Final regulations: Loss corporation stock under U.S. Treasury program

Loss corporation stock

The Treasury Department and IRS today released for publication in the Federal Register final regulations (T.D. 9721) that adopt as final “without substantial change” regulations that were proposed in July 2014 to modify the effective date of a 2013 regulatory provision concerning corporations whose stock is or was acquired by the U.S. Treasury Department pursuant to certain programs under the Emergency Economic Stabilization Act of 2008 (P.L. 110-343), or the “EESA.”


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According to the preamble to today’s release, the July 2014 temporary regulations were issue to address what may have been an unintentional result of regulations issued in 2013. Those 2013 regulations may have rendered inoperative a rule previously provided in Notice 2010-2 that protected a loss corporation from an owner shift when the Treasury Department sold stock pursuant to one of the EESA programs to public shareholders.

The IRS and Treasury determined that the special rule in Notice 2010-2 may have become unintentionally inoperative by the issuance of October 2013 regulations. Still intending a no-owner-shift consequence to result from the Treasury’s sale of stock to public shareholders, the July 2014 regulations were issued to modify the effective date of the October 2013 regulations to provide, in effect, that such a sale by the Treasury Department will create a public group. Thus, such a sale will benefit from the special rule in the notice.

More specifically, the 2014 regulations modified the effective date rule of the 2013 regulations to provide an exception from the changes to the segregation rules for a sale by Treasury to public shareholders of any “program instrument” (defined an instrument issued pursuant to a program or a covered instrument under the rules of Notice 2010-2). 

Today’s final regulations [PDF 203 KB] state that no comments or requests for a public hearing concerning the 2014 regulations were received. Thus, today’s release adds the effective date modification provided in the 2014 temporary regulations as part of the permanent section 382 regulations. The temporary regulations are removed.

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