Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Rules and Regulations 31805

serve to put the process on notice

regarding existing requirements and

prepare it for future regulatory

requirements. If a minimal effort is in

place, FHWA and FTA should

encourage the planning process

participants to become familiar with the

provisions of the Executive Order on

Environmental Justice and identify

needed improvements based on the

Order.

(3) If no formal evaluation of the

public involvement process has been

conducted per the requirement for

periodic assessment (see 23 CFR

450.316(b)), a corrective action to

conduct an evaluation should be

included in the certification report. The

formal evaluation should, at a

minimum, assess the effectiveness of

efforts to engage minority and lowincome populations through the local

public involvement process. If the MPO

or State has conducted a public

involvement evaluation, FHWA and

FTA should determine whether the

involvement of minorities and lowincome individuals has been addressed

and what strengths and deficiencies

were identified. Recommended

improvements or corrective actions for

the certification report or STIP findings

can be tied to the results of the MPO’s

or State’s public involvement

evaluation.

[FR Doc. 00–12590 Filed 5–18–00; 8:45 am]

BILLING CODE 4910–22–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 8885]

RIN 1545–AW55

The Solely for Voting Stock

Requirement in Certain Corporate

Reorganizations

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Final regulation.

SUMMARY: This document contains final

regulations relating to the solely for

voting stock requirement in certain

corporate reorganizations under section

368(a)(1)(C). The final regulations

provide that a prior acquisition of a

target corporation’s stock by an

acquiring corporation generally will not

prevent the solely for voting stock

requirement in a ‘‘C’’ reorganization of

the target corporation and the acquiring

corporation from being satisfied. They

affect persons engaging in certain

transactions occurring after December

31, 1999.

DATES: Effective Date: These regulations

are effective May 19, 2000.

Applicability Date: These regulations

apply to transactions occurring after

December 31, 1999, unless the

transaction occurs pursuant to a written

agreement that is (subject to customary

conditions) binding on that date and at

all times thereafter.

FOR FURTHER INFORMATION CONTACT:

Marnie Rapaport, (202) 622–7550 (not a

toll-free number).

SUPPLEMENTARY INFORMATION:

Background

On June 14, 1999, the IRS and

Treasury issued a notice of proposed

rulemaking in the Federal Register (64

FR 31770) setting forth rules relating to

the solely for voting stock requirement

in reorganizations under section

368(a)(1)(C). The proposed regulations

provided that prior ownership of stock

of a target corporation by an acquiring

corporation will not by itself prevent the

solely for voting stock requirement of a

‘‘C’’ reorganization from being satisfied.

The regulations propose to reverse the

IRS’s previous position that the

acquisition of assets of a partially

controlled subsidiary does not qualify as

a tax-free ‘‘C’’ reorganization. See Rev.

Rul. 54–396 (1954–2 C.B. 147). This

position subsequently was sustained in

litigation in Bausch & Lomb Optical Co.

v. Commissioner, 267 F.2d 75 (2d Cir.),

cert. denied, 361 U.S. 835 (1959) (the

Bausch & Lomb doctrine). A public

hearing regarding these proposed

regulations was held on October 5,

1999. Written comments to the notice

were received. After consideration of all

the comments, the proposed regulations

are adopted as revised by this Treasury

decision.

Explanation of Revisions and Summary

of Comments

The Applicability Date

The proposed regulations apply to

transactions occurring after the date that

a Treasury decision adopting the

regulations is published in the Federal

Register, except that they do not apply

to any transactions occurring pursuant

to a written agreement which is (subject

to customary conditions) binding on the

date that the regulations are published

as final regulations in the Federal

Register, and at all times thereafter.

A commentator requested that

taxpayers be allowed to apply the

proposed regulations to transactions

occurring before the proposed

regulations are published as final

regulations.

