Document Headings

                    Document headings vary by document type but may contain                    the following:                  
                -                       the agency or agencies that issued and signed a document                    
                -                       the number of the CFR title and the number of each part                      the document amends, proposes to amend, or is directly                      related to                    
                -                       the agency docket number / agency internal file number                    
                -                       the RIN which identifies each regulatory action listed in                      the Unified Agenda of Federal Regulatory and Deregulatory                      Actions                    

                    See the                                          Document Drafting Handbook                                        for more details.                  

###### Department of the Treasury

###### Internal Revenue Service 

          - 26 CFR Part 1 
          - [REG-149405-07] 
          - RIN 1545-BH32 

# AGENCY:

Internal Revenue Service (IRS), Treasury. 

# ACTION:

Notice of proposed rulemaking by cross-reference to temporary regulations and notice of public hearing. 

# SUMMARY:

                        In the Rules and Regulations section in this issue of the                         **Federal Register**                        , the IRS is issuing temporary regulations relating to the election and calculation of the alternative simplified credit under section 41(c)(5) of the Internal Revenue Code (ASC). The regulations implement changes to the credit for increasing research activities under section 41 made by the Tax Relief and Health Care Act of 2006 and will affect certain taxpayers claiming the section 41 credit. The text of those regulations also serves as the text of these proposed regulations. This document also provides notice of a public hearing on these proposed regulations.                     

# DATES:

Written or electronic comments must be received by September 15, 2008. Outlines of topics to be discussed at the public hearing scheduled for September 25, 2008, must be received by September 4, 2008. 

# ADDRESSES:

                        Send submissions to: CC:PA:LPD:PR (REG-149405-07), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington,                               ( print page 34238)                            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-149405-07), 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-149405-07). The public hearing will be held in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC.                     

# FOR FURTHER INFORMATION CONTACT:

Concerning the proposed regulations, David Selig, (202) 622-3040; concerning submission of comments, the hearing, and/or to be placed on the building access list to attend the hearing, Regina Johnson, (202) 622-7180 (not toll-free numbers). 

# SUPPLEMENTARY INFORMATION:

## Background 

                    Temporary regulations in the Rules and Regulations section of this issue of the                     **Federal Register**                     amend the Income Tax Regulations (26 CFR Part 1) relating to section 41. The temporary regulations provide guidance concerning the election and calculation of the alternative simplified credit under section 41(c)(5). The text of those regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains these proposed regulations.                 

## 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 these regulations. It is hereby certified that these regulations will not have a significant economic impact on a substantial number of small entities. Although a substantial number of small entities may make an election under these regulations, any economic impact is minimal because an election under these regulations generally will simplify the calculation of the credit and may result in a benefit to the taxpayer. Accordingly, a regulatory flexibility analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the Internal Revenue Code, these regulations will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business. 

## Comments and Public Hearing 

Before these proposed regulations are adopted as final regulations, consideration will be given to any written comments (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. All comments will be available for public inspection and copying. The IRS and the Treasury Department invite taxpayers to submit comments on the proposed regulations and issues relating to the election and calculation of the ASC under section 41(c)(5). In particular, the IRS and the Treasury Department encourage taxpayers to submit comments on the following issues: 

Should the regulations allow a controlled group to make an election to use the ASC both for computation of the group credit and computation of every member's stand-alone entity credit, even if the ASC does not provide the greatest stand-alone entity credit? 

If so, how should that election be made and by whom? 

What relief should be made available to taxpayers that have used methodologies inconsistent with the short taxable year rules provided in these regulations on tax returns filed after the effective date of section 41(c)(5) and prior to the publication of these regulations? 

                    A public hearing has been scheduled for September 25, 2008, at 10 a.m. in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the                     **FOR FURTHER INFORMATION CONTACT**                     section of this preamble.                 

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing must submit electronic or written comments by September 15, 2008, and an outline of the topics to be discussed and the time to be devoted to each topic (a signed original and eight (8) copies) by September 4, 2008. A period of 10 minutes will be allotted to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing. 

## Drafting Information 

The principal author of these regulations is David Selig, Office of Associate Chief Counsel (Passthroughs and Special Industries). However, other personnel from the IRS and the Treasury Department participated in their 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 is amended by adding entries in numerical order to read in part as follows:                     

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

Section 1.41-8 also issued under 26 U.S.C. 41(c)(4)(B); Section 1.41-9 also issued under 26 U.S.C. 41(c)(5)(C); * * * 

**Par. 2.**                         Section 1.41-6 is amended by revising paragraphs (b)(1), (c)(2), (e) and (j) to read as follows:                     

§ 1.41-6 

* * * * *

                            (b)(1) [The text of the proposed amendment to § 1.41-6(b)(1) is the same as the text of § 1.41-6T(b)(1) published elsewhere in this issue of the                             **Federal Register**                            .]                         

* * * * *

(c) * * * 

                            (2) [The text of the proposed amendment to § 1.41-6(c)(2) is the same as the text of § 1.41-6T(c)(2) published elsewhere in this issue of the                             **Federal Register**                            ].                         

* * * * *

                            (e) [The text of the proposed amendment to § 1.41-6(e) is the same as the text of § 1.41-6T(e) published elsewhere in this issue of the                             **Federal Register**                            ].                         

* * * * *

                            (j) [The text of the proposed amendment to § 1.41-6(j) is the same as the text of § 1.41-6T(j) published elsewhere in this issue of the                             **Federal Register**                            ].                         

**Par. 3.**                             Section 1.41-8 is amended by revising paragraphs (b)(2), (b)(3), (b)(4) and (b)(5) to read as follows:                         

§ 1.41-8 

* * * * *

                            (b)(2) through (b)(5) [The text of proposed § 1.41-8(b)(2) through (b)(5) is                                   ( print page 34239)                                the same as the text of § 1.41-8T(b)(2) through (b)(5) published elsewhere in this issue of the                             **Federal Register**                            .]                         

* * * * *

**Par. 4.**                             Section 1.41-9 is added to read as follows:                         

§ 1.41-9 

                            [The text of proposed § 1.41-9 is the same as the text of § 1.41-9T (a) through (d) published elsewhere in this issue of the                             **Federal Register**                            .]                         

Steven T. Miller,

Acting Deputy Commissioner for Services and Enforcement.

[FR Doc. 08-1363 Filed 6-13-08; 11:51am] 

BILLING CODE 4830-01-P