject to the
requirement to publish an initial or final
regulatory flexibility analysis under the
RFA as part of such action.
Unfunded Mandates Reform
Section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA) 2
requires that an agency prepare a
budgetary impact statement before
promulgating a rule that includes a
Federal mandate that may result in the
expenditure by state, local and tribal
governments, in the aggregate, or by the
private sector of $100 million or more
in any one year. If a budgetary impact
statement is required, section 205 of
UMRA also requires an agency to
identify and consider a reasonable
number of regulatory alternatives before
promulgating a rule.3 However, the
UMRA applies only to rules for which
an agency publishes a general notice of
proposed rulemaking pursuant to the
APA.4 As discussed above, HUD has
determined for good cause that the APA
does not require general notice and
public comment on this rule and,
therefore, the UMRA does not apply to
this final rule.
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Executive Order 13132, Federalism
Executive Order 13132 (entitled
‘‘Federalism’’) prohibits an agency from
publishing any rule that has federalism
implications if the rule either imposes
substantial direct compliance costs on
state and local governments and is not
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state law, unless the agency meets the
consultation and funding requirements
of section 6 of the Executive Order. This
final rule will not have federalism
implications and would not impose
substantial direct compliance costs on
state and local governments or preempt
state law within the meaning of the
Executive Order.
22
U.S.C. 1532.
U.S.C. 1534.
4 2 U.S.C. 1532(a).
32
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Environmental Review
This final rule does not direct,
provide for assistance or loan and
mortgage insurance for, or otherwise
govern, or regulate, real property
acquisition, disposition, leasing,
rehabilitation, alteration, demolition, or
new construction, or establish, revise or
provide for standards for construction or
construction materials, manufactured
housing, or occupancy. Accordingly,
under 24 CFR 50.19(c)(1), this final rule
is categorically excluded from
environmental review under the
National Environmental Policy Act of
1969 (42 U.S.C. 4321).
List of Subjects
24 CFR Part 235
Condominiums, Cooperatives, Grant
programs—housing and community
development, Low and moderate
income housing, Mortgage insurance,
Reporting and recordkeeping
requirements.
For the reasons set forth in the
preamble, and under the authority of 42
U.S.C. 3535(d), HUD amends 24 CFR
parts 200 and 235 as follows:
PART 200—INTRODUCTION TO FHA
PROGRAMS
1. The authority citation for part 200
continues to read as follows:
■
Authority: 12 U.S.C. 1702–1715z–21; 42
U.S.C. 3535(d).
2. Add § 200.1301(g) to read as
follows:
■
Expiring programs—Savings
*
*
*
*
*
(g) Any existing loan assistance
(including recapture of loan assistance),
ongoing participation, or insured loans
under the program listed in this
paragraph will continue to be governed
by the regulations in effect as they
existed immediately before May 4, 2015
(24 CFR part 235, 2014 Edition):
(1) Part 235, Mortgage Insurance and
Assistance Payments for Home
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PART 235—[Removed]
■
3. Remove part 235.
Dated: March 27, 2015.
Biniam Gebre,
Acting Assistant Secretary for Housing—
Federal Housing Commissioner.
[FR Doc. 2015–07597 Filed 4–2–15; 8:45 am]
BILLING CODE 4210–67–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
24 CFR Part 200
Administrative practice and
procedure, Claims, Equal employment
opportunity, Fair housing, Home
improvement, Housing standards,
Incorporation by reference, Lead
poisoning, Loan programs—housing and
community development, Minimum
property standards, Mortgage insurance,
Organization and functions
(Government agencies), Penalties,
Reporting and recordkeeping
requirements, Social security,
Unemployment compensation, Wages.
§ 200.1301
clause.
Ownership and Project Rehabilitation
(12 U.S.C. 1715z).
(2) [Reserved]
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26 CFR Part 1
[TD 9717]
RIN 1545–BL77
Allocation of Controlled Group
Research Credit
Internal Revenue Service (IRS),
Treasury.
ACTION: Final and temporary
regulations.
AGENCY:
This document contains final
and temporary regulations relating to
the allocation of the credit for increasing
research activities (research credit) to
corporations and trades or businesses
under common control (controlled
groups)... This document also contains
final and temporary regulations relating
to the allocation of the railroad track
maintenance credit and the election for
a reduced research credit. The text of
these temporary regulations also serves
as the text of the proposed regulations
(REG–133489–13) published in the
Proposed Rules section in this issue of
the Federal Register.
DATES: Effective date: These regulations
are effective April 3, 2015.
Applicability date: For dates of
applicability, see §§ 1.41–6T(j), 1.45G–
1T(g), and 1.280C–4T(c).
FOR FURTHER INFORMATION CONTACT:
James Holmes, at (202) 317–4137; (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
SUMMARY:
Background
This document contains final and
temporary regulations for § 1.41–6,
§ 1.45G–1, and § 1.280C–4 of the Income
Tax Regulations (26 CFR part 1). These
regulations update the rules in a manner
that is consistent with the amendments
made to section 41(f)(1)(A)(ii) and
section 41(f)(1)(B)(ii) in Section 301(c)
of the Act.
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Explanation of Provisions
Section 41—Research Credit
Section 41(a) provides an incremental
tax credit for increasing research
activities and is based on a percentage
of a taxpayer’s qualified research
expenses over a base amount, basic
research payments as determined under
section 41(e)(1)(A), and amounts paid or
incurred to energy research consortiums
(collectively, ‘‘QREs’’). Under section
41(f)(1) and § 1.41–6(b), all members of
a controlled group are treated as a single
taxpayer for purposes of computing the
research credit for the group (group
credit). Section 1.41–6(b) provides that
the group credit is computed by
applying all of the section 41
computational rules on an aggregate
basis. Section 1.41–6(c) provides a
method of allocating a group research
credit among the members of the
controlled group.
