Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has released guidance detailing the procedures for a consolidated group to elect under Reg. §1.1502-13(e)(3) to account for intercompany transactions on a separate entity basis. These requests must be submitted as a private letter ruling request under the provisions of Rev. Proc. 2009-1, IRB 2009-1, 1, and apply to all members of the consolidated group for the consent year (and generally for all subsequent taxable years).

  The election may generally be revoked without IRS consent provided certain reporting requirements are met. Automatic revocation occurs if the effect on consolidated taxable income or liability is greater than 5 percent for each of the two taxable years preceding the current year. In addition, the IRS can revoke or modify the election if the circumstances under which the ruling was granted have changed substantially and it is determined that single entity reporting is necessary in order to clearly reflect income and tax liability.

  This new guidance is substantially the same as previous guidance in Rev. Proc. 97-49, 1997-2 CB 523, except that: (1) the IRS will now look at consolidated tax liability as well as consolidated taxable income in determining whether to grant or revoke an election under Reg. §1.1502-13(e)(3); and (2) the IRS's review of election requests and revocations will now look for a 5-percent impact on consolidated tax liability and income as opposed to a 10-percent impact.

  Elections under Reg. §1.1502-13(e)(3) are not available for transactions between members of a controlled group under Code Sec. 267(f).

 
Rev. Proc. 97-49, 1997-2 CB 523, is modified and superseded.

Rev. Proc. 2009-31, 2009FED ¶46,406

Other References:

 
Code Sec. 1502

  CCH Reference - 2009FED ¶33,168.721

  CCH Reference - 2009FED ¶43,360.35

  Tax Research Consultant

  CCH Reference - TRC CONSOL: 39,306