Application of Separate Limitations to Dividends From Noncontrolled Section 902 Corporations; Correction, 77264-77266 [E6-22024]

Download as PDF 77264 Federal Register / Vol. 71, No. 247 / Tuesday, December 26, 2006 / Rules and Regulations 2006–26–03 Alpha Aviation Design Limited (Type Certificate No. A48EU formerly held by APEX Aircraft and AVIONS PIERRE ROBIN): Amendment 39–14861; Docket No. FAA–2006–26492; Directorate Identifier 2006–CE–77–AD. the FAA amends 14 CFR part 39 as follows: PART 39—AIRWORTHINESS DIRECTIVES 1. The authority citation for part 39 continues to read as follows: I Authority: 49 U.S.C. 106(g), 40113, 44701. § 39.13 Effective Date (a) This AD becomes effective on January 30, 2007. Affected ADs (b) None. [Amended] 2. The FAA amends § 39.13 by adding the following new airworthiness directive (AD): I Applicability (c) This AD applies to Model R2160 airplanes, serial numbers 142, 143, 144, 147, 148, and 151 through 155, that are certificated in any category. Unsafe Condition (d) This AD is the result of the possibility of fuel leakage at the end of the adapter in the fuel pressure indication system. We are issuing this AD to detect and correct fuel leaks in the fuel pressure indicating system. This failure could allow fuel to leak near the exhaust manifold and lead to a fire. Compliance (e) To address this problem, you must do the following, unless already done: Actions Compliance Procedures (1) Inspect the fuel pressure system indication adaptor (part number 52.46.11.000 or FAA approved equivalent part number) for indication of fuel leakage. (2) If any leak is found, repair the leak ............. Before further flight after January 30, 2007 (the effective date of this AD) and thereafter at intervals not to exceed 50 hours time-inservice. Before further flight after inspection required by paragraph (e)(1) of this AD. Perform a visual inspection. Figure 1 of Robin Aviation Service Letter No 37 rev. 2 dated April 4, 2000, shows a view of the fuel pressure indicator system. Perform a repair program approved specifically for this AD by the FAA. Alternative Methods of Compliance (AMOCs) (f) The Manager, Standards Staff, FAA, ATTN: Karl Schletzbaum, Aerospace Engineer, FAA, Small Airplane Directorate, 901 Locust, Room 301, Kansas City, Missouri 64106; telephone: (816) 329–4146; fax: (816) 329–4090, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. ACTION: Correcting amendments. I Par. 2. Section 1.902–1 is amended by adding a heading to paragraph (a)(4)(i) introductory text and revising the heading for paragraph (c)(8) to read as follows: Related Information (g) This AD is related to the Civil Aviation Authority of New Zealand AD DCA/R2000/ 33, dated June 29, 2006, which references Direction Generale de l’Aviation Civile (DGAC) AD F–2001–391(a), dated October 3, 2001. Material Incorporated by Reference (h) None. Issued in Kansas City, Missouri, on December 15, 2006. Kim Smith, Manager, Small Airplane Directorate, Aircraft Certification Service. [FR Doc. E6–21923 Filed 12–22–06; 8:45 am] BILLING CODE 4910–13–P Internal Revenue Service Need for Correction As published, TD 9260 contains errors that may prove to be misleading and are in need of clarification. Correction of Publication 26 CFR Part 1 Accordingly, 26 CFR part 1 is corrected by making the following correcting amendments: I [TD 9260] RIN 1545–BF46 jlentini on PROD1PC65 with RULES Background The final and temporary regulations (TD 9260) that are the subject of these corrections are under sections 902, 904, and 964 of the Internal Revenue Code. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. DEPARTMENT OF THE TREASURY Application of Separate Limitations to Dividends From Noncontrolled Section 902 Corporations; Correction Internal Revenue Service (IRS), Treasury. AGENCY: VerDate Aug<31>2005 SUMMARY: This document contains corrections to final and temporary regulations that were published in the Federal Register on Tuesday, April 25, 2006 (71 FR 24516) concerning the application of separate foreign tax credit limitations to dividends received from noncontrolled section 902 corporations under section 904(d)(4). DATES: These corrections are effective April 25, 2006. FOR FURTHER INFORMATION CONTACT: Ginny Chung (202) 622–3850 (not a tollfree call). SUPPLEMENTARY INFORMATION: 16:12 Dec 22, 2006 Jkt 211001 PART 1—INCOME TAXES Paragraph 1. The authority for part 1 is amended and continues to read in part: I Authority: 26 U.S.C. 7805 * * * PO 00000 Frm 00020 Fmt 4700 Sfmt 4700 § 1.902–1 Credit for domestic corporate shareholder of a foreign corporation for foreign income taxes paid by the foreign corporation. (a) * * * (4) Third- or lower-tier