[Federal Register: December 16, 2002 (Volume 67, Number 241)]
[Rules and Regulations]
[Page 76985]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16de02-3]
[[Page 76985]]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9025]
RIN 1545-BA05
Intercompany Transactions: Conforming Amendments to Section 446
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: On July 18, 1995, the Treasury Department and the IRS
published final regulations governing the intercompany transaction
system of the consolidated return regulations. Those regulations state
that the timing rules of the intercompany transaction system are a
method of accounting. At the time of the publication of those
regulations, no amendment was made to the regulations promulgated under
section 446 to coordinate with that statement. This document contains
final regulations confirming that the timing rules of the intercompany
transaction regulations are a method of accounting. These regulations
apply to all taxpayers filing consolidated returns.
DATES: Effective Date: These regulations are effective December 16,
2002.
Applicability Date: These regulations apply to consolidated return
years beginning on or after November 7, 2001.
FOR FURTHER INFORMATION CONTACT: Vincent Daly, (202) 622-7770, or
Jeffery G. Mitchell (202) 622-4930 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background and Explanation of Provisions
On July 18, 1995, the Treasury Department and the IRS published in
the Federal Register (60 FR 36671 (1995-2 C.B. 147)) final regulations
under Sec. 1.1502-13 governing the intercompany transaction system of
the consolidated return regulations. Included in such regulations was
an express statement that ``[t]he timing rules of [the intercompany
transaction regulations] are a method of accounting for intercompany
transactions, to be applied by each member in addition to the member's
other methods of accounting.'' Sec. 1.1502-13(a)(3)(i). At the time of
the publication of those final regulations, no amendment was made to
the regulations promulgated under section 446 to coordinate with the
statement in Sec. 1.1502-13(a)(3)(i) that the timing rules of Sec.
1.1502-13 are a method of accounting.
In General Motors v. Commissioner, 112 T.C. 270 (1999), the Tax
Court determined that the timing rule of former Sec. 1.1502-13(b)(2)
was not a method of accounting for purposes of section 446(e). On
November 7, 2001, the Treasury and the IRS published in the Federal
Register a notice of proposed rulemaking (REG-125161-01, 66 FR 56262
(2001-48 I.R.B. 538)) proposing amendments to CFR part 1 under section
446 of the Internal Revenue Code to confirm that the timing rules of
Sec. 1.1502-13 are a method of accounting. No written comments
responding to the notice of proposed rulemaking were received, and no
public hearing was requested or held. Therefore, the proposed
regulations are adopted by this Treasury decision without change.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It also has been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these regulations. Because the
regulations do not impose a collection of information on small
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f) of the Internal Revenue Code, the
notice of proposed rulemaking preceding these regulations was submitted
to the Chief Counsel for Advocacy of the Small Business Administration
for comment on its impact on small business.
Drafting Information
The principal author of these regulations is Vincent Daly, Office
of the Associate Chief Counsel (Corporate). However, other personnel
from the IRS and Treasury Department participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
1. The authority citation for part 1 continues to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
2. Section 1.446-1 is amended by adding paragraph (c)(2)(iii) to
read as follows:
Sec. 1.446-1 General rule for methods of accounting.
* * * * *
(c) * * *
(2) * * *
(iii) The timing rules of Sec. 1.1502-13 are a method of
accounting for intercompany transactions (as defined in Sec. 1.1502-
13(b)(1)(i)), to be applied by each member of a consolidated group in
addition to the member's other methods of accounting. See Sec. 1.1502-
13(a)(3)(i). This paragraph (c)(2)(iii) is applicable to consolidated
return years beginning on or after November 7, 2001.
* * * * *
3. In Sec. 1.1502-13, the second sentence of paragraph (a)(3)(i)
is revised to read as follows:
Sec. 1.1502-13 Intercompany transactions.
(a) * * *
(3) * * *
(i) * * * See Sec. 1.1502-17 and, with regard to consolidated
return years beginning on or after November 7, 2001, Sec. 1.446-
1(c)(2)(iii). * * *
* * * * *
David A. Mader,
Assistant Deputy Commissioner of Internal Revenue.
Approved: December 9, 2002.
Pamela F. Olson,
Assistant Secretary of the Treasury.
[FR Doc. 02-31614 Filed 12-13-02; 8:45 am]
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