Revised Applicability Dates for Regulations Under Section 382(h) Related to Built-in Gain and Loss, 2061-2064 [2020-00469]
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Federal Register / Vol. 85, No. 9 / Tuesday, January 14, 2020 / Proposed Rules
development (such as supportive
services that enable an individual with
a disability to transfer from an
institutional setting into the
community), and engagement in
ongoing coordination with state and
local aging and disability community
and community-based organizations to
provide additional community-based
housing opportunities for individuals
with disabilities and to connect such
individuals with supportive services to
enable an individual with a disability to
transfer from an institutional setting
into the community and facilitate the
provision of such services at PHA
properties.
(c) Validity of certification. (1) A
PHA’s certification under § 903.7(o) will
be subject to challenge by HUD where
it appears that a PHA fails to meet the
requirements in 24 CFR 903.7(o).
(2) If HUD challenges the validity of
a PHA’s certification, HUD will do so in
writing specifying the deficiencies, and
will give the PHA an opportunity to
respond to the particular challenge in
writing. In responding to the specified
deficiencies, a PHA must establish, as
applicable, that it has complied with
fair housing and civil rights laws and
regulations, or has remedied violations
of fair housing and civil rights laws and
regulations, and has adopted policies
and undertaken actions to affirmatively
further fair housing, including, but not
limited to, providing a full range of
housing opportunities to applicants and
tenants and taking affirmative steps as
described in paragraph (d)(2) of this
section in a nondiscriminatory manner.
In responding to the PHA, HUD may
accept the PHA’s explanation and
withdraw the challenge, undertake
further investigation, or pursue other
remedies available under law. HUD will
seek to obtain voluntary corrective
action consistent with the specified
deficiencies. In determining whether a
PHA has complied with its certification,
HUD will review the PHA’s
circumstances relevant to the specified
deficiencies, including characteristics of
the population served by the PHA;
characteristics of the PHA’s existing
housing stock; and decisions, plans,
goals, priorities, strategies, and actions
of the PHA, including those designed to
affirmatively further fair housing.
■ 45. In § 903.23 revise paragraph (f) to
read as follows;
§ 903.23 What is the process by which
HUD reviews, approves, or disapproves an
Annual Plan?
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(f) Recordkeeping. PHAs must
maintain records reflecting actions to
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affirmatively further fair housing, as
described in § 903.7(o).
PART 905—THE PUBLIC HOUSING
CAPITAL FUND PROGRAM
46. The authority citation for part 905
continues to read as follows:
■
Authority: 42 U.S.C. 1437g, 42 U.S.C.
1437z–2, 42 U.S.C. 1437z–7, and 3535(d).
47. In § 905.308 revise paragraph
(b)(1) to read as follows:
■
§ 905.308 Federal requirements applicable
to all Capital Fund activities.
*
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(b) * * *
(1) Nondiscrimination and equal
opportunity. The PHA shall comply
with all applicable nondiscrimination
and equal opportunity requirements,
including, but not limited to, the
Department’s generally applicable
nondiscrimination and equal
opportunity requirements at 24 CFR
5.105(a) and the Architectural Barriers
Act of 1968 (42 U.S.C. 4151 et seq.), and
its implementing regulations at 24 CFR
parts 40 and 41. The PHA shall
affirmatively further fair housing in its
use of funds under this part, following
the requirements at 24 CFR 903.7(o).
*
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Dated: January 6, 2020.
Benjamin S. Carson, Sr.,
Secretary.
[FR Doc. 2020–00234 Filed 1–13–20; 8:45 am]
BILLING CODE 4210–67–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
[REG–125710–18]
RIN 1545–BP07
Revised Applicability Dates for
Regulations Under Section 382(h)
Related to Built-in Gain and Loss
Internal Revenue Service (IRS),
Treasury.
ACTION: Partial withdrawal of notice of
proposed rulemaking; notice of
proposed rulemaking.
AGENCY:
This document withdraws a
portion of a notice of proposed
rulemaking published in the Proposed
Rules section of the Federal Register on
September 10, 2019. That notice of
proposed rulemaking contained
proposed rules to provide guidance
regarding the items of income and
deduction that are included in the
calculation of built-in gains and losses
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under section 382 of the Internal
Revenue Code (Code). If adopted, those
proposed rules would apply to any
ownership change occurring after the
date the Treasury decision adopting
those proposed rules as a final
regulation is published in the Federal
Register. This notice of proposed
rulemaking would delay the
applicability of those proposed rules
and provide transition relief for eligible
taxpayers. The proposed regulations in
this notice of proposed rulemaking
would affect corporations that
experience an ownership change for
purposes of section 382.
DATES: Written or electronic comments
must be received by March 16, 2020.
Written or electronic requests for a
public hearing and outlines of topics to
be discussed at the public hearing must
be received by March 16, 2020.
