Internal Revenue Bulletin 2020-47 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 2020–47
November 16, 2020
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
ADMINISTRATIVE
Announcement 2020-19, page 1070.
The Office of Professional Responsibility (OPR) announces re-
cent disciplinary sanctions involving attorneys, certified pub-
lic accountants, enrolled agents, enrolled actuaries, enrolled
retirement plan agents, and appraisers. These individuals are
subject to the regulations governing practice before the Inter-
nal Revenue Service (IRS), which are set out in Title 31, Code
of Federal Regulations, Part 10, and which are published in
pamphlet form as Treasury Department Circular No. 230.
The regulations prescribe the duties and restrictions relating
to such practice and prescribe the disciplinary sanctions for
violating the regulations.
Notice 2020-76, page 1058.
This notice extends the due dates under sections 6055 and
6056 from January 31, 2021, to March 2, 2021, for insur-
ers, self-insuring employers, applicable large employers, and
certain other providers of minimum essential coverage to
furnish to individuals the 2020 Form 1095-B, Health Cover-
age, and the 2020 Form 1095-C, Employer-Provided Health
Insurance Offer and Coverage. Additionally, this notice pro-
vides that the IRS will not impose a penalty under section
6722 for failures to furnish a Form 1095-B to responsible
individuals and also provides a final extension of transitional
good-faith relief from section 6721 and 6722 penalties to
the 2020 information reporting requirements under sections
6055 and 6056.
EMPLOYEE PLANS
Notice 2020-80, page 1060.
This notice requests comments on the application of the
annuity and spousal rights provisions of section 205 of the
Employee Retirement Income Security Act of 1974, P.L. 93-
406, 88 Stat. 829, as amended (ERISA), in connection with
a distribution of an individual custodial account (ICA) in kind
from a terminating § 403(b) plan. Although no § 403(b) plans
are subject to the annuity and spousal rights provisions of
§§ 401(a)(11) and 417 of the Internal Revenue Code (Code),
some § 403(b) plans that are subject to ERISA (such as a
plan of a non-church tax-exempt employer that provides for
matching contributions) are subject to the parallel annuity and
spousal rights provisions of section 205 of ERISA. Revenue
Ruling 2020-23, 2020-47 I.R.B., issued contemporaneously
with this notice, provides guidance regarding termination of
a § 403(b) plan that is funded through the use of § 403(b)
(7) custodial accounts and distribution of an ICA in kind to
a participant or beneficiary of the plan. The revenue ruling
does not, however, address the application of the annuity
and spousal rights provisions under section 205 of ERISA in
connection with a distribution of an ICA in kind as part of a
plan termination.
Rev. Rul. 2020-23, page 1028.
Under the situations in the revenue ruling, the plan is ter-
minated in accordance with the rules of § 1.403(b)-10(a).
Distribution of an individual custodial account (ICA) in kind to
a participant or beneficiary is not includible in gross income
until amounts are actually paid to the participant or beneficia-
ry out of the ICA, so long as the ICA maintains its status as a
§ 403(b)(7) custodial account. Any other amount distributed
from a custodial account to a participant or beneficiary to
effectuate plan termination is includible in gross income, ex-
cept to the extent the amount is rolled over to an IRA or other
eligible retirement plan by a direct rollover or by a transfer
made within 60 days.
Finding Lists begin on page ii.

INCOME TAX
REG-119890-18, page 1063.
These proposed regulations set forth guidance on the aver-
age income test under § 42(g)(1)(C) of the Internal Revenue
Code for purposes of the low-income housing credit.
T.D. 9927, page 1031.
This document contains final regulations under section 1502
of the Internal Revenue Code (the Code). The final regulations
would update existing regulations under section 1.1502-21
to reflect statutory changes made to section 172 of the
Code by the Tax Cuts and Jobs Act, P.L. 115-97 (Dec. 22,
2017) and the Coronavirus Aid, Relief, and Economic Secu-
rity Act, P.L. 116-36 (Mar. 27, 2020). The final regulations
affect taxpayers that file consolidated returns.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing of-
ficial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
November 16, 2020 Bulletin No. 2020–47

Part I
Distribution of individual
custodial accounts in kind
upon termination of a
§ 403(b) plan.
Rev. Rul. 2020-23
ISSUES
Whether a § 403(b) retirement plan
funded through the use of § 403(b)(7)
custodial accounts that takes the actions
described in this revenue ruling has been
terminated in accordance with the rules of
§ 1.403(b)-10(a), and whether distribu-
tions made to participants or beneficiaries
in connection with termination of the plan
are includible in gross income.
FACTS
Situation 1. Plan A is a defined contri-
bution plan that includes both nonelec-
tive employer contributions and elective
deferrals. Section 205 of the Employee
Retirement Income Security Act of 1974,
P.L. 93-406, 88 Stat. 829, as amended
(ERISA), applies neither to Plan A gen-
erally nor to any participant under Plan
A.
1
Plan A satisfies the requirements
of § 403(b) and §§ 1.403(b)-2 through
1.403(b)-10. Plan A permits benefits
to be paid only after termination from
employment or upon plan termination.
Plan A is funded solely through the use
of § 403(b)(7) custodial accounts main-
tained under individual agreements.
2
All
amounts held under Plan A are attrib-
utable to employer contributions, in-
cluding elective deferrals as defined in
§ 1.403(b)-2(b)(7), and no amounts held
under Plan A are attributable to designat-
ed Roth contributions or after-tax contri-
butions. Neither the sponsoring employ-
er, nor any other entity that is treated
as the same employer under § 414(b),
(c), (m), or (o) on the date of plan ter-
mination, makes contributions to any
§ 403(b) contract that is not part of Plan
A, including during the period beginning
on January 1, 2021, and ending on the
date that is 12 months after distribution
of all assets from Plan A.
On January 1, 2021, the employer
sponsoring Plan A takes action to ter-
minate Plan A. That action includes the
employer executing a binding resolution
to cease future contributions to custodial
accounts under Plan A and to terminate
Plan A, effective January 1, 2021 (the date
of plan termination). The resolution also
provides that all benefits held under Plan
A are fully vested and nonforfeitable as of
January 1, 2021, and directs that all ben-
efits be distributed as soon as practicable
thereafter. Participants and beneficiaries
in Plan A are notified of the plan termi-
nation.
Distributions pursuant to the terms
of Plan A and the termination resolution
are made as soon as administratively
practicable after the date of plan termi-
nation. For a participant or beneficiary
who affirmatively elects to receive a dis-
tribution, depending on the participant’s
or beneficiary’s election, a distribution
equal to that participant’s or beneficia-
ry’s account balance is made either to
that participant or beneficiary, or to an
individual retirement account or annui-
ty under § 408 (an IRA) established for
that participant or beneficiary, or another
eligible retirement plan (in accordance
with the rules of § 1.403(b)-7(b)(1) un-
der which an eligible rollover distribu-
tion may be made to an IRA established
for the participant or beneficiary or to
another eligible retirement plan). Each
custodial account provider permits any
distribution that is an eligible rollover
distribution (as described in § 402(c)
(4)) to be paid by a direct transfer to an
IRA or other eligible retirement plan (as
defined in § 401(a)(31)(E)) in a manner
that satisfies § 401(a)(31), including to
an IRA established by the same provider
that permits investment in the same mu-
tual funds in which the participant’s or
beneficiary’s custodial account is or may
be invested. The plan administrator pro-
vides a notice to each participant describ-
ing the participant’s rollover rights, as
required by § 402(f) and § 1.403(b)-7(b)
(3), withholds in accordance with § 3405
and § 1.403(b)-7(g), and reports the dis-
tribution on Form 1099-R, Distributions
From Pensions, Annuities, Retirement
or Profit-Sharing Plans, IRAs, Insurance
Contracts, etc., as required by § 6047(d).
For a participant or beneficiary who
does not affirmatively elect to receive a
distribution, so that a distribution of the
participant’s or beneficiary’s account
balance is not made as described in the
preceding paragraph, a distribution pur-
suant to the terms of Plan A and the ter-
mination resolution is made as soon as
administratively practicable after the
date of plan termination and is effectu-
ated by the distribution of an individual
custodial account (ICA) in kind to the
participant, beneficiary who is an alter-
nate payee, or beneficiary of a deceased
participant.
As part of the process of distributing
an ICA in kind to a participant or bene-
ficiary, the plan administrator notifies the
participant or beneficiary that, after the
distribution of the ICA in kind, the cus-
todial account is being maintained as an
ICA of the participant or beneficiary and
is no longer part of Plan A. The distributed
ICA is maintained by the custodian as a
§ 403(b)(7) custodial account that adheres
to the requirements of § 403(b) in effect
at the time of the distribution of the ICA
1
Section 205 of ERISA includes annuity and spousal rights provisions that are parallel to the annuity and spousal rights provisions under §§ 401(a)(11) and 417 of the Internal Revenue
Code. Section 205(a) of ERISA generally provides that a distribution must be provided either as a qualified joint and survivor annuity in the case of a participant who does not die before the
annuity starting date, or as a qualified preretirement survivor annuity in the case of a participant who dies before the annuity starting date. Because section 205 of ERISA does not apply to
Plan A generally or to any participant under Plan A, this revenue ruling does not address any annuity and spousal rights issues that may arise under section 205 of ERISA in connection with
distributions of individual custodial accounts in kind. Notice 2020-80, 2020-47 I.R.B., issued contemporaneously with this revenue ruling, requests comments relating to these annuity and
spousal rights issues.
2
Pursuant to § 8 of Rev. Proc. 2007-71, 2007-51 I.R.B. 1184, certain contracts issued before 2009 are not required to be covered by the terms of a § 403(b) plan document. This revenue ruling
does not apply to those contracts.
November 16, 2020 1028 Bulletin No. 2020–47

until amounts are actually paid to the par-
ticipant or beneficiary. Additionally, the
employer has no material retained rights
under the distributed ICA after it has been
distributed.
Situation 2. The facts are the same as
in Situation 1, except that Plan A is funded
not only by custodial accounts maintained
under individual agreements, but also
by custodial accounts maintained under
group agreements. With respect to custo-
dial accounts maintained under individual
agreements, the facts are the same as in
Situation 1.
With respect to custodial accounts
maintained under group agreements, dis-
tributions pursuant to the terms of Plan A
and the termination resolution are made as
soon as administratively practicable after
the date of plan termination. For a par-
ticipant or beneficiary who affirmatively
elects to receive a distribution, depending
on the participant’s or beneficiary’s elec-
tion, a distribution equal to the partici-
pant’s or beneficiary’s account balance is
made either to the participant or benefi-
ciary or to an IRA established for the par-
ticipant or beneficiary or another eligible
retirement plan (in accordance with the
rules of § 1.403(b)-7(b)(1)).
For a participant or beneficiary whose
account balance is held all or in part in
custodial accounts maintained under a
group agreement and who does not af-
firmatively elect to receive a distribution
described in the prior paragraph, a distri-
bution of an amount from the custodial
accounts maintained under the group
agreement is made as soon as admin-
istratively practicable after the date of
plan termination and is effectuated by
the distribution of an ICA in kind to each
participant, beneficiary who is an alter-
nate payee, or beneficiary of a deceased
participant in the custodial accounts
maintained under a group agreement.
Distribution of an ICA in kind from the
custodial accounts maintained under a
group agreement is accomplished by dis-
tributing a document that evidences the
ICA, including the accumulated nonfor-
feitable value of the participant’s or bene-
ficiary’s interest in the custodial accounts
maintained under a group agreement, and
associated rights and responsibilities of
the participant or beneficiary and custo-
dian. A distributed ICA is maintained by
the custodian as a § 403(b)(7) custodial
account that adheres to the requirements
of § 403(b) in effect at the time of the
distribution of the ICA until amounts are
actually paid to the participant or benefi-
ciary. Additionally, the employer has no
material retained rights under an ICA af-
ter it has been distributed.
L AW
Section 403(b) – In General
Section 403(b) applies to contribu-
tions made for employees who are per-
forming services for a public school
of a State or a local government or for
employees of employers that are tax-ex-
empt organizations under § 501(c)(3).
Section 403(b) also applies to contribu-
tions made for certain ministers. Under
§ 403(b)(1), (7), and (9), contributions
are excluded from gross income only if
made to one or more of the following
funding arrangements: (1) contracts is-
sued by an insurance company qualified
to issue annuities in a State that includes
payment in the form of an annuity, (2)
custodial accounts that are exclusively
invested in stock of a regulated invest-
ment company (as defined in § 851(a)
relating to mutual funds), or (3) retire-
ment income accounts for employees of
a church-related organization (as defined
in § 1.403(b)-2) (collectively referred to
as § 403(b) contracts). Additionally, un-
der § 403(b)(1)(C), an employee’s rights
under the § 403(b) contract must be non-
forfeitable.
Final regulations under § 403(b) (TD
9340) were published in the Federal Reg-
ister (72 FR 41128) on July 26, 2007. Sub-
ject to a number of special applicability
date rules, § 1.403(b)-11(a) provides that
those final regulations generally apply for
taxable years beginning after December
31, 2008.
Freezing and Terminating § 403(b)
Plans
Section 1.403(b)-10(a) provides that an
employer may amend its § 403(b) plan to
eliminate future contributions for existing
participants or to limit participation to ex-
isting participants and employees (to the
extent consistent with § 1.403(b)-5). A
§ 403(b) plan also may include provisions
that provide for plan termination and that
allow accumulated benefits to be distribut-
ed on plan termination.
Under § 1.403(b)-10(a), in the case of
a § 403(b) contract that is subject to the
distribution restrictions in § 1.403(b)-
6(c) or (d) (relating to custodial accounts
and § 403(b) elective deferrals), termina-
tion of a § 403(b) plan and distribution
of accumulated benefits is permitted only
if the employer (taking into account all
entities that are treated as the same em-
ployer under § 414(b), (c), (m), or (o) on
the date of termination) does not make
contributions to any § 403(b) contract
that is not part of the plan (these contracts
are referred to in this revenue ruling as
“another § 403(b) plan”). For rules relat-
ing to entities that are treated as the same
employer under § 414(c), see § 1.414(c)-
5; for controlled group rules relating to
governmental entities, see Notice 89-23
(1989-1 CB 654), as modified by Rev.
Rul. 2009-18, 2009-2 C.B. 1; and, for
special rules applicable to church plans
for entities under common control, see
§ 414(c)(2).
For purposes of the requirement that,
after plan termination, the employer make
no contributions to any other § 403(b)
plan, the employer makes contributions to
another § 403(b) plan only if the employer
makes contributions to a § 403(b) contract
during the period beginning on the date of
plan termination and ending 12 months
after distribution of all assets from the
terminated plan. However, if at all times
during the period beginning 12 months
before the plan termination and ending
12 months after distribution of all assets
from the terminated plan, fewer than two
percent of the employees who were eligi-
ble under the terminating § 403(b) plan as
of the date of plan termination are eligi-
ble under another § 403(b) plan, that other
§ 403(b) plan is disregarded. To the extent
a contract fails to satisfy the nonforfeit-
ability requirement of § 1.403(b)-3(a)
(2) as of the date of plan termination, the
contract is not, and cannot later become, a
§ 403(b) contract.
For a § 403(b) plan to be terminated
under § 1.403(b)-10(a), all accumulated
benefits under the plan must be distribut-
ed to all participants and beneficiaries as
soon as administratively practicable after
Bulletin No. 2020–47 1029 November 16, 2020

November 16, 2020 1030 Bulletin No. 2020–47
termination of the plan.
3
For this pur-
pose, delivery of a fully paid individual
insurance annuity contract is treated as a
distribution. The mere provision for, and
making of, benefit distributions to partic-
ipants or beneficiaries upon plan termina-
tion does not cause a contract to cease to
be a § 403(b) contract. Section 1.403(b)-7
provides rules regarding the tax treatment
of benefit distributions, including rules in
§ 1.403(b)-7(b)(1) under which an eligi-
ble rollover distribution is not included in
gross income if paid in a direct rollover
to an eligible retirement plan or if trans-
ferred to an eligible retirement plan within
60 days.
Rev. Rul. 2011-7, 2011-10 I.R.B. 534,
provides that a plan may be terminated in
accordance with the rules of § 1.403(b)-
10(a) by the delivery to participants or
beneficiaries of a fully paid individual
annuity contract or an individual certifi-
cate evidencing fully paid benefits under a
group annuity contract. Rev. Rul. 2011-7
further provides that the delivery of a fully
paid individual annuity contract to a par-
ticipant or beneficiary, or of an individual
certificate evidencing fully paid benefits
under a group annuity contract, is not in-
cluded in gross income until amounts are
actually paid to the participant or bene-
ficiary out of the contract, so long as the
contract maintains its status as a § 403(b)
contract. Finally, Rev. Rul. 2011-7 pro-
vides that any other distribution to a par-
ticipant or beneficiary to effectuate plan
termination is included in gross income,
except to the extent the amount is rolled
over to an IRA or other eligible retirement
plan by a direct rollover or by a transfer
made within 60 days.
Section 110 of the SECURE Act
Section 110 of Division O of the Fur-
ther Consolidated Appropriations Act,
2020, Pub. L. 116-94, 133 Stat. 2534
(2019) known as the Setting Every Com-
munity Up for Retirement Enhancement
Act of 2019 (SECURE Act), provides that
the Secretary of the Treasury shall issue
guidance providing that, if an employer
terminates a plan under which amounts
are contributed to a custodial account un-
der § 403(b)(7), the plan administrator or
custodian may distribute an ICA in kind to
a participant or beneficiary of the plan. It
also provides that the distributed custodial
account will be maintained by the custodi-
an on a tax-deferred basis as a § 403(b)(7)
custodial account, similar to the treatment
of fully paid individual annuity contracts
under Rev. Rul. 2011-7, until amounts are
actually paid to the participant or benefi-
ciary. The legislation further directs that
the guidance provide (1) that the § 403(b)
(7) status of the distributed custodial ac-
count generally is maintained if the cus-
todial account thereafter adheres to the re-
quirements of § 403(b) that are in effect at
the time of the distribution of the account,
and (2) that a custodial account is not con-
sidered distributed to the participant or
beneficiary if the employer has any mate-
rial retained rights under the account (but
the employer is not treated as retaining
material rights merely because the custo-
dial account was originally opened under
a group contract). Finally, the legislation
directs that the guidance be retroactively
effective for taxable years beginning after
December 31, 2008.
4
ANALYSIS
The employer in Situation 1 adopts
a resolution to cease contributions and
terminate the plan at a specified date, in-
cluding full vesting for all benefits as of
that date. Because the plan satisfies the
applicable requirements under § 403(b)
and the employer takes action to ful-
ly vest any participants with respect to
amounts not otherwise fully vested as of
the date of plan termination, all custodi-
al accounts under the plan are § 403(b)
contracts upon plan termination. See
§ 1.403(b)-10(a)(1).
Distributions of accumulated benefits
under the plan in Situation 1 are made ei-
ther (1) by payment to the participant or
beneficiary, or to an IRA established by
the participant or beneficiary or another el-
igible retirement plan (in accordance with
§ 1.403(b)-7(b)); or (2) by distribution of
an ICA in kind to each participant or ben-
eficiary as soon as administratively prac-
ticable after the date of plan termination.
Because the plan is funded solely through
custodial accounts maintained under in-
dividual agreements, no further action is
required to be taken in order to distribute
the ICA in kind. In addition, neither the
sponsoring employer nor any other entity
that is treated as the same employer un-
der § 414(b), (c), (m), or (o) on the date
of plan termination makes contributions
to any § 403(b) contract that is not part of
Plan A, including during the period begin-
ning on the date of plan termination and
ending 12 months after distribution of all
assets from the terminated plan. Accord-
ingly, the employer’s actions to terminate
the plan and distribute accumulated ben-
efits satisfy the requirements of § 403(b)
and § 1.403(b)-10(a) for plan termination.
Following termination of the plan, a par-
ticipant or beneficiary who holds an ICA
is entitled to payments in accordance with
the terms of the ICA (which may permit
single-sum payments in connection with
plan termination).
In Situation 2, the same actions are tak-
en, except that the employer distributes
an ICA in kind to a participant or bene-
ficiary whose accumulated benefits are
funded by a custodial account maintained
under a group agreement by providing a
document to the participant or beneficia-
ry that evidences the ICA, including the
accumulated nonforfeitable value of the
participant’s or beneficiary’s interest in
the custodial accounts maintained under
the group agreement, and associated rights
and responsibilities of the participant or
beneficiary and custodian. The distribu-
tion of the ICA in kind to the participant
or beneficiary constitutes a distribution
of the participant’s or beneficiary’s accu-
mulated benefit in the custodial accounts
maintained under a group agreement for
purposes of § 1.403(b)-10(a).
In both Situation 1 and Situation 2, the
employer has no material retained rights
under an ICA after it has been distribut-
ed (and the employer is not treated as re-
taining material rights merely because the
ICA was originally opened under a group
contract). Accordingly, with respect to
3
For rules relating to the requirement that distributions to all participants and beneficiaries be made as soon as administratively practicable after plan termination in the case of a plan qualified
under § 401(a), see Rev. Rul. 89-87, 1989-2 C.B. 81.
4
Because SECURE Act section 110 provides that the guidance is retroactively effective only for taxable years beginning after December 31, 2008, this revenue ruling does not apply to any
action that occurred in taxable years beginning on or before December 31, 2008.

Bulletin No. 2020–47 1031 November 16, 2020
Situation 1 and Situation 2, the distribu-
tion of an ICA in kind to a participant or
beneficiary is not immediately includible
in gross income, but rather amounts are
includible in income only when actually
paid to the participant or beneficiary from
the custodial account, so long as the ICA
maintains its status as a § 403(b)(7) cus-
todial account; the § 403(b)(7) custodi-
al account status of the ICA generally is
maintained if the ICA continues to adhere
to the requirements of § 403(b) that are in
effect at the time of the distribution of the
ICA. Any other amount paid to a partici-
pant or beneficiary, such as a single-sum
payment, is includible in the gross income
of the participant or beneficiary, except to
the extent the amount is rolled over to an
IRA or other eligible retirement plan by a
direct rollover or by a transfer made with-
in 60 days.
HOLDING
In Situation 1 and Situation 2, Plan A is
terminated in accordance with the rules of
§ 1.403(b)-10(a). Distribution of an ICA in
kind to a participant or beneficiary is not
includible in gross income until amounts
are actually paid to the participant or ben-
eficiary out of the ICA, so long as the
ICA maintains its status as a § 403(b)(7)
custodial account. Any other amount dis-
tributed from a custodial account to a par-
ticipant or beneficiary to effectuate plan
termination is includible in gross income,
except to the extent the amount is rolled
over to an IRA or other eligible retirement
plan by a direct rollover or by a transfer
made within 60 days.
EFFECT ON OTHER REVENUE
RULINGS
Rev. Rul. 2011-7 is modified.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Patrick T. Gutierrez of the Office
of Associate Chief Counsel, Employee
Benefits, Exempt Organizations, and Em-
ployment Taxes. For further information
regarding this revenue ruling, please con-
tact Patrick T. Gutierrez at (202) 317-4148
(not toll-free).
26 CFR 1.1502-21: Net Operating Losses
T.D. 9927
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Consolidated Net Operating
Losses
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains final
regulations under sections 1502 and 1503
of the Internal Revenue Code (Code).
These regulations provide guidance im-
plementing recent statutory amendments
to section 172 of the Code relating to the
absorption of consolidated net operating
loss (CNOL) carryovers and carrybacks.
These regulations also update regulations
applicable to consolidated groups that
include both life insurance companies
and other companies to reflect statutory
changes. These regulations affect corpora-
tions that file consolidated returns.
DATES: Effective Date: These regula-
tions are effective on December 28, 2020.
Applicability Date: For dates of appli-
cability, see §§1.1502-1(l), 1.1502-21(h)
(10), 1.1502-47(n), and 1.1503(d)-8(b)(8).
FOR FURTHER INFORMATION
CONTACT: Justin O. Kellar at (202)
317-6720, Gregory J. Galvin at (202) 317-
3598, or William W. Burhop at (202) 317-
5363.
SUPPLEMENTARY INFORMATION:
Background
This Treasury decision amends the
Income Tax Regulations (26 CFR part
1) under section 1502 of the Code. Sec-
tion 1502 authorizes the Secretary of
the Treasury or his delegate (Secretary)
to prescribe regulations for an affiliated
group of corporations that join in filing
(or that are required to join in filing) a
consolidated return (consolidated group)
to reflect clearly the Federal income tax
liability of the consolidated group and
to prevent avoidance of such tax liabili-
ty. See § 1.1502-1(h) (defining the term
“consolidated group”). For purposes of
carrying out those objectives, section
1502 also permits the Secretary to pre-
scribe rules that may be different from
the provisions of chapter 1 of the Code
that would apply if the corporations
composing the consolidated group filed
separate returns. Terms used in the con-
solidated return regulations generally are
defined in § 1.1502-1.
On July 8, 2020, the IRS published a
notice of proposed rulemaking (REG-
125716-18) in the Federal Register (85
FR 40927) under section 1502 of the Code
(proposed regulations). The proposed reg-
ulations provided guidance implementing
recent statutory amendments to section
172, relating to net operating loss (NOL)
deductions, and withdrew and re-pro-
posed certain sections of proposed guid-
ance issued in prior notices of proposed
rulemaking relating to the absorption of
CNOL carryovers and carrybacks. In ad-
dition, the proposed regulations updated
regulations applicable to consolidated
groups that include both life insurance
companies and other companies to reflect
statutory changes.
In connection with the proposed reg-
ulations, the IRS published on the same
date temporary regulations under section
1502 (TD 9900) in the Federal Register
(85 FR 40892) (temporary regulations).
The temporary regulations permit consol-
idated groups that acquire new members
that were members of another consolidat-
ed group to elect to waive all or part of
the pre-acquisition portion of an extended
carryback period under section 172 for
certain losses attributable to the acquired
members. The text of the temporary regu-
lations also serves as the text of §1.1502-
21(b)(3)(ii)(C) and (D) of the proposed
regulations.
The IRS received seven comments
in response to the proposed regulations.
Copies of the comments received are
available for public inspection at http://
www.regulations.gov or upon request.
No public hearing was requested or held.

November 16, 2020 1032 Bulletin No. 2020–47
This Treasury decision adopts the pro-
posed regulations, other than proposed
§1.1502-21(b)(3)(ii)(C) and (D), as final
regulations with the changes described in
the following Summary of Comments and
Explanation of Revisions. The Treasury
Department and the IRS expect to finalize
proposed §1.1502-21(b)(3)(ii)(C) and (D)
at a later date and welcome further com-
ments on these provisions.
Summary of Comments and
Explanation of Revisions
I. Comments on and Changes to
Proposed §1.1502-21
A. Overview of section 172
These final revisions implement cer-
tain statutory amendments to section 172
made by Public Law 115-97, 131 Stat.
2054 (December 22, 2017), commonly
referred to as the Tax Cuts and Jobs Act
(TCJA), and by the Coronavirus Aid, Re-
lief, and Economic Security Act (CARES
Act), Public Law 116-136, 134 Stat. 281
(March 27, 2020). See generally the Back-
ground section of the preamble to the pro-
posed regulations. As amended, section
172(a)(2) allows an NOL deduction for a
taxable year beginning after December 31,
2020, in an amount equal to the sum of (A)
the aggregate amount of pre-2018 NOLs
that are carried to such taxable year, and
(B) the lesser of (i) the aggregate amount
of post-2017 NOLs that are carried to such
taxable year, or (ii) the “80-percent limita-
tion.” The 80-percent limitation is equal to
80 percent of the excess (if any) of (I) tax-
able income computed without regard to
any deductions under sections 172, 199A,
and 250 of the Code, over (II) the aggre-
gate amount of pre-2018 NOLs carried to
the taxable year. See section 172(a)(2)(B)
(ii). For purposes of the foregoing com-
putation, the term “pre-2018 NOLs” refers
to NOLs arising in taxable years begin-
ning before January 1, 2018, and the term
“post-2017 NOLs” refers to NOLs arising
in taxable years beginning after December
31, 2017.
The 80-percent limitation does not ap-
ply to the offset of income by NOLs in
taxable years beginning before January 1,
2021. Section 172(a)(1). The 80-percent
limitation also does not apply to limit the
use of pre-2018 NOLs. Section 172(a)(2)
(A).
Moreover, the 80-percent limitation
does not apply to insurance companies
other than life insurance companies (non-
life insurance companies). Section 172(f).
Therefore, the taxable income of nonlife
insurance companies may be fully off-
set by NOL deductions. In addition, un-
der section 172(b)(1)(C) and (b)(1)(D)
(i), losses of nonlife insurance compa-
nies arising in taxable years beginning
after December 31, 2020, may be carried
back two years and carried over 20 years.
In contrast, losses (aside from farming
losses) of other taxpayers arising in such
taxable years may not be carried back but
may be carried forward indefinitely. Sec-
tion 172(b)(1). Thus, nonlife insurance
companies are subject to special rules un-
der section 172 both with respect to the
amount of taxable income that may be off-
set by NOL deductions and with respect
to the taxable years to which NOLs may
be carried.
B. Overview of the proposed approach
and the alternative approach
To implement the special rules under
section 172 for nonlife insurance com-
panies for a consolidated return year be-
ginning after December 31, 2020, the
proposed regulations provided that the
application of the 80-percent limitation
within a consolidated group to post-2017
NOLs depends on the status of the mem-
ber that generated the income being offset.
The proposed regulations further provided
that the amount of post-2017 CNOLs that
may be absorbed by one or more members
of the group in such a consolidated return
year (post-2017 CNOL deduction limit)
is determined by applying the 80-percent
limitation, section 172(f) (that is, the spe-
cial rule for nonlife insurance companies),
or both, to the group’s consolidated tax-
able income (CTI) for that year. See pro-
posed §1.1502-21(a)(2)(ii)(A) and (B).
For consolidated groups comprised
of both nonlife insurance companies and
other members for a consolidated re-
turn year beginning after December 31,
2020, the proposed regulations adopted
a two-factor computation (proposed ap-
proach). In general, under the proposed
approach, the post-2017 CNOL deduc-
tion limit for such a group equals the sum
of two amounts. The first amount, which
relates to the income of those members
that are not nonlife insurance compa-
nies (residual income pool), is subject
to the 80-percent limitation. The second
amount, which relates to the income of
those members that are nonlife insurance
companies (nonlife income pool), is not
subject to the 80-percent limitation. See
proposed §1.1502-21(a)(2)(iii)(C). Thus,
the proposed approach divides a consol-
idated group’s nonlife insurance compa-
nies and its other members into two sepa-
rate “pools” for purposes of determining
the amount of CTI that is available to be
offset by post-2017 CNOLs after apply-
ing the 80-percent limitation.
In formulating the proposed regula-
tions, the Treasury Department and the
IRS considered another approach (alterna-
tive approach). This alternative approach
would have required a group to first off-
set income and loss items within a pool of
nonlife insurance companies and a pool of
other members for all purposes of section
172 applicable to taxable years beginning
after December 31, 2020. In other words,
the alternative approach would have ap-
plied a pooling concept beyond merely
determining the group’s post-2017 CNOL
deduction limit, but would have required
a group’s CTI to be allocated between the
operations of its nonlife insurance compa-
ny members, which can be offset fully by
CNOL deductions, and the operations of
its other members subject to the 80-per-
cent limitation. This alternative approach
would also have applied similar rules to
allocate CNOLs within groups including
both nonlife insurance companies and
other members to consistently identify the
portions of CNOLs allocable to nonlife
insurance company members, which are
subject to different carryover rules than
those of other members.
The alternative approach would have
contrasted with the historical application
of §1.1502-21(b)(2)(iv)(B), under which a
CNOL for a taxable year is attributed pro
rata to all members of a group that pro-
duce net loss, without first netting among
entities of the same type. In the preamble
to the proposed regulations, the Treasury
Department and the IRS requested com-
ments regarding both the proposed ap-
proach and the alternative approach.

