Federal Register / Vol. 74, No. 187 / Tuesday, September 29, 2009 / Proposed Rules 49829 

the low-pressure flex-hoses of the flightcrew 

and supernumerary oxygen system can be 

conclusively determined from that review. 

(1) For any hose having a part number 

identified in Table 2 of this AD, before 

further flight, replace the hose with a new or 

serviceable part, in accordance with the 

Accomplishment Instructions of the 

applicable service bulletin identified in Table 

1 of this AD. 

(2) For any hose not having a part number 

identified in Table 2 of this AD, no further 

action is required by this paragraph. 

Parts Installation 

(h) As of the effective date of this AD, no 

person may install a flightcrew or 

supernumerary oxygen hose with a part 

number identified in Table 2 of this AD on 

any airplane. 

TABLE 2—APPLICABLE PART NUMBERS

Boeing specification part No.— 

Equivalent Boeing supplier part Nos.— 

Sierra Engineering Spencer Fluid Puritan Bennett Hydraflow AVOX (formerly Sierra Engineering) 

60B50059–70 ............................... 835–01–70 9513–20S5–18.0 ZH784–20 38001–70 9513–835–01–70 

60B50059–81 ............................... 835–01–81 9513–20S5–24.0 ZH784–81 38001–81 9513–835–01–81 

Actions Accomplished According to 

Previous Issue of Service Bulletin 

(i) Actions accomplished before the 

effective date of this AD in accordance with 

Boeing Alert Service Bulletin 757–35A0015, 

dated September 2, 1999, or Revision 1, 

dated November 11, 1999; or Boeing Alert 

Service Bulletin 757–35A0016, dated 

November 11, 1999; are considered 

acceptable for compliance with the 

corresponding actions specified in this AD. 

Alternative Methods of Compliance 

(AMOCs) 

(j)(1) The Manager, Seattle Aircraft 

Certification Office (ACO), FAA, has the 

authority to approve AMOCs for this AD, if 

requested using the procedures found in 14 

CFR 39.19. Send information to ATTN: 

Robert Hettman, Aerospace Engineer, Cabin 

Safety and Environmental Systems Branch, 

ANM–150S, FAA, Seattle ACO, 1601 Lind 

Avenue, SW., Renton, Washington 98057– 

3356; telephone (425) 917–6457; fax (425) 

917–6590. Or, e-mail information to 9-ANMSeattle-ACO-AMOC-Requests@faa.gov. 

(2) To request a different method of 

compliance or a different compliance time 

for this AD, follow the procedures in 14 CFR 

39.19. Before using any approved AMOC on 

any airplane to which the AMOC applies, 

notify your principal maintenance inspector 

(PMI) or principal avionics inspector (PAI), 

as appropriate, or lacking a principal 

inspector, your local Flight Standards District 

Office. The AMOC approval letter must 

specifically reference this AD. 

Issued in Renton, Washington, on 

September 18, 2009. 

Ali Bahrami, 

Manager, Transport Airplane Directorate, 

Aircraft Certification Service. 

[FR Doc. E9–23421 Filed 9–28–09; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–135005–07] 

RIN 1545–BG94 

Clarification of Controlled Group 

Qualification Rules 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This document contains a 

proposed regulation to clarify which 

corporations are included in 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: Written or electronic comments 

and request for a public hearing must be 

received by December 28, 2009. 

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–135005–07), room 

5205, Internal Revenue Service, P.O. 

Box 7604, Ben Franklin Station, 

Washington, DC 20044. Submissions 

may be hand-delivered Monday through 

Friday between the hours of 8 a.m. and 

4 p.m. to CC:PA:LPD:PR (REG–135005– 

07), Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC, or sent 

electronically via the Federal 

eRulemaking Portal at http:// 

www.regulations.gov (IRS REG–135005– 

07). 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Grid Glyer (202) 622–7930; concerning 

submissions of comments, 

Oluwafunmilayo Taylor (202) 622–7180 

(not toll-free numbers). 

