[Federal Register: August 27, 2007 (Volume 72, Number 165)]
[Rules and Regulations]
[Page 48933-48936]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27au07-1]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
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[[Page 48933]]
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9355]
RIN 1545-BF66
Clarification of Section 6411 Regulations
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final and temporary regulations.
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SUMMARY: This document contains final and temporary regulations
clarifying that for purposes of allowing a tentative adjustment, the
IRS may credit or reduce the tentative adjustment by an assessed tax
liability, whether or not that tax liability was assessed before the
date the application for tentative carryback was filed, and other
unassessed tax liabilities in certain other circumstances. The portions
of this document that are final regulations provide technical revisions
that remove all references to IRS district director and service center
director, as those positions no longer exist within the IRS. The
offices of the district director and service center director were
eliminated by the IRS reorganization implemented pursuant to the IRS
Reform and Restructuring Act of 1998. The text of the temporary
regulations serves as the text of the proposed regulations, set forth
in the notice of proposed rulemaking on this subject in the Proposed
Rules section in this issue of the Federal Register.
DATES: Effective Date: These regulations are effective August 27, 2007.
Applicability Date: These regulations apply with respect to
applications for tentative refund filed on or after August 27, 2007.
FOR FURTHER INFORMATION CONTACT: Cynthia A. McGreevy, (202) 622-4910
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background and Explanation of Provisions
These regulations clarify the Income Tax Regulations (26 CFR part
1) under section 6411 relating to the computation and allowance of the
tentative carryback adjustment. The tentative allowance is computed
pursuant to Sec. 1.6411-2 but applied pursuant to Sec. 1.6411-3.
These temporary regulations clarify that, for purposes of computing the
allowance, the Commissioner will not consider amounts to which the
taxpayer and the Commissioner are in disagreement. For purposes of
applying the allowance, however, the Commissioner may credit or reduce
the tentative adjustment by any assessed tax liabilities, unassessed
liabilities determined in a statutory notice of deficiency, unassessed
liabilities identified in a proof of claim filed in a bankruptcy
proceeding, and other unassessed liabilities in rare and unusual
circumstances. Regarding unassessed liabilities determined in a
statutory notice of deficiency, see Rev. Rul. 2007-51. Regarding
unassessed liabilities identified in a proof of claim filed in a
bankruptcy proceeding, see Rev. Rul. 2007-52. See Sec. 601.601(d)(2).
The IRS plans to adopt procedures requiring IRS National Office review
prior to a credit or reduction of the tentative adjustment by an
unassessed liability that constitutes a rare and unusual circumstance.
These regulations also contain final regulations that remove all
references to IRS district director or service center director, to
account for the IRS's current organizational structure. The text of the
temporary regulations serves as the text of the proposed regulations,
published elsewhere in this issue of the Federal Register.
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. For the
applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6)
please refer to the Special Analyses section of the preamble of the
cross-reference notice of proposed rulemaking published in the Proposed
Rules section in this issue of the Federal Register. Pursuant to
section 7805(f) of the Internal Revenue Code, these regulations have
been submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on their impact on small business.
Drafting Information
The principal author of these final and temporary regulations is
Cynthia A. McGreevy of the Office of the Associate Chief Counsel
(Procedure and Administration).
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Amendments to the Regulations
0
Accordingly, 26 CFR part 1 is to be amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *.
Sec. 1.6411-2 [Amended]
0
Par. 2. In the list below, for each section listed in the left column,
remove the language in the middle column and add the language in the
right column:
----------------------------------------------------------------------------------------------------------------
Section Remove Add
----------------------------------------------------------------------------------------------------------------
1.6411-2(a), first sentence........... , unused investment credit, or , or unused investment credit
unused WIN credit
1.6411-2(a), fourth sentence.......... Internal Revenue Service Commissioner
1.6411-2(a), last sentence............ 32 33
1.6411-2(b), third sentence........... Internal Revenue Service Commissioner
[[Page 48934]]
1.6411-2(b), fourth sentence.......... District director Commissioner
1.6411-2(b), fourth sentence.......... Internal Revenue Service Commissioner
----------------------------------------------------------------------------------------------------------------
0
Par. 3. Section 1.6411-2(c) is added to read as follows:
Sec. 1.6411-2 Computation of tentative carryback adjustment.
