Use of Controlled Corporations To Avoid the Application of Section 304, 75844-75845 [2012-30967]
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Federal Register / Vol. 77, No. 247 / Wednesday, December 26, 2012 / Rules and Regulations
tkelley on DSK3SPTVN1PROD with
increase or decrease on the affected
small entities.
42. Further, NERC explains that the
cost for smaller entities to implement
regional Reliability Standard PRC–006–
SERC–01 was considered during the
development process. The continentwide NERC UFLS Reliability Standard
PRC–006–1 requires a planning
coordinator to identify which entities
will participate in its UFLS scheme,
including the number of steps and
percent load that UFLS entities will
shed. The standard drafting team
recognized that UFLS entities with a
load of less than 100 MW may have
difficulty in implementing more than
one UFLS step and in meeting a tight
tolerance. Therefore, the standard
drafting team included Requirement R5,
which states that such small entities
shall not be required to have more than
one UFLS step, and sets their
implementation tolerance to a wider
level. Requirement R5 limits additional
compliance costs for smaller entities to
comply with the regional Reliability
Standard.
43. Based on this understanding, the
Commission certifies that regional
Reliability Standard PRC–006–SERC–01
will not have a significant economic
impact on a substantial number of small
entities. Accordingly, no regulatory
flexibility analysis is required.
VI. Document Availability
44. In addition to publishing the full
text of this document in the Federal
Register, the Commission provides all
interested persons an opportunity to
view and/or print the contents of this
document via the Internet through
FERC’s Home Page (https://www.ferc.gov)
and in FERC’s Public Reference Room
during normal business hours (8:30 a.m.
to 5:00 p.m. Eastern time) at 888 First
Street NE., Room 2A, Washington, DC
20426.
45. From FERC’s Home Page on the
Internet, this information is available on
eLibrary. The full text of this document
is available on eLibrary in PDF and
Microsoft Word format for viewing,
printing, and/or downloading. To access
this document in eLibrary, type the
docket number excluding the last three
digits of this document in the docket
number field.
46. User assistance is available for
eLibrary and the FERC’s Web site during
normal business hours from FERC
Online Support at (202) 502–6652 (toll
free at 1–866–208–3676) or email at
ferconlinesupport@ferc.gov, or the
Public Reference Room at (202) 502–
8371, TTY (202) 502–8659. Email the
Public Reference Room at
public.referenceroom@ferc.gov.
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VII. Effective Date and Congressional
Notification
47. These regulations are effective
February 25, 2013. The Commission has
determined, with the concurrence of the
Administrator of the Office of
Information and Regulatory Affairs of
OMB, that this rule is not a ‘‘major rule’’
as defined in section 351 of the Small
Business Regulatory Enforcement
Fairness Act of 1996.
By the Commission.
Kimberly D. Bose,
Secretary.
[FR Doc. 2012–31034 Filed 12–24–12; 8:45 am]
BILLING CODE 6717–01–P
section 304. A correction to the 2009
regulations was published in the
Federal Register on February 26, 2010
(75 FR 8796). The 2009 regulations
amended the anti-abuse rule of § 1.304–
4T, which was published in the Federal
Register on June 14, 1988 (TD 8209), to
address transactions that are subject to
section 304 but are structured with a
principal purpose of avoiding the
application of section 304 to certain
corporations. No public hearing on the
2009 regulations was requested or held,
and no written comments were
received. Accordingly, this Treasury
decision adopts the 2009 regulations
without change as final regulations and
removes the temporary regulations
under section 304.
DEPARTMENT OF THE TREASURY
Special Analyses
Internal Revenue Service
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) and (d) of the Administrative
Procedure Act (5 U.S.C. Chapter 6) do
not apply to these regulations. For
applicability of the Regulatory
Flexibility Act (5 U.S.C. Chapter 6), it is
hereby certified that this rule will not
have a significant economic impact on
a substantial number of small entities.
These regulations primarily will affect
large corporations. Thus, the number of
affected small entities will not be
substantial. Pursuant to section 7805(f)
of the Internal Revenue Code, the notice
of proposed rulemaking preceding this
regulation was submitted to the Chief
Counsel for Advocacy of the Small
Business Administration for comments
on its impact on small business.