corporation— (i) Third-tier corporation. * * * * * * * * (c) * * * (8) Effect of certain liquidations, reorganizations, or similar transactions on certain foreign taxes paid or accrued in taxable years beginning on or before August 5, 1997. * * * * * * * * I Par. 3. Section 1.902–1T is amended by revising the first sentence of paragraph (a)(7) to read as follows: § 1.902–1T Credit for domestic corporate shareholder of a foreign corporation for foreign income taxes paid by the foreign corporation (temporary). (a) * * * (7) * * * The term foreign income taxes means income, war profits, and excess profits taxes as defined in § 1.902–1(a), and taxes included in the term income, war profits, and excess profits taxes by reason of section 903, that are imposed by a foreign country or a possession of the United States, including any such taxes deemed paid by a foreign corporation under this section. * * * * * * * * E:\FR\FM\26DER1.SGM 26DER1 Federal Register / Vol. 71, No. 247 / Tuesday, December 26, 2006 / Rules and Regulations I Par. 4. Section 1.902–2 is amended by revising the first sentence of paragraph (a)(1) to read as follows: § 1.902–2 Treatment of deficits in post1986 undistributed earnings and pre-1987 accumulated profits of a first- or lower-tier corporation for purposes of computing an amount of foreign taxes deemed paid under § 1.902–1. (a) * * * (1) * * * For purposes of computing foreign income taxes deemed paid under § 1.902–1(b) with respect to dividends paid by a first- or lower-tier corporation, when there is a deficit in the post-1986 undistributed earnings of that corporation and the corporation makes a distribution to shareholders that is a dividend or would be a dividend if there were current or accumulated earnings and profits, then the post-1986 deficit shall be carried back to the most recent pre-effective date taxable year of the first- or lowertier corporation with positive accumulated profits computed under section 902. * * * * * * * * I Par. 5. Section 1.904–0 is amended by adding the entries for paragraphs (o)(1) and (o)(2) under § 1.904–5 to read as follows: on the basis of the tax imposed on that income as provided in § 1.904– 4T(c)(3)(i) through (iv). (iii) Determination of the source of income. For purposes of this paragraph (c)(4), income will be determined to be from sources within or without the QBU’s country of operation under the laws of the foreign country of the payor of the income. * * * * * Par. 7. Section 1.904–5 is amended by revising paragraphs (a) introductory text and (a)(1) and adding Examples 4 and 5 to paragraph (i)(5) to read as follows: § 1.904–5 Look-through rules as applied to controlled foreign corporations and other entities. (a) and (a)(1) [Reserved]. For further guidance, see § 1.904–5T(a) introductory text and (a)(1). * * * * * (i) * * * (5) * * * Examples 4 and 5 [Reserved]. For further guidance, see § 1.904–5T(i)(5) Examples 4 and 5. * * * * * Par. 8. Section 1.904(f)–12T is amended by revising the heading for paragraph (g)(1) to read as follows: § 1.904–0 Outline of regulations provisions for section 904. § 1.904(f)–12T (temporary). * * * * * * § 1.904–5 Look-through rules as applied to controlled foreign corporations and other entities. * * * * * (o) * * * (1) Rules for controlled foreign corporations and other look-through entities. (2) Rules for noncontrolled section 902 corporations. * * * * * I Par. 6. Section 1.904–4 is amended by revising paragraph (c)(4) introductory text and adding paragraphs (c)(4)(i) through (c)(4)(iii) to read as follows: § 1.904–4 Separate application of section 904 with respect to certain categories of income. jlentini on PROD1PC65 with RULES * * * * * (c) * * * (3) and (4) [Reserved]. For further guidance, see § 1.904–4T(c)(3) and (4) introductory text. (4)(i) Income from sources within the QBU’s country of operation. Passive income from sources within the QBU’s country of operation shall be treated as one item of income. (ii) Income from sources without the QBU’s country of operation. Passive income from sources without the QBU’s country of operation shall be grouped VerDate Aug<31>2005 16:12 Dec 22, 2006 Jkt 211001 Transition rules * * * * (g) * * * (1) Recapture of separate limitation loss or overall foreign loss in a separate category for dividends from a noncontrolled section 902 corporation. * * * * * * * * I Par. 9. Section 1.964–1 is amended by: I 1. Redesignating paragraphs (a) introductory text, (a)(1), (a)(2) and (a)(3) as paragraphs (a)(1) introductory text, (a)(1)(i), (a)(1)(ii) and (a)(1)(iii), respectively. I 2. Designating the undesignated text following newly-designated paragraph (a)(1)(iii) as paragraph (a)(2). I 