ADDRESSES: Submit electronic
submissions via the Federal
eRulemaking Portal at
www.regulations.gov (indicate IRS and
REG–125710–18) by following the
online instructions for submitting
comments. Once submitted to the
Federal eRulemaking Portal, comments
cannot be edited or withdrawn. The
Department of the Treasury (Treasury
Department) and the IRS will publish
for public availability any comment
received to its public docket, whether
submitted electronically or in hard
copy. Send hard copy submissions to:
Internal Revenue Service,
CC:PA:LPD:PR (REG–125710–18), Room
5203, Post Office Box 7604, Ben
Franklin Station, Washington, DC
20044.
FOR FURTHER INFORMATION CONTACT:
26 CFR Part 1
SUMMARY:
2061
Concerning the proposed regulations,
Jonathan R. Neuville at (202) 317–5363;
concerning submissions of comments or
requests for a public hearing, Regina L.
Johnson at (202) 317–6901 (not toll-free
numbers).
SUPPLEMENTARY INFORMATION:
Background
On September 10, 2019, the Treasury
Department and the IRS published in
the Federal Register (84 FR 47455) a
notice of proposed rulemaking (REG–
125710–18) proposing revisions to the
rules in §§ 1.382–2 and 1.382–7
(September 2019 proposed regulations).
These rules would affect the
determination of net built-in gains and
losses and recognized built-in gains and
losses under section 382(h) that, in turn,
affect the limitation under section 382
on net operating losses and disallowed
business interest expense under section
163(j).
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Federal Register / Vol. 85, No. 9 / Tuesday, January 14, 2020 / Proposed Rules
Proposed §§ 1.382–2(b)(4) and 1.382–
7(g)(1), as set forth in the September
2019 proposed regulations, provided
that the September 2019 proposed
regulations would apply to ownership
changes that occur after the date the
Treasury decision adopting the
September 2019 proposed regulations as
final regulations is published in the
Federal Register. As noted in part II of
the Background in the September 2019
proposed regulations, section V of
Notice 2003–65 (2003–2 C.B. 747)
provides that taxpayers may rely on
either of two safe harbor approaches for
applying section 382(h) to an ownership
change ‘‘prior to the effective date of
temporary or final regulations under
section 382(h).’’
Taxpayers and practitioners have
expressed concern that the applicability
date set forth in the September 2019
proposed regulations would impose a
significant burden on taxpayers
evaluating and negotiating business
transactions, due to their uncertainty
regarding when those transactions will
close and when the September 2019
proposed regulations will be finalized.
As a result, taxpayers and practitioners
have requested transition relief with
regard to ownership changes caused by
pending transactions. In connection
with this request, taxpayers and
practitioners also have expressed
concern that transition relief limited to
transactions for which a binding
agreement is in effect on or before the
applicability date of final regulations
would be inadequate, because pending
transactions regularly are modified or
delayed prior to closing.
As explained more fully in the
Explanation of Provisions, this notice of
proposed rulemaking modifies the
applicability dates for the September
2019 proposed regulations by
withdrawing the text of proposed
§§ 1.382–2(b)(4) and 1.382–7(g), as set
forth in the September 2019 proposed
regulations, and proposing revised
applicability dates.
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Explanation of Provisions
I. Delay of Applicability Date and
Applicability of Pre-Existing Guidance
To address the concerns raised by
taxpayers and practitioners, the
Treasury Department and the IRS are
withdrawing the text of proposed
§§ 1.382–2(b)(4) and 1.382–7(g)
contained in the September 2019
proposed regulations. In its place, the
Treasury Department and the IRS are
proposing the revised applicability date
text set forth in proposed §§ 1.382–
2(b)(4) and 1.382–7(g) as contained in
this notice of proposed rulemaking.
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The Treasury Department and the IRS
do not intend there to be any gap
between the date on which taxpayers
can no longer rely on Notice 2003–65
and the date on which the final
regulations are applicable. Other than in
the case of the two exceptions described
in parts II and III of this Explanation of
Provisions, the applicability date of the
final regulations will be 30 days after
the date the Treasury decision
containing such regulations is published
in the Federal Register (delayed
applicability date). As provided in this
proposed regulation, Notice 2003–65
will remain applicable to ownership
changes to which the final regulations
do not apply.
II. Limiting Duplicative Application of
Section 382
The first exception to the delayed
applicability date relates to the rule in
proposed § 1.382–7(d)(5), which
provides that certain carryforwards of
business interest expense disallowed
under section 163(j) would not be
treated as recognized built-in losses
under section 382(h)(6)(B) if such
amounts were allowable as deductions
during the five-year recognition period
set forth in section 382(h)(7)(A). This
rule eliminates the possible duplicative
application of section 382 to certain
disallowed business interest expense
carryforwards. Due to the
noncontroversial nature of this rule, the
Treasury Department and the IRS have
determined that proposed § 1.382–
7(d)(5) should be finalized before the
remainder of the rules in the September
2019 proposed regulations, and that
taxpayers should be allowed to
retroactively apply this rule. To that
end, the Treasury Department and IRS
expect that proposed § 1.382–7(d)(5)
will be finalized as part of the Treasury
decision that finalizes the proposed
section 163(j) regulations (see 83 FR
67490) and taxpayers will be permitted
to apply the rule to prior periods. The
Treasury Department and the IRS
continue to actively study the remainder
of the rules in the September 2019
proposed regulations.