The IRS and Treasury Department

determined that the increased flexibility

that results from the proposed

regulations should be available to

taxpayers in structuring transactions

before their publication as final

regulations. Accordingly, the IRS and

the Treasury Department issued Notice

2000–1 (2000–2 I.R.B. 288), which

changes the proposed effective date of

the proposed regulations to apply to any

transactions occurring after December

31, 1999, unless the transaction occurs

pursuant to a written agreement binding

on that date. Notice 2000–1 further

provides that the proposed regulations,

when finalized, will adopt this effective

date rule and that taxpayers may rely on

Notice 2000–1 until final regulations are

issued. Accordingly, the final

regulations adopt this effective date

rule.

Finally, Notice 2000–1 provides that

taxpayers may request a private letter

ruling permitting them to apply the final

regulations to transactions occurring on

or after June 11, 1999 (the date the

proposed regulations were filed with the

Federal Register) to which the final

regulations would not otherwise apply,

and for which there was not a written

agreement (subject to customary

conditions) binding on June 11, 1999

and at all times thereafter. The Notice

cautions, however, that a private letter

ruling will not be issued unless the

taxpayer establishes to the satisfaction

of the IRS that there is not a significant

risk of different parties to the

transaction taking inconsistent

positions, for U.S. tax purposes, with

respect to the applicability of the final

regulations to the transaction. Any such

requests for a ruling will continue to be

considered.

Extension of the Repeal of the Bausch

& Lomb Doctrine to ‘‘B’’ Reorganizations

A comment was received requesting

that the IRS reconsider its position in

Rev. Rul. 69–294 (1969–1 C.B. 110),

where the Bausch & Lomb doctrine was

applied to disqualify a purported

section 368(a)(1)(B) reorganization that

followed a tax-free section 332

liquidation. In Rev. Rul. 69–294, X

owned all of the stock of Y and Y owned

80 percent of the stock of Z. Y

completely liquidated into X in a

section 332 liquidation. As part of the

plan, X (now owning 80 percent of the

stock of Z) acquired the minority 20

percent stock interest in Z in exchange

for X voting stock in a purported ‘‘B’’

reorganization. The ruling holds that the

exchange with the 20 percent minority

shareholders was not a ‘‘B’’

reorganization. The rationale is that

although the acquisition from the

31806 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Rules and Regulations

minority shareholders was ‘‘solely for

voting stock,’’ the liquidation of Y, as

part of the same plan, resulted in X

acquiring 80 percent of the Z stock in

exchange for Y stock surrendered back

to Y on the liquidation of Y and not

solely in exchange for X voting stock.

The commentator’s suggestion is

beyond the scope of this regulations

project, which relates to ‘‘C’’

reorganizations. In light of these

regulations, however, the IRS and

Treasury Department may reconsider

Rev. Rul. 69–294.

Effect on Other Documents

The following publication is obsolete

as of January 1, 2000: Rev. Rul. 54–396

(1954–2 C.B. 147).

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 and, because these

regulations do not impose a collection

of information on small entities, the

Regulatory Flexibility Act (5 U.S.C.

chapter 6) does not apply. Therefore, a

Regulatory Flexibility Analysis is not

required. Pursuant to section 7805(f) of

the Internal Revenue Code, these

regulations were 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 Marnie

Rapaport of the Office of the Assistant

Chief Counsel (Corporate), IRS.

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

Paragraph 1. The authority citation

for part 1 continues to read in part as

follows:

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

Par. 2. Section 1.368–2 is amended by

adding paragraph (d)(4) to read as

follows:

§ 1.368–2 Definition of terms.