Section 301(c) of the Act amended
section 41(f)(1)(A)(ii) and section
41(f)(1)(B)(ii) by requiring the allocation
of research credits to each controlled
group member ‘‘on a proportionate basis
to its share of the aggregate of the
qualified research expenses, basic
research payments, and amounts paid or
incurred to energy research
consortiums, taken into account by such
controlled group for purposes of this
section.’’ Section 301(c) of the Act
applies to taxable years beginning after
December 31, 2011.
Former section 41(f)(1)(A)(ii) and
former section 41(f)(1)(B)(ii) provided
that the research credit allowable to a
controlled group member shall be its
proportionate shares of the QREs giving
rise to the credit. Prior to these
regulations, § 1.41–6(c)(1)(i) required a
controlled group to allocate the group
credit in proportion to each member’s
stand-alone entity credit, as defined in
§ 1.41–6(c)(2), in cases in which the
group credit does not exceed the sum of
the stand-alone entity credits of all of
the members. If the group credit does
exceed this sum, then the excess of the
group credit over the sum of the standalone entity credits of all of the
members was allocated in proportion to
the QREs of the members of the
controlled group. See § 1.41–6(c)(1)(ii).
Notice 2013–20 (2013–15 IRB 902
(April 8, 2013)) was released on March
9, 2013, to provide interim guidance
relating to the allocation of the
controlled group research credit and is
effective for taxable years beginning
after December 31, 2011. Notice 2013–
20 provides that the group credit is
allocated to group members based on
each member’s share of QREs, without
regard to whether the member would
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have a stand-alone entity credit or what
the amount of any such credit would be.
The final and temporary regulations
implement the Act’s changes to the
allocation of the controlled group
research credit by revising the allocation
method in § 1.41–6(c), (d), and (e).
Section 1.41–6T(c) provides an
allocation method that follows the
approach taken in Notice 2013–20.
Section 1.41–6T(c) provides that the
group credit is allocated to group
members based on a member’s
proportionate share of the controlled
group’s aggregate QREs. Members are no
longer required to calculate a standalone entity credit. The temporary
regulations also remove references to
the stand-alone entity credit in § 1.41–
6(d)(1) and (3). New examples are
provided in § 1.41–6T(e). The first
example illustrates a general application
of the allocation method provided in
these temporary regulations. The second
example demonstrates an allocation
under these temporary regulations
where a consolidated group is treated as
a single member of a controlled group
pursuant to § 1.41–6T(d).
A commenter to Notice 2013–20
suggested that the IRS adopt a safe
harbor under § 1.41–6(c) that permits
taxpayers to calculate and allocate
group credits for taxable years ending
prior to January 1, 2013, under the new
law. The commenter’s proposal would
effectively make the Act’s amendments
retroactive to before the effective date of
the statutory change (change effective
for taxable years beginning after
December 31, 2011). Therefore, the
regulations do not adopt this suggestion
for taxable years beginning before
January 1, 2012. For taxable years
beginning before January 1, 2012,
taxpayers must apply the rules
applicable to such taxable years.
Section 45G—Railroad Track
Maintenance Credit (RTMC)
Section 45G, subject to limitations,
generally provides a RTMC in an
amount equal to fifty percent of the
qualified railroad track maintenance
expenditures paid or incurred by an
eligible taxpayer during the year.
Section 45G(e)(2) provides, for
controlled groups, that rules similar to
the rules of section 41(f)(1) shall apply
for purposes of section 45G. Section
1.45G–1(f) provides guidance on
determining the amount of RTMC under
section 45G if a taxpayer is a member
of a controlled group. Section 1.45G–1(f)
applies rules similar to the rules of
§ 1.41–6 for allocating a group RTMC.
The temporary regulations add
§ 1.45G–1T(f)(4) to provide an allocation
method for the RTMC that is consistent
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with the Act’s amendments to section
41(f)(1). Section 1.45G–1T(f)(5)(i) and
(ii) of the temporary regulations remove
references to the stand-alone entity
credit.
Section 280C(c)—Credit for Increasing
Research Activities
Section 280C(c)(1) generally disallows
otherwise allowable deductions for
QREs in an amount equal to the research
credit determined under 41(a) for a
taxable year. Section 280C(c)(3)
provides a method to elect a reduced
amount of research credit. Section
280C(c)(4) provides, by reference to
section 280C(b)(3), that in the case of a
corporation which is a member of a
controlled group of corporations (within
the meaning of section 41(f)(5)) or a
trade or business treated as being under
common control with other trades or
business (within the meaning of section
41(f)(1)(B)), section 280C(c) shall be
applied under rules prescribed by the
Secretary similar to the rules applicable
under section 41(f)(1)(A) and (B).
Section 1.280C–4(b) relates to the
election under section 280C(c)(3) that a
member of a controlled group may
make. Section 1.280C–4(b)(2) contains
an example that includes references to
the rules in § 1.41–6(c). The temporary
regulations update the example in
§ 1.280C–4(b)(2) because it describes the
rules of section 41(f) in effect before the
Act’s amendments.
Effect on Other Documents
Notice 2013–20 (2013–15 IRB 902) is
obsolete for taxable years beginning on
or after April 3, 2015.