III. Transition Relief Provisions
Under the transition relief provisions
proposed in this notice of proposed
rulemaking, the final regulations would
not apply to certain ownership changes
that occur after the delayed applicability
date. As discussed in part I of this
Explanation of Provisions, the delayed
applicability date will be 30 days after
the date these regulations are published
in the Federal Register. In order for an
ownership change after the delayed
applicability date to qualify for
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transition relief, the ownership change
must occur immediately after an owner
shift or equity structure shift that
occurs:
(1) Pursuant to a binding agreement in
effect on or before the delayed
applicability date and at all times
thereafter;
(2) Pursuant to a specific transaction
described in a public announcement
made on or before the delayed
applicability date;
(3) Pursuant to a specific transaction
described in a filing with the Securities
and Exchange Commission submitted
on or before the delayed applicability
date;
(4) By order of a court (or pursuant to
a plan confirmed, or a sale approved, by
order of a court) in a title 11 or similar
case (as defined in section 382(l)(5)(F)),
provided that the taxpayer was a debtor
in a case before such court on or before
the delayed applicability date; or
(5) Pursuant to a transaction described
in a private letter ruling request
submitted to the IRS on or before the
delayed applicability date.
The relevant owner shift or equity
structure shift must be a specific,
identifiable transaction. For example, a
stock buyback pursuant to an
announced, on-going program would
not qualify.
Taxpayers may continue to rely on
Notice 2003–65 with respect to any
ownership change qualifying for
transition relief, even though the Notice
will be obsoleted on the delayed
applicability date. However, a taxpayer
may choose to apply the final
regulations to such an ownership
change.
Special Analyses
These proposed regulations are not
subject to review under section 6(b) of
Executive Order 12866 pursuant to the
Memorandum of Agreement (April 11,
2018) between the Treasury Department
and the Office of Management and
Budget regarding review of tax
regulations.
Pursuant to the Regulatory Flexibility
Act (RFA), 5 U.S.C. chapter 6, the
Treasury Department and the IRS
hereby certify that these proposed
regulations will not have a significant
economic impact on a substantial
number of small entities. This proposed
rule is limited to revising the proposed
applicability date of proposed
regulations under section 382(h) of the
Internal Revenue Code that were
published in the Federal Register (84
FR 47455) on September 10, 2019.
Based on the narrow scope of corporate
transactions covered by the proposed
regulations’ delayed applicability rules,
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Federal Register / Vol. 85, No. 9 / Tuesday, January 14, 2020 / Proposed Rules
the Treasury Department and the IRS
have determined that these proposed
regulations are unlikely to affect a
substantial number of small entities and
are unlikely to have a significant
economic impact on any small entities
affected.
The Treasury Department and the IRS
invite comments on any impact that
these regulations would have on small
entities.
Pursuant to section 7805(f), this
notice of proposed rulemaking has been
submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on its
impact on small business.
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Comments and Requests for Public
Hearing
The Treasury Department and the IRS
appreciate the comments that taxpayers
and practitioners already have provided
regarding the September 2019 proposed
regulations and encourage taxpayers
and practitioners to provide comments
on the proposed regulations contained
in this notice of proposed rulemaking.
In particular, the Treasury Department
and the IRS request comments on
whether taxpayers should be permitted
to apply the final regulations to
ownership changes occurring before the
applicability date and what restrictions,
if any, should be placed on such
retroactive application.
Before these proposed regulations are
adopted as final regulations,
consideration will be given to any
comments that are submitted timely to
the Treasury Department and the IRS as
prescribed in this preamble under the
ADDRESSES heading. All comments will
be available at https://
www.regulations.gov or upon request. A
public hearing will be scheduled if
requested in writing by any person that
timely submits written comments. If a
public hearing is scheduled, notice of
the date, time, and place of the public
hearing will be published in the Federal
Register.
Statement of Availability of IRS
Documents
Notice 2003–65 is published in the
Internal Revenue Bulletin (or
Cumulative Bulletin) and is available
from the Superintendent of Documents,
U.S. Government Publishing Office,
Washington, DC 20402, or by visiting
the IRS website at https://www.irs.gov.
Drafting Information
The principal authors of this notice of
proposed rulemaking are Jonathan R.
Neuville of the Office of Associate Chief
Counsel (Corporate) and Kevin M.
Jacobs, formerly of the Office of
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Associate Chief Counsel (Corporate).
However, other personnel from the
Treasury Department and the IRS
participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Partial Withdrawal of Notice of
Proposed Rulemaking
Accordingly, under the authority of
26 U.S.C. 382(h)(3)(B)(ii), 382(m), and
7805, §§ 1.382–2(b)(4) and 1.382–7(g) of
the notice of proposed rulemaking
(REG–125710–18) published in the
Federal Register on September 10, 2019
(84 FR 47455) are withdrawn.