26 CFR Part 1
[TD 9606]
RIN 1545–BI13
Use of Controlled Corporations To
Avoid the Application of Section 304
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations and removal of
temporary regulations.
AGENCY:
This document contains final
regulations addressing sales of stock
between related corporations. The
regulations finalize proposed
regulations and remove temporary
regulations that apply to certain sales of
stock that are recharacterized as
contributions and redemptions, but that
are structured with a principal purpose
of redesignating the issuing corporation
or the acquiring corporation. The
regulations affect persons treated as
receiving distributions in redemption of
stock as a result of such transactions.
DATES: Effective Date: These regulations
are effective on December 26, 2012.
Applicability Date: These regulations
apply to acquisitions of stock occurring
on or after December 29, 2009.
FOR FURTHER INFORMATION CONTACT:
Ryan A. Bowen, (202) 622–3860 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
SUMMARY:
Background
On December 30, 2009, the IRS and
the Treasury Department published
final and temporary regulations and a
notice of proposed rulemaking by crossreference to temporary regulations in
the Federal Register (74 FR 69021, TD
9477, 2010–1 CB 385; REG–132232–08,
74 FR 69043) (2009 regulations) under
PO 00000
Frm 00022
Fmt 4700
Sfmt 4700
Drafting Information
The principal author of the
regulations is Ryan A. Bowen of the
Office of Associate Chief Counsel
(International). 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:
■
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26DER1
Federal Register / Vol. 77, No. 247 / Wednesday, December 26, 2012 / Rules and Regulations
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.304–4 is revised to
read as follows:
■
§ 1.304–4 Special rules for the use of
related corporations to avoid the
application of section 304.
tkelley on DSK3SPTVN1PROD with
(a) Scope and purpose. This section
applies to determine the amount of a
property distribution constituting a
dividend (and the source thereof) under
section 304(b)(2), for certain
transactions involving controlled
corporations. The purpose of this
section is to prevent the avoidance of
the application of section 304 to a
controlled corporation.
(b) Amount and source of dividend.
For purposes of determining the amount
constituting a dividend (and source
thereof) under section 304(b)(2), the
following rules shall apply:
(1) Deemed acquiring corporation. A
corporation (deemed acquiring
corporation) shall be treated as
acquiring for property the stock of a
corporation (issuing corporation)
acquired for property by another
corporation (acquiring corporation) that
is controlled by the deemed acquiring
corporation, if a principal purpose for
creating, organizing, or funding the
acquiring corporation by any means
(including through capital contributions
or debt) is to avoid the application of
section 304 to the deemed acquiring
corporation. See paragraph (c) Example
1 of this section for an illustration of
this paragraph.
(2) Deemed issuing corporation. The
acquiring corporation shall be treated as
acquiring for property the stock of a
corporation (deemed issuing
corporation) controlled by the issuing
corporation if, in connection with the
acquisition for property of stock of the
issuing corporation by the acquiring
corporation, the issuing corporation
acquired stock of the deemed issuing
corporation with a principal purpose of
avoiding the application of section 304
to the deemed issuing corporation. See
paragraph (c) Example 2 of this section
for an illustration of this paragraph.
(c) Examples. The rules of this section
are illustrated by the following
examples:
Example 1. (i) Facts. P, a domestic
corporation, wholly owns CFC1, a controlled
foreign corporation with substantial
accumulated earnings and profits. CFC1 is
organized in Country X, which imposes a
high rate of tax on the income of CFC1. P also
wholly owns CFC2, a controlled foreign
corporation with accumulated earnings and
profits of $200x. CFC2 is organized in
Country Y, which imposes a low rate of tax
on the income of CFC2. P wishes to own all
of its foreign corporations in a direct chain
and to repatriate the cash of CFC2. In order
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04:58 Dec 22, 2012
Jkt 229001
to avoid having to obtain Country X approval
for the acquisition of CFC1 (a Country X
corporation) by CFC2 (a Country Y
corporation) and to avoid the dividend
distribution from CFC2 to P that would result
if CFC2 were the acquiring corporation, P
causes CFC2 to form CFC3 in Country X and
to contribute $100x to CFC3. CFC3 then
acquires all of the stock of CFC1 from P for
$100x.