Bulletin No. 2020–47 1033 November 16, 2020
C. Comments on the proposed approach
and the alternative approach
In response to the request for com-
ments, the Treasury Department and the
IRS received comments that uniformly
approved the proposed approach. For ex-
ample, two commenters commended the
proposed regulations as implementing the
statutory amendments to section 172 in a
reasonable manner that is consistent with
both the statute and consolidated return
principles. Specifically, both commenters
supported the proposed regulations’ ap-
proach to computing a group’s post-2017
CNOL deduction limit as well as the pro-
posed regulations’ retention of the histori-
cal pro rata approach under §1.1502-21(b)
(2)(iv)(B) to determine the amount of
nonlife insurance company losses that can
be carried to other taxable years.
In support of the proposed regulations,
one commenter asserted that the proposed
approach is more consistent with the treat-
ment of CNOLs as consolidated items and
with the current CNOL use and absorption
rules in §1.1502-21 than the alternative
approach. The commenter further assert-
ed that, because the alternative approach
would depart from the general pro rata
rules of §1.1502-21 by first netting in-
come and loss among entities of the same
type within a consolidated group, the al-
ternative approach could result in com-
putational and compliance complications
in circumstances that may be difficult to
anticipate.
In response to the comments received,
these final regulations retain the proposed
approach to computing a consolidated
group’s post-2017 CNOL deduction limit.
D. Application of the proposed approach
to life-nonlife groups
One commenter recommended that,
for consolidated groups with both nonlife
insurance companies and life insurance
companies, the amounts of the residual
income pool and the nonlife income pool
in proposed §1.1502-21(a)(2)(iii)(C)(2)
and (3) be clarified to refer only to the
items of income, gain, deduction, or loss
of members of the nonlife subgroup (as
defined in §1.1502-47(b)(9) of these final
regulations). The commenter further rec-
ommended that, in making this clarifica-
tion, the Treasury Department and the IRS
should not prevent nonlife CNOLs from
offsetting life subgroup income where
permitted by the Code and §1.1502-47.
The commenter noted that this outcome
appears to be the intent of the cross-refer-
ence to §1.1502-47 in proposed §1.1502-
21(b)(2)(iv)(E), but the commenter indi-
cated that clarification would be useful.
The Treasury Department and the IRS
agree with the commenter regarding the
purpose of the cross-reference to §1.1502-
47 in proposed §1.1502-21(b)(2)(iv)(E)
and have revised the regulations to more
clearly confirm this outcome.
E. Consolidated capital gain net income
Section 1.1502-11(a)(3) provides that
the CTI for a consolidated return year is
determined by taking into account, among
other enumerated items, any consolidat-
ed capital gain net income. See generally
§1.1502-22(a) (providing rules for de-
termining consolidated capital gain net
income). Under §1.1502-22(a), the deter-
minations for a consolidated group under
section 1222, including capital gain net
income, are not made separately. Instead,
such consolidated amounts are determined
for the group as a whole.
Section 1.1502-11 does not provide
explicit rules for allocating consolidated
capital gain net income among members.
Thus, one commenter requested that the
final regulations clarify that, for groups
that include nonlife insurance companies,
consolidated capital gain net income un-
der §1.1502-11(a)(3) is allocated to the
residual income pool and the nonlife in-
come pool using a pro rata method based
on the principles of §1.1502-21(b)(2)(iv),
as reflected in the general rule in §1.1502-
21(b)(1), for the use and absorption of
CNOLs.
Section 1.1502-11 also does not pro-
vide explicit rules for determining the
amount of each member’s income that is
offset by losses (whether incurred in the
current year or carried over or back as a
part of a CNOL or consolidated net capital
loss). However, the Treasury Department
and the IRS understand that, in the ab-
sence of express rules, consolidated return
practitioners generally apply the princi-
ples of §1.1502-21(b)(2)(iv) to make such
determinations. The methodology for
computing a consolidated group’s post-
2017 CNOL deduction limit is intended
to implement the changes made to section
172(a) by the TCJA and the CARES Act
in a manner that is flexible for taxpayers to
apply and administrable for the IRS. The
Treasury Department and the IRS have de-
termined that specific rules regarding the
allocation of consolidated capital gain net
income to the residual income pool and
the nonlife income pool under §1.1502-
21(a)(2)(iii)(C)(2) and (3) would exceed
the scope of these final regulations. Ac-
cordingly, the Treasury Department and
the IRS continue to reflect on the com-
menter’s recommendation but have not
incorporated that recommendation into
the final regulations.
F. Example 6 in proposed §1.1502-21(b)
(2)(v)(F)
Proposed §1.1502-21(b)(2)(v)(F) (Ex-
ample 6) contains an example that illus-
trates the application of section 172 to a
CNOL incurred by a consolidated group
(P group) that includes P, an includible
corporation under section 1504(b) of a
type other than a nonlife insurance com-
pany, and PC1, a nonlife insurance com-
pany. Both P and PC1 were incorporated
in Year 1, a year beginning after Decem-
ber 31, 2020. In Year 1, the P group has
$45 of CTI, $20 of which is attributable to
P and $25 of which is attributable to PC1.
In Year 2, the P group incurs a $16 CNOL
that is attributable to PC1 and that is car-
ried back to Year 1 under section 172(b)
(1)(C)(i).
The example illustrates that, under
proposed §1.1502-21(a)(2)(iii)(C), the P
group’s post-2017 CNOL deduction lim-
it for Year 1 is $41, which is the sum of
the residual income pool ($16) and the
nonlife income pool ($25), as described
in proposed §1.1502-21(a)(2)(iii)(C)(2)
and (3), respectively. More specifically,
the amount of the residual income pool
equaled the lesser of the aggregate amount
of post-2017 NOLs carried to Year 1 ($16),
or 80 percent of the excess of P’s taxable
income for that year ($20) over the aggre-
gate amount of pre-2018 NOLs allocable
to P ($0), which also was $16 (80 percent
× ($20−$0)). See proposed §1.1502-21(b)
(2)(v)(F)(3). The amount of the nonlife
income pool equaled the excess of PC1’s

November 16, 2020 1034 Bulletin No. 2020–47
taxable income for Year 1 ($25) over the
aggregate amount of pre-2018 NOLs allo-
cable to PC1 ($0). Id.
Two commenters requested clarifica-
tion as to how much taxable income in
each pool is offset by a CNOL carryover
or carryback if each pool has positive tax-
able income, as in Example 6. Specifically,
commenters contended that a specific ab-
sorption rule is needed to determine how
much taxable income in the residual in-
come pool (which is subject to the 80-per-
cent limitation) can be offset by subse-
quent CNOL carryovers or carrybacks to
the same year. For example, assume the
same facts as in Example 6, but that the
P group also incurs a $30 CNOL in Year
3 that is entirely attributable to PC1 and
that is eligible to be carried back to Year
1. Absent a rule specifying how much
taxable income in each pool was offset
in Year 1 by the $16 Year 2 CNOL car-
ryback, the commenters questioned how
to compute the residual income pool for
purposes of determining how much of the
P group’s Year 3 CNOL carryback could
be absorbed by the P group in Year 1.
As noted in part I.A of this Summary of
Comments and Explanation of Revisions,
the computation in section 172(a)(2)(B)
(ii) is made “without regard to the de-
ductions under [section 172] and sections
199A and 250.” Consistent with the stat-
ute, the amount of income in the residual
income pool that is subject to the 80-per-
cent limitation for a particular consolidat-
ed return year is not recomputed to reflect
the amount of CNOLs carried over to and
absorbed in that year. See §1.1502-21(a)
(2)(iii)(C)(2) of these final regulations.
Rather, the only component of the post-
2017 CNOL deduction limit that is subject
to change upon the carryover or carryback
of additional CNOLs to the same consoli-
dated return year is the aggregate amount
of post-2017 CNOLs carried to that year.
See §1.1502-21(a)(2)(iii)(C)(1)(i) of these
final regulations. Determining this amount
does not require an absorption rule.
With regard to Example 6, if the P
group were to incur a $30 CNOL in Year 3
that was eligible to be carried back to Year
1, the P group would redetermine the ag-
gregate amount of the P group’s post-2017
CNOLs that are carried to Year 1, but the
P group would not recompute the amount
of Year 1 income subject to the 80-percent
limitation. Thus, an absorption rule is not
needed to determine how much of the P
group’s Year 1 CTI can be offset by subse-
quent CNOL carrybacks. However, these
final regulations provide additional facts
in Example 6 to illustrate the computation
of the amount of additional CNOL carry-
overs or carrybacks to the same consoli-
dated return year that can be deducted to
offset income in that year.
G. Split-waiver elections
If a member of one consolidated group
becomes a member of another consolidat-
ed group, §1.1502-21(b)(3)(ii)(B) permits
the acquiring group to make an irrevoca-
ble election to relinquish, with respect to
all CNOLs attributable to the acquired
corporation, the portion of the carryback
period for which the acquired corporation
was a member of another group (so long
as any other corporation joining the ac-
quiring group that was affiliated with the
acquired corporation immediately before
it joined the acquiring group also is in-
cluded in the waiver).
A commenter noted that, pursuant to
§1.1502-21(b)(3)(ii)(B), an acquiring
group may make a split-waiver election
only with respect to acquired corporations
that were members of a different consoli-
dated group in a carryback year. The com-
menter recommended that §1.1502-21(b)
(3)(ii) be expanded to allow a split-waiver
election if the acquired corporation was
not a member of a consolidated group in
the carryback year.
The Treasury Department and the IRS
appreciate the commenter’s suggestion
and will continue to consider it in con-
nection with the future finalization of
the temporary regulations. However, this
comment exceeds the scope of these final
regulations, which adopt the provisions
of the proposed regulations other than
those for which the text was contained in
the temporary regulations (specifically,
§1.1502-21(b)(3)(ii)(C) and (D)). There-
fore, the Treasury Department and the IRS
decline to adopt this recommendation in
this Treasury decision.
H. Modification to SRLY rules
The proposed regulations modify the
separate return limitation year (SRLY)
rules in §1.1502-21(c) to take into account
the limitations on NOL deductions under
section 172, as amended by the TCJA and
the CARES Act. See proposed §1.1502-
21(c)(1)(i)(E). A commenter recom-
mended that this modification not apply
for purposes of section 1503(d) (the dual
consolidated loss (DCL) rules). In certain
cases, the extent to which section 1503(d)
restricts the use of a DCL, or requires the
recapture of a DCL (or a related interest
charge), depends on the application of the
SRLY rules in §1.1502-21(c), subject to
certain adjustments. See §§1.1503(d)-4(c)
(3) and 1.1503(d)-6(h)(2). In these cases,
the adjusted SRLY rules are generally in-
tended to ensure that a DCL may be used
only to offset income of the dual resident
corporation or separate unit that incurred
the DCL, such that the use does not result
in a “double dip” of the DCL.
The commenter recommended that
the modification reflected in proposed
§1.1502-21(c)(1)(i)(E) not apply for pur-
poses of the DCL rules because the mod-
ification addresses policies specific to the
SRLY rules in §1.1502-21(c) (replicating,
to the extent possible, separate-entity us-
age of SRLY attributes), which differ from
the policies underlying the DCL rules
(preventing double dipping of losses). In
addition, the commenter asserted that ap-
plying the rule in proposed §1.1502-21(c)
(1)(i)(E) for DCL purposes could distort
the determination of whether double dip-
ping could occur.
The Treasury Department and the IRS
agree with the commenter. The final reg-
ulations therefore provide that §1.1502-
21(c)(1)(i)(E) does not apply for purposes
of the DCL rules. See §1.1503(d)-4(c)(3)
(v).
I. Clarifying changes to proposed
§1.1502-21
In addition to the foregoing comments,
a commenter recommended clarifying
changes to proposed §1.1502-21. The
Treasury Department and the IRS appreci-
ate these suggested clarifications and have
incorporated many of them into the final
regulations. However, the commenter
also recommended deleting the reference
to section 199A in proposed §§1.1502-
21(a)(2)(iii)(A)(2)(ii) and 1.1502-21(a)
(2)(iii)(C)(2)(ii) on the grounds that the

Bulletin No. 2020–47 1035 November 16, 2020
deduction under section 199A is available
to only noncorporate taxpayers. Because
section 199A(g) provides a deduction for
specified agricultural or horticultural co-
operatives, which (as C corporations) can
be members of a consolidated group, these
references to section 199A have been re-
tained in the final regulations.
The Treasury Department and the IRS
also have made additional clarifying revi-
sions based on further review of the pro-
posed regulations. In particular, the final
regulations contain corrections to scriven-
er’s errors in the two-factor computation
in proposed §1.1502-21(a)(2)(iii). Specifi-
cally, the “lesser of” language in proposed
§1.1502-21(a)(2)(iii)(C)(2), which was
intended to reflect the application of sec-
tion 172(a)(2)(B) to groups that include
both nonlife insurance companies and
other corporations, was mislocated. To
accurately reflect the comparison required
under section 172(a)(2)(B), the language
at issue has been moved to §1.1502-21(a)
(2)(iii)(C)(1) of the final regulations.
Additional edits have been made to
enhance the consistency and clarity of the
rules in proposed §1.1502-21(a)(2). For
example, language reflecting the “lesser
of” comparison described in the preced-
ing paragraph has been explicitly inte-
grated into §§1.1502-21(a)(2)(iii)(B) and
1.1502-21(a)(2)(iii)(C)(5)(ii) (concerning
CNOL deductions that offset income of
nonlife insurance company members) of
these final regulations. As discussed in part
II.B of this Summary of Comments and
Explanation of Revisions, the post-2017
CNOL deduction limit equals the maxi-
mum amount of post-2017 CNOLs that
can be deducted against taxable income in
a consolidated return year beginning after
December 31, 2020. This amount could
never exceed the total amount of post-
2017 CNOLs carried to that year. See sec-
tion 172(f) (providing that, in the case of a
nonlife insurance company, the amount of
the NOL deduction allowed under section
172(a) in any taxable year equals the ag-
gregate of NOL carrybacks and carryovers
to that year).
Likewise, in the absence of any other
limitation, the taxable income of a tax-
payer always constitutes a limit on the de-
ductibility of NOLs. See generally section
172(b)(2). Without such limit, the deduc-
tion of NOLs in excess of taxable income
would create an additional NOL. The
Treasury Department and IRS have deter-
mined that explicitly providing the respec-
tive post-2017 CNOL and taxable income
limitations on the deduction of NOLs to
offset taxable income of nonlife insurance
companies will enhance the clarity of the
final regulations and the consistency of
their application.
II. Comments on and Changes to
Proposed §1.1502-47
The proposed regulations updated the
rules in §1.1502-47 to reflect statutory
changes enacted since these rules were
promulgated. Commenters commended
the Treasury Department and the IRS for
updating these regulations. Additionally,
several commenters expressed their un-
derstanding that another guidance project
has been initiated to propose substantive
changes to §1.1502-47 and urged the
Treasury Department and the IRS to give
priority to this effort. These commenters
argued that the objective of that guidance
project should be the elimination of any
provisions that depart from general con-
solidated return principles in life-non-
life consolidation, except to the extent
non-conforming provisions are necessary
to implement specific provisions of the
Code. In particular, these commenters
expressed concern about the treatment of
consolidated capital gains and losses un-
der §1.1502-47 and requested simplifica-
tion of the eligibility and tacking rules.
The Treasury Department and the IRS
appreciate the commenters’ input and
welcome further comments regarding
substantive changes to §1.1502-47 for
purposes of potential future guidance.
However, such changes are beyond the
scope of these final regulations.
Additionally, commenters recommend-
ed several clarifying changes to proposed
§1.1502-47. Many of these suggested clar-
ifications have been incorporated into the
final regulations. For example, these final
regulations have added a cross-reference
to the definition of “nonlife insurance
company” in §1.1502-1(k). However, one
commenter recommended that §1.1502-
47(g)(3) of these final regulations be mod-
ified to more closely parallel §1.1502-
47(f)(3) of these final regulations. The
commenter further requested that para-
graph (d)(5) of these final regulations be
modified to explicitly set forth the various
rules (both statutory and regulatory) that
apply to certain dividends received by an
includible member from another member
of the consolidated group. These com-
ments exceed the scope of these final reg-
ulations, but the Treasury Department and
the IRS will continue to consider these
comments for purposes of potential future
guidance regarding §1.1502-47.
Effective/Applicability Dates
The final regulations in §§1.1502-1(k),
1.1502-21(a), (b)(1), (b)(2)(iv), and (c)
(1)(i)(E), 1.1502-47, and 1.1503(d)-8(b)
(8) apply to taxable years beginning af-
ter December 31, 2020. However, a tax-
payer may choose to apply the rules in
§§1.1502-1(k) and 1.1502-47 of these fi-
nal regulations to taxable years beginning
on or before December 31, 2020. If a tax-
payer makes the choice described in the
previous sentence with regard to the rules
in §1.1502-47, the corporation must apply
those rules in their entirety and consistent-
ly with the provisions of the Internal Rev-
enue Code applicable to the years at issue.
Special Analyses
I. Regulatory Planning and Review –
Economic Analysis
Executive Orders 13563, 13771, and
12866 direct agencies to assess costs and
benefits of available regulatory alterna-
tives and, if regulation is necessary, to se-
lect regulatory approaches that maximize
net benefits (including potential econom-
ic, environmental, public health and safety
effects, distributive impacts, and equity).
Executive Order 13563 emphasizes the
importance of quantifying both costs and
benefits, of reducing costs, of harmoniz-
ing rules, and of promoting flexibility.
These final regulations have been des-
ignated as subject to review under Exec-
utive Order 12866 pursuant to the Mem-
orandum of Agreement (April 11, 2018)
between the Treasury Department and the
Office of Management and Budget (OMB)
regarding review of tax regulations. The
Office of Information and Regulatory
Affairs (OIRA) has designated the final
regulations as economically significant

November 16, 2020 1036 Bulletin No. 2020–47
under section 1(c) of the Memorandum
of Agreement. Accordingly, OMB has re-
viewed the final regulations.
A. Background and Need for Regulations
In general, taxpayers whose deductions
exceed their income generate a net operat-
ing loss (NOL), calculated under the rules
of section 172. Section 172 also governs
the use of NOLs generated in other years
to offset taxable income in the current year.
Regulations issued under the authority of
section 1502 may be used to govern how
section 172 applies to consolidated groups
of C corporations. In general, a consoli-
dated group generates a combined NOL
at an aggregate level (CNOL), with the
CNOL generally equal to the loss gener-
ated from treating the consolidated group
as a single entity. Under regulations pro-
mulgated prior to the Tax Cuts and Jobs
Act (TCJA), the allowed CNOL deduction
was equal to the lesser of the CNOL car-
ryover or the combined taxable income of
the group (before the CNOL deduction).
The TCJA and the Coronavirus Aid,
Relief, and Economic Security (CARES)
Act made several changes to section 172.
First, the TCJA and the CARES Act disal-
lowed the carry back of NOLs generated
in taxable years beginning after 2020, ex-
cept for farming losses and losses incurred
by corporations that are insurance compa-
nies other than life insurance companies
(nonlife insurance companies). Second,
the TCJA and the CARES Act limited the
NOL deduction in taxable years beginning
after 2020 for NOLs generated in 2018
or later (post-2017 NOLs) to 80 percent
of taxable income determined after the
deduction for pre-2018 NOLs but before
the deduction for post-2017 NOLs. This
80-percent limitation does not apply to
nonlife insurance companies.
These final regulations implement the
changes to section 172 in the context of
consolidated groups. In particular, regu-
lations are needed to address three issues
related to consolidated groups that were
not expressly addressed in the TCJA or
the CARES Act. First, the final regu-
lations describe how to determine the
80-percent limitation in the case of a
“mixed” group – that is, a consolidated
group containing nonlife insurance com-
panies and other members. Second, the
final regulations address the calculation
and allocation of farming losses. Third,
the final regulations implement the
80-percent limitation into existing regu-
lations to determine the CNOL deduction
attributable to losses from a member aris-
ing during periods in which that member
was not part of that group. Part I.B of this
Special Analyses describes the manner
by which the final regulations addresses
each of these issues.
Part I.B also describes an alternative
approach that was contemplated by the
Treasury Department and the IRS regard-
ing the allocation of currently generated
losses to nonlife insurance companies and
other members. The Treasury Department
and the IRS elected not to implement this
approach.
B. Overview of the Final Regulations
In this part I.B the following terms are
used. The term “P group” means a consol-
idated group of which P is the common
parent. The term “P&C member” means a
member of the P group that is a nonlife in-
surance company. The term “C member”
means a member of the P group that is a C
corporation other than a nonlife insurance
company.
1. Application of 80-percent limitation in
mixed groups
Under the statute, the general rule for
determining the NOL deduction (for a
taxable year beginning after December
31, 2020) effectively proceeds in two
steps. First, the taxpayer deducts pre-2018
NOLs without limit. Second, the taxpayer
deducts post-2017 NOLs up to 80 percent
of the taxpayer’s taxable income (comput-
ed without regard to the deductions under
sections 199A and 250) determined after
the deduction of pre-2018 NOLs (but, nat-
urally, before the deduction for post-2017
NOLs). However, this 80-percent limita-
tion does not apply for corporations that
are nonlife insurance companies.
The application of the 80-percent lim-
itation to the P group is straightforward
if (i) there are no pre-2018 NOLs and
(ii) both classes of P&C members and
C members have positive income before
the CNOL deduction. In that case, these
final regulations provide, quite naturally,
that the CNOL limitation is determined by
adding (i) the pre-CNOL income generat-
ed by the class of C members (C member
income pool), determined by applying the
80-percent limitation, plus (ii) 100 percent
of the pre-CNOL income generated by the
class of P&C members (P&C member in-
come pool). This latter treatment reflects
the rule in section 172(f) that nonlife in-
surance companies are not subject to the
80-percent limitation.
One complication arises when the pre-
CNOL C member income pool is positive
and the pre-CNOL P&C income pool is
negative, and the P group has positive
combined pre-CNOL taxable income. In
this case (where the pre-CNOL income is
generated by C members, rather than P&C
members), these final regulations provide
that the post-2017 CNOL deduction limit
is determined by applying the 80-percent
limitation to the income of the P group. If
the situation were reversed, such that the
P group had positive combined taxable
income but the pre-CNOL income is gen-
erated by P&C members, rather than the C
members, the post-2017 CNOL deduction
limit is equal to the income of the P group
(that is, determined without regard to the
80-percent limitation). In essence, in these
situations, the amount of the P group’s in-
come able to absorb a post-2017 CNOL
carryover is defined by the member pool
(that is, the C member income pool or the
P&C member income pool) that is gener-
ating the income.
The other complication occurs when
there is a pre-2018 NOL. In this situa-
tion, it matters whether the pre-2018 NOL
is treated as reducing the amount of the
C member income pool or reducing the
amount of P&C member income pool.
Consider the following example (Example
1). In Example 1, the P group carries $50
in pre-2018 NOLs and $1000 in post-2017
NOLs to 2021. In 2021, the P&C mem-
bers and the C members, respectively,
earn (pre-CNOL) income of $100. If the
pre-2018 NOL were treated as solely re-
ducing the amount of C member income
pool, then the limitation for the post-2017
CNOL deduction would be $100 plus 80
percent of $50 ($100 minus $50), equal to
$140. If the pre-2018 NOL were treated
as solely reducing the amount of the P&C
member income pool, then the post-2017
CNOL deduction limit for the P group

Bulletin No. 2020–47 1037 November 16, 2020
would be $50 ($100 minus $50) plus 80
percent of $100, or $130.
These final regulations allocate the pre-
2018 NOL pro-rata to the C member in-
come pool and the P&C member income
pool in proportion to their current-year in-
come. In Example 1, $25 of the pre-2018
NOL would be allocated to the C member
income pool and $25 to the P&C member
income pool. Therefore, the post-2017
CNOL deduction limit for the P group
would be $75 ($100 minus $25) plus 80
percent of $75 ($100 minus $25), or $135.
2. Farming losses
Section 172 provides that NOLs aris-
ing in a taxable year beginning after De-
cember 31, 2020, may not be carried back
to prior years, with two exceptions: (1)
farming losses and (2) nonlife insurance
company losses. Section 172(b)(1)(B)
defines a “farming loss” as the smaller
of the actual loss from farming activities
in a given year (that is, the excess of the
deductions in farming activities over in-
come in farming activities) and the total
NOL generated in that year. This statutory
provision means that if a taxpayer incurs
a loss in farming activities but has overall
income in other activities, the farming loss
will be smaller than the loss in farming ac-
tivities (and can possibly be zero).
Regulations were needed to clarify two
issues that arise in the context of consoli-
dated groups. First, these regulations clar-
ify that the maximum amount of farming
loss is the CNOL of the group rather than
the NOL of the specific member generat-
ing the loss in farming activities. This ap-
proach follows closely regulations issued
by the Treasury Department and the IRS
in 2012 in an analogous setting.
Second, given the overlapping catego-
ries of carryback-eligible NOLs (farming
losses and nonlife insurance companies),
regulations are needed to allocate the
farming loss to the various members to de-
termine the total amount of CNOL that can
be carried back. Consider the following
example (Example 2). In Example 2, the P
group consists of one C member and one
P&C member. In 2021, the C member’s
only activity is farming and the C mem-
ber incurs a loss of $30, while the P&C
member incurs a loss of $10. The total
farming loss is $30, since $30 is less than
the P group CNOL of $40. If this farming
loss were allocated entirely to the C mem-
ber, then the total amount eligible for car-
ryback would be $40 (that is, $30 for the
farming loss and $10 for the loss incurred
by the P&C member). By contrast, if the
farming loss were allocated entirely to the
P&C member, only $30 would be eligible
to be carried back.
Again, following a similar rule as the
2012 regulations, these final regulations
allocate the farming loss to each member
of the group in proportion with their share
of total losses, without regard to whether
each member actually engaged in farming.
In Example 2, this would allocate $7.50
(that is, one-fourth of $30) of the farming
loss to the P&C member and the remain-
ing $22.50 (that is, three-fourths of $30)
to the C member. Therefore, the P group
would be allowed to carry back $32.50 to-
tal (that is, the $10 of loss generated by the
P&C member and the $22.50 of farming
losses allocated to the C member).
3. Separate Return Limitation Year
To reduce “loss trafficking,” existing
regulations under section 1502 limit the
extent to which a consolidated group (that
is, the P group) can claim a CNOL attrib-
utable to losses generated by some mem-
ber (M) in years in which M was not a
member. In particular, existing rules limit
this amount of loss to the amount of the
loss that would have been deductible had
M remained a separate entity; that is, the
rules are designed to preserve neutrality in
loss use between being a separate entity
or a member of a group. Existing rules
operationalize this principle using the
mechanic of a “cumulative register.” The
cumulative register is equal to the (cumu-
lative) amount of M’s income that is taken
into account in the P group’s income. In-
come earned by M while a member of the
P group increases the cumulative register,
while losses (carried over or otherwise)
taken into account by the group reduce
the cumulative register. In general, the
existing rules provide that M’s pre-group
NOLs cannot offset the P group’s income
when the cumulative register is less than
or equal to zero.
The introduction of the 80-percent
limitation in the TCJA and CARES Act
necessitates an adjustment to this mech-
anism in order to retain this neutrali-
ty-in-loss-use property. In particular, these
final regulations provide that any losses
by M that are absorbed by the P group and
subject to the 80-percent limitation cause
a reduction to the register equal to the full
amount of income needed to support that
deduction. The following example (Ex-
ample 3) demonstrates why this adjust-
ment is necessary. In Example 3, P and S
are each corporations other than nonlife
insurance companies (that is, they are sub-
ject to the 80-percent limitation). Suppose
in 2021, S incurs a loss of $800, which is
the only loss ever incurred by S. In 2022,
S incurs income of $400. If S were not a
member of a consolidated group, its 2022
NOL deduction would be limited to $320
(80 percent of $400). Suppose instead that
P acquires S in 2022 and that P has sepa-
rate income of $600 in 2022, so the con-
solidated group has $1000 in pre-CNOL
income in 2022. Before claiming any
CNOLs, S’s cumulative register would in-
crease to $400 in 2022. Without any addi-
tional rules, the $400 cumulative register
would allow P to claim a CNOL of $400
(bringing the register down to zero), great-
er than what would have been allowed had
S remained a separate entity. By contrast,
requiring the register to be reduced by 125
percent of the NOL (as under the final reg-
ulations) allows P to claim only a $320
CNOL, replicating the result if S were a
separate entity.
4. Allocation of current losses to nonlife
insurance companies
In general, under the TCJA and
CARES Act, taxpayers may not carry
back any losses generated in tax years
beginning after 2020, with the exception
of losses generated by nonlife insurance
companies and farming losses. Existing
regulations clarify that CNOLs are allo-
cated to each member in proportion to the
total loss. This allocation rule can be il-
lustrated by example (Example 4). In Ex-
ample 4, the C member has a current loss
of $10 (in a tax year beginning in 2021
or later). The P&C members are corpo-
rations PC1 and PC2. PC1 has a gain of
$40 and PC2 has a loss of $40. Assume
that the P group does not engage in any
farming activities. The CNOL for the P
group is $10. The $10 of CNOL is allo-

