FROM THE OFFICE OF PUBLIC AFFAIRS

Treasury today issued proposed regulations under section 1502 of the Internal Revenue Code to prevent groups of corporations from inappropriately duplicating for tax purposes a single economic loss. Under the regulations, which apply to corporations filing a consolidated tax return, corporations are entitled to one and only one tax loss with respect to a single economic loss.

On March 7, 2002, the IRS issued Notice 2002-18 announcing that regulations would be promulgated to defer or limit the use of losses in transactions structured by corporations to artificially accelerate losses or to claim more than one tax loss with respect to a single economic loss. The Notice stated that the regulations would apply to dispositions occurring on or after March 7, 2002.

According to Pamela Olson, Assistant Treasury Secretary for Tax Policy, “we have issued these new regulations in proposed form in order to allow time to solicit and receive taxpayers comments before final regulations are issued.  We recognize this is an extremely complex topic and we look forward to receiving input from affected taxpayers in order to ensure that the rules work as they are intended." 

The text of the proposed regulations is attached.