Clarification of Controlled Group Qualification Rules, 19907-19908 [2011-8555]
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Federal Register / Vol. 76, No. 69 / Monday, April 11, 2011 / Rules and Regulations
Issued in Kansas City, Missouri, on April
1, 2011.
John Colomy,
Acting Manager, Small Airplane Directorate,
Aircraft Certification Service.
[FR Doc. 2011–8547 Filed 4–8–11; 8:45 am]
BILLING CODE 4910–13–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9522]
RIN 1545–BG94
Clarification of Controlled Group
Qualification Rules
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulation.
AGENCY:
This document contains a
final regulation that applies to a
controlled group of corporations. The
regulation clarifies that a corporation
that satisfies the controlled group rules
for stock ownership and qualification is
a member of such group, without regard
to its status as a component member.
DATES:
Effective Date: This regulation is
effective on April 11, 2011.
Applicability Date: For date of
applicability, see § 1.1563–1(e).
FOR FURTHER INFORMATION CONTACT: Grid
Glyer (202) 622–7930 (not a toll-free
number).
SUMMARY:
SUPPLEMENTARY INFORMATION:
WReier-Aviles on DSKGBLS3C1PROD with RULES
Background and Explanation of
Provisions
This document contains an
amendment to 26 CFR part 1. On
September 29, 2009, a notice of
proposed rulemaking (NPRM) regarding
the controlled group qualification rules
under § 1.1563–1 was published in the
Federal Register (REG–135005–07; 74
FR 49829). The NPRM proposed to
amend § 1.1563–1 to clarify that a
corporation described in section 1563(b)
as an excluded member of a controlled
group of corporations is nevertheless a
member of the group. The NPRM further
proposed to add an example
demonstrating that a controlled group of
corporations can consist solely of
excluded members.
One comment was received and no
public hearing was requested or held.
The public comment concerned the
treatment of gross receipts between
members of a controlled group of
corporations for purposes of section 41,
VerDate Mar<15>2010
13:05 Apr 08, 2011
Jkt 223001
which provides a tax credit to taxpayers
for increasing their research activities.
In particular, the comment refers to CCA
200233011, dated May 1, 2002. In that
CCA, the IRS Office of Chief Counsel
concluded first that a domestic
corporation and its majority-owned
foreign subsidiaries should be treated as
a single taxpayer for purposes of
sections 41(f)(1)(A)(i), 41(f)(5) and
1563(a) because they were members of
the same controlled group of
corporations even though the foreign
subsidiaries were treated as excluded
members of the group.
Second, the IRS Office of Chief
Counsel concluded that, given the
particular facts and circumstances of
that case, the taxpayer should exclude
sales to its majority-owned foreign
subsidiaries when computing gross
receipts for purposes of determining its
base amount under section 41(c). The
commenter requested guidance on the
facts and circumstances that caused the
IRS Office of Chief Counsel to exclude
such sales in computing gross receipts.
The IRS and the Treasury Department
believe that the requested guidance is
outside the scope of the NPRM, which
only involves the first issue addressed
in the CCA, and is consistent with the
conclusion of the CCA on that issue.
However, the final regulation makes
one clarifying change. Paragraph
(a)(1)(ii) of the proposed regulation
states that in determining whether a
corporation is included in a controlled
group of corporations, section 1563(b)
shall not be taken into account. Section
1563(b) defines a component member,
including an excluded member and an
additional member. Paragraph (a)(1)(ii)
as now revised will also provide that the
underlying regulation, § 1.1563–1(b),
which defines a component member,
shall not be taken into account in
determining the members of a
controlled group.
Special Analyses
It has been determined that this
regulation is not a significant regulatory
action as defined in Executive Order
12866. Therefore, a regulatory
assessment is not required. It also has
been determined that section 553(b) of
the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to this
regulation and because this regulation
does not impose a collection of
information on small entities, the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to
section 7805(f) this regulation has been
submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on its
impact on small business.
PO 00000
Frm 00007
Fmt 4700
Sfmt 4700
19907
Drafting Information
The principal author of this regulation
is Grid Glyer of the Office of Associate
Chief Counsel (Corporate). However,
other personnel from the IRS and the
Treasury Department participated in its
development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Adoption of 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 * * *
Par. 2. Section 1.1563–1 is amended
by:
■ 1. Redesignating paragraph (a)(1)(ii) as
paragraph (a)(1)(iii) and adding new
paragraph (a)(1)(ii).
■ 2. Adding Example 4 to paragraph
(b)(4).
■ 3. Adding a sentence at the end of
paragraph (e).