November 16, 2020 1038 Bulletin No. 2020–47
cated to the C member and PC2 in pro-
portion to their total losses. The C mem-
ber has one-fifth of the total loss ($10
divided by $50) and PC2 has four-fifths.
Therefore, under the existing regulations,
the C member is allocated $2 ($10 times
one-fifth) and PC2 is allocated $8 ($10
times four-fifths). In the end, $8 of the
CNOL may be carried back in Example
4. The final regulations do not alter these
existing regulations.
In formulating these final regulations,
the Treasury Department and the IRS
contemplated an alternative approach.
Under this alternative, consolidated
groups would be required to compute
gain and loss by grouping P&C mem-
bers and C members separately prior to
allocating CNOL to members. The ap-
plication of this approach can be seen by
revisiting Example 4. Under this alterna-
tive approach, because the P&C members
as a whole do not have a loss, no CNOL
would be allocated to any P&C member
regardless of the gain or loss of any of the
individual P&C members. Thus, under
the alternative approach, none of the $10
CNOL would be eligible for carryback in
Example 4.
C. Economic Analysis
1. Baseline
In this analysis, the Treasury Depart-
ment and the IRS assess the benefits and
costs of the final regulations relative to a
no-action baseline reflecting anticipated
Federal income tax-related behavior in the
absence of these regulations.
2. Summary of economic effects
The final regulations provide certain-
ty and clarity to taxpayers regarding the
treatment of NOLs under section 172 and
the regulations under section 1502. In
the absence of such guidance, the chance
that different taxpayers would interpret
the statute and the regulations differently
would be exacerbated. Similarly situated
taxpayers might interpret those rules dif-
ferently, with one taxpayer pursuing an
economic opportunity that another tax-
payer might decline to make because of
different interpretations of the ability of
losses to offset taxable income. If this sec-
ond taxpayer’s activity were more profit-
able, the resulting economic decisions are
inefficient. Such situations are more likely
to arise in the absence of guidance. While
no guidance can curtail all differential or
inaccurate interpretations of the statute,
the regulations significantly mitigate the
chance for differential or inaccurate inter-
pretations and thereby increase economic
efficiency.
To the extent that the specific pro-
visions of the final regulations result in
the acceleration or delay of the tax year
in which taxpayers deduct an NOL rela-
tive to the baseline, those taxpayers may
face a change in the present value of the
after-tax return to new investment, par-
ticularly investment that may result in
losses. The resulting changes in the incen-
tives facing the taxpayer are complex and
may lead the taxpayer either to increase,
decrease, or leave unchanged the volume
and risk level of its investment portfolio,
relative to the baseline, in ways that de-
pend on the taxpayer’s stock of NOLs and
the depreciation schedules and income
patterns of investments they would typi-
cally consider, including whether the in-
vestment is subject to bonus depreciation.
Because these elements are complex and
taxpayer-specific and because the sign of
the effect on investment is generally am-
biguous, the Treasury Department and the
IRS have not projected the specific effects
on economic activity arising from the final
regulations.
The Treasury Department and the
IRS project that these regulations will
have annual effects below $100 million
($2020) relative to the baseline. The ef-
fects are small because the regulations
apply only to consolidated groups; in
addition, several provisions of the final
regulations apply only to the extent that
a consolidated group contains a mix of
member types. Moreover, the effects are
small because: (i) for provisions of the fi-
nal regulations that affect the deduction
for pre-2018 NOLs, the effects are lim-
ited to the stock of the pre-2018 NOLs;
and (ii) for provisions that affect the al-
lowable rate of loss usage of post-2017
NOLs, the effect arises only from the 20
percentage point differential in the de-
duction for these NOLs. This latter effect
in particular, to which the bulk of the pro-
visions apply, is too small to substantial-
ly affect taxpayers’ use of NOLs and thus
too small to lead to meaningful changes
in economic decisions.
The Treasury Department and the IRS
did not estimate more precisely the eco-
nomic effects of these regulations because
(i) the effects are expected to be small and
(ii) data or models that would address the
effects of these regulations are not read-
ily available. In the absence of quantita-
tive estimates, the subsequent discussion
provides qualitative analysis of these eco-
nomic effects.
The proposed regulations solicited
comments on the economic effects of the
proposed regulations. No such comments
were received.
3. Allocation of CNOLs to specific
members of consolidated groups
The final regulations do not amend ex-
isting rules for the allocation of the CNOL
within consolidated groups. The final reg-
ulations follow existing rules and allocate
the CNOLs to each member of the group
in proportion to the total loss.
The Treasury Department and the IRS
considered an alternative approach that
would have required groups to compute
gain and loss at the subgroup level prior
to allocating CNOL to members. Recall
Example 4 in which the P&C subgroup
had no gain or loss but the C subgroup
had a loss of $10. Under this alternative
approach, because the P&C subgroup as
a whole does not have a loss, no CNOL
would be allocated to any member in
the P&C group regardless of the gain or
loss of any of the individual members of
PC. Thus, in Example 4, none of the $10
CNOL would be eligible for carryback.
The Treasury Department and the IRS
recognize that as a result of the TCJA and
the CARES Act, the final regulations may
provide groups with an incentive to split
their C members into several corporations
– some with loss and some with gain; this
potential incentive would not exist un-
der the alternative regulatory approach.
In certain circumstances, such a strategy
would effectively enable some share of
the losses generated by the other C mem-
bers to be carried back. This change in the
business structure of consolidated groups
may entail economic costs because, to the
extent this strategy is pursued, it would

Bulletin No. 2020–47 1039 November 16, 2020
result from tax-driven rather than mar-
ket-driven considerations. The Treasury
Department and the IRS project, however,
that the adopted approach will have lower
compliance costs for taxpayers, relative to
the alternative regulatory approach, be-
cause it generally follows existing regula-
tory practice for allocating losses within a
consolidated group.
The Treasury Department and the IRS
have not attempted to estimate the eco-
nomic consequences of either of these
effects but project them to be small. The
effects are projected to be small because
(i) only a small number of taxpayers are
likely to be affected; (ii) any reorganiza-
tion that occurs due to the final regulations
will primarily be “on paper” and entail lit-
tle or no economic loss; and (iii) the com-
pliance burden of loss allocation, under ei-
ther the final regulations or the alternative
approach, is not high.
No additional substantive alternatives
were raised by the comments.
4. Affected Taxpayers
The Treasury Department and the IRS
project that these regulations will pri-
marily affect consolidated groups that
contain at least one nonlife insurance
member and at least one member that is
not a nonlife insurance company. Based
on data from 2015, the Treasury Depart-
ment and the IRS calculate that there
were 1,130 such consolidated groups.
Approximately 460 of these groups were
of “mixed loss” status, meaning that at
least one nonlife insurance member had
a gain and one other member had a loss,
or vice versa.
D. Summary
In sum, these regulations clarify the
recent statutory changes to section 172
as they apply to consolidated corporate
groups. The Treasury Department and IRS
project the economic effect of these regu-
lations to be small given that (1) the effect
of NOL usage on investment incentives is
of ambiguous sign, (2) these regulations
are projected to have only a small effect
on NOL usage, and (3) it is expected that
most taxpayers would have come to a sim-
ilar interpretation of the statute in the ab-
sence of these regulations.
II. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibili-
ty Act (5 U.S.C. chapter 6), it is hereby
certified that these final regulations will
not have a significant economic impact
on a substantial number of small entities.
This certification is based on the fact that
these final regulations apply only to cor-
porations that file consolidated Federal
income tax returns, and that such corpo-
rations almost exclusively consist of larg-
er businesses. Specifically, based on data
available to the IRS, corporations that file
consolidated Federal income tax returns
represent only approximately two percent
of all filers of Forms 1120 (U.S. Corpora-
tion Income Tax Return). However, these
consolidated Federal income tax returns
account for approximately 95 percent of
the aggregate amount of receipts provided
on all Forms 1120. Therefore, these final
regulations would not create additional
obligations for, or impose an economic
impact on, small entities. Accordingly, the
Secretary certifies that the final regula-
tions will not have a significant economic
impact on a substantial number of small
entities.
Pursuant to section 7805(f) of the In-
ternal Revenue Code, the notice of pro-
posed rulemaking that preceded these
final regulations was submitted to the
Chief Counsel for the Office of Advocacy
of the Small Business Administration for
comment on its impact on small business.
No comments on the notice were received
from the Chief Counsel for the Office of
Advocacy of the Small Business Admin-
istration.
III. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 requires that agencies
assess anticipated costs and benefits and
take certain other actions before issuing a
final rule that includes any Federal man-
date that may result in expenditures in any
one year by a state, local, or tribal govern-
ment, in the aggregate, or by the private
sector, of $100 million in 1995 dollars,
updated annually for inflation. In 2020,
that threshold is approximately $156 mil-
lion. This rule does not include any Fed-
eral mandate that may result in expendi-
tures by state, local, or tribal governments,
or by the private sector in excess of that
threshold.
IV. Executive Order 13132: Federalism
Executive Order 13132 (entitled
“Federalism”) prohibits an agency from
publishing any rule that has federalism
implications if the rule either imposes sub-
stantial, direct compliance costs on state
and local governments, and is not required
by statute, or preempts state law, unless
the agency meets the consultation and
funding requirements of section 6 of the
Executive Order. This rule does not have
federalism implications, does not impose
substantial direct compliance costs on
state and local governments, and does not
preempt state law within the meaning of
the Executive Order.
V. Congressional Review Act
The Administrator of OIRA has deter-
mined that this is a major rule for purpos-
es of the Congressional Review Act (5
U.S.C. 801 et seq.) (CRA). Under section
801(3) of the CRA, a major rule takes
effect 60 days after the rule is published
in the Federal Register. Consistent with
this requirement, the effective date of this
Treasury decision is December 28, 2020,
whereas the rules in this Treasury decision
apply for taxable years beginning after
December 31, 2020.
Drafting Information
The principal authors of these regula-
tions are Justin O. Kellar, Gregory J. Gal-
vin, and William W. Burhop of the Office
of Associate Chief Counsel (Corporate).
However, other personnel from the Trea-
sury Department and the IRS participated
in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amend-
ed as follows:

November 16, 2020 1040 Bulletin No. 2020–47
PART 1—INCOME TAX
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.1502-1 is amended by
adding paragraphs (k) and (l) to read as
follows:
§1.1502-1 Definitions.
* * * * *
(k) Nonlife insurance company. The
term nonlife insurance company means a
member that is an insurance company oth-
er than a life insurance company, each as
defined in section 816(a).
(l) Applicability date. Paragraph (k) of
this section applies to taxable years begin-
ning after December 31, 2020. However,
a taxpayer may choose to apply paragraph
(k) of this section to taxable years begin-
ning on or before December 31, 2020.
Par. 3. Section 1.1502-21 is amended:
1. By revising paragraph (a).
2. By revising paragraph (b)(1).
3. By revising paragraph (b)(2)(iv).
4. By revising paragraph (b)(2)(v) in-
troductory text.
5. In paragraph (b)(2)(v), by designat-
ing Examples 1 through 3 as paragraphs
(b)(2)(v)(A) through (C), respectively,
and removing the period after each exam-
ple number in the paragraph headings and
replacing them with a colon.
6. In newly designated paragraphs (b)
(2)(v)(A) through (C), by redesignating
paragraphs (b)(2)(v)(A)(i) and (ii) as para-
graphs (b)(2)(v)(A)(1) and (2), paragraphs
(b)(2)(v)(B)(i) and (ii) as paragraphs (b)
(2)(v)(B)(1) and (2), and paragraphs (b)
(2)(v)(C)(i) and (ii) as paragraphs (b)(2)
(v)(C)(1) and (2).
7. By adding paragraphs (b)(2)(v)(D)
through (G).
8. In paragraph (b)(3)(ii)(B), by removing
the text “§ 1.1502-21(b)(3)(ii)(B)(2)” and
adding in its place “§1.1502-21(b)(3)(ii)(B)”.
9. By revising paragraph (b)(3)(ii)(C).
10. By adding paragraph (b)(3)(ii)(D).
11. By revising paragraph (c)(1)(i) in-
troductory text.
12. In paragraph (c)(1)(i)(C)(2), by re-
moving the word “and”.
13. In paragraph (c)(1)(i)(D), by re-
moving the word “account.” and adding in
its place “account; and”.
14. By adding paragraph (c)(1)(i)(E).
15. By revising paragraph (c)(1)(iii) in-
troductory text.
16. In paragraph (c)(1)(iii), by des-
ignating Examples 1 through 5 as para-
graphs (c)(1)(iii)(A) through (E), respec-
tively, and removing the period after each
example number in the paragraph head-
ings and replacing them with a colon.
17. In newly redesignated paragraphs
(c)(1)(iii)(A) through (E), by redesignating
paragraphs (c)(1)(iii)(A)(i) through (iii) as
paragraphs (c)(1)(iii)(A)(1) through (3),
paragraphs (c)(1)(iii)(B)(i) through (vi) as
paragraphs (c)(1)(iii)(B)(1) through (6),
paragraphs (c)(1)(iii)(C)(i) through (iii) as
paragraphs (c)(1)(iii)(C)(1) through (3),
paragraphs (c)(1)(iii)(D)(i) through (iv) as
paragraphs (c)(1)(iii)(D)(1) through (4),
and paragraphs (c)(1)(iii)(E)(i) through (v)
as paragraphs (c)(1)(iii)(E)(1) through (5).
18. By revising newly redesignated
paragraphs (c)(1)(iii)(A)(2) and (c)(1)(iii)
(B)(2) through (6).
19. In newly redesignated paragraph
(c)(1)(iii)(C)(2), by adding the words “,
a taxable year that begins on January 1,
2021” after the words “at the beginning of
Year 4”.
20. By revising newly redesignated
paragraphs (c)(1)(iii)(D)(2) through (4).
21. By adding paragraph (c)(1)(iii)(D)
(5).
22. By revising newly redesignated
paragraphs (c)(1)(iii)(E)(2) through (5).
23. By adding paragraphs (c)(1)(iii)(E)
(6) and (c)(1)(iii)(F).
24. By revising paragraph (c)(2)(v).
25. By revising paragraph (c)(2)(viii)
introductory text,.
26. In paragraph (c)(2)(viii), by desig-
nating Examples 1 through 4 as paragraphs
(c)(2)(viii)(A) through (D), respectively,
and removing the period after each exam-
ple number in the paragraph headings and
replacing them with a colon.
27. In newly designated paragraphs (c)
(2)(viii)(A) through (D), by redesignat-
ing paragraphs (c)(2)(viii)(A)(i) through
(vii) as paragraphs (c)(2)(viii)(A)(1)
through (7), paragraphs (c)(2)(viii)(B)(i)
through (iv) as paragraphs (c)(2)(viii)(B)
(1) through (4), paragraphs (c)(2)(viii)(C)
(i) through (iii) as paragraphs (c)(2)(viii)
(C)(1) through (3), and paragraphs (c)(2)
(viii)(D)(i) and (ii) as paragraphs (c)(2)
(viii)(D)(1) and (2).
28. In newly redesignated paragraphs
(c)(2)(viii)(A)(3) through (7), the first
sentence of each, by adding the words “,
including the limitation under paragraph
(c)(1)(i)(E) of this section” after the words
“under paragraph (c) of this section”.
29. In newly redesignated paragraph
(c)(2)(viii)(B)(1), the first sentence, by
adding the words “, none of which is a
nonlife insurance company” after the text
“S, T, P and M”.
30. In newly redesignated paragraph
(c)(2)(viii)(B)(1), the fourth sentence, by
adding the text “(a taxable year beginning
after December 31, 2020)” after the lan-
guage “Year 3”.
31. By revising newly designated para-
graph (c)(2)(viii)(B)(3).
32. By redesignating newly redesig-
nated paragraph (c)(2)(viii)(B)(4) as para-
graph (c)(2)(viii)(B)(5).
33. By adding a new paragraph (c)(2)
(viii)(B)(4).
34. By revising newly redesignated
paragraph (c)(2)(viii)(B)(5).
35. By adding paragraph (c)(2)(viii)(B)
(6).
36. In paragraph (g)(5), by designating
Examples 1 through 9 as paragraphs (g)(5)
(i) through (ix), respectively, and remov-
ing the period after each example number
in the paragraph headings and replacing
them with a colon.
37. In newly redesignated paragraphs
(g)(5)(i) through (ix), by redesignat-
ing paragraphs (g)(5)(i)(i) through (iv)
as paragraphs (g)(5)(i)(A) through (D),
paragraphs (g)(5)(ii)(i) through (iv) as
paragraphs (g)(5)(ii)(A) through (D),
paragraphs (g)(5)(iii)(i) through (iii) as
paragraphs (g)(5)(iii)(A) through (C),
paragraphs (g)(5)(iv)(i) through (iv) as
paragraphs (g)(5)(iv)(A) through (D),
paragraphs (g)(5)(v)(i) through (iv) as
paragraphs (g)(5)(v)(A) through (D),
paragraphs (g)(5)(vi)(i) through (iv) as
paragraphs (g)(5)(vi)(A) through (D),
paragraphs (g)(5)(vii)(i) through (vi) as
paragraphs (g)(5)(vii)(A) through (F),
paragraphs (g)(5)(viii)(i) through (v) as
paragraphs (g)(5)(viii)(A) through (E),
and paragraphs (g)(5)(ix)(i) through (vii)
as paragraphs (g)(5)(ix)(A) through (G).
38. By revising paragraph (h)(9).
39. By adding paragraph (h)(10).
The revisions and additions read as fol-
lows:

Bulletin No. 2020–47 1041 November 16, 2020
§1.1502-21 Net operating losses.
(a) Consolidated net operating loss
deduction—(1) In general. Subject to
any limitations under the Internal Rev-
enue Code or this chapter (for example,
the limitations under section 172(a)(2)
and paragraph (a)(2) of this section), the
consolidated net operating loss deduction
(or CNOL deduction) for any consolidated
return year is the aggregate of the net op-
erating loss carryovers and carrybacks to
the year. The net operating loss carryovers
and carrybacks consist of—
(i) Any CNOLs (as defined in para-
graph (e) of this section) of the consoli-
dated group; and
(ii) Any net operating losses (or NOLs)
of the members arising in separate return
years.
(2) Application of section 172 for com-
puting net operating loss deductions—(i)
Overview. For purposes of §1.1502-11(a)
(2) (regarding a CNOL deduction), the
rules of section 172 regarding the use of
net operating losses are taken into account
as provided by this paragraph (a)(2) in cal-
culating the consolidated taxable income
of a group for a particular consolidated
return year. More specifically, in comput-
ing taxable income for taxable years be-
ginning after December 31, 2020, section
172(a) generally limits the deductibili-
ty of net operating losses arising in tax-
able years beginning after December 31,
2017 (post-2017 NOLs). However, these
limitations do not apply to net operating
losses arising in taxable years beginning
before January 1, 2018 (pre-2018 NOLs).
Therefore, in any particular consolidat-
ed return year beginning after December
31, 2020, the group’s CNOL deduction
includes CNOLs arising in taxable years
beginning before January 1, 2018 (pre-
2018 CNOLs), without limitation under
section 172(a). Following the deduction
of pre-2018 CNOLs, this paragraph (a)(2)
applies to compute the maximum amount
of CNOLs from taxable years beginning
after December 31, 2017 (post-2017
CNOLs), that can be deducted against tax-
able income in a consolidated return year
beginning after December 31, 2020 (post-
2017 CNOL deduction limit). See section
172(a)(2)(A) and (B).
(ii) Computation of the 80-percent
limitation and special rule for nonlife in-
surance companies—(A) Determinations
based on status of group members. If a
portion of a post-2017 CNOL is carried
back or carried over to a consolidated re-
turn year beginning after December 31,
2020, whether the members of the group
include nonlife insurance companies, oth-
er types of corporations, or both deter-
mines whether section 172(a) (including
the limitation described in section 172(a)
(2)(B)(ii) (80-percent limitation)), section
172(f) (providing special rules for nonlife
insurance companies), or both, apply to
the group for the consolidated return year.
(B) Determination of post-2017 CNOL
deduction limit. The post-2017 CNOL
deduction limit is determined under para-
graph (a)(2)(iii) of this section by apply-
ing section 172(a)(2)(B)(ii) (that is, the
80-percent limitation), section 172(f) (that
is, the special rule for nonlife insurance
companies), or both, to the group’s con-
solidated taxable income for that year.
(C) Inapplicability of 80-percent lim-
itation. The 80-percent limitation does
not apply to CNOL deductions taken in
taxable years beginning before January
1, 2021, or to CNOLs arising in taxable
years beginning before January 1, 2018
(that is, pre-2018 CNOLs). See section
172(a).
(iii) Computations under sections
172(a)(2)(B) and 172(f). This paragraph
(a)(2)(iii) provides rules for applying sec-
tions 172(f) and 172(a)(2)(B) to consoli-
dated return years beginning after Decem-
ber 31, 2020 (that is, for computing the
post-2017 CNOL deduction limit). Sec-
tion 172(f) applies to income of nonlife
insurance company members, whereas
section 172(a)(2)(B)(ii) applies to income
of members that are not nonlife insurance
companies. Thus, this paragraph (a)(2)(iii)
provides specific rules for groups with no
nonlife insurance company members, only
nonlife insurance company members, or
a combination of nonlife insurance com-
pany members and other members. For
groups with both nonlife insurance com-
pany members and life insurance compa-
ny members, see paragraph (b)(2)(iv)(E)
of this section.
(A) Groups without nonlife insur-
ance company members. If no member
of a group is a nonlife insurance compa-
ny during a particular consolidated re-
turn year beginning after December 31,
2020, section 172(a)(2)(B)(ii) (that is, the
80-percent limitation) applies to all in-
come of the group for that year. Therefore,
the post-2017 CNOL deduction limit for
the group for that year is the lesser of—
(1) The aggregate amount of post-2017
NOLs carried to that year; or
(2) The amount determined by multi-
plying—
(i) 80 percent, by
(ii) Consolidated taxable income for
the group for that year (determined with-
out regard to any deductions under sec-
tions 172, 199A, and 250) less the aggre-
gate amount of pre-2018 NOLs carried to
that year.
(B) Groups comprised solely of nonlife
insurance companies. If a group is com-
prised solely of nonlife insurance com-
panies during a particular consolidated
return year beginning after December 31,
2020, section 172(f) applies to all income
of the group for that year. Therefore, the
post-2017 CNOL deduction limit for the
group for that year equals the lesser of—
(1) The aggregate amount of post-2017
NOLs carried to that year, or
(2) Consolidated taxable income less
the aggregate amount of pre-2018 NOLs
carried to that year.
(C) Groups that include both nonlife
insurance companies and other corpora-
tions—(1) General rule. Except as pro-
vided in paragraph (a)(2)(iii)(C)(5) of this
section, if a group has at least one member
that is a nonlife insurance company and
at least one member that is not a nonlife
insurance company during a particular
consolidated return year beginning after
December 31, 2020, the post-2017 CNOL
deduction limit for the group for that year
equals the lesser of—
(i) The aggregate amount of post-2017
NOLs carried to that year, or
(ii) The sum of the amounts in the in-
come pools determined under paragraphs
(a)(2)(iii)(C)(2) and (3) of this section.
(2) Residual income pool. The amount
determined under this paragraph (a)(2)
(iii)(C)(2) (residual income pool) is eighty
percent of the excess of—
(i) The consolidated taxable income of
the group for a consolidated return year
beginning after December 31, 2020, deter-
mined without regard to any income, gain,
deduction, or loss of members that are
nonlife insurance companies and without

November 16, 2020 1042 Bulletin No. 2020–47
regard to any deductions under sections
172, 199A, and 250, over
(ii) The aggregate amount of pre-2018
NOLs carried to that year that are allocat-
ed to this income pool under paragraph
(a)(2)(iii)(C)(4) of this section (that is, by
applying the 80-percent limitation). See
section 172(a)(2)(B)(ii).
(3) Nonlife income pool. The amount
determined under this paragraph (a)(2)(iii)
(C)(3) (nonlife income pool) is the consol-
idated taxable income of the group for a
consolidated return year beginning after
December 31, 2020, determined without
regard to any income, gain, deduction, or
loss of members included in the compu-
tation under paragraph (a)(2)(iii)(C)(2) of
this section, less the aggregate amount of
pre-2018 NOLs carried to that year that
are allocated to this income pool under
paragraph (a)(2)(iii)(C)(4) of this section.
See section 172(f).
(4) Pro rata allocation of pre-2018
NOLs between pools of income. For pur-
poses of paragraphs (a)(2)(iii)(C)(2) and
(3) of this section, the aggregate amount of
pre-2018 NOLs carried to any particular
consolidated return year beginning after
December 31, 2020, is prorated between
the residual income pool and the nonlife
income pool based on the relative amounts
of positive income of those two pools. For
example, if $30 of pre-2018 NOLs is car-
ried over to a consolidated return year in
which the residual income pool contains
$75 and the nonlife income pool contains
$150, the residual income pool is allocat-
ed $10 of the pre-2018 NOLs ($30 x $75/
($75 + $150), or $30 x 1/3), and the non-
life income pool is allocated the remain-
ing $20 of pre-2018 NOLs ($30 x $150/
($75 + $150), or $30 x 2/3).
(5) Exception. The post-2017 CNOL
deduction limit for the group for a consol-
idated return year is determined under this
paragraph (a)(2)(iii)(C)(5) if the amounts
computed under paragraphs (a)(2)(iii)(C)
(2) and (3) of this section for that year are
not both positive.
(i) Positive residual income pool and
negative nonlife income pool. This para-
graph (a)(2)(iii)(C)(5)(i) applies if the
amount computed under paragraph (a)(2)
(iii)(C)(2) of this section for the residual
income pool is positive and the amount
computed under paragraph (a)(2)(iii)(C)
(3) of this section for the nonlife income
pool is negative. If this paragraph (a)(2)
(iii)(C)(5)(i) applies, the post-2017 CNOL
deduction limit for the group for a con-
solidated return year equals the lesser of
the aggregate amount of post-2017 NOLs
carried to that year, or 80 percent of the
consolidated taxable income of the en-
tire group (determined without regard to
any deductions under sections 172, 199A,
and 250) after subtracting the aggregate
amount of pre-2018 NOLs carried to that
year (that is, by applying the 80-percent
limitation). See section 172(a)(2)(B).
(ii) Positive nonlife income pool and
negative residual income pool. If the
amount computed under paragraph (a)(2)
(iii)(C)(3) of this section for the nonlife
income pool is positive and the amount
computed under paragraph (a)(2)(iii)(C)
(2) of this section for the residual income
pool is negative, the post-2017 CNOL
deduction limit for the group for a con-
solidated return year equals the lesser of
the aggregate amount of post-2017 NOLs
carried to that year, or the consolidated
taxable income of the entire group less the
aggregate amount of pre-2018 NOLs car-
ried to that year. See section 172(f).
(b) * * *
(1) Carryovers and carrybacks gen-
erally. The net operating loss carryovers
and carrybacks to a taxable year are de-
termined under the principles of, and are
subject to any limitations under, section
172 and this section. Thus, losses permit-
ted to be absorbed in a consolidated return
year generally are absorbed in the order of
the taxable years in which they arose, and
losses carried from taxable years ending
on the same date, and which are available
to offset consolidated taxable income for
the year, generally are absorbed on a pro
rata basis. In addition, except as otherwise
provided in this section, the amount of any
CNOL absorbed by the group in any year
is apportioned among members based on
the percentage of the CNOL eligible for
carryback or carryover that is attributable
to each member as of the beginning of the
year. The percentage of the CNOL attrib-
utable to a member is determined pursuant
to paragraph (b)(2)(iv)(B) of this section.
Additional rules provided under the In-
ternal Revenue Code or regulations also
apply. See, for example, section 382(l)(2)
(B) (if losses are carried from the same
taxable year, losses subject to limitation
under section 382 are absorbed before
losses that are not subject to limitation
under section 382). See paragraph (c)(1)
(iii)(B) of this section, (Example 2), for an
illustration of pro rata absorption of losses
subject to a SRLY limitation.
(2) * * *
(iv) Operating rules. (A) Amount of
CNOL attributable to a member. The
amount of a CNOL that is attributable to
a member equals the product obtained by
multiplying the CNOL and the percentage
of the CNOL attributable to the member.
(B) Percentage of CNOL attributable
to a member—(1) In general. Except as
provided in paragraph (b)(2)(iv)(B)(2) of
this section, the percentage of the CNOL
for the consolidated return year attribut-
able to a member equals the separate net
operating loss of the member for the con-
solidated return year divided by the sum
of the separate net operating losses for that
year of all members having such losses for
that year. For this purpose, the separate net
operating loss of a member is determined
by computing the CNOL by reference to
only the member’s items of income, gain,
deduction, and loss, including the mem-
ber’s losses and deductions actually ab-
sorbed by the group in the consolidated
return year (whether or not absorbed by
the member).
(2) Recomputed percentage. If, for any
reason, a member’s portion of a CNOL
is absorbed or reduced on a non-pro rata
basis (for example, under §1.1502-11(b)
or (c), paragraph (b)(2)(iv)(C) of this sec-
tion, §1.1502-28, or 1.1502-36(d), or as
the result of a carryback to a separate re-
turn year), the percentage of the CNOL at-
tributable to each member is recomputed.
In addition, if a member with a separate
net operating loss ceases to be a member,
the percentage of the CNOL attributable
to each remaining member is recomputed.
The recomputed percentage of the CNOL
attributable to each member equals the re-
maining CNOL attributable to the member
at the time of the recomputation divided
by the sum of the remaining CNOL attrib-
utable to all of the remaining members at
the time of the recomputation. For pur-
poses of this paragraph (b)(2)(iv)(B)(2), a
CNOL that is permanently disallowed or
eliminated is treated as absorbed.
(C) Net operating loss carryovers and
carrybacks—(1) General rules. Subject to