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 is amended by revising the
entry for § 1.382–7 to read as follows:
■
Authority: 26 U.S.C. 7805 * * *
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*
Section 1.382–7 also issued under 26
U.S.C. 382(h)(3)(B)(ii) and (m).
*
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Par. 2. Section 1.382–1, as proposed
to be revised by 84 FR 47455, September
10, 2019, is further amended by revising
the entry for § 1.382–7(g) to read as
follows:
■
§ 1.382–1
*
*
§ 1.382–7
Table of Contents.
*
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*
Built-in gains and losses.
*
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(g) Applicability dates.
(1) In general.
(2) Transition relief.
(3) Paragraph (d)(2)(vi) of this section.
*
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■ Par. 3. Section 1.382–2, as proposed
to be amended by 84 FR 47455,
September 10, 2019, is further amended
by revising paragraph (b)(4) to read as
follows:
§ 1.382–2
change.
General rules for ownership
*
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*
*
(b) * * *
(4) Rules provided in paragraphs
(a)(9) through (13) of this section. The
rules of paragraphs (a)(9) through (13) of
this section apply to any ownership
change that occurs after the date that is
30 days after the date of publication in
the Federal Register of a Treasury
decision adopting these proposed
regulations as final regulations, if
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2063
§ 1.382–7(g)(2) does not apply to that
ownership change. Notwithstanding the
preceding sentence, a taxpayer may
apply the rules of paragraphs (a)(9)
through (13) of this section to an
ownership change to which § 1.382–
7(g)(2) applies if the taxpayer applies
the rules of § 1.382–7 to such ownership
change.
■ Par. 4. Section 1.382–7, as proposed
to be revised by 84 FR 47455, September
10, 2019, is further amended by revising
paragraph (g) to read as follows:
§ 1.382–7
Built-in gains and losses.
*
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*
*
*
(g) Applicability dates—(1) In general.
Except as otherwise provided in this
paragraph (g), this section applies to any
ownership change that occurs after the
date that is 30 days after the date of
publication in the Federal Register of a
Treasury decision adopting the rules of
this section as final regulations
(applicability date), if paragraph (g)(2) of
this section does not apply to that
ownership change. For ownership
changes occurring on or before the
applicability date and ownership
changes to which paragraph (g)(2) of
this section applies, see § 1.382–7 as
contained in 26 CFR part 1, revised
April 1, 2019, and other applicable
guidance, including Notice 2003–65
(2003–2 CB 747) (see
§ 601.601(d)(2)(ii)(b) of this chapter).
Notwithstanding the preceding
sentences of this paragraph (g)(1), a
taxpayer may apply this section to an
ownership change to which paragraph
(g)(2) of this section applies.
(2) Certain ownership changes eligible
for transition relief. This paragraph
(g)(2) applies to an ownership change
after the applicability date that occurs
immediately after an owner shift or
equity structure shift, if the owner shift
or equity structure shift occurs—
(i) Pursuant to a binding agreement in
effect on or before the applicability date
and at all times thereafter;
(ii) Pursuant to a specific transaction
described in a public announcement
made on or before the applicability date;
(iii) Pursuant to a specific transaction
described in a filing with the Securities
and Exchange Commission submitted
on or before the applicability date;
(iv) By order of a court (or pursuant
to a plan confirmed, or a sale approved,
by order of a court) in a title 11 or
similar case (as defined in section
382(l)(5)(F)), provided that the taxpayer
was a debtor in a case before such court
on or before the applicability date; or
(v) Pursuant to a transaction described
in a ruling request submitted to the IRS
on or before the applicability date.
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Federal Register / Vol. 85, No. 9 / Tuesday, January 14, 2020 / Proposed Rules
(3) Paragraph (d)(2)(vi) of this section.
Paragraph (d)(2)(vi) of this section
applies to loss corporations that have
undergone an ownership change on or
after June 11, 2010. For loss
corporations that have undergone an
ownership change before June 11, 2010,
see § 1.382–7T as contained in 26 CFR
part 1, revised April 1, 2009.
Sunita Lough,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2020–00469 Filed 1–10–20; 4:15 pm]
BILLING CODE 4830–01–P
DEPARTMENT OF LABOR
Mine Safety and Health Administration
30 CFR Parts 56 and 57
[Docket No. MSHA–2019–0007]
RIN 1219–AB88
Electronic Detonators
Mine Safety and Health
Administration, Labor.
ACTION: Proposed rule; request for
comments.
AGENCY:
The Mine Safety and Health
Administration (MSHA) is proposing to
revise certain safety standards for
explosives at metal and nonmetal
(MNM) mines. This proposed rule
updates existing provisions consistent
with technological advancements
involving electronic detonators.
