Election of Reduced Research Credit Under Section 280C(c)(3), 44800-44802 [2011-18993]
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Federal Register / Vol. 76, No. 144 / Wednesday, July 27, 2011 / Rules and Regulations
provide an identifier that is unique to each
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CBOT).
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market (DCM), derivatives clearing
organization (DCO), swap execution facility
(SEF), or swap data repository (SDR),
electronic trading facility with a significant
price discovery contract (the term will be
removed on July 20, 2012).1
5. Type of Filing—An indication as to
whether the filing is a new rule, rule
amendment or new product. The registered
entity should check the appropriate box to
indicate the applicable category under that
heading.
6. Rule Numbers—For rule filings, the rule
number(s) being adopted or modified in the
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(b) Other Requirements—A submission
shall comply with all applicable filing
requirements for proposed rules, rule
amendments, or products. The filing of the
submission cover sheet does not obviate the
registered entity’s responsibility to comply
with applicable filing requirements (e.g.,
rules submitted for Commission approval
under § 40.5 must be accompanied by an
explanation of the purpose and effect of the
proposed rule along with a description of any
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(c) Checking the box marked ‘‘confidential
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Issued in Washington, DC, on July 19,
2011, by the Commission.
David A. Stawick,
Secretary of the Commission.
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Appendices to Provisions Common to
Registered Entities—Commission
Voting Summary and Statements of
Commissioners
Note: The following appendices will not
appear in the Code of Federal Regulations.
1 Even though ECM–SPDC was eliminated by the
Dodd-Frank Act, the Commission will retain
references to this entity in the cover sheet since
ECMs may be allowed to operate until July 20,
2012, pursuant to grandfather relief issued by the
Commission. See 75 FR 56513 (Sept. 16, 2010).
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Appendix 1—Commission Voting
Summary
On this matter, Chairman Gensler and
Commissioners Dunn, Sommers, Chilton and
O’Malia voted in the affirmative; no
Commissioner voted in the negative.
Appendix 2—Statement of Chairman
Gary Gensler
I support the final rulemaking to establish
a process for the certification and approval of
new rules and rule amendments for
designated contract markets, derivatives
clearing organizations, as well as new
registrants, swap execution facilities and
swap data repositories. The Dodd-Frank Wall
Street Reform and Consumer Protection Act
establishes enhanced CFTC review and
certification of new rules and amendments.
Today’s final regulations provide important
procedural guidance to registered entities on
how to comply with Congress’s mandate for
the Commission’s review of new rules and
rule amendments.
[FR Doc. 2011–18661 Filed 7–26–11; 8:45 am]
BILLING CODE 6351–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9539]
RIN 1545–BI09
Election of Reduced Research Credit
Under Section 280C(c)(3)
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:
This document contains final
regulations that amend the regulations
concerning the election to claim the
reduced research credit. The final
regulations simplify how taxpayers
make the election and affect taxpayers
that claim the reduced research credit.
DATES: Effective Date: These regulations
are effective on July 27, 2011.
Applicability Date: For dates of
applicability, see § 1.280C–4(c).
FOR FURTHER INFORMATION CONTACT:
David Selig, (202) 622–3040 (not a tollfree number).
SUPPLEMENTARY INFORMATION:
SUMMARY:
Background
This document contains amendments
to the Income Tax Regulations (26 CFR
Part 1) relating to the election for
claiming the reduced research credit
under section 280C(c)(3). On July 16,
2009, a notice of proposed rulemaking
(REG–130200–08) was published in the
Federal Register (74 FR 34523). No
public hearing was requested or held.
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Written and electronic comments
responding to the notice of proposed
rulemaking were received. After
considering the comments received the
proposed regulations are adopted as
revised by this Treasury decision.
Section 280C(c)(1) provides that no
deduction shall be allowed for that
portion of the qualified research
expenses (as defined in section 41(b)) or
basic research expenses (as defined in
section 41(e)(2)) otherwise allowable as
a deduction for the taxable year which
is equal to the amount of the credit
determined for such taxable year under
section 41(a).
