Federal Register / Vol. 73, No. 117 / Tuesday, June 17, 2008 / Rules and Regulations 34185 

supplement provides for revision of an 

effectiveness claim and pathogen 

nomenclature. The supplemental NADA 

is approved as of May 8, 2008, and the 

regulations in 21 CFR 558.630 are 

amended to reflect the approval. 

Approval of this supplemental NADA 

did not require review of additional 

safety or effectiveness data or 

information. Therefore, a freedom of 

information summary is not required. 

FDA has determined under 21 CFR 

25.33(a)(1) that this action is of a type 

that does not individually or 

cumulatively have a significant effect on 

the human environment. Therefore, 

neither an environmental assessment 

nor an environmental impact statement 

is required. 

This rule does not meet the definition 

of ‘‘rule’’ in 5 U.S.C. 804(3)(A) because 

it is a rule of ‘‘particular applicability.’’

Therefore, it is not subject to the 

congressional review requirements in 5 

U.S.C. 801–808. 

List of Subjects in 21 CFR Part 558 

Animal drugs, Animal feeds. 

■ Therefore, under the Federal Food, 

Drug, and Cosmetic Act and under 

authority delegated to the Commissioner 

of Food and Drugs and redelegated to 

the Center for Veterinary Medicine, 21 

CFR part 558 is amended as follows: 

PART 558—NEW ANIMAL DRUGS FOR 

USE IN ANIMAL FEEDS 

■ 1. The authority citation for 21 CFR 

part 558 continues to read as follows: 

Authority: 21 U.S.C. 360b, 371. 

■ 2. Revise § 558.630 to read as follows: 

§ 558.630 Tylosin and sulfamethazine. 

(a) Specifications. Type A medicated 

articles containing equal amounts of 

tylosin phosphate and sulfamethazine, 

available in concentrations of 4, 5, 10, 

20, or 40 grams each, per pound. 

(b) Approvals. See sponsor numbers 

in § 510.600(c) of this chapter for use as 

in paragraph (e) of this section. 

(1) No. 000986: 10 or 40 grams per 

pound each for use as in paragraph 

(e)(2)(i) of this section. 

(2) No. 021930: 2 grams per pound 

each for use as in paragraph (e)(2)(i) of 

this section. 

(3) No. 051311: 40 grams per pound 

each for use as in paragraph (e)(2)(ii) of 

this section. 

(4) No. 017139: 4, 10, or 20 grams per 

pound each for use as in paragraph 

(e)(2)(ii) of this section. 

(5) Nos. 000986, 010439, 016968, 

021930, 024174, 030841, 034936, 

035098, 046573, 046987, and 051359: 5, 

10, 20, or 40 grams per pound each for 

use as in paragraph (e)(2)(ii) of this 

section. 

(6) No. 000986: 40 grams per pound 

each for use as in paragraph (e)(2)(iii) of 

this section. 

(c) Special considerations. Labeling 

shall bear the statement: ‘‘Do not use in 

medicated feeds containing in excess of 

2% bentonite.’’

(d) Related tolerances. See §§ 556.670 

and 556.740 of this chapter. 

(e) Conditions of use. It is used in feed 

for swine as follows: 

(1) Amount per ton. 100 grams tylosin 

and 100 grams sulfamethazine. 

(2) Indications for use–(i) Maintaining 

weight gains and feed efficiency in the 

presence of atrophic rhinitis; lowering 

the incidence and severity of Bordetella 

bronchiseptica rhinitis; prevention of 

swine dysentery (vibrionic); control of 

swine pneumonias caused by bacterial 

pathogens (Pasteurella multocida and/ 

or Corynebacterium pyogenes); for 

reducing the incidence of cervical 

lymphadenitis (jowl abscesses) caused 

by Group E Streptococci. Only the 

sulfamethazine portion of this 

combination is active in controlling jowl 

abscesses. 

(ii) Maintaining weight gains and feed 

efficiency in the presence of atrophic 

rhinitis; lowering the incidence and 

severity of Bordetella bronchiseptica 

rhinitis; prevention of swine dysentery 

(vibrionic); control of swine 

pneumonias caused by bacterial 

pathogens (Pasteurella multocida and/ 

or Corynebacterium pyogenes). 

(iii) For maintaining weight gains and 

feed efficiency in the presence of 

atrophic rhinitis; lowering the incidence 

and severity of Bordetella 

bronchiseptica rhinitis; prevention of 

swine dysentery associated with 

Brachyspira hyodysenteriae; and control 

of swine pneumonias caused by 

bacterial pathogens (Pasteurella 

multocida and/or Arcanobacterium 

pyogenes). 

(3) Limitations. Withdraw 15 days 

before swine are slaughtered. 

Dated: June 9, 2008. 

Bernadette Dunham, 

Director, Center for Veterinary Medicine. 