Elsewhere in this issue of the Federal
Register, MSHA is also publishing a
direct final rule because the Agency
expects that there will be no significant
adverse comments on the rule. If no
significant adverse comments are
received, the Agency will confirm the
effective date of the final rule. If a
significant adverse comment is received,
MSHA will withdraw the direct final
rule and proceed with this proposed
rule. MSHA intends to publish a
Federal Register notice announcing the
Agency’s action. This proposed rule and
the companion direct final rule are
substantially identical.
DATES: Comments must be received or
postmarked by midnight Eastern
Standard Time on March 16, 2020.
ADDRESSES: Submit comments and
informational materials, identified by
RIN 1219–AB88 or Docket No. MSHA–
2019–0007, by one of the following
methods listed below:
• Federal E-Rulemaking Portal:
https://www.regulations.gov. Follow the
on-line instructions for submitting
comments.
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SUMMARY:
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• Email: zzMSHA-comments@
dol.gov.
• Mail: MSHA, Office of Standards,
Regulations, and Variances, 201 12th
Street South, Suite 4E401, Arlington,
Virginia 22202–5452.
• Hand Delivery or Courier: 201 12th
Street South, Suite 4E401, Arlington,
Virginia, between 9:00 a.m. and 5:00
p.m. Monday through Friday, except
Federal holidays. Sign in at the
receptionist’s desk on the 4th Floor East,
Suite 4E401.
• Fax: 202–693–9441.
Instructions: All submissions for the
direct final rule must include RIN 1219–
AB88 or Docket No. MSHA–2019–0007.
MSHA posts all comments without
change, including any personal
information provided. Access comments
electronically on https://
www.regulations.gov and on MSHA’s
website at https://www.msha.gov/
regulations/rulemaking.
Docket: For access to the docket to
read comments received, go to https://
www.regulations.gov or https://
www.msha.gov/currentcomments.asp.
To read background documents, go to
https://www.regulations.gov. Review
comments in person at the Office of
Standards, Regulations, and Variances,
201 12th Street South, Suite 4E401,
Arlington, Virginia 22202–5452. Sign in
at the receptionist’s desk on the 4th
Floor East, Suite 4E401.
Email Notification: To subscribe to
receive email notification when MSHA
publishes rulemaking documents in the
Federal Register, go to https://
public.govdelivery.com/accounts/
USDOL/subscriber/new.
FOR FURTHER INFORMATION CONTACT:
Sheila A. McConnell, Director, Office of
Standards, Regulations, and Variances,
MSHA, at mcconnell.sheila.a@dol.gov
(email), 202–693–9440 (voice); or 202–
693–9441 (facsimile). These are not tollfree numbers.
SUPPLEMENTARY INFORMATION:
I. Direct Final Rule
Concurrent with this proposed rule,
MSHA is publishing a separate,
substantially identical direct final rule
in the Final Rules section of this
Federal Register edition. The
concurrent publication of these
documents will speed notice and
comment rulemaking under 30 U.S.C.
811 and the Administrative Procedure
Act (see 5 U.S.C. 553) should the
Agency decide to withdraw the direct
final rule. All interested parties who
wish to comment should comment at
this time because MSHA does not
anticipate initiating an additional
comment period.
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MSHA has determined that notice and
public comment are unnecessary
because the rule imposes no new
requirements; it simply clarifies the
application of MSHA’s existing
standards to technologies developed
after the standards were promulgated. If
MSHA does not receive significant
adverse comments on or before February
13, 2020, the Agency will publish
notification in the Federal Register no
later than March 16, 2020, confirming
the effective date of the direct final rule.
In the event the direct final rule is
withdrawn because of significant
adverse comments, the Agency will
proceed with this proposed rulemaking
by addressing the comments received
and publishing a final rule. The
comment period for this proposed rule
runs concurrently with that of the direct
final rule. Any comments received
under this proposed rule will be treated
as comments regarding the direct final
rule. Likewise, significant adverse
comments submitted to the direct final
rule will be considered as comments to
this proposed rule. The Agency will
consider such comments in developing
a subsequent final rule.
II. Background
A. General Discussion
A detonator is a device containing a
detonating charge that is used to initiate
an explosion reliably, at a specified
time, and, as applicable, in a prescribed
sequence. There are three types of
detonators primarily used in blasting
operations in MNM mines. These are
non-electric, electric, and electronic
detonators. A non-electric detonator is
designed to initiate explosions without
the use of electric wires. A non-electric
detonator includes devices that use
detonating cords, shock-tube systems or
safety fuse detonators, or a combination
of these.
An electric detonator uses electrical
currents to initiate detonation. Electrical
currents from the detonator’s lead wires
or connectors ignite an electric match
which in turn ignites a pyrotechnic
delay element that initiates the base
charge. The pyrotechnic delay element
burns at an approximated rate. The
length and composition of the
pyrotechnic delay element control the
approximate rate of burn and thus the
timing. Since the approximate rate of
burn is subject to variation, the timing
accuracy of electric detonators is
affected. Electric detonator systems
typically include a blasting machine
that delivers the electrical current to the
detonator. Circuit testers, such as a
blaster’s galvanometer, are used to
check the continuity and resistance of
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]]>Agencies
[Federal Register Volume 85, Number 9 (Tuesday, January 14, 2020)]
[Proposed Rules]
[Pages 2061-2064]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00469]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-125710-18]
RIN 1545-BP07
Revised Applicability Dates for Regulations Under Section 382(h)
Related to Built-in Gain and Loss
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Partial withdrawal of notice of proposed rulemaking; notice of
proposed rulemaking.