SUPPLEMENTARY INFORMATION: 

Background 

Section 1563(a) defines four types of 

controlled groups of corporations. This 

definition is relevant for purposes of 

allocating certain tax benefits under 

section 1561, as well as other provisions 

of the Internal Revenue Code that 

incorporate the concept of a controlled 

group of corporations. In order for a 

corporation to be included in one of 

these controlled groups under section 

1563(a), it must satisfy the stock 

ownership test for that type of group. In 

addition, other rules in section 1563 

may also apply in order to determine 

whether a corporation satisfies the 

applicable stock ownership test. For 

example, section 1563(c) excludes 

certain stock of a corporation (for 

example, nonvoting stock that is limited 

and preferred as to dividends) from the 

definition of stock, section 1563(d) 

determines when to take into account 

the stock owned by a corporation, and 

section 1563(e) determines when stock 

of a corporation is constructively 

owned. 

Section 1563(b) describes which 

corporations are ‘‘component members’’ 

of a section 1563(a) controlled group of 

corporations for purposes of section 

1561 and section 1563, in part by 

excluding certain corporations under 

section 1563(b)(2). For example, certain 

special purpose corporations, such as 

tax-exempt corporations, are treated as 

excluded members and not as 

component members. See sections 

1563(b)(2)(B) through 1563(b)(2)(E). 

Notwithstanding that a corporation is 

not a ‘‘component member,’’ however, 

the IRS has consistently taken the 

position that the determination of 

whether a corporation is included in a 

controlled group under section 1563(a) 

is determined without applying section 

1563(b). 

Explanation of Provisions 

The Treasury Department and the IRS 

propose to amend § 1.1563–1 to clarify 


CPrice-Sewell on DSKGBLS3C1PROD with PROPOSALS
49830 Federal Register / Vol. 74, No. 187 / Tuesday, September 29, 2009 / Proposed Rules 

that an excluded member of a controlled 

group, such as a corporation described 

in sections 1563(b)(2)(B) through 

1563(b)(2)(E), is nevertheless a member 

of the group. Specifically, the proposal 

will add paragraph (a)(1)(ii) to § 1.1563– 

1 and an Example to § 1.1563–1(b)(4). 

Section 1563 was originally 

promulgated to limit the use of the tax 

benefit items described in section 1561 

by the component members of a 

controlled group as defined in section 

1563. S. Rep. No. 88–830 at 150 (1964), 

1964–1 (Part 2) CB 502, 654. However, 

since then, certain other statutory and 

regulatory provisions have referenced 

the controlled group rules of section 

1563 for other purposes. Some of these 

provisions adjust the definition of a 

controlled group to state that certain 

provisions of section 1563 do not apply. 

For example, section 41(f)(1)(A)(i) 

provides that, in determining the 

amount of the credit for increasing 

research activities under section 41, all 

members of the same controlled group 

shall be treated as a single taxpayer. 

Section 41(f)(5)(B) provides that the 

term ‘‘controlled group of corporations’’ 

has the same meaning given to such 

term by section 1563(a), except that the 

determination shall be made without 

regard to subsections (a)(4) and (e)(3)(C) 

of section 1563. The effect of not 

applying section 1563(a)(4) is to treat 

two or more life insurance companies, 

which would otherwise be treated as 

members of a separate life insurance 

controlled group, each as a member of 

a controlled group described in section 

1563(a)(1)-(3) (Section 1563(e)(3)(B) 

deals with an application of the 

constructive ownership rules; however, 

because that application is not relevant 

to the issue being addressed in this 

preamble, it will not be further 

discussed.). However, section 41(f)(5) 

and similar provisions make no 

reference to subsection (b) of section 

1563. Section 1563(b), among other 

things, defines which corporations are 

‘‘component members’’ and ‘‘excluded 

members’’ for purposes of section 1561 

and section 1563. Nevertheless, some 

taxpayers have argued that a corporation 

that is an ‘‘excluded member’’ within 

the meaning of section 1563(b)(2) 

cannot, as a consequence, be a 

‘‘member’’ of a section 1563(a) 

controlled group generally. This line of 

argument tends to equate a corporation’s 

membership generally with such 

corporation’s status as a component 

member. 

The Treasury Department and the IRS 

disagree with such arguments and 

believe that an excluded member under 

section 1563(b)(2), while not a 

component member of a controlled 

group under section 1563(b)(1), is 

nevertheless a member of a controlled 

group under section 1563(a). See also 

§ 1.414(b)-1(a). 

