Federal Register / Vol. 79, No. 217 / Monday, November 10, 2014 / Rules and Regulations 66615 

Rose E. Gottemoeller, 

Under Secretary, Arms Control and 

International Security, Department of State. 

[FR Doc. 2014–26631 Filed 11–7–14; 8:45 am] 

BILLING CODE 4710–25–P 

DEPARTMENT OF STATE 

22 CFR Part 126 

[Public Notice 8943] 

RIN 1400–AD73 

Amendment to the International Traffic 

in Arms Regulations: Policy on 

Exports to Vietnam 

AGENCY: Department of State. 

ACTION: Final rule. 

SUMMARY: The Department of State is 

revising the International Traffic in 

Arms Regulations (ITAR) to reflect a 

change in its policy on exports to 

Vietnam. 

DATES: This rule is effective on 

November 10, 2014. 

FOR FURTHER INFORMATION CONTACT: Mr. 

C. Edward Peartree, Director, Office of 

Defense Trade Controls Policy, 

Department of State, telephone (202) 

663–2792; email 

DDTCPublicComments@state.gov. 

ATTN: Regulatory Change, Exports to 

Vietnam. 

SUPPLEMENTARY INFORMATION: The 

Department has determined that is in 

the best interests of U.S. foreign policy, 

national security, and human rights 

concerns that exports of lethal defense 

articles and defense services to Vietnam 

may be authorized on a case-by-case 

basis when in support of maritime 

security and domain awareness. 

Regulatory Analysis and Notices 

Administrative Procedure Act 

The Department of State is of the 

opinion that controlling the import and 

export of defense articles and services is 

a foreign affairs function of the United 

States Government and that rules 

implementing this function are exempt 

from sections 553 (rulemaking) and 554 

(adjudications) of the Administrative 

Procedure Act (APA), pursuant to 5 

U.S.C. 553(a)(1). Since the Department 

is of the opinion that this rule is exempt 

from 5 U.S.C 553, it is the view of the 

Department that the provisions of 

Section 553(d) do not apply to this 

rulemaking. Therefore, this rule is 

effective upon publication. The 

Department also finds that, given the 

national security issues surrounding 

U.S. policy toward Vietnam, notice and 

public procedure on this rule would be 

impracticable, unnecessary, or contrary 

to the public interest; for this reason, the 

rule is effective upon publication. 

Regulatory Flexibility Act 

Since the Department is of the 

opinion that this rule is exempt from the 

provisions of 5 U.S.C. 553, there is no 

requirement for an analysis under the 

Regulatory Flexibility Act. 

Unfunded Mandates Reform Act of 1995 

This rulemaking does not involve a 

mandate that will result in the 

expenditure by State, local, and tribal 

governments, in the aggregate, or by the 

private sector, of $100 million or more 

in any year and it will not significantly 

or uniquely affect small governments. 

Therefore, no actions were deemed 

necessary under the provisions of the 

Unfunded Mandates Reform Act of 

1995. 

Small Business Regulatory Enforcement 

Fairness Act of 1996 

This rulemaking has been found not 

to be a major rule within the meaning 

of the Small Business Regulatory 

Enforcement Fairness Act of 1996. 

Executive Orders 12372 and 13132 

This rulemaking will not have 

substantial direct effects on the States, 

on the relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. Therefore, in 

accordance with Executive Order 13132, 

it is determined that this rulemaking 

does not have sufficient federalism 

implications to require consultations or 

warrant the preparation of a federalism 

summary impact statement. The 

regulations implementing Executive 

Order 12372 regarding 

intergovernmental consultation on 

Federal programs and activities do not 

apply to this rulemaking. 

Executive Order 12866 

The Department is of the opinion that 

controlling the import and export of 

defense articles and services is a foreign 

affairs function of the United States 

Government and that rules governing 

the conduct of this function are exempt 

from the requirements of Executive 

Order 12866. However, the Department 

has reviewed the rule to ensure its 

consistency with the regulatory 

philosophy and principles set forth in 

the Executive Order. 

Executive Order 13563 

The Department of State has 

considered this rule in light of 

Executive Order 13563, dated January 

18, 2011, and affirms that this regulation 

is consistent with the guidance therein. 

Executive Order 12988 

The Department of State has reviewed 

this rulemaking in light of sections 3(a) 

and 3(b)(2) of Executive Order 12988 to 

eliminate ambiguity, minimize 

litigation, establish clear legal 

standards, and reduce burden. 