[FR Doc. E8–13606 Filed 6–16–08; 8:45 am] 

BILLING CODE 4160–01–S 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9401] 

RIN 1545–BH33 

Alternative Simplified Credit Under 

Section 41(c)(5) 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final and temporary 

regulations. 

SUMMARY: This document contains final 

and temporary regulations relating to 

the election and calculation of the 

alternative simplified credit under 

section 41(c)(5) of the Internal Revenue 

Code. The final and temporary 

regulations implement changes to the 

credit for increasing research activities 

under section 41 made by the Tax Relief 

and Health Care Act of 2006. The final 

and temporary regulations will affect 

certain taxpayers claiming credit under 

section 41. The text of these temporary 

regulations also serves as the text of the 

proposed regulations (REG–149405–07) 

published in the Proposed Rules section 

in this issue of the Federal Register. 

DATES: Effective Date: These regulations 

are effective on June 17, 2008. 

Applicability Date: For dates of 

applicability, see §§ 1.41–6T(j), 1.41–

8T(b)(5), and 1.41–9T(d). 

FOR FURTHER INFORMATION CONTACT: 

David A. Selig (202) 622–3040 (not a 

toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

This document amends 26 CFR part 1 

to provide rules relating to the 

alternative simplified credit (ASC), 

which may be elected under section 

41(c)(5) of the Internal Revenue Code 

(Code). 

General Overview 

Section 41(a) provides an incremental 

tax credit for increasing research 

activities (research credit), and is based 

on a percentage of a taxpayer’s qualified 

research expenses (QREs) above a base 

amount. The Tax Relief and Health Care 

Act of 2006 (Pub. L. 109–432, 120 Stat. 

2922, December 20, 2006) (the Act) 

made certain changes to the research 

credit, including the addition of another 

method of computation that taxpayers 

may elect to use in computing the 

amount of the research credit. The 

relevant Act provisions are effective 

generally for tax years after December 

31, 2006, but provide certain 


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transitional rules for fiscal year 

taxpayers. 

Prior to the Act changes, there were 

two ways a taxpayer could determine 

the research credit under section 41(a). 

One way, commonly referred to as the 

regular credit, is determined by 

following the rules and percentages 

stated under section 41(a)(1). Under the 

regular credit, the base amount is 

generally determined with reference to 

the gross receipts of the taxpayer for the 

four prior taxable years preceding the 

taxable year in which credit is being 

determined (credit year) and the QREs 

and gross receipts over the five-year 

base period from 1984–1988. The base 

amount cannot be less than 50 percent 

of the taxpayer’s QREs for the credit 

year. Special rules are provided for 

certain start-up companies. 

The second way a taxpayer could 

compute the research credit prior to the 

Act was to elect, in lieu of the regular 

credit, the alternative incremental credit 

(AIRC) under section 41(c)(4). Under the 

AIRC, the base amount is determined 

with reference to the gross receipts of 

the taxpayer for the four prior taxable 

years. 

The Act added a third way, the ASC, 

under section 41(c)(5), which a taxpayer 

may elect to compute the research 

credit. Section 41(c)(5)(A) provides the 

general rule that, at the election of the 

taxpayer, the credit determined under 

section 41(a)(1) shall be equal to 12 

percent of so much of the QREs for the 

taxable year as exceeds 50 percent of the 

average QREs for the three taxable years 

preceding the taxable year for which the 

credit is being determined. Section 

41(c)(5)(B) provides a special rule that 

the credit shall be equal to 6 percent of 

the QREs for the taxable year if the 

taxpayer does not have QREs in each of 

the three taxable years preceding the 

year for which credit is being 

determined. 

Section 41(c)(5)(C) provides that an 

ASC election under section 41(c)(5) 

shall apply to the taxable year for which 

made and all succeeding taxable years 

unless revoked with the consent of the 

Secretary. It further provides that an 

ASC election under section 41(c)(5) may 

not be made for any taxable year to 

which an AIRC election under section 

41(c)(4) applies. 

Explanation of Provisions 

The primary objective of these 

temporary regulations is to provide 

guidance on the ASC under section 

41(c)(5). The temporary regulations 

provide rules for the ASC similar to 

some of the rules relating to the AIRC 

as contained in § 1.41–8 of the current 

regulations. However, because there are 

also differences, such as the formula 

calculation for the ASC, the ASC rules 

are provided in a new § 1.41–9T. These 

final and temporary regulations also 

make conforming and clarifying changes 

to §§ 1.41–1, 1.41–6, and 1.41–8. 

Section 1.41–9T provides that, at the 

election of the taxpayer, the credit 

determined under section 41(a)(1) 

equals the amount determined under 

the ASC under section 41(c)(5). 

Generally, a taxpayer may elect the ASC 

for any taxable year of the taxpayer 

ending after December 31, 2006. 