Similarly, section 280C(c)(2) provides
that if the amount of the credit
determined for the taxable year under
section 41(a)(1) exceeds the amount
allowable as a deduction for such
taxable year for qualified research
expenses or basic research expenses
(determined without regard to section
280C(c)(1)), the amount chargeable to
capital account for the taxable year for
such expenses shall be reduced by the
amount of such excess.
Section 280C(c)(3)(A) provides, in
general, that in the case of any taxable
year for which an election is made
under section 280C(c)(3), sections
280C(c)(1) and (c)(2) shall not apply,
and the amount of the credit under
section 41(a) shall be the amount
determined under section 280C(c)(3)(B).
Under section 280C(c)(3)(B), the amount
of credit for any taxable year shall be the
amount equal to the excess of the
amount of credit determined under
section 41(a) without regard to section
280C(c)(3), over the product of the
amount of credit determined under
section 280C(c)(3)(B)(i), and the
maximum rate of tax under section
11(b)(1).
Section 280C(c)(3)(C) provides that an
election under section 280C(c)(3) for
any taxable year shall be made not later
than the time for filing the return of tax
for such year (including extensions),
shall be made on such return, and shall
be made in such manner as the
Secretary may prescribe. Section
1.280C–4(a) provides that the section
280C(c)(3) election to have the
provisions of section 280C(c)(1) and
(c)(2) not apply shall be made by
claiming the reduced credit under
section 41(a) determined by the method
provided in section 280C(c)(3)(B) on an
original return for the taxable year, filed
at any time on or before the due date
(including extensions) for filing the
income tax return for such year. Such an
election, once made, shall be irrevocable
for that taxable year.
Section 280C(c)(4) provides that
section 280C(b)(3) shall apply for
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purposes of section 280C(c). Under
section 280C(b)(3), 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 which is treated as
being under common control with other
trades or businesses (within the
meaning of section 41(f)(1)(B)), section
280C(b) shall be applied under rules
prescribed by the Secretary similar to
the rules applicable under section
41(f)(1)(A) and (f)(1)(B).
Section 1.41–6(a)(1) provides that to
determine the amount of research credit
(if any) allowable to a trade or business
that at the end of its taxable year is a
member of a controlled group, a
taxpayer must: (i) Compute the group
credit in the manner described in
§ 1.41–6(b), and (ii) allocate the group
credit among the members of the group
in the manner described under § 1.41–
6(c). All members of the controlled
group are required to use the same
computation method, that is, the section
41(a)(1) method or the section 41(c)(5)
alternative simplified research credit
method, in computing the group credit
for the credit year.
Explanation and Summary of
Comments
These final regulations simplify the
section 280C(c)(3) election to have the
provisions of section 280C(c)(1) and
(c)(2) not apply by requiring the election
to be made on Form 6765, ‘‘Credit for
Increasing Research Activities.’’ The
form must be filed with an original
return for the taxable year filed on or
before the due date (including
extensions) for filing the income tax
return for such year. An election, once
made for any taxable year, is irrevocable
for that taxable year.
These final regulations also provide
that each member of a controlled group
may make the election under section
280C(c)(3) after the group credit is
computed and allocated under §§ 1.41–
6(b)(1) and 1.41–6(c).
One commentator was concerned that
the controlled group rules in the
proposed regulations might cause
administrative complexity for some
members of a controlled group filing a
consolidated return because each
member would be required to file a
separate Form 6765 to make the election
under section 280C(c)(3). Generally, the
proposed regulations provided that each
member of a controlled group of
corporations (within the meaning of
section 41(f)(5)), or a trade or business
which is treated as being under common
control with other trades or businesses
(within the meaning of section
41(f)(1)(B)), could make the election
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under section 280C(c)(3). In order to
clarify and simplify the election
procedure for members of consolidated
groups, however, the final regulations
add that only a common parent (within
the meaning of § 1.1502–77(a)(1)(i)) of a
consolidated group may make the
election under section 280C(c)(3) on
behalf of the members of the
consolidated group. An attachment to a
Form 6765 filed by a common parent of
a consolidated group adequately
identifying the members for which an
election under section 280C(c)(3) is
made is generally sufficient to clearly
indicate the intent of the common
parent to make the election for those
members.
