Federal Register / Vol. 76, No. 69 / Monday, April 11, 2011 / Rules and Regulations 19907 

Issued in Kansas City, Missouri, on April 

1, 2011. 

John Colomy, 

Acting Manager, Small Airplane Directorate, 

Aircraft Certification Service. 

[FR Doc. 2011–8547 Filed 4–8–11; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9522] 

RIN 1545–BG94 

Clarification of Controlled Group 

Qualification Rules 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulation. 

SUMMARY: This document contains a 

final regulation that applies to a 

controlled group of corporations. The 

regulation clarifies that a corporation 

that satisfies the controlled group rules 

for stock ownership and qualification is 

a member of such group, without regard 

to its status as a component member. 

DATES:

Effective Date: This regulation is 

effective on April 11, 2011. 

Applicability Date: For date of 

applicability, see § 1.1563–1(e). 

FOR FURTHER INFORMATION CONTACT: Grid 

Glyer (202) 622–7930 (not a toll-free 

number). 

SUPPLEMENTARY INFORMATION: 

Background and Explanation of 

Provisions 

This document contains an 

amendment to 26 CFR part 1. On 

September 29, 2009, a notice of 

proposed rulemaking (NPRM) regarding 

the controlled group qualification rules 

under § 1.1563–1 was published in the 

Federal Register (REG–135005–07; 74 

FR 49829). The NPRM proposed to 

amend § 1.1563–1 to clarify that a 

corporation described in section 1563(b) 

as an excluded member of a controlled 

group of corporations is nevertheless a 

member of the group. The NPRM further 

proposed to add an example 

demonstrating that a controlled group of 

corporations can consist solely of 

excluded members. 

One comment was received and no 

public hearing was requested or held. 

The public comment concerned the 

treatment of gross receipts between 

members of a controlled group of 

corporations for purposes of section 41, 

which provides a tax credit to taxpayers 

for increasing their research activities. 

In particular, the comment refers to CCA 

200233011, dated May 1, 2002. In that 

CCA, the IRS Office of Chief Counsel 

concluded first that a domestic 

corporation and its majority-owned 

foreign subsidiaries should be treated as 

a single taxpayer for purposes of 

sections 41(f)(1)(A)(i), 41(f)(5) and 

1563(a) because they were members of 

the same controlled group of 

corporations even though the foreign 

subsidiaries were treated as excluded 

members of the group. 

Second, the IRS Office of Chief 

Counsel concluded that, given the 

particular facts and circumstances of 

that case, the taxpayer should exclude 

sales to its majority-owned foreign 

subsidiaries when computing gross 

receipts for purposes of determining its 

base amount under section 41(c). The 

commenter requested guidance on the 

facts and circumstances that caused the 

IRS Office of Chief Counsel to exclude 

such sales in computing gross receipts. 

The IRS and the Treasury Department 

believe that the requested guidance is 

outside the scope of the NPRM, which 

only involves the first issue addressed 

in the CCA, and is consistent with the 

conclusion of the CCA on that issue. 

However, the final regulation makes 

one clarifying change. Paragraph 

(a)(1)(ii) of the proposed regulation 

states that in determining whether a 

corporation is included in a controlled 

group of corporations, section 1563(b) 

shall not be taken into account. Section 

1563(b) defines a component member, 

including an excluded member and an 

additional member. Paragraph (a)(1)(ii) 

as now revised will also provide that the 

underlying regulation, § 1.1563–1(b), 

which defines a component member, 

shall not be taken into account in 

determining the members of a 

controlled group. 

Special Analyses 

It has been determined that this 

regulation 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 this 

regulation and because this regulation 

does 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) this regulation has been 

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 this regulation 

is Grid Glyer of the Office of Associate 

Chief Counsel (Corporate). However, 

other personnel from the IRS and the 

Treasury Department participated in its 

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 

■ Paragraph 1. The authority citation 

for part 1 continues to read in part as 

follows: 

Authority: 26 U.S.C. 7805 * * * 

■ Par. 2. Section 1.1563–1 is amended 

by: 

■ 1. Redesignating paragraph (a)(1)(ii) as 

paragraph (a)(1)(iii) and adding new 

paragraph (a)(1)(ii). 

■ 2. Adding Example 4 to paragraph 

(b)(4). 

■ 3. Adding a sentence at the end of 

paragraph (e). 

