[Federal Register Volume 77, Number 104 (Wednesday, May 30, 2012)]
[Proposed Rules]
[Pages 31786-31794]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-13056]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-142561-07]
RIN 1545-BH31
Regulations Revising Rules Regarding Agency for a Consolidated
Group
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document contains proposed amendments to the regulations
regarding the agent for an affiliated group that files a consolidated
return (consolidated group). The proposed regulations provide guidance
concerning the identity and authority of the agent for the consolidated
group (agent for the group). These proposed regulations affect all
consolidated groups. This document also invites comments from the
public regarding these proposed regulations.
DATES: Written or electronic comments and a request for a public
hearing must be received by August 28, 2012.
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-142561-07), room
5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may also be hand-delivered Monday
through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR
(REG-142561-07), Courier's Desk, Internal Revenue Service, 1111
Constitution Avenue NW., Washington, DC, or sent electronically via the
Federal eRulemaking Portal at http://www.regulations.gov (IRS REG-
142561-07).
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Gerald B. Fleming at (202) 622-7770 or Richard M. Heinecke at (202)
622-7930; concerning submissions of comments or a request for a public
hearing, Funmi Taylor, (202) 622-7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collections of information contained in this notice of proposed
rulemaking have been submitted to the Office of Management and Budget
(OMB) for review and approval under OMB approval number 1545-1699 in
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3507(d)).
Comments on the collection of information should be sent to the
Office of Management and Budget, Attn: Desk Officer for the Department
of the Treasury, Office of Information and Regulatory Affairs,
Washington, DC 20503, with copies to the Internal Revenue Service,
Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:SP, Washington, DC
20224. Comments on the collection of information should be received by
July 30, 2012.
Comments are specifically requested concerning:
Whether the proposed collection of information is necessary for the
proper performance of the functions of the IRS, including whether the
collection will have practical utility;
The accuracy of the estimated burden associated with the proposed
collection of information;
How the quality, utility, and clarity of the information to be
collected may be enhanced;
How the burden of complying with the proposed collection of
information may be minimized, including through the application of
automated collection techniques or other forms of information
technology; and
Estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to provide information.
The collections of information in the proposed regulations are in
Sec. 1.1502-77(c)(3), (c)(4), (c)(5), and (f)(3).
The proposed regulations provide that an entity that is the agent
for the group, upon becoming the default successor, is required to
notify the Commissioner in writing (under procedures prescribed by the
Commissioner), in accordance with Sec. 1.1502-77(c)(3), that it is the
default successor.
The proposed regulations under Sec. 1.1502-77(c)(4) further
provide that, when the agent for the group designates an agent for the
group under circumstances in which the agent for the group's existence
terminates without a default successor, the agent for the group must
notify the Commissioner in writing (under procedures prescribed by the
Commissioner) of the designation and provide an agreement executed by
the designated entity acknowledging
[[Page 31787]]
that it will serve as the agent for the group. If the designated entity
was not itself a member of the group during the consolidated return
year because the designated entity is a successor of a member of the
group for the consolidated return year, the agent for the group must
furnish a statement by the designated entity acknowledging that it is
or will be primarily liable for the tax as a successor of a member.
The proposed regulations at Sec. 1.1502-77(c)(5) require a
designated substitute agent to give notice to each member of the group
when the Commissioner has designated a substitute agent for the group.
Under Sec. 1.1502-77(f)(3), if an entity ceases to be a member of
a group, such entity may file a written notice of that fact with the
Commissioner and request a copy of the notice of deficiency with
respect to the Federal income tax for a consolidated return year during
which the entity was a member, or a copy of any notice and demand for
payment of such deficiency, or both.
The collections of information are required to obtain a benefit,
for example, to identify a substitute agent for the group. The likely
respondents are business or other for-profit institutions.
The burden for the collection of information in Sec. 1.1502-
77(c)(3), (c)(4), (c)(5), and (f)(3) is as follows:
Estimated total annual reporting burden: 200 hours.
Estimated average annual burden per respondent: 2 hours.
Estimated number of respondents: 100.
Estimated annual frequency of responses: On occasion.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a valid
control number assigned by the Office of Management and Budget.
Background
This document proposes amendments to 26 CFR part 1 under section
1502 of the Internal Revenue Code of 1986 (Code). Section 1.1502-77
provides the existing regulations concerning the agent for a group and
the designation of a new agent to act for the group. Section 1.1502-77
was promulgated in 2002 in TD 9002 (June 28, 2002) (67 FR 43538), and
supplemented by TD 9255 (71 FR 13001) (March 14, 2006) and TD 9343 (72
FR 40066) (July 23, 2007) (each providing authority to replace the
common parent as agent where the parent is a foreign entity).
Subsequent to 2002, the IRS and Treasury Department issued other
regulations, Sec. Sec. 1.856-9, 1.1361-4(a)(6), and 301.7701-
2(c)(2)(iii), which provide that an entity treated as disregarded from
its owner for Federal income tax purposes is not disregarded for
purposes of its tax liability for periods during which it was not
disregarded. These proposed regulations conform to the subsequent
guidance by permitting a non-corporate entity to be agent for the
group.
These proposed regulations provide greater certainty as to which
entity will be the substitute agent for the group by identifying a
default successor agent for the group. Under the proposed regulations,
an entity (whether foreign or domestic) is a default successor if it
becomes the single entity primarily liable, pursuant to applicable law
(including, for example, by operation of a state or Federal merger
statute), for the tax liability of the former agent of the group upon
the termination of the agent's existence. (The determination of tax
liability is made without regard to Sec. 1.1502-1(f)(4) or Sec.
1.1502-6(a)). When the agent for the group terminates under applicable
law and there is no default successor, the agent for the group may
designate a substitute agent.
Furthermore, as discussed under ``Explanation of Provisions'' the
proposed amendments clarify and supplement the existing regulations to
address other issues that have arisen. This notice of proposed
rulemaking also requests comments with respect to several issues that
the proposed amendments do not address.
Explanation of Provisions
1. Overview
These proposed regulations generally retain the rules, concepts and
examples from the existing regulations regarding the agent for a
consolidated group. However, the rules, concepts and examples from the
existing regulations have been renumbered, restructured and revised to
provide greater clarity. Examples in the final regulations also have
been modified to reflect the more limited circumstances in which an
agent may be selected by the IRS or the former agent. In addition, when
these proposed regulations are adopted, the IRS plans to issue
contemporaneous guidance in a revenue procedure superseding Rev. Proc.