This position is supported by the 

clear language of the statute. Section 

1563(b)(2) provides, in the introductory 

text, that a ‘‘corporation which is a 

member of a controlled group of 

corporations * * * shall be treated as 

an excluded member of such group 

* * *’’. Moreover, this position is also 

supported by the legislative history for 

sections 1561 and 1563, which states 

that ‘‘the determination of the 

corporations included within a parentsubsidiary controlled group, or a 

brother-sister controlled group, is made 

without regard to the type of 

corporation involved.’’ S. Rep. No. 88– 

830 at 152 (1964), 1964–1 (Part 2) CB 

505, 656; see also H.R. Rep. 88–749 at 

A201–202 (1963), 1964–1 (Part 2) CB 

248, 449–450 (providing examples 

where an ‘‘excluded member’’ is treated 

as a member of a controlled group of 

corporations). Compare section 

1504(a)(1)(A) (affiliated group 

comprised of includible corporations 

only). Therefore, this proposed 

regulation clarifies that a corporation 

identified in section 1563(b)(2) as an 

excluded member of a controlled group 

is nevertheless a member of such group 

for purposes of section 1563(a). 

Accordingly, a corporation whose stock 

is held by such an excluded member 

may be treated as a component member 

of the controlled group of corporations. 

Finally, this proposed regulation 

further illustrates that an excluded 

member of a controlled group is treated 

as a member of such group by adding an 

example demonstrating that a controlled 

group can consist solely of excluded 

members. 

Special Analyses 

It has been determined that this notice 

of proposed rulemaking 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. 

Comments and Requests for Public 

Hearing 

Before this proposed regulation is 

adopted as a final regulation, 

consideration will be given to any 

written (a signed original and eight (8) 

copies) or electronic comments that are 

submitted timely to the IRS. The IRS 

and the Treasury Department request 

comments on the clarity of the proposed 

regulation and how it can be made 

easier to understand. All comments will 

be available for public inspection and 

copying. A public hearing may be 

scheduled if requested in writing by any 

person that timely submits written or 

electronic comments. If a public hearing 

is scheduled, notice of the date, time, 

and place for the public hearing will be 

published in the Federal Register. 

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. 

Proposed Amendments to the 

Regulations 

Accordingly, 26 CFR part 1 is 

proposed to be 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 

paragraph (a)(1)(ii). 

2. Adding Example 4 to paragraph 

(b)(4). 

3. Adding a sentence at the end of 

paragraph (e). 

The additions to 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) 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 


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Federal Register / Vol. 74, No. 187 / Tuesday, September 29, 2009 / Proposed Rules 49831 

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

section applies to taxable years 

beginning on or after the date of 

publication in the Federal Register of 

the Treasury decision adopting these 

rules as final regulations. 

Linda E. Stiff, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. E9–23396 Filed 9–28–09; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[Docket No. USCG–2009–0484] 

RIN 1625–AA00 

Safety Zone; San Diego Parade of 

Lights Fireworks; San Diego, CA 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Coast Guard proposes a 

safety zone upon the navigable waters of 

San Diego Bay in San Diego, CA in 

support of the San Diego Parade of 

Lights Fireworks. This safety zone is 

necessary to provide for the safety of the 

participants, crew, spectators, 

participating vessels, and other users of 

the waterway. Persons and vessels are 

prohibited from entering into, transiting 

through, or anchoring within this safety 

zone unless authorized by the Captain 

of the Port, or his designated 

representative. 

DATES: Comments and related material 

must be received by the Coast Guard on 

or before October 29, 2009. 

ADDRESSES: You may submit comments 

identified by docket number USCG– 

2009–0484 using any one of the 

following methods: 

(1) Federal eRulemaking Portal: 

http://www.regulations.gov. 

(2) Fax: 202–493–2251. 

(3) Mail: Docket Management Facility 

(M–30), U.S. Department of 

Transportation, West Building Ground 

Floor, Room W12–140, 1200 New Jersey 

Avenue, SE., Washington, DC 20590– 

0001. 

(4) Hand delivery: Same as mail 

address above, between 9 a.m. and 5 

p.m., Monday through Friday, except 

Federal holidays. The telephone number 

is 202–366–9329. 