Another commentator believed that
some members of a controlled group
may fail to make a timely election under
section 280C(c)(3) because, at the time
of filing the Form 6765 with the original
return, no credit was reported by such
members. The election under section
280C(c)(3) may be made whether or not
a taxpayer claims any amount of credit
on its original return. An example has
been added to the final regulations
showing that a taxpayer may make an
election under section 280C(c)(3) on its
original return without reporting any
credit.
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in
Executive Order 12866. Therefore, a
regulatory assessment is not required. It
also has been determined that section
553(b) of the Administrative Procedure
Act (5 U.S.C. chapter 5) does not apply
to these regulations.
When an agency promulgates a final
rule, the Regulatory Flexibility Act (5
U.S.C. chapter 6) requires the agency to
‘‘prepare a final regulatory flexibility
analysis’’ with ‘‘a description of and an
estimate of the number of small entities
to which the rule will apply.’’ See 5
U.S.C. 604(a). Section 605 of the
Regulatory Flexibility Act provides an
exception to this requirement if the
agency certifies that the final rule will
not have a significant economic impact
on a substantial number of small
entities.
The final rule affects individuals and
small businesses engaged in research
activities under section 41. The IRS has
determined that the final rule will have
an impact on a substantial number of
small entities. However, the IRS also has
determined that the impact on entities
affected by the final rule will not be
significant. This determination is based
on the fact that the regulations would
simplify the procedure for making the
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44801
election for the reduced research credit
under section 280C(c)(3)(C). Instead of
requiring such an election to be made by
claiming the reduced credit ‘‘on an
original return,’’ the regulations specify
that the election is made by clearly
indicating an intent to make the election
on Form 6765, ‘‘Credit for Increasing
Research Activities,’’ which is attached
to the return. This form requires only a
minimal amount of time to complete
and places no greater burden on the
taxpayer than the current procedure.
Accordingly, a final regulatory
flexibility analysis is not required.
Pursuant to section 7805(f) of the
Internal Revenue Code, the notice of
proposed rulemaking preceding these
regulations was submitted to the Chief
Counsel for Advocacy of the Small
Business Administration for comment
on its impact on small business.
Drafting Information
The principal author of these
regulations is David Selig, Office of
Associate Chief Counsel (Passthroughs
and Special Industries). However, other
personnel from the IRS and the Treasury
Department participated in their
development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Adoption of Amendments to the
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 1.280C–4 is revised to
read as follows:
■
§ 1.280C–4
activities.
Credit for increasing research
(a) In general. An election under
section 280C(c)(3) to have the
provisions of section 280C(c)(1) and
(c)(2) not apply and elect the reduced
research credit under section
280C(c)(3)(B) shall be made on Form
6765, ‘‘Credit for Increasing Research
Activities’’ (or any successor form). In
order for the election to be effective, the
Form 6765 must clearly indicate the
taxpayer’s intent to make the section
280C(c)(3) election, and must be filed
with an original return for the taxable
year filed on or before the due date
(including extensions) for filing the
income tax return for such year,
regardless of whether any research
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Federal Register / Vol. 76, No. 144 / Wednesday, July 27, 2011 / Rules and Regulations
credits are claimed on the original
return. An election, once made for any
taxable year, is irrevocable for that
taxable year.
