Federal Register / Vol. 77, No. 16 / Wednesday, January 25, 2012 / Rules and Regulations 3605 

Lender Insurance program approval. 

The decision will be communicated to 

the mortgagee in writing, will be 

deemed a final agency action, and, 

pursuant to section 256(d) of the 

National Housing Act (12 U.S.C. 1715z– 

21(d)), is not subject to judicial review. 

(3) Lender Insurance authority is 

automatically terminated for a 

mortgagee whose nationwide Direct 

Endorsement approval under 

§ 203.3(d)(2) is terminated, without 

imposing any further requirement on 

the mortgagee to comply with this 

paragraph. 

(4) Any termination instituted under 

this section is distinct from withdrawal 

of mortgagee approval by the Mortgagee 

Review Board under 24 CFR part 25. 

(e) Reinstatement. A mortgagee whose 

Lender Insurance authority is 

terminated under this section may apply 

for reinstatement if the Lender 

Insurance authority for the mortgagee 

has been terminated for at least 6 

months. In addition to addressing the 

criteria for Lender Insurance approval 

specified in paragraphs (a) and (b) of 

this section, the application for 

reinstatement must be accompanied by 

a corrective action plan addressing the 

issues resulting in the termination of the 

mortgagee’s Lender Insurance authority, 

along with evidence that the mortgagee 

has implemented the corrective action 

plan. HUD may grant the mortgagee’s 

application for reinstatement if the 

mortgagee’s application is complete and 

HUD determines that the underlying 

causes for the termination have been 

satisfactorily remedied. 

■ 3. In § 203.255, revise paragraph (f)(1), 

remove paragraph (f)(4), and add 

paragraph (g) to read as follows: 

§ 203.255 Insurance of mortgage. 

* * * * * 

(f) Lender Insurance. (1) Preinsurance review. For applications for 

insurance involving mortgages 

originated under the Lender Insurance 

program under § 203.6, the mortgagee is 

responsible for performing a preinsurance review that would otherwise 

be performed by HUD under 

§ 203.255(c) on the documents that 

would otherwise be submitted to HUD 

under § 203.255(b). The mortgagee’s 

staff that performs the pre-insurance 

review must not be the same staff that 

originated the mortgage or underwrote 

the mortgage for insurance. 

* * * * * 

(g) Indemnification. (1) General. By 

insuring the mortgage, a Lender 

Insurance mortgagee agrees to 

indemnify HUD, in accordance with this 

paragraph. 

(2) Definition of origination. For 

purposes of indemnification under this 

paragraph, the term ‘‘origination’’ means 

the process of creating a mortgage, 

starting with the taking of the initial 

application, continuing with the 

processing and underwriting, and 

ending with the mortgagee endorsing 

the mortgage note for FHA insurance. 

(3) Serious and material violation. 

The mortgagee shall indemnify HUD for 

an FHA insurance claim paid within 5 

years of mortgage insurance 

endorsement, if the mortgagee knew or 

should have known of a serious and 

material violation of FHA origination 

requirements, such that the mortgage 

loan should not have been approved 

and endorsed by the mortgagee and 

irrespective of whether the violation 

caused the mortgage default. Such a 

serious and material violation of FHA 

requirements in the origination of the 

mortgage may occur if the mortgagee 

failed to, among other actions: 

(i) Verify the creditworthiness, 

income, and/or employment of the 

mortgagor in accordance with FHA 

requirements; 

(ii) Verify the assets brought by the 

mortgagor for payment of the required 

down payment and/or closing costs in 

accordance with FHA requirements; or 

(iii) Address property deficiencies 

identified in the appraisal affecting the 

health and safety of the occupants or the 

structural integrity of the property in 

accordance with FHA requirements, or 

(iv) Ensure that the appraisal of the 

property serving as security for the 

mortgage loan satisfies FHA appraisal 

requirements, in accordance with 

§ 203.5(e). 

(4) Fraud or misrepresentation. The 

mortgagee shall indemnify HUD for an 

insurance claim if the mortgagee knew 

or should have known that fraud or 

misrepresentation was involved in 

connection with the origination of the 

mortgage, regardless of whether the 

fraud or misrepresentation caused the 

mortgage default and regardless of when 

an insurance claim is filed. 

