Allocation and Apportionment of Interest Expense, 2240-2241 [2012-595]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 77, Number 10 (Tuesday, January 17, 2012)]
[Proposed Rules]
[Pages 2240-2241]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-595]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-113903-10]
RIN 1545-BJ59


Allocation and Apportionment of Interest Expense

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary 
regulations and notice of public hearing.

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SUMMARY: In the Rules and Regulations section in this issue of the 
Federal Register, the IRS is issuing temporary regulations that provide 
guidance relating to the allocation and apportionment of interest 
expense. The temporary regulations provide guidance concerning the 
allocation and apportionment of interest expense by corporations owning 
a 10 percent or greater interest in a partnership, as well as the 
allocation and apportionment of interest expense using the fair market 
value asset method. The temporary regulations also update the interest 
allocation regulations to conform to the changes made to the applicable 
law by the legislation commonly referred to as the Education Jobs and 
Medicaid Assistance Act (EJMAA), enacted on August 10, 2010 (Pub. L. 
111-226, 124 Stat. 2389 (2010)), which affect corporations owning 
certain foreign corporations engaged in the conduct of a trade or 
business in the United States. The text of those temporary regulations 
published in this issue of the Federal Register also serves as the text 
of these proposed regulations. This document also provides a notice of 
public hearing on these proposed regulations.

DATES: Written or electronic comments must be received by March 13, 
2012. Outlines of topics to be discussed at the public hearing 
scheduled for April 3, 2012, at 10 a.m. must be received by March 13, 
2012.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG-113903-10), room 5203, 
Internal Revenue Service, PO Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
113903-10), Courier's desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC 20044, or sent electronically, via the 
Federal eRulemaking Portal at www.regulations.gov (IRS REG-113903-10). 
The public hearing will be held in the IRS Auditorium, Internal Revenue 
Building, 1111 Constitution Avenue NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Jeffrey L. 
Parry, (202) 622-3850; concerning submissions of comments, the hearing, 
and/or to be placed on the building access list to attend the hearing 
Oluwfunmilayo Taylor (202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

    Temporary regulations in the Rules and Regulations section of this 
issue of the Federal Register contain amendments to the Income Tax 
Regulations (26 CFR part 1) which provide rules under section 861 
relating to the affiliation of certain foreign corporations for 
purposes of section 864, the allocation and apportionment of interest 
expense by corporations owning a 10 percent or greater interest in a 
partnership, and the allocation and apportionment of interest expense 
using the fair market value method. The text of those regulations also 
serves as the text of these proposed regulations. The preamble to the 
temporary regulations explains the temporary regulations and these 
proposed regulations. The regulations affect taxpayers that allocate 
and apportion interest expense under section 864.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required. It has also 
been determined that section 553(b) of the Administrative Procedure Act 
(5 U.S.C. chapter 5) does not apply to these regulations, and because 
the regulations do 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), these regulations have been 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small business.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any electronic or written comments (a 
signed original and eight (8) copies) that are submitted timely to the 
IRS. The IRS and the Treasury Department request comments on all 
aspects of the proposed rules. All comments will be available for 
public inspection and copying.
    A public hearing has been scheduled for April 3, 2012, in the IRS 
auditorium, Internal Revenue Building, 1111 Constitution Avenue NW., 
Washington, DC. Due to building security procedures, visitors must 
enter at the Constitution Avenue entrance. In addition, all visitors 
must present photo identification to enter the building. Because of 
access restrictions, visitors will not be admitted beyond the immediate 
entrance more than 30 minutes before the hearing starts. For 
information about having your name placed on the building access list 
to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section 
of this preamble.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments at the hearing must submit electronic or 
written comments by March 13, 2012, and an outline of the topics to be 
discussed and the time to be devoted to each topic (signed original and 
eight (8) copies) by March 13, 2012. A period of 10 minutes will be 
allotted to each person for making comments.
    An agenda showing the scheduling of the speakers will be prepared 
after the deadline for receiving outlines has passed. Copies of the 
agenda will be available free of charge at the hearing.

Drafting Information

    The principal author of these regulations is Jeffrey L. Parry of 
the Office of Chief Counsel (International). However, other personnel 
from the IRS and the Treasury Department participated in their 
development.

[[Page 2241]]

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be 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. In Sec.  1.861-9, paragraphs (e)(2), (e)(3), (h)(4), and 
(k) are revised to read as follows:


Sec.  1.861-9  Allocation and apportionment of interest expense

* * * * *
    (e) * * *
    (2) and (3) [The text of the proposed amendments to Sec.  1.861-
9(e)(2) and Sec.  1.861-9(e)(3) is the same as the text of Sec.  1.861-
9T(e)(2) and Sec.  1.861-9T(e)(3) published elsewhere in this issue of 
the Federal Register.]
* * * * *
    (h) * * *
    (4) [The text of the proposed amendment to Sec.  1.861-9(h)(4) is 
the same as the text of Sec.  1.861-9T(h)(4) published elsewhere in 
this issue of the Federal Register.]
* * * * *
    (k) [The text of the proposed amendment to Sec.  1.861-9(k) is the 
same as the text of Sec.  1.861-9T(k) published elsewhere in this issue 
of the Federal Register.]
    Par. 3. In Sec.  1.861-11, paragraphs (d)(6)(ii) and (h) are 
revised to read as follows:


Sec.  1.861-11  Special rules for allocating and apportioning interest 
expense of an affiliated group of corporations.

* * * * *
    (d) * * *
    (6)(ii) [The text of proposed Sec.  1.861-11(d)(6)(ii) is the same 
as the text of Sec.  1.861-11T(d)(6)(ii) published elsewhere in this 
issue of the Federal Register.]
* * * * *
    (h) [The text of the proposed amendment to Sec.  1.861-11(h) is the 
same as the text of Sec.  1.861-11T(h) published elsewhere in this 
issue of the Federal Register.]

Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2012-595 Filed 1-13-12; 8:45 am]
BILLING CODE 4830-01-P