2002-43 (2002-2 CB 99) (see Sec. 601.601(d)(2)(ii)(b) of this
chapter). Rev. Proc. 2002-43 provides instructions regarding all
communications relating to the determination of a substitute agent to
act on behalf of a consolidated group. In general, it is anticipated
that the instructions in the superseding revenue procedure will update
Revenue Procedure 2002-43 to reflect the rules in the adopted
regulations.
2. Automatic Designation of a Default Successor Agent
Under the existing regulations, a common parent that is going out
of existence may designate its successor, another member of the group,
or a group member's successor entity as the substitute agent for the
group. In practice, the terminating common parent, when it has
designated a substitute agent at all, has generally designated its
successor rather than another member as the substitute agent.
The proposed regulations provide that the terminating agent's
default successor automatically becomes the agent for the group. The
former agent cannot designate an agent if there is a default successor,
and the IRS can replace a default successor only in limited
circumstances. See Sec. 1.1502-77(c)(5). If the agent for the group
has no default successor, the agent for the group may designate an
entity that was a member of the group for the consolidated return year
or a successor of such member. Narrowing the option to designate the
agent for the group is consistent with the pattern of choices exhibited
by taxpayers under the existing regulations and minimizes the
difficulties that arise when a terminating agent fails to designate a
substitute. In the rare cases in which an entity serving as agent
terminates its existence without having a default successor, the IRS
and Treasury Department expect that fact generally will be clear.
Accordingly, IRS and taxpayers can readily identify situations in which
a new agent must be designated. Furthermore, having the default
successor become the substitute agent is the intuitively appropriate
choice because it is generally consistent with the handling of tax
matters involving non-consolidated entities and non-consolidated taxes.
A default successor must notify the IRS in writing (under
procedures prescribed by the IRS) that it is the default successor.
Until the IRS receives such notification, any notice of deficiency or
other communication mailed to the predecessor agent for the group, even
if no longer in existence, is considered as having been properly mailed
to the agent for the group, and the IRS is not required to act on any
communication (including, for example, a claim for refund) submitted on
behalf of the group by any person (including the default successor)
other than the predecessor agent for the group.
[[Page 31788]]
3. Entities That Can Be an Agent for the Group
In general, Sec. 1.1502-77(e) provides that the common parent, as
agent for the group, ceases to be the agent for the group if its
existence terminates under applicable law, if it becomes an entity
disregarded from its owner for Federal tax purposes, or if it becomes
an entity that is reclassified as a partnership for Federal tax
purposes.
When the existing regulations were adopted in 2002, there was no
direct guidance concerning whether the party liable for a disregarded
entity's Federal taxes with respect to periods before it becomes
disregarded should be the disregarded entity or its owner. Section
1.1502-77(e) generally precludes the common parent from continuing to
serve as the agent for the group if it becomes a disregarded entity or
partnership. Subsequent regulatory amendments provided that an entity
treated as disregarded from its owner for Federal income tax purposes
(whether a single member eligible entity, a Qualified Real Estate
Investment Trust Subsidiary or a Qualified Subchapter S Subsidiary) is
not disregarded for purposes of its tax liability for taxable periods
during which it was not disregarded. See TD 9183 (70 FR 9220) (February
25, 2005), as supplemented in TD 9462 (74 FR 46903) (September 14,
2009) and TD 9553 (76 FR 66181) (October 26, 2011). Thus, such an
entity, rather than its owner, is the party liable for the taxes
arising in taxable periods before the entity became disregarded.
These proposed regulations include disregarded entities and
partnerships among the entities capable of serving as substitute agents
for prior years. Accordingly, the transformation or merger of a common
parent into a disregarded entity or partnership after the taxable year
of the return generally will result in the disregarded entity or
partnership becoming the agent for the group. Because the entity that
was formerly a corporation serving as the agent for the group is no
longer treated as a corporation for Federal income tax purposes after
the change in its classification, it will not be a continuing member of
a consolidated group in future periods. Nevertheless, the continuing or
successor juridical entity is the agent for the group for prior
periods. This result will obtain whether the change in classification
is effectuated by a merger under state law, a conversion under state
law, or a tax election.
4. TEFRA Partnerships
Section 402 of the Tax Equity and Fiscal Responsibility Act of 1982
(96 Stat. 324) (TEFRA) provides that the tax treatment of partnership
items shall be determined at the partnership level. These TEFRA
provisions are in sections 6221 through 6234. A partner in a TEFRA
partnership is subject to the provisions of sections 6221 through 6234.
In general, the IRS will deal with the tax matters partner (TMP)
regarding specified matters for the partners in a TEFRA partnership.
The existing regulations at Sec. 1.1502-77(a)(6)(iii) provide that
``[t]he Commissioner generally will deal directly with any member in
its capacity as a partner of a [TEFRA] partnership'' but also permits
the Commissioner to deal with the common parent, as agent for the
group, if requested to do so in accordance with the provisions of Sec.
301.6223(c)-1(b). This provision was intended to facilitate IRS audits
of TEFRA partnerships by permitting the IRS TEFRA audit team to deal
with a member-partner without the involvement of the agent for the
group. However, these rules have created some confusion, especially
with respect to the execution of consents to extend the statute of
limitations and settlement agreements in connection with TEFRA audits.
Subject to enumerated exceptions in (f)(2)(iii) (relating to a
member's actions as TMP and the Commissioner's discretion to deal
directly with the member-partner), section 1.1502-77(f)(2)(iii)(A)
provides that the agent for the group is the agent for any matter
related to a TEFRA partnership in which a member is a partner.
Consistent with this general rule, these proposed regulations would
delete the provision of the existing regulations that the common
parent, as agent for the group, will not act as agent for a member that
is a partner in a TEFRA partnership for purposes of executing a
settlement agreement under section 6224(c). The proposed regulations
also clarify that only the agent for the group can extend the statute
of limitations with respect to items other than the items of the TEFRA
partnership. Section 1.1502-77(g), Example 11.