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SUMMARY: This document withdraws a portion of a notice of proposed
rulemaking published in the Proposed Rules section of the Federal
Register on September 10, 2019. That notice of proposed rulemaking
contained proposed rules to provide guidance regarding the items of
income and deduction that are included in the calculation of built-in
gains and losses under section 382 of the Internal Revenue Code (Code).
If adopted, those proposed rules would apply to any ownership change
occurring after the date the Treasury decision adopting those proposed
rules as a final regulation is published in the Federal Register. This
notice of proposed rulemaking would delay the applicability of those
proposed rules and provide transition relief for eligible taxpayers.
The proposed regulations in this notice of proposed rulemaking would
affect corporations that experience an ownership change for purposes of
section 382.
DATES: Written or electronic comments must be received by March 16,
2020. Written or electronic requests for a public hearing and outlines
of topics to be discussed at the public hearing must be received by
March 16, 2020.
ADDRESSES: Submit electronic submissions via the Federal eRulemaking
Portal at www.regulations.gov (indicate IRS and REG-125710-18) by
following the online instructions for submitting comments. Once
submitted to the Federal eRulemaking Portal, comments cannot be edited
or withdrawn. The Department of the Treasury (Treasury Department) and
the IRS will publish for public availability any comment received to
its public docket, whether submitted electronically or in hard copy.
Send hard copy submissions to: Internal Revenue Service, CC:PA:LPD:PR
(REG-125710-18), Room 5203, Post Office Box 7604, Ben Franklin Station,
Washington, DC 20044.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Jonathan R. Neuville at (202) 317-5363; concerning submissions of
comments or requests for a public hearing, Regina L. Johnson at (202)
317-6901 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
On September 10, 2019, the Treasury Department and the IRS
published in the Federal Register (84 FR 47455) a notice of proposed
rulemaking (REG-125710-18) proposing revisions to the rules in
Sec. Sec. 1.382-2 and 1.382-7 (September 2019 proposed regulations).
These rules would affect the determination of net built-in gains and
losses and recognized built-in gains and losses under section 382(h)
that, in turn, affect the limitation under section 382 on net operating
losses and disallowed business interest expense under section 163(j).
[[Page 2062]]
Proposed Sec. Sec. 1.382-2(b)(4) and 1.382-7(g)(1), as set forth
in the September 2019 proposed regulations, provided that the September
2019 proposed regulations would apply to ownership changes that occur
after the date the Treasury decision adopting the September 2019
proposed regulations as final regulations is published in the Federal
Register. As noted in part II of the Background in the September 2019
proposed regulations, section V of Notice 2003-65 (2003-2 C.B. 747)
provides that taxpayers may rely on either of two safe harbor
approaches for applying section 382(h) to an ownership change ``prior
to the effective date of temporary or final regulations under section
382(h).''
Taxpayers and practitioners have expressed concern that the
applicability date set forth in the September 2019 proposed regulations
would impose a significant burden on taxpayers evaluating and
negotiating business transactions, due to their uncertainty regarding
when those transactions will close and when the September 2019 proposed
regulations will be finalized. As a result, taxpayers and practitioners
have requested transition relief with regard to ownership changes
caused by pending transactions. In connection with this request,
taxpayers and practitioners also have expressed concern that transition
relief limited to transactions for which a binding agreement is in
effect on or before the applicability date of final regulations would
be inadequate, because pending transactions regularly are modified or
delayed prior to closing.
As explained more fully in the Explanation of Provisions, this
notice of proposed rulemaking modifies the applicability dates for the
September 2019 proposed regulations by withdrawing the text of proposed
Sec. Sec. 1.382-2(b)(4) and 1.382-7(g), as set forth in the September
2019 proposed regulations, and proposing revised applicability dates.
Explanation of Provisions
I. Delay of Applicability Date and Applicability of Pre-Existing
Guidance
To address the concerns raised by taxpayers and practitioners, the
Treasury Department and the IRS are withdrawing the text of proposed
Sec. Sec. 1.382-2(b)(4) and 1.382-7(g) contained in the September 2019
proposed regulations. In its place, the Treasury Department and the IRS
are proposing the revised applicability date text set forth in proposed
Sec. Sec. 1.382-2(b)(4) and 1.382-7(g) as contained in this notice of
proposed rulemaking.
The Treasury Department and the IRS do not intend there to be any
gap between the date on which taxpayers can no longer rely on Notice
2003-65 and the date on which the final regulations are applicable.
