IRS PROVIDES PROCEDURE FOR OBTAINING WAIVER OF RECONSOLIDATION WAITING PERIOD.

Rev. Proc. 91-71

SECTION 1. PURPOSE

01 This revenue procedure clarifies and supersedes Rev. Proc. 90-53, 1990-2 C.B. 636, which grants certain taxpayers a waiver of the general rule of section 1504(a)(3)(A) of the Internal Revenue Code, which generally provides that a corporation that ceased to be a member of a consolidated group is prohibited from being included in a consolidated return of that group for five years after the corporation ceased to be a member of the group.

02 If a corporation qualifies to use this revenue procedure, then this revenue procedure is the exclusive procedure available for obtaining a waiver of the general rule of section 1504(a)(3)(A) of the Code.

SEC. 2. BACKGROUND

01 Section 60 of the Tax Reform Act of 1984 (Pub. L. 98-369, 98 Stat. 577), 1984-3 (Vol. 1) C.B. 1, 85, amended section 1504(a) of the Code by, among other things, adding section 1504(a)(3).

02 Section 1504(a)(3)(A) of the Code provides that (1) if a corporation is included (or required to be included) in a consolidated return filed by an affiliated group for a taxable year which includes any period after December 31, 1984, and (2) the corporation ceases to be a member of the affiliated group in a taxable year beginning after December 31, 1984, the corporation (and any successor of the corporation) may not be included in any consolidated return filed by the affiliated group (or by another affiliated group with the same common parent or a successor of the common parent) before the 61st month beginning after its first taxable year in which it ceased to be a member of the affiliated group.

03 Section 1504(a)(3)(B) of the Code provides that the Secretary may waive the application of section 1504(a)(3)(A) to any corporation for any period subject to such conditions as the Secretary may prescribe.

SEC. 3. APPLICATION

01 Any corporation described in section 4.01 of this revenue procedure that requests a waiver by complying with the requirements set forth in sections 5 and 6 of this revenue procedure is hereby granted a waiver under section 1504(a)(3)(B) of the Code so that the corporation may join in the filing of a consolidated return with the affiliated group of which it is a member.

02 Any corporation described in section 4.02 or 4.03 of this revenue procedure must join in the filing of a consolidated return with the affiliated group of which it is a member. No waiver request is necessary.

SEC. 4. SCOPE

01 This revenue procedure applies to any corporation (1) that was a member of a consolidated group, (2) that subsequently ceased to be a member of the group, and (3) that rejoined the SAME group before the 61st month beginning after its first taxable year in which it ceased to be a member of the group. For purposes of this revenue procedure, the SAME group means a group that remains in existence within the meaning of section 1.1502-75(d) of the Income Tax Regulations.

02 Any corporation that was a member of a consolidated group (the terminating group) and that ceased to be a member of the terminating group solely as a result of a transaction in which a nonmember corporation acquired the assets of the common parent of the terminating group in a reorganization described in section 368(a)(1)(A), (C), or (D) of the Code (but only if the requirements of section 354(b)(1)(A) and (B) are met) and, immediately after the acquisition, the acquiring corporation is the common parent of another affiliated group (the acquiring group), is not prevented by section 1504(a)(3) from joining in the consolidated return filed by the acquiring group. If the acquiring group has an election to file consolidated returns in effect, that corporation must be included in the consolidated return filed by the acquiring group. See Rev. Rul. 91-70, 1991-52 I.R.B. ___.

03 Any corporation that was a member of a consolidated group (the terminating group) and that ceased to be a member of the terminating group solely as a result of a transaction in which a member of the terminating group acquired (a) the assets of a nonmember corporation in a reorganization described in section 368(a)(1)(A), (C), or (D) of the Code (but only if the requirements of section 354(b)(1)(A) and (D) are met) or (b) the stock of a nonmember corporation, and the acquisition was a reverse acquisition described in section 1.1502-75(d)(3) of the regulations in which the terminating group ceased to exist, is not prevented by section 1504(a)(3) from joining in the consolidated return filed by the group that remains in existence (the continuing group). If the continuing group has an election to file consolidated returns in effect, that corporation must be included in the consolidated return filed by the continuing group. See Rev. Rul. 91-70, 1991-52 I.R.B. ___.

04 Any corporation described in both section 4.01 and either section 4.02 or section 4.03 of this revenue procedure shall be treated as a corporation described only in section 4.01. Consequently that corporation must comply with the requirements set forth in sections 5 and 6 of this revenue procedure to obtain a waiver of section l5O4(a)(3)(A) of the Code.

05 A waiver will be granted pursuant to section 3.01 of this revenue procedure only to a corporation which (pursuant to this revenue procedure) joins in the filing of a consolidated return beginning with the taxable year of the affiliated group in which the corporation rejoins the affiliated group.

SEC. 5. MANNER FOR CORPORATIONS DESCRIBED IN SECTION 4.01 TO REQUEST A WAIVER UNDER SECTION 1504(a)(3)(B) OF THE CODE

The common parent of the consolidated group of which the corporation seeking the waiver is a member must include that corporation in the consolidated return and must attach a statement to the consolidated return of the group, filed under penalties of perjury, which includes all the following information:

01 The following heading typed or legibly printed at the top of the statement: "WAIVER OF THE APPLICATION OF SECTION 1504(a)(3) FILED PURSUANT TO REV. PROC. 91-71".