3. Removing the comma following the word ‘‘shall’’ from newly-designated paragraph (a)(1) introductory text. I 4. Removing the last sentence in newly-designated paragraph (a)(1)(i). I 5. Revising newly-designated paragraph (a)(2), and the text of paragraphs (b)(1) introductory text and (c)(1) introductory text. The revisions read as follows: § 1.964–1 Determination of the earnings and profits of a foreign corporation. (a) * * * (2) Required adjustments. The computation described in paragraph (a)(1) of this section shall be made in the PO 00000 Frm 00021 Fmt 4700 Sfmt 4700 77265 foreign corporation’s functional currency (determined under section 985 and the regulations under that section) and may be made by following the procedures described in paragraphs (a)(1)(i) through (a)(1)(iii) of this section in an order other than the one listed, as long as the result so obtained would be the same. In determining earnings and profits, or the deficit in earnings and profits, of a foreign corporation under section 964, the amount of an illegal bribe, kickback, or other payment (within the meaning of section 162(c), as amended by section 288 of the Tax Equity and Fiscal Responsibility Act of 1982 in the case of payments made after September 3, 1982, and the regulations issued pursuant to section 964) paid after November 3, 1976, by or on behalf of the corporation during the taxable year of the corporation directly or indirectly to an official, employee, or agent in fact of a government shall not be taken into account to decrease such earnings and profits or to increase such deficit. No adjustment shall be required under paragraph (a)(1)(ii) or (iii) of this section unless it is material. Whether an adjustment is material depends on the facts and circumstances of the particular case, including the amount of the adjustment, its size relative to the general level of the corporation’s total assets and annual profit or loss, the consistency with which the practice has been applied, and whether the item to which the adjustment relates is of a recurring or merely a nonrecurring nature. For the treatment of earnings and profits whose distribution is prevented by restrictions and limitations imposed by a foreign government, see section 964(b) and the regulations issued pursuant to section 964. For rules for determining the earnings and profits (or deficit in earnings and profits) of a foreign corporation for taxable years beginning before January 1, 1987, for purposes of sections 951 through 964, see 26 CFR 1.964–1(a) (revised as of April 1, 2006). (b) * * * (1) * * * The accounting principles to be applied in making the adjustments required by paragraph (a)(1)(ii) of this section shall be those accounting principles generally accepted in the United States for purposes of reflecting in the financial statements of a domestic corporation the operations of its foreign affiliates, including the following: * * * * * (c) * * * (1) * * * The tax accounting standards to be applied in making the adjustments required by E:\FR\FM\26DER1.SGM 26DER1 77266 Federal Register / Vol. 71, No. 247 / Tuesday, December 26, 2006 / Rules and Regulations paragraph (a)(1)(iii) of this section shall be the following: * * * * * I Par. 10. Section 1.964–1T is amended by revising the first sentence of paragraph (c)(2) and the last sentence of paragraph (c)(5)(i) to read as follows: § 1.964–1T Determination of the earnings and profits of a foreign corporation (temporary). * * * * * (c) * * * (2) * * * For the first taxable year of a foreign corporation beginning after April 25, 2006, in which such foreign corporation first qualifies as a controlled foreign corporation (as defined in section 957 or 953) or a noncontrolled section 902 corporation (as defined in section 904(d)(2)(E)), any method of accounting or taxable year allowable under this section may be adopted, and any election allowable under this section may be made, by such foreign corporation or on its behalf notwithstanding that, in previous years, its books or financial statements were prepared on a different basis, and notwithstanding that such election is required by the Internal Revenue Code or regulations to be made in a prior taxable year. * * * * * * * * (5) * * * (i) * * * In the event that the United States shareholders of the controlled foreign corporation do not, in the aggregate, own (within the meaning of section 958(a)) more than 50 percent of the total combined voting power of all classes of the stock of such foreign corporation entitled to vote, the controlling United States shareholders of the controlled foreign corporation shall be all those United States shareholders who own (within