Bulletin No. 2020–47 1043 November 16, 2020
the rules regarding allocation of special
status losses under paragraph (b)(2)(iv)
(D) of this section—
(i) Nonlife insurance companies. The
portion of a CNOL attributable to any
members of the group that are nonlife in-
surance companies is carried back or car-
ried over under the rules in section 172(b)
applicable to nonlife insurance compa-
nies.
(ii) Corporations other than nonlife
insurance companies. The portion of a
CNOL attributable to any other members
of the group is carried back or carried over
under the rules in section 172(b) applica-
ble to corporations other than nonlife in-
surance companies.
(2) Recomputed percentage. For rules
governing the recomputation of the per-
centage of a CNOL attributable to each
remaining member if any portion of the
CNOL attributable to a member is carried
back under section 172(b)(1)(B) or (C)
and absorbed on a non-pro rata basis, see
paragraph (b)(2)(iv)(B)(2) of this section.
(D) Allocation of special status losses.
The amount of the group’s CNOL that is
determined to constitute a farming loss
(as defined in section 172(b)(1)(B)(ii)) or
any other net operating loss that is subject
to special carryback or carryover rules
(special status loss) is allocated to each
member separately from the remainder of
the CNOL based on the percentage of the
CNOL attributable to the member, as de-
termined under paragraph (b)(2)(iv)(B) of
this section. This allocation is made with-
out regard to whether a particular mem-
ber actually incurred specific expenses
or engaged in specific activities required
by the special status loss provisions. This
paragraph (b)(2)(iv)(D) applies only with
regard to losses for which the special car-
ryback or carryover rules are dependent
on the type of expense generating the loss,
rather than on the special status of the
entity to which the loss is allocable. See
section 172(b)(1)(C) and paragraph (b)(2)
(iv)(C)(1)(i) of this section (applicable to
losses of nonlife insurance companies).
This paragraph (b)(2)(iv)(D) does not ap-
ply to farming losses incurred by a con-
solidated group in any taxable year begin-
ning after December 31, 2017, and before
January 1, 2021.
(E) Coordination with rules for
life-nonlife groups under §1.1502-47. For
groups that include at least one member
that is a life insurance company and for
which an election is in effect under sec-
tion 1504(c)(2), any computation of the
80-percent limitation under paragraph (a)
(2)(iii)(C) of this section is computed only
with respect to items of income, gain, de-
duction, and loss of the members of the
nonlife subgroup (as defined in §1.1502-
47(b)(9)). For rules regarding the use of
CNOLs of the nonlife subgroup to offset
life insurance company taxable income
of the life subgroup (each as defined in
§1.1502-47(b)), or the use of CNOLs of
the life subgroup to offset consolidated
taxable income of the nonlife subgroup,
see generally section 1503(c)(1) and
§1.1502-47.
(v) Examples. For purposes of the ex-
amples in this paragraph (b)(2)(v), unless
otherwise stated, all groups file consolidat-
ed returns, all corporations have calendar
taxable years, all losses are farming losses
within the meaning of section 172(b)(1)
(B)(ii), all taxable years begin after De-
cember 31, 2020, the facts set forth the
only corporate activity, value means fair
market value and the adjusted basis of
each asset equals its value, all transactions
are with unrelated persons, and the appli-
cation of any limitation or threshold under
section 382 is disregarded. The principles
of this paragraph (b) are illustrated by the
following examples:
* * * * *
(D) Example 4: Allocation of a CNOL
arising in a consolidated return year be-
ginning after December 31, 2020. (1) P
is the common parent of a consolidated
group that includes S. Neither P nor S is
a nonlife insurance company. The P group
also includes nonlife insurance companies
PC1, PC2, and PC3. In the P group’s 2021
consolidated return year, all members ex-
cept S have separate net operating losses,
and the P group’s CNOL in that year is
$40. No member of the P group engages
in farming activities. See section 172(b)
(1)(B)(ii).
(2) Under paragraphs (b)(1) and (b)(2)
(iv)(B)(1) of this section, for purposes of
carrying losses to other taxable years, the
P group’s $40 CNOL is allocated pro rata
among the group members that have sepa-
rate net operating losses. Under paragraph
(b)(2)(iv)(C) of this section, those respec-
tive portions of the CNOL attributable
to PC1, PC2, and PC3 (that is, members
that are nonlife insurance companies) are
carried back to each of the two preceding
taxable years and then carried over to each
of the 20 subsequent taxable years. See
section 172(b)(1)(C). The portion attribut-
able to P (which is not a nonlife insurance
company) may not be carried back but is
carried over to future years. See section
172(b)(1)(A).
(E) Example 5: Allocation of a CNOL
arising in a consolidated return year be-
ginning before January 1, 2021. The facts
are the same as in paragraph (b)(2)(v)(D)
(1) of this section, except that the P group
incurred the CNOL during the P group’s
2020 consolidated return year. The allo-
cation among the P group members of the
CNOL described in paragraph (b)(2)(v)
(D)(2) of this section would be the same.
However, those respective portions of the
CNOL attributable to PC1, PC2, and PC3
(that is, members that are nonlife insurance
companies) will be carried back to each of
the five preceding taxable years and then
carried over to each of the 20 subsequent
taxable years. See section 172(b)(1)(C) and
section 172(b)(1)(D)(i). The portion attrib-
utable to P (which is not a nonlife insurance
company) will be carried back to each of
the five preceding taxable years and then
carried over to future years. See section
172(b)(1)(A) and section 172(b)(1)(D)(i).
(F) Example 6: CNOL deduction and
application of section 172. (1) P (a type of
corporation other than a nonlife insurance
company) is the common parent of a con-
solidated group that includes PC1 (a non-
life insurance company). P and PC1 were
both incorporated in Year 1 (a year begin-
ning after December 31, 2020). In Year 1,
P and PC1 have separate taxable income
of $20 and $25, respectively. As a result,
the P group has Year 1 consolidated tax-
able income of $45. In Year 2, P has sep-
arate taxable income of $24, and PC1 has
a separate taxable loss of $40, resulting in
a P group CNOL of $16. Additionally, in
Year 3, P has separate taxable income of
$15, and PC1 has a separate taxable loss
of $45, resulting in a P group CNOL of
$30. No member of the P group engages
in farming activities. See section 172(b)
(1)(B)(ii).
(2) Under paragraph (b)(2)(iv)(B) of
this section, the P group’s Year 2 CNOL
and Year 3 CNOL are entirely attribut-

November 16, 2020 1044 Bulletin No. 2020–47
able to PC1, a nonlife insurance compa-
ny. Therefore, under section 172(b)(1)
(C)(i), the entire amount of each of these
CNOLs is eligible to be carried back to
Year 1.
(3) Under paragraph (a)(2)(ii) of this
section, the amount of the Year 2 CNOL
that may be used by the P group in Year
1 is determined by taking into account
the status (nonlife insurance company or
other type of corporation) of the member
that has separate taxable income compos-
ing in whole or in part the P group’s con-
solidated taxable income. Because the P
group includes both a nonlife insurance
company member and a member that is
not a nonlife insurance company, para-
graph (a)(2)(iii)(C) of this section ap-
plies to determine the computation of the
post-2017 CNOL deduction limit for the
group for Year 1. Therefore, the 80-per-
cent limitation is applied to the residual
income pool, which consists of the tax-
able income of P, a type of corporation
other than a nonlife insurance company.
Under the 80-percent limitation, the max-
imum amount of P’s Year 1 income that
may be offset by the P group’s post-2017
CNOLs is $16, which equals 80 percent
of the excess of P’s taxable income for
Year 1 ($20) over the aggregate amount
of pre-2018 NOLs allocable to P ($0)
(80 percent x ($20 - $0)). See paragraph
(a)(2)(iii)(C)(2) and (a)(2)(iii)(C)(4) of
this section. PC1 is a nonlife insurance
company to which section 172(f), rather
than the 80-percent limitation in section
172(a)(2)(B)(ii), applies. Therefore, the
maximum amount of PC1’s Year 1 in-
come that may be offset by the P group’s
post-2017 CNOLs is $25, which equals
the excess of PC1’s taxable income for
Year 1 ($25) over the aggregate amount
of pre-2018 NOLs allocable to PC1 ($0).
See paragraph (a)(2)(iii)(C)(3) and (4) of
this section.
(4) Based on paragraph (a)(2)(iii)(C)
of this section and the analysis set forth
in paragraph (b)(2)(v)(F)(3) of this sec-
tion, at the end of Year 2, the P group’s
post-2017 CNOL deduction limit for Year
1 is the lesser of the aggregate amount of
post-2017 NOLs carried to Year 1 ($16),
or $41 ($16 + $25). Therefore, the P group
can offset $16 of its Year 1 income with its
CNOL carryback from Year 2.
(5) When the Year 3 CNOL is carried
back to Year 1, the P group’s post-2017
CNOL deduction limit for Year 1 is the
lesser of $46 (the aggregate amount of
post-2017 NOLs carried to Year 1) or
$41 ($16 + $25; see the computation in
paragraph (b)(2)(v)(F)(3) of this section).
Thus, the total amount of the P group’s
Year 1 income that may be offset by the P
group’s Year 2 and Year 3 CNOLs is $41
($16 from Year 2 + $25 from Year 3). As
a result, the P group reports $4 of income
($45 - $41) in Year 1 that is ineligible for
offset by any other NOLs. The P group
carries over its remaining $5 CNOL ($46
- $41) to future years.
(G) Example 7: Pre-2018 and post-
2017 CNOLs. (1) P is the common parent
of a consolidated group. No member of the
P group is a nonlife insurance company or
is engaged in a farming business, and no
member of the P group has a loss that is sub-
ject to a SRLY limitation. The P group had
the following consolidated taxable income
or CNOL for the following taxable years:
Table 1 to paragraph (b)(2)(v)(G)(1)
20142015201620172018201920202021
$60$0$0($90)$30($40)($100)$120
(2) Under section 172(a)(1), all $30 of
the P group’s 2018 consolidated taxable
income is offset by the 2017 CNOL car-
ryover without limitation. The remaining
$60 of the P group’s 2017 CNOL is car-
ried over to 2021 under section 172(b)(1)
(A)(ii)(I).
(3) Under section 172(b)(1)(D)(i)(I),
the P group’s $40 2019 CNOL is carried
back to the five taxable years preceding
the year of the loss. Thus, the P group’s
$40 2019 CNOL is carried back to offset
$40 of its 2014 consolidated taxable in-
come.
(4) Under section 172(a)(2) and para-
graph (a)(2)(i) of this section, the P
group’s CNOL deduction for 2021 equals
the aggregate amount of pre-2018 NOLs
carried to 2021 plus the group’s post-2017
CNOL deduction limit. The P group has
$60 of pre-2018 NOLs carried to 2021
($90 - $30). Because no member of the
P group is a nonlife insurance company,
paragraph (a)(2)(iii)(A) of this section
applies to determine the computation of
the group’s post-2017 CNOL deduction
limit for 2021. See also section 172(a)(2)
(B). Therefore, the post-2017 CNOL de-
duction limit of the P group for 2021 is
$48, which equals the lesser of the aggre-
gate amount of post-2017 NOLs carried
to 2021 ($100), or 80 percent of the ex-
cess of the P group’s consolidated taxable
income for that year computed without
regard to any deductions under sections
172, 199A, and 250 ($120) over the ag-
gregate amount of pre-2018 NOLs carried
to 2021 ($60) (that is, 80 percent x $60).
Thus, the P group’s CNOL deduction for
2021 equals $108 ($60 pre-2018 NOLs
carried to 2021 + $48 post-2017 CNOL
deduction limit). See section 172(a)(2)
and paragraph (a)(2)(i) of this section. The
P group offsets $108 of its $120 of 2021
consolidated taxable income, resulting
in $12 of consolidated taxable income in
2021. The remaining $52 of the P group’s
2020 CNOL ($100 - $48) is carried over
to future taxable years. See section 172(b)
(1)(A)(ii)(II).
(3) * * *
(ii) * * *
(C) Waiver of carryback period for
losses in taxable years to which statuto-
rily amended carryback rules apply. For
further information, see §1.1502-21T(b)
(3)(ii)(C).
(D) Examples. For further information,
see §1.1502-21T(b)(3)(ii)(D).
* * * * *
(c) * * *
(1) * * *
(i) General rule. Except as provided
in paragraph (g) of this section (relating
to an overlap with section 382), the ag-
gregate of the net operating loss carry-

Bulletin No. 2020–47 1045 November 16, 2020
overs and carrybacks of a member (SRLY
member) arising (or treated as arising) in
SRLYs (SRLY NOLs) that are included in
the CNOL deductions for all consolidated
return years of the group under paragraph
(a) of this section may not exceed the ag-
gregate consolidated taxable income for
all consolidated return years of the group
determined by reference to only the mem-
ber’s items of income, gain, deduction,
and loss (cumulative register). For this
purpose—
* * * * *
(E) If a limitation on the amount of
taxable income that may be offset under
section 172(a) (see paragraph (a)(2) of
this section) applies in a taxable year to a
member whose carryovers or carrybacks
are subject to a SRLY limitation (SRLY
member), the amount of net operating
loss subject to a SRLY limitation that is
available for use by the group in that year
is limited to the percentage of the balance
in the cumulative register that would be
available for offset under section 172(a) if
the SRLY member filed a separate return
and reported as taxable income in that year
the amount contained in the cumulative
register. For example, assume that a con-
solidated group has a SRLY member that
is a corporation other than a nonlife insur-
ance company, and that the SRLY member
has a SRLY NOL that arose in a taxable
year beginning after December 31, 2017
(post-2017 NOL). The group’s consoli-
dated taxable income for a consolidated
return year beginning after December 31,
2020 is $200, but the cumulative register
has a positive balance of only $120 (and
no other net operating loss carryovers or
carrybacks are available for the year). Be-
cause the SRLY limitation would be $96
($120 x 80 percent), only $96 of SRLY
loss may be used, rather than $160 ($200 x
80 percent). In addition, to the extent that
this paragraph (c)(1)(i)(E) applies, the cu-
mulative register is decreased by the full
amount of income required under section
172(a) to support the amount of SRLY
NOL absorption. See, for example, para-
graph (c)(1)(iii)(A) and (B) of this section
for examples illustrating the application of
this rule.
* * * * *
(iii) Examples. For purposes of the
examples in this paragraph (c)(1)(iii), no
corporation is a nonlife insurance com-
pany and, unless otherwise specified, all
taxable years begin after December 31,
2020, and all CNOLs arise in taxable
years beginning after December 31, 2020.
The principles of this paragraph (c)(1) are
illustrated by the following examples:
(A) * * *
(2) T’s $100 net operating loss carry-
over from Year 1 arose in a SRLY. See
§1.1502-1(f)(2)(iii). P’s acquisition of
T was not an ownership change as de-
fined by section 382(g). Thus, the $100
net operating loss carryover is subject
to the SRLY limitation in paragraph (c)
(1) of this section. The positive balance
of the cumulative register of T for Year
2 equals the consolidated taxable income
of the P group determined by reference
to only T’s items, or $70. However, due
to the 80-percent limitation and the ap-
plication of paragraph (c)(1)(i)(E) of this
section, the SRLY limitation is $56 ($70
x 80 percent). No losses from equivalent
years are available, and the P group oth-
erwise has sufficient consolidated taxable
income to support the CNOL deduction
($300 x 80 percent = $240). Therefore,
$56 of the SRLY net operating loss is
included under paragraph (a) of this sec-
tion in the P group’s CNOL deduction for
Year 2. Although only $56 is absorbed,
the cumulative register of T is reduced by
$70, the full amount of income necessary
to support the $56 deduction after taking
into account the 80-percent limitation
($70 x 80 percent = $56).
* * * * *
(B) * * *
(2) P’s Year 1, Year 2, and Year 3 are
not SRLYs with respect to the P group.
See §1.1502-1(f)(2)(i). Thus, P’s $40 net
operating loss arising in Year 1 and $120
net operating loss arising in Year 3 are
not subject to the SRLY limitation under
paragraph (c) of this section. Although
the P group has $160 of taxable income
in Year 4, the 80-percent limitation re-
duces the P group’s net operating loss de-
duction in that year to $128 ($160 x 80
percent). Under the principles of section
172, paragraph (b) of this section requires
that P’s $40 loss arising in Year 1 be the
first loss absorbed by the P group in Year
4. Absorption of this loss leaves $88 ($128
- $40) of the P group’s Year 4 consolidated
taxable income available for offset by loss
carryovers.
(3) T’s Year 2 and Year 3 are SRLYs with
respect to the P group. See §1.1502-1(f)(2)
(ii). P’s acquisition of T was not an owner-
ship change as defined by section 382(g).
Thus, T’s $50 net operating loss arising in
Year 2 and $60 net operating loss arising in
Year 3 are subject to the SRLY limitation.
The positive balance of the cumulative reg-
ister of T for Year 4 equals the P group’s
consolidated taxable income determined by
reference to only T’s items, or $70. Under
paragraph (c)(1)(i)(E) of this section, after
taking into account the 80-percent limita-
tion, T’s SRLY limitation is $56 ($70 x 80
percent). Therefore, the P group can absorb
up to $56 of T’s SRLY net operating loss-
es in Year 4. Under the principles of sec-
tion 172, T’s $50 SRLY net operating loss
from Year 2 is included under paragraph
(a) of this section in the P group’s CNOL
deduction for Year 4. After absorption of
this loss, under paragraph (c)(1)(i) of this
section, $6 of SRLY limit remains in Year
4 ($56 - $50). Further, the total amount of
Year 4 consolidated taxable income avail-
able for offset by other loss carryovers un-
der section 172(a) is $38 ($88 - $50).
(4) P and T each carry over net oper-
ating losses to Year 4 from a taxable year
ending on the same date (that is, Year 3).
The losses carried over from Year 3 to-
tal $180. However, the remaining Year
4 SRLY limit is $6. Therefore, the total
amount of loss available for absorption is
$126 ($120 allocable to P and $6 allocable
to T). Under paragraph (b) of this section,
the losses available for absorption that are
carried over from Year 3 are absorbed on
a pro rata basis, even though one loss aris-
es in a SRLY and the other loss does not.
Thus, $36.19 of P’s Year 3 loss is absorbed
($120/($120 + $6)) x $38 = $36.19. In ad-
dition, $1.81 of T’s Year 3 loss is absorbed
($6/($120 + $6)) x $38 = $1.81.
(5) After deduction of T’s SRLY net
operating losses in Year 4, the cumulative
register of T is adjusted pursuant to para-
graph (c)(1)(i)(E) of this section. A total of
$51.81 of SRLY net operating losses were
absorbed in Year 4 ($50 + $1.81). After
taking into account the 80-percent limita-
tion, the amount of income necessary to
support this deduction is $64.76 ($64.76
x 80 percent = $51.81). Therefore, the
cumulative register of T is decreased by
$64.76, and $5.24 remains in the cumula-
tive register ($70 - $64.76).

November 16, 2020 1046 Bulletin No. 2020–47
(6) P carries its remaining $83.81 ($120
- $36.19) Year 3 net operating loss and T
carries its remaining $58.19 ($60 - $1.81)
Year 3 net operating loss over to Year 5.
Assume that, in Year 5, the P group has
$90 of consolidated taxable income (com-
puted without regard to the CNOL deduc-
tion). The P group’s consolidated taxable
income determined by reference to only
T’s items is a CNOL of $4. Therefore, the
positive balance of the cumulative register
of T in Year 5 equals $1.24 ($5.24 - $4).
Under paragraph (c)(1)(i)(E) of this sec-
tion, after taking into account the 80-per-
cent limitation, T’s SRLY limitation is
$0.99 ($1.24 x 80 percent). For Year 5,
the total amount of Year 5 consolidated
taxable income available for offset by loss
carryovers as a result of the 80-percent
limitation is $72 ($90 x 80 percent). Un-
der paragraph (b) of this section, the loss-
es carried over from Year 3 are absorbed
on a pro rata basis, even though one loss
arises in a SRLY and the other loss does
not. Therefore, $71.16 of P’s Year 3 loss
is absorbed (($83.81/($83.81 + $0.99)) x
$72 = $71.16). In addition, $0.84 of T’s
Year 3 losses is absorbed (($0.99/($83.81
+ $0.99)) x $72 = $0.84).
* * * * *
(D) * * *
(2) Under §1.1502-15(a), T’s $100 of
ordinary loss in Year 3 constitutes a built-
in loss that is subject to the SRLY limita-
tion under paragraph (c) of this section.
The amount of the limitation is deter-
mined by treating the deduction as a net
operating loss carryover from a SRLY.
The built-in loss is therefore subject to
both a SRLY limitation and the 80-percent
limitation for Year 3. The built-in loss is
treated as a net operating loss carryover
solely for purposes of determining the ex-
tent to which the loss is not allowed by
reason of the SRLY limitation, and for all
other purposes the loss remains a loss aris-
ing in Year 3. See §1.1502-21(c)(1)(i)(D).
Consequently, under paragraph (b) of this
section, the built-in loss is absorbed by
the P group before the net operating loss
carryover from Year 1 is absorbed. The
positive balance of the cumulative register
of T for Year 3 equals the P group’s con-
solidated taxable income determined by
reference to only T’s items, or $60. Under
paragraph (c)(1)(i)(E) of this section, after
taking into account the 80-percent limita-
tion, the SRLY limitation for Year 3 is $48
($60 x 80 percent). Therefore, $48 of the
built-in loss is absorbed by the P group.
None of T’s $100 SRLY net operating loss
carryover from Year 1 is allowed.
(3) After deduction of T’s $48 SRLY
built-in loss in Year 4, the cumulative reg-
ister of T is adjusted pursuant to paragraph
(c)(1)(i)(E) of this section. After taking
into account the 80-percent limitation, the
amount of income necessary to support
this deduction is $60 ($60 x 80 percent =
$48). Therefore, the cumulative register of
T is decreased by $60, and zero remains in
the cumulative register ($60 - $60).
(4) Under §1.1502-15(a), the $52 bal-
ance of the built-in loss that is not allowed
in Year 3 because of the SRLY limitation
and the 80-percent limitation is treated as
a $52 net operating loss arising in Year 3
that is subject to the SRLY limitation be-
cause, under paragraph (c)(1)(ii) of this
section, Year 3 is treated as a SRLY. The
built-in loss is carried to other years in ac-
cordance with the rules of paragraph (b)
of this section. The positive balance of the
cumulative register of T for Year 4 equals
$40 (zero from Year 3 + $40). Under para-
graph (c)(1)(i)(E) of this section, after
taking into account the 80-percent limita-
tion, the SRLY limitation for Year 4 is $32
($40 x 80 percent). Therefore, under para-
graph (c) of this section, $32 of T’s $100
net operating loss carryover from Year 1
is included in the CNOL deduction under
paragraph (a) of this section in Year 4.
(5) After deduction of T’s $32 SRLY
net operating loss in Year 4, the cumula-
tive register of T is adjusted pursuant to
paragraph (c)(1)(i)(E) of this section. Af-
ter taking into account the 80-percent lim-
itation, the amount of income necessary
to support this deduction is $40 ($40 x 80
percent = $32). Therefore, the cumulative
register is decreased by $40, and zero re-
mains in the cumulative register ($40 -
$40).
(E) * * *
(2) For Year 2, the P group computes
separate SRLY limits for each of T’s
SRLY carryovers from Year 1. The group
determines its ability to use its capital loss
carryover before it determines its ability to
use its ordinary loss carryover. Under sec-
tion 1212, because the P group has no Year
2 capital gain, it cannot absorb any capital
losses in Year 2. T’s Year 1 net capital loss
and the P group’s Year 2 consolidated net
capital loss (all of which is attributable to
T) are carried over to Year 3.
(3) The P group’s ability to deduct net
operating losses in Year 2 is subject to
the 80-percent limitation, based on the P
group’s consolidated taxable income for
the year. Thus, the group’s limitation for
Year 2 is $72 ($90 x 80 percent). How-
ever, use of the Year 1 net operating loss
also is subject to the SRLY limitation. The
positive balance of the cumulative regis-
ter of T applicable to SRLY net operating
losses for Year 2 equals the P group’s con-
solidated taxable income determined by
reference to only T’s items, or $60. Under
paragraph (c)(1)(i)(E) of this section, after
taking into account the 80-percent limita-
tion, the SRLY limitation for Year 2 is $48
($60 x 80 percent). Therefore, only $48 of
T’s Year 1 SRLY net operating loss is ab-
sorbed by the P group in Year 2. T carries
over its remaining $52 of its Year 1 loss
to Year 3.
(4) After deduction of T’s SRLY net
operating losses in Year 2, the net oper-
ating loss cumulative register is adjusted
pursuant to paragraph (c)(1)(i)(E) of this
section. The P group deducted $48 of
T’s SRLY net operating losses in Year 2.
After taking into account the 80-percent
limitation, the amount of taxable income
necessary to support this deduction is $60
($60 x 80 percent = $48). Therefore, the
net operating loss cumulative register of T
is decreased by $60, and zero remains in
the net operating loss cumulative register
($60 - $60).
(5) For Year 3, the P group again com-
putes separate SRLY limits for each of
T’s SRLY carryovers from Year 1. The
group has consolidated net capital gain
(without taking into account a net capi-
tal loss carryover deduction) of $30. Un-
der §1.1502-22(c), the aggregate amount
of T’s $50 capital loss carryover from
Year 1 that is included in computing the
P group’s consolidated net capital gain
for all years of the group (in this case,
Years 2 and 3) may not exceed $30 (the
aggregate consolidated net capital gain
computed by reference only to T’s items,
including losses and deductions actually
absorbed (that is, $30 of capital gain in
Year 3)). Thus, the P group may include
$30 of T’s Year 1 capital loss carryover
in its computation of consolidated net

Bulletin No. 2020–47 1047 November 16, 2020
capital gain for Year 3, which offsets the
group’s capital gains for Year 3. T carries
over its remaining $20 of its Year 1 cap-
ital loss to Year 4. Therefore, the capital
loss cumulative register of T is decreased
by $30, and zero remains in the capital
loss cumulative register ($30 - $30). Fur-
ther, because the net operating loss cumu-
lative register includes all taxable income
of T included in the P group, as well as
all absorbed losses of T (including capital
items), a zero net increase occurs in the
net operating loss cumulative register.
The P group carries over the Year 2 con-
solidated net capital loss to Year 4.
(6) The P group’s ability to deduct net
operating losses in Year 3 is subject to
the 80-percent limitation, based on the P
group’s consolidated taxable income for
the year. Thus, the P group’s taxable in-
come for Year 3 that can be offset, before
use of net operating losses, is $40 (80 per-
cent x the sum of zero capital gain, after
use of the capital loss carryover, plus $50
of ordinary income). However, use of the
Year 1 net operating loss also is subject to
the SRLY limitation. The positive balance
of the cumulative register of T applicable
to SRLY net operating losses for Year 3
equals the P group’s consolidated taxable
income determined by reference only to
T’s items, or $40. This amount equals the
sum obtained by adding the zero carry-
over from Year 2, a net inclusion of zero
from capital items implicated in Year 3
($30 - $30), and $40 of taxable income
in Year 3. Under paragraph (c)(1)(i)(E) of
this section, after taking into account the
80-percent limitation, the SRLY limita-
tion for Year 3 is $32 ($40 x 80 percent).
Therefore, only $32 of the Year 1 net op-
erating loss is absorbed by the P group in
Year 3. T carries over its remaining $20 of
its Year 1 loss to Year 4.
(F) Example 6: Pre-2018 NOLs and
post-2017 NOLs. (1) Individual A owns P.
On January 1, 2017, A forms T. P and T are
calendar-year taxpayers. In 2017, T sus-
tains a $100 net operating loss that is car-
ried over. During 2018, 2019, and 2020,
T deducts a total of $90 of its 2017 net
operating loss against its taxable income,
and T carries over the remaining $10 of its
2017 net operating loss. In 2021, T sus-
tains a net operating loss of $50. On De-
cember 31, 2021, P acquires all the stock
of T, and T becomes a member of the P
group. The P group has $300 of consoli-
dated taxable income in 2022 (computed
without regard to the CNOL deduction).
Such consolidated taxable income would
be $70 if determined by reference to only
T’s items. The P group has no other SRLY
net operating loss carryovers or CNOL
carryovers.
(2) T’s remaining $10 of net operat-
ing loss carryover from 2017 and its $50
net operating loss carryover from 2021
are both SRLY losses in the P group.
See §1.1502-1(f)(2)(iii). P’s acquisition
of T was not an ownership change as
defined by section 382(g). Thus, T’s net
operating loss carryovers are subject to
the SRLY limitation in paragraph (c)(1)
of this section. The SRLY limitation for
the P group’s 2022 consolidated return
year is consolidated taxable income de-
termined by reference to only T’s $70 of
items.
(3) Because T’s oldest (2017) carry-
over was sustained in a year beginning
before January 1, 2018, its use is not sub-
ject to limitation under section 172(a)(2)
(B). Therefore, all $10 of T’s 2017 SRLY
net operating loss (that is, a pre-2018
NOL) is included under paragraph (a) of
this section in the P group’s CNOL de-
duction for 2022. After deduction of T’s
$10 SRLY net operating loss from 2017,
the cumulative register of T is reduced on
a dollar-for-dollar basis, pursuant to para-
graph (c)(1)(i) of this section. Therefore,
the cumulative register of T is decreased
by $10, and $60 remains in the cumulative
register ($70 - $10).
(4) The P group’s deduction of T’s
2021 net operating loss is subject to both
a SRLY limitation and the 80-percent
limitation under section 172(a)(2)(B)(ii).
Therefore, the total limitation on the use
of T’s 2021 net operating loss in the P
group is $48 (the remaining cumulative
register of $60 x 80 percent). No losses
from equivalent years are available, and
the P group otherwise has sufficient con-
solidated taxable income to support the
CNOL deduction ($290 x 80 percent =
$232). Therefore, $48 of T’s 2021 SRLY
net operating loss is included under para-
graph (a) of this section in the P group’s
CNOL deduction for 2022. The remaining
$2 of T’s 2021 SRLY net operating loss
($50 - $48) is carried over to the P group’s
2023 consolidated return year.
(5) After deduction of T’s $48 SRLY
NOL in 2022, the cumulative register of
T is adjusted pursuant to paragraph (c)
(1)(i)(E) of this section. After taking into
account the 80-percent limitation, the
amount of income necessary to support
this deduction is $60 ($60 x 80 percent =
$48). Therefore, the cumulative register of
T is decreased by $60, and zero remains in
the cumulative register ($60 - $60).
(2) * * *
(v) Coordination with other limita-
tions. This paragraph (c)(2) does not al-
low a net operating loss to offset income
to the extent inconsistent with other lim-
itations or restrictions on the use of losses,
such as a limitation based on the nature
or activities of members. For example, a
net operating loss may not offset income
in excess of any limitations under section
172(a) and paragraph (a)(2) of this sec-
tion. Additionally, any dual consolidated
loss may not reduce the taxable income
to an extent greater than that allowed un-
der section 1503(d) and §§ 1.1503(d)-1
through 1.1503(d)-8. See also §1.1502-
47(k) (relating to preemption of rules for
life-nonlife groups).
* * * * *
(viii) Examples. For purposes of the
examples in this paragraph (c)(2)(viii), no
corporation is a nonlife insurance compa-
ny or has any farming losses. The princi-
ples of this paragraph (c)(2) are illustrated
by the following examples:
* * * * *
(B) * * *
(3) In Year 4, the M group has $10 of
consolidated taxable income (computed
without regard to the CNOL deduction for
Year 4). That consolidated taxable income
would be $45 if determined by reference
only to the items of P, S, and T, the mem-
bers included in the SRLY subgroup with
respect to P’s loss carryover. Therefore,
the positive balance of the cumulative
register of the P SRLY subgroup for Year
4 equals $45 and, due to the application
of the 80-percent limitation under para-
graph (c)(2)(v) of this section, the SRLY
subgroup limitation under this paragraph
(c)(2) is $36 ($45 x 80 percent). However,
the M group has only $10 of consolidated
taxable income in Year 4. Thus, due to the
80-percent limitation and the application
of paragraph (b)(1) of this section, the
M group’s deduction of all net operating