* * * * *
(c) Effective/applicability date. These regulations apply with
respect to applications for tentative refund filed on or after August
27, 2007.
0
Par. 4. Section 1.6411-2T is added to read as follows:
Sec. 1.6411-2T Computation of tentative carryback adjustment
(temporary).
(a) Tax previously determined. The taxpayer is to determine the
amount of decrease, attributable to the carryback, in tax previously
determined for each taxable year before the taxable year of the net
operating loss, net capital loss, or unused investment credit. The tax
previously determined is to be ascertained in accordance with the
method prescribed in section 1314(a). Thus, the tax previously
determined will be the tax shown on the return as filed, increased by
any amounts assessed (or collected without assessment) as deficiencies
before the date of the filing of the application for a tentative
carryback adjustment, and decreased by any amounts abated, credited,
refunded, or otherwise repaid prior to that date. Any items as to which
the Commissioner and the taxpayer are in disagreement at the time of
the filing of the application shall, for purposes of Sec. 1.6411-2, be
taken into account in ascertaining the tax previously determined only
if, and to the extent that, they were reported in the return, or were
reflected in any amounts assessed (or collected without assessment) as
deficiencies, or in any amounts abated, credited, refunded, or
otherwise repaid, before the date of filing the application. The tax
previously determined, therefore, will reflect the foreign tax credit
and the credit for tax withheld at source provided in section 33.
(b) Decrease attributable to carryback. After ascertaining the tax
previously determined in the manner described in paragraph (a) of this
section, the taxpayer shall determine the decrease in tax previously
determined attributable to the carryback and any related adjustments on
the basis of the items of tax taken into account in computing the tax
previously determined. In determining any decrease attributable to the
carryback or any related adjustment, items shall be taken into account
under this subsection only to the extent that they were reported in the
return, or were reflected in amounts assessed (or collected without
assessment) as deficiencies, or in amounts abated, credited, refunded,
or otherwise repaid, before the date of filing the application for a
tentative carryback adjustment. If the Commissioner and the taxpayer
are in disagreement as to the proper treatment of any item, it shall be
assumed for purposes of determining the decrease in the tax previously
determined that the item was correctly reported by the taxpayer unless,
and to the extent that, the disagreement has resulted in the assessment
of a deficiency (or the collection of an amount without an assessment),
or the allowing or making of an abatement, credit, refund, or other
repayment, before the date of filing the application. Thus, if the
taxpayer claimed a deduction on its return of $50,000 for salaries paid
its officers but the Commissioner proposes that the deduction should
not exceed $20,000, and the Commissioner and the taxpayer have not
agreed on the amount properly deductible before the date the
application for a tentative carryback adjustment is filed, $50,000
shall be considered as the amount properly deductible for purposes of
determining the decrease in tax previously determined in respect of the
application for a tentative carryback adjustment. In determining the
decrease in tax previously determined, any items which are affected by
the carryback must be adjusted to reflect the carryback. Thus, unless
otherwise provided, any deduction limited, for example, by adjusted
gross income, such as the deduction for medical, dental, etc.,
expenses, is to be recomputed on the basis of the adjusted gross income
as affected by the carryback. See Sec. 1.6411-3T(d) for rules on the
application of the decrease in tax to any tax liability.
(c) Effective/applicability date. (1) These regulations apply with
respect to applications for tentative refund filed on or after August
27, 2007. (2) The applicability of this section expires on or before
August 24, 2010.
0
Par. 5.
Sec. 1.6411-3 [Amended].