(b) Controlled groups of corporations;
trades or businesses under common
control—(1) In general. A member of a
controlled group of corporations (within
the meaning of section 41(f)(5)), or a
trade or business which is treated as
being under common control with other
trades or businesses (within the
meaning of section 41(f)(1)(B)), may
make the election under section
280C(c)(3). However, only the common
parent (within the meaning of § 1.1502–
77(a)(1)(i)) of a consolidated group may
make the election on behalf of the
members of a consolidated group. A
member or trade or business shall make
the election on Form 6765 and by the
time prescribed in paragraph (a) of this
section.
(2) Example. The following example
illustrates an application of paragraph
(b) of this section:
Example. 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 2009 Form 6765,
‘‘Credit for Increasing Research Activities,’’
showing A and C had stand-alone entity
credits (within the meaning of § 1.41–6(c)(2))
that exceeded the group credit (within the
meaning of § 1.41–6(a)(3)(iv)). A and C report
their allocated portions of the group credit
(as determined under § 1.41–6(c)) on the
2009 Form 6765 and B reports no research
credit on the 2009 Form 6765. A and B, but
not C, each make an election for the reduced
credit on the 2009 Form 6765. In December
2010, A determines that it understated its
qualified research expenses in 2009 resulting
in the group credit exceeding the sum of the
stand-alone credits. On an amended 2009
Form 6765, A, B, and C each report their
allocated portions of the group credit
(including the excess 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 280C(c)(3)(B) because C did
not make an election for the reduced credit
with its original return.
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(c) Effective/applicability date. This
section applies to taxable years ending
on or after July 27, 2011.
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
Approved: July 19, 2011.
Emily S. McMahon,
Acting Assistant Secretary of the Treasury
(Tax Policy).
[FR Doc. 2011–18993 Filed 7–26–11; 8:45 am]
BILLING CODE 4830–01–P
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DEPARTMENT OF THE TREASURY
Office of the Secretary
31 CFR Part 1
RIN 1505–AC27
Privacy Act of 1974; Implementation
Departmental Offices, Treasury.
Final rule.
AGENCY:
ACTION:
In accordance with the
requirements of the Privacy Act of 1974,
5 U.S.C. 552a, the Department of the
Treasury gives notice of an amendment
to update its Privacy Act regulations,
and to add an exemption from certain
provisions of the Privacy Act for a
system of records related to the Office
of Financial Stability (OFS).
DATES: Effective Date: July 27, 2011.
FOR FURTHER INFORMATION CONTACT:
Brian Bressman, Department of the
Treasury, 1500 Pennsylvania Avenue,
NW., Washington, DC 20220, at (202)
927–0419 (fax) or via electronic mail at
Brian.Bressman@Treasury.gov.
SUPPLEMENTARY INFORMATION: The
Departmental Offices published a
system of records notice on February 9,
2011, at 76 FR 7239, establishing a new
system of records entitled ‘‘Treasury/
DO.225—TARP Fraud Investigation
Information System.’’
On February 9, 2011, the Department
also published, at 75 FR 7121, a
proposed rule amending 31 CFR
1.36(g)(1)(i). The proposed rule
exempted the system of records from
provisions of the Privacy Act pursuant
to 5 U.S.C. 552a(k)(2).
The proposed rule requested that
public comments be submitted to OFS,
Department of the Treasury, 1500
Pennsylvania Avenue, NW.,
Washington, DC 20220. The Department
did not receive comments on the
proposed rule. Accordingly the
Department is hereby giving notice that
the system of records entitled
‘‘Treasury/DO.225—TARP Fraud
Investigation Information System’’ is
exempt from provisions of the Privacy
Act, pursuant to 5 U.S.C. 552a(k)(2) as
set forth in the proposed rule.
This final rule is not a ‘‘significant
regulatory action’’ under Executive
Order 12866.
Pursuant to the requirements of the
Regulatory Flexibility Act (RFA), 5
U.S.C. 601–612, it is hereby certified
that this rule will not have significant
economic impact on a substantial
number of small entities. This
certification is based on the fact that the
final rule affects individuals and not
small entities. The term ‘‘small entity’’
SUMMARY:
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is defined to have the same meaning as
the terms ‘‘small business,’’ ‘‘small
organization,’’ and ‘‘small governmental
jurisdiction,’’ as defined in the RFA.