To avoid duplication, please use only 

one of these four methods. See the 

‘‘Public Participation and Request for 

Comments’’ portion of the 

SUPPLEMENTARY INFORMATION section 

below for instructions on submitting 

comments. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this proposed 

rule, call or e-mail Petty Officer Shane 

Jackson, USCG, Waterways 

Management, U.S. Coast Guard Sector 

San Diego at telephone 619–278–7262, 

e-mail Shane.E.Jackson@uscg.mil. If you 

have questions on viewing or submitting 

material to the docket, call Renee V. 

Wright, Program Manager, Docket 

Operations, telephone 202–366–9826. 

SUPPLEMENTARY INFORMATION: 

Public Participation and Request for 

Comments 

We encourage you to participate in 

this rulemaking by submitting 

comments and related materials. All 

comments received will be posted 

without change to http:// 

www.regulations.gov and will include 

any personal information you have 

provided. 

Submitting Comments 

If you submit a comment, please 

include the docket number for this 

rulemaking (USCG–2009–0484), 

indicate the specific section of this 

document to which each comment 

applies, and provide a reason for each 

suggestion or recommendation. You 

may submit your comments and 

material online (via http:// 

www.regulations.gov) or by fax, mail, or 

hand delivery, but please use only one 

of these means. If you submit a 

comment online via http:// 

www.regulations.gov, it will be 

considered received by the Coast Guard 

when you successfully transmit the 

comment. If you fax, hand deliver, or 

mail your comment, it will be 

considered as having been received by 

the Coast Guard when it is received at 

the Docket Management Facility. We 

recommend that you include your name 

and a mailing address, an e-mail 

address, or a telephone number in the 

body of your document so that we can 

contact you if we have questions 

regarding your submission. 

To submit your comment online, go to 

http://www.regulations.gov, click on the 

‘‘submit a comment’’ box, which will 

then become highlighted in blue. In the 

‘‘Document Type’’ drop down menu 

select ‘‘Proposed Rule’’ and insert 

‘‘USCG–2009–0484’’ in the ‘‘Keyword’’ 

box. Click ‘‘Search’’ then click on the 

balloon shape in the ‘‘Actions’’ column. 

If you submit your comments by mail or 

hand delivery, submit them in an 

unbound format, no larger than 81⁄2 by 

11 inches, suitable for copying and 

electronic filing. If you submit 

comments by mail and would like to 

know that they reached the Facility, 

please enclose a stamped, self-addressed 

postcard or envelope. We will consider 

all comments and material received 

during the comment period and may 

change the rule based on your 

comments. 

Viewing Comments and Documents 

To view comments, as well as 

documents mentioned in this preamble 

as being available in the docket, go to 

http://www.regulations.gov, click on the 

‘‘read comments’’ box, which will then 

become highlighted in blue. In the 

‘‘Keyword’’ box insert ‘‘USCG–2009– 

0484’’ and click ‘‘Search.’’ Click the 

‘‘Open Docket Folder’’ in the ‘‘Actions’’ 

column. You may also visit the Docket 

Management Facility in Room W12–140 

on the ground floor of the Department 

of Transportation West Building, 1200 

New Jersey Avenue, SE., Washington, 

DC 20590, between 9 a.m. and 5 p.m., 

Monday through Friday, except Federal 

holidays. We have an agreement with 

the Department of Transportation to use 

the Docket Management Facility. 

Privacy Act 

Anyone can search the electronic 

form of comments received into any of 

our dockets by the name of the 

individual submitting the comment (or 

signing the comment, if submitted on 

behalf of an association, business, labor 

union, etc.). You may review a Privacy 

Act notice regarding our public dockets 

in the January 17, 2008 issue of the 

Federal Register (73 FR 3316). 

Public Meeting 

We do not now plan to hold a public 

meeting. But you may submit a request 

for one using one of the four methods 

specified under ADDRESSES. Please 

explain why you believe a public 

meeting would be beneficial. If we 

determine that one would aid this 

rulemaking, we will hold one at a time 

and place announced by a later notice 

in the Federal Register. 


CPrice-Sewell on DSKGBLS3C1PROD with PROPOSALS