In the list below, for each section listed in the left column,
remove the language in the middle column and add the language in the
right column:
----------------------------------------------------------------------------------------------------------------
Section Remove Add
----------------------------------------------------------------------------------------------------------------
1.6411-3(a), first sentence........... district director or director of a Commissioner
service center (either of whom are
sometimes hereinafter referred to
in this section as internal
revenue officer)
1.6411-3(a)(2), first sentence........ , unused investment credit, or , or unused investment credit
unused WIN credit
1.6411-3(b), first sentence........... district director or director of a Commissioner
service center
1.6411-3(b), first sentence........... he deems Deemed
1.6411-3(b), second sentence.......... he The Commissioner
1.6411-3(b), fourth sentence.......... Such internal revenue officer The Commissioner
1.6411-3(b), fourth sentence.......... he may discover discovered
1.6411-3(b), fifth sentence........... he accordingly the Commissioner accordingly
1.6411-3(b), fifth sentence........... he may May
1.6411-3(b), fifth sentence........... , unused investment credit, or , or unused investment credit
unused WIN credit
1.6411-3(b), fifth sentence........... , investment credit or WIN credit , or investment credit
1.6411-3(b), sixth sentence........... such internal revenue officer the Commissioner
1.6411-3(b), sixth sentence........... he the Commissioner
1.6411-3(b), sixth sentence........... his the Commissioner's
[[Page 48935]]
1.6411-3(b), seventh sentence......... such internal revenue officer the Commissioner
1.6411-3(b), seventh sentence......... he believes the Commissioner believes
1.6411-3(b), seventh sentence......... he will the Commissioner will
1.6411-3(b), seventh sentence......... such officer the Commissioner
1.6411-3(c), first sentence........... district director or director of a Commissioner
service center
1.6411-3(c), first sentence........... he the Commissioner
1.6411-3(c), second sentence.......... he deems the Commissioner deems
1.6411-3(c), second sentence.......... by him ...................................
1.6411-3(c), second sentence.......... he the Commissioner
1.6411-3(c), third sentence........... Such internal revenue officer's The Commissioner's
1.6411-3(c), third sentence........... he the Commissioner
1.6411-3(c), fourth sentence.......... his the Commissioner's
1.6411-3(c), fifth sentence........... such internal revenue officer the Commissioner
1.6411-3(d)(1), first sentence........ district director or director of a Commissioner
service center
1.6411-3(d)(1)(iii), first sentence... including an amount the time for ...................................
payment of which has been extended
under section 6162, but
1.6411-3(d)(2), first sentence........ district director, or director of a Commissioner
service center
1.6411-3(d)(2), fifth sentence........ such internal revenue officer The Commissioner
1.6411-3(d)(2), fifth sentence........ , unused investment credit, or , or unused investment credit
unused WIN credit
1.6411-3(d)(3), first sentence........ district director or director of a Commissioner
service center
----------------------------------------------------------------------------------------------------------------
0
Par. 6. Section 1.6411-3(e) is added to read as follows:
Sec. 1.6411-3 Allowance of adjustments.
* * * * *
(e) Effective/applicability date. These regulations apply with
respect to applications for tentative refund filed on or after August
27, 2007.
0
Par. 7. Section 1.6411-3T is added to read as follows:
Sec. 1.6411-3T Allowance of adjustments (temporary).
(a) Time prescribed. The Commissioner shall act upon any
application for a tentative carryback adjustment filed under section
6411(a) within a period of 90 days from whichever of the following two
dates is the later--
(1) The date the application is filed; or
(2) The last day of the month in which falls the last date
prescribed by law (including any extension of time granted the
taxpayer) for filing the return for the taxable year of the net
operating loss, net capital loss, or unused investment credit from
which the carryback results.
(b) Examination. Within the 90-day period described in paragraph
(a) of this section, the Commissioner shall make, to the extent deemed
practicable within this period, an examination of the application to
discover omissions and errors of computation. The Commissioner shall
determine within this period the decrease in tax previously determined,
affected by the carryback or any related adjustments, upon the basis of
the application and examination. The decrease shall be determined in
the same manner as that provided in section 1314(a) for the
determination by the taxpayer of the decrease in taxes previously
determined which must be set forth in the application for a tentative
carryback adjustment. The Commissioner, however, may correct any errors
of computation or omissions discovered upon examination of the
application. In determining the decrease in tax previously determined
which is affected by the carryback or any related adjustment, the
Commissioner may correct any mathematical error appearing on the
application and may likewise correct any modification required by the
law and incorrectly made by the taxpayer in computing the net operating
loss, net capital loss, or unused investment credit, the resulting
carrybacks, or the net operating loss deduction, capital loss
deduction, or investment credit allowable. If the required modification
has not been made by the taxpayer and the Commissioner has the
necessary information to make the modification within the 90-day
period, the Commissioner may, in the Commissioner's discretion, make
the modification. In determining the decrease, however, the
Commissioner will not, for example, change the amount claimed on the
return as a deduction for depreciation because the Commissioner
believes that the taxpayer has claimed an excessive amount; likewise,
the Commissioner will not include in gross income any amount not so
included by the taxpayer, even though the Commissioner believes that
the amount is subject to tax and properly should be included in gross
income.