However, for certain transitional rules, 

see Division A, section 104(b)(3), (c)(2), 

and (c)(4) of the Act. Because the 

transitional rules are of limited duration 

and have already been described and 

implemented in the 2006 version of 

Form 6765, ‘‘Credit for Increasing 

Research Activities,’’ these regulations 

do not address the transitional rules. 

The temporary regulations generally 

provide the same rules related to 

elections and revocations as those 

provided for the AIRC in § 1.41–8 in the 

current regulations. If a taxpayer makes 

an ASC election under section 41(c)(5), 

the election applies to the taxable year 

for which made and all subsequent 

taxable years unless revoked. An ASC 

election under section 41(c)(5) is made 

by completing the portion of Form 6765, 

‘‘Credit for Increasing Research 

Activities,’’ (or successor form) relating 

to the election of the ASC, and attaching 

the completed form to the taxpayer’s 

timely filed (including extensions) 

original return for the taxable year to 

which the election applies. The election 

may not be revoked except with the 

consent of the Commissioner. A 

taxpayer is deemed to have requested, 

and to have been granted, the consent of 

the Commissioner to revoke the election 

if the taxpayer completes the portion of 

Form 6765 (or successor form) relating 

to the credit determined under section 

41(a)(1) or the AIRC and attaches the 

completed form to the taxpayer’s timely 

filed (including extensions) original 

return for the year to which the 

revocation applies. As is the case with 

a revocation of an AIRC election under 

§ 1.41–8, an election under section 

41(c)(5) may not be made or revoked on 

an amended return. Accordingly, for 

purposes of further clarification, the 

temporary regulations also provide that 

an extension of time to make or revoke 

an election under section 41(c)(5) (and 

similarly, under section 41(c)(4)) will 

not be granted under § 301.9100–3. 

In the case of a controlled group of 

corporations, all the members of which 

are not included on a single 

consolidated return, an election or 

revocation must be made by the 

designated member by satisfying the 

requirements described above. The 

election or revocation by the designated 

member is binding on all the members 

of the group for the credit year to which 

the election or revocation relates. If the 

designated member fails to timely make 

or revoke an election, each member of 

the group must compute the group 

credit using the method used to 

compute the group credit for the 

immediately preceding credit year. 

The term designated member means 

that member of the group that is 

allocated the greatest amount of the 

group credit under § 1.41–6(c) based on 

the amount of credit reported on the 

original timely-filed Federal income tax 

return (even if that member 

subsequently is determined not to be the 

designated member). If the members of 

a group compute the group credit using 

different methods (the method 

described in section 41(a), the AIRC 

method, or the ASC method) and at least 

two members of the group qualify as the 

designated member, then the term 

designated member means that member 

that computes the group credit using the 

method that yields the greatest group 

credit. 

The temporary regulations provide 

several special rules. Section 1.41–9T(c) 

provides that unless a taxpayer has 

QREs in each of the three taxable years 

preceding the taxable year for which the 

credit is being determined, the credit 

equals the percentage of the QREs for 

the taxable year provided by section 

41(c)(5)(B)(ii). 

The temporary regulations also 

provide special rules relating to 

consistency and short taxable years. The 

temporary regulations provide that in 

computing the credit, QREs for the three 

taxable years preceding the credit year 

must be determined on a basis 

consistent with the definition of QREs 

for the credit year, without regard to the 

law in effect for the three taxable years 

preceding the credit year. This 

consistency requirement applies even if 

the period for filing a claim for credit or 

refund has expired for any of the three 

taxable years preceding the credit year. 

The regulations also provide special 

rules similar to the rules in § 1.41–3(b) 

of the existing regulations for taxpayers 

that have a short taxable year. If one or 

more of the three taxable years 

preceding the credit year is a short 

taxable year, then the QREs for such 

year are deemed to be equal to the QREs 

actually paid or incurred in that year 

multiplied by 12 and divided by the 

number of months in that year. 

Additionally, the temporary regulations 

provide that if a credit year is a short 

taxable year, then the average QREs for 


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Federal Register / Vol. 73, No. 117 / Tuesday, June 17, 2008 / Rules and Regulations 34187 

the three taxable years preceding the 

credit year are modified by multiplying 

that amount by the number of months 

in the short taxable year and dividing 

the result by 12. 

The regulations also clarify that the 

average QREs for the three taxable years 

preceding the taxable year for which 

credit is being determined will be 

considered the base amount for 

purposes of the computation under 

section 41(h)(2). Therefore, if the 

research credit expires during the credit 

year, the average QREs for the three 

taxable years preceding the credit are 

multiplied by the ratio of the number of 

days for which the research credit is 

effective to the total number of days in 

the credit year. 

The Treasury Department and the IRS 

note that the rules generally applicable 

under section 6001 provide sufficient 

detail about required documentary 

substantiation for purposes of the 

research credit. Section 1.6001–1 

requires the keeping of records 

‘‘sufficient to establish the amount of 

* * * * * required to be shown* * *.’’

The IRS may deny the credit for failure 

to provide sufficient records 

substantiating the claimed credit for any 

method used in determining the 

research credit. 