5. Commissioner's Affirmative Approval
The existing regulations at Sec. 1.1502-77(d)(1)(i)(A) and
(d)(1)(ii) provide that any designation of the substitute agent for the
group must be approved by the Commissioner. The IRS is aware of having
denied this approval only in the very limited circumstance in which the
designation was not made in accordance with the regulations. Because
the IRS would deny approval only infrequently, the proposed regulations
do not require IRS approval of the designation of an agent for the
group by the terminating agent. This proposed change will enhance
efficiency and save resources. However, the proposed regulations retain
the requirement that a terminating agent must notify the IRS in writing
(under procedures prescribed by the IRS) of the designation of the
agent for the group so that IRS records will reflect the identity of
the agent for the group.
The proposed regulations also provide several limited circumstances
in which the IRS may designate or replace the agent for the group,
either on its own initiative or at the request of other members. The
IRS will not, however, have the ability to replace a domestic default
successor under circumstances in which it could not replace the common
parent.
6. Foreign Entity
Under the existing regulations, a substitute agent is required to
be a domestic entity for Federal income tax purposes. However, the
existing regulations also provide that the Commissioner may designate
another domestic member of the group to act as the agent for the group
(a domestic substitute agent) if the common parent is an entity created
or organized under the laws of a foreign country and is treated as a
domestic corporation by reason of section 7874 (or regulations under
that section) or a section 953(d) election (a foreign common parent).
This rule recognizes that foreign agents may present unique logistical
issues, and provides the Commissioner full discretion to replace a
foreign agent should those issues arise.
Although a foreign entity may raise practical difficulties in
certain cases, the IRS and Treasury realize that a foreign entity,
especially a default successor, may have the best access to information
relating to prior consolidated return years. Furthermore, the IRS and
Treasury believe that it is important for a consolidated group to have,
to the greatest extent practicable, an entity that is authorized to act
on its behalf to enable the group to communicate with the IRS and to
ensure that the group can timely meet its compliance obligations (for
example, file a timely final return if the group terminates). The IRS
and Treasury also believe that the interests of the government and
taxpayers are best served by a rule that clearly identifies the group's
agent. Balancing special logistical issues and the importance of
continual agency, the
[[Page 31789]]
proposed regulations do not preclude a foreign entity from being the
agent for the consolidated group. However, the IRS retains discretion
to replace a foreign entity that is an agent for a consolidated group.
7. Agency Does Not Include Any Winding Up Period After Dissolution
These proposed regulations also provide that an entity cannot serve
as the agent for the group during any winding up period that follows
its dissolution.
The existing regulations predicate agency on the continued
existence of the corporation under applicable law. Questions have
arisen as to what actions can be performed by a dissolved entity that
has a ``winding up'' period following its dissolution. In many states,
a dissolved corporation or entity may continue to perform certain acts
after its dissolution to wind up its affairs. The duration of such a
winding up period and the scope of the permissible actions vary from
jurisdiction to jurisdiction. To resolve questions about whether a
dissolved entity may be the agent for the remaining members of the
consolidated group during the winding up period, these proposed
regulations provide that an entity that has dissolved or otherwise
ceased to exist under applicable law can no longer be the agent for the
group, irrespective of any winding up period under applicable law.
8. The Agent for the Group's Failure To Fulfill Its Duties With Respect
to the Consolidated Group
These proposed regulations include no new mechanism to address
situations in which the agent for the group fails to fulfill its duties
on behalf of the members of the consolidated group, for example by not
filing a return, not requesting a refund, or not cooperating with an
examination. Under those circumstances, the members might not be able
to accurately file or determine their Federal tax liability or obtain
their refunds. The government might have difficulty determining which,
if any, member is entitled to a refund, forcing it to interplead all
potential claimants in any such refund case.
The IRS and Treasury Department request comments on whether and how
to implement a mechanism whereby the subsidiary members can request
that the IRS designate another member of the group to be the agent when
the common parent or substitute agent does not discharge its
obligations as agent. Comments should consider under what circumstances
and how this mechanism might be invoked to ensure that it is narrowly
applied.
9. Possible Resignation of the Agent for the Group
Under the existing regulations, a common parent, as agent for the
group, remains the agent for the group for consolidated return years
for which it was the common parent of the group. Only a termination of
the common parent under applicable law will result in either the
successor becoming the default substitute agent or an agent being
designated for the group. The proposed regulations do not provide a
mechanism for an existing agent to resign and limit the ability of the
agent to displace its obligations transactionally by mandating the
designation of any default successor. The Treasury Department and the
IRS are considering whether, and under what circumstances, the
regulations should allow an agent for the group to resign as the agent,
and invite comments on this issue.
Proposed Effective/Applicability Date
The amendments to Sec. 1.1502-77 are proposed to apply to
consolidated return years beginning on or after the date final
regulations are published in the Federal Register. The current rules of
Sec. 1.1502-77 continue to apply with respect to consolidated return
years beginning before the effective date of final regulations. Those
regulations are proposed to be republished as Sec. 1.1502-77B.
Special Analyses
It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in Executive Order
12666, as supplemented by Executive Order 13563. Therefore, a
regulatory assessment is not required. It is hereby certified that
these regulations will not have a significant economic impact on a
substantial number of small entities. This certification is based on
the fact that these regulations primarily will affect affiliated groups
of corporations that have elected to file consolidated returns, which
tend to be larger entities. Therefore, a Regulatory Flexibility
Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is
not required. Pursuant to section 7805(f) of the Code, 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 a Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any written comments (a signed original
and eight (8) copies) or electronic comments that are timely submitted
to the IRS.
The Treasury Department and the IRS request comments on all aspects
of the proposed rules. In addition, comments are requested on the
treatment in the proposed regulations of entities that become
disregarded as entities separate from their owners or classified as
partnerships for Federal tax purposes.
All comments that are submitted by the public will be available for
public inspection and copying at http://www.regulations.gov or upon
request. A public hearing may be scheduled if requested in writing by
any person who timely submits comments. If a public hearing is
scheduled, notice of the date, time and place for the hearing will be
published in the Federal Register.
Drafting Information
The principal author of these proposed regulations is Richard M.
Heinecke, Office of Associate Chief Counsel (Corporate). 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.
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 to read
in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.1502-77 also issued under 26 U.S.C. 1502 and 6402(j).
* * *
Section 1.1502-77A also issued under 26 U.S.C. 1502 and 6402(j).
* * *
Section 1.1502-77B also issued under 26 U.S.C. 1502 and 6402(j).
* * *
Par. 2. Section 1.338-1 is amended by removing the language ``Sec.