As authorized by 5 U.S.C. 553(d)(3),
the Department finds that good cause
exists for dispensing with the 30-day
delay in the effective date of this rule.
These regulations exempt certain
investigative records maintained by the
Department from notification, access,
and amendment of a record.
Accordingly, to protect the integrity of
the records system, the Department
finds that it is in the public interest to
make these regulations effective upon
publication.
List of Subjects in 31 CFR Part 1
Privacy.
Part 1, Subpart C of title 31 of the
Code of Federal Regulations is amended
as follows:
PART 1—[AMENDED]
1. The authority citation for part 1
continues to read as follows:
■
Authority: 5 U.S.C. 301 and 31 U.S.C. 321.
Subpart A also issued under 5 U.S.C. 552 as
amended. Subpart C also issued under 5
U.S.C. 552a.
2. Section 1.36 paragraph (g)(1)(i) is
amended by adding the following text to
the table in numerical order.
■
§ 1.36 Systems exempt in whole or in part
from provisions of 5 U.S.C. 552a and this
part.
*
*
(g) * *
(1) * *
(i) * *
*
*
*
*
*
Number
*
System name
*
DO.225 ....
*
*
*
*
*
TARP Fraud Investigation Information System.
*
*
*
*
*
*
*
*
*
Dated: May 9, 2011.
Melissa Hartman,
Deputy Assistant Secretary for Privacy,
Transparency and Records.
[FR Doc. 2011–18959 Filed 7–26–11; 8:45 am]
BILLING CODE 4810–25–P
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]]>Agencies
[Federal Register Volume 76, Number 144 (Wednesday, July 27, 2011)]
[Rules and Regulations]
[Pages 44800-44802]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-18993]
=======================================================================
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9539]
RIN 1545-BI09
Election of Reduced Research Credit Under Section 280C(c)(3)
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations that amend the
regulations concerning the election to claim the reduced research
credit. The final regulations simplify how taxpayers make the election
and affect taxpayers that claim the reduced research credit.
DATES: Effective Date: These regulations are effective on July 27,
2011.
Applicability Date: For dates of applicability, see Sec. 1.280C-
4(c).
FOR FURTHER INFORMATION CONTACT: David Selig, (202) 622-3040 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to the Income Tax Regulations (26
CFR Part 1) relating to the election for claiming the reduced research
credit under section 280C(c)(3). On July 16, 2009, a notice of proposed
rulemaking (REG-130200-08) was published in the Federal Register (74 FR
34523). No public hearing was requested or held. Written and electronic
comments responding to the notice of proposed rulemaking were received.
After considering the comments received the proposed regulations are
adopted as revised by this Treasury decision.
Section 280C(c)(1) provides that no deduction shall be allowed for
that portion of the qualified research expenses (as defined in section
41(b)) or basic research expenses (as defined in section 41(e)(2))
otherwise allowable as a deduction for the taxable year which is equal
to the amount of the credit determined for such taxable year under
section 41(a).
Similarly, section 280C(c)(2) provides that if the amount of the
credit determined for the taxable year under section 41(a)(1) exceeds
the amount allowable as a deduction for such taxable year for qualified
research expenses or basic research expenses (determined without regard
to section 280C(c)(1)), the amount chargeable to capital account for
the taxable year for such expenses shall be reduced by the amount of
such excess.
Section 280C(c)(3)(A) provides, in general, that in the case of any
taxable year for which an election is made under section 280C(c)(3),
sections 280C(c)(1) and (c)(2) shall not apply, and the amount of the
credit under section 41(a) shall be the amount determined under section
280C(c)(3)(B). Under section 280C(c)(3)(B), the amount of credit for
any taxable year shall be the amount equal to the excess of the amount
of credit determined under section 41(a) without regard to section
280C(c)(3), over the product of the amount of credit determined under
section 280C(c)(3)(B)(i), and the maximum rate of tax under section
11(b)(1).
