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 


rmajette on DSK2TPTVN1PROD with RULES
Federal Register / Vol. 79, No. 217 / Monday, November 10, 2014 / Rules and Regulations 66617 

of property between corporations (for 

example, gain required to be recognized 

under section 367 or 1001). This 

clarifying, non-substantive change 

confirms that except as provided in 

§ 1.312–10, in all other cases in which 

property is transferred from one 

corporation to another, no allocation of 

earnings and profits is made. 

Special Analyses 

It has been determined that this 

Treasury decision is not a significant 

regulatory action as defined in 

Executive Order 12866, as 

supplemented by Executive Order 

13563. Therefore, a regulatory 

assessment is not required. It has also 

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. Pursuant to 

section 7805(f) of the Code, the notices 

of proposed rulemaking that preceded 

these regulations were submitted to the 

Chief Counsel for Advocacy of the Small 

Business Administration for comment 

on their impact on small business, and 

no comments were received. 

Drafting Information 

The principal author of these 

regulations is Stephanie D. Floyd of the 

Office of Associate Chief Counsel 

(Corporate). 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. 

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 1.312–11 is amended 

by revising paragraph (a) and adding 

paragraph (e) to read as follows: 

§ 1.312–11 Effect on earnings and profits 

of certain other tax-free exchanges, tax-free 

distributions, and tax-free transfers from 

one corporation to another. 

(a) In a transfer described in section 

381(a), the acquiring corporation, as 

defined in § 1.381(a)–1(b)(2), and only 

that corporation, succeeds to the 

earnings and profits of the distributor or 

transferor corporation (within the 

meaning of § 1.381(a)–1(a)). Except as 

provided in § 1.312–10, in all other 

cases in which property is transferred 

from one corporation to another, no 

allocation of the earnings and profits of 

the transferor is made to the transferee. 

* * * * * 

(e) Effective/applicability date. 

Paragraph (a) of this section applies to 

transactions occurring on or after 

November 10, 2014. 

■ Par. 3. Section 1.381(a)–1 is amended 

by: 

■ a. Removing the third, fourth, and 

fifth sentences of paragraph (b)(2)(i) and 

adding one sentence in their place. 

■ b. Removing from the last sentence of 

paragraph (b)(2)(ii) Example 2 ‘‘Y’’ and 

adding ‘‘X’’ in its place. 

■ c. Redesignating paragraph (b)(3)(i) as 

paragraph (b)(3). 

■ d. Removing paragraph (b)(3)(ii). 

■ e. Adding a sentence at the end of 

paragraph (e). 

The additions read as follows: 

§ 1.381(a)–1 General rule relating to 

carryovers in certain corporate 

acquisitions. 

* * * * * 

(b) * * * 

(2) * * * (i) * * * In a transaction to 

which section 381(a)(2) applies, the 

acquiring corporation is the corporation 

that, pursuant to the plan of 

reorganization, directly acquires the 

assets transferred by the transferor 

corporation, even if that corporation 

ultimately retains none of the assets so 

transferred. 

* * * * * 

(e) * * * The last sentence of 

paragraph (b)(2)(i) of this section and 

Example 2 of paragraph (b)(2)(ii) of this 

section apply to transactions occurring 

on or after November 10, 2014. 

§ 1.381(c)(2)–1 [Amended] 

■ Par. 4. Section 1.381(c)(2)-1 is 

amended by removing paragraph (d). 

John Dalrymple, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: October 17, 2014. 

Mark J. Mazur, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 2014–26546 Filed 11–7–14; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2520 

RIN 1210–AB66 

Revisions to Annual Return/Report— 

Multiple-Employer Plans 

AGENCY: Employee Benefits Security 

Administration, Labor. 

ACTION: Interim final rule with request 

for comments. 

SUMMARY: This interim final rule 

describes revisions to the Form 5500 

Annual Return/Report of Employee 

Benefit Plan and Form 5500–SF Annual 

Return/Report of Small Employee 

Benefit Plan (together ‘‘Form 5500 

Annual Return/Report’’) to implement 

annual reporting changes for multipleemployer plans required by The 

Cooperative and Small Employer 

Charity Pension Flexibility Act (CSEC 

Act), enacted on April 7, 2014. The 

Form 5500 annual return/report is filed 

by employee benefit plans under the 

Employee Retirement Income Security 

Act of 1974 (ERISA) and sections 

6047(e), 6057(b), 6058(a), and 6059 of 

the Internal Revenue Code (Code). The 

CSEC Act established additional annual 

reporting requirements for multipleemployer plans for plan years beginning 

after December 31, 2013, by adding new 

section 103(g) to Title I of ERISA. 

Specifically, the annual return/report of 

a multiple-employer plan must include 

a list of participating employers and a 

good faith estimate of the percentage of 

total contributions made by each 

participating employer during the plan 

year. This interim final rule also 

includes findings by the Department of 

Labor (Department) under the 

Administrative Procedure Act that good 

cause exists to adopt these revisions on 

an interim final basis without prior 

notice and public comments. 

DATES: Effective Date. This interim final 

rule is effective on November 10, 2014. 

Comment Date. Comments are due on 

or before January 9, 2015. We will 

consider public comments in 

connection with publishing a final rule 

that would apply no earlier than the 

2015 Form 5500. 

Applicability Dates. The multipleemployer plan reporting requirements 

under the CSEC Act apply to plan years 

beginning after December 31, 2013, 

which created an immediate need for 

changes to the Form 5500 and Form 

5500–SF. Accordingly, the CSEC Act 

form changes in this document will be 

applicable beginning with the 2014 


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