Effective/Applicability Date 

Sections 1.41–6T(j), 1.41–8T(b)(5), 

and 1.41–9T(d) of these regulations 

apply to taxable years ending after 

December 31, 2006, the effective date of 

section 41(c)(5), and terminate on or 

before June 13, 2011. 

For certain transitional rules under 

section 41, see Division A, sections 

104(b)(3), (c)(2), (c)(4), and 123(a) of the 

Act. 

The IRS and Treasury Department are 

committed to providing appropriate 

relief 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. 

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. For the 

applicability of the Regulatory 

Flexibility Act, refer to the Special 

Analyses section of the preamble to the 

cross-referenced notice of proposed 

rulemaking published in the Proposed 

Rules section in this issue of the Federal 

Register. Pursuant to section 7805(f) of 

the Code, these regulations have been 

submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comment on their 

impact on small business. 

Drafting Information 

The principal author of these 

regulations is David Selig, Office of the 

Associate Chief Counsel (Passthroughs 

and Special Industries). 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. 

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 is amended by adding entries 

in numerical order to read in part as 

follows: 

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

Section 1.41–8T also issued under 26 

U.S.C. 41(c)(4)(B); 

Section 1.41–9T also issued under 26 

U.S.C. 41(c)(5)(C); * * * 

§ 1.41–0 [Amended] 

■ Par. 2. Section 1.41–0 is amended by: 

■ 1. Revising the introductory text. 

§ 1.41–6 [Amended] 

■ 2. Revising the paragraph heading for 

§ 1.41–6(j) and adding entries for 

paragraphs (j)(1), (j)(2), and (j)(3). 

§ 1.41–8 [Amended] 

■ 3. Revising the section heading for 

§ 1.41–8 and entries for paragraphs (a) 

and (b)(5). 

■ 4. Adding § 1.41–9. 

The additions and revisions read as 

follows: 

§ 1.41–0 Table of contents. 

This section lists the table of contents 

for §§ 1.41–1 through 1.41–9. 

* * * * * 

§ 1.41–6 Aggregation of expenditures. 

* * * * * 

(j) Effective/applicability date. 

(1) In general. 

(2) Consolidated group rule. 

(3) Taxable years ending on or before 

December 31, 2006. 

* * * * * 

§ 1.41–8 Alternative incremental credit. 

(a) Determination of credit. 

(b) * * * 

(5) Effective/applicability dates. 

§ 1.41–9 Alternative simplified credit. 

[Reserved]. For further guidance, see 

the entries for § 1.41–9T in § 1.41–0T. 

■ Par. 3. Section 1.41–0T is added to 

read as follows: 

§ 1.41–0T Table of contents (temporary). 

This section lists the table of contents 

for §§ 1.41–6T, 1.41–8T, and 1.41–9T. 

§ 1.41–6T Aggregation of expenditures 

(temporary). 

(a) [Reserved]. For further guidance, 

see the entry for § 1.41–6(a) in § 1.41–0. 

(b) Computation of the group credit. 

(1) In general. 

(2) [Reserved]. For further guidance, 

see the entry for § 1.41–6(b)(2) in § 1.41–

0. 

(c) Allocation of the group credit. 

(1) [Reserved]. For further guidance, 

see the entry for § 1.41–6(c)(1) in § 1.41–

0. 

(2) Stand-alone entity credit. 

(d) [Reserved]. For further guidance, 

see the entry for § 1.41–6(d) in § 1.41–

0. 

(e) Example. 

(f) through (i) [Reserved]. For further 

guidance, see the entries for § 1.41–6(f) 

through (i) in § 1.41–0. 

(j) Effective/applicability dates. 

* * * * * 

§ 1.41–8T Alternative incremental credit 

(temporary). 

(a) [Reserved]. For further guidance, 

see the entry for § 1.41–8(a) in § 1.41–0. 

(b) Election. 

(1) In general. 

(2) Time and manner of election. 

(3) Revocation. 

(4) Special rules for controlled groups. 

(i) In general. 

(ii) Designated member. 

(5) Effective/applicability dates. 

§ 1.41–9T Alternative simplified credit 

(temporary). 

(a) Determination of credit. 

(b) Election. 

(1) In general. 

(2) Time and manner of election. 

(3) Revocation. 

(4) Special rules for controlled groups. 

(i) In general. 

(ii) Designated member. 

(c) Special rules. 

(d) Effective/applicability dates. 

(e) Expiration date. 

■ Par. 4. Section 1.41–1 is amended by 

adding a sentence to the end of 

paragraph (a) to read as follows: 

§ 1.41–1 Credit for increasing research 

activities. 

(a) * * * For taxable years ending 

after December 31, 2006, and at the 


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election of the taxpayer, the portion of 

the credit determined under section 

41(a)(1) may be calculated using either 

the alternative incremental credit set 

forth in section 41(c)(4), or the 

alternative simplified credit set forth in 

section 41(c)(5). 