November 16, 2020 1048 Bulletin No. 2020–47
losses in Year 4 is limited to $8 ($10 x 80
percent). As a result, the M group deducts
$8 of P’s SRLY net operating loss car-
ryover, and the remaining $37 is carried
over to Year 5.
(4) After deduction of $8 of P’s SRLY
net operating loss in Year 4, the cumu-
lative register of the P SRLY subgroup
is adjusted pursuant to paragraph (c)(1)
(i)(E) of this section. After taking into
account the 80-percent limitation, the
amount of income necessary to support
this deduction is $10 ($10 x 80 percent =
$8). Therefore, the cumulative register of
the P SRLY subgroup is decreased by $10,
and $35 remains in the cumulative register
($45 - $10).
(5) In Year 5, the M group has $100 of
consolidated taxable income (computed
without regard to the CNOL deduction for
Year 5). None of P, S, or T has any items
of income, gain, deduction, or loss in Year
5. Although the members of the P SRLY
subgroup do not contribute to the $100
of consolidated taxable income in Year
5, the positive balance of the cumulative
register of the P SRLY subgroup for Year
5 is $35 and, due to the application of the
80-percent limitation under paragraph (c)
(2)(v) of this section, the SRLY subgroup
limitation under this paragraph (c)(2) is
$28 ($35 x 80 percent). Because of the
80-percent limitation and the application
of paragraph (b)(1) of this section, the M
group’s deduction of net operating loss-
es in Year 5 is limited to $80 ($100 x 80
percent). Because the $28 of net operating
loss available to be absorbed is less than
80 percent of the M group’s consolidated
taxable income, $28 of P’s SRLY net op-
erating loss is absorbed in Year 5, and the
remaining $9 ($37 - $28) is carried over
to Year 6.
(6) After deduction of $28 of P’s SRLY
net operating loss in Year 5, the cumula-
tive register of the P SRLY subgroup is ad-
justed pursuant to paragraph (c)(1)(i)(E)
of this section. After taking into account
the 80-percent limitation, the amount
of income necessary to support this de-
duction is $35 ($35 x 80 percent = $28).
Therefore, the cumulative register of the P
SRLY subgroup is decreased by $35, and
zero remains in the cumulative register
($35 - $35).
* * * * *
(h) * * *
(9) For the applicability dates of para-
graphs (b)(3)(ii)(C) and (b)(3)(ii)(D) of
this section, see §1.1502-21T(h)(9).
(10) The rules of paragraphs (a), (b)(1),
(b)(2)(iv), and (c)(1)(i)(E) of this section
apply to taxable years beginning after De-
cember 31, 2020.
Par. 4. Section 1.1502-47 is amended:
1. By revising paragraphs (a)(2)(i) and
(ii).
2. By removing paragraph (a)(3).
3. By redesignating paragraph (a)(4) as
paragraph (a)(3).
4. By removing paragraphs (b) and (c).
5. By redesignating paragraph (d) as
paragraph (b).
6. By revising newly redesignated
paragraphs (b)(1), (2), (3), (4), (5), (10),
(11), and (13).
7. In newly redesignated paragraph (b)
(14), by designating Examples 1 through
14 as paragraphs (b)(14)(i) through (xiv),
respectively.
8. In newly redesignated paragraph (b)
(14)(i), by adding a sentence at the end of
the paragraph.
9. By revising newly redesignated
paragraph (b)(14)(ii).
10. By removing newly redesignated
paragraph (b)(14)(xiv).
11. By redesignating paragraph (e) as
paragraph (c).
12. By removing newly redesignated
paragraphs (c)(4) and (5).
13. By redesignating paragraph (c)(6)
as paragraph (c)(4).
14. By redesignating paragraph (f) as
paragraph (d).
15. By revising newly redesignated
paragraph (d)(5).
16. By removing the last sentence of
newly redesignated paragraph (d)(6).
17. By removing newly redesignated
paragraph (d)(7)(ii).
18. By redesignating paragraph (d)(7)
(iii) as paragraph (d)(7)(ii).
19. By revising newly redesignated
paragraph (d)(7)(ii).
20. By redesignating paragraph (g) as
paragraph (e).
21. In newly redesignated paragraph
(e)(2), by removing the language “partial”
everywhere it appears.
22. By removing newly redesignated
paragraph (e)(3).
23. By redesignating paragraph (h) as
paragraph (f).
24. By revising newly redesignated
paragraph (f)(2)(iii).
25. In newly designated paragraph (f)
(2)(v), by removing the word “partial” ev-
erywhere it appears.
26. In newly redesignated paragraph (f)
(2)(v), by adding a sentence at the end of
the paragraph.
27. By revising newly redesignated
paragraph (f)(2)(vi) and (vii).
28. By removing newly redesignated
paragraph (f)(3).
29. By redesignating newly redesig-
nated paragraph (f)(4) as paragraph (f)(3).
30. By revising newly redesignated para-
graph (f)(3)(ii).
31. By adding a new paragraph (g).
32. By removing paragraphs (j), (k),
and (l).
33. By redesignating paragraph (m)
as paragraph (h), and redesignating para-
graph (n) as paragraph (j).
34. In newly redesignated paragraph
(h), by removing the language “partial”
everywhere it appears.
35. In newly redesignated paragraph
(h)(2)(ii), by adding a sentence at the end
of the paragraph.
36. In newly redesignated paragraph
(h)(3)(iv), by adding a sentence at the end
of the paragraph.
37. In newly redesignated paragraph
(h)(3)(viii), by removing the language
“common parent’s election” and adding
in its place “election by the agent for the
group (within the meaning of §1.1502-
77)”.
38. In newly redesignated paragraph
(h)(3)(ix), by removing the last two sen-
tences.
39. By removing newly redesignated
paragraph (h)(4).
40. By redesignating newly redesignat-
ed paragraph (h)(5) as paragraph (h)(4).
41. By revising newly redesignated
paragraph (h)(4) introductory text.
42. In newly redesignated paragraph (h)
(4), by redesignating Examples 1 through
6 as paragraphs (h)(4)(i) through (vi).
43. By revising newly redesignated
paragraphs (h)(4)(ii) and (iii).
44. By removing newly redesignated
paragraphs (h)(4)(v) and (vi).
45. By revising redesignated paragraph
(j)(2)(iii).
46. By removing newly redesignated
paragraph (j)(2)(v).

Bulletin No. 2020–47 1049 November 16, 2020
47. By redesignating newly redesignat-
ed paragraph (j)(2)(vi) as paragraph (j)(2)
(v).
48. By revising newly redesignated
paragraph (j)(3).
49. By redesignating paragraphs (q),
(r), and (s) as paragraphs (k), (l), and (m),
respectively.
50. By adding a new paragraph (n).
51. By removing paragraphs (o), (p),
and (t).
52. In the following table, for each
section designated or redesignated under
these regulations (as indicated in the sec-
ond column), removing the language in
the third column and adding the language
in the fourth column with the frequency
indicated in the fifth column:
ParagraphRedesignationsRemoveAddFrequency
1.1502-47(a)(1)N/Asection 802 or 821
(relating respectively to
life insurance companies
and to certain mutual
insurance companies)
section 801 (relating to
life insurance companies)
Once
1.1502-47(a)(1)N/Alife insurance companies
and mutual insurance
companies may
life insurance companies
may
Once
1.1502-47(a)(1)N/Acomposition and its
consolidated tax
composition, its
consolidated taxable
income (or loss), and its
consolidated tax
Once
1.1502-47(a)(4)1.1502-47(a)(3)§§ 1.1502-1 through
1.1502-80
§§1.1502-0 through
1.1502-100
Once
1.1502-47(a)(4)1.1502-47(a)(3)844848Once
1.1502-47(d)(12)(i)(A),
(d)(12)(i)(C), (d)(12)(i)
(D), (d)(12)(iii), (d)(12)
(iv), (d)(12)(v), (d)(12)
(v)(B), (d)(12)(v)(C), (d)
(12)(v)(D), (d)(12)(vi),
(d)(12)(vii), and (d)(12)
(viii)(F)
1.1502-47(b)(12)(i)(A),
(b)(12)(i)(C), (b)(12)(i)
(D), (b)(12)(iii), (b)(12)
(iv), (b)(12)(v), (b)(12)(v)
(B), (b)(12)(v)(C), (b)(12)
(v)(D), (b)(12)(vi), (b)
(12)(vii), and (b)(12)(viii)
(F), respectively
(d)(12)(b)(12)Each place it
appears
1.1502-47(d)(12)(iii)1.1502-47(b)(12)(iii)subdivision (iii)paragraph (b)(12)(iii)Once
1.1502-47(d)(12)(iv)1.1502-47(b)(12)(iv)subdivision (iv)paragraph (b)(12)(iv)Once
1.1502-47(d)(12)(v)(B)1.1502-47(b)(12)(v)(B)(i.e., sections 11, 802,
821, or 831)
(for example, section 11,
section 801, or section
831)
Once
1.1502-47(d)(12)(vi)1.1502-47(b)(12)(vi)subdivision (vi)paragraph (b)(12)(vi)Once
1.1502-47(d)(12)(vii)1.1502-47(b)(12)(vii)return year and evenreturn year evenOnce
1.1502-47(d)(12)(viii)(A)1.1502-47(b)(12)(viii)(A)(i.e., total reserves in
section 801(c))
(that is, total reserves
in section 816(c), as
modified by section
816(h))
Once
1.1502-47(d)(12)(viii)(D)
and (F)
1.1502-47(b)(12)(viii)(D)
and (F), respectively
subdivision (viii)paragraph (b)(12)(viii)Once
1.1502-47(d)(14)1.1502-47(b)(14)
IllustrationsExamples
Once
1.1502-47(d)(14)1.1502-47(b)(14)paragraph (d)paragraph (b)Once
1.1502-47(d)(14),
Example 1
1.1502-47(b)(14)(i)19132012Once

November 16, 2020 1050 Bulletin No. 2020–47
ParagraphRedesignationsRemoveAddFrequency
1.1502-47(d)(14),
Examples 2 through 4, 8,
10, and 12
1.1502-47(b)(14)(ii)
through (iv), (viii), (x),
and (xii), respectively
19742012Each place it
appears
1.1502-47(d)(14),
Examples 1 through 3
1.1502-47(b)(14)(i)
through (iii), respectively
19802018Each place it
appears
1.1502-47(d)(14),
Examples 1 through 5 and
8 through 13
1.1502-47(b)(14)
(i) through (v) and
(viii) through (xiii),
respectively
19822020Each place it
appears
1.1502-47(d)(14),
Examples 5 through 7
and 9
1.1502-47(b)(14)(v)
through (vii) and (ix),
respectively
19832021Each place it
appears
1.1502-47(d)(14),
Examples 2 through 5 and
8 through 12
1.1502-47(b)(14)(ii)
through (v) and (viii)
through (xii), respectively
(d)(12)(b)(12)Each place it
appears
1.1502-47(d)(14),
Examples 2, 3, and 12
1.1502-47(b)(14)(ii), (iii),
and (xii), respectively
stock casualtynonlife insuranceEach place it
appears
1.1502-47(d)(14),
Example 3
1.1502-47(b)(14)(iii)subparagraph (d)(12)(v)
(B) and (E)
paragraph (b)(12)(v)(B)
and (D)
Once
1.1502-47(d)(14),
Example 3
1.1502-47(b)(14)(iii)e.g.for exampleOnce
1.1502-47(d)(14),
Example 5
1.1502-47(b)(14)(v)i.e.in other wordsOnce
1.1502-47(d)(14),
Example 12
1.1502-47(b)(14)(xii)casualtynonlife insuranceOnce
1.1502-47(e)(1)1.1502-47(c)(1)life company or an
ineligible mutual
company.
life company.Once
1.1502-47(e)(3)1.1502-47(c)(3)§ 1.1502-75(c) and
paragraph (e)(4) of this
section,
§1.1502-75(c),Once
1.1502-47(f)(3)1.1502-47(d)(3)19812019Each place it
appears
1.1502-47(f)(3)1.1502-47(d)(3)19822020Each place it
appears
1.1502-47(f)(3)1.1502-47(d)(3)applying §§ 1.1502-13,
1.1502-18, and 1.1502-19
applying §§1.1502-13 and
1.1502-19
Once
1.1502-47(f)(7)(i)1.1502-47(d)(7)(i)paragraph (g)paragraph (e)Once
1.1502-47(f)(7)(i)1.1502-47(d)(7)(i)sections 802(a), 821(a),
and 831(a)
sections 801(a) and 831(a)Once
1.1502-47(g)1.1502-47(e)threetwoOnce
1.1502-47(g)(1)1.1502-47(e)(1)paragraph (h)paragraph (f)Once
1.1502-47(g)(1)1.1502-47(e)(1)paragraph (n)paragraph (j)Once
1.1502-47(g)(1)1.1502-47(e)(1)paragraph (g)(1)paragraph (e)(1)Once
1.1502-47(g)(2)1.1502-47(e)(2)paragraph (j)paragraph (g)(1)Once
1.1502-47(g)(2)1.1502-47(e)(2)paragraph (m)paragraph (h)Once
1.1502-47(g)(2)1.1502-47(e)(2)paragraph (g)(2)paragraph (e)(2)Once
1.1502-47(h)(1)1.1502-47(f)(1)paragraph (h)paragraph (f)Once

Bulletin No. 2020–47 1051 November 16, 2020
ParagraphRedesignationsRemoveAddFrequency
1.1502-47(h)(1)1.1502-47(f)(1)includes separate mutual
insurance company
taxable income (as
defined in section 821(b))
and insurance company
taxable income
includes insurance
company taxable income
Once
1.1502-47(h)(2)(i)1.1502-47(f)(2)(i)§§ 1.1502-21 or 1.1502-
21A (as appropriate), the
rules in this subparagraph
(2)
§1.1502-21, the rules in
this paragraph (f)(2)
Once
1.1502-47(h)(2)(ii)1.1502-47(f)(2)(ii)§§ 1.1502-21(A)(f)
or 1.1502-21(e) (as
appropriate)
§1.1502-21(e)Once
1.1502-47(h)(2)(iv)1.1502-47(f)(2)(iv)year beginning after
December 31, 1981,
§§ 1.1502-21A or 1.1502-
21 (as appropriate)
year, §1.1502-21Once
1.1502-47(h)(2)(iv)1.1502-47(f)(2)(iv)nonlife lossnonlife subgroup lossOnce
1.1502-47(h)(2)(v)1.1502-47(f)(2)(v)subparagraph (2)paragraph (f)(2)Once
1.1502-47(h)(4)(i)1.1502-47(f)(3)(i)§§ 1.1502-22 or 1.1502-
22A (as appropriate)
§1.1502-22Once
1.1502-47(h)(4)(i)1.1502-47(f)(3)(i)subparagraph (4)paragraph (f)(3)Once
1.1502-47(h)(4)(i)1.1502-47(f)(3)(i)§§ 1.1502-22 or 1.1502-
22A(a) (as appropriate)
§1.1502-22Once
1.1502-47(h)(4)(iii)1.1502-47(f)(3)(iii)§§ 1.1502–22A(b)(1) or
1.1502-22(b)
§1.1502-22(b),Once
1.1502-47(h)(4)(iii)(A)1.1502-47(f)(3)(iii)(A)allowed under section
822(c)(6) or section
832(c)(5),
allowed under section
832(c)(5),
Once
1.1502-47(m)1.1502-47(h)paragraph (g)paragraph (e)Each place it
appears
1.1502-47(m)1.1502-47(h)paragraph (h)paragraph (f)Each place it
appears
1.1502-47(m)1.1502-47(h)paragraph (l)paragraph (g)Each place it
appears
1.1502-47(m)1.1502-47(h)paragraph (m)paragraph (h)Each place it
appears
1.1502-47(m)(2)(ii)1.1502-47(h)(2)(ii)§§ 1502-21 or 1.1502-
21A (as appropriate)
§1.1502-21Once
1.1502-47(m)(2)(ii)1.1502-47(h)(2)(ii)§§ 1.1502-22 or 1.1502-
22A (as appropriate)
§1.1502-22Once
1.1502-47(m)(3)(i)1.1502-47(h)(3)(i)But see subdivision (ix) of
this paragraph (m)(3)
But see paragraph (h)(3)
(ix) of this section
Once
1.1502-47(m)(3)(i)1.1502-47(h)(3)(i)arising in separate
return years ending after
December 31, 1980,
arising in separate return
years
Once
1.1502-47(m)(3)(i)1.1502-47(h)(3)(i)and 1.1502-22 (or
§§ 1.1502-21A and
1.1502-22A, as
appropriate).
and 1.1502-22.Once

November 16, 2020 1052 Bulletin No. 2020–47
ParagraphRedesignationsRemoveAddFrequency
1.1502-47(m)(3)(iii)1.1502-47(h)(3)(iii)consolidated LOlife consolidated net
operating loss
Once
1.1502-47(m)(3)(v)1.1502-47(h)(3)(v)GO or TIItaxable incomeOnce
1.1502-47(m)(3)(v)1.1502-47(h)(3)(v)LICTI (as determined
under paragraph (j) of this
section) for any
LICTI for anyOnce
1.1502-47(m)(3)(vi)(A)1.1502-47(h)(3)(vi)(A)subparagraph (3)paragraph (h)(3)Once
1.1502-47(m)(3)(vii)(A)1.1502-47(h)(3)(vii)(A)notwithstanding § 1.1502-
21A(b)(3)(ii) or 1.1502-
21(b),
notwithstanding §1.1502-
21(b),
Once
1.1502-47(m)(3)(vii)(A)1.1502-47(h)(3)(vii)(A)taxable income for that
year.
taxable income for that
year, subject to the
limitation in section
172(a).
Once
1.1502-47(m)(3)(vii)(B)1.1502-47(h)(3)(vii)(B)(A) of this subdivision
(vii)
paragraph (h)(3)(vii)(A)
of this section
Once
1.1502-47(m)(3)(viii)1.1502-47(h)(3)(viii)section 172(b)(3)(C)section 172(b)(3)Once
1.1502-47(m)(3)(ix)1.1502-47(h)(3)(ix)243(b)(2)243(b)(3)Once
1.1502-47(m)(3)(ix)1.1502-47(h)(3)(ix)return year ending after
December 31, 1980,
return year,Once
1.1502-47(m)(3)(x)1.1502-47(h)(3)(x)LICTI (as defined in
paragraph (j) of this
section) in the particular
LICTI in the particularOnce
1.1502-47(m)(3)(xii)1.1502-47(h)(3)(xii)carryback of a
consolidated LO
carryback of a life
consolidated net operating
loss
Once
1.1502-47(m)(3)(xii)1.1502-47(h)(3)(xii)(2) or (4)(2) or (3)Once
1.1502-47(m)(5),
Examples 1 through 4
1.1502-47(h)(4)(i)
through (iv), respectively
19822021Each place it
appears
1.1502-47(m)(5),
Examples 1 through 4
1.1502-47(h)(4)(i)
through (iv), respectively
i.e.that isEach place it
appears
1.1502-47(m)(5),
Example 1
1.1502-47(h)(4)(i)paragraph (d)(13)paragraph (b)(13)Once
1.1502-47(m)(5),
Example 1
1.1502-47(h)(4)(i)attributable to I (an
ineligible member)
attributable to I (an
ineligible member that is
not a nonlife insurance
company)
Once
1.1502-47(m)(5),
Example 1
1.1502-47(h)(4)(i)of this section. The result
would be
of this section and section
172(a). The result would
be
Once
1.1502-47(m)(5),
Example 4
1.1502-47(h)(4)(iv)of this section or under
§ 1.1502-15A.
of this section.Once
1.1502-47(m)(5),
Example 4
1.1502-47(h)(4)(iv)taxable income is $35taxable income is $32.5Once
1.1502-47(m)(5),
Example 4
1.1502-47(h)(4)(iv)30%35%Once
1.1502-47(m)(5),
Example 4
1.1502-47(h)(4)(iv)(15)(17.5)Once
1.1502-47(m)(5),
Example 4
1.1502-47(h)(4)(iv)(65)(67.5)Once

Bulletin No. 2020–47 1053 November 16, 2020
ParagraphRedesignationsRemoveAddFrequency
1.1502-47(m)(5),
Example 4
1.1502-47(h)(4)(iv)(85)(82.5)Once
1.1502-47(n)1.1502-47(j)consolidated LOlife consolidated net
operating loss and
consolidated operations
loss carryovers
Each place it
appears
1.1502-47(n)(1)1.1502-47(j)(1)paragraph (g)(1)paragraph (e)(1)Once
1.1502-47(n)(1)1.1502-47(j)(1)paragraph (n)(2) of this
section
paragraph (j)(2) of this
section, subject to the
rules and limitations in
paragraph (j)(3) of this
section
Once
1.1502-47(n)(1)1.1502-47(j)(1)consolidated net capital
loss (as determined under
paragraph (l)(4) of this
section).
consolidated net capital
loss.
Once
1.1502-47(n)(2)1.1502-47(j)(2)paragraph (h)paragraph (f)Once
1.1502-47(n)(2)1.1502-47(j)(2)paragraphs (m)(2) and (3)paragraphs (h)(2) and (3)Once
1.1502-47(n)(2)(ii)1.1502-47(j)(2)(ii)consolidated partial
LICTI
consolidated LICTIOnce
1.1502-47(n)(2)(iv)1.1502-47(j)(2)(iv)Paragraphs (m)(3)(vi),
(vii), (x), and (xi)
Paragraphs (h)(3)(vi),
(vii), (x), and (xi)
Once
1.1502-47(q)1.1502-47(k)§ 1.1502-1 through
1.1502-80
§§1.1502-0 through
1.1502-100
Once
1.1502-47(q)1.1502-47(k)paragraph (m)(3)(vi)paragraph (h)(3)(vi)Once
1.1502-47(q)1.1502-47(k)§§ 1.1502-21A(b)(3)
and 1.1502-79A(a)
(3) (or § 1.1502-21, as
appropriate)
§1.1502-21Once
1.1502-47(r)1.1502-47(l)partial LICTI (or LO)LICTI (or life
consolidated net operating
loss)
Once
1.1502-47(r)1.1502-47(l)§§ 1.1502-0 - 1.1502-80§§1.1502-0 through
1.1502-100
Once
1.1502-47(s)(1)(iii)1.1502-47(m)(1)(iii)paragraphs (g), (m), and
(n)
paragraphs (e), (h), and (j)Once
1.1502-47(s)(1)(iv)1.1502-47(m)(1)(iv)paragraph (h)paragraph (f)Once
1.1502-47(s)(1)(v)1.1502-47(m)(1)(v)consolidated partial Lifeconsolidated LifeOnce
1.1502-47(s)(1)(v)1.1502-47(m)(1)(v)(as defined by paragraph
(d)(3) of this section),
determined under
paragraph (j) of this
section,
or life consolidated net
operating loss
Once

November 16, 2020 1054 Bulletin No. 2020–47
The additions and revisions read as fol-
lows:
§1.1502-47 Consolidated returns by
life-nonlife groups.
(a) * * *
(2) General method of consolidation—
(i) Subgroup method. The regulations
adopt a subgroup method to determine
consolidated taxable income. One sub-
group is the group’s nonlife companies.
The other subgroup is the group’s life in-
surance companies. Initially, the nonlife
subgroup computes nonlife consolidated
taxable income and the life subgroup com-
putes consolidated LICTI. A subgroup’s
income may in effect be reduced by a loss
of the other subgroup, subject to the lim-
itations in sections 172 and 1503(c). The
life subgroup losses consist of life con-
solidated net operating loss, consolidated
operations loss carryovers from taxable
years beginning before January 1, 2018
(consolidated operations loss carryovers),
and life consolidated net capital loss. The
nonlife subgroup losses consist of nonlife
consolidated net operating loss and non-
life consolidated net capital loss. Consol-
idated taxable income is therefore defined
in pertinent part as the sum of nonlife con-
solidated taxable income and consolidated
LICTI, reduced by life subgroup losses
and/or nonlife subgroup losses.
(ii) Subgroup loss. A subgroup loss
does not actually affect the computation
of nonlife consolidated taxable income
or consolidated LICTI. It merely consti-
tutes a bottom-line adjustment in reaching
consolidated taxable income. Further-
more, the amount of a subgroup’s loss, if
any, that is eligible to be carried back to
a prior taxable year first must be carried
back against income of the same subgroup
before it may be used as a setoff against
the other subgroup’s income in the taxable
year the loss arose. (See sections 172(b)
(1) and 1503(c)(1); see also §1.1502-
21(b)). The carryback of losses from one
subgroup may not be used to offset income
of the other subgroup in the year to which
the loss is to be carried. This carryback of
one subgroup’s loss may “bump” the other
subgroup’s loss that, in effect, previously
reduced the income of the first subgroup.
The subgroup’s loss that is bumped in
appropriate cases may, in effect, reduce
a succeeding year’s income of either
subgroup. This approach gives the group
the tax savings of the use of losses, but
the bumping rule assures that, insofar as
possible, life deductions will be matched
against life income and nonlife deductions
against nonlife income.
* * * * *
(b) * * *
(1) Life company. The term life com-
pany means a life insurance company as
defined in section 816 and subject to tax
under section 801. Section 816 applies to
each company separately.
(2) Nonlife insurance company. The
term nonlife insurance company has the
meaning provided in §1.1502-1(k).
(3) Life insurance company taxable
income. The term life insurance company
taxable income or LICTI has the meaning
provided in section 801(b).
(4) Group. The term group has the
meaning provided in §1.1502-1(a). Un-
less otherwise indicated in this section, a
group’s composition is determined with-
out regard to section 1504(b)(2).
(5) Member. The term member has the
meaning provided in §1.1502-1(b). A life
company is tentatively treated as a mem-
ber for any taxable year for purposes of
determining if it is an eligible corporation
under paragraph (b)(12) of this section
and, therefore, if it is an includible cor-
poration under section 1504(c)(2). If such
a company is eligible and includible (un-
der section 1504(c)(2)), it will actually be
treated as a member of the group.
* * * * *
(10) Separate return year. The term
separate return year has the meaning
provided in §1.1502-1(e). For purposes
of this paragraph (b)(10), the term group
is defined with regard to section 1504(b)
(2) for years in which an election under
section 1504(c)(2) is not in effect. Thus,
a separate return year includes a taxable
year for which that election is not in effect.
(11) Separate return limitation year.
Section 1.1502-1(f)(2) provides excep-
tions to the definition of the term separate
return limitation year. For purposes of
applying those exceptions to this section,
the term group is defined without regard
to section 1504(b)(2), and the definition
in this paragraph (b)(11) applies separate-
ly to the nonlife subgroup in determining
nonlife consolidated taxable income un-
der paragraph (f) of this section and to the
life subgroup in determining consolidated
LICTI under paragraph (g) of this section.
Paragraph (h)(3)(ix) of this section defines
the term separate return limitation year for
purposes of determining whether the loss-
es of one subgroup may be used against
the income of the other subgroup.
* * * * *
(13) Ineligible corporation. A corpora-
tion that is not an eligible corporation is
ineligible. If a life company is ineligible,
it is not treated under section 1504(c)(2)
as an includible corporation. Losses of a
nonlife member arising in years when it is
ineligible may not be used under section
1503(c)(2) and paragraph (g) of this sec-
tion to set off the income of a life mem-
ber. If a life company is ineligible and is
the common parent of the group (without
regard to section 1504(b)(2)), the elec-
tion under section 1504(c)(2) may not be
made.
(14) * * *
(i) * * * S
2
must file its own separate
return for 2020.
(ii) Example 2. Since 2012, L1 has
been a life company owning all the stock
of L2. In 2018, L1 transfers assets to S1,
a new nonlife insurance company sub-
ject to taxation under section 831(a). For
2020, only L1 and L2 are eligible corpo-
rations. The tacking rule in paragraph (b)
(12)(v) of this section does not apply in
2020 because the old corporation (L1) and
the new corporation (S1) do not have the
same tax character.
* * * * *
(d) * * *
(5) Dividends received deduction—(i)
Dividends received by an includible in-
surance company. Dividends received by
an includible member insurance company,
taxed under either section 801 or section
831, from another includible member of
the group are treated for Federal income
tax purposes as if the group did not file
a consolidated return. See sections 818(e)
(2) and 805(a)(4) for rules regarding a
member taxed under section 801, and see
sections 832(g) and 832(b)(5)(B) through
(E) for rules regarding a member taxed
under section 831.
(ii) Other dividends. Dividends re-
ceived from a life company member of
the group that are not subject to paragraph
(d)(5)(i) of this section are not included in

Bulletin No. 2020–47 1055 November 16, 2020
gross income of the distributee member.
See section 1504(c)(2)(B)(i). If the dis-
tributee corporation is a nonlife insurance
company subject to tax under section 831,
the rules of section 832(b)(5)(B) through
(E) apply.
* * * * *
(7) * * *
(ii) Any taxes described in §1.1502-2
(other than in §1.1502-2(a)(1), (a)(6), and
(a)(7)).
* * * * *
(f) * * *
(2) * * *
(iii) Carrybacks. The portion of the
nonlife consolidated net operating loss
for the nonlife subgroup described in
paragraph (f)(2)(vi) of this section, if any,
that is eligible to be carried back to prior
taxable years under §1.1502-21 is carried
back to the appropriate years (whether
consolidated or separate) before the non-
life consolidated net operating loss may
be used as a nonlife subgroup loss under
paragraphs (e)(2) and (h) of this section
to set off consolidated LICTI in the year
the loss arose. The election under section
172(b)(3) to relinquish the entire carry-
back period for the net operating loss of
the nonlife subgroup may be made by the
agent for the group within the meaning of
§1.1502-77.
* * * * *
(v) * * * For limitations on the use of
nonlife carryovers to offset nonlife con-
solidated taxable income or consolidated
LICTI, see §1.1502-21.
(vi) Portion of nonlife consolidated net
operating loss that is carried back to prior
taxable years. The portion of the nonlife
consolidated net operating loss that (ab-
sent an election to waive carrybacks) is
carried back to the two preceding taxable
years is the sum of the nonlife subgroup’s
farming loss (within the meaning of sec-
tion 172(b)(1)(B)(ii)) and the amount of
the subgroup’s net operating loss that is
attributable to nonlife insurance compa-
nies (as determined under §1.1502-21).
For rules governing the absorption of net
operating loss carrybacks, including lim-
itations on the amount of net operating
loss carrybacks that may be absorbed in
prior taxable years, see §1.1502-21(b).
(vii) Example. P, a holding company
that is not an insurance company, owns all
of the stock of S, a nonlife insurance com-
pany, and L1, a life insurance company.
L1 owns all of the stock of L2, a life insur-
ance company. Both L1 and L2 satisfy the
eligibility requirements of §1.1502-47(b)
(12). Each corporation uses the calendar
year as its taxable year, and no corpora-
tion has incurred farming losses (within
the meaning of section 172(b)(1)(B)(ii)).
For 2021, the group first files a consolidat-
ed return for which the election under sec-
tion 1504(c)(2) is effective. P and S filed
consolidated returns for 2019 and 2020. In
2021, the P-S group sustains a nonlife con-
solidated net operating loss that is attribut-
able entirely to S (see §1.1502-21(b)). The
election in 2021 under section 1504(c)(2)
does not result under paragraph (d)(1) of
this section in the creation of a new group
or the termination of the P-S group. The
loss is carried back to the consolidated
return years 2019 and 2020 of P and S.
Pursuant to §1.1502-21(b), the loss may
be used to offset S’s income in 2019 and
2020 without limitation, and the loss may
be used to offset P’s income in those years,
subject to the limitation in section 172(a)
(see §1.1502-21(b)). The portion of the
loss not absorbed in 2019 and 2020 may
serve as a nonlife subgroup loss in 2021
that may set off the consolidated LICTI of
L1 and L2 under paragraphs (e)(2) and (h)
of this section.
(3) * * *
(ii) Additional principles. In applying
§1.1502-22 to nonlife consolidated net
capital loss carryovers and carrybacks,
the principles set forth in paragraph (f)(2)
(iii) through (v) of this section for apply-
ing §1.1502-21 to nonlife consolidated net
operating loss carryovers and carrybacks
also apply, without regard to the limitation
in paragraph (f)(2)(vi) of this section.
* * * * *
(g) Consolidated LICTI—(1) General
rule. Consolidated LICTI is the consoli-
dated taxable income of the life subgroup,
computed under §1.1502-11 as modified
by this paragraph (g).
(2) Life consolidated net operating loss
deduction—(i) In general. In applying
§1.1502-21, the rules in this paragraph (g)
(2) apply in determining for the life sub-
group the life net operating loss and the
portion of the life net operating loss carry-
overs and carrybacks to the taxable year.
(ii) Life CNOL. The life consolidated
net operating loss is determined under
§1.1502-21(e) by treating the life sub-
group as the group.
(iii) Carrybacks—(A) General rule. The
portion of the life consolidated net operat-
ing loss for the life subgroup, if any, that is
eligible to be carried back under §1.1502-
21 is carried back to the appropriate years
(whether consolidated or separate) before
the life consolidated net operating loss may
be used as a life subgroup loss under para-
graphs (e)(1) and (j) of this section to set
off nonlife consolidated taxable income in
the year the loss arose. The election under
section 172(b)(3) to relinquish the entire
carryback period for the consolidated net
operating loss of the life subgroup may be
made by the agent for the group within the
meaning of §1.1502-77.
(B) Special rule for life consolidat-
ed net operating losses arising in 2018,
2019, or 2020. If a life consolidated net
operating loss arising in a taxable year
beginning after December 31, 2017, and
before January 1, 2021, is carried back
to a life insurance company taxable year
beginning before January 1, 2018, then
such life consolidated net operating loss
is treated as an operations loss carryback
(within the meaning of section 810, as in
effect prior to its repeal) of such company
to such taxable year.
(iv) Subgroup rule. In determining the
portion of the life consolidated net operat-
ing loss that is absorbed when the loss is
carried back to a consolidated return year,
§1.1502-21 is applied by treating the life
subgroup as the group. Therefore, the ab-
sorption is determined without taking into
account any nonlife subgroup losses that
were previously reported on a consolidat-
ed return as setting off life consolidated
taxable income for the year to which the
life subgroup loss is carried back.
(v) Carryovers. The portion of the life
consolidated net operating loss that is not
absorbed in a prior year as a carryback, or
as a life subgroup loss that set off nonlife
consolidated taxable income for the year
the loss arose, constitutes a life carryover
under this paragraph (g)(2) to reduce con-
solidated LICTI before that portion may
constitute a life subgroup loss that sets off
nonlife consolidated taxable income for
that particular year. For limitations on the
use of life carryovers to offset nonlife con-
solidated taxable income or consolidated
LICTI, see §1.1502-21(b).