Section 280C(c)(3)(C) provides that an election under section
280C(c)(3) for any taxable year shall be made not later than the time
for filing the return of tax for such year (including extensions),
shall be made on such return, and shall be made in such manner as the
Secretary may prescribe. Section 1.280C-4(a) provides that the section
280C(c)(3) election to have the provisions of section 280C(c)(1) and
(c)(2) not apply shall be made by claiming the reduced credit under
section 41(a) determined by the method provided in section
280C(c)(3)(B) on an original return for the taxable year, filed at any
time on or before the due date (including extensions) for filing the
income tax return for such year. Such an election, once made, shall be
irrevocable for that taxable year.
Section 280C(c)(4) provides that section 280C(b)(3) shall apply for
[[Page 44801]]
purposes of section 280C(c). Under section 280C(b)(3), 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 which
is treated as being under common control with other trades or
businesses (within the meaning of section 41(f)(1)(B)), section 280C(b)
shall be applied under rules prescribed by the Secretary similar to the
rules applicable under section 41(f)(1)(A) and (f)(1)(B).
Section 1.41-6(a)(1) provides that to determine the amount of
research credit (if any) allowable to a trade or business that at the
end of its taxable year is a member of a controlled group, a taxpayer
must: (i) Compute the group credit in the manner described in Sec.
1.41-6(b), and (ii) allocate the group credit among the members of the
group in the manner described under Sec. 1.41-6(c). All members of the
controlled group are required to use the same computation method, that
is, the section 41(a)(1) method or the section 41(c)(5) alternative
simplified research credit method, in computing the group credit for
the credit year.
Explanation and Summary of Comments
These final regulations simplify the section 280C(c)(3) election to
have the provisions of section 280C(c)(1) and (c)(2) not apply by
requiring the election to be made on Form 6765, ``Credit for Increasing
Research Activities.'' The form must be filed with an original return
for the taxable year filed on or before the due date (including
extensions) for filing the income tax return for such year. An
election, once made for any taxable year, is irrevocable for that
taxable year.
These final regulations also provide that each member of a
controlled group may make the election under section 280C(c)(3) after
the group credit is computed and allocated under Sec. Sec. 1.41-
6(b)(1) and 1.41-6(c).
One commentator was concerned that the controlled group rules in
the proposed regulations might cause administrative complexity for some
members of a controlled group filing a consolidated return because each
member would be required to file a separate Form 6765 to make the
election under section 280C(c)(3). Generally, the proposed regulations
provided that each member of a controlled group of corporations (within
the meaning of section 41(f)(5)), or a trade or business which is
treated as being under common control with other trades or businesses
(within the meaning of section 41(f)(1)(B)), could make the election
under section 280C(c)(3). In order to clarify and simplify the election
procedure for members of consolidated groups, however, the final
regulations add that only a common parent (within the meaning of Sec.
1.1502-77(a)(1)(i)) of a consolidated group may make the election under
section 280C(c)(3) on behalf of the members of the consolidated group.
An attachment to a Form 6765 filed by a common parent of a consolidated
group adequately identifying the members for which an election under
section 280C(c)(3) is made is generally sufficient to clearly indicate
the intent of the common parent to make the election for those members.
Another commentator believed that some members of a controlled
group may fail to make a timely election under section 280C(c)(3)
because, at the time of filing the Form 6765 with the original return,
no credit was reported by such members. The election under section
280C(c)(3) may be made whether or not a taxpayer claims any amount of
credit on its original return. An example has been added to the final
regulations showing that a taxpayer may make an election under section
280C(c)(3) on its original return without reporting any credit.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It also has been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these regulations.