Effective/Applicability Dates
The temporary regulations are
applicable for taxable years beginning
on or after April 3, 2015 and expire on
April 2, 2018. A taxpayer may apply
§§ 1.41–6T, 1.45G–1T, and 1.280C–4T to
taxable years beginning after December
31, 2011, but before April 3, 2015. For
a taxpayer that does not apply these
temporary regulations to a taxable year
beginning after December 31, 2011, but
before April 3, 2015, the guidance that
applies to such taxable year is contained
in Notice 2013–20 (2013–15 IRB 902).
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in
Executive Order 12866, as
supplemented by Executive Order
13563. 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
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Federal Register / Vol. 80, No. 64 / Friday, April 3, 2015 / Rules and Regulations
regulations. For the applicability of the
Regulatory Flexibility Act (5 U.S.C.
chapter 6), refer to the Special Analyses
section of the preamble to the crossreferenced notice of proposed
rulemaking published in the Proposed
Rules section in this issue of the Federal
Register. Pursuant to section 7805(f) of
the Code, these regulations have been
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 James Holmes, Office of
the Associate Chief Counsel
(Passthroughs and Special Industries).
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.
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 * * *
Section 1.41–6T also issued under 26
U.S.C. 41(f)(1) * * *
Section 1.45G–1T also issued under 26
U.S.C. 45G(e)(2) * * *
Section 1.280C–4T also issued under 26
U.S.C. 280C(c)(4) * * *
Par. 2. Section 1.41–0 is amended by
removing the entries in the table of
contents for § 1.41–6(c)(1) and § 1.41–
6(c)(2) and adding an entry for §§ 1.41–
6(j)(4) and (5) to read as follows:
■
§ 1.41–0.
Table of contents.
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*
(j) * * *
(4) Taxable years beginning after
December 31, 2011.
(5) Taxable years ending before
January 1, 2012.
■ Par. 3. Section 1.41–6 is amended by
revising paragraphs (c), (d)(1) and (3),
and (e) and adding paragraphs (j)(4) and
(5) to read as follows:
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§ 1.41–6.
Aggregation of expenditures.
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(c) [Reserved]. For further guidance,
see § 1.41–6T(c).
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(d) * * *
(1) [Reserved]. For further guidance,
see § 1.41–6T(d)(1).
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(3) [Reserved]. For further guidance,
see § 1.41–6T(d)(3).
(e) [Reserved]. For further guidance,
see § 1.41–6T(e).
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*
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*
*
(j) * * *
(4) Taxable years beginning after
December 31, 2011. [Reserved]. For
further guidance, see § 1.41–6T(j)(4).
(5) Taxable years ending before
January 1, 2012. [Reserved]. For further
guidance, see § 1.41–6T(j)(5).
■ Par. 4. Section 1.41–6T is added to
read as follows:
§ 1.41–6T. Aggregation of expenditures
(temporary).
(a) through (b) [Reserved]. For further
guidance, see § 1.41–6(a) through (b).
(c) Allocation of the group credit. The
group credit is allocated to each member
of the controlled group on a
proportionate basis to its share of the
aggregate of the qualified research
expenses, basic research payments, and
amounts paid or incurred to energy
research consortiums (collectively
‘‘QREs’’ for purposes of paragraphs (c),
(d), and (e) of this section) taken into
account for the taxable year by such
controlled group for purposes of the
credit.
(d) Special rules for consolidated
groups—(1) In general. For purposes of
applying paragraph (c) of this section,
members of a consolidated group who
are members of a controlled group are
treated as a single member of the
controlled group.
(2) [Reserved]. For further guidance,
see § 1.41–6(d)(2).
(3) Special rule for allocation of group
credit among consolidated group
members. The portion of the group
credit that is allocated to a consolidated
group is allocated to each member of the
consolidated group on a proportionate
basis to its share of the aggregate of the
QREs taken into account for the taxable
year by such consolidated group for
purposes of the credit.
(e) Examples. The following examples
illustrate the provisions of paragraphs
(c) and (d) of this section.
Example 1. Controlled group. A, B, and C
are a controlled group. A had $100x, B
$300x, and C $500x of qualified research
expenses for the year, totaling $900x for the
group. A, in the course of its trade or
business, also made a payment of $100x to
an energy research consortium for energy
research. The group’s QREs total 1000x and
the group calculated its total research credit
to be $60x for the year. Based on each
member’s proportionate share of the
controlled group’s aggregate QREs, A is
allocated $12x, B $18x, and C $30x of the
credit.
Example 2. Consolidated group is a
member of controlled group. The controlled
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group’s members are D, E, F, G, and H. F, G,
and H file a consolidated return and are
treated as a single member (FGH) of the
controlled group. D had $240x, E $360x, and
FGH $600x of qualified research expenses for
the year ($1,200x aggregate). The group
calculated its research credit to be $100x for
the year. Based on the proportion of each
member’s share of QREs to the controlled
group’s aggregate QREs for the taxable year
D is allocated $20x, E $30x, and FGH $50x
of the credit. The $50x of credit allocated to
FGH is then allocated to the consolidated
group members based on the proportion of
each consolidated group member’s share of
QREs to the consolidated group’s aggregate
QREs. F had $120x, G $240x, and H $240x
of QREs for the year. Therefore, F is allocated
$10x, G is allocated $20x, and H is allocated
$20x.
(f) through (i) [Reserved]. For further
guidance, see § 1.41–6(f) through (i).
(j)(1) through (3) [Reserved]. For
further guidance, see § 1.41–6(j)(1)
through (3).