The additions read as follows:
■
§ 1.1563–1 Definition of controlled group
of corporations and component members
and related concepts.
(a) * * *
(1) * * *
(ii) Special rules. In determining
whether a corporation is included in a
controlled group of corporations,
section 1563(b) and paragraph (b) of this
section shall not be taken into account.
For rules defining a component member
of a controlled group of corporations,
including rules defining an excluded
member and an additional member, see
section 1563(b) and paragraph (b) of this
section.
*
*
*
*
*
(b) * * *
(4) * * *
Example 4. Individual A owns all of the
stock of corporations X, Y and Z. Each of
these corporations is an S corporation. X, Y,
and Z are each members of a brother-sister
controlled group, even though each such
corporation is treated as an excluded member
of such group. See § 1.1563–1(b)(2)(ii)(C).
*
*
*
*
*
(e) Effective/Applicability date. * * *
Paragraph (a)(1)(ii) of this section
E:\FR\FM\11APR1.SGM
11APR1
19908
Federal Register / Vol. 76, No. 69 / Monday, April 11, 2011 / Rules and Regulations
applies to taxable years beginning on or
after April 11, 2011.
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
Approved: April 4, 2011.
Michael Mundaca,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2011–8555 Filed 4–8–11; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Alcohol and Tobacco Tax and Trade
Bureau
27 CFR Parts 19 and 30
[Docket No. TTB–2008–0004; T.D. TTB–92a;
Re: T.D. TTB–92]
RIN 1513–AA23
Revision of Distilled Spirits Plant
Regulations; Corrections
Alcohol and Tobacco Tax and
Trade Bureau, Treasury.
ACTION: Final rule; Treasury decision;
correction.
AGENCY:
The Alcohol and Tobacco Tax
and Trade Bureau published a final rule
revising its distilled spirits plant
regulations in the Federal Register of
February 16, 2011 (76 FR 9080). That
final rule contained several
typographical and textual errors. This
document corrects those errors.
DATES: Effective Date: April 18, 2011.
FOR FURTHER INFORMATION CONTACT:
Christopher M. Thiemann, Regulations
and Rulings Division, Alcohol and
Tobacco Tax and Trade Bureau, 1310 G
Street, NW., Suite 200E, Washington,
DC 20220; telephone 202–453–2265.
SUPPLEMENTARY INFORMATION: The
Alcohol and Tobacco Tax and Trade
Bureau (TTB) recently published a final
rule completely revising its distilled
spirits plant regulations as contained in
27 CFR part 19. TTB published this final
rule as T.D. TTB–92 in the Federal
Register of February 16, 2011 (see 76 FR
9080). The final rule also amended
cross-references to part 19 found in 27
CFR parts 1, 17, 24, 26, 28, 30 and 31.
T.D. TTB–92 is effective on April 18,
2011.
After its publication, TTB found that
T.D. TTB–92 contained several
typographical and textual errors in the
revised regulations in part 19 and a
textual error in an amendatory
instruction for part 31. This document
corrects those errors.
WReier-Aviles on DSKGBLS3C1PROD with RULES
SUMMARY:
VerDate Mar<15>2010
11:35 Apr 08, 2011
Jkt 223001
Specifically, typographical errors are
corrected in T.D. TTB–92 in the part 19
table of contents listing for § 19.26
(‘‘Alternate’’ rather than ‘‘lternate’’), in
the ‘‘Authority’’ citation at the beginning
of the part (‘‘5121–5124’’ rather than
‘‘5121, 5122–5124’’), and in the section
heading for § 19.603 (‘‘§ 19.603’’ rather
than ‘‘§ 10.603’’). In § 19.1, in the
definition of ‘‘Lot identification
number,’’ the cross-reference to ‘‘27 CFR
19.485’’ is corrected to read ‘‘§ 19.485’’
for consistency with other internal part
19 cross references. Also in § 19.1, the
definitions of ‘‘Kind’’ and ‘‘Package
identification number’’ are corrected to
use the new part 19 section numbers
contained in T.D. TTB–92 rather than
section numbers from the version of part
19 being replaced.
In § 19.454(a), TTB is correcting
‘‘SDA’’ to read ‘‘denatured spirits’’ in
order to clarify that denatured spirits,
including specially denatured spirits
and completely denatured alcohol,
withdrawn free of tax under 27 CFR part
20 may be returned to bonded premises
in accordance with § 19.454. In
§ 19.454(e), TTB is correcting ‘‘SDA’’ to
read ‘‘specially denatured spirits’’ in
order to clarify that specially denatured
spirits, including specially denatured
alcohol and specially denatured rum,
withdrawn free of tax for export under
27 CFR part 28 may be returned to
bonded premises in accordance with
§ 19.454.