* * * * *

(d) * * *

(4)(i) For purposes of paragraphs

(d)(1) and (2)(ii) of this section, prior

ownership of stock of the target

corporation by an acquiring corporation

will not by itself prevent the solely for

voting stock requirement of such

paragraphs from being satisfied. In a

transaction in which the acquiring

corporation has prior ownership of

stock of the target corporation, the

requirement of paragraph (d)(2)(ii) of

this section is satisfied only if the sum

of the money or other property that is

distributed in pursuance of the plan of

reorganization to the shareholders of the

target corporation other than the

acquiring corporation and to the

creditors of the target corporation

pursuant to section 361(b)(3), and all of

the liabilities of the target corporation

assumed by the acquiring corporation

(including liabilities to which the

properties of the target corporation are

subject), does not exceed 20 percent of

the value of all of the properties of the

target corporation. If, in connection with

a potential acquisition by an acquiring

corporation of substantially all of a

target corporation’s properties, the

acquiring corporation acquires the target

corporation’s stock for consideration

other than the acquiring corporation’s

own voting stock (or voting stock of a

corporation in control of the acquiring

corporation if such stock is used in the

acquisition of the target corporation’s

properties), whether from a shareholder

of the target corporation or the target

corporation itself, such consideration is

treated, for purposes of paragraphs

(d)(1) and (2) of this section, as money

or other property exchanged by the

acquiring corporation for the target

corporation’s properties. Accordingly,

the transaction will not qualify under

section 368(a)(1)(C) unless, treating such

consideration as money or other

property, the requirements of section

368(a)(2)(B) and paragraph (d)(2)(ii) of

this section are met. The determination

of whether there has been an acquisition

in connection with a potential

reorganization under section

368(a)(1)(C) of a target corporation’s

stock for consideration other than an

acquiring corporation’s own voting

stock (or voting stock of a corporation in

control of the acquiring corporation if

such stock is used in the acquisition of

the target corporation’s properties) will

be made on the basis of all of the facts

and circumstances.

(ii) The following examples illustrate

the principles of this paragraph (d)(4):

Example 1. Corporation P (P) holds 60

percent of the Corporation T (T) stock that P

purchased several years ago in an unrelated

transaction. T has 100 shares of stock

outstanding. The other 40 percent of the T

stock is owned by Corporation X (X), an

unrelated corporation. T has properties with

a fair market value of $110 and liabilities of

$10. T transfers all of its properties to P. In

exchange, P assumes the $10 of liabilities,

and transfers to T $30 of P voting stock and

$10 of cash. T distributes the P voting stock

and $10 of cash to X and liquidates. The

transaction satisfies the solely for voting

stock requirement of paragraph (d)(2)(ii) of

this section because the sum of $10 of cash

paid to X and the assumption by P of $10 of

liabilities does not exceed 20% of the value

of the properties of T.

Example 2. The facts are the same as in

Example 1 except that P purchased the 60

shares of T for $60 in cash in connection

with the acquisition of T’s assets. The

transaction does not satisfy the solely for

voting stock requirement of paragraph

(d)(2)(ii) of this section because P is treated

as having acquired all of the T assets for

consideration consisting of $70 of cash, $10

of liability assumption and $30 of P voting

stock, and the sum of $70 of cash and the

assumption by P of $10 of liabilities exceeds

20% of the value of the properties of T.

(iii) This paragraph (d)(4) applies to

transactions occurring after December

31, 1999, unless the transaction occurs

pursuant to a written agreement that is

(subject to customary conditions)

binding on that date and at all times

thereafter.

* * * * *

David A. Mader,

Acting Deputy Commissioner of Internal

Revenue.

Approved: May 9, 2000.

Jonathan Talisman,

Deputy Assistant Secretary of the Treasury.

[FR Doc. 00–12406 Filed 5–18–00; 8:45 am]

BILLING CODE 4830–01–P

DEPARTMENT OF TRANSPORTATION

Coast Guard

33 CFR Part 155

46 CFR Part 32

[USCG 1998–4443]

RIN 2115–AF65

Emergency Control Measures for Tank

Barges

AGENCY: Coast Guard, DOT.

ACTION: Final rule.

SUMMARY: This final rule implements

measures for maintaining or regaining

control of a tank barge that will reduce

the likelihood of a tank barge’s