Executive Order 13175 

The Department of State has 

determined that this rulemaking will 

not have tribal implications, will not 

impose substantial direct compliance 

costs on Indian tribal governments, and 

will not pre-empt tribal law. 

Accordingly, the provisions of 

Executive Order 13175 do not apply to 

this rulemaking. 

Paperwork Reduction Act 

This rule does not impose any new 

reporting or record-keeping 

requirements subject to the Paperwork 

Reduction Act, 44 U.S.C. Chapter 35. 

List of Subjects in 22 CFR Part 126 

Arms and munitions, Exports. 

For the reasons set forth above, 22 

CFR part 126 is amended as follows: 

PART 126—GENERAL POLICIES AND 

PROVISIONS 

■ 1. The authority citation for part 126 

continues to read as follows: 

Authority: Secs. 2, 38, 40, 42, and 71, Pub. 

L. 90–629, 90 Stat. 744 (22 U.S.C. 2752, 2778, 

2780, 2791, and 2797); 22 U.S.C. 2651a; 22 

U.S.C. 287c; E.O. 12918, 59 FR 28205; 3 CFR, 

1994 Comp., p. 899; Sec. 1225, Pub. L. 108– 

375; Sec. 7089, Pub. L. 111–117; Pub. L. 111– 

266; Sections 7045 and 7046, Pub. L. 112–74; 

E.O. 13637, 78 FR 16129. 

■ 2. Section 126.1(l) is revised to read as 

follows: 

§ 126.1 Prohibited exports, imports, and 

sales to or from certain countries. 

* * * * * 

(l) Vietnam. It is the policy of the 

United States to deny licenses or other 

approvals for exports or imports of 

defense articles and defense services 

destined for or originating in Vietnam, 

except that a license or other approval 

may be issued, on a case-by-case basis, 

for: 

(1) Lethal defense articles and defense 

services to enhance maritime security 

capabilities and domain awareness; 

(2) Non-lethal defense articles and 

defense services; or, 

(3) Non-lethal, safety-of-use defense 

articles (e.g., cartridge actuated devices, 

propellant actuated devices and 

technical manuals for military aircraft 


rmajette on DSK2TPTVN1PROD with RULES
66616 Federal Register / Vol. 79, No. 217 / Monday, November 10, 2014 / Rules and Regulations 

for purposes of enhancing the safety of 

the aircraft crew) for lethal end-items. 

Note to paragraph (l). For non-lethal 

defense end-items, no distinction will be 

made between Vietnam’s existing and new 

inventory. 

* * * * * 

Rose E. Gottemoeller, 

Under Secretary, Arms Control and 

International Security, Department of State. 

[FR Doc. 2014–26632 Filed 11–7–14; 8:45 am] 

BILLING CODE 4710–05–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9700] 

RINs 1545–BK73; 1545–BL80 

Allocation of Earnings and Profits in 

Tax-Free Transfers From One 

Corporation to Another; Acquiring 

Corporation for Purposes of Section 

381 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations. 

SUMMARY: This document contains final 

regulations under section 312 of the 

Internal Revenue Code (Code) that 

clarify the regulations under section 312 

regarding the allocation of earnings and 

profits in tax-free transfers from one 

corporation to another. These 

regulations affect corporations involved 

in these transfers and their 

shareholders. This document also 

contains final regulations under section 

381 of the Code that modify the 

definition of an acquiring corporation 

for purposes of section 381 with regard 

to certain acquisitions of assets. These 

regulations affect corporations that 

acquire the assets of other corporations 

in corporate reorganizations. 

DATES: Effective Date: These regulations 

are effective on November 10, 2014. 

Applicability Date: These regulations 

apply to transactions occurring on or 

after November 10, 2014. 

FOR FURTHER INFORMATION CONTACT: 

Stephanie D. Floyd at (202) 317–6848 or 

Isaac W. Zimbalist at (202) 317–6847 

(not toll-free numbers). 