the meaning of section 958(a)) stock of such corporation. * * * * * Cynthia Grigsby, Senior Federal Register Liaison Officer, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration). [FR Doc. E6–22024 Filed 12–22–06; 8:45 am] BILLING CODE 4830–01–P ENVIRONMENTAL PROTECTION AGENCY jlentini on PROD1PC65 with RULES 40 CFR Part 80 Regulation of Fuels and Fuel Additives CFR Correction In Title 40 of the Code of Federal Regulations, parts 72 to 80, revised as of VerDate Aug<31>2005 16:12 Dec 22, 2006 Jkt 211001 July 1, 2006, on page 695, § 80.75 is corrected by reinstating paragraphs (a)(2)(ix) and (a)(2)(x) to read as follows: § 80.75 Reporting requirements. * * * * * (a) * * * (2) * * * (ix) In the case of butane blended with reformulated gasoline or RBOB under § 80.82: (A) Identification of the butane batch as complying with the provisions of § 80.82; (B) Identification of the butane batch as commercial or non-commercial grade butane; (C) The batch number of the butane; (D) The date of production of the gasoline produced using the butane batch; (E) The volume of the butane batch; (F) The properties of the butane batch specified by the butane supplier, or the properties specified in § 80.82(c) or (d), as appropriate; (G) The volume of the gasoline batch subsequent to the butane blending; and (x) In the case of any imported GTAB, identification of the gasoline as GTAB. * * * * * [FR Doc. 06–55532 Filed 12–22–06; 8:45 am] BILLING CODE 1505–01–D ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 112 [EPA–HQ–OPA–2005–0001; FRL–8258–3] RIN 2050–AG23 Oil Pollution Prevention; Spill Prevention, Control, and Countermeasure Plan Requirements— Amendments Environmental Protection Agency. ACTION: Final rule. AGENCY: SUMMARY: The Environmental Protection Agency (EPA or the Agency) is amending the Spill Prevention, Control, and Countermeasure (SPCC) Plan requirements by: first, providing the option for owners and operators of facilities that store 10,000 gallons of oil or less and meet other qualifying criteria to self-certify their SPCC Plans in lieu of review and certification by a Professional Engineer; second, providing an alternative to the general secondary containment requirement without requiring a determination of impracticability for facilities that have particular types of oil-filled equipment; third, defining and exempting particular PO 00000 Frm 00022 Fmt 4700 Sfmt 4700 vehicle fuel tanks and other on-board bulk oil storage containers used for motive power; and fourth, exempting mobile refuelers from the sized secondary containment requirements for bulk storage containers. The Agency also is removing and reserving the SPCC requirements for animal fats and vegetable oils that are specific to onshore oil production facilities, onshore oil drilling and workover facilities, and offshore oil drilling, production, or workover facilities. Finally, the Agency is extending the SPCC compliance dates for farms. These changes significantly reduce the burden imposed on the regulated community for complying with the SPCC requirements, while maintaining protection of human health and the environment. In a separate document in this Federal Register, the Agency is proposing to extend the compliance dates for all facilities. DATES: This final rule is effective February 26, 2007. ADDRESSES: The public docket for this final rule, Docket ID No. EPA–HQ– OPA–2005–0001, contains the information related to this rulemaking, including the response to comment document. All documents in the docket are listed in the http:// www.regulations.gov index. Although listed in the index, some information may not be publicly available, e.g., Confidential Business Information or other information the disclosure of which is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in hard copy. Publicly available docket materials are available either electronically in http:// www.regulations.gov or in hard copy at the EPA Docket, EPA/DC, EPA West, Room B102, 1301 Constitution Ave., NW., Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number of the Public Reading Room is 202–566–1744, and the telephone number to make an appointment to view the docket is 202–566–0276. The EPA Docket Center suffered damage due to flooding during the last week of June 2006. The Docket Center is continuing to operate. However, during the cleanup, there will be temporary changes to Docket Center telephone numbers, addresses, and hours of operation for people who wish to visit the Public Reading Room to view documents. Consult EPA’s Federal Register notice at 71 FR 38147 (July 5, 2006) or the EPA Web site at http:// www.epa.gov/epahome/dockets.htm for E:\FR\FM\26DER1.SGM 26DER1