(ii) Result. Because a principal purpose for
creating, organizing, or funding CFC3
(acquiring corporation) is to avoid the
application of section 304 to CFC2 (deemed
acquiring corporation), under paragraph
(b)(1) of this section, for purposes of
determining the amount of the $100x
distribution constituting a dividend (and
source thereof) under section 304(b)(2), CFC2
shall be treated as acquiring the stock of
CFC1 (issuing corporation) from P for $100x.
As a result, P receives a $100x distribution
out of the earnings and profits of CFC2 to
which section 301(c)(1) applies.
Example 2. (i) Facts. P, a domestic
corporation, wholly owns CFC1, a controlled
foreign corporation with substantial
accumulated earnings and profits. The CFC1
stock has a basis of $100x. CFC1 is organized
in Country X. P also wholly owns CFC2, a
controlled foreign corporation with zero
accumulated earnings and profits. CFC2 is
organized in Country Y. P wishes to own all
of its foreign corporations in a direct chain
and to repatriate the cash of CFC2. In order
to avoid having to obtain Country X approval
for the acquisition of CFC1 (a Country X
corporation) by CFC2 (a Country Y
corporation) and to avoid a dividend
distribution from CFC1 to P, P forms a new
corporation (CFC3) in Country X and
transfers the stock of CFC1 to CFC3 in
exchange for CFC3 stock. P then transfers the
stock of CFC3 to CFC2 in exchange for $100x.
(ii) Result. Because a principal purpose for
the transfer of the stock of CFC1 (deemed
issuing corporation) by P to CFC3 (issuing
corporation) is to avoid the application of
section 304 to CFC1, under paragraph (b)(2)
of this section, for purposes of determining
the amount of the $100x distribution
constituting a dividend (and source thereof)
under section 304(b)(2), CFC2 (acquiring
corporation) shall be treated as acquiring the
stock of CFC1 from P for $100x . As a result,
P receives a $100x distribution out of the
earnings and profits of CFC1 to which section
301(c)(1) applies.
(d) Effective/applicability date. This
section applies to acquisitions of stock
occurring on or after December 29, 2009.
§ 1.304–4T
■
[Removed]
Par. 3. Section 1.304–4T is removed.
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
Approved: December 12, 2012.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2012–30967 Filed 12–21–12; 8:45 am]
BILLING CODE 4830–01–P
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75845
DEPARTMENT OF THE TREASURY
Office of Foreign Assets Control
31 CFR Part 560
Iranian Transactions and Sanctions
Regulations
Office of Foreign Assets
Control, Treasury.
ACTION: Final rule.
AGENCY:
The Department of the
Treasury’s Office of Foreign Assets
Control (‘‘OFAC’’) is amending the
Iranian Transactions and Sanctions
Regulations (the ‘‘ITSR’’) to implement
section 218 and portions of sections 602
and 603 of the Iran Threat Reduction
and Syria Human Rights Act of 2012;
section 5, portions of section 6, and
other related provisions of Executive
Order 13622 of July 30, 2012; and
section 4 of Executive Order 13628 of
October 9, 2012. These amendments,
inter alia, add a new section to the ITSR
to prohibit certain transactions by
entities owned or controlled by a U.S.
person and established or maintained
outside the United States. They also
expand the categories of persons whose
property and interests in property are
blocked to include any person
determined by the Secretary of the
Treasury, in consultation with the
Secretary of State, to have provided
material support for certain Government
of Iran-related entities or certain
activities by the Government of Iran.
DATES: Effective Date: December 26,
2012.
FOR FURTHER INFORMATION CONTACT:
Assistant Director for Sanctions
Compliance & Evaluation, tel.: 202/622–
2490, Assistant Director for Licensing,
tel.: 202/622–2480, Assistant Director
for Policy, tel.: 202/622–4855, Office of
Foreign Assets Control, or Chief Counsel
(Foreign Assets Control), tel.: 202/622–
2410, Office of the General Counsel,
Department of the Treasury (not toll free
numbers).