Also, as described in T.D. TTB–92,
TTB intends to require serial numbers
on certain records to either commence
with the number ‘‘1’’ each calendar or
fiscal year or otherwise be unique and
not repeated. These numbering options
are incorporated into the recordkeeping
requirements contained in § 19.618,
Gauge record, and § 19.620, Transfer
record—consignor’s responsibility.
However, the option to use a unique,
non-repeated number was inadvertently
left out of § 19.599, Bottling and packing
records. TTB is therefore correcting
§ 19.599(b) to conform to the similar
recordkeeping requirements found in
§§ 19.618 and 19.620.
In addition, the amendatory
instruction updating a cross-reference to
part 19 in 27 CFR part 30 was
incorrectly phrased. When referring to
the existing text of § 30.31(d), the
amendatory instructions in T.D. TTB–92
should have used the phrase ‘‘27 CFR
19.383’’ rather than merely ‘‘§ 19.383.’’
1. On page 9090, in the third column,
in the part 19 table of contents, the
listing ‘‘19.26 lternate methods or
procedures.’’ is corrected to read ‘‘19.26
Alternate methods or procedures.’’.
2. On page 9094, in the second
column, in the authority citation for 27
CFR part 19, in the fourth line, the
number phrase ‘‘5121, 5122–5124’’ is
corrected to read ‘‘5121–5124’’.
Corrections
In the final rule document numbered
FR Doc. 2011–1956 beginning on page
9080 in the Federal Register issue of
Wednesday, February 16, 2011, make
the following corrections:
10. On page 9171, in the third column,
in paragraph 16, in the amendatory
instructions for § 30.31, the phrase ‘‘the
reference to ‘§ 19.383’ ’’ is corrected to
read ‘‘the reference to ‘27 CFR 19.383’ of
this chapter’’.
PO 00000
Frm 00008
Fmt 4700
Sfmt 4700
§ 19.1
[Corrected]
3. On page 9095, in the third column,
in the definition of ‘‘Kind,’’ the crossreference to ‘‘§ 19.597’’ is corrected to
read ‘‘§ 19.487’’.
■ 4. On page 9096, in the first column,
in the definition of ‘‘Lot identification
number,’’ the cross-reference to ‘‘27 CFR
19.485’’ is corrected to read ‘‘§ 19.485’’.
■ 5. On page 9096, in the first column,
in the definition of ‘‘Package
identification number,’’ the crossreference to ‘‘27 CFR 19.595’’ is
corrected to read ‘‘§ 19.490’’.
■
§ 19.454
[Corrected]
6. On page 9140, in the first column
of the table (titled ‘‘Type of product’’), in
paragraph (a), the sentence ‘‘SDA
withdrawn free of tax under part 20 of
this chapter’’ is corrected to read
‘‘Denatured spirits withdrawn free of tax
under part 20 of this chapter’’.
■ 7. On page 9140, in the first column
of the table (titled ‘‘Type of product’’), in
paragraph (e), the sentence ‘‘SDA
withdrawn free of tax for export under
part 28 of this chapter’’ is corrected to
read ‘‘Specially denatured spirits
withdrawn free of tax for export under
part 28 of this chapter’’.
■
§ 19.599
[Corrected]
8. On page 9152, in the second
column, in § 19.599, in paragraph (b),
the text ‘‘Serial number of the record
(beginning with ‘‘1’’ at the start of each
calendar or fiscal year)’’ is corrected to
read ‘‘Serial number of the record
(which must commence with ‘‘1’’ at the
start of each calendar or fiscal year, or
be a unique identifying number that is
not repeated)’’.
■
§ 19.603
[Corrected]
9. On page 9153, in the first column,
the section heading ‘‘§ 10.603, Liquor
bottle records’’ is corrected to read
‘‘§ 19.603, Liquor bottle records’’.
■
§ 30.31
[Corrected]
■
E:\FR\FM\11APR1.SGM
11APR1
]]>Agencies
[Federal Register Volume 76, Number 69 (Monday, April 11, 2011)]
[Rules and Regulations]
[Pages 19907-19908]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8555]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9522]
RIN 1545-BG94
Clarification of Controlled Group Qualification Rules
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulation.
-----------------------------------------------------------------------
SUMMARY: This document contains a final regulation that applies to a
controlled group of corporations. The regulation clarifies that a
corporation that satisfies the controlled group rules for stock
ownership and qualification is a member of such group, without regard
to its status as a component member.