November 16, 2020 1056 Bulletin No. 2020–47
(3) Life consolidated capital gain net
income or loss—(i) [Reserved].
(ii) Life consolidated net capital loss
carryovers and carrybacks. The life con-
solidated net capital loss carryovers and
carrybacks for the life subgroup are de-
termined by applying the principles of
§1.1502-22 as modified by the following
rules in this paragraph (g)(3)(ii):
(A) Life consolidated net capital loss
is first carried back (or apportioned to the
life members for separate return years)
to be absorbed by life consolidated capi-
tal gain net income without regard to any
nonlife subgroup capital losses and before
the life consolidated net capital loss may
serve as a life subgroup capital loss that
sets off nonlife consolidated capital gain
net income in the year the life consolidat-
ed net capital loss arose.
(B) If a life consolidated net capital
loss is not carried back or is not a life
subgroup loss that sets off nonlife consol-
idated capital gain net income in the year
the life consolidated net capital loss arose,
then it is carried over to the particular year
under this paragraph (g)(3)(ii) first against
life consolidated capital gain net income
before it may serve as a life subgroup cap-
ital loss that sets off nonlife consolidated
capital gain net income in that particular
year.
(h) * * *
(2) * * *
(ii) * * * Additionally, the amount of
consolidated LICTI that may be offset by
nonlife consolidated net operating loss
carryovers may be subject to limitation
(see section 172 and §1.1502-21).
* * * * *
(3) * * *
(iv) * * * The amount of consolidated
LICTI that may be offset by nonlife con-
solidated net operating loss carryovers
may be subject to limitation (see section
172 and §1.1502-21).
* * * * *
(4) Examples. The following examples
illustrate the principles of this paragraph
(h). In the examples, L indicates a life
company, S is a nonlife insurance compa-
ny, another letter indicates a nonlife com-
pany that is not an insurance company, no
company has farming losses (within the
meaning of section 172(b)(1)(B)(ii)), and
each corporation uses the calendar year as
its taxable year.
* * * * *
(ii) Example 2. (A) The facts are the
same as in paragraph (h)(4)(i) of this sec-
tion, except that, for 2021, S’s separate
net operating loss is $200. Assume further
that L’s consolidated LICTI is $200. Un-
der paragraph (h)(3)(vi) of this section,
the offsettable nonlife consolidated net
operating loss is $100 (the nonlife consol-
idated net operating loss computed under
paragraph (f)(2)(ii) of this section ($200),
reduced by the separate net operating
loss of I ($100)). The offsettable nonlife
consolidated net operating loss that may
be set off against consolidated LICTI in
2021 is $35 (35 percent of the lesser of the
offsettable $100 or consolidated LICTI of
$200). See section 1503(c)(1) and para-
graph (h)(3)(x) of this section. S carries
over a loss of $65, and I carries over a loss
of $100, to 2022 under paragraph (f)(2) of
this section to be used against nonlife con-
solidated taxable income (consolidated
net operating loss ($200) less amount used
in 2021 ($35)). Under paragraph (h)(2)(ii)
of this section, the offsettable nonlife con-
solidated net operating loss that may be
carried to 2022 is $65 ($100 minus $35).
The facts and results are summarized in
the following table.
Table 1 to paragraph (h)(4)(ii)(A)
(Dollars omitted)
FactsOffsettableLimitUnused Loss
(a)(b)(c)(d)
1P100
2S(200)(100)(65)
3I(100)(100)
4Nonlife Subgroup(200)(100)(100)(165)
5L200200
635% of lower of line 4(c) or 5(c)35
7Unused offsettable loss(65)
(B) Accordingly, under paragraph (e)
of this section, consolidated taxable in-
come is $165 (line 5(a) minus line 6(c)).
(iii) Example 3. The facts are the same
as in paragraph (h)(4)(ii) of this section,
with the following additions for 2022. The
nonlife subgroup has nonlife consolidated
taxable income of $50 (all of which is at-
tributable to I) before the nonlife consol-
idated net operating loss deduction under
paragraph (f)(2) of this section. Consol-
idated LICTI is $100. Under paragraph
(f)(2) of this section, $50 of the nonlife
consolidated net operating loss carryover
($165) is used in 2022 and, under para-
graph (h)(3)(vi) and (vii) of this section,
the portion used in 2022 is attributable to
I, the ineligible nonlife member. Accord-
ingly, the offsettable nonlife consolidated
net operating loss from 2021 under para-
graph (h)(3)(ii) of this section is $65, the
unused loss from 2021. The offsettable
nonlife consolidated net operating loss in
2022 is $22.75 (35 percent of the lesser
of the offsettable loss of $65 or consoli-
dated LICTI of $100). Accordingly, under
paragraph (e) of this section, consolidated
taxable income is $77.25 (consolidated
LICTI of $100 minus the offsettable loss
of $22.75).

Bulletin No. 2020–47 1057 November 16, 2020
* * * * *
(j) * * *
(2) * * *
(iii) Substitute the term “life consol-
idated net operating loss and consolidat-
ed operations loss carryovers” for “non-
life consolidated net operating loss”, and
“paragraph (g)” for “paragraph (f)”.
(3) Examples. The following examples
illustrate the principles of this paragraph
(j). In the examples, L indicates a life
company, S is a nonlife insurance compa-
ny, another letter indicates a nonlife com-
pany that is not an insurance company, no
company has farming losses (within the
meaning of section 172(b)(1)(B)(ii)), and
each corporation uses the calendar year as
its taxable year.
(i) Example 1. P, S, L1 and L2 constitute a group
that elects under section 1504(c)(2) to file a consoli-
dated return for 2021. In 2021, the nonlife subgroup
consolidated taxable income is $100 and there is $20
of nonlife consolidated net capital loss that cannot
be carried back under paragraph (f) of this section to
taxable years (whether consolidated or separate) pre-
ceding 2021. The nonlife subgroup has no carryover
from years prior to 2021. The life consolidated net
operating loss is $150, which under paragraph (g) of
this section includes life consolidated capital gain net
income of $25. Since life consolidated capital gain
net income is zero for 2021 (see paragraph (h)(3)
(iii) of this section), the nonlife capital loss offset is
zero (see paragraph (h)(3)(ii) of this section). How-
ever, $100 of life consolidated net operating loss sets
off the $100 nonlife consolidated taxable income in
2021. The life subgroup carries under paragraph (g)
(2) of this section to 2022 $50 of the life consolidated
net operating loss ($150 minus $100). The $50 carry-
over will be used in 2022 (subject to the limitation in
section 172(a)) against life subgroup income before
it may be used in 2022 to setoff nonlife consolidated
taxable income.
(ii) Example 2. The facts are the same as in para-
graph (j)(3)(i) of this section, except that, for 2021,
the nonlife consolidated taxable income is $150 (this
amount is entirely attributable to S and includes non-
life consolidated capital gain net income of $50),
consolidated LICTI is $200, and a life consolidated
net capital loss is $50. The $50 life consolidated net
capital loss sets off the $50 nonlife consolidated cap-
ital gain net income. Consolidated taxable income
under paragraph (e) of this section is $300 (nonlife
consolidated taxable income ($150) minus the setoff
of the life consolidated net capital loss ($50), plus
consolidated LICTI ($200)).
(iii) Example 3. The facts are the same as in
paragraph (j)(3)(ii) of this section, except that, for
2022, the nonlife consolidated net operating loss is
$150. This entire amount is attributable to S; thus, it
is eligible to be carried back to 2021 against nonlife
consolidated taxable income under paragraph (f)(2)
of this section and §1.1502-21(b). If P, the agent for
the group within the meaning of §1.1502-77, does
not elect to relinquish the carryback under section
172(b)(3), the entire $150 will be carried back, re-
ducing 2021 nonlife consolidated taxable income to
zero and nonlife consolidated capital gain net income
to zero. Under paragraph (h)(3)(xii) of this section,
the setoff in 2021 of the nonlife consolidated capital
gain net income ($50) by the life consolidated net
capital loss ($50) is restored. Accordingly, the 2021
life consolidated net capital loss may be carried over
by the life subgroup to 2022. Under paragraph (e) of
this section, after the carryback, consolidated taxable
income for 2021 is $200 (nonlife consolidated tax-
able income ($0) plus consolidated LICTI ($200)).
(iv) Example 4. The facts are the same as in para-
graph (j)(3)(iii) of this section, except that P elects
under section 172(b)(3) to relinquish the carryback
of $150 arising in 2022. The setoff in Example 2 is
not restored. However, the offsettable nonlife con-
solidated net operating loss for 2022 (or that may be
carried over from 2022) is zero. See paragraph (h)(3)
(viii) of this section. Nevertheless, the $150 nonlife
consolidated net operating loss may be carried over
to be used by the nonlife group.
(v) Example 5. P owns all of the stock of S1 and
of L1. On January 1, 2017, L1 purchases all of the
stock of L2. For 2021, the group elects under section
1504(c)(2) to file a consolidated return. For 2021,
L1 is an eligible corporation under paragraph (b)
(12) of this section but L2 is ineligible. Thus, L1 but
not L2 is a member for 2021. For 2021, L2 sustains
a net operating loss, which cannot be carried back
(see section 172(b)). For 2021, L2 is treated under
paragraph (d)(6) of this section as a member of a
controlled group of corporations under section 1563
with P, S, and L1. For 2022, L2 is eligible and is
included on the group’s consolidated return. L2’s net
operating loss for 2021 that may be carried to 2022 is
not treated under paragraph (b)(11) of this section as
having been sustained in a separate return limitation
year for purposes of computing consolidated LICTI
of the L1-L2 life subgroup for 2022. Furthermore,
the portion of L2’s net operating loss not used under
paragraph (g)(2) of this section against life subgroup
income in 2022 may be included in offsettable life
consolidated net operating loss under paragraph (j)
(2) and (h)(3)(i) of this section that reduces in 2022
nonlife consolidated taxable income (subject to the
limitation in section 172(a)) because L2’s loss in
2021 was not sustained in a separate return limitation
year under paragraph (j)(2) and (h)(3)(ix)(A) of this
section or in a separate return year (2021) when an
election was in effect under neither section 1504(c)
(2) nor section 243(b)(3).
* * * * *
(n) Effective/applicability dates. The
rules of this section apply to taxable years
beginning after December 31, 2020. How-
ever, a taxpayer may choose to apply the
rules of this section to taxable years begin-
ning on or before December 31, 2020. If
a taxpayer makes the choice described in
the previous sentence, the taxpayer must
apply those rules in their entirety and con-
sistently with the provisions of subchapter
L of the Internal Revenue Code applicable
to the years at issue.
Par. 5. Section 1.1503(d)-4 is amended
by:
1. In paragraph (c)(3)(iii)(B), remov-
ing the period and adding in its place a
semi-colon.
2. In paragraph (c)(3)(iv), removing
the period and adding in its place “; and”.
3. Adding paragraph (c)(3)(v).
The addition reads as follows:
§1.1503(d)-4 Domestic use limitation and
related operating rules.
* * * * *
(c) * * *
(3) * * *
(v) The SRLY limitation is applied
without regard to §1.1502-21(c)(1)(i)(E)
(section 172(a) limitation applicable to a
SRLY member).
* * * * *
Par. 6. Section 1.1503(d)-8 is amend-
ed by adding paragraph (b)(8) to read as
follows:
§1.1503(d)-8 Effective dates.
* * * * *
(b) * * *
(8) Rule providing that SRLY limitation
applies without regard to §1.1502-21(c)
(1)(i)(E). Section 1.1503(d)-4(c)(3)(v) ap-
plies to any period to which §1.1502-21(c)
(1)(i)(E) applies.
Sunita Lough,
Deputy Commissioner for Services
and Enforcement.
Approved: September 29, 2020.
David J. Kautter,
Assistant Secretary of the Treasury
(Tax Policy).
(Filed by the Office of the Federal Register on Octo-
ber 23, 2020, 11:15 a.m., and published in the issue
of the Federal Register for October 27, 2020, 85 FR
67966)

November 16, 2020 1058 Bulletin No. 2020–47
Part III
Transition Relief Related to
Health Coverage Reporting
Required by Sections 6055
and 6056 for 2020
Notice 2020-76
SECTION 1. PURPOSE
This notice extends the due date for
certain 2020 information-reporting re-
quirements under sections 6055 and 6056
of the Internal Revenue Code (Code) from
January 31, 2021, to March 2, 2021. This
notice also provides relief from the section
6721 and section 6722 penalties for cer-
tain aspects of the 2020 information-re-
porting requirements under sections 6055
and 6056.
SECTION 2. BACKGROUND
Sections 6055 and 6056 were added
to the Code by sections 1502 and 1514,
respectively, of the Patient Protection and
Affordable Care Act (PPACA), enacted
March 23, 2010, Pub. L. No. 111-148, 124
Stat. 119, 250, 256. Section 6055 requires
health insurance issuers, self-insuring em-
ployers, government agencies, and other
providers of minimum essential coverage
to file and furnish annual information re-
turns and statements regarding coverage
provided. Section 6056 requires applica-
ble large employers (generally those with
50 or more full-time employees, including
full-time equivalent employees, in the pre-
vious year) to file and furnish annual in-
formation returns and statements relating
to the health insurance, if any, that the em-
ployer offers to its full-time employees.
Section 6056 was amended by sections
10106(g) and 10108(j) of the PPACA and
was further amended by section 1858(b)
(5) of the Department of Defense and
Full-Year Continuing Appropriations Act,
2011, enacted April 15, 2011, Pub. L. No.
112-10, 125 Stat. 38, 169.
Section 36B, which was added to the
Code by section 1401 of the PPACA,
provides a premium tax credit for eligi-
ble individuals who enroll, or enroll a
family member, in coverage through a
Health Insurance Marketplace. Section
5000A, which was added to the Code by
section 1501(b) of the PPACA, general-
ly provides that individuals must have
minimum essential coverage, qualify for
an exemption from the minimum essen-
tial coverage requirement, or make an
individual shared responsibility payment
when they file their federal income tax re-
turn. Section 11081 of Pub. L. No. 115-97,
131 Stat. 2054, 2092, enacted December
22, 2017, and commonly referred to as the
Tax Cuts and Jobs Act, reduces the indi-
vidual shared responsibility payment to
zero for months beginning after December
31, 2018.
Section 6721 imposes a penalty for
failing to timely file an information return
or for filing an incorrect or incomplete in-
formation return. Section 6722 imposes
a penalty for failing to timely furnish an
information statement or for furnishing
an incorrect or incomplete information
statement. The section 6721 and section
6722 penalties are imposed with regard to
information returns and statements listed
in section 6724(d), which includes those
required by sections 6055 and 6056.
The regulations under section 6055
require every person that provides mini-
mum essential coverage to an individual
during a calendar year to file with the In-
ternal Revenue Service (IRS) an informa-
tion return and a transmittal on or before
the following February 28 (March 31 if
filed electronically) and to furnish to the
responsible individual identified on the
return a written statement on or before
January 31 following the calendar year to
which the statement relates. See § 1.6055-
1(f) and (g)(4) of the Income Tax Regu-
lations; see also section 6055(c)(2). (In
2021, the January 31 furnishing due dates
referred to above in this paragraph and in
the following paragraph fall on a weekend
day; accordingly, in 2021 such furnishing
will be timely if done on February 1. See
section 7503.) Except as provided in the
following paragraph, the IRS has desig-
nated Form 1094-B, Transmittal of Health
Coverage Information Returns, and Form
1095-B, Health Coverage, to meet the
requirements of the section 6055 regula-
tions.
The regulations under section 6056
require every applicable large employer
or a member of an aggregated group that
is determined to be an applicable large
employer (ALE member) to file with the
IRS an information return and a transmit-
tal on or before February 28 (March 31 if
filed electronically) of the year following
the calendar year to which it relates and
to furnish to full-time employees a writ-
ten statement on or before January 31
following the calendar year to which the
statement relates. See § 301.6056-1(e) and
(g) of the Procedure and Administration
Regulations; see also section 6056(c)(2).
The IRS has designated Form 1094-C,
Transmittal of Employer-Provided Health
Insurance Offer and Coverage Informa-
tion Returns, and Form 1095-C, Employ-
er-Provided Health Insurance Offer and
Coverage, to meet the requirements of the
section 6056 regulations. In addition, an
ALE member that offers health coverage
through a self-insured health plan must
complete the reporting required under sec-
tion 6055 (that is, information about each
individual enrolled in the self-insured
health plan) using Form 1095-C, Part III,
rather than Form 1095-B.
1
ALE members
use Form 1095-C, Part III to meet the sec-
tion 6055 reporting requirement for all
employees, but for employees who are not
full-time, ALE members report only cer-
tain information to reflect that the Form
1095-C is being used to complete section
6055 reporting but not section 6056 re-
porting, which applies only to full-time
employees.
The regulations under sections 6055
and 6056 allow the IRS to grant an ex-
tension of time of up to 30 days to fur-
nish Forms 1095-B and 1095-C for good
cause shown. See §§ 1.6055-1(g)(4)(i)(B)
(1) and 301.6056-1(g)(1)(ii)(A). In addi-
tion, filers of Forms 1095-B, 1094-C, and
1095-C may receive an automatic 30-day
extension of time to file these forms with
1
See the Instructions for Forms 1094-C and 1095-C for the option to file Form 1094-B and Form 1095-B, rather than Form 1094-C and Form 1095-C, to report coverage of certain non-em-
ployees.

Bulletin No. 2020–47 1059 November 16, 2020
the IRS by submitting Form 8809, Appli-
cation for Extension of Time To File Infor-
mation Returns, on or before the due date
for filing those forms. See §§ 1.6081-1 and
1.6081-8. In limited situations, filers who
submit Form 8809 before the automatic
30-day extension period expires may also
receive an additional 30-day extension of
time to file Forms 1095-B, 1094-C, and
1095-C with the IRS. See id.
The preambles to the section 6055 and
section 6056 regulations (T.D. 9660, 79
FR 13220, 2014-13 I.R.B. 842; T.D. 9661,
79 FR 13231, 2014-13 I.R.B. 855) provid-
ed that, for reporting of 2015 offers and
coverage, the IRS would not impose pen-
alties under sections 6721 and 6722 on re-
porting entities that could show that they
made good-faith efforts to comply with
the information-reporting requirements.
This relief applied only to furnishing and
filing incorrect or incomplete information
reported on a statement or return and not
to a failure to timely furnish or file a state-
ment or return. Notice 2015-87, 2015-52
I.R.B. 889, reiterated that relief, and No-
tice 2015-68, 2015-41 I.R.B. 547, provid-
ed additional information about that relief
with regard to reporting under section
6055. The preambles also noted the gen-
eral rule that, under section 6724 and the
related regulations, the section 6721 and
section 6722 penalties may be waived if a
failure to timely furnish or file a statement
or return is due to reasonable cause.
Through a series of Internal Revenue
Bulletin notices, the Department of the
Treasury (Treasury Department) and the
IRS extended the due dates for informa-
tion-reporting requirements under sec-
tions 6055 and 6056 for furnishing state-
ments to individuals for the years 2015,
2016, 2017, 2018, and 2019. See Notice
2016-4, 2016-3 I.R.B. 279 (2015); Notice
2016-70, 2016-49 I.R.B. 784 (2016); No-
tice 2018-06, 2018-2 I.R.B. 300 (2017);
Notice 2018-94, 2018-51 I.R.B.1042
(2018); Notice 2019-63, 2019-51 I.R.B.
1390 (2019). In these notices, in gener-
al,
2
the Treasury Department and the IRS
extended the furnishing due date for the
Forms 1095-B and 1095-C by 30 days.
Each notice also extended the good-faith
transition relief from the section 6721
and section 6722 penalties to the infor-
mation-reporting requirements under sec-
tions 6055 and 6056 for the years 2015,
2016, 2017, 2018, and 2019, respectively.
In Notices 2018-94 and 2019-63, the
Treasury Department and the IRS stated
that, because the individual shared re-
sponsibility payment is reduced to zero
for months beginning after December 31,
2018, they were studying whether and
how the reporting requirements under
section 6055 should change, if at all, for
future years. Notice 2019-63 also provid-
ed penalty relief for Form 1095-B filers
who chose to furnish the forms only upon
request and did so in accordance with the
procedures described in the notice.
SECTION 3. TRANSITION RELIEF
A. Extension of Due Date for Furnishing
Information Statements to Individuals
under Sections 6055 and 6056 for 2020
The Treasury Department and the IRS
have determined that a substantial number
of employers, insurers, and other providers
of minimum essential coverage need addi-
tional time beyond the January 31, 2021,
due date to gather and analyze the infor-
mation and prepare the 2020 Forms 1095-
B and 1095-C to be furnished to individ-
uals. Accordingly, this notice extends the
due date for furnishing the 2020 Forms
1095-B and 1095-C, from January 31,
2021, to March 2, 2021. In view of this
automatic extension to March 2, 2021, the
provisions under §§ 1.6055-1(g)(4)(i)(B)
(1) and 301.6056-1(g)(1)(ii)(A) allowing
the IRS to grant an extension of time of
up to 30 days to furnish Forms 1095-B
and 1095-C will not apply to the extended
due date. Because the extension of the due
date to furnish information statements to
individuals granted in this notice applies
automatically and is as generous as the
permissive 30-day extension of time to
furnish 2020 information statements un-
der sections 6055 and 6056 that may be
requested by some reporting entities in
submissions to the IRS, the IRS will not
formally respond to such requests. Not-
withstanding the extension provided in
this notice, employers and other coverage
providers are encouraged to furnish 2020
information statements as soon as they are
able.
This notice does not extend the due
date for filing with the IRS the 2020
Forms 1094-B, 1095-B, 1094-C, or 1095-
C. However, this notice does not affect
the provisions regarding an automatic
extension of time for filing information
returns; the automatic extension remains
available under the normal rules for em-
ployers and other coverage providers who
submit a Form 8809 on or before the due
date. See §§ 1.6081-1 and 1.6081-8. This
notice also does not affect the provisions
regarding additional extensions of time to
file. See id.
B. Relief Regarding the Furnishing
Requirement under Section 6055 for
2020
Because the individual shared respon-
sibility payment is zero in 2020, an indi-
vidual does not need the information on
Form 1095-B to compute his or her fed-
eral tax liability or file an income tax re-
turn with the IRS. Nonetheless, reporting
entities required to furnish Form 1095-B
to individuals must expend resources to
do so. At this time, the Treasury Depart-
ment and the IRS have determined as a
matter of enforcement priorities that, for
2020, relief from the penalty under section
6722 for failing to furnish a statement as
required under section 6055 is in the inter-
est of sound tax administration in certain
cases. In particular, the IRS will not as-
sess a penalty under section 6722 against
reporting entities for failing to furnish a
Form 1095-B to responsible individuals in
cases where the following two conditions
are met (the 2020 section 6055 furnish-
ing relief). First, the reporting entity must
post a notice prominently on its website
stating that responsible individuals may
receive a copy of their 2020 Form 1095-
B upon request, accompanied by an email
address and a physical address to which
a request may be sent, as well as a tele-
phone number that responsible individu-
als can use to contact the reporting entity
with any questions. Second, the reporting
entity must furnish a 2020 Form 1095-B
2
For 2015 information statements, the furnishing due date was extended by 60 days. For 2018 information statements, the furnishing due date was extended by 30 days but the 30th day fell
on a Saturday, so the Forms 1095-B and 1095-C were timely if filed by the 32
nd
day.

November 16, 2020 1060 Bulletin No. 2020–47
to any responsible individual upon request
within 30 days of the date the request is
received. The reporting entity may furnish
these statements electronically if it meets
the requirements provided in § 1.6055-2.
As noted earlier, ALE members that of-
fer self-insured health plans are generally
required to use Form 1095-C, Part III, to
meet the section 6055 reporting require-
ments, instead of Form 1095-B. However,
because of the combined reporting under
sections 6055 and 6056 on the Form 1095-
C for full-time employees of ALE mem-
bers enrolled in self-insured health plans,
the 2020 section 6055 furnishing relief
does not extend to the requirement to fur-
nish Forms 1095-C to full-time employ-
ees. Accordingly, for full-time employ-
ees enrolled in self-insured health plans,
penalties will continue to be assessed
consistent with prior enforcement poli-
cies for any failure by ALE members to
furnish Form 1095-C, including Part III,
according to the applicable instructions.
However, the 2020 section 6055 furnish-
ing relief does extend to penalty assess-
ments in connection with the requirement
to furnish Form 1095-C to any employee
enrolled in an ALE member’s self-insured
health plan who is not a full-time employ-
ee for any month of 2020,
3
subject to the
requirements of the 2020 section 6055
furnishing relief.
The 2020 section 6055 furnishing relief
does not affect assessment of penalties as-
sociated with the requirement or the dead-
line to file with the IRS the 2020 Forms
1094-B or 1095-B or the Forms 1094-C or
1095-C, as applicable.
C. Final Extension of Good-Faith Relief
for Reporting and Furnishing under
Sections 6055 and 6056 for 2020
This notice also provides a final ex-
tension of relief from penalties under
sections 6721 and 6722 to reporting en-
tities that report incorrect or incomplete
information on the return or statement
when these entities can show they made
good-faith efforts to comply with the in-
formation-reporting requirements under
sections 6055 and 6056 for 2020 (both
for furnishing to individuals and for filing
with the IRS). This relief applies to miss-
ing and inaccurate taxpayer identification
numbers and dates of birth, as well as oth-
er information required on the return or
statement. Reporting entities must make a
good-faith effort to comply with the reg-
ulations under sections 6055 and 6056 to
be eligible for this relief. In determining
good faith, the IRS will take into account
whether an employer or other coverage
provider made reasonable efforts to pre-
pare for reporting the required information
to the IRS and furnishing it to employees
and covered individuals, such as gathering
and transmitting the necessary data to an
agent to prepare the data for submission
to the IRS or testing its ability to transmit
information to the IRS. Reporting entities
that fail to file an information return or
furnish a statement by the extended due
dates, except as otherwise provided in
this notice, are not eligible for relief. As
this good-faith relief was intended to be
transitional relief, this is the last year the
Treasury Department and the IRS intend
to provide this relief.
D. Future Years and Request for
Comments
In Notice 2019-63, the Treasury De-
partment and the IRS requested comments
as to whether an extension of the due date
for furnishing statements to individuals
under section 6056 would be necessary
for future years and, if so, why. Very few
comments were submitted, which indi-
cates that this relief may no longer be nec-
essary. In Notice 2019-63, the Treasury
Department and the IRS also requested
comments as to whether and how the re-
porting requirements under section 6055
should change, if at all, for future years;
only one comment was submitted.
The Treasury Department and the IRS
are renewing the request for comments
related to furnishing requirements under
sections 6055 and 6056. Unless we re-
ceive comments that explain why this re-
lief continues to be necessary, no relief re-
lated to the furnishing requirements under
sections 6055 and 6056 will be granted
in future years. Taxpayers and reporting
entities are strongly encouraged to submit
comments electronically via the Federal
eRulemaking Portal at www.regulations.
gov (type “IRS- 2020-0037” in the search
field on the regulations.gov homepage to
find this notice and submit comments).
Alternatively, taxpayers and reporting
entities may mail comments to:
Internal Revenue Service
Attn: CC:PA:LPD:PR (Notice
2020-76) Room 5203
P.O. Box 7604
Ben Franklin Station
Washington, D.C. 20044
Comments must be submitted by Feb-
ruary 1, 2021. All comments received
will be available for public inspection on
www.regulations.gov. Once submitted
to the Federal eRulemaking Portal, com-
ments cannot be edited or withdrawn. The
IRS expects to have limited personnel
available to process public comments that
are submitted on paper through mail. Un-
til further notice, any comments submitted
on paper will be considered to the extent
practicable.
SECTION 4. CONTACT
INFORMATION
The principal author of this notice is
Danielle Pierce of the Office of the As-
sociate Chief Counsel (Procedure and
Administration). For further information
regarding this notice contact Danielle
Pierce at (202) 317-5150 (not a toll-free
number).
Request for Comments
Regarding Protection of
Annuity and Spousal Rights
Under Section 205 of
ERISA with Respect to a
Terminating § 403(b) Plan
Funded Through the Use of
Custodial Accounts
Notice 2020-80
PURPOSE
This notice requests comments on the
application of the annuity and spousal
3
For such an employee, the Instructions for Forms 1094-C and 1095-C provide that the employer is to enter code 1G on line 14 for the Form 1095-C, but the ALE member is not otherwise
required to complete Part II of Form 1095-C.