1.1502-77(e)(4)'' in the last sentence of paragraph (b)(2)(viii) and
adding the language ``Sec. 1.1502-77(c)(8)'' in its place.
Par. 3. Section 1.1502-41A, paragraph (c) heading is revised to
read as follows:
* * * * *
(c) Effective/applicability dates. * * *
Par. 4. Section 1.1502-77 is redesignated as Sec. 1.1502-77B and
added immediately following newly designated Sec. 1.1502-77B the
undesignated center heading and revised paragraph (h)(1)(i) to read as
follows:
[[Page 31790]]
Sec. 1.1502-77B Agent for the group applicable for consolidated
return years beginning on or after June 28, 2002, and before [the date
final regulations are published in the Federal Register].
Regulations Applicable to Taxable Years Beginning on or After June 28,
2002, and Before [the Date Final Regulations Are Published in the
Federal Register]
* * * * *
(h) Effective/Applicability date--(1) Application--(i) In general.
This section applies to taxable years beginning on or after June 28,
2002, and before [the date final regulations are published in the
Federal Register].
* * * * *
Par. 5. New Sec. 1.1502-77 is added to read as follows:
Sec. 1.1502-77 Agent for the group.
(a) Agent for the group. Except as provided in paragraphs (e) and
(f)(2) of this section, one entity (the agent for the group) is the
sole agent that is authorized to act in its own name regarding all
matters relating to the Federal income tax liability for the
consolidated return year for each member of the group and any successor
or transferee of a member (and any subsequent successors and
transferees thereof). The common parent during the consolidated return
year to which the matter relates or such other entity as is provided in
paragraph (c) of this section is the agent for the group. Agency for
the group is established for each consolidated return year and is not
affected by the status or membership of the group in later years. Thus,
for as long as it remains in existence under applicable law and is not
replaced under paragraph (c)(5)(i)(C) of this section, a corporation or
entity that is the agent for the group for a particular consolidated
return year remains the agent for the group for that year regardless of
whether one or more subsidiaries later cease to be members of the
group, whether the group files a consolidated return for any subsequent
year, whether the agent for the group ceases to be the agent for the
group or a member of the group in any subsequent year, or whether the
group continues pursuant to Sec. 1.1502-75(d) with a new common parent
in any subsequent year.
(b) Definitions. The following definitions apply for purposes of
this section only--
(1) Successor. A successor is an individual or entity (including a
disregarded entity) that is primarily liable, pursuant to applicable
law (including, for example, by operation of a state or Federal merger
statute), for the tax liability of a corporation which was a member of
the group but is no longer in existence under applicable law. The
determination of tax liability is made without regard to Sec. 1.1502-
1(f)(4) or Sec. 1.1502-6(a). (For inclusion of a successor in
references to a subsidiary or member, see paragraph (b)(5)(iii) of this
section.)
(2) Entity. The term entity includes any corporation, limited
liability company or partnership formed under any state, Federal, or
foreign jurisdiction. The term entity includes a disregarded entity.
The term entity does not include an entity during any winding up period
if the entity's existence has terminated pursuant to the law under
which it is organized.
(3) Disregarded entity. The term disregarded entity includes any of
the following types of entities disregarded as separate from their
owners--
(i) Qualified real estate investment trust subsidiaries (within the
meaning of section 856(i)(2));
(ii) Qualified subchapter S subsidiaries (within the meaning of
section 1361(b)(3)(B)); and
(iii) Single owner eligible entities (within the meaning of Treas.
Reg. Sec. 301.7701-3).
(4) Default successor. A successor to the agent for the group is
the default successor if it is an entity (whether domestic or foreign)
that is the sole successor to the agent for the group. A partnership is
treated as a sole successor with primary liability notwithstanding that
one or more partners may also be primarily liable by virtue of being
partners.
(5) Member or subsidiary. All references to a member or subsidiary
for a consolidated return year include--
(i) Each corporation that was a member of the group during any part
of such year (except that any reference to a subsidiary does not
include the common parent);
(ii) Each corporation whose income was included in the consolidated
return for such year, notwithstanding that the tax liability of such
corporation should have been computed on the basis of a separate
return, or as a member of another consolidated group, under the
provisions of Sec. 1.1502-75; and
(iii) Except as indicated otherwise, a successor of any of the
foregoing corporations.
(c) Identity of the agent for the group--(1) In general. Except as
otherwise provided in this section, the common parent or its default
successor, if any, is the agent for the group. Any entity that is an
agent pursuant to this paragraph (c) acts as agent for the group to the
same extent and subject to the same limitations as are applicable to
the common parent.
(2) New common parent after a group structure change. If the group
continues in existence with a new common parent under the principles of
Sec. 1.1502-75(d) during a consolidated return year, the common parent
at the beginning of the year is the agent for the group through the
date of the Sec. 1.1502-75(d) transaction, and the new common parent
becomes the agent for the group beginning the day after the
transaction, at which time the new common parent becomes the agent for
the group with respect to the entire consolidated return year
(including the period through the date of the transaction) and the
former common parent is no longer the agent for that year.
(3) Notification by default successor. A default successor must
notify the Commissioner in writing (under procedures prescribed by the
Commissioner) that it is the default successor. Until the Commissioner
receives such notification--
(i) Any notice of deficiency or other communication mailed to the
predecessor agent for the group, even if no longer in existence, is
considered as having been properly mailed to the agent for the group;
and
(ii) The Commissioner is not required to act on any communication
(including, for example, a claim for refund) submitted on behalf of the
group by any person (including the default successor) other than the
predecessor agent for the group.
(4) Designation by terminating agent. (i) Prior to the termination
of its existence without a default successor, the agent for the group
may designate an entity described in paragraph (c)(4)(ii) of this
section to act as agent for the group, effective upon its termination.
(ii) The terminating agent for the group may designate as agent for
the group, for any consolidated return year for which it is the agent
for the group--
(A) Any corporation that was a member of the group during any part
of the consolidated return year, or
(B) Any successor of such a corporation or of the agent for the
group that is an entity (whether domestic or foreign), including an
entity that will become a successor at the time that the agent for the
group's existence terminates.