SUPPLEMENTARY INFORMATION:
SUMMARY:
Electronic and Facsimile Availability
This document and additional
information concerning OFAC are
available from OFAC’s Web site
(www.treas.gov/ofac). Certain general
information pertaining to OFAC’s
sanctions programs also is available via
facsimile through a 24-hour fax-ondemand service, tel.: 202/622–0077.
Background
On October 22, 2012, the Department
of the Treasury’s Office of Foreign
Assets Control (‘‘OFAC’’) published a
E:\FR\FM\26DER1.SGM
26DER1
]]>Agencies
[Federal Register Volume 77, Number 247 (Wednesday, December 26, 2012)]
[Rules and Regulations]
[Pages 75844-75845]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-30967]
=======================================================================
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9606]
RIN 1545-BI13
Use of Controlled Corporations To Avoid the Application of
Section 304
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations and removal of temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations addressing sales of
stock between related corporations. The regulations finalize proposed
regulations and remove temporary regulations that apply to certain
sales of stock that are recharacterized as contributions and
redemptions, but that are structured with a principal purpose of
redesignating the issuing corporation or the acquiring corporation. The
regulations affect persons treated as receiving distributions in
redemption of stock as a result of such transactions.
DATES: Effective Date: These regulations are effective on December 26,
2012.
Applicability Date: These regulations apply to acquisitions of
stock occurring on or after December 29, 2009.
FOR FURTHER INFORMATION CONTACT: Ryan A. Bowen, (202) 622-3860 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On December 30, 2009, the IRS and the Treasury Department published
final and temporary regulations and a notice of proposed rulemaking by
cross-reference to temporary regulations in the Federal Register (74 FR
69021, TD 9477, 2010-1 CB 385; REG-132232-08, 74 FR 69043) (2009
regulations) under section 304. A correction to the 2009 regulations
was published in the Federal Register on February 26, 2010 (75 FR
8796). The 2009 regulations amended the anti-abuse rule of Sec. 1.304-
4T, which was published in the Federal Register on June 14, 1988 (TD
8209), to address transactions that are subject to section 304 but are
structured with a principal purpose of avoiding the application of
section 304 to certain corporations. No public hearing on the 2009
regulations was requested or held, and no written comments were
received. Accordingly, this Treasury decision adopts the 2009
regulations without change as final regulations and removes the
temporary regulations under section 304.
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) and (d) of the Administrative Procedure
Act (5 U.S.C. Chapter 6) do not apply to these regulations. For
applicability of the Regulatory Flexibility Act (5 U.S.C. Chapter 6),
it is hereby certified that this rule will not have a significant
economic impact on a substantial number of small entities. These
regulations primarily will affect large corporations. Thus, the number
of affected small entities will not be substantial. Pursuant to section
7805(f) of the Internal Revenue Code, the notice of proposed rulemaking
preceding this regulation was submitted to the Chief Counsel for
Advocacy of the Small Business Administration for comments on its
impact on small business.
Drafting Information
The principal author of the regulations is Ryan A. Bowen of the
Office of Associate Chief Counsel (International). 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:
[[Page 75845]]
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 1.304-4 is revised to read as follows:
Sec. 1.304-4 Special rules for the use of related corporations to
avoid the application of section 304.
(a) Scope and purpose. This section applies to determine the amount
of a property distribution constituting a dividend (and the source
thereof) under section 304(b)(2), for certain transactions involving
controlled corporations. The purpose of this section is to prevent the
avoidance of the application of section 304 to a controlled
corporation.
(b) Amount and source of dividend. For purposes of determining the
amount constituting a dividend (and source thereof) under section
304(b)(2), the following rules shall apply:
(1) Deemed acquiring corporation. A corporation (deemed acquiring
corporation) shall be treated as acquiring for property the stock of a
corporation (issuing corporation) acquired for property by another
corporation (acquiring corporation) that is controlled by the deemed
acquiring corporation, if a principal purpose for creating, organizing,
or funding the acquiring corporation by any means (including through
capital contributions or debt) is to avoid the application of section
304 to the deemed acquiring corporation. See paragraph (c) Example 1 of
this section for an illustration of this paragraph.