* * * * * 

■ Par. 5. Section 1.41–6 is amended by: 

■ 1. Revising paragraph (e) introductory 

text and the paragraph heading for 

paragraph (j). 

■ 2. Adding paragraph (j)(3). 

The revision and addition reads as 

follows: 

§ 1.41–6 Aggregation of expenditures. 

* * * * * 

(e) Examples. The following examples 

illustrate the provisions of this section. 

Unless otherwise stated, no members of 

a controlled group are members of a 

consolidated group, no member of the 

group made any basic research 

payments or paid or incurred any 

amounts to an energy research 

consortium, and the group has not made 

an AIRC election (except as provided in 

Example 6) or an ASC election. For an 

example illustrating the calculation of 

the alternative simplified credit under 

section 41(c)(5), which is applicable for 

taxable years ending after December 31, 

2006, see § 1.41–6T(e). 

* * * * * 

(j) Effective/applicability dates. * * * 

(3) Taxable years ending on or before 

December 31, 2006. Paragraphs (b)(1) 

and (c)(2) of this section are applicable 

for taxable years ending on or before 

December 31, 2006. For taxable years 

ending after December 31, 2006, see 

§ 1.41–6T. 

■ Par. 6. Section 1.41–6T is added to 

read as follows: 

§ 1.41–6T Aggregation of expenditures 

(temporary). 

(a) [Reserved]. For further guidance, 

see § 1.41–6(a). 

(b) Computation of the group credit—

(1) In general. All members of a 

controlled group are treated as a single 

taxpayer for purposes of computing the 

research credit. The group credit is 

computed by applying all of the section 

41 computational rules on an aggregate 

basis. All members of a controlled group 

must use the same method of 

computation, either the method 

described in section 41(a)(1), the 

alternative incremental credit (AIRC) 

method described in section 41(c)(4), or 

the alternative simplified credit (ASC) 

method described in section 41(c)(5), in 

computing the group credit for a credit 

year. 

(2) [Reserved]. For further guidance, 

see § 1.41–6(b)(2). 

(c) Allocation of the group credit. (1) 

[Reserved]. For further guidance, see 

§ 1.41–6(c)(1). 

(2) Stand-alone entity credit. The term 

stand-alone entity credit means the 

research credit (if any) that would be 

allowable to a member of a controlled 

group if the credit were computed as if 

section 41(f)(1) did not apply, except 

that the member must apply the rules 

provided in § 1.41–6(d)(1) (relating to 

consolidated groups) and § 1.41–6(i) 

(relating to intra-group transactions). 

Each member’s stand-alone entity credit 

for any credit year must be computed 

under whichever method (the method 

described in section 41(a), the method 

described in section 41(c)(4), or the 

method described in section 41(c)(5)) 

results in the greatest stand-alone entity 

credit for that member, without regard 

to the method used to compute the 

group credit. 

(d) [Reserved]. For further guidance 

see § 1.41–6(d). 

(e) Example. Group alternative simplified 

credit. The following example illustrates a 

group computation in a year for which the 

ASC method under section 41(c)(5) is in 

effect. No members of the controlled group 

are members of a consolidated group and no 

member of the group made any basic research 

payments or paid or incurred any amounts to 

an energy research consortium. 

Example. (i) Facts. Q, R, and S, all of 

which are calendar-year taxpayers, are 

members of a controlled group. The research 

credit under section 41(a)(1) is not allowable 

to the group for the 2008 taxable year (the 

credit year) because the group’s aggregate 

QREs for the credit year are less than the 

group’s base amount. The group does not use 

the AIRC method of section 41(c)(4) because 

its aggregate QREs for the credit year do not 

exceed 1 percent of the average annual gross 

receipts for the four years preceding the 

credit year. The group credit is computed 

using the ASC rules of section 41(c)(5). 

Assume that each member of the 

group had QREs in each of the three 

years preceding the credit year. For 

purposes of computing the group credit 

for the credit year, Q, R, and S had the 

following: 

Q R S Group 

aggregate 

Credit Year QREs ............................................................................................................................ $0x $20x $30x $50x 

Average QREs for 3 Years Preceding the Credit Year .................................................................. 10x 20x 10x 40x 

(ii) Computation of the group credit. 

The research credit allowable to the 

group is computed as if Q, R, and S are 

one taxpayer. The group credit is equal 

to 12 percent of so much of the QREs 

for the credit year as exceeds 50 percent 

of the average QREs for the three taxable 

years preceding the credit year. The 

group credit is 0.12 x ($50x¥(0.5 x 

$40x)), which equals $3.6x. 

(iii) Allocation of the group credit. 

Under paragraph (c)(2) of this section, 

the stand-alone entity credit for each 

member of the group must be computed 

using the method that results in the 

greatest stand-alone entity credit for that 

member. The stand-alone entity credit 

for Q is zero under all three methods. 