Bulletin No. 2020–47 1061 November 16, 2020
rights provisions of section 205 of the
Employee Retirement Income Security
Act of 1974, P.L. 93-406, 88 Stat. 829,
as amended (ERISA), in connection with
a distribution of an individual custodial
account (ICA) in kind from a terminat-
ing § 403(b) plan. Although no § 403(b)
plans are subject to the annuity and spou-
sal rights provisions of §§ 401(a)(11) and
417 of the Internal Revenue Code (Code),
some § 403(b) plans that are subject to
ERISA (such as a plan of a non-church
tax-exempt employer that provides for
matching contributions) are subject to the
parallel annuity and spousal rights provi-
sions of section 205 of ERISA.
1
Revenue
Ruling 2020-23, 2020-47 I.R.B., issued
contemporaneously with this notice, pro-
vides guidance regarding termination of
a § 403(b) plan that is funded through the
use of § 403(b)(7) custodial accounts and
distribution of an ICA in kind to a partic-
ipant or beneficiary of the plan. The rev-
enue ruling does not, however, address
the application of the annuity and spou-
sal rights provisions under section 205 of
ERISA in connection with a distribution
of an ICA in kind as part of a plan termi-
nation.
BACKGROUND
Treas. Reg. § 1.403(b)-10(a) provides
that a § 403(b) plan may be terminated
and establishes requirements for the plan
termination. One of the requirements for
a plan termination is that “all accumulated
benefits under the plan must be distribut-
ed to all participants and beneficiaries as
soon as administratively practicable after
termination of the plan.”
Rev. Rul. 2011-7, 2011-10 I.R.B. 534,
provides, in relevant part, that a plan may
be terminated in accordance with the rules
of § 1.403(b)-10(a) by delivery to partici-
pants and beneficiaries of a fully paid in-
dividual annuity contract or an individual
certificate evidencing fully paid benefits
under a group annuity contract, as further
described in the ruling.
Section 110 of Division O of the Fur-
ther Consolidated Appropriations Act,
2020, P.L. 116-94 , 133 Stat. 2534 (2019),
known as the Setting Every Community
Up for Retirement Enhancement Act of
2019 (SECURE Act), directs that guid-
ance be issued providing that, if an em-
ployer terminates a plan under which
amounts are contributed to a custodial ac-
count under § 403(b)(7), the plan adminis-
trator or custodian may distribute an ICA
in kind to a participant or beneficiary of
the plan. It also provides that the distribut-
ed ICA shall be maintained by the custodi-
an on a tax-deferred basis as a § 403(b)(7)
custodial account, similar to the treatment
of fully paid individual annuity contracts
under Rev. Rul. 2011-7, until amounts are
actually paid to the participant or benefi-
ciary.
Rev. Rul. 2020-23 provides that a plan
is terminated in accordance with the rules
of § 1.403(b)-10(a) in situations that in-
volve the distribution of an ICA in kind.
The revenue ruling further provides that
a distribution of an ICA in kind to a par-
ticipant or beneficiary is not includible in
gross income until amounts are actually
paid to the participant or beneficiary from
the ICA, so long as the ICA maintains its
status as a § 403(b)(7) custodial account.
The revenue ruling explicitly does not,
however, address a situation in which an-
nuity and spousal rights under section 205
of ERISA apply.
Section 205(a) of ERISA general-
ly provides that a distribution must be
provided either as a qualified joint and
survivor annuity (QJSA) in the case of a
participant who does not die before the
annuity starting date,
2
or as a qualified
preretirement survivor annuity (QPSA)
in the case of a participant who dies be-
fore the annuity starting date. However,
section 205(b)(1)(C) of ERISA provides
that section 205 of ERISA does not apply
to a participant under a plan that is not a
defined benefit plan or money purchase
pension plan if (i) a full death benefit is
provided to the surviving spouse, (ii) no
participant election of a distribution in
the form of a life annuity is made (and
a life annuity is not the normal form of
benefit), and (iii) no part of the distri-
bution is the result of a transfer from a
defined benefit plan or a money purchase
pension plan (this is sometimes called the
“profit-sharing exception” or the “prof-
it-sharing safe harbor”). Section 205(c)
of ERISA provides that a participant may
elect to waive the QJSA or QPSA form of
benefit, but spousal consent is needed for
a waiver by a married participant.
REQUEST FOR COMMENTS
For a § 403(b) plan that does not have
a participant to whom the annuity and
spousal rights provisions of section 205
of ERISA apply, Rev. Rul. 2020-23 pro-
vides guidance allowing the distribution
of an ICA in kind as part of the termina-
tion of the plan. However, issues remain
regarding the application of section 205 of
ERISA in connection with a distribution
of an ICA in kind under section 110 of the
SECURE Act for a § 403(b) plan with at
least one participant to whom section 205
of ERISA applies, including if a partici-
pant cannot be reached, a participant does
not elect to waive the QJSA and QPSA
form of benefit, or a married participant
elects to waive the QJSA and QPSA form
of benefit but the participant’s spouse does
not consent to the waiver.
The Department of the Treasury (Trea-
sury Department) and the IRS request
comments on the application of ERISA
section 205 annuity and spousal rights
provisions in connection with a distribu-
tion in kind of an ICA under section 110 of
the SECURE Act, including any adminis-
trative or other burdens that may arise and
potential methods or rules that could min-
imize or eliminate those burdens.
The Treasury Department and the IRS
are particularly interested in—
• Information on current practices and
arrangements (including sample lan-
guage from custodial account agree-
ments and § 403(b) plan documents, if
relevant) that may affect the termina-
tion of § 403(b) plans that are funded
through § 403(b)(7) custodial accounts
and that are subject to section 205 of
ERISA;
1
The Internal Revenue Service (IRS) has interpretive authority over section 205 of ERISA pursuant to the Reorganization Plan No. 4 of 1978, 5 U.S.C. App.
2
In general, for a married participant, a QJSA is an annuity for the life of the participant with a survivor annuity for the life of the spouse that meets certain requirements, and the participant’s
election to waive the QJSA cannot take effect unless the participant’s spouse consents to the election. ERISA § 205(c)(2) and (d)(1). For an unmarried participant, the QJSA is an annuity for
the life of the participant, and a single life annuity must be provided unless the participant elects another form of benefit. § 1.401(a)-20, Q&A-25(a).

November 16, 2020 1062 Bulletin No. 2020–47
• Views regarding the administrability of
alternative dates (which continue to be
evaluated by the Treasury Department
and the IRS for consistency with appli-
cable law) for when rights under sec-
tion 205 of ERISA might be required to
be protected, for example, at the time
of the termination of a § 403(b) plan
(by obtaining the participant’s waiv-
er and the spouse’s consent, pursuant
to section 205(c) of ERISA, to a dis-
tribution in kind of an ICA), or at the
time payments are made from the ICA
(analogous to § 1.401(a)-20, Q&A-2,
which provides that the requirements
of §§ 401(a)(11) and 417 of the Code
are applied to payments under distrib-
uted annuity contracts);
• Views on whether the Pension Benefit
Guaranty Corporation’s missing partic-
ipants program for defined contribution
plans (29 CFR Part 4050 Subpart B)
3

might be a destination for transferring,
without participant and spousal con-
sent, the cash value of custodial ac-
counts that are subject to section 205
of ERISA; and
• Views on the type(s) of transition re-
lief, if any, that would assist with the
termination of an existing § 403(b)
plan that is funded through the use of
§ 403(b)(7) custodial accounts in a way
that protects rights under section 205 of
ERISA.
Comments should be submitted in
writing on or before February 3, 2021,
and should include a reference to Notice
2020-80. Comments may be submitted in
one of two ways:
(1) Electronically via the Federal
eRulemaking Portal at www.regula-
tions.gov (type “IRS IRS-2020-0032”
in the search field on the regulations.
gov homepage to find this notice and
submit comments).
(2) Alternatively, by mail to: Internal
Revenue Service, Attn: CC:PA:LP-
D:PR (Notice 2020-80), Room 5203,
P.O. Box 7604, Ben Franklin Station,
Washington, D.C. 20044.
All commenters are strongly encour-
aged to submit comments electronically,
as access to mail may be limited. The IRS
expects to have limited personnel avail-
able to process public comments that are
submitted on paper through mail. Until
further notice, any comments submitted
on paper will be considered to the extent
practicable. The Treasury Department and
the IRS will publish for public availabili-
ty any comment submitted electronically,
and to the extent practicable on paper, to
its public docket.
DRAFTING INFORMATION
The principal author of this notice is
Patrick T. Gutierrez of the Office of As-
sociate Chief Counsel, Employee Ben-
efits, Exempt Organizations, and Em-
ployment Taxes. For further information
regarding this notice, please contact Pat-
rick T. Gutierrez at (202) 317-4148 (not
toll-free).
3
Pension Benefit Guaranty Corporation (PBGC) staff advised the Treasury Department and the IRS that, under the missing participants program, (i) PBGC generally pays a 50-percent joint
and survivor annuity to participants who are married and claim benefits (although de minimis amounts transferred into the program are paid as a lump sum), (ii) married participants may
elect with spousal consent a lump sum or another type of annuity, and (iii) terminating plans transferring benefits into the program must liquidate accounts and send money to the PGBC (as
PBGC cannot accept in-kind account transfers).

Bulletin No. 2020–47 1063 November 16, 2020
Part IV
Notice of Proposed
Rulemaking
Section 42, Low-Income
Housing Credit Average
Income Test Regulations
REG-119890-18
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains pro-
posed regulations setting forth guidance on
the average income test under section 42(g)
(1)(C) of the Internal Revenue Code (Code)
for purposes of the low-income housing
credit. These proposed regulations affect
owners of low-income housing projects,
tenants in those projects, and State or local
housing credit agencies that administer the
low-income housing credit.
DATES: Written (including electronic)
comments must be received by December
29, 2020.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically. Submit electronic submis-
sions via the Federal eRulemaking Portal
at www.regulations.gov (indicate IRS and
REG-104591-18) by following the online
instructions for submitting comments.
Once submitted to the Federal eRulemak-
ing Portal, comments cannot be edited or
withdrawn. The IRS expects to have lim-
ited personnel available to process public
comments that are submitted on paper
through the mail. Until further notice,
any comments submitted on paper will
be considered to the extent practicable.
The Department of the Treasury (Treasury
Department) and the IRS will publish for
public availability any comment submit-
ted electronically, and to the extent practi-
cable on paper, to its public docket.
FOR FURTHER INFORMATION CON-
TACT: Concerning these proposed regu-
lations, Dillon Taylor or Michael J. Torru-
ella Costa at (202) 317-4137; concerning
submissions of comments, Regina L.
Johnson at (202) 317-6901 (not toll-free
numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to the Income Tax Regula-
tions (26 CFR part 1) under section 42 of
the Code.
The Tax Reform Act of 1986, Pub. L.
99-514, 100 Stat. 2085 (1986 Act) creat-
ed the low-income housing credit under
section 42 of the Code. Section 42(a) pro-
vides that the amount of the low-income
housing credit for any taxable year in the
credit period is an amount equal to the ap-
plicable percentage of the qualified basis
of each qualified low-income building.
Section 42(c)(1)(A) provides that the
qualified basis of any qualified low-in-
come building for any taxable year is an
amount equal to (i) the applicable fraction
(determined as of the close of the taxable
year) of (ii) the eligible basis of the build-
ing (determined under section 42(d)).
Sections 42(c) and 42(d) define applicable
fraction and eligible basis. Section 42(d)
(1) and (2) define the eligible basis of a
new building or an existing building, re-
spectively.
Section 42(c)(2) defines a qualified
low-income building as any building
which is part of a qualified low-income
housing project at all times during the
compliance period (that is, the period of
15 taxable years beginning with the first
taxable year of the credit period) and to
which the amendments made by section
201(a) of the 1986 Act apply (generally
property placed in service after Decem-
ber 31, 1986, in taxable years ending af-
ter that date). To qualify as a low-income
housing project, one of the section 42(g)
minimum set-aside tests, as elected by the
taxpayer, must be satisfied.
Prior to the enactment of the Consol-
idated Appropriations Act of 2018, Pub.
L. 115-141, 132 Stat. 348 (2018 Act),
section 42(g) set forth two minimum set-
aside tests that a taxpayer may elect with
respect to a low-income housing project,
known as the 20-50 test and the 40-60 test.
Under the 20-50 test, at least 20 percent
of the residential units in the project must
be both rent-restricted and occupied by
tenants whose gross income is 50 percent
or less of the area median gross income
(AMGI). Section 42(g)(1)(A). Under the
40-60 test, at least 40 percent of the res-
idential units in the project must be both
rent-restricted and occupied by tenants
whose gross income is 60 percent or less
of AMGI. Section 42(g)(1)(B).
Section 103(a) of Division T of the 2018
Act added section 42(g)(1)(C) to the Code
to provide a third minimum set-aside test
that a taxpayer may elect with respect to a
low-income housing project: the average
income test. Section 42(g)(1)(C)(i) pro-
vides that, a project meets the minimum
requirements of the average income test if
40 percent or more (25 percent or more in
the case of a project described in section
142(d)(6)) of the residential units in the
project are both rent-restricted and occu-
pied by tenants whose income does not
exceed the imputed income limitation des-
ignated by the taxpayer with respect to the
respective unit. Section 42(g)(1)(C)(ii)(I)
and (III) provides that the taxpayer must
designate the imputed income limitation
for each unit and the designated imputed
income limitation of any unit must be 20,
30, 40, 50, 60, 70, or 80 percent of AMGI.
Section 42(g)(1)(C)(ii)(II) provides that
the average of the imputed income limita-
tions designated by the taxpayer for each
unit must not exceed 60 percent of AMGI.
Generally, under section 42(g)(2)(D)
(i), if the income of the occupant of a
low-income unit rises above the income
limitation, the unit continues to be treated
as a low-income unit if the income of the
occupant initially met the income limita-
tion and the unit continues to be rent-re-
stricted. Section 42(g)(2)(D)(ii), however,
provides an exception to the general rule
in case of the 20-50 test or the 40-60 test.
Under this exception, the unit ceases to
be treated as a low-income unit when two
conditions occur. The first condition is that
the income of an occupant of a low-in-
come unit increases above 140 percent of

November 16, 2020 1064 Bulletin No. 2020–47
the imputed income limitation applicable
to the unit under section 42(g)(1) (ap-
plicable income limitation). The second
condition is that a new occupant, whose
income exceeds the applicable income
limitation, occupies any residential unit
in the building of a comparable or small-
er size. In the case of a deep rent skewed
project described in section 142(d)(4)(B),
“170 percent” is substituted for “140 per-
cent” in applying the applicable income
limitation under section 42(g)(1), and the
second condition is that any low-income
unit in the building is occupied by a new
resident whose income exceeds 40 per-
cent of AMGI. Section 42(g)(2)(D)(iv).
The exception contained in section 42(g)
(2)(D)(ii) is referred to as the “next avail-
able unit rule.” See also §1.42-15 of the
Income Tax Regulations.
Section 103(b) of Division T of the
2018 Act added section 42(g)(2)(D)(iii),
(iv) and (v) to the Code to provide a new
next available unit rule for situations in
which the taxpayer has elected the av-
erage income test. Under this new next
available unit rule, a unit ceases to be a
low-income unit if two conditions are met.
The first condition is whether the income
of an occupant of a low-income unit in-
creases above 140 percent of the greater of
(i) 60 percent of AMGI, or (ii) the imputed
income limitation designated by the tax-
payer with respect to the unit (applicable
imputed income limitation). The second
condition is whether any other residen-
tial rental unit in the building that is of a
size comparable to, or smaller than, that
unit is occupied by a new tenant whose
income exceeds the applicable imputed
income limitation. If the new tenant oc-
cupies a unit that was taken into account
as a low-income unit prior to becoming
vacant, the applicable imputed income
limitation is the limitation designated with
respect to the unit. If the new tenant oc-
cupies a market-rate unit, the applicable
imputed income limitation is the limita-
tion that would have to be designated with
respect to the unit in order for the project
to continue to maintain an average of the
designations of 60 percent of AMGI or
lower.
In the case of a deep rent skewed proj-
ect described in section 142(d)(4)(B) for
which the taxpayer elects the average
income test, “170 percent” is substituted
for “140 percent” in applying the appli-
cable imputed income limitation, and the
second condition is that any low-income
unit in the building is occupied by a new
resident whose income exceeds the lesser
of 40 percent of AMGI or the imputed in-
come limitation designated with respect to
the unit under section 42(g)(1)(C)(ii)(I).
Section 42(g)(2)(D)(iv).
Under section 42(g), once a taxpay-
er elects to use a particular set-aside test
with respect to a low-income housing
project, that election is irrevocable. Thus,
if a taxpayer had previously elected to use
the 20-50 test under section 42(g)(1)(A)
or the 40-60 test under section 42(g)(1)
(B) with respect to a low-income housing
project, the taxpayer may not subsequent-
ly elect to use the average income test
under section 42(g)(1)(C) with respect to
that low-income housing project. Section
42(g)(4) provides generally that section
142(d)(2) applies for purposes of deter-
mining whether any project is a qualified
low-income housing project and whether
any unit is a low-income unit.
Section 42(m)(1) provides that the
owners of an otherwise-qualifying build-
ing are not entitled to the housing credit
dollar amount that is allocated to the build-
ing unless, among other requirements, the
allocation is pursuant to a qualified allo-
cation plan (QAP). A QAP provides stan-
dards by which a State or local housing
credit agency (Agency) is to make these
allocations. Under §1.42-5(a)(1), a QAP
must contain a procedure that the Agency
will follow in monitoring noncompliance.
Explanation of Provisions
I. Proposed §1.42-15, Next Available
Unit Rule for the Average Income Test
The proposed regulations update the
next available unit provisions in §1.42-
15 to reflect the new set-aside based on
the average income test and to take into
account section 42(g)(2)(D)(iii), (iv) and
(v). In situations where multiple units
are over-income at the same time in an
average-income project that has a mix of
low-income and market-rate units, these
regulations provide that a taxpayer need
not comply with the next available unit
rule in a specific order. Instead, renting
any available comparable or smaller va-
cant unit to a qualified tenant maintains
the status of all over-income units as
low-income units until the next compara-
ble or smaller unit becomes available (or,
in the case of a deep rent skewed project,
the next low-income unit becomes avail-
able). For example, in a 20-unit building
with 9 low-income units (3 units at 80
percent of AMGI; 2 units at 70 percent
of AMGI; 1 unit at 40 percent of AMGI;
and 3 units at 30 percent of AMGI), if
there are two over-income units, one a
30 percent income 3-bedroom unit and
another a 70 percent 2-bedroom unit,
and the next available unit is a vacant
2-bedroom market-rate unit, renting the
vacant 2-bedroom unit to occupants at
either the 30 or 70 percent income lim-
itation would satisfy both the minimum
set-aside of 40 percent and the average
test of 60 percent or lower required by
section 42(g)(1)(C).
II. Proposed §1.42-19, Average Income
Test
A. In General
The proposed regulations provide that
a project for residential rental property
meets the requirements of the average
income test under section 42(g)(1)(C) if
40 percent or more (25 percent or more
in the case of a project described in sec-
tion 142(d)(6)) of the residential units in
the project are both rent-restricted and
occupied by tenants whose income does
not exceed the imputed income limitation
designated by the taxpayer with respect
to the respective unit. The average of the
designated imputed income limitations of
the low-income units in the project must
not exceed 60 percent of AMGI.
B. Designation of Imputed Income
Limitations
Section 42(g)(1)(C)(ii) provides spe-
cial rules relating to the income limita-
tions applicable in the average income
test. Specifically, it provides that the tax-
payer must designate the imputed income
limitation for each unit taken into account
under the average income test. Further,
the imputed income limitation of any unit
designated must be 20, 30, 40, 50, 60, 70,
or 80 percent of AMGI.

Bulletin No. 2020–47 1065 November 16, 2020
The proposed regulations provide that
a taxpayer must designate the imputed
income limitation of each unit taken into
account under the average income test
in accordance with: (1) any procedures
established by the IRS in forms, instruc-
tions, or publications or in other guidance
published in the Internal Revenue Bulletin
pursuant to §601.601(d)(2)(ii)(b); and (2)
any procedures established by the Agency
that has jurisdiction over the low-income
housing project that contains the units
to be designated, to the extent that those
Agency procedures are consistent with
any IRS guidance and these regulations.
After the enactment of the 2018 Act, com-
menters have specifically asked that Agen-
cies be provided this flexibility, and the
Treasury Department and the IRS agree
that Agencies should generally be able
to establish designation procedures that
accommodate their needs. Several com-
menters suggested allowing the Agencies,
when they consider it necessary, to require
income recertifications, to set compliance
testing periods, or to adjust compliance
monitoring fees to reflect the additional
costs associated with monitoring income
averaging. These proposed regulations do
not change existing levels of flexibility on
those issues.
C. Method and Timing of Unit
Designation
The Code does not specify the manner
by which taxpayers must designate the
imputed income limitation of units for
purposes of the average income test. Des-
ignation of the imputed income limitation
with respect to a unit is, first, for Agen-
cies to evaluate the proper mix of units in
a project in making housing credit dollar
amount allocations consistent with the
State policies and procedures set forth in
the QAPs, and, second, to carry out their
compliance-monitoring responsibilities.
For these reasons, the proposed regula-
tions provide that the taxpayers should
designate the units in accordance with
the Agency procedures relating to such
designations, provided that the Agency
procedures are consistent with any re-
quirements and procedures relating to unit
designation that the IRS may set forth in
its forms and publications and other guid-
ance. Further, to promote certainty, the
proposed regulations provide that the tax-
payers must complete the initial designa-
tion of all of the units taken into account
for the average income test as of the close
of the first taxable year of the credit peri-
od. In addition, the proposed regulations
provide that no change to the designated
imputed income limitations may be made.
D. Requirement to Maintain 60 Percent
AMGI Average Test and Opportunity to
Take Mitigating Actions
A low-income housing project must
meet the requirements of the elected set-
aside test for each taxable year. For a proj-
ect electing the average income test, in ad-
dition to the project containing at least 40
percent low-income units, the designated
imputed income limitations of the project
must meet the requirement of an average
test. That is, the average of the designated
imputed income limitations of all low-in-
come units (including units in excess of
the minimum 40 percent set-aside) must
be 60 percent of AMGI or lower (60-per-
cent or lower average test). Regardless
of their other attributes, residential units
that are not included in the computation
of the average do not count as low-income
units. Consistent with the application of
the 20-50 test and 40-60 test, the statuto-
ry requirements of a set-aside test do not
change from year to year. Accordingly, in
each taxable year, the average of all of the
designations must be 60 percent of AMGI
or lower.
The Treasury Department and the IRS
recognize that, in some situations, the
average income requirement may magni-
fy the adverse consequences of a single
unit’s failure to maintain its status as a
low-income unit. Assume, for example, a
100 percent low-income project in which
a single unit is taken out of service. Under
the 20–50 or 40–60 set-asides, the project
remains a qualified low-income housing
project even though the reduction in qual-
ified basis may trigger a corresponding
amount of recapture. By contrast, under
the average income set-aside, if the fail-
ing unit has a designated imputed income
limitation that is less than 60 percent of
AMGI, the average of the limitations
without that unit may now be more than
60 percent. In the absence of some relief
provision under the average income test,
the entire project would fail, and the tax-
payer would experience a correspondingly
large recapture.
Because there is no indication that the
statute intended such a stark disparity be-
tween the average income set-aside and
the existing 20–50 and 40–60 set-asides,
the proposed regulations provide for
certain mitigating actions. In most situ-
ations, if the taxpayer takes a mitigating
action within 60 days of the close of a
year for which the average income test
might be violated, the taxpayer avoids
total disqualification of the project and
significantly reduces the amount of re-
capture. See part II.F. of this Explanation
of Provisions.
Responding to that same concern after
the enactment of the 2018 Act, some com-
menters asked that Agencies be provided
a specific grant of authority to establish
procedures and policies related to the av-
erage income set-aside that could reduce
the risk of failure of an entire project. For
example, some commenters asked that
Agencies be allowed to establish rules
permitting owners to alter the imputed
income limitations designated for particu-
lar units (presumably by reducing income
limitations when needed to maintain a
compliant average and then later raising
limitations to prevent a permanent reduc-
tion in the aggregate maximum gross rents
from the project). As described in part
II.C. of this Explanation of Provisions,
these proposed regulations do not permit
designated imputed income limitations to
be changed. Other commenters proposed
allowing owners to take protective steps
similar to those that are provided in the
proposed regulations.
E. Results Following an Opportunity to
Take Mitigating Actions
The proposed regulations provide that,
after any mitigating actions, if, prior to the
end of the 60th day following the year in
which the project would otherwise fail the
60-percent or lower average test, the proj-
ect satisfies all other requirements to be
a qualified low-income housing project,
then as a result of the mitigating action,
the project is treated as having satisfied
the 60-percent or lower average test at
the close of the immediately preceding
year. However, if no mitigating actions

November 16, 2020 1066 Bulletin No. 2020–47
are taken, the project fails to be a quali-
fied low-income housing project as of the
close of the year in which the project fails
the average income test.
F. Description of Mitigating Actions
The proposed regulations describe
two possible mitigating actions. First,
the taxpayer may convert one or more
market-rate units to low-income units.
Immediately prior to becoming a low-in-
come unit, that unit must be vacant or
occupied by a tenant who qualifies for
residence in a low-income unit (or units)
and whose income is not greater than the
new imputed income limitation of that
unit (or units).
Alternatively, the taxpayer may identi-
fy one or more low-income units as “re-
moved” units. A unit may be a removed
unit only if it complies with all the re-
quirements of section 42 to be a low-in-
come unit.
G. Tax Treatment of Removed Units
The proposed regulations provide that
a removed unit is not included in com-
puting the average of the imputed income
limitations of the low-income units un-
der the 60-percent or lower average test.
If the absence of one or more removed
units from the computation causes fewer
than 40 percent (or, if applicable, fewer
than 25 percent) of the residential units
to be taken into account in computing
the average, the project fails to be a qual-
ified low-income housing project. In ad-
dition, a removed unit is not treated as a
low-income unit (or units) for purposes
of credit calculation. On the other hand,
for purposes of the recapture provisions
of section 42(j), a removed unit is treated
the same as a low-income unit, and thus
the act of identifying a removed unit does
not trigger recapture (unless the identifica-
tion reduces the low-income units below
40 percent of the project).
H. Request for Comments on an
Alternative Mitigating Action Approach
Recognizing that this approach of
mitigating actions may in certain cases
cause a project to have less than 40 per-
cent of low-income units and, thereby, to
fail the average income test, the Treasury
Department and the IRS request com-
ments on an alternative mitigating ap-
proach. Under this alternative mitigating
approach, in the event that the average
test rises above 60 percent of AMGI as
of the close of a taxable year, due to a
low-income unit or units ceasing to be
treated as a low-income unit or units, the
taxpayer may take the mitigating actions
of redesignating the imputed income lim-
itation of a low-income unit to return the
average test to 60 percent of AMGI or
lower. If, under this approach, a redes-
ignation causes a low-income unit to be
an over-income unit as defined in §1.42-
15(a), the taxpayer would be required to
apply the next available unit rule applica-
ble to the average income test.
Proposed Applicability Date
The amendments to the next available
unit regulations in §1.42-15 are proposed
to apply to occupancy beginning 60 or
more days after the date those regulations
are published as final regulations in the
Federal Register. The average income
test regulations in §1.42-19 are proposed
to apply to taxable years beginning after
the date those regulations are published
as final regulations in the Federal Reg-
ister. Taxpayers, however, may rely on
the proposed amendments to §1.42-15
for occupancy beginning after October
30, 2020 and on or before 60 days after
the date those regulations are published
as final regulations in the Federal Reg-
ister, provided the taxpayer follows the
rules in proposed §1.42-15 in their entire-
ty, and in a consistent manner. Taxpayers
may also rely on proposed §1.42-19 for
taxable years beginning after October 30,
2020 and on or before the date those reg-
ulations are published as final regulations
in the Federal Register, provided the
taxpayer follows the rules in proposed
§1.42-19 in their entirety, and in a con-
sistent manner.
Special Analyses
This regulation is not subject to review
under section 6(b) of Executive Order
12866 pursuant to the Memorandum of
Agreement (April 11, 2018) between the
Department of the Treasury and the Office
of Management and Budget regarding re-
view of tax regulations.
Pursuant to the Regulatory Flexibil-
ity Act (5 U.S.C. chapter 6), it is here-
by certified that this regulation will not
have a significant economic impact on a
substantial number of small entities. This
certification is based on the fact that, pri-
or to the publication of this regulation
and before the enactment of the 2018
Act, taxpayers were already required to
satisfy either the 20-50 test or the 40-60
test, as elected by the taxpayer, in order
to qualify as a low-income housing proj-
ect. The 2018 Act added a third minimum
set-aside test, the average income test,
that taxpayers may elect. This regulation
sets forth requirements for the average
income test, and the costs associated with
the average income test are similar to the
costs associated with the 20-50 test and
40-60 test. Accordingly, the Secretary
certifies that this regulation will not have
a significant economic impact on a sub-
stantial number of small entities.
Pursuant to section 7805(f) of the Inter-
nal Revenue Code, these regulations will
be submitted to the Chief Counsel for the
Office of Advocacy of the Small Business
Administration for comment on its impact
on small business.
Comments and Requests for a Public
Hearing
Before these proposed amendments
to the regulations are adopted as final
regulations, consideration will be given
to comments that are submitted timely
to the IRS as prescribed in the preamble
under the “ADDRESSES” section. The
Treasury Department and the IRS request
comments on all aspects of the proposed
regulations. Any electronic comments
submitted, and to the extent practicable
any paper comments submitted, will be
made available at www.regulations.gov
or upon request.
A public hearing will be scheduled if
requested in writing by any person who
timely submits electronic or written com-
ments. Requests for a public hearing are
also encouraged to be made electronically.
If a public hearing is scheduled, notice of
the date and time for the public hearing
will be published in the Federal Regis-
ter. Announcement 2020-4, 2020-17 IRB