SUPPLEMENTARY INFORMATON: 

Background 

This document contains amendments 

to 26 CFR part 1 under section 312 and 

section 381 of the Code. On April 16, 

2012, the IRS and the Treasury 

Department published a notice of 

proposed rulemaking (REG–141268–11) 

in the Federal Register (77 FR 22515) 

containing proposed regulations under 

section 312 (proposed section 312 

regulations) to clarify § 1.312–11 

regarding the allocation of earnings and 

profits in nonrecognition transfers of 

property from one corporation to 

another. The proposed section 312 

regulations provided that, in a transfer 

described in section 381(a) (section 381 

transaction), the acquiring corporation, 

as defined in § 1.381(a)–1(b)(2), would 

succeed to the earnings and profits of 

the distributor or transferor corporation. 

For example, in a reorganization under 

section 368(a)(1) by reason of section 

368(a)(2)(C), if the transferee 

corporation that directly acquires a 

transferor corporation’s assets 

transferred some, but not all, of the 

acquired assets to a controlled 

subsidiary, the transferee corporation 

(the acquiring corporation under 

§ 1.381(a)–1(b)(2)) would succeed to the 

transferor corporation’s earnings and 

profits. However, if the transferee 

corporation instead transferred all of the 

acquired assets to a controlled 

subsidiary, then the controlled 

subsidiary (the acquiring corporation 

under § 1.381(a)–1(b)(2)) would succeed 

to the transferor corporation’s earnings 

and profits. 

Comments responding to the 

proposed section 312 regulations were 

received, but no public hearing was 

requested or held. In response to the 

comments received on the proposed 

section 312 regulations, on May 7, 2014, 

the IRS and the Treasury Department 

published a notice of proposed 

rulemaking (REG–131239–13) in the 

Federal Register (79 FR 26190) 

containing proposed regulations under 

section 381 (proposed section 381 

regulations) to modify the definition of 

an acquiring corporation for purposes of 

section 381 with regard to certain 

acquisitions of assets. As discussed in 

the preamble to the proposed section 

381 regulations, commenters generally 

welcomed the apparent certainty 

provided by the proposed section 312 

regulations regarding the location of the 

transferor corporation’s earnings and 

profits. However, commenters suggested 

that this certainty was illusory because 

the existing definition of ‘‘acquiring 

corporation’’ under § 1.381(a)–1(b)(2) 

focused on whether the direct transferee 

corporation in a reorganization further 

transferred all of the assets it received 

in the section 381 transaction. Thus, 

commenters suggested that the existing 

regulations under section 381 should be 

revised to limit the degree of electivity 

regarding the identity of the acquiring 

corporation, as well as the uncertainty 

regarding whether all of the assets 

transferred in the section 381 

transaction were further transferred to a 

single controlled corporation. 

The proposed section 381 regulations 

provided greater certainty regarding the 

identity of the acquiring corporation by 

providing that, in a transaction 

described in section 381(a)(2), the term 

acquiring corporation means the 

corporation that directly acquired the 

assets transferred by the transferor 

corporation, even if the direct transferee 

corporation ultimately retained none of 

the assets so transferred. As discussed 

in the preamble to the proposed section 

381 regulations, the IRS and the 

Treasury Department believe that this 

rule is appropriate with respect to 

determining the location of the earnings 

and profits (as well as other tax 

attributes) of a transferor corporation 

because it generally maintains such 

earnings and profits at the corporation 

closest to the transferor corporation’s 

former shareholders in a manner that 

minimizes electivity and administrative 

burden. No comments were received in 

response to the proposed section 381 

regulations, and no public hearing was 

requested or held. 

Explanation of Provisions 

The proposed section 381 regulations 

are adopted without substantive change 

by this Treasury decision. Because the 

proposed section 312 regulations merely 

cross-reference the section 381 

regulations, this Treasury decision also 

adopts the proposed section 312 

regulations without substantive change. 

However, these final regulations make 

a clarifying, non-substantive change to 

the proposed section 312 regulations. 

The proposed section 312 regulations 

provided that ‘‘[e]xcept as provided in 

§ 1.312–10, in all other cases in which 

property is transferred from one 

corporation to another and no gain or 

loss is recognized (or is recognized only 

to the extent of the property received 

other than that permitted to be received 

without the recognition of gain), no 

allocation of the earnings and profits of 

the transferor is made to the transferee.’’ 

These final regulations remove the 

language ‘‘and no gain or loss is 

recognized (or is recognized only to the 

extent of the property received other 

than that permitted to be received 

without the recognition of gain).’’ The 

IRS and the Treasury Department 

believe this language may 

inappropriately imply that allocation of 

earnings and profits may be permitted 

in cases in which gain not expressly 

described is recognized on the transfer 


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