Assume that the stand-alone entity 

credit for each of R ($1.2x) and S ($3x) 

is greatest using the ASC method. 

Therefore, the stand-alone entity credits 

for each of R and S must be computed 

using the ASC method. The sum of the 

stand-alone entity credits of the 

members of the group is $4.2x. Because 

the group credit of $3.6x is less than the 

sum of the stand-alone entity credits of 

all the members of the group ($4.2x), the 

group credit is allocated among the 

members of the group based on the ratio 

that each member’s stand-alone entity 

credit bears to the sum of the standalone entity credits of all the members 

of the group. The $3.6x group credit is 

allocated as follows: 

Q R S Total 

Stand-Alone Entity Credit ................................................................................................................ $0x $1.2x $3x $4.2x 

Allocation Ratio (Stand-Alone Entity Credit/Sum of Stand-Alone Entity Credits) ........................... 0/4.2 1.2/4.2 3/4.2 

Multiplied by: Group Credit .............................................................................................................. $3.6x $3.6x $3.6x 

Equals: Credit Allocated to Member ................................................................................................ $0x $1.03x $2.57x $3.6x 


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(f) through (i) [Reserved]. For further 

guidance see § 1.41–6(f) through (i). 

(j) Effective/applicability dates. This 

section is applicable for taxable years 

ending after December 31, 2006. For 

taxable years ending on or before 

December 31, 2006, see § 1.41–6. 

(k) Expiration date. The applicability 

of this section will expire on or before 

June 13, 2011. 

■ Par. 7. Section 1.41–8 is amended by: 

■ 1. Revising the section heading and 

the heading of paragraph (a). 

■ 2. Removing the language ‘‘paragraph 

(c) of this section’’ from the first 

sentence of paragraph (b)(4)(ii) and 

adding ‘‘§ 1.41–6(c)’’ in its place. 

■ 3. Revising the paragraph heading and 

adding two sentences at the end of 

paragraph (b)(5). 

The revisions and additions read as 

follows: 

§ 1.41–8 Alternative incremental credit. 

(a) Determination of credit. * * * 

(b) * * * 

(5) Effective/applicability dates. 

* * * Paragraphs (b)(3) and (b)(4)(ii) of 

this section are applicable for taxable 

years ending on or before December 31, 

2006. For taxable years ending after 

December 31, 2006, see § 1.41–8T. 

■ Par. 8. Section 1.41–8T is added to 

read as follows: 

§ 1.41–8T Alternative incremental credit 

(temporary). 

(a) [Reserved]. For further guidance, 

see § 1.41–8(a). 

(b) Election—(1) [Reserved]. For 

further guidance, see § 1.41–8(b)(1). 

(2) Time and manner of election. An 

election under section 41(c)(4) is made 

by completing the portion of Form 6765, 

‘‘Credit for Increasing Research 

Activities,’’ (or successor form) relating 

to the election of the AIRC, and 

attaching the completed form to the 

taxpayer’s timely filed (including 

extensions) original return for the 

taxable year to which the election 

applies. An election under section 

41(c)(4) may not be made on an 

amended return. An extension of time to 

make an election under section 41(c)(4) 

will not be granted under § 301.9100–3 

of this chapter. 

(3) Revocation. An election under this 

section may not be revoked except with 

the consent of the Commissioner. A 

taxpayer is deemed to have requested, 

and to have been granted, the consent of 

the Commissioner to revoke an election 

under section 41(c)(4) if the taxpayer 

completes the portion of Form 6765, 

‘‘Credit For Increasing Research 

Activities,’’ (or successor form) relating 

to the amount determined under section 

41(a)(1) (the regular credit) or the 

alternative simplified credit (ASC) and 

attaches the completed form to the 

taxpayer’s timely filed (including 

extensions) original return for the year 

to which the revocation applies. An 

election under section 41(c)(4) may not 

be revoked on an amended return. An 

extension of time to revoke an election 

under section 41(c)(4) will not be 

granted under § 301.9100–3 of this 

chapter. 

(4) Special rules for controlled 

groups—(i) [Reserved]. For further 

guidance, see § 1.41–8(b)(4)(i). 

(ii) Designated member. For purposes 

of this paragraph (b)(4), for any credit 

year, the term designated member 

means that member of the group that is 

allocated the greatest amount of the 

group credit under § 1.41–6(c) based on 

the amount of credit reported on the 

original timely-filed Federal income tax 

return (even if that member 

subsequently is determined not to be the 

designated member). If the members of 

a group compute the group credit using 

different methods (the method 

described in section 41(a)(1), the AIRC 

method of section 41(c)(4), or the ASC 

method of section 41(c)(5)) and at least 

two members of the group qualify as the 

designated member, then the term 

designated member means that member 

that computes the group credit using the 

method that yields the greatest group 

credit. For example, A, B, C, and D are 

members of a controlled group but are 

not members of a consolidated group. 