Agencies

[Federal Register Volume 71, Number 247 (Tuesday, December 26, 2006)]
[Rules and Regulations]
[Pages 77264-77266]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-22024]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9260]
RIN 1545-BF46


Application of Separate Limitations to Dividends From 
Noncontrolled Section 902 Corporations; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendments.

-----------------------------------------------------------------------

SUMMARY: This document contains corrections to final and temporary 
regulations that were published in the Federal Register on Tuesday, 
April 25, 2006 (71 FR 24516) concerning the application of separate 
foreign tax credit limitations to dividends received from noncontrolled 
section 902 corporations under section 904(d)(4).

DATES: These corrections are effective April 25, 2006.

FOR FURTHER INFORMATION CONTACT: Ginny Chung (202) 622-3850 (not a 
toll-free call).

SUPPLEMENTARY INFORMATION: 

Background

    The final and temporary regulations (TD 9260) that are the subject 
of these corrections are under sections 902, 904, and 964 of the 
Internal Revenue Code.

Need for Correction

    As published, TD 9260 contains errors that may prove to be 
misleading and are in need of clarification.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Correction of Publication

0
Accordingly, 26 CFR part 1 is corrected by making the following 
correcting amendments:

PART 1--INCOME TAXES

0
Paragraph 1. The authority for part 1 is amended and continues to read 
in part:

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


0
Par. 2. Section 1.902-1 is amended by adding a heading to paragraph 
(a)(4)(i) introductory text and revising the heading for paragraph 
(c)(8) to read as follows:


Sec.  1.902-1  Credit for domestic corporate shareholder of a foreign 
corporation for foreign income taxes paid by the foreign corporation.

    (a) * * *
    (4) Third- or lower-tier corporation--(i) Third-tier corporation. * 
* *
* * * * *
    (c) * * *
    (8) Effect of certain liquidations, reorganizations, or similar 
transactions on certain foreign taxes paid or accrued in taxable years 
beginning on or before August 5, 1997.
    * * *
* * * * *

0
Par. 3. Section 1.902-1T is amended by revising the first sentence of 
paragraph (a)(7) to read as follows:


Sec.  1.902-1T  Credit for domestic corporate shareholder of a foreign 
corporation for foreign income taxes paid by the foreign corporation 
(temporary).

    (a) * * *
    (7) * * * The term foreign income taxes means income, war profits, 
and excess profits taxes as defined in Sec.  1.902-1(a), and taxes 
included in the term income, war profits, and excess profits taxes by 
reason of section 903, that are imposed by a foreign country or a 
possession of the United States, including any such taxes deemed paid 
by a foreign corporation under this section. * * *
* * * * *

[[Page 77265]]


0
Par. 4. Section 1.902-2 is amended by revising the first sentence of 
paragraph (a)(1) to read as follows:


Sec.  1.902-2  Treatment of deficits in post-1986 undistributed 
earnings and pre-1987 accumulated profits of a first- or lower-tier 
corporation for purposes of computing an amount of foreign taxes deemed 
paid under Sec.  1.902-1.