(4) Taxable years beginning after
December 31, 2011. Section 1.41–6T is
applicable for taxable years beginning
on or after April 3, 2015. Taxpayers may
apply § 1.41–6T to taxable years
beginning after December 31, 2011, but
before April 3, 2015. For a taxpayer that
does not apply § 1.41–6T to a taxable
year beginning after December 31, 2011,
but before April 3, 2015, the guidance
that applies to such taxable year is
contained in Notice 2013–20 (2013–15
IRB 902).
(5) Taxable years beginning before
January 1, 2012. See § 1.41–6 as
contained in 26 CFR part 1, revised
April 1, 2014.
(6) Expiration date. The applicability
of § 1.41–6T expires on April 2, 2018.
■ Par. 5. Section 1.45G–0 is amended by
removing the entries in the table of
contents for § 1.45G–1(f)(4)(i) and
§ 1.45G–1(f)(4)(ii) and adding an entry
in the table of contents for §§ 1.45G–
1(g)(4) and (5) to read as follows:
§ 1.45G–0. Table of contents for the
railroad track maintenance credit.
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*
*
*
(g) * * *
(4) Taxable years beginning after
December 31, 2011.
(5) Taxable years beginning before
January 1, 2012.
■ Par. 6. Section 1.45G–1 is amended by
revising paragraphs (f)(4) and (f)(5)(i)
and (ii) and adding paragraphs (g)(4)
and (5) to read as follows:
§ 1.45G–1.
credit.
Railroad track maintenance
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(f) * * *
(4) [Reserved]. For further guidance,
see § 1.45G–1T(f)(4).
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(5) [Reserved]. For further guidance
see § 1.45G–1T(f)(5).
(g) * * *
(4) Taxable years beginning after
December 31, 2011. [Reserved]. For
further guidance see § 1.45G–1T(g)(4).
(5) Taxable years beginning before
January 1, 2012. [Reserved]. For further
guidance see § 1.45G–1T(g)(5).
■ Par. 7. Section 1.45G–1T is added to
read as follows:
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§ 1.45G–1T. Railroad track maintenance
credit (temporary).
(a) through (e) [Reserved]. For further
guidance, see § 1.45G–1(a) through (e).
(f)(1) through (3) [Reserved]. For
further guidance, see § 1.45G–1(f)(1)
through (3).
(4) Allocation of the group credit. The
group credit is allocated to each member
of the controlled group on a
proportionate basis to its share of the
aggregate of the QRTMEs taken into
account for the taxable year by such
controlled group for purposes of the
credit.
(5) Special rules for consolidated
groups—(i) In general. For purposes of
applying paragraph (f)(4) of this section,
members of a consolidated group who
are members of a controlled group are
treated as a single member of the
controlled group.
(ii) Special rule for allocation of group
credit among consolidated group
members. The portion of the group
credit that is allocated to a consolidated
group is allocated to each member of the
consolidated group on a proportionate
basis to its share of the aggregate of the
QRTMEs taken into account for the
taxable year by such consolidated group
for purposes of the credit.
(6) through (8) [Reserved]. For further
guidance, see § 1.45G–1(f)(6) through
(8).
(g)(1) through (3) [Reserved]. For
further guidance, see § 1.45G–1(g)(1)
through (3).
(4) Taxable years beginning after
December 31, 2011. Section 1.45G–1T is
applicable for taxable years beginning
on or after April 3, 2015. Taxpayers may
apply § 1.45G–1T to taxable years
beginning after December 31, 2011, but
before April 3, 2015. For a taxpayer that
does not apply § 1.45G–1T to a taxable
year beginning after December 31, 2011,
but before April 3, 2015, the guidance
that applies to such taxable year is
contained in Notice 2013–20 (2013–15
IRB 902).
(5) Taxable years ending before
January 1, 2012. See § 1.45–1 as
contained in 26 CFR part 1, revised
April 1, 2014.
(6) Expiration date. The applicability
of § 1.45G–1T expires on April 2, 2018.
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Par. 8. Section 1.280C–4 is amended
by revising paragraph (b)(2),
redesignating paragraph (c) as (c)(1) and
adding paragraphs (c)(2) and (3) to read
as follows:
■
§ 1.280C–4.
activities.
Credit for increasing research
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*
*
*
*
(b) * * *
(2) [Reserved]. For further guidance,
see § 1.280C–4T(b)(2).
*
*
*
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*
(c) * * *
(2) [Reserved]. For further guidance,
see § 1.280C–4T(c)(2).
(3) [Reserved]. For further guidance,
see § 1.280C–4T(c)(3).
■ Par. 9. Section 1.280C–4T is added to
read as follows:
18099
contained in Notice 2013–20 (2013–15
IRB 902).
(3) For taxable years ending before
January 1, 2012. See § 1.280C–4 as
contained in 26 CFR part 1, revised
April 1, 2014.
(4) Expiration date. The applicability
of paragraph (b)(2) expires on April 2,
2018.
John Dalrymple,
Deputy Commissioner for Services and
Enforcement.
Approved: March 16, 2015.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2015–07331 Filed 4–2–15; 8:45 am]
BILLING CODE 4830–01–P
§ 1.280C–4T. Credit for increasing
research activities (temporary).
DEPARTMENT OF JUSTICE
(a) [Reserved]. For further guidance,
see § 1.280C–4(a).
(b) Controlled groups of corporations;
trades or businesses under common
control. (1) [Reserved]. For further
guidance, see § 1.280C–4(b)(1).