For the 2008 taxable year (the credit 

year), the group credit using the method 

described in section 41(a)(1) is $10x. 

Under this method, A would be 

allocated $5x of the group credit, which 

would be the largest share of the group 

credit under this method. For the credit 

year, the group credit using the AIRC 

method is $15x. Under the AIRC 

method, B would be allocated $5x of the 

group credit, which is the largest share 

of the group credit computed using the 

AIRC method. For the credit year, the 

group credit using the ASC method is 

$10x. Under the ASC method, C would 

be allocated $5x of the group credit, 

which is the largest share of the group 

credit computed using the ASC method. 

Because the group credit is greatest 

using the AIRC method and B is 

allocated the greatest amount of credit 

under that method, B is the designated 

member. Therefore, if B makes a section 

41(c)(4) election on its original timelyfiled return for the credit year, that 

election is binding on all members of 

the group for the credit year. 

(5) Effective/applicability dates. This 

section is applicable for taxable years 

ending after December 31, 2006. For 

taxable years ending on or before 

December 31, 2006, see § 1.41–8. 

(6) Expiration date. This applicability 

of this section expires on or before June 

13, 2011. 

■ Par. 9. Sections 1.41–9 and 1.41–9T 

are added to read as follows: 

§ 1.41–9 Alternative simplified credit. 

[Reserved]. For further guidance, see 

§ 1.41–9T. 

§ 1.41–9T Alternative simplified credit 

(temporary). 

(a) Determination of credit. At the 

election of the taxpayer, the credit 

determined under section 41(a)(1) 

equals the amount determined under 

section 41(c)(5). 

(b) Election—(1) In general. A 

taxpayer may elect to apply the 

provisions of the alternative simplified 

credit (ASC) in section 41(c)(5) for any 

taxable year of the taxpayer ending after 

December 31, 2006. If a taxpayer makes 

an election under section 41(c)(5), the 

election applies to the taxable year for 

which made and all subsequent taxable 

years unless revoked in the manner 

prescribed in paragraph (b)(3) of this 

section. 

(2) Time and manner of election. An 

election under section 41(c)(5) is made 

by completing the portion of Form 6765, 

‘‘Credit for Increasing Research 

Activities,’’ (or successor form) relating 

to the election of the ASC, and attaching 

the completed form to the taxpayer’s 

timely filed (including extensions) 

original return for the taxable year to 

which the election applies. An election 

under section 41(c)(5) may not be made 

on an amended return. An extension of 

time to make an election under section 

41(c)(5) will not be granted under 

§ 301.9100–3 of this chapter. 

(3) Revocation. An election under this 

section may not be revoked except with 

the consent of the Commissioner. A 

taxpayer is deemed to have requested, 

and to have been granted, the consent of 

the Commissioner to revoke an election 

under section 41(c)(5) if the taxpayer 

completes the portion of Form 6765 (or 

successor form) relating to the credit 

determined under section 41(a)(1) (the 

regular credit) or the alternative 

incremental credit (AIRC) and attaches 

the completed form to the taxpayer’s 

timely filed (including extensions) 

original return for the year to which the 

revocation applies. An election under 

section 41(c)(5) may not be revoked on 

an amended return. An extension of 

time to revoke an election under section 

41(c)(5) will not be granted under 

§ 301.9100–3 of this chapter. 

(4) Special rules for controlled 

groups—(i) In general. In the case of a 


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34190 Federal Register / Vol. 73, No. 117 / Tuesday, June 17, 2008 / Rules and Regulations 

controlled group of corporations, all the 

members of which are not included on 

a single consolidated return, an election 

(or revocation) must be made by the 

designated member by satisfying the 

requirements of paragraph (b)(2) or 

(b)(3) of this section (whichever 

applies), and such election (or 

revocation) by the designated member 

shall be binding on all the members of 

the group for the credit year to which 

the election (or revocation) relates. If the 

designated member fails to timely make 

(or revoke) an election, each member of 

the group must compute the group 

credit using the method used to 

compute the group credit for the 

immediately preceding credit year. 

(ii) Designated member. For purposes 

of this paragraph (b)(4), for any credit 

year, the term designated member 

means that member of the group that is 

allocated the greatest amount of the 

group credit under § 1.41–6(c) based on 

the amount of credit reported on the 

original timely-filed Federal income tax 

return (even if that member 

subsequently is determined not to be the 

designated member). If the members of 

a group compute the group credit using 

different methods (the method 

described in section 41(a), the AIRC 

method of section 41(c)(4), or the ASC 

method of section 41(c)(5)) and at least 

two members of the group qualify as the 

designated member, then the term 

designated member means that member 

that computes the group credit using the 

method that yields the greatest group 

credit. For example, A, B, C, and D are 

members of a controlled group but are 

not members of a consolidated group. 

For the 2008 taxable year (the credit 

year), the group credit using the method 

described in section 41(a)(1) is $10x. 