    (a) * * * (1) * * * For purposes of computing foreign income taxes 
deemed paid under Sec.  1.902-1(b) with respect to dividends paid by a 
first- or lower-tier corporation, when there is a deficit in the post-
1986 undistributed earnings of that corporation and the corporation 
makes a distribution to shareholders that is a dividend or would be a 
dividend if there were current or accumulated earnings and profits, 
then the post-1986 deficit shall be carried back to the most recent 
pre-effective date taxable year of the first- or lower-tier corporation 
with positive accumulated profits computed under section 902. * * *
* * * * *

0
Par. 5. Section 1.904-0 is amended by adding the entries for paragraphs 
(o)(1) and (o)(2) under Sec.  1.904-5 to read as follows:


Sec.  1.904-0  Outline of regulations provisions for section 904.

* * * * *


Sec.  1.904-5  Look-through rules as applied to controlled foreign 
corporations and other entities.

* * * * *
    (o) * * *
    (1) Rules for controlled foreign corporations and other look-
through entities.
    (2) Rules for noncontrolled section 902 corporations.
* * * * *

0
Par. 6. Section 1.904-4 is amended by revising paragraph (c)(4) 
introductory text and adding paragraphs (c)(4)(i) through (c)(4)(iii) 
to read as follows:


Sec.  1.904-4  Separate application of section 904 with respect to 
certain categories of income.

* * * * *
    (c) * * *
    (3) and (4) [Reserved]. For further guidance, see Sec.  1.904-
4T(c)(3) and (4) introductory text.
    (4)(i) Income from sources within the QBU's country of operation. 
Passive income from sources within the QBU's country of operation shall 
be treated as one item of income.
    (ii) Income from sources without the QBU's country of operation. 
Passive income from sources without the QBU's country of operation 
shall be grouped on the basis of the tax imposed on that income as 
provided in Sec.  1.904-4T(c)(3)(i) through (iv).
    (iii) Determination of the source of income. For purposes of this 
paragraph (c)(4), income will be determined to be from sources within 
or without the QBU's country of operation under the laws of the foreign 
country of the payor of the income.
* * * * *
    Par. 7. Section 1.904-5 is amended by revising paragraphs (a) 
introductory text and (a)(1) and adding Examples 4 and 5 to paragraph 
(i)(5) to read as follows:


Sec.  1.904-5  Look-through rules as applied to controlled foreign 
corporations and other entities.

    (a) and (a)(1) [Reserved]. For further guidance, see Sec.  1.904-
5T(a) introductory text and (a)(1).
* * * * *
    (i) * * *
    (5) * * *
    Examples 4 and 5 [Reserved]. For further guidance, see Sec.  1.904-
5T(i)(5) Examples 4 and 5.
* * * * *
    Par. 8. Section 1.904(f)-12T is amended by revising the heading for 
paragraph (g)(1) to read as follows:


Sec.  1.904(f)-12T  Transition rules (temporary).

* * * * *
    (g) * * * (1) Recapture of separate limitation loss or overall 
foreign loss in a separate category for dividends from a noncontrolled 
section 902 corporation. * * *
* * * * *

0
Par. 9. Section 1.964-1 is amended by:
0
1. Redesignating paragraphs (a) introductory text, (a)(1), (a)(2) and 
(a)(3) as paragraphs (a)(1) introductory text, (a)(1)(i), (a)(1)(ii) 
and (a)(1)(iii), respectively.
0
2. Designating the undesignated text following newly-designated 
paragraph (a)(1)(iii) as paragraph (a)(2).
0
3. Removing the comma following the word ``shall'' from newly-
designated paragraph (a)(1) introductory text.
0
4. Removing the last sentence in newly-designated paragraph (a)(1)(i).
0
5. Revising newly-designated paragraph (a)(2), and the text of 
paragraphs (b)(1) introductory text and (c)(1) introductory text.
    The revisions read as follows:


Sec.  1.964-1  Determination of the earnings and profits of a foreign 
corporation.

