Source: https://www.federalregister.gov/documents/2018/03/28/2018-06241/allocation-of-controlled-group-research-credit
Timestamp: 2019-10-15 21:43:24
Document Index: 274782564

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A Rule by the Internal Revenue Service on 03/28/2018
Effective date: These regulations are effective on April 2, 2018.
13183-13185 (3 pages)
https://www.federalregister.gov/d/2018-06241 https://www.federalregister.gov/d/2018-06241
Applicability date: For dates of applicability, see §§ 1.41-6(j), 1.45G-1(g), and 1.280C-4(c).
This document amends 26 CFR part 1 to provide rules relating to sections 41, 45G, and 280C of the Internal Revenue Code (Code). On April 3, 2015, the Department of the Treasury (Treasury Department) and the IRS published final and temporary regulations (TD 9717) (temporary regulations) in the Federal Register (80 FR 18096) and a notice of proposed rulemaking by cross-reference to the temporary regulations (REG-133489-13) in the Federal Register (80 FR 18171) (proposed regulations). On April 27, 2015, the Treasury Department and the IRS published corrections to TD 9717 in the Federal Register (80 FR 23237 and 80 FR 23238). The temporary regulations expire on April 2, 2018.
The preamble to the temporary regulations fully describes the updates to the regulations under sections 41, 45G, and 280C. See 80 FR 18097, April 3, 2015. The temporary regulations updated the section 41 rules in a Start Printed Page 13184manner that is consistent with the amendments made to section 41(f)(1)(A)(ii) and section 41(f)(1)(B)(ii) contained in Section 301(c) of the American Taxpayer Relief Act of 2012, Public Law 112-240, H.R. 8 (ATRA). The temporary regulations also updated the regulations under § 1.45G-1(f) and an example under § 1.280C-4(b)(2) because they are based on the rules of section 41(f) in effect before the ATRA amendments.
One written comment responding to the proposed regulations was received. No requests for a public hearing were made and no public hearing was held. After consideration of the comment, the proposed regulations are adopted without change by this Treasury decision.
No comments were received related to the proposed regulations under section 41 or section 280C. One commenter requested the regulations under § 1.45G-1(f)(8) be amended to explicitly provide that qualified railroad track maintenance expenditures (QRTMEs) associated with a track assignment reside with the assignee (and not with the track owner) when there has been an intra-group track assignment. Revising those rules is beyond the scope of these regulations. Therefore, the Treasury Department and IRS decline to adopt the comment.
The temporary regulations are obsolete for taxable years beginning on or after April 2, 2018.
Certain IRS regulations, including these, are exempt from the requirements of Executive Order 12866, as supplemented and reaffirmed by Executive Order 13563. Therefore, a regulatory impact assessment is not required. Because the final 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 notice of proposed rulemaking that preceded the final regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business. No comments were received on the proposed regulations.
These final regulations provide necessary guidance for corporations that file a consolidated return regarding the allocation of the group credit to members of certain controlled groups of corporations and trades or businesses under common control. It is necessary to provide this administrative relief for these controlled groups as of April 2, 2018, the expiration date of the temporary regulations, to remove impediments to claiming the research and railroad track maintenance credits and making the election for a reduced research credit. Accordingly, good cause is found for dispensing with a delayed effective date pursuant to 5 U.S.C. 553(d).
The principal author of these regulations is James Holmes, Office of the Associate Chief Counsel (Passthroughs and Special Industries). However, other personnel from the Treasury Department and the IRS participated in their development.
Paragraph 1. The authority citation for part 1 is amended by revising the sectional authority entires for §§ 1.41-6 and 1.280C-4 and adding a sectional authority for § 1.45G-1 in numerical order to read in part as follows:
Section 1.41-6 also issued under 26 U.S.C. 41(f)(1) and 1502.
Section 1.45G-1 also issued under 26 U.S.C. 45G(e)(2).
Section 1.280C-4 also issued under 26 U.S.C. 280C(c)(4).
Par. 2. Section 1.41-6 is amended by revising paragraphs (c), (d)(1) and (3), (e), and (j)(4) and (5) to read as follows:
(c) Allocation of the group credit. The group credit is allocated to each member of the controlled group on a proportionate basis to its share of the aggregate of the qualified research expenses, basic research payments, and amounts paid or incurred to energy research consortiums taken into account for the taxable year by such controlled group for purposes of the credit. For purposes of paragraphs (c), (d), and (e) of this section, qualified research expenses, basic research payments, and amounts paid or incurred to energy research consortiums are collectively referred to as QREs.
(4) Taxable years beginning after December 31, 2011. Paragraphs (c), (d)(1) and (3), (e), and (j)(4) and (5) of this section apply to taxable years beginning on or after April 2, 2018. For taxable years ending before April 2, 2018, see § 1.41-6T as contained in 26 CFR part 1, as revised April 1, 2017.Start Printed Page 13185
(5) Taxable years beginning before January 1, 2012. See § 1.41-6 as contained in 26 CFR part 1, revised April 1, 2014.
Par. 3. Section 1.41-6T is removed.
Par. 4. Section 1.45G-1 is amended by revising paragraphs (f)(4) and (5) and (g)(4) and (5) to read as follows:
(4) Taxable years beginning after December 31, 2011. Paragraphs (f)(4) and (5) and (g)(4) and (5) of this section apply to taxable years beginning on or after April 2, 2018. For taxable years ending before April 2, 2018, see § 1.45G-1T as contained in 26 CFR part 1, as revised April 1, 2017.
(5) Taxable years beginning before January 1, 2012. See § 1.45-1 as contained in 26 CFR part 1, revised April 1, 2014.
Par. 5. Section 1.45G-1T is removed.
Par. 6. Section 1.280C-4 is amended by revising paragraphs (b)(2) and (c)(2) and (3) to read as follows:
§ 1.280C-4
(2) Example. The following example illustrates an application of paragraph (b) of this section: A, B, and C, all of which are calendar year taxpayers, are members of a controlled group of corporations (within the meaning of section 41(f)(5)). A, B, and C each attach a statement to the 2012 Form 6765, “Credit for Increasing Research Activities,” showing A and C were the only members of the controlled group to have qualified research expenses when calculating the group credit. A and C report their allocated portions of the group credit on the 2012 Form 6765 and B reports no research credit on Form 6765. Pursuant to paragraph (a) of this section, A and B, but not C, each make an election for the reduced credit under section 280C(c)(3)(B) on the 2012 Form 6765. In December 2013, B determines it had qualified research expenses in 2012 resulting in an increased group credit. On an amended 2012 Form 6765, A, B, and C each report their allocated portions of the group credit. B reports its credit as a regular credit under section 41(a) and reduces the credit under section 280C(c)(3)(B). C may not reduce its credit under section 280C(c)(3)(B) because C did not make an election for the reduced credit with its original return.
(2) Taxable years beginning after December 31, 2011. Paragraphs (b)(2) and (c)(2) and (3) of this section apply to taxable years beginning on or after April 2, 2018. For taxable years ending before April 2, 2018, see § 1.280C-4T as contained in 26 CFR part 1, as revised April 1, 2017.
(3) For taxable years ending before January 1, 2012. See § 1.280C-4 as contained in 26 CFR part 1, revised April 1, 2014.
§ 1.280C-4T
Par. 7. Section 1.280C-4T is removed.
Approved: March 7, 2018.
[FR Doc. 2018-06241 Filed 3-27-18; 8:45 am]