28 CFR Part 16
(2) Example. The following example
illustrates an application of paragraph (b) of
this section: A, B, and C, all of which are
calendar year taxpayers, are members of a
controlled group of corporations (within the
meaning of section 41(f)(5)). A, B, and C each
attach a statement to the 2012 Form 6765,
‘‘Credit for Increasing Research Activities,’’
showing A and C were the only members of
the controlled group to have qualified
research expenses when calculating the
group credit. A and C report their allocated
portions of the group credit on the 2012 Form
6765 and B reports no research credit on
Form 6765. Pursuant to § 1.280C–4(a), A and
B, but not C, each make an election for the
reduced credit under section 280(c)(3)(B) on
the 2012 Form 6765. In December 2013, B
determines it had qualified research expenses
in 2012 resulting in an increased group
credit. On an amended 2012 Form 6765, A,
B, and C each report their allocated portions
of the group credit. B reports its credit as a
regular credit under section 41(a) and
reduces the credit under section
280C(c)(3)(B). C may not reduce its credit
under section 280(c)(3)(B) because C did not
make an election for the reduced credit with
its original return.
Revision of Department’s Freedom of
Information Act Regulations
(c)(1) [Reserved]. For further guidance
see § 1.280C–4(c)(1).
(2) Taxable years beginning after
December 31, 2011. Section 1.280C–4T
is applicable for taxable years beginning
on or after April 3, 2015. Taxpayers may
apply § 1.280C–4T to taxable years
beginning after December 31, 2011, but
before April 3, 2015. For a taxpayer that
does not apply § 1.280C–4T to a taxable
year beginning after December 31, 2011,
but before April 3, 2015, the guidance
that applies to such taxable year is
Background Information
PO 00000
Frm 00017
Fmt 4700
Sfmt 4700
[Docket No. OAG 140; AG Order No. 3517–
2015]
RIN 1105–AB27
Department of Justice.
Final rule.
AGENCY:
ACTION:
This rule amends the
Department’s regulations under the
Freedom of Information Act (‘‘FOIA’’).
The regulations have been revised to
update and streamline the language of
several procedural provisions and to
incorporate changes brought about by
the amendments to the FOIA under the
OPEN Government Act of 2007.
Additionally, the regulations have been
updated to reflect developments in the
case law and to include current cost
figures to be used in calculating and
charging fees.
DATES: Effective May 4, 2015.
FOR FURTHER INFORMATION CONTACT:
Lindsay Roberts, Attorney-Advisor,
Office of Information Policy, (202) 514–
3642.
SUPPLEMENTARY INFORMATION:
SUMMARY:
On March 21, 2011, the Department of
Justice published a proposed rule to
revise its existing regulations under the
FOIA. See 76 FR 15236. On September
19, 2011, the Department reopened the
comment period for another thirty days
in order to consider additional public
comments. See 76 FR 57940.
Comments
Interested persons were afforded the
opportunity to participate in the
E:\FR\FM\03APR1.SGM
03APR1
]]>Agencies
[Federal Register Volume 80, Number 64 (Friday, April 3, 2015)]
[Rules and Regulations]
[Pages 18096-18099]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-07331]
=======================================================================
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9717]
RIN 1545-BL77
Allocation of Controlled Group Research Credit
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final and temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final and temporary regulations
relating to the allocation of the credit for increasing research
activities (research credit) to corporations and trades or businesses
under common control (controlled groups)... This document also contains
final and temporary regulations relating to the allocation of the
railroad track maintenance credit and the election for a reduced
research credit. The text of these temporary regulations also serves as
the text of the proposed regulations (REG-133489-13) published in the
Proposed Rules section in this issue of the Federal Register.
DATES: Effective date: These regulations are effective April 3, 2015.
Applicability date: For dates of applicability, see Sec. Sec.
1.41-6T(j), 1.45G-1T(g), and 1.280C-4T(c).
FOR FURTHER INFORMATION CONTACT: James Holmes, at (202) 317-4137; (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains final and temporary regulations for Sec.
1.41-6, Sec. 1.45G-1, and Sec. 1.280C-4 of the Income Tax Regulations
(26 CFR part 1). These regulations update the rules in a manner that is
consistent with the amendments made to section 41(f)(1)(A)(ii) and
section 41(f)(1)(B)(ii) in Section 301(c) of the Act.
[[Page 18097]]
Explanation of Provisions
Section 41--Research Credit
Section 41(a) provides an incremental tax credit for increasing
research activities and is based on a percentage of a taxpayer's
qualified research expenses over a base amount, basic research payments
as determined under section 41(e)(1)(A), and amounts paid or incurred
to energy research consortiums (collectively, ``QREs''). Under section
41(f)(1) and Sec. 1.41-6(b), all members of a controlled group are
treated as a single taxpayer for purposes of computing the research
credit for the group (group credit). Section 1.41-6(b) provides that
the group credit is computed by applying all of the section 41
computational rules on an aggregate basis. Section 1.41-6(c) provides a
method of allocating a group research credit among the members of the
controlled group.
Section 301(c) of the Act amended section 41(f)(1)(A)(ii) and
section 41(f)(1)(B)(ii) by requiring the allocation of research credits
to each controlled group member ``on a proportionate basis to its share
of the aggregate of the qualified research expenses, basic research
payments, and amounts paid or incurred to energy research consortiums,
taken into account by such controlled group for purposes of this
section.'' Section 301(c) of the Act applies to taxable years beginning
after December 31, 2011.
Former section 41(f)(1)(A)(ii) and former section 41(f)(1)(B)(ii)
provided that the research credit allowable to a controlled group
member shall be its proportionate shares of the QREs giving rise to the
credit. Prior to these regulations, Sec. 1.41-6(c)(1)(i) required a
controlled group to allocate the group credit in proportion to each
member's stand-alone entity credit, as defined in Sec. 1.41-6(c)(2),
in cases in which the group credit does not exceed the sum of the
stand-alone entity credits of all of the members. If the group credit
does exceed this sum, then the excess of the group credit over the sum
of the stand-alone entity credits of all of the members was allocated
in proportion to the QREs of the members of the controlled group. See
Sec. 1.41-6(c)(1)(ii).