    (a) * * *
    (2) Required adjustments. The computation described in paragraph 
(a)(1) of this section shall be made in the foreign corporation's 
functional currency (determined under section 985 and the regulations 
under that section) and may be made by following the procedures 
described in paragraphs (a)(1)(i) through (a)(1)(iii) of this section 
in an order other than the one listed, as long as the result so 
obtained would be the same. In determining earnings and profits, or the 
deficit in earnings and profits, of a foreign corporation under section 
964, the amount of an illegal bribe, kickback, or other payment (within 
the meaning of section 162(c), as amended by section 288 of the Tax 
Equity and Fiscal Responsibility Act of 1982 in the case of payments 
made after September 3, 1982, and the regulations issued pursuant to 
section 964) paid after November 3, 1976, by or on behalf of the 
corporation during the taxable year of the corporation directly or 
indirectly to an official, employee, or agent in fact of a government 
shall not be taken into account to decrease such earnings and profits 
or to increase such deficit. No adjustment shall be required under 
paragraph (a)(1)(ii) or (iii) of this section unless it is material. 
Whether an adjustment is material depends on the facts and 
circumstances of the particular case, including the amount of the 
adjustment, its size relative to the general level of the corporation's 
total assets and annual profit or loss, the consistency with which the 
practice has been applied, and whether the item to which the adjustment 
relates is of a recurring or merely a nonrecurring nature. For the 
treatment of earnings and profits whose distribution is prevented by 
restrictions and limitations imposed by a foreign government, see 
section 964(b) and the regulations issued pursuant to section 964. For 
rules for determining the earnings and profits (or deficit in earnings 
and profits) of a foreign corporation for taxable years beginning 
before January 1, 1987, for purposes of sections 951 through 964, see 
26 CFR 1.964-1(a) (revised as of April 1, 2006).
    (b) * * * (1) * * * The accounting principles to be applied in 
making the adjustments required by paragraph (a)(1)(ii) of this section 
shall be those accounting principles generally accepted in the United 
States for purposes of reflecting in the financial statements of a 
domestic corporation the operations of its foreign affiliates, 
including the following:
* * * * *
    (c) * * * (1) * * * The tax accounting standards to be applied in 
making the adjustments required by

[[Page 77266]]

paragraph (a)(1)(iii) of this section shall be the following:
* * * * *
0
Par. 10. Section 1.964-1T is amended by revising the first sentence of 
paragraph (c)(2) and the last sentence of paragraph (c)(5)(i) to read 
as follows:


Sec.  1.964-1T  Determination of the earnings and profits of a foreign 
corporation (temporary).

* * * * *
    (c) * * *
    (2) * * * For the first taxable year of a foreign corporation 
beginning after April 25, 2006, in which such foreign corporation first 
qualifies as a controlled foreign corporation (as defined in section 
957 or 953) or a noncontrolled section 902 corporation (as defined in 
section 904(d)(2)(E)), any method of accounting or taxable year 
allowable under this section may be adopted, and any election allowable 
under this section may be made, by such foreign corporation or on its 
behalf notwithstanding that, in previous years, its books or financial 
statements were prepared on a different basis, and notwithstanding that 
such election is required by the Internal Revenue Code or regulations 
to be made in a prior taxable year. * * *
* * * * *
    (5) * * * (i) * * * In the event that the United States 
shareholders of the controlled foreign corporation do not, in the 
aggregate, own (within the meaning of section 958(a)) more than 50 
percent of the total combined voting power of all classes of the stock 
of such foreign corporation entitled to vote, the controlling United 
States shareholders of the controlled foreign corporation shall be all 
those United States shareholders who own (within the meaning of section 
958(a)) stock of such corporation.
* * * * *

Cynthia Grigsby,
Senior Federal Register Liaison Officer, Publications and Regulations 
Branch, Legal Processing Division, Associate Chief Counsel (Procedure 
and Administration).
[FR Doc. E6-22024 Filed 12-22-06; 8:45 am]
BILLING CODE 4830-01-P