(c) Disallowance in whole or in part. If the Commissioner finds
that an application for a tentative carryback adjustment contains
material omissions or errors of computation, the Commissioner may
disallow such application in whole or in part without further action.
If, however, the Commissioner deems that any error of computation can
be corrected within the 90-day period, the Commissioner may do so and
allow the application in whole or in part. The Commissioner's
determination as to whether the Commissioner can correct any error of
computation within the 90-day period shall be conclusive. Similarly,
the Commissioner's action in disallowing, in whole or in part, any
application for a tentative carryback adjustment shall be final and may
not be challenged in any proceeding. The taxpayer may, however, file a
claim for credit or refund under section 6402, and may maintain a suit
based on the claim if it is disallowed or if the Commissioner does not
act upon the claim within 6 months from the date it is filed.
(d) Application of decrease. (1) Each decrease determined by the
Commissioner in any previously determined tax which is affected by the
carryback or any related adjustments shall first be applied against any
unpaid amount of the tax with respect to which such decrease was
determined. The unpaid amount of tax may include one or more of the
following:
(i) An amount with respect to which the taxpayer is delinquent.
(ii) An amount the time for payment of which has been extended
under section 6164 and which is due and
[[Page 48936]]
payable on or after the date of the allowance of the decrease.
(iii) An amount (not including an amount the time for payment of
which has been extended under section 6164) which is due and payable on
or after the date of the allowance of the decrease, including any
assessed liabilities, unassessed liabilities determined in a statutory
notice of deficiency, unassessed liabilities identified in a proof of
claim filed in a bankruptcy proceeding, and other unassessed
liabilities in rare and unusual circumstances.
(2) If the unpaid amount of tax includes more than one unpaid
amount, the Commissioner in his discretion, shall determine against
which amount or amounts, and in what proportion, the decrease is to be
applied. In general, however, the decrease will be applied against any
amounts described in paragraphs (d)(1)(i) through (iii) of this section
in the order named. If there are several amounts of the type described
in paragraph (d)(1)(iii) of this section, any amount of the decrease
which is to be applied against the amount will be applied by assuming
that the tax previously determined minus the amount of the decrease to
be so applied is ``the tax'' and that the taxpayer had elected to pay
the tax in installments. The unpaid amount of tax against which a
decrease may be applied under paragraph (d)(1) of this section may not
include any amount of tax for any taxable year other than the year of
the decrease. After making the application, the Commissioner will
credit any remainder of the decrease against any unsatisfied amount of
any tax for the taxable year immediately preceding the taxable year of
the net operating loss, capital loss, or unused investment credit, the
time for payment of which has been extended under section 6164.
(3) Any remainder of the decrease after the application and credits
may, within the 90-day period, in the discretion of the Commissioner,
be credited against any tax liability or installment thereof then due
from the taxpayer (including assessed liabilities, unassessed
liabilities determined in a statutory notice of deficiency, unassessed
liabilities identified in a proof of claim filed in a bankruptcy
proceeding, and other unassessed liabilities in rare and unusual
circumstances), and, if not so credited, shall be refunded to the
taxpayer within the 90-day period.
(e) Effective/applicability date. (1) These regulations apply with
respect to applications for tentative refund filed on or after August
27, 2007.
(2) The applicability of this section expires on or before August
24, 2010.
Kevin M. Brown,
Deputy Commissioner for Services and Enforcement.
Approved: August 1, 2007.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. E7-16878 Filed 8-24-07; 8:45 am]
BILLING CODE 4830-01-P