Notice 2013-20 (2013-15 IRB 902 (April 8, 2013)) was released on
March 9, 2013, to provide interim guidance relating to the allocation
of the controlled group research credit and is effective for taxable
years beginning after December 31, 2011. Notice 2013-20 provides that
the group credit is allocated to group members based on each member's
share of QREs, without regard to whether the member would have a stand-
alone entity credit or what the amount of any such credit would be.
The final and temporary regulations implement the Act's changes to
the allocation of the controlled group research credit by revising the
allocation method in Sec. 1.41-6(c), (d), and (e). Section 1.41-6T(c)
provides an allocation method that follows the approach taken in Notice
2013-20. Section 1.41-6T(c) provides that the group credit is allocated
to group members based on a member's proportionate share of the
controlled group's aggregate QREs. Members are no longer required to
calculate a stand-alone entity credit. The temporary regulations also
remove references to the stand-alone entity credit in Sec. 1.41-
6(d)(1) and (3). New examples are provided in Sec. 1.41-6T(e). The
first example illustrates a general application of the allocation
method provided in these temporary regulations. The second example
demonstrates an allocation under these temporary regulations where a
consolidated group is treated as a single member of a controlled group
pursuant to Sec. 1.41-6T(d).
A commenter to Notice 2013-20 suggested that the IRS adopt a safe
harbor under Sec. 1.41-6(c) that permits taxpayers to calculate and
allocate group credits for taxable years ending prior to January 1,
2013, under the new law. The commenter's proposal would effectively
make the Act's amendments retroactive to before the effective date of
the statutory change (change effective for taxable years beginning
after December 31, 2011). Therefore, the regulations do not adopt this
suggestion for taxable years beginning before January 1, 2012. For
taxable years beginning before January 1, 2012, taxpayers must apply
the rules applicable to such taxable years.
Section 45G--Railroad Track Maintenance Credit (RTMC)
Section 45G, subject to limitations, generally provides a RTMC in
an amount equal to fifty percent of the qualified railroad track
maintenance expenditures paid or incurred by an eligible taxpayer
during the year. Section 45G(e)(2) provides, for controlled groups,
that rules similar to the rules of section 41(f)(1) shall apply for
purposes of section 45G. Section 1.45G-1(f) provides guidance on
determining the amount of RTMC under section 45G if a taxpayer is a
member of a controlled group. Section 1.45G-1(f) applies rules similar
to the rules of Sec. 1.41-6 for allocating a group RTMC.
The temporary regulations add Sec. 1.45G-1T(f)(4) to provide an
allocation method for the RTMC that is consistent with the Act's
amendments to section 41(f)(1). Section 1.45G-1T(f)(5)(i) and (ii) of
the temporary regulations remove references to the stand-alone entity
credit.
Section 280C(c)--Credit for Increasing Research Activities
Section 280C(c)(1) generally disallows otherwise allowable
deductions for QREs in an amount equal to the research credit
determined under 41(a) for a taxable year. Section 280C(c)(3) provides
a method to elect a reduced amount of research credit. Section
280C(c)(4) provides, by reference to section 280C(b)(3), that in the
case of a corporation which is a member of a controlled group of
corporations (within the meaning of section 41(f)(5)) or a trade or
business treated as being under common control with other trades or
business (within the meaning of section 41(f)(1)(B)), section 280C(c)
shall be applied under rules prescribed by the Secretary similar to the
rules applicable under section 41(f)(1)(A) and (B). Section 1.280C-4(b)
relates to the election under section 280C(c)(3) that a member of a
controlled group may make. Section 1.280C-4(b)(2) contains an example
that includes references to the rules in Sec. 1.41-6(c). The temporary
regulations update the example in Sec. 1.280C-4(b)(2) because it
describes the rules of section 41(f) in effect before the Act's
amendments.
Effect on Other Documents
Notice 2013-20 (2013-15 IRB 902) is obsolete for taxable years
beginning on or after April 3, 2015.
Effective/Applicability Dates
The temporary regulations are applicable for taxable years
beginning on or after April 3, 2015 and expire on April 2, 2018. A
taxpayer may apply Sec. Sec. 1.41-6T, 1.45G-1T, and 1.280C-4T to
taxable years beginning after December 31, 2011, but before April 3,
2015. For a taxpayer that does not apply these temporary regulations to
a taxable year beginning after December 31, 2011, but before April 3,
2015, the guidance that applies to such taxable year is contained in
Notice 2013-20 (2013-15 IRB 902).
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866, as
supplemented by Executive Order 13563. 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
[[Page 18098]]
regulations. For the applicability of the Regulatory Flexibility Act (5
U.S.C. chapter 6), refer to the Special Analyses section of the
preamble to the cross-referenced notice of proposed rulemaking
published in the Proposed Rules section in this issue of the Federal
Register. Pursuant to section 7805(f) of the Code, these regulations
have been 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 James Holmes, Office
of the Associate Chief Counsel (Passthroughs and Special Industries).
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.
Amendments to the Regulations
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.41-6T also issued under 26 U.S.C. 41(f)(1) * * *
Section 1.45G-1T also issued under 26 U.S.C. 45G(e)(2) * * *
Section 1.280C-4T also issued under 26 U.S.C. 280C(c)(4) * * *
0
Par. 2. Section 1.41-0 is amended by removing the entries in the table
of contents for Sec. 1.41-6(c)(1) and Sec. 1.41-6(c)(2) and adding an
entry for Sec. Sec. 1.41-6(j)(4) and (5) to read as follows:
Sec. 1.41-0. Table of contents.