Bulletin No. 2020–47 1067 November 16, 2020
1, provides that until further notice, pub-
lic hearings conducted by the IRS will be
held telephonically. Any telephonic hear-
ing will be made accessible to people with
disabilities.
Drafting Information
The principal authors of these regula-
tions are Dillon Taylor and Michael J. Tor-
ruella Costa, Office of the Associate Chief
Counsel (Passthroughs and Special Indus-
tries). However, other personnel from the
Treasury Department and the IRS partici-
pated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding in numer-
ical order an entry for §1.42-19 to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.42-19 also issued under 26
U.S.C. 42(n).
* * * * *
Par. 2. Section 1.42-0 is amended by:
1. In §1.42-15:
i. Revising the entry for (c).
ii. Adding entries for (c)(1) and (2) and
(c)(2)(i) through (iv).
iii. Revising the entry for (i).
iv. Adding entries for (i)(1) and (2).
2. Adding §1.42-19.
The revisions and additions read as fol-
lows:
§1.42-0 Table of contents.
* * * * *
§1.42-15 Available unit rule.
* * * * *
(c) Exceptions.
(1) Rental of next available unit in case
of the 20–50 test or 40–60 test.
(2) Rental of next available unit in case
of the average income test.
(i) Basic rule.
(ii) No requirement to comply with the
next available unit rule in a specific order.
(iii) Deep rent skewed projects.
(iv) Limitation.
* * * * *
(i) Applicability dates.
(1) In general.
(2) Applicability dates under the aver-
age income test.
* * * * *
§1.42-19 Average income test.
(a) In general.
(b) Designation of imputed income
lim itations.
(1) 10-percent increments.
(2) Method of designation.
(3) Timing of designation.
(i) No subsequent change to imputed
income limitations.
(ii) Converted market-rate units.
(c) Opportunity to take mitigating ac-
tions.
(d) Results following an opportunity to
take mitigating actions.
(e) Mitigating actions.
(1) Conversion of a market-rate unit.
(2) Removing low-income units from
the average income computation.
(f) Tax treatment of removed units.
(1) Status of the project.
(2) Recapture.
(3) Amount of credit.
(4) Long-term commitment.
(g) Examples.
(1) Example 1.
(i) Facts.
(ii) Analysis.
(2) Example 2.
(i) Facts.
(ii) Analysis.
(A) Average income test.
(B) Recapture.
(C) Restoration of habitability and of
qualified basis.
(h) Applicability dates.
Par. 3. Section 1.42-15 is amended by:
1. Revising the definition of Over-in-
come unit in paragraph (a).
2. Revising the heading for paragraph
(c).
3. Designating the text of paragraph (c)
as paragraph (c)(1) and adding a heading
for newly designated paragraph (c)(1).
3. Adding paragraph (c)(2).
4. Revising paragraph (i).
The revisions and additions read as fol-
lows:
§1.42-15 Available unit rule.
(a)* * *
Over-income unit means, in the case of
a project with respect to which the taxpay-
er elects the requirements of section 42(g)
(1)(A) (20-50 test) or section 42(g)(1)(B)
(40–60 test), a low-income unit in which
the aggregate income of the occupants of
the unit increases above 140 percent of the
applicable income limitation under section
42(g)(1)(A) and (B), or above 170 per-
cent of the applicable income limitation
for deep rent skewed projects described
in section 142(d)(4)(B). In the case of a
project with respect to which the taxpayer
elects the requirements of section 42(g)
(1)(C) (average income test), over-income
unit means a low-income unit in which the
aggregate income of the occupants of the
unit increases above 140 percent (170 per-
cent in case of deep rent skewed projects
described in section 142(d)(4)(B)) of the
greater of 60 percent of area median gross
income or the imputed income limitation
designated with respect to the unit under
§1.42-19(b).
* * * * *
(c) Exceptions—(1) Rental of next
available unit in case of the 20–50 test or
40–60 test.* * *
(2) Rental of next available unit in
case of the average income test—(i) Basic
rule. In the case of a project with respect
to which the taxpayer elects the average
income test, if a unit becomes an over-in-
come unit within the meaning of para-
graph (a) of this section, that unit ceases
to be a low-income unit if—
(A) Any residential rental unit (of a
size comparable to, or smaller than, the
over-income unit) is available, or subse-
quently becomes available, in the same
low-income building; and
(B) That available unit is occupied by
a new resident whose income exceeds the
limitation described in paragraph (c)(2)
(iv) of this section.
(ii) No requirement to comply with the
next available unit rule in a specific or-
der. In situations where multiple units in a
building are over-income units at the same
time, it is not necessary for a taxpayer to
comply with the rule in this section (next
available unit rule) in a specific order.
(iii) Deep rent skewed projects. In
the case of a project described in section

November 16, 2020 1068 Bulletin No. 2020–47
142(d)(4)(B) with respect to which the
taxpayer elects the average income test, if
a unit becomes an over-income unit within
the meaning of paragraph (a) of this sec-
tion, that unit ceases to be a low-income
unit if—
(A) Any low-income unit is available,
or subsequently becomes available, in the
same low-income building; and
(B) That unit is occupied by a new res-
ident whose income exceeds the lesser of
40 percent of area median gross income or
the imputed income limitation designated
with respect to that unit.
(iv) Limitation. For purposes of para-
graph (c)(2) of this section (basic next
available unit rule for the average income
test), the limitation described in this para-
graph (c)(2)(iv) is—
(A) In the case of a unit that was taken
into account as a low-income unit prior
to becoming vacant, the imputed income
limitation designated with respect to that
available unit for the average income test
under §1.42-19(b); and
(B) In the case of any other unit, the
highest imputed income limitation that
could be designated with respect to that
available unit under §1.42-19(e)(1), in or-
der for the project to continue to meet the
requirements of §1.42-19(a)(3) (60 per-
cent of AMGI or less).
* * * * *
(i) Applicability dates—(1) In general.
Except as provided in paragraph (i)(2) of
this section, this section applies to leases
entered into or renewed on and after Sep-
tember 26, 1997.
(2) Applicability dates under the aver-
age income test. The second sentence of
the definition of over-income unit in para-
graph (a) of this section and paragraph (c)
(2) of this section apply to occupancy be-
ginning 60 or more days after [date these
regulations are published as final regula-
tions in the Federal Register].
Par. 4. Section 1.42-19 is added to read
as follows:
§1.42-19 Average income test.
(a) In general. A project for residential
rental property meets the requirements of
section 42(g)(1)(C) (average income test)
if—
(1) 40 percent or more (25 percent or
more in the case of a project described in
section 142(d)(6)) of the residential units
in the project are both rent-restricted and
occupied by individuals whose income
does not exceed the imputed income lim-
itation designated by the taxpayer with re-
spect to the respective unit;
(2) The taxpayer designates these im-
puted income limitations in the manner
provided by paragraph (b) of this section;
and
(3) The average of the imputed income
limitations of the low-income units in the
project does not exceed 60 percent of area
median gross income (AMGI).
(b) Designation of imputed income lim-
itations—(1) 10-percent increments. The
designated imputed income limitation of
any unit must be 20 percent, 30 percent,
40 percent, 50 percent, 60 percent, 70 per-
cent, or 80 percent of AMGI.
(2) Method of designation. The taxpay-
er must designate the imputed income lim-
itation of each unit in accordance with—
(i) Any procedures established by the
Internal Revenue Service (IRS) in forms,
instructions, or publications or in other
guidance published in the Internal Reve-
nue Bulletin pursuant to §601.601(d)(2)
(ii)(b) of this chapter; and
(ii) Any procedures established by
the State or local housing credit agency
(Agency) that has jurisdiction over the
low-income housing project that contains
the units to be designated, to the extent that
those Agency procedures are consistent
with the requirements of paragraph (b)(2)
(i) of this section.
(3) Timing of designation. Except as
provided in paragraph (b)(3)(ii) of this
section, not later than the close of the first
taxable year of the credit period, the tax-
payer must designate the imputed income
limitation of each unit taken into account
for purposes of paragraph (a) of this sec-
tion.
(i) No subsequent change to imputed
income limitations. No change to the des-
ignated imputed income limitations may
be made. Even if the taxpayer elects to
identify a low-income unit as a removed
unit under paragraph (e)(2) of this section,
the designated imputed income limitation
of the unit is not changed. If a designation
is removed, the unit ceases to be a low-in-
come unit.
(ii) Converted market-rate units. If a
residential unit that was not a low-income
unit is converted to a low-income unit,
the designation of the imputed income
limitation for that unit must take place on
or before the 60th day after the unit is to
be treated as a low-income unit. See para-
graphs (b)(1) and (2) of this section for
rules regarding designation.
(c) Opportunity to take mitigating ac-
tions. The taxpayer may take one or more
of the mitigating actions described in
paragraph (e)(1) or (2) of this section if—
(1) At the close of a taxable year (fail-
ing year), one or more low-income units
have ceased to qualify as low-income
units; and
(2) This cessation causes the project
of which they are a part to fail to satis-
fy the requirement in paragraph (a)(3) of
this section (regarding the average of the
imputed income limitations of the low-in-
come units).
(d) Results following an opportunity
to take mitigating actions. (1) After any
mitigating actions, if, prior to the end of
the 60th day following the failing year,
the project satisfies the requirements to
be a low-income housing project (in-
cluding satisfaction of the requirement
in paragraph (a)(3) of this section), then
paragraph (a)(3) of this section is treated
as having been satisfied at the close of the
failing year.
(2) If paragraph (d)(1) of this section
does not apply, the project fails to be a
qualified low-income project on the close
of the failing year.
(e) Mitigating actions—(1) Conversion
of a market-rate unit. The taxpayer may
convert to low-income status a unit that
is not currently a low-income unit. Imme-
diately prior to becoming a low-income
unit, the unit must be vacant or occupied
by a tenant who qualifies for residence
in a low-income unit and whose income
is not greater than the imputed income
limitation designated by the taxpayer for
that unit. This inclusion of conversions as
mitigating actions is without prejudice to
the permissibility of conversions in other
contexts.
(2) Removing low-income units from
the average income computation. The
taxpayer may identify one or more res-
idential units as removed units. A unit
may be a removed unit only if it complies
with all requirements of section 42 to be
a low-income unit. Status as a removed

Bulletin No. 2020–47 1069 November 16, 2020
unit may be ended by the taxpayer at any
time. Identification of a removed unit and
termination of that identification must be
effected as provided by the IRS in forms,
publications, and guidance published in
the Internal Revenue Bulletin pursuant to
§601.601(d)(2)(ii)(b) of this chapter. In
the absence of any such IRS requirements,
the identification and termination must be
made in accordance with any Agency pro-
cedures.
(f) Tax treatment of removed units—(1)
Status of the project. A removed unit is not
taken into account under paragraph (a)(3)
of this section in computing the average
of the imputed income limitations of the
low-income units. If the absence of one
or more removed units from the compu-
tation causes fewer than 40 percent (or, if
applicable, fewer than 25 percent) of the
residential units to be taken into account
in computing the average, the project fails
to be a qualified low-income housing proj-
ect.
(2) Recapture. For purposes of apply-
ing section 42(j), removed units are taken
into account in the same manner as low-in-
come units. Thus, during the compliance
period, a unit’s status as a removed unit
does not reduce the applicable fraction of
section 42(c)(1)(B) and thus does not re-
duce qualified basis for purposes of recap-
ture under section 42(j).
(3) Amount of credit. For purposes of
section 42(a), removed units are not taken
into account as low-income units. Thus,
during the credit period, a unit’s status as a
removed unit reduces the applicable frac-
tion—and thus reduces qualified basis—
for purposes of calculating the taxpayer’s
annual credit amount.
(4) Long-term commitment. For pur-
poses of applying section 42(h)(6)(B)(i)
to any taxable year after the credit period,
removed units are not taken into account
as low-income units.
(g) Examples. The operation of this
section is illustrated by the following ex-
amples.
(1) Example 1—(i) Facts. (A) A sin-
gle-building housing project received an
allocation of housing credit dollar amount.
The taxpayer who owns the project elects
the average income test, intending for
the 5-unit building to have 100 percent
low-income occupancy. The taxpayer
properly and timely designates the imput-
ed income limitations for the 5 units as
follows: 2 units at 40 percent of AMGI; 1
unit at 60 percent of AGMI; and 2 units at
80 percent of AMGI.
Table 1 to paragraph (g)(1)(i)(A)
Unit
Number
Imputed Income
Limitation of the Unit
180 percent of AMGI
280 percent of AMGI
360 percent of AMGI
440 percent of AMGI
540 percent of AMGI
(B) In the first taxable year of the credit
period (Year 1), the project is fully leased
and occupied.
(ii) Analysis. (A) The average of the
imputed income limitations of the units is
60 percent of AMGI calculated as follows:
(2 x 40% + 1 x 60% + 2 x 80%) / 5 = 60%.
(B) Thus, the income limitations satis-
fy the requirement in paragraph (a)(3) of
this section that the average of the desig-
nated imputed income limitations of the
low-income units in the project does not
exceed 60% of AMGI.
(2) Example 2—(i) Facts. Assume the
same facts as in paragraph (g)(1) of this
section (Example 1). In Year 2, Unit # 4
becomes uninhabitable. (Unit # 4 has a
designated imputed income limitation of
40 percent of AMGI.) Because all of the
units in the project are low-income units,
converting a market-rate unit to a low-in-
come unit is not an available mitigating
action. Within 60 calendar days following
the close of Year 2, the taxpayer identifies
Unit # 2 as a removed unit. (Unit # 2 has
a designated imputed income limitation
of 80 percent of AMGI.) Repair work on
Unit # 4 is completed in Year 4, and the
taxpayer then ends the status of Unit # 2
as a removed unit.
(ii) Analysis. During Year 2, Unit # 4
is not a low-income unit because it is not
suitable for occupancy under section 42(i)
(3)(B). In the absence of any mitigating
action, the average of the imputed in-
come limitations of the units at the close
of Year 2 would be 65 percent of AMGI.
That average would be calculated as fol-
lows: (1 x 40% + 1 x 60% + 2 x 80%) / 4
= 65%. Under paragraph (d)(2) of this sec-
tion, unless effective mitigating action is
taken not later than the 60th calendar day
following the close of Year 2, the project
fails to be a qualified low-income housing
project because it fails to satisfy para-
graph (a)(3) of this section. As described
in the facts in paragraph (g)(2)(i) of this
section, however, the taxpayer takes the
mitigating action in paragraph (e)(2) of
this section. That action has the following
results:
(A) Average income test. Under para-
graph (f)(2) of this section, the identifica-
tion of Unit # 2 as a removed unit causes
that unit not to be taken into account in
computing the average of the imputed in-
come limitations of the low-income units.
Unit # 4 is also not taken into account be-
cause it is no longer a low-income unit.
Therefore, the calculation under para-
graph (a)(3) of this section as of the close
of Years 2 and 3 is as follows: (1 x 40% +
1 x 60% + 1 x 80%) / 3 = 60%. Thus, for
those years, the project satisfies the aver-
age income test because, for purposes of
that test, at least 40 percent of the units are
taken into account as low-income units
and the average of the imputed income
limitations of those units does not exceed
60% of AMGI.
(B) Recapture. At the close of Year 2,
the amount of the qualified basis is less
than the amount of the qualified basis at
the close of Year 1, because Unit # 4’s un-
suitability for occupancy prohibits it from
being a low-income unit. Unit # 4’s fail-
ure to be a low-income unit, therefore, re-
duces the applicable fraction and thus the
qualified basis as well. This results in a
credit recapture amount for Year 2. Under
paragraph (f)(2) of this section, however,
for purposes of calculating the recapture
amount, Unit # 2’s status as a removed
unit does not impair its contribution to the
applicable fraction and the qualified basis.
(C) Restoration of habitability and of
qualified basis. As described in the facts
in paragraph (g)(2)(i) of this section, in
Year 4, after repair work is complete, the
formerly uninhabitable Unit # 4 is again
suitable for occupancy, and the taxpayer
ends the status of Unit # 2 as a removed
unit. Thus, both units are now low-income
units, neither is a removed unit, and so both
are included in the computations for the
average income test. At the close of Year
4, therefore, the average of the imputed in-
come limitations of all of the low-income

November 16, 2020 1070 Bulletin No. 2020–47
units in the project is 60 percent of AMGI,
which is calculated as follows: (2 x 40% +
1 x 60% + 2 x 80%) / 5 = 60%. For pur-
poses of computing the credit under sec-
tion 42(a) for Year 4, both units are includ-
ed in the applicable fraction and, thus, are
included in qualified basis for purposes of
that calculation. Prior to the restoration in
Year 4, for purposes of a computation of
credits under section 42(a), Unit # 4 does
not contribute to qualified basis because it
is not a low-income unit, and, under para-
graph (f)(3) of this section, Unit # 2 does
not contribute to qualified basis because it
is a removed unit.
(h) Applicability dates. This section ap-
plies to taxable years beginning after [date
these regulations are published as final
regulations in the Federal Register].
Sunita Lough,
Deputy Commissioner for Services
and Enforcement.
(Filed by the Office of the Federal Register on Oc-
tober 29, 2020, 8:45 a.m., and published in the issue
of the Federal Register for October 30, 2020, 85 F.R.
68816)
Announcement of
Disciplinary Sanctions
From the Office of
Professional Responsibility
Announcement 2020-19
The Office of Professional Respon-
sibility (OPR) announces recent disci-
plinary sanctions involving attorneys,
certified public accountants, enrolled
agents, enrolled actuaries, enrolled re-
tirement plan agents, appraisers, and
unenrolled/unlicensed return preparers
(individuals who are not enrolled to
practice and are not licensed as attor-
neys or certified public accountants).
Licensed or enrolled practitioners are
subject to the regulations governing
practice before the Internal Revenue
Service (IRS), which are set out in Title
31, Code of Federal Regulations, Subti-
tle A, Part 10, and which are released as
Treasury Department Circular No. 230.
The regulations prescribe the duties and
restrictions relating to such practice and
prescribe the disciplinary sanctions for
violating the regulations. Unenrolled/
unlicensed return preparers are subject
to Revenue Procedure 81-38 and super-
seding guidance in Revenue Procedure
2014-42, which govern a preparer’s eli-
gibility to represent taxpayers before the
IRS in examinations of tax returns the
preparer both prepared for the taxpayer
and signed as the preparer. Additionally,
unenrolled/unlicensed return preparers
who voluntarily participate in the Annu-
al Filing Season Program under Revenue
Procedure 2014-42 agree to be subject
to the duties and restrictions in Circular
230, including the restrictions on incom-
petent or disreputable conduct.
The disciplinary sanctions to be im-
posed for violation of the applicable stan-
dards are:
Disbarred from practice before the
IRS—An individual who is disbarred
is not eligible to practice before the IRS
as defined at 31 C.F.R. § 10.2(a)(4) for a
minimum period of five (5) years.
Suspended from practice before the
IRS—An individual who is suspended is
not eligible to practice before the IRS as
defined at 31 C.F.R. § 10.2(a)(4) during
the term of the suspension.
Censured in practice before the
IRS—Censure is a public reprimand. Un-
like disbarment or suspension, censure
does not affect an individual’s eligibility
to practice before the IRS, but OPR may
subject the individual’s future practice
rights to conditions designed to promote
high standards of conduct.
Monetary penalty—A monetary pen-
alty may be imposed on an individual who
engages in conduct subject to sanction,
or on an employer, firm, or entity if the
individual was acting on its behalf and it
knew, or reasonably should have known,
of the individual’s conduct.
Disqualification of appraiser—An
appraiser who is disqualified is barred
from presenting evidence or testimony in
any administrative proceeding before the
Department of the Treasury or the IRS.
Ineligible for limited practice—An
unenrolled/unlicensed return preparer
who fails to comply with the requirements
in Revenue Procedure 81-38 or to comply
with Circular 230 as required by Revenue
Procedure 2014-42 may be determined in-
eligible to engage in limited practice as a
representative of any taxpayer.
Under the regulations, individuals sub-
ject to Circular 230 may not assist, or ac-
cept assistance from, individuals who are
suspended or disbarred with respect to
matters constituting practice (i.e., repre-
sentation) before the IRS, and they may
not aid or abet suspended or disbarred in-
dividuals to practice before the IRS.
Disciplinary sanctions are described in
these terms:
Disbarred by decision, Suspended by
decision, Censured by decision, Mone-
tary penalty imposed by decision, and
Disqualified after hearing—An adminis-
trative law judge (ALJ) issued a decision
imposing one of these sanctions after the
ALJ either (1) granted the government’s
summary judgment motion or (2) con-
ducted an evidentiary hearing upon OPR’s
complaint alleging violation of the regu-
lations. After 30 days from the issuance
of the decision, in the absence of an ap-
peal, the ALJ’s decision becomes the final
agency decision.
Disbarred by default decision, Sus-
pended by default decision, Censured
by default decision, Monetary penalty
imposed by default decision, and Dis-
qualified by default decision—An ALJ,
after finding that no answer to OPR’s
complaint was filed, granted OPR’s mo-
tion for a default judgment and issued a
decision imposing one of these sanctions.
Disbarment by decision on appeal,
Suspended by decision on appeal, Cen-
sured by decision on appeal, Monetary
penalty imposed by decision on ap-
peal, and Disqualified by decision on
appeal—The decision of the ALJ was
appealed to the agency appeal authority,
acting as the delegate of the Secretary
of the Treasury, and the appeal authority
issued a decision imposing one of these
sanctions.
Disbarred by consent, Suspend-
ed by consent, Censured by consent,
Monetary penalty imposed by consent,
and Disqualified by consent—In lieu of
a disciplinary proceeding being instituted
or continued, an individual offered a con-
sent to one of these sanctions and OPR
accepted the offer. Typically, an offer of
consent will provide for: suspension for
an indefinite term; conditions that the in-
dividual must observe during the suspen-

Bulletin No. 2020–47 1071 November 16, 2020
sion; and the individual’s opportunity,
after a stated number of months, to file
with OPR a petition for reinstatement
affirming compliance with the terms of
the consent and affirming current fitness
and eligibility to practice (i.e., an active
professional license or active enrollment
status, with no intervening violations of
the regulations).
Suspended indefinitely by decision in
expedited proceeding, Suspended indef-
initely by default decision in expedited
proceeding, Suspended by consent in
expedited proceeding—OPR instituted
an expedited proceeding for suspension
(based on certain limited grounds, in-
cluding loss of a professional license for
cause, and criminal convictions).
Determined ineligible for limited
practice—-There has been a final deter-
mination that an unenrolled/unlicensed
return preparer is not eligible for limited
representation of any taxpayer because the
preparer violated standards of conduct or
failed to comply with any of the require-
ments to act as a representative.
A practitioner who has been disbarred
or suspended under 31 C.F.R. § 10.60, or
suspended under § 10.82, or a disqualified
appraiser may petition for reinstatement
before the IRS after the expiration of 5
years following such disbarment, suspen-
sion, or disqualification (or immediately
following the expiration of the suspension
or disqualification period if shorter than 5
years). Reinstatement will not be granted
unless the IRS is satisfied that the peti-
tioner is not likely to engage thereafter in
conduct contrary to Circular 230, and that
granting such reinstatement would not be
contrary to the public interest.
Reinstatement decisions are published
at the individual’s request, and described
in these terms:
Reinstated to practice before the
IRS—-The individual’s petition for
reinstatement has been granted. The
agent, and eligible to practice before the
IRS, or in the case of an appraiser, the in-
dividual is no longer disqualified.
Reinstated to engage in limited
practice before the IRS—-The individ-
ual’s petition for reinstatement has been
granted. The individual is an unenrolled/
unlicensed return preparer and eligible to
engage in limited practice before the IRS,
subject to requirements the IRS has pre-
scribed for limited practice by tax return
preparers.
OPR has authority to disclose the
grounds for disciplinary sanctions in these
situations: (1) an ALJ or the Secretary’s
delegate on appeal has issued a final de-
cision; (2) the individual has settled a dis-
ciplinary case by signing OPR’s “consent
to sanction” agreement admitting to one
or more violations of the regulations and
consenting to the disclosure of the admit-
ted violations (for example, failure to file
Federal income tax returns, lack of due
diligence, conflict of interest, etc.); (3)
OPR has issued a decision in an expedited
proceeding for indefinite suspension; or
(4) OPR has made a final determination
(including any decision on appeal) that an
unenrolled/unlicensed return preparer is
ineligible to represent any taxpayer before
the IRS.
Announcements of disciplinary sanc-
tions appear in the Internal Revenue Bul-
letin at the earliest practicable date. The
sanctions announced below are alphabet-
ized first by state and second by the last
names of the sanctioned individuals.
City & State
NameProfessional DesignationDisciplinary SanctionEffective Date(s)
California
San FranciscoCollins, Cary S.C PASuspended by default decision
in expedited proceeding under
31 C.F.R § 10.82(b)
Indefinite from
May 13, 2019
Florida
North Miami
Beach
Aronson, David A.C PASuspended by consent for
admitted violations of
31 C.F.R. § 10.51(a)(10)
Indefinite from
September 30, 2020
Oakland ParkMarcus, JoelC PASuspended by decision in
expedited proceeding under
31 C.F.R. § 10.82(b)
Indefinite from
July 29, 2020
Marco IslandWagner, AlbertC PADisbarred by ALJ DecisionIndefinite from
July 19, 2020
Michigan
InksterHairston, Gary Y.C PASuspended by
decision in expedited
proceeding under
31 C.F.R. § 10.82(b)
Indefinite from
August 12, 2020
New Jersey
CliftonAref, Hamed M.C PASuspended by consent for
admitted violation of
31 C.F.R. §§ 10.51(a),
10.51(a)(2), and 10.51(a)(9)
Indefinite from
August 12, 2020

November 16, 2020 1072 Bulletin No. 2020–47
City & StateNameProfessional
Designation
Disciplinary SanctionEffective Date(s)
New York
LansingLaVigne,
Andrew N.
C PASuspension by default decision
in expedited proceeding under
31 C.F.R. § 10.82(b)(2)
Indefinite from
July 19, 2020
Ohio
HamiltonMarshall, Keith S.C PADisbarred by ALJ DecisionIndefinite from
August 6, 2020
Texas
CastrovilleValdez-Ortegon,
Richard
Enrolled AgentSuspension by default decision
in expedited proceeding under
31 C.F.R. § 10.82(b)(2)
Indefinite from
September 3, 2020
Wisconsin
WausauDeedon, Michael C.C PASuspended by default decision
in expedited proceeding under
31 C.F.R. § 10.82(b)(1) and (2)
Indefinite from
September 3, 2020

Bulletin No. 2020–47 i November 16, 2020
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion. It
is not used where a position in a prior rul-
ing is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previous-
ly published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cas-
es in litigation, or the outcome of a Ser-
vice study.
Abbreviations
The following abbreviations in current use
and formerly used will appear in material
published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

November 16, 2020 ii Bulletin No. 2020–47
Numerical Finding List
1
Bulletin 2020–47
Announcements:
2020-8, 2020-32 I.R.B. 244
2020-9, 2020-32 I.R.B. 244
2020-10, 2020-33 I.R.B. 385
2020-11, 2020-33 I.R.B. 385
2020-13, 2020-35 I.R.B. 492
2020-14, 2020-36 I.R.B. 549
2020-15, 2020-38 I.R.B. 577
2020-16, 2020-38 I.R.B. 578
2020-17, 2020-40 I.R.B. 794
2020-12, 2020-41 I.R.B. 893
2020-40, 2020-45 I.R.B. 999
2020-47, 2020-19 I.R.B. 1070
Notices:
2020-43, 2020-27 I.R.B. 1
2020-45, 2020-27 I.R.B. 3
2020-46, 2020-27 I.R.B. 7
2020-47, 2020-27 I.R.B. 7
2020-49, 2020-27 I.R.B. 8
2020-50, 2020-28 I.R.B. 35
2020-48, 2020-29 I.R.B. 72
2020-51, 2020-29 I.R.B. 73
2020-52, 2020-29 I.R.B. 79
2020-53, 2020-30 I.R.B. 151
2020-54, 2020-31 I.R.B. 226
2020-56, 2020-32 I.R.B. 239
2020-57, 2020-32 I.R.B. 240
2020-58, 2020-34 I.R.B. 419
2020-55, 2020-35 I.R.B. 467
2020-61, 2020-35 I.R.B. 468
2020-62, 2020-35 I.R.B. 476
2020-63, 2020-35 I.R.B. 491
2020-60, 2020-36 I.R.B. 514
2020-64, 2020-36 I.R.B. 519
2020-65, 2020-38 I.R.B. 567
2020-68, 2020-38 I.R.B. 567
2020-69, 2020-39 I.R.B. 604
2020-59, 2020-40 I.R.B. 782
2020-66, 2020-40 I.R.B. 785
2020-71, 2020-40 I.R.B. 786
2020-72, 2020-40 I.R.B. 789
2020-73, 2020-41 I.R.B. 886
2020-74, 2020-41 I.R.B. 887
2020-70, 2020-43 I.R.B. 913
2020-77, 2020-45 I.R.B. 988
2020-79, 2020-46 I.R.B. 1014
2020-76, 2020-47 I.R.B. 1058
2020-80, 2020-47 I.R.B. 1060
Proposed Regulations:
REG-119307-19, 2020-28 I.R.B. 44
REG-112339-19, 2020-30 I.R.B. 155
Proposed Regulations:—Continued
REG-117589-18, 2020-30 I.R.B. 184
REG-125716-18, 2020-30 I.R.B. 197
REG-123027-19, 2020-31 I.R.B. 229
REG-130081-19, 2020-32 I.R.B. 246
REG-127732-19, 2020-33 I.R.B. 385
REG-111879-20, 2020-34 I.R.B. 421
REG-112042-19, 2020-34 I.R.B. 422
REG-132766-18, 2020-34 I.R.B. 436
REG-132434-17, 2020-35 I.R.B. 508
REG-116475-19, 2020-37 I.R.B. 553
REG-107911-18, 2020-40 I.R.B. 795
REG-110059-20, 2020-42 I.R.B. 904
REG-119890-18, 2020-47 I.R.B. 1063
Revenue Procedures:
2020-16, 2020-27 I.R.B. 10
2020-31, 2020-27 I.R.B. 12
2020-35, 2020-29 I.R.B. 82
2020-36, 2020-32 I.R.B. 243
2020-37, 2020-33 I.R.B. 381
2020-38, 2020-36 I.R.B. 522
2020-39, 2020-36 I.R