(2) Deemed issuing corporation. The acquiring corporation shall be
treated as acquiring for property the stock of a corporation (deemed
issuing corporation) controlled by the issuing corporation if, in
connection with the acquisition for property of stock of the issuing
corporation by the acquiring corporation, the issuing corporation
acquired stock of the deemed issuing corporation with a principal
purpose of avoiding the application of section 304 to the deemed
issuing corporation. See paragraph (c) Example 2 of this section for an
illustration of this paragraph.
(c) Examples. The rules of this section are illustrated by the
following examples:
Example 1. (i) Facts. P, a domestic corporation, wholly owns
CFC1, a controlled foreign corporation with substantial accumulated
earnings and profits. CFC1 is organized in Country X, which imposes
a high rate of tax on the income of CFC1. P also wholly owns CFC2, a
controlled foreign corporation with accumulated earnings and profits
of $200x. CFC2 is organized in Country Y, which imposes a low rate
of tax on the income of CFC2. P wishes to own all of its foreign
corporations in a direct chain and to repatriate the cash of CFC2.
In order to avoid having to obtain Country X approval for the
acquisition of CFC1 (a Country X corporation) by CFC2 (a Country Y
corporation) and to avoid the dividend distribution from CFC2 to P
that would result if CFC2 were the acquiring corporation, P causes
CFC2 to form CFC3 in Country X and to contribute $100x to CFC3. CFC3
then acquires all of the stock of CFC1 from P for $100x.
(ii) Result. Because a principal purpose for creating,
organizing, or funding CFC3 (acquiring corporation) is to avoid the
application of section 304 to CFC2 (deemed acquiring corporation),
under paragraph (b)(1) of this section, for purposes of determining
the amount of the $100x distribution constituting a dividend (and
source thereof) under section 304(b)(2), CFC2 shall be treated as
acquiring the stock of CFC1 (issuing corporation) from P for $100x.
As a result, P receives a $100x distribution out of the earnings and
profits of CFC2 to which section 301(c)(1) applies.
Example 2. (i) Facts. P, a domestic corporation, wholly owns
CFC1, a controlled foreign corporation with substantial accumulated
earnings and profits. The CFC1 stock has a basis of $100x. CFC1 is
organized in Country X. P also wholly owns CFC2, a controlled
foreign corporation with zero accumulated earnings and profits. CFC2
is organized in Country Y. P wishes to own all of its foreign
corporations in a direct chain and to repatriate the cash of CFC2.
In order to avoid having to obtain Country X approval for the
acquisition of CFC1 (a Country X corporation) by CFC2 (a Country Y
corporation) and to avoid a dividend distribution from CFC1 to P, P
forms a new corporation (CFC3) in Country X and transfers the stock
of CFC1 to CFC3 in exchange for CFC3 stock. P then transfers the
stock of CFC3 to CFC2 in exchange for $100x.
(ii) Result. Because a principal purpose for the transfer of the
stock of CFC1 (deemed issuing corporation) by P to CFC3 (issuing
corporation) is to avoid the application of section 304 to CFC1,
under paragraph (b)(2) of this section, for purposes of determining
the amount of the $100x distribution constituting a dividend (and
source thereof) under section 304(b)(2), CFC2 (acquiring
corporation) shall be treated as acquiring the stock of CFC1 from P
for $100x . As a result, P receives a $100x distribution out of the
earnings and profits of CFC1 to which section 301(c)(1) applies.
(d) Effective/applicability date. This section applies to
acquisitions of stock occurring on or after December 29, 2009.
Sec. 1.304-4T [Removed]
0
Par. 3. Section 1.304-4T is removed.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
Approved: December 12, 2012.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2012-30967 Filed 12-21-12; 8:45 am]
BILLING CODE 4830-01-P