The additions read as follows: 

§ 1.1563–1 Definition of controlled group 

of corporations and component members 

and related concepts. 

(a) * * * 

(1) * * * 

(ii) Special rules. In determining 

whether a corporation is included in a 

controlled group of corporations, 

section 1563(b) and paragraph (b) of this 

section shall not be taken into account. 

For rules defining a component member 

of a controlled group of corporations, 

including rules defining an excluded 

member and an additional member, see 

section 1563(b) and paragraph (b) of this 

section. 

* * * * * 

(b) * * * 

(4) * * * 

Example 4. Individual A owns all of the 

stock of corporations X, Y and Z. Each of 

these corporations is an S corporation. X, Y, 

and Z are each members of a brother-sister 

controlled group, even though each such 

corporation is treated as an excluded member 

of such group. See § 1.1563–1(b)(2)(ii)(C). 

* * * * * 

(e) Effective/Applicability date. * * * 

Paragraph (a)(1)(ii) of this section 

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19908 Federal Register / Vol. 76, No. 69 / Monday, April 11, 2011 / Rules and Regulations 

applies to taxable years beginning on or 

after April 11, 2011. 

Steven T. Miller, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: April 4, 2011. 

Michael Mundaca, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 2011–8555 Filed 4–8–11; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Alcohol and Tobacco Tax and Trade 

Bureau 

27 CFR Parts 19 and 30 

[Docket No. TTB–2008–0004; T.D. TTB–92a; 

Re: T.D. TTB–92] 

RIN 1513–AA23 

Revision of Distilled Spirits Plant 

Regulations; Corrections 

AGENCY: Alcohol and Tobacco Tax and 

Trade Bureau, Treasury. 

ACTION: Final rule; Treasury decision; 

correction. 

SUMMARY: The Alcohol and Tobacco Tax 

and Trade Bureau published a final rule 

revising its distilled spirits plant 

regulations in the Federal Register of 

February 16, 2011 (76 FR 9080). That 

final rule contained several 

typographical and textual errors. This 

document corrects those errors. 

DATES: Effective Date: April 18, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Christopher M. Thiemann, Regulations 

and Rulings Division, Alcohol and 

Tobacco Tax and Trade Bureau, 1310 G 

Street, NW., Suite 200E, Washington, 

DC 20220; telephone 202–453–2265. 

SUPPLEMENTARY INFORMATION: The 

Alcohol and Tobacco Tax and Trade 

Bureau (TTB) recently published a final 

rule completely revising its distilled 

spirits plant regulations as contained in 

27 CFR part 19. TTB published this final 

rule as T.D. TTB–92 in the Federal 

Register of February 16, 2011 (see 76 FR 

9080). The final rule also amended 

cross-references to part 19 found in 27 

CFR parts 1, 17, 24, 26, 28, 30 and 31. 

T.D. TTB–92 is effective on April 18, 

2011. 

After its publication, TTB found that 

T.D. TTB–92 contained several 

typographical and textual errors in the 

revised regulations in part 19 and a 

textual error in an amendatory 

instruction for part 31. This document 

corrects those errors. 

Specifically, typographical errors are 

corrected in T.D. TTB–92 in the part 19 

table of contents listing for § 19.26 

(‘‘Alternate’’ rather than ‘‘lternate’’), in 

the ‘‘Authority’’ citation at the beginning 

of the part (‘‘5121–5124’’ rather than 

‘‘5121, 5122–5124’’), and in the section 

heading for § 19.603 (‘‘§ 19.603’’ rather 

than ‘‘§ 10.603’’). In § 19.1, in the 

definition of ‘‘Lot identification 

number,’’ the cross-reference to ‘‘27 CFR 

19.485’’ is corrected to read ‘‘§ 19.485’’ 

for consistency with other internal part 

19 cross references. Also in § 19.1, the 

definitions of ‘‘Kind’’ and ‘‘Package 

identification number’’ are corrected to 

use the new part 19 section numbers 

contained in T.D. TTB–92 rather than 

section numbers from the version of part 

19 being replaced. 

In § 19.454(a), TTB is correcting 

‘‘SDA’’ to read ‘‘denatured spirits’’ in 

order to clarify that denatured spirits, 

including specially denatured spirits 

and completely denatured alcohol, 

withdrawn free of tax under 27 CFR part 

20 may be returned to bonded premises 

in accordance with § 19.454. In 

§ 19.454(e), TTB is correcting ‘‘SDA’’ to 

read ‘‘specially denatured spirits’’ in 

order to clarify that specially denatured 

spirits, including specially denatured 

alcohol and specially denatured rum, 

withdrawn free of tax for export under 

27 CFR part 28 may be returned to 

bonded premises in accordance with 

§ 19.454. 