* * * * *
(j) * * *
(4) Taxable years beginning after December 31, 2011.
(5) Taxable years ending before January 1, 2012.
0
Par. 3. Section 1.41-6 is amended by revising paragraphs (c), (d)(1)
and (3), and (e) and adding paragraphs (j)(4) and (5) to read as
follows:
Sec. 1.41-6. Aggregation of expenditures.
* * * * *
(c) [Reserved]. For further guidance, see Sec. 1.41-6T(c).
* * * * *
(d) * * *
(1) [Reserved]. For further guidance, see Sec. 1.41-6T(d)(1).
* * * * *
(3) [Reserved]. For further guidance, see Sec. 1.41-6T(d)(3).
(e) [Reserved]. For further guidance, see Sec. 1.41-6T(e).
* * * * *
(j) * * *
(4) Taxable years beginning after December 31, 2011. [Reserved].
For further guidance, see Sec. 1.41-6T(j)(4).
(5) Taxable years ending before January 1, 2012. [Reserved]. For
further guidance, see Sec. 1.41-6T(j)(5).
0
Par. 4. Section 1.41-6T is added to read as follows:
Sec. 1.41-6T. Aggregation of expenditures (temporary).
(a) through (b) [Reserved]. For further guidance, see Sec. 1.41-
6(a) through (b).
(c) Allocation of the group credit. The group credit is allocated
to each member of the controlled group on a proportionate basis to its
share of the aggregate of the qualified research expenses, basic
research payments, and amounts paid or incurred to energy research
consortiums (collectively ``QREs'' for purposes of paragraphs (c), (d),
and (e) of this section) taken into account for the taxable year by
such controlled group for purposes of the credit.
(d) Special rules for consolidated groups--(1) In general. For
purposes of applying paragraph (c) of this section, members of a
consolidated group who are members of a controlled group are treated as
a single member of the controlled group.
(2) [Reserved]. For further guidance, see Sec. 1.41-6(d)(2).
(3) Special rule for allocation of group credit among consolidated
group members. The portion of the group credit that is allocated to a
consolidated group is allocated to each member of the consolidated
group on a proportionate basis to its share of the aggregate of the
QREs taken into account for the taxable year by such consolidated group
for purposes of the credit.
(e) Examples. The following examples illustrate the provisions of
paragraphs (c) and (d) of this section.
Example 1. Controlled group. A, B, and C are a controlled group.
A had $100x, B $300x, and C $500x of qualified research expenses for
the year, totaling $900x for the group. A, in the course of its
trade or business, also made a payment of $100x to an energy
research consortium for energy research. The group's QREs total
1000x and the group calculated its total research credit to be $60x
for the year. Based on each member's proportionate share of the
controlled group's aggregate QREs, A is allocated $12x, B $18x, and
C $30x of the credit.
Example 2. Consolidated group is a member of controlled group.
The controlled group's members are D, E, F, G, and H. F, G, and H
file a consolidated return and are treated as a single member (FGH)
of the controlled group. D had $240x, E $360x, and FGH $600x of
qualified research expenses for the year ($1,200x aggregate). The
group calculated its research credit to be $100x for the year. Based
on the proportion of each member's share of QREs to the controlled
group's aggregate QREs for the taxable year D is allocated $20x, E
$30x, and FGH $50x of the credit. The $50x of credit allocated to
FGH is then allocated to the consolidated group members based on the
proportion of each consolidated group member's share of QREs to the
consolidated group's aggregate QREs. F had $120x, G $240x, and H
$240x of QREs for the year. Therefore, F is allocated $10x, G is
allocated $20x, and H is allocated $20x.
(f) through (i) [Reserved]. For further guidance, see Sec. 1.41-
6(f) through (i).
(j)(1) through (3) [Reserved]. For further guidance, see Sec.
1.41-6(j)(1) through (3).
(4) Taxable years beginning after December 31, 2011. Section 1.41-
6T is applicable for taxable years beginning on or after April 3, 2015.
Taxpayers may apply Sec. 1.41-6T to taxable years beginning after
December 31, 2011, but before April 3, 2015. For a taxpayer that does
not apply Sec. 1.41-6T to a taxable year beginning after December 31,
2011, but before April 3, 2015, the guidance that applies to such
taxable year is contained in Notice 2013-20 (2013-15 IRB 902).
(5) Taxable years beginning before January 1, 2012. See Sec. 1.41-
6 as contained in 26 CFR part 1, revised April 1, 2014.
(6) Expiration date. The applicability of Sec. 1.41-6T expires on
April 2, 2018.
0
Par. 5. Section 1.45G-0 is amended by removing the entries in the table
of contents for Sec. 1.45G-1(f)(4)(i) and Sec. 1.45G-1(f)(4)(ii) and
adding an entry in the table of contents for Sec. Sec. 1.45G-1(g)(4)
and (5) to read as follows:
Sec. 1.45G-0. Table of contents for the railroad track maintenance
credit.
* * * * *
(g) * * *
(4) Taxable years beginning after December 31, 2011.
(5) Taxable years beginning before January 1, 2012.
0
Par. 6. Section 1.45G-1 is amended by revising paragraphs (f)(4) and
(f)(5)(i) and (ii) and adding paragraphs (g)(4) and (5) to read as
follows:
Sec. 1.45G-1. Railroad track maintenance credit.
