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Regulation and Compliance > Federal Regulation

IRS Completes Tax Regulations

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The Internal Revenue Service has published the final version of rules that may affect the income taxes of corporate groups that include both life and non-life insurance companies.

The final regulations, published today in the Federal Register, affect how the groups split their tax obligations.

The regulations will affect tightly linked “life-nonlife consolidated groups” that include life insurers along with property-casualty insurers. The regulations also will affect more loosely linked “controlled groups of corporations.”

The regulations will apply to consolidated federal income tax returns due on or after Dec. 21, 2009, and to taxable years beginning on or after Dec. 21, 2009, IRS officials write in a preamble to the final regulations.

The IRS first published temporary regulations on the topic in December 2006, and they published additional temporary regulations and a draft of the final regulations in December 2007.

No one submitted any comments on the draft regulations, and the final regulations are similar to the draft regulations, officials write.

One change in the final regulations highlights a difference between controlled groups and consolidated groups. The parent of a consolidated group can use a loss at one member company offset positive income at another when computing taxes and exemptions in connection with the final regulations, but the parent of a controlled group of corporations cannot use a loss at one component company to offset income at another, officials write.

A second change sets the rules for controlled groups in which one member has a short taxable year, and a third change will help a corporate group use the current list of group members to comply with the regulations, rather than requiring the group to predict what companies will be in the group in future years.

“It is often not feasible for the members of a controlled group to know for the current tax year whether a corporation will or will not be a component member of such group for the succeeding tax year,” officials write.

The regulations also clarify how the IRS will handle changes in consolidated groups that are part of controlled groups of corporations.

A copy of the final regulations is available here.


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