(5) Demand for indemnification. The 

demand for indemnification will be 

made by either the Secretary or the 

Mortgagee Review Board. Under 

indemnification, the Lender Insurance 

mortgagee agrees to either abstain from 

filing an insurance claim, or reimburse 

FHA if a subsequent holder of the 

mortgage files an insurance claim and 

FHA suffers a financial loss. 

Dated: January 18, 2012. 

Carole J. Galante, 

Acting Assistant Secretary for Housing, 

Federal Housing Commissioner. 

[FR Doc. 2012–1508 Filed 1–24–12; 8:45 am] 

BILLING CODE 4210–67–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9568] 

RIN 1545–BI47 

Section 482; Methods To Determine 

Taxable Income in Connection With a 

Cost Sharing Arrangement; Correction 

AGENCY: Internal Revenue Service (IRS). 

ACTION: Final rule; correction. 

SUMMARY: This document contains 

corrections to final regulations (TD 

9568), which were published in the 

Federal Register on Thursday, 

December 22, 2011 (76 FR 80082), 

Relating to section 482 and methods to 

determine taxable income in connection 

with a cost sharing arrangement. 

DATES: Effective January 25, 2012, and 

applicable beginning December 22, 

2011. 

FOR FURTHER INFORMATION CONTACT: 

Joseph L. Tobin at (202) 435–5265 (not 

a toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

The final regulations that are the 

subject of these corrections are under 

section 482 of the Internal Revenue 

Code. 

Need for Correction 

As published, final regulations (TD 

9568), contains errors which may prove 

to be misleading and are in need of 

clarification. 

Correction of Publication 

Accordingly, the publication of the 

final regulations, (TD 9568), which were 

the subject of FR Doc. 2011–32458, is 

corrected as follows: 

1. On page 80082, column one, in the 

preamble, under the caption DATES, 

lines 4 and 5, the language ‘‘1.482–8(c), 

1.482–9(n), and 1.301–7701–1(f)’’ is 

corrected to read as ‘‘1.482–8(c), 1.482– 

9(n), and 301.7701–1(f).’’ 

2. On page 80082, column one, in the 

preamble, under the caption, Paperwork 

Reduction Act, line one, the language 

‘‘The collection of information’’ is 

corrected to read ‘‘The collections of 

information’’. 


sroberts on DSK4TPTVN1PROD with RULES
3606 Federal Register / Vol. 77, No. 16 / Wednesday, January 25, 2012 / Rules and Regulations 

3. On page 80086, column three, in 

the preamble, paragraph d. introductory 

text, the language ‘‘Contractual CWI 

Provisions—§ 1.482–1(d)(3)(ii)(C), 

Examples 3 through 7’’ is corrected to 

read ‘‘Contractual CWI Provisions— 

§ 1.482–7(h)(2)(iii)(C), Examples 3 

through 7.’’. 

Guy R. Traynor, 

Federal Register Liaison, Legal Processing 

Division, Publication and Regulations 

Branch, Procedure and Administration. 

[FR Doc. 2012–894 Filed 1–24–12; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9568] 

RIN 1545–BI47 

Section 482; Methods To Determine 

Taxable Income in Connection With a 

Cost Sharing Arrangement; Correction 

AGENCY: Internal Revenue Service (IRS). 

ACTION: Correcting amendment. 

SUMMARY: This document contains 

corrections to final regulations (TD 

9568), which were published in the 

Federal Register on Thursday, 

December 22, 2011 (76 FR 80082), 

Relating to section 482 and methods to 

determine taxable income in connection 

with a cost sharing arrangement. 

DATES: Effective January 25, 2012, and 

applicable beginning December 22, 

2011. 

FOR FURTHER INFORMATION CONTACT: 

Joseph L. Tobin at (202) 435–5265 (not 

a toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

The final regulations that are the 

subject of these corrections are under 

section 482 of the Internal Revenue 

Code. 