When an agency promulgates a final rule, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) requires the agency to ``prepare a final
regulatory flexibility analysis'' with ``a description of and an
estimate of the number of small entities to which the rule will
apply.'' See 5 U.S.C. 604(a). Section 605 of the Regulatory Flexibility
Act provides an exception to this requirement if the agency certifies
that the final rule will not have a significant economic impact on a
substantial number of small entities.
The final rule affects individuals and small businesses engaged in
research activities under section 41. The IRS has determined that the
final rule will have an impact on a substantial number of small
entities. However, the IRS also has determined that the impact on
entities affected by the final rule will not be significant. This
determination is based on the fact that the regulations would simplify
the procedure for making the election for the reduced research credit
under section 280C(c)(3)(C). Instead of requiring such an election to
be made by claiming the reduced credit ``on an original return,'' the
regulations specify that the election is made by clearly indicating an
intent to make the election on Form 6765, ``Credit for Increasing
Research Activities,'' which is attached to the return. This form
requires only a minimal amount of time to complete and places no
greater burden on the taxpayer than the current procedure. Accordingly,
a final regulatory flexibility analysis is not required. Pursuant to
section 7805(f) of the Internal Revenue Code, the notice of proposed
rulemaking preceding these regulations was submitted to the Chief
Counsel for Advocacy of the Small Business Administration for comment
on its impact on small business.
Drafting Information
The principal author of these regulations is David Selig, Office of
Associate Chief Counsel (Passthroughs and Special Industries). However,
other personnel from the IRS and the Treasury Department participated
in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the 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 1.280C-4 is revised to read as follows:
Sec. 1.280C-4 Credit for increasing research activities.
(a) In general. An election under section 280C(c)(3) to have the
provisions of section 280C(c)(1) and (c)(2) not apply and elect the
reduced research credit under section 280C(c)(3)(B) shall be made on
Form 6765, ``Credit for Increasing Research Activities'' (or any
successor form). In order for the election to be effective, the Form
6765 must clearly indicate the taxpayer's intent to make the section
280C(c)(3) election, and must be filed with an original return for the
taxable year filed on or before the due date (including extensions) for
filing the income tax return for such year, regardless of whether any
research
[[Page 44802]]
credits are claimed on the original return. An election, once made for
any taxable year, is irrevocable for that taxable year.
(b) Controlled groups of corporations; trades or businesses under
common control--(1) In general. A member of a controlled group of
corporations (within the meaning of section 41(f)(5)), or a trade or
business which is treated as being under common control with other
trades or businesses (within the meaning of section 41(f)(1)(B)), may
make the election under section 280C(c)(3). However, only the common
parent (within the meaning of Sec. 1.1502-77(a)(1)(i)) of a
consolidated group may make the election on behalf of the members of a
consolidated group. A member or trade or business shall make the
election on Form 6765 and by the time prescribed in paragraph (a) of
this section.
(2) Example. The following example illustrates an application of
paragraph (b) of this section:
Example. 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 2009 Form 6765, ``Credit for Increasing Research Activities,''
showing A and C had stand-alone entity credits (within the meaning
of Sec. 1.41-6(c)(2)) that exceeded the group credit (within the
meaning of Sec. 1.41-6(a)(3)(iv)). A and C report their allocated
portions of the group credit (as determined under Sec. 1.41-6(c))
on the 2009 Form 6765 and B reports no research credit on the 2009
Form 6765. A and B, but not C, each make an election for the reduced
credit on the 2009 Form 6765. In December 2010, A determines that it
understated its qualified research expenses in 2009 resulting in the
group credit exceeding the sum of the stand-alone credits. On an
amended 2009 Form 6765, A, B, and C each report their allocated
portions of the group credit (including the excess 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 280C(c)(3)(B) because C did not make an
election for the reduced credit with its original return.
(c) Effective/applicability date. This section applies to taxable
years ending on or after July 27, 2011.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
Approved: July 19, 2011.
Emily S. McMahon,
Acting Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2011-18993 Filed 7-26-11; 8:45 am]
BILLING CODE 4830-01-P