(iii) The agent for the group must notify the Commissioner in
writing (under procedures prescribed by the Commissioner) of the
designation and provide an agreement executed by the designated entity
acknowledging that it will serve as the agent for the group,
[[Page 31791]]
and, if the designated entity was not itself a member of the group
during the consolidated return year (because the designated entity is a
successor of a member of the group for the consolidated return year), a
statement by the designated entity acknowledging that it is or will be
primarily liable for the tax as a successor of a member.
(iv) If the agent for the group's existence terminates without
there being a default successor, and it has not designated an entity to
act as agent for the group in its place pursuant to this paragraph
(c)(4)--
(A) Any notice of deficiency or other communication mailed to the
agent for the group, even if no longer in existence, is considered as
having been properly mailed to the agent for the group; and
(B) The Commissioner is not required to act on any communication
(including, for example, a claim for refund) submitted on behalf of the
group by any person.
(5) Designation by the Commissioner. (i) The Commissioner may, at
any time, with or without a request from any member of the group,
designate an entity described in paragraph (c)(4)(ii) of this section
to act as the agent for the group if--
(A) The agent for the group's existence terminates without there
being a default successor and no designation is made under paragraph
(c)(4) of this section;
(B) The Commissioner believes that the agent for the group or its
default successor exists but such entity has not responded to the
Commissioner's notices sent to the last known address on file for the
entity or any notices left at the usual place of business for such
entity; or
(C) The agent for the group is or becomes a foreign entity as a
result of any action or transaction (including, for example, a
continuance into a foreign jurisdiction).
(ii) The Commissioner will notify the designated entity in writing
of its designation, and the designation is effective upon receipt by
the designated entity of such notice. The designated entity must give
notice of the designation to each member of the group during any part
of the consolidated return year, but a failure by the designated entity
to notify any such member of the group does not invalidate the
designation.
(iii) At the request of any member, the Commissioner may, but is
not required to, replace an agent for the group previously designated
under this paragraph (c)(5) with another entity described in paragraph
(c)(4)(ii) of this section.
(iv) If the Commissioner replaces the agent for the group pursuant
to this paragraph (c)(5), the replaced agent for the group ceases to be
the agent after the Commissioner designates another agent.
(6) Successors to designated agents. The designation of an agent
for the group under paragraph (c)(4) or paragraph (c)(5) of this
section includes its default successors, if any.
(7) Purported agent for the group. If any entity files a
consolidated return, or takes any other action related to the tax
liability for the consolidated return year, purporting to be the agent
for the group but is subsequently determined not to have been the agent
for the group with respect to the claimed group, that entity is
treated, to the extent necessary to avoid prejudice to the
Commissioner, as if it were the agent for the group.
(8) Section 338 transactions. Notwithstanding section 338(a)(2), a
target corporation for which an election is made under section 338 is
not deemed to terminate for purposes of this section.
(d) Examples of matters subject to agency. With respect to any
consolidated return year for which it is the agent for the group--
(1) The agent for the group makes any election (or similar choice
of a permissible option) that is available to a subsidiary in the
computation of its separate taxable income, and any change in an
election (or similar choice of a permissible option) previously made by
or for a subsidiary, including, for example, a request to change a
subsidiary's method or period of accounting;
(2) All correspondence concerning the income tax liability for the
consolidated return year is carried on directly with the agent for the
group;
(3) The agent for the group files for all extensions of time,
including extensions of time for payment of tax under section 6164, and
any extension so filed is considered as having been filed by each
member;
(4) The agent for the group gives waivers, gives bonds, and
executes closing agreements, offers in compromise, and all other
documents, and any waiver or bond so given, or agreement, offer in
compromise, or any other document so executed, is considered as having
also been given or executed by each member;
(5) The agent for the group files claims for refund, and any refund
is made directly to and in the name of the agent for the group and
discharges any liability of the Government to any member with respect
to such refund;
(6) The agent for the group takes any action on behalf of a member
of the group with respect to a foreign corporation including, for
example, elections by, and changes to the method of accounting of, a
controlled foreign corporation in accordance with Sec. 1.964-1(c)(3);
(7) Notices of claim disallowance are mailed only to the agent for
the group, and the mailing to the agent for the group is considered as
a mailing to each member;
(8) Notices of deficiencies are mailed only to the agent for the
group (except as provided in paragraph (f)(3) of this section), and the
mailing to the agent for the group is considered as a mailing to each
member;
(9) Notices of final partnership administrative adjustment under
section 6223 with respect to any partnership in which a member of the
group is a partner may be mailed to the agent for the group, and, if
so, the mailing to the agent for the group is considered as a mailing
to each member that is a partner entitled to receive such notice (for
other rules regarding partnership proceedings, see paragraph
(f)(2)(iii) of this section);
(10) The agent for the group files petitions and conducts
proceedings before the United States Tax Court, and any such petition
is considered as also having been filed by each member;
(11) Any assessment of tax may be made in the name of the agent for
the group, and an assessment naming the agent for the group is
considered as an assessment with respect to each member; and
(12) Notice and demand for payment of taxes is given only to the
agent for the group, and such notice and demand is considered as a
notice and demand to each member.
(e) Matters reserved to subsidiaries. Except as provided in this
paragraph (e) and paragraph (f)(2) of this section, no subsidiary has
authority to act for or to represent itself in any matter related to
the tax liability for the consolidated return year. The following
matters, however, are reserved exclusively to each subsidiary--
(1) The making of the consent required by Sec. 1.1502-75(a)(1);
(2) Any action with respect to the subsidiary's liability for a
Federal tax other than the income tax imposed by chapter 1 of the
Internal Revenue Code (Code) (including, for example, employment taxes
under chapters 21 through 25 of the Code, and miscellaneous excise
taxes under chapters 31 through 47 of the Code);
(3) The making of an election under section 936(e); and
[[Page 31792]]
(4) The making of an election to be treated as a Domestic
International Sales Corporation under Sec. 1.992-2.
(f) Dealings with members. (1) Identifying members in notice of a
lien. Notwithstanding any other provisions of this section, any notice
of a lien, any levy or any other proceeding to collect the amount of
any assessment, after the assessment has been made, must name the
entity from which such collection is to be made.
(2) Direct dealing with a member--(i) Several liability. The
Commissioner may, upon issuing to the agent for the group written
notice that expressly invokes the authority of this provision, deal
directly with any member of the group with respect to its liability
under Sec. 1.1502-6 for the consolidated tax of the group, in which
event such member has sole authority to act for itself with respect to
that liability. However, if the Commissioner believes or has reason to
believe that the existence of the agent for the group has terminated,
he may, if he deems it advisable, deal directly with any member with
respect to that member's liability under Sec. 1.1502-6.