Need for Correction 

As published, final regulations (TD 

9568), contains errors which may prove 

to be misleading and are in need of 

clarification. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

Accordingly, 26 CFR Parts 1 and 301 

are corrected by making the following 

correcting amendments: 

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 * * * 

PART 1—[CORRECTED] 

■ Par. 2. Section 1.482–1 is amended by 

revising the first and second sentences 

of paragraph (b)(2)(i) to read as follows: 

§ 1.482–1 Allocation of income and 

deductions among taxpayers. 

* * * * * 

(b) * * * 

(2) * * * 

(i) Methods. Sections 1.482–2 through 

1.482–7 and 1.482–9 provide specific 

methods to be used to evaluate whether 

transactions between or among members 

of the controlled group satisfy the arm’s 

length standard, and if they do not, to 

determine the arm’s length result. This 

section provides general principles 

applicable in determining arm’s length 

results of such controlled transactions, 

but do not provide methods, for which 

reference must be made to those other 

sections in accordance with paragraphs 

(b)(2)(ii) and (iii) of this section. * * * 

* * * * * 

Par. 3. Section 1.482–7 is amended 

by: 

■ 1. Revising the fourth sentence of 

paragraph (c)(3). 

■ 2. Revising the fifth sentence of 

paragraph (g)(2)(v)(C), Example, 

paragraph (i). 

■ 3. Revising the first sentence of 

paragraph (g)(2)(v)(C), Example, 

paragraph (ii). 

■ 4. Revising paragraph (k)(2)(ii)(3). 

The revisions read as follows: 

§ 1.482–7 Methods to determine taxable 

income in connection with a cost sharing 

arrangement. 

* * * * * 

(c) * * * 

(3) * * * If the conduct is consistent 

with different, economically equivalent 

types of transactions then the controlled 

participants may designate the PCT as 

being any of such types of transactions. 

* * * 

* * * * * 

(g) * * * 

(2) * * * 

(v) * * * 

(C) * * * 

Example. (i) * * * Specifically, the 

Commissioner compares P’s anticipated posttax discounted present value of the financial 

projections under the CSA (taking into 

account S’s PCT payment of 5% of its sale 

of product Y) with P’s anticipated post-tax 

discounted present value of the financial 

projections under a reasonably available 

licensing alternative that consists of 

developing intangible X on its own and then 

licensing X to S or to an uncontrolled party 

similar to S. 

* * * * * 

(ii) The Commissioner determines 

that, as between the two scenarios, all 

of the components of P’s anticipated 

financial flows are identical, except for 

the CST and PCT Payments under the 

CSA, compared to the licensing 

payments under the licensing 

alternative. * * * 

* * * * * 

(3) * * * 

(viii) * * * 

Example 3. * * * FS determines that the 

discount rate that would be applied to 

determine the present value of income and 

costs attributable to its participation in the 

licensing alternative would be 12.5% as 

compared to the 15% discount rate that 

would be applicable in determining the 

present value of the net income attributable 

to its participation in the CSA (reflecting the 

increased risk borne by FS in bearing a share 

of the R & D costs in the cost sharing 

alternative). * * * 

* * * * * 

(k) * * * 

(2) * * * 

(ii) * * * 

(3) Any further development of 

intangibles already developed under the 

CSA or of specified applications of such 

intangible which has been removed 

from the IDA (see paragraphs (d)(1)(ii) 

and (j)(1)(i) of this section for the 

definitions of reasonably anticipated 

cost shared intangible and cost shared 

intangible) and the steps (including any 

accounting classifications and 

allocations) taken to implement such 

removal; 

* * * * * 

Guy R. Traynor, 

Federal Register Liaison, Legal Processing 

Division, Publication & Regulation Branch 

(Procedure and Administration). 

[FR Doc. 2012–895 Filed 1–24–12; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE INTERIOR 

Office of Natural Resources Revenue 

30 CFR Part 1206 

Product Valuation 

CFR Correction 

■ In Title 30 of the Code of Federal 

Regulations, Part 700 to End, revised as 

of July 1, 2011, ‘‘ONNR’’ is corrected to 

read ‘‘ONRR’’, as set forth in the 

following table: 


sroberts on DSK4TPTVN1PROD with RULES