PROPOSAL WOULD DELAY EFFECTIVE DATE FOR ELIMINATION OF CONSOLIDATED GROUP 30-DAY RULES.

Notice 92-59

This document contains information regarding Notice of Proposed Rulemaking CO-30-92, which was filed on November 10, 1992, and published in the Federal Register on November 12, 1992. See 57 FR 53634 [1992-48 I.R.B. 27] (the "proposed regulations"). The proposed regulations, which amend the existing consolidated return regulations relating to the investment adjustment system, also revise the rules for allocating a corporation's items of income, gain, deduction, loss, and credit, when it joins or leaves a consolidated group.

Under existing section 1.1502-76(b)(5), if S becomes a member of the P group within the first 30 days of S's taxable year, S may elect to be considered to have become a member of the group as of the first day of its year. In addition, if S has been a member of the P group for less than 30 days of the P group's taxable year, S may elect not to be considered as a member for the year.

The proposed rules would eliminate these 30-day rules. Although the proposed rules generally would apply based on the filing of final regulations with the Federal Register, the 30-day rules would be eliminated with respect to corporations becoming or ceasing to be members of consolidated groups on or after December 1, 1992. The period from the filing date of the proposed regulations to December 1, 1992 was intended to be a transition period.

The Treasury Department and the Internal Revenue Service have determined that additional transitional relief is warranted with respect to the elimination of 30-day rules under section 1.1502- 76(b)(5). Accordingly, proposed section 1.1502-76(b)(4)(ii) will be modified to read as follows:

(ii) PRIOR LAW. For corporations becoming or ceasing to be members of consolidated groups before this paragraph (b) applies, see prior section 1.1502-76(b) and (d) (as contained in the CFR edition revised as of April 1, 1992). However, section 1.1502-76(b)(5) (as contained in the CFR edition revised as of April 1, 1992) does not apply with respect to corporations becoming or ceasing to be members on or after February 15, 1993.

In addition to extending the 30-day rules to certain corporations becoming or ceasing to be members on or after December 1, 1992, the Internal Revenue Service will examine whether the elimination of the 30-day rules can be better coordinated with the proposed rules making available simplified rules for allocating income to the short periods that were eliminated under the 30-day rules.

Notice of Proposed Rulemaking CO-30-92, together with the modifications described in this document, is still under consideration and may or may not be adopted in whole or in part as final regulations.

For further information, contact Sharon J. Bomgardner (202) 622- 7770, or Roy A. Hirschhorn (202) 622-7770 (not toll-free numbers).