* * * * *
(f) * * *
(4) [Reserved]. For further guidance, see Sec. 1.45G-1T(f)(4).
[[Page 18099]]
(5) [Reserved]. For further guidance see Sec. 1.45G-1T(f)(5).
(g) * * *
(4) Taxable years beginning after December 31, 2011. [Reserved].
For further guidance see Sec. 1.45G-1T(g)(4).
(5) Taxable years beginning before January 1, 2012. [Reserved]. For
further guidance see Sec. 1.45G-1T(g)(5).
0
Par. 7. Section 1.45G-1T is added to read as follows:
Sec. 1.45G-1T. Railroad track maintenance credit (temporary).
(a) through (e) [Reserved]. For further guidance, see Sec. 1.45G-
1(a) through (e).
(f)(1) through (3) [Reserved]. For further guidance, see Sec.
1.45G-1(f)(1) through (3).
(4) Allocation of the group credit. The group credit is allocated
to each member of the controlled group on a proportionate basis to its
share of the aggregate of the QRTMEs taken into account for the taxable
year by such controlled group for purposes of the credit.
(5) Special rules for consolidated groups--(i) In general. For
purposes of applying paragraph (f)(4) of this section, members of a
consolidated group who are members of a controlled group are treated as
a single member of the controlled group.
(ii) Special rule for allocation of group credit among consolidated
group members. The portion of the group credit that is allocated to a
consolidated group is allocated to each member of the consolidated
group on a proportionate basis to its share of the aggregate of the
QRTMEs taken into account for the taxable year by such consolidated
group for purposes of the credit.
(6) through (8) [Reserved]. For further guidance, see Sec. 1.45G-
1(f)(6) through (8).
(g)(1) through (3) [Reserved]. For further guidance, see Sec.
1.45G-1(g)(1) through (3).
(4) Taxable years beginning after December 31, 2011. Section 1.45G-
1T is applicable for taxable years beginning on or after April 3, 2015.
Taxpayers may apply Sec. 1.45G-1T to taxable years beginning after
December 31, 2011, but before April 3, 2015. For a taxpayer that does
not apply Sec. 1.45G-1T to a taxable year beginning after December 31,
2011, but before April 3, 2015, the guidance that applies to such
taxable year is contained in Notice 2013-20 (2013-15 IRB 902).
(5) Taxable years ending before January 1, 2012. See Sec. 1.45-1
as contained in 26 CFR part 1, revised April 1, 2014.
(6) Expiration date. The applicability of Sec. 1.45G-1T expires on
April 2, 2018.
0
Par. 8. Section 1.280C-4 is amended by revising paragraph (b)(2),
redesignating paragraph (c) as (c)(1) and adding paragraphs (c)(2) and
(3) to read as follows:
Sec. 1.280C-4. Credit for increasing research activities.
* * * * *
(b) * * *
(2) [Reserved]. For further guidance, see Sec. 1.280C-4T(b)(2).
* * * * *
(c) * * *
(2) [Reserved]. For further guidance, see Sec. 1.280C-4T(c)(2).
(3) [Reserved]. For further guidance, see Sec. 1.280C-4T(c)(3).
0
Par. 9. Section 1.280C-4T is added to read as follows:
Sec. 1.280C-4T. Credit for increasing research activities
(temporary).
(a) [Reserved]. For further guidance, see Sec. 1.280C-4(a).
(b) Controlled groups of corporations; trades or businesses under
common control. (1) [Reserved]. For further guidance, see Sec. 1.280C-
4(b)(1).
(2) Example. The following example illustrates an application
of paragraph (b) of this section: A, B, and C, all of which are
calendar year taxpayers, are members of a controlled group of
corporations (within the meaning of section 41(f)(5)). A, B, and C
each attach a statement to the 2012 Form 6765, ``Credit for
Increasing Research Activities,'' showing A and C were the only
members of the controlled group to have qualified research expenses
when calculating the group credit. A and C report their allocated
portions of the group credit on the 2012 Form 6765 and B reports no
research credit on Form 6765. Pursuant to Sec. 1.280C-4(a), A and
B, but not C, each make an election for the reduced credit under
section 280(c)(3)(B) on the 2012 Form 6765. In December 2013, B
determines it had qualified research expenses in 2012 resulting in
an increased group credit. On an amended 2012 Form 6765, A, B, and C
each report their allocated portions of the group credit. B reports
its credit as a regular credit under section 41(a) and reduces the
credit under section 280C(c)(3)(B). C may not reduce its credit
under section 280(c)(3)(B) because C did not make an election for
the reduced credit with its original return.
(c)(1) [Reserved]. For further guidance see Sec. 1.280C-4(c)(1).
(2) Taxable years beginning after December 31, 2011. Section
1.280C-4T is applicable for taxable years beginning on or after April
3, 2015. Taxpayers may apply Sec. 1.280C-4T to taxable years beginning
after December 31, 2011, but before April 3, 2015. For a taxpayer that
does not apply Sec. 1.280C-4T to a taxable year beginning after
December 31, 2011, but before April 3, 2015, the guidance that applies
to such taxable year is contained in Notice 2013-20 (2013-15 IRB 902).
(3) For taxable years ending before January 1, 2012. See Sec.
1.280C-4 as contained in 26 CFR part 1, revised April 1, 2014.
(4) Expiration date. The applicability of paragraph (b)(2) expires
on April 2, 2018.
John Dalrymple,
Deputy Commissioner for Services and Enforcement.
Approved: March 16, 2015.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2015-07331 Filed 4-2-15; 8:45 am]
BILLING CODE 4830-01-P