(ii) Information requests. The Commissioner may, upon issuing to
the agent for the group written notice, request information relevant to
the consolidated tax liability from any member of the group. However,
if the Commissioner believes or has reason to believe that the
existence of the agent for the group has terminated, he may request
such information from any member of the group.
(iii) Members as partners in partnerships subject to the provisions
of sections 6221 through 6234.
(A) Except as otherwise provided in this paragraph (f)(2)(iii), the
general rule of paragraph (a)(1) of this section applies to make the
agent for the group the agent for any subsidiary member that for any
part of the consolidated return year is a partner in a partnership
subject to the provisions of sections 6221 through 6234 of the Code (as
originally enacted by the Tax Equity and Fiscal Responsibility Act of
1982 and subsequently amended) and the accompanying regulations (TEFRA
partnership).
(B) Any subsidiary or any disregarded entity owned by a subsidiary
that is designated as tax matters partner of a TEFRA partnership will
act in its own name and perform its responsibilities under sections
6221 through 6234 and the accompanying regulations without requiring
any action by the agent for the group (but see paragraph (d)(9) of this
section regarding the mailing of a final partnership administrative
adjustment to the agent for the group).
(C) The Commissioner may at any time communicate directly with a
subsidiary or a disregarded entity owned by a subsidiary that is a
partner in a TEFRA partnership whenever the Commissioner determines
that such direct communication will facilitate the conduct of an
examination, appeal or settlement with respect to the partnership.
(3) Copy of notice of deficiency to entity that has ceased to be a
member of the group. A subsidiary that ceases to be a member of the
group during or after a consolidated return year may file a written
notice of that fact with the Commissioner and request a copy of any
notice of deficiency with respect to the tax for a consolidated return
year during which it was a member, or a copy of any notice and demand
for payment of such deficiency, or both. Such filing does not limit the
scope of the agency of the agent for the group provided for in this
section. Any failure by the Commissioner to comply with such request
does not limit the subsidiary's tax liability under Sec. 1.1502-6.
(g) Examples. Unless otherwise indicated, all entities are domestic
and are calendar year taxpayers. For none of the tax years at issue
does the Commissioner exercise the authority under paragraph (f)(2) of
this section to deal with any member separately. Any surviving entity
in a merger is either a successor as described in paragraph (b)(1) of
this section, or a default successor as described in (b)(4) of this
section, as the case may be. The following examples illustrate the
principles of this section:
Example 1. Disposition of all group members where the agent for
the group remains the agent. As of January 1 of Year 1, P, a
domestic corporation, is the common parent and agent for the P
consolidated group, consisting of P and its two subsidiary
corporations, S and S-1. P files consolidated returns for the P
group in Years 1 and 2. On December 31 of Year 1, P sells all the
stock of S-1 to X. On December 31 of Year 2, P distributes all the
stock of S to P's shareholders. P files a separate return for Year
3. Although the consolidated group terminates after Year 2 and P is
no longer the common parent nor the agent for the group in years
after Year 2, P remains the agent for the P group for Years 1 and 2.
For as long as P remains in existence, P is the agent for the P
group under paragraph (a) of this section for Years 1 and 2.
Example 2. Acquisition of the agent for the group by another
group where the agent for the group remains the agent. The facts
are the same as in Example 1, except on January 1 of Year 3, all of
the outstanding stock of P is acquired by Y, a domestic corporation
that is the common parent and agent for the group of the Y
consolidated group. P thereafter joins in the Y group consolidated
return as a member of the Y group. Although P is a member of the Y
group in Year 3 and subsequent periods, P remains the agent for the
P group for Years 1 and 2. For as long as P remains in existence, P
is the agent for the P group under paragraph (a) of this section for
Years 1 and 2.
Example 3. Reverse triangular merger of the agent for the group
where the agent for the group remains the agent. (i) As of January
1 of Year 1, P, a domestic corporation that is the common parent and
agent for the P consolidated group consisting of P and its two
subsidiary corporations, S and S-1. P files consolidated returns for
the P group in Years 1 and 2. On March 1 of Year 3, W-1, a domestic
subsidiary corporation of W, a domestic corporation, merges into P,
in a reverse triangular merger described in section 368(a)(1)(A) and
(a)(2)(E). P survives the merger with W-1. The transaction
constitutes a reverse acquisition under Sec. 1.1502-75(d)(3)(i)
because P's shareholders receive more than 50 percent of W's stock
in exchange for all of P's stock.
(ii) Because the transaction constitutes a reverse acquisition,
the P group is treated as remaining in existence with W as its
common parent and agent for the group. Under paragraph (a) of this
section, P remains the agent for the P group for Years 1 and 2, even
though the P group continues with W as its new common parent
pursuant to Sec. 1.1502-75(d)(3)(i). Before March 2 of Year 3, P is
the agent for the P group for Year 3. Beginning on March 2 of Year
3, W becomes the agent for the P group with respect to all of Year 3
(including the period through March 1) and subsequent consolidated
return years. Thus, for as long as P remains in existence, P is the
agent for the P group under paragraph (a) of this section for Years
1 and 2.
Example 4. Reverse triangular merger of the agent for the
group--subsequent spinoff of agent for the group where the agent for
the group remains the agent. The facts are the same as in Example
3, except that on April 1 of Year 4, in a transaction unrelated to
the March 1, Year 3 reverse acquisition, P distributes the stock of
its subsidiaries S and S-1 to W, and W then distributes the stock of
P to the W shareholders. Beginning on March 2 of Year 3, W becomes
the agent for the P group with respect to Year 3 (including the
period through March 1) and subsequent consolidated return years.
Although P is no longer a member of the P group after the Year 4
spinoff, P remains the agent for the P group under paragraph (a) of
this section for Years 1 and 2. For as long as P remains in
existence, P is the agent for the P group under paragraph (a) of
this section for Years 1 and 2.