Also, as described in T.D. TTB–92, 

TTB intends to require serial numbers 

on certain records to either commence 

with the number ‘‘1’’ each calendar or 

fiscal year or otherwise be unique and 

not repeated. These numbering options 

are incorporated into the recordkeeping 

requirements contained in § 19.618, 

Gauge record, and § 19.620, Transfer 

record—consignor’s responsibility. 

However, the option to use a unique, 

non-repeated number was inadvertently 

left out of § 19.599, Bottling and packing 

records. TTB is therefore correcting 

§ 19.599(b) to conform to the similar 

recordkeeping requirements found in 

§§ 19.618 and 19.620. 

In addition, the amendatory 

instruction updating a cross-reference to 

part 19 in 27 CFR part 30 was 

incorrectly phrased. When referring to 

the existing text of § 30.31(d), the 

amendatory instructions in T.D. TTB–92 

should have used the phrase ‘‘27 CFR 

19.383’’ rather than merely ‘‘§ 19.383.’’ 

Corrections 

In the final rule document numbered 

FR Doc. 2011–1956 beginning on page 

9080 in the Federal Register issue of 

Wednesday, February 16, 2011, make 

the following corrections: 

1. On page 9090, in the third column, 

in the part 19 table of contents, the 

listing ‘‘19.26 lternate methods or 

procedures.’’ is corrected to read ‘‘19.26 

Alternate methods or procedures.’’. 

2. On page 9094, in the second 

column, in the authority citation for 27 

CFR part 19, in the fourth line, the 

number phrase ‘‘5121, 5122–5124’’ is 

corrected to read ‘‘5121–5124’’. 

§ 19.1 [Corrected] 

■ 3. On page 9095, in the third column, 

in the definition of ‘‘Kind,’’ the crossreference to ‘‘§ 19.597’’ is corrected to 

read ‘‘§ 19.487’’. 

■ 4. On page 9096, in the first column, 

in the definition of ‘‘Lot identification 

number,’’ the cross-reference to ‘‘27 CFR 

19.485’’ is corrected to read ‘‘§ 19.485’’. 

■ 5. On page 9096, in the first column, 

in the definition of ‘‘Package 

identification number,’’ the crossreference to ‘‘27 CFR 19.595’’ is 

corrected to read ‘‘§ 19.490’’. 

§ 19.454 [Corrected] 

■ 6. On page 9140, in the first column 

of the table (titled ‘‘Type of product’’), in 

paragraph (a), the sentence ‘‘SDA 

withdrawn free of tax under part 20 of 

this chapter’’ is corrected to read 

‘‘Denatured spirits withdrawn free of tax 

under part 20 of this chapter’’. 

■ 7. On page 9140, in the first column 

of the table (titled ‘‘Type of product’’), in 

paragraph (e), the sentence ‘‘SDA 

withdrawn free of tax for export under 

part 28 of this chapter’’ is corrected to 

read ‘‘Specially denatured spirits 

withdrawn free of tax for export under 

part 28 of this chapter’’. 

§ 19.599 [Corrected] 

■ 8. On page 9152, in the second 

column, in § 19.599, in paragraph (b), 

the text ‘‘Serial number of the record 

(beginning with ‘‘1’’ at the start of each 

calendar or fiscal year)’’ is corrected to 

read ‘‘Serial number of the record 

(which must commence with ‘‘1’’ at the 

start of each calendar or fiscal year, or 

be a unique identifying number that is 

not repeated)’’. 

§ 19.603 [Corrected] 

■ 9. On page 9153, in the first column, 

the section heading ‘‘§ 10.603, Liquor 

bottle records’’ is corrected to read 

‘‘§ 19.603, Liquor bottle records’’. 

§ 30.31 [Corrected] 

■ 10. On page 9171, in the third column, 

in paragraph 16, in the amendatory 

instructions for § 30.31, the phrase ‘‘the 

reference to ‘§ 19.383’ ’’ is corrected to 

read ‘‘the reference to ‘27 CFR 19.383’ of 

this chapter’’. 

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