02 The name, address, and employer identification number of the corporation for which the waiver is requested.

03 The year in which the consolidated group of which the corporation is now a member elected to file consolidated returns.

04 The date on which the corporation ceased to be a member of the consolidated group.

05 The date on which the corporation rejoined the affiliated group.

06 A description of the manner by which the corporation ceased to be a member of the consolidated group and the manner by which the corporation rejoined the same group (redemption of stock, new issuance of stock, etc.). This statement should include the business purpose of the transactions that caused the disaffiliation and reaffiliation and whether the transactions were with a related party.

07 The taxable income of the consolidated group for (1) the taxable year prior to the taxable year in which the corporation left the consolidated group, (2) the taxable year in which the corporation left the consolidated group, (3) all taxable years subsequent to the taxable year in which the corporation left the consolidated group but before the corporation rejoined the consolidated group, and (4) the taxable year in which the corporation rejoined the consolidated group.

08 The taxable income, or separate taxable income as defined in section 1.1502-12 of the regulations, as the case may be, of the corporation for all periods described in section 5.07.

09 An analysis of the effect of the disaffiliation and reconsolidation on the consolidated group and the corporation for all periods described in section 5.07 on the following items:

(1) Taxable income;

(2) Deferred gains and losses;

(3) Excess loss accounts;

(4) Tax liability;

(5) Net operating loss carryovers;

(6) Capital loss carryovers; and

(7) Investment and foreign tax credits.

10 In the case of a consolidated group one or more members of which are reporting corporations described in section 6038A(a), an analysis of the effect of the disaffiliation and reconsolidation on the United States taxation of any related party within the meaning of section 6038A(c)(2) (other than a member of the group). Such analysis must take into account any transfers of money or property occurring during the period of disaffiliation and involving (directly or indirectly) the corporation seeking the waiver and any reporting corporation or related party, if such transfers are not in the ordinary course of business.

11 A representation that the disaffiliation and reconsolidation will not provide a benefit of a reduction in income, increase in loss, or any other deduction, credit, or allowance that would not otherwise be secured or have been secured had the disaffiliation and reconsolidation not occurred, including, but not limited to, the use of a net operating loss or credit that would have otherwise expired. In determining whether the disaffiliation and reconsolidation will provide a benefit, the net tax consequences to all parties are considered. For example, if, as a result of the disaffiliation and reconsolidation, the gross income of one affiliated group increased by $100,000 and a deduction of the same group increased by $100,000, but the taxable income of the other affiliated group was not affected, no benefit within the meaning of this paragraph has occurred. Similarly, if, as a result of the disaffiliation and reconsolidation, the taxable income of one affiliated group decreased by $100,000, but the taxable income of another affiliated group increased by $100,000, no benefit within the meaning of this paragraph has occurred.

SEC. 6. EFFECT OF WAIVER

01 A waiver under section 1504(a)(3)(B) of the Code granted pursuant to section 3.01 of this revenue procedure is binding on the consolidated group upon the filing of the consolidated return which includes the statement required by section 5 and may not be revoked by the taxpayer. The waiver shall be binding for all subsequent taxable years after the granting of the waiver in which the corporation remains a member of the consolidated group, unless permission is granted for the entire group to cease filing a consolidated return.

02 Notwithstanding section 6.01, if it is determined that the information provided pursuant to this revenue procedure is incorrect, the Service may revoke the waiver granted pursuant to this revenue procedure at any time. The revocation will be effective beginning with the first taxable year for which the waiver was granted.

SEC. 7. TIME FOR FILING A REQUEST FOR WAIVER PURSUANT TO SECTION 3.01 OF THIS REVENUE PROCEDURE

A request for waiver pursuant to section 3.01 of this revenue procedure must be attached to the consolidated return of the affiliated group filed on or before the due date (including extensions of time) of the consolidated return.

SEC. 8. CORPORATIONS OUTSIDE THE SCOPE OF THE REVENUE PROCEDURE OR WHICH CANNOT SATISFY ITS REQUIREMENTS

If a corporation either is outside the scope of this revenue procedure or cannot satisfy its requirements, a waiver under section 1504(a)(3)(B) of the Code must be requested in a ruling request filed in accordance with Rev. Proc. 91-1, 1991-1 I.R.B. 9, by the common parent of the affiliated group of which the corporation is now a member on or before the due date (including extensions of time) of the consolidated return of the affiliated group for the tax year with respect to which the waiver is requested. The ruling request should include the information set forth in section 5 of this revenue procedure. See Rev. Proc. 90-17, 1990-12 I.R.B. 13, for information regarding user fees.

SEC. 9. EFFECTIVE DATE

This revenue procedure is effective for any group for which the due date (including extensions of time) of its consolidated return for the taxable year of the group in which the corporation rejoins the group is on or after October 15, 1990, the date of publication of Rev. Proc. 90-53, 1990-2 C.B. 636, in the Internal Revenue Bulletin.

SEC. 10. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 90-53, 1990-2 C.B. 636, is clarified and, as clarified, is superseded.

DRAFTING INFORMATION

The principal author of this revenue procedure is Sharon J. Bomgardner of the Office of Assistant Chief Counsel (Corporate). For further information regarding this revenue procedure contact Ms. Bomgardner on (202) 566-3226 (not a toll-free call).