Example 5. Qualified stock purchase and section 338 election
where the agent for the group remains the agent. As of January 1 of
Year 1, P, a domestic corporation, is the common parent and agent
for the P consolidated group consisting of P and its two subsidiary
corporations, S and S-1. P files consolidated returns for the P
group in Years 1 and 2. On March 31 of Year 2, V, a domestic
corporation, purchases the stock of P in a qualified stock purchase
(within the meaning of section 338(d)(3)), and V makes a timely
election pursuant to section 338(g)
[[Page 31793]]
with respect to P. Although section 338(a)(2) provides that P is
treated as a new corporation as of the beginning of the day after
the acquisition date for purposes of subtitle A, paragraph (c)(8) of
this section provides that P's existence is not deemed to terminate
for purposes of this section notwithstanding the general rule of
section 338(a)(2). Therefore, new P remains the agent for the P
group for Year 1 and the period ending March 31 of Year 2 (short
Year 2) regardless of the election under section 338(g).
Example 6. Change in the agent for the group's Federal income
tax classification to a partnership and the resulting partnership
continues as the agent for the group. (i) P, a State M limited
liability partnership with two partners, makes an initial entity
classification election to be an association taxable as a
corporation for Federal income tax purposes. P is the common parent
and agent for the P consolidated group consisting of P and its two
subsidiary corporations, S and S-1. P files consolidated returns for
the P group in Years 1 through 5. On January 1 of Year 6, P elects
pursuant to Treas. Reg. Sec. 301.7701-3(c) to be treated as a
partnership. P remains in existence under applicable law.
(ii) The P group terminates and P is no longer the common parent
of a consolidated group after its election to be treated as a
partnership for Federal income tax purposes. Because P remains in
existence under applicable law, P is the agent for the P group under
paragraph (a) of this section for Years 1 through 5. The results
would be the same if P merged into a foreign partnership because the
foreign partnership would be P's default successor and agent for the
P group for Years 1 through 5. See paragraphs (b)(4) and (c)(1) of
this section.
Example 7. Forward triangular merger of agent for the group--
successor as default successor. As of January 1 of Year 1, P, a
domestic corporation, is the common parent and agent for the P
consolidated group consisting of P and its two subsidiary
corporations, S and S-1. P files consolidated returns for the P
group in Years 1 and 2. On January 1 of Year 3, P merges with and
into Z-1 corporation, a subsidiary of Z corporation, in a forward
triangular merger described in section 368(a)(1)(A) and (a)(2)(D).
The transaction constitutes a reverse acquisition under Sec.
1.1502-75(d)(3)(i) because P's shareholders receive more than 50
percent of Z's stock in exchange for all of P's stock. Z-1, the
corporation that survives the merger and the successor of P, is the
default successor for the P group for Years 1 and 2. Although Z is
the new common parent and agent for the P group (which continues
pursuant to Sec. 1.1502-75(d)(3)(i)) for years after the merger, P
may not designate Z, S or S-1 as the agent for Years 1 or 2 because
Z-1 is P's default successor and the agent for the P group for Years
1 and 2. See paragraphs (b)(4) and (c)(1) of this section.
Example 8. Merger of the agent for the group into a disregarded
entity in exchange for stock of owner in a transaction qualifying as
a reorganization under section 368(a)(1)(F) where successor is the
default successor. (i) As of January 1 of Year 1, P, a domestic
corporation, is the common parent and agent for the P consolidated
group consisting of P and its two subsidiary corporations, S and S-
1. P files a consolidated return for the P group in Year 1. On
January 1 of Year 2, the shareholders of P form Y, a State M
corporation. On the same date, Y forms Y-1, a State M limited
liability company that is a disregarded entity (within the meaning
of paragraph (b)(3) of this section) for Federal income tax
purposes, and P merges into Y-1. In the merger, the P shareholders
receive all of the Y stock. For Federal income tax purposes, Y is
treated as succeeding to P in a transaction qualifying under section
368(a)(1)(F), and the P group continues under Treas. Reg. Sec.
1.1502-75(d)(2) with Y as the common parent and agent for the group
for Year 2.
(ii) In Year 4, the IRS seeks to extend the period of
limitations on assessment with respect to Year 1 of the P
consolidated group. As a result of the January 1, Year 2 merger, Y-1
is P's default successor and the agent for the P group for Year 1.
See paragraphs (b)(4) and (c)(1) of this section. Therefore, Y-1 is
the only party that can sign the extension with respect to the P
group for Year 1.
(iii) In Year 5, the IRS seeks to extend the period of
limitations on assessment with respect to Year 1 of the P group and
Year 2 of the Y group (formerly the P group). Y-1 remains as the
default successor to P for Year 1 and therefore is the only party
that can sign the extension with respect to the P group for Year 1.
Furthermore, because the merger transaction qualified as a
reorganization under section 368(a)(1)(F), the P group remains in
existence with Y as the common parent. Therefore, Y is the agent for
the group for Year 2 and is the only party that can sign the
extension with respect to the Y group for that year. See paragraphs
(a) and (c)(1) of this section.
Example 9. Designation of agent where there is no default
successor. (i) P is a corporation formed under the laws of State X.
Fifty percent of its stock is owned at all times by A, an
individual, and 50 percent by BCD, a partnership. On January 1 of
Year 1, P forms two subsidiary corporations, S and T. P files
consolidated returns for the P group beginning in Year 1. On
November 30 of Year 3, P dissolves under X law. Under X law, A and
BCD are primarily liable for the Federal income tax liability of
dissolved corporation P. State X law allows the officers of a
dissolved corporation to perform certain actions incident to the
winding up of its affairs after its dissolution, including the
filing of tax returns.
(ii) Upon its dissolution, there is no default successor to P
because there are two successors. Prior to its dissolution on
November 30 of Year 3, P may designate an agent for the P group for
Years 1 and 2 and the short taxable year ending on November 30 of
Year 3, to be effective upon P's dissolution. P may designate S or T
(because they are members of the former group) or BCD (because it is
an entity that is a successor to P). P cannot designate A because A
is not an entity. The officers of P cannot designate an agent for
the P group after P dissolves on November 30 of Year 3,
notwithstanding the winding up provisions of State X law.
Accordingly, P should designate an agent prior to its dissolution to
ensure that there is an agent for the group authorized to file the
short Year 3 consolidated return. If P does not designate an agent
prior to dissolution, the Commissioner may designate an agent from
among S, T or BCD, upon their request or otherwise. If any of S, T,
A or BCD realizes that P has dissolved without designating an agent
for the group, it should request a designation of an agent by the
Commissioner as soon as possible.