Other than in the case of the two exceptions described in parts II and
III of this Explanation of Provisions, the applicability date of the
final regulations will be 30 days after the date the Treasury decision
containing such regulations is published in the Federal Register
(delayed applicability date). As provided in this proposed regulation,
Notice 2003-65 will remain applicable to ownership changes to which the
final regulations do not apply.
II. Limiting Duplicative Application of Section 382
The first exception to the delayed applicability date relates to
the rule in proposed Sec. 1.382-7(d)(5), which provides that certain
carryforwards of business interest expense disallowed under section
163(j) would not be treated as recognized built-in losses under section
382(h)(6)(B) if such amounts were allowable as deductions during the
five-year recognition period set forth in section 382(h)(7)(A). This
rule eliminates the possible duplicative application of section 382 to
certain disallowed business interest expense carryforwards. Due to the
noncontroversial nature of this rule, the Treasury Department and the
IRS have determined that proposed Sec. 1.382-7(d)(5) should be
finalized before the remainder of the rules in the September 2019
proposed regulations, and that taxpayers should be allowed to
retroactively apply this rule. To that end, the Treasury Department and
IRS expect that proposed Sec. 1.382-7(d)(5) will be finalized as part
of the Treasury decision that finalizes the proposed section 163(j)
regulations (see 83 FR 67490) and taxpayers will be permitted to apply
the rule to prior periods. The Treasury Department and the IRS continue
to actively study the remainder of the rules in the September 2019
proposed regulations.
III. Transition Relief Provisions
Under the transition relief provisions proposed in this notice of
proposed rulemaking, the final regulations would not apply to certain
ownership changes that occur after the delayed applicability date. As
discussed in part I of this Explanation of Provisions, the delayed
applicability date will be 30 days after the date these regulations are
published in the Federal Register. In order for an ownership change
after the delayed applicability date to qualify for transition relief,
the ownership change must occur immediately after an owner shift or
equity structure shift that occurs:
(1) Pursuant to a binding agreement in effect on or before the
delayed applicability date and at all times thereafter;
(2) Pursuant to a specific transaction described in a public
announcement made on or before the delayed applicability date;
(3) Pursuant to a specific transaction described in a filing with
the Securities and Exchange Commission submitted on or before the
delayed applicability date;
(4) By order of a court (or pursuant to a plan confirmed, or a sale
approved, by order of a court) in a title 11 or similar case (as
defined in section 382(l)(5)(F)), provided that the taxpayer was a
debtor in a case before such court on or before the delayed
applicability date; or
(5) Pursuant to a transaction described in a private letter ruling
request submitted to the IRS on or before the delayed applicability
date.
The relevant owner shift or equity structure shift must be a
specific, identifiable transaction. For example, a stock buyback
pursuant to an announced, on-going program would not qualify.
Taxpayers may continue to rely on Notice 2003-65 with respect to
any ownership change qualifying for transition relief, even though the
Notice will be obsoleted on the delayed applicability date. However, a
taxpayer may choose to apply the final regulations to such an ownership
change.
Special Analyses
These proposed regulations are not subject to review under section
6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement
(April 11, 2018) between the Treasury Department and the Office of
Management and Budget regarding review of tax regulations.
Pursuant to the Regulatory Flexibility Act (RFA), 5 U.S.C. chapter
6, the Treasury Department and the IRS hereby certify that these
proposed regulations will not have a significant economic impact on a
substantial number of small entities. This proposed rule is limited to
revising the proposed applicability date of proposed regulations under
section 382(h) of the Internal Revenue Code that were published in the
Federal Register (84 FR 47455) on September 10, 2019. Based on the
narrow scope of corporate transactions covered by the proposed
regulations' delayed applicability rules,
[[Page 2063]]
the Treasury Department and the IRS have determined that these proposed
regulations are unlikely to affect a substantial number of small
entities and are unlikely to have a significant economic impact on any
small entities affected.
The Treasury Department and the IRS invite comments on any impact
that these regulations would have on small entities.
Pursuant to section 7805(f), this notice of proposed rulemaking has
been submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
Comments and Requests for Public Hearing
The Treasury Department and the IRS appreciate the comments that
taxpayers and practitioners already have provided regarding the
September 2019 proposed regulations and encourage taxpayers and
practitioners to provide comments on the proposed regulations contained
in this notice of proposed rulemaking. In particular, the Treasury
Department and the IRS request comments on whether taxpayers should be
permitted to apply the final regulations to ownership changes occurring
before the applicability date and what restrictions, if any, should be
placed on such retroactive application.
Before these proposed regulations are adopted as final regulations,
consideration will be given to any comments that are submitted timely
to the Treasury Department and the IRS as prescribed in this preamble
under the ADDRESSES heading. All comments will be available at https://www.regulations.gov or upon request. A public hearing will be scheduled
if requested in writing by any person that timely submits written
comments. If a public hearing is scheduled, notice of the date, time,
and place of the public hearing will be published in the Federal
Register.