DATES:
Effective Date: This regulation is effective on April 11, 2011.
Applicability Date: For date of applicability, see Sec. 1.1563-
1(e).
FOR FURTHER INFORMATION CONTACT: Grid Glyer (202) 622-7930 (not a toll-
free number).
SUPPLEMENTARY INFORMATION:
Background and Explanation of Provisions
This document contains an amendment to 26 CFR part 1. On September
29, 2009, a notice of proposed rulemaking (NPRM) regarding the
controlled group qualification rules under Sec. 1.1563-1 was published
in the Federal Register (REG-135005-07; 74 FR 49829). The NPRM proposed
to amend Sec. 1.1563-1 to clarify that a corporation described in
section 1563(b) as an excluded member of a controlled group of
corporations is nevertheless a member of the group. The NPRM further
proposed to add an example demonstrating that a controlled group of
corporations can consist solely of excluded members.
One comment was received and no public hearing was requested or
held. The public comment concerned the treatment of gross receipts
between members of a controlled group of corporations for purposes of
section 41, which provides a tax credit to taxpayers for increasing
their research activities. In particular, the comment refers to CCA
200233011, dated May 1, 2002. In that CCA, the IRS Office of Chief
Counsel concluded first that a domestic corporation and its majority-
owned foreign subsidiaries should be treated as a single taxpayer for
purposes of sections 41(f)(1)(A)(i), 41(f)(5) and 1563(a) because they
were members of the same controlled group of corporations even though
the foreign subsidiaries were treated as excluded members of the group.
Second, the IRS Office of Chief Counsel concluded that, given the
particular facts and circumstances of that case, the taxpayer should
exclude sales to its majority-owned foreign subsidiaries when computing
gross receipts for purposes of determining its base amount under
section 41(c). The commenter requested guidance on the facts and
circumstances that caused the IRS Office of Chief Counsel to exclude
such sales in computing gross receipts. The IRS and the Treasury
Department believe that the requested guidance is outside the scope of
the NPRM, which only involves the first issue addressed in the CCA, and
is consistent with the conclusion of the CCA on that issue.
However, the final regulation makes one clarifying change.
Paragraph (a)(1)(ii) of the proposed regulation states that in
determining whether a corporation is included in a controlled group of
corporations, section 1563(b) shall not be taken into account. Section
1563(b) defines a component member, including an excluded member and an
additional member. Paragraph (a)(1)(ii) as now revised will also
provide that the underlying regulation, Sec. 1.1563-1(b), which
defines a component member, shall not be taken into account in
determining the members of a controlled group.
Special Analyses
It has been determined that this regulation is not a significant
regulatory action as defined in Executive Order 12866. Therefore, a
regulatory assessment is not required. It also has been determined that
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)
does not apply to this regulation and because this regulation does not
impose a collection of information on small entities, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to
section 7805(f) this regulation has been submitted to the Chief Counsel
for Advocacy of the Small Business Administration for comment on its
impact on small business.
Drafting Information
The principal author of this regulation is Grid Glyer of the Office
of Associate Chief Counsel (Corporate). However, other personnel from
the IRS and the Treasury Department participated in its development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of 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 * * *
0
Par. 2. Section 1.1563-1 is amended by:
0
1. Redesignating paragraph (a)(1)(ii) as paragraph (a)(1)(iii) and
adding new paragraph (a)(1)(ii).
0
2. Adding Example 4 to paragraph (b)(4).
0
3. Adding a sentence at the end of paragraph (e).
The additions read as follows:
Sec. 1.1563-1 Definition of controlled group of corporations and
component members and related concepts.
(a) * * *
(1) * * *
(ii) Special rules. In determining whether a corporation is
included in a controlled group of corporations, section 1563(b) and
paragraph (b) of this section shall not be taken into account. For
rules defining a component member of a controlled group of
corporations, including rules defining an excluded member and an
additional member, see section 1563(b) and paragraph (b) of this
section.
* * * * *
(b) * * *
(4) * * *
Example 4. Individual A owns all of the stock of corporations
X, Y and Z. Each of these corporations is an S corporation. X, Y,
and Z are each members of a brother-sister controlled group, even
though each such corporation is treated as an excluded member of
such group. See Sec. 1.1563-1(b)(2)(ii)(C).
* * * * *
(e) Effective/Applicability date. * * * Paragraph (a)(1)(ii) of
this section
[[Page 19908]]
applies to taxable years beginning on or after April 11, 2011.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
Approved: April 4, 2011.
Michael Mundaca,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2011-8555 Filed 4-8-11; 8:45 am]
BILLING CODE 4830-01-P