Example 10. Fraudulent conveyance of assets. As of January 1 of
Year 1, P, a domestic corporation, is the common parent and agent
for the P consolidated group consisting of P and its two subsidiary
corporations, S and S-1. On March 15 of Year 2, P files a
consolidated return that includes the income of S and S-1 for Year
1. On December 1 of Year 2, S-1 transfers assets having a fair
market value of $ 100x to U in exchange for $10x. This transfer of
assets for less than fair market value constitutes a fraudulent
conveyance under applicable state law. On March 1 of Year 5, P
executes a waiver extending to December 31 of Year 6 the period of
limitations on assessment with respect to the group's Year 1
consolidated return. On February 1 of Year 6, the Commissioner
issues a notice of deficiency to P asserting a deficiency of $ 30x
for the P group's Year 1 consolidated tax liability. P does not file
a petition for redetermination in the Tax Court, and the
Commissioner makes a timely assessment against the P group. P, S and
S-1 are all insolvent and are unable to pay the deficiency. On
February 1 of Year 8, the Commissioner sends a notice of transferee
liability to U, which does not file a petition in the Tax Court. On
August 1 of Year 8, the Commissioner assesses the amount of the P
group's deficiency against U. Under section 6901(c), the
Commissioner may assess U's transferee liability within one year
after the expiration of the period of limitations against the
transferor S-1. By operation of section 6213(a) and 6503(a), the
issuance of the notice of deficiency to P and the expiration of the
90-day period for filing a petition in the Tax Court have the effect
of further extending by 150 days the P group's limitations period on
assessment from the previously extended date of December 31 of Year
6 to May 30 of Year 7. Pursuant to paragraph (a) of this section,
the waiver executed by P on March 1 of Year 5 to extend the period
of limitations on assessment to December 31 of Year 6 and the
further extension of the P group's limitations period to May 30 of
Year 7 (by operation of sections 6213(a) and 6503(a)) have the
derivative effect of extending the period of limitations on
assessment of U's transferee liability to May 30 of Year 8. By
operation of section 6901(f), the issuance of the notice of
transferee liability to U and the expiration of the 90-day period
for filing a petition in the Tax Court have the effect of further
extending the limitations period on assessment of U's liability as a
transferee by 150 days, from May 30 of Year 8 to October 27 of Year
8. Accordingly, the Commissioner may send a notice of transferee
liability to U at any time on or before May 30 of Year 8 and assess
the
[[Page 31794]]
unpaid liability against U at any time on or before October 27 of
Year 8. The result would be the same even if S-1 ceased to exist
before March 1 of Year 5, the date P executed the waiver.
Example 11. Consent to extend the statute of limitations for a
partnership where a member of the consolidated group is a partner of
such partnership subject to the provisions of sections 6221 through
6234 and the tax matters partner is not a member of the group. (i)
P, a domestic corporation, is the common parent and agent for the P
consolidated group consisting of P and its two subsidiary
corporations, S and S-1. The P group has a November 30 fiscal year
end and P files consolidated returns for the P group for the years
ending November 30, Year 1 and November 30, Year 2. S-1 is a partner
in the PRS partnership which is subject to the provisions of
sections 6221 through 6234. PRS has a calendar year end and A, an
individual, is the tax matters partner of the PRS partnership. PRS
files a partnership return for the year ending December 31, Year 1.
On January 10, Year 5, A, as the tax matters partner for the PRS
partnership, executes a consent to extend the period for assessment
of partnership items of PRS for all partners, and the Service co-
executes the consent on the same day for the year ending December
31, Year 1.
(ii) A's consent to extend the statute of limitations for the
partnership items of PRS partnership for the year ending December
31, Year 1, extends the statute of limitations with respect to the
partnership items for all members of the P group, including P, S and
S-1 for the consolidated return year ending November 30, Year 2.
This is because S-1 is a partner in the PRS partnership for which A,
the tax matters partner for the PRS partnership, consents to extend
the statute of limitations for the year ending December 31, Year 1.
However, under paragraph (f)(2)(iii), such agreement with respect to
the statute of limitations for the PRS partnership for the year
ending December 31, Year 1 does not obviate the need to obtain a
consent from P, the agent for the P consolidated group, to extend
the statute of limitations for the P consolidated group for the P
group's consolidated return years ending November 30, Year 1 and
November 30, Year 2 regarding any items other than partnership items
or affected items of the PRS partnership.
Example 12. Contacting subsidiary member in order to facilitate
the conduct of an examination, appeal or settlement where a member
of the consolidated group is a partner of a partnership subject to
the provisions of sections 6221 through 6234. (i) P, a domestic
corporation, is the common parent and agent for the P consolidated
group consisting of P and its two subsidiary corporations, S and S-
1. The P group has a November 30 fiscal year end, and P files
consolidated returns for the P group for the years ending November
30, Year 1 and November 30, Year 2. S-1 is a partner in the PRS
partnership which is subject to the provisions of sections 6221
through 6234. PRS has a calendar year end and A, an individual, is
the tax matters partner of the PRS partnership. PRS files a
partnership return for the year ending December 31, Year 1. The
Commissioner, on January 10, Year 4, in the course of an examination
of the PRS partnership for the year ending December 31, Year 1,
seeks to obtain information in the course of that examination in
order to resolve the audit.
(ii) Because the direct contact with a subsidiary member of a
consolidated group that is a partner in a partnership subject to the
provisions under sections 6221 through 6234 may facilitate the
conduct of an examination, appeal or settlement, the Commissioner,
under paragraph (f)(2)(iii) of this section, may communicate
directly with either S-1, P or A regarding the PRS partnership
without breaking agency pursuant to paragraph (f)(2)(i) of this
section. However, if the Commissioner were instead seeking to
execute a settlement agreement with respect to S-1 as a partner with
respect to its liability as a partner in PRS partnership, P would
need to execute such settlement agreement for all members of the
group including the partner subsidiary.
(i) [Reserved]
(j) Cross-reference. For further rules applicable to groups that
include insolvent financial institutions, see Sec. 301.6402-7 of this
chapter.
(k) Effective/applicability date. The rules of this section apply
to taxable years ending on or after the date of publication of the
Treasury decision adopting these rules as final regulations in the
Federal Register.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2012-13056 Filed 5-29-12; 8:45 am]
BILLING CODE 4830-01-P