Statement of Availability of IRS Documents
Notice 2003-65 is published in the Internal Revenue Bulletin (or
Cumulative Bulletin) and is available from the Superintendent of
Documents, U.S. Government Publishing Office, Washington, DC 20402, or
by visiting the IRS website at https://www.irs.gov.
Drafting Information
The principal authors of this notice of proposed rulemaking are
Jonathan R. Neuville of the Office of Associate Chief Counsel
(Corporate) and Kevin M. Jacobs, formerly of the Office of Associate
Chief Counsel (Corporate). However, other personnel from the Treasury
Department and the IRS participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Partial Withdrawal of Notice of Proposed Rulemaking
Accordingly, under the authority of 26 U.S.C. 382(h)(3)(B)(ii),
382(m), and 7805, Sec. Sec. 1.382-2(b)(4) and 1.382-7(g) of the notice
of proposed rulemaking (REG-125710-18) published in the Federal
Register on September 10, 2019 (84 FR 47455) are withdrawn.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 1 is proposed to be amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 is amended by revising
the entry for Sec. 1.382-7 to read as follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Section 1.382-7 also issued under 26 U.S.C. 382(h)(3)(B)(ii) and
(m).
* * * * *
0
Par. 2. Section 1.382-1, as proposed to be revised by 84 FR 47455,
September 10, 2019, is further amended by revising the entry for Sec.
1.382-7(g) to read as follows:
Sec. 1.382-1 Table of Contents.
* * * * *
Sec. 1.382-7 Built-in gains and losses.
* * * * *
(g) Applicability dates.
(1) In general.
(2) Transition relief.
(3) Paragraph (d)(2)(vi) of this section.
* * * * *
0
Par. 3. Section 1.382-2, as proposed to be amended by 84 FR 47455,
September 10, 2019, is further amended by revising paragraph (b)(4) to
read as follows:
Sec. 1.382-2 General rules for ownership change.
* * * * *
(b) * * *
(4) Rules provided in paragraphs (a)(9) through (13) of this
section. The rules of paragraphs (a)(9) through (13) of this section
apply to any ownership change that occurs after the date that is 30
days after the date of publication in the Federal Register of a
Treasury decision adopting these proposed regulations as final
regulations, if Sec. 1.382-7(g)(2) does not apply to that ownership
change. Notwithstanding the preceding sentence, a taxpayer may apply
the rules of paragraphs (a)(9) through (13) of this section to an
ownership change to which Sec. 1.382-7(g)(2) applies if the taxpayer
applies the rules of Sec. 1.382-7 to such ownership change.
0
Par. 4. Section 1.382-7, as proposed to be revised by 84 FR 47455,
September 10, 2019, is further amended by revising paragraph (g) to
read as follows:
Sec. 1.382-7 Built-in gains and losses.
* * * * *
(g) Applicability dates--(1) In general. Except as otherwise
provided in this paragraph (g), this section applies to any ownership
change that occurs after the date that is 30 days after the date of
publication in the Federal Register of a Treasury decision adopting the
rules of this section as final regulations (applicability date), if
paragraph (g)(2) of this section does not apply to that ownership
change. For ownership changes occurring on or before the applicability
date and ownership changes to which paragraph (g)(2) of this section
applies, see Sec. 1.382-7 as contained in 26 CFR part 1, revised April
1, 2019, and other applicable guidance, including Notice 2003-65 (2003-
2 CB 747) (see Sec. 601.601(d)(2)(ii)(b) of this chapter).
Notwithstanding the preceding sentences of this paragraph (g)(1), a
taxpayer may apply this section to an ownership change to which
paragraph (g)(2) of this section applies.
(2) Certain ownership changes eligible for transition relief. This
paragraph (g)(2) applies to an ownership change after the applicability
date that occurs immediately after an owner shift or equity structure
shift, if the owner shift or equity structure shift occurs--
(i) Pursuant to a binding agreement in effect on or before the
applicability date and at all times thereafter;
(ii) Pursuant to a specific transaction described in a public
announcement made on or before the applicability date;
(iii) Pursuant to a specific transaction described in a filing with
the Securities and Exchange Commission submitted on or before the
applicability date;
(iv) By order of a court (or pursuant to a plan confirmed, or a
sale approved, by order of a court) in a title 11 or similar case (as
defined in section 382(l)(5)(F)), provided that the taxpayer was a
debtor in a case before such court on or before the applicability date;
or
(v) Pursuant to a transaction described in a ruling request
submitted to the IRS on or before the applicability date.
[[Page 2064]]
(3) Paragraph (d)(2)(vi) of this section. Paragraph (d)(2)(vi) of
this section applies to loss corporations that have undergone an
ownership change on or after June 11, 2010. For loss corporations that
have undergone an ownership change before June 11, 2010, see Sec.
[thinsp]1.382-7T as contained in 26 CFR part 1, revised April 1, 2009.
Sunita Lough,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2020-00469 Filed 1-10-20; 4:15 pm]
BILLING CODE 4830-01-P
