Rev. Rul. 67-263

Inquiries have been received as to whether the amendments to the Income Tax Regulations under subchapter A of chapter 6 of the Internal Revenue Code of 1954, relating to consolidated returns, published in the Federal Register for September 8, 1966, T.D. 6894, C.B. 1966-2, 363, and December 30, 1966, T.D. 6909, C.B. 1967-1, 240, are of the type which will permit affiliated groups of corporations an election to discontinue filing consolidated returns.

The new regulations, which are effective for taxable years beginning after December 31, 1965, contain a number of substantive changes, as for example, the treatment of gains and losses in intercompany transactions.

Section 1.1502-75(c)(2)(i) of the regulations, published in the Federal Register for September 8, 1966, T.D. 6894, C.B. 1966-2, 363, provides that the Commissioner of Internal Revenue, in his discretion, may grant all groups permission to discontinue filing consolidated returns if any provision of the Code or regulations has been amended and such amendment is of the type which could have a substantial adverse effect on the filing of consolidated returns by substantially all groups, relative to the filing of separate returns. Ordinarily, the permission to discontinue shall apply with respect to the taxable year of each group which includes the effective date of such an amendment.

In view of the scope of the new regulations and the nature of their provisions, the Commissioner has granted blanket permission to all affiliated groups, which filed or were required to file consolidated returns for taxable years beginning before January 1, 1966, to discontinue filing consolidated returns for their first taxable year beginning after December 31, 1965.

However, affiliated groups required to file consolidated returns for taxable years beginning before January 1, 1966, are not given blanket permission to file separate returns for such years by reason of the amendment to the regulations.

¹ Based on Technical Information Release 769, dated Oct. 1, 1965.