Under this method, A would be 

allocated $5x of the group credit, which 

would be the largest share of the group 

credit under this method. For the credit 

year, the group credit using the AIRC 

method is $10x. Under the AIRC 

method, B would be allocated $5x of the 

group credit, which is the largest share 

of the group credit computed using the 

AIRC method. For the credit year, the 

group credit using the ASC method is 

$15x. Under the ASC method, C would 

be allocated $5x of the group credit, 

which is the largest share of the group 

credit computed using the ASC method. 

Because the group credit is greatest 

using the ASC method and C is 

allocated the greatest amount of credit 

under that method, C is the designated 

member. Therefore, if C makes a section 

41(c)(5) election on its original timelyfiled return for the credit year, that 

election is binding on all members of 

the group for the credit year. 

(c) Special rules—(1) Qualified 

research expenses (QREs) required in all 

years. Unless a taxpayer has QREs in 

each of the three taxable years preceding 

the taxable year for which the credit is 

being determined, the credit equals that 

percentage of the QREs for the taxable 

year provided by section 41(c)(5)(B)(ii). 

(2) Section 41(c)(6) applicability. 

QREs for the three taxable years 

preceding the credit year must be 

determined on a basis consistent with 

the definition of QREs for the credit 

year, without regard to the law in effect 

for the three taxable years preceding the 

credit year. This consistency 

requirement applies even if the period 

for filing a claim for credit or refund has 

expired for any of the three taxable 

years preceding the credit year. 

(3) Section 41(h)(2) applicability. 

Solely for purposes of the computation 

under section 41(h)(2), the average QREs 

for the three taxable years preceding the 

taxable year for which the credit is 

being determined shall be treated as the 

base amount. 

(4) Short taxable years. If one or more 

of the three taxable years preceding the 

credit year is a short taxable year, then 

the QREs for such year are deemed to 

be equal to the QREs actually paid or 

incurred in that year multiplied by 12 

and divided by the number of months 

in that year. If a credit year is a short 

taxable year, then the average QREs for 

the three taxable years preceding the 

credit year are modified by multiplying 

that amount by the number of months 

in the short taxable year and dividing 

the result by 12. 

(5) Controlled groups. For purposes of 

computing the group credit under 

§ 1.41–6, a controlled group must apply 

the rules of this paragraph (c) on an 

aggregate basis. For example, if the 

controlled group has QREs in each of 

the three taxable years preceding the 

taxable year for which the credit is 

being determined, the controlled group 

applies the credit computation provided 

by section 41(c)(5)(A) rather than 

section 41(c)(5)(B)(ii). 

(d) Effective/applicability dates. This 

section is applicable for taxable years 

ending after December 31, 2006. For 

certain transitional rules, see Division 

A, section 104(b)(3), (c)(2), and (c)(4) of 

the Tax Relief and Health Care Act of 

2006 (Pub. L. 109–432, 120 Stat. 2922). 

(e) Expiration date. The applicability 

of this section expires on or before June 

13, 2011. 

Dated: June 6, 2008. 

Steven T. Miller, 

Acting Deputy Commissioner for Services and 

Enforcement. 

Eric Solomon, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 08–1362 Filed 6–13–08; 11:51am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 104 

[Docket No. USCG–2008–0028] 

RIN 1625–AB26 

Implementation of Vessel Security 

Officer Training and Certification 

Requirements—International 

Convention on Standards of Training, 

Certification and Watchkeeping for 

Seafarers, 1978, as Amended 

AGENCY: Coast Guard, DHS. 

ACTION: Interim rule; correction. 

SUMMARY: On May 20, 2008, the Coast 

Guard published in the Federal Register 

an interim rule with request for 

comments to amend its regulations to 

implement the vessel security officer 

training and certification amendments 

to the International Convention on 

Standards of Training, Certification and 

Watchkeeping for Seafarers, 1978, as 

amended, and the Seafarers’ Training, 

Certification and Watchkeeping Code. In 

the interim rule a clerical error was 

made stating as an option that to qualify 

for a VSO endorsement, a person must 

‘‘have approved sea service of not less 

than 90 days on any vessel subject to 

section 104.215 of this part * * *.’’

Instead, the option should have stated 

that a person must have not less than six 

months to qualify for a VSO 

endorsement, not 90 days. This 

document corrects that error. 

DATES: This interim rule is effective 

June 19, 2008. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this interim rule, 

contact Ms. Mayte Medina, Maritime 

Personnel Qualifications Division, Coast 

Guard, by telephone 202–372–1406 or 

by e-mail at Mayte.Medina2@uscg.mil. If 

you have questions on viewing or 

submitting material to the docket, 

contact Ms. Renee V. Wright, Program 

Manager, Docket Operations, telephone 

202–366–9826. 

SUPPLEMENTARY INFORMATION: 


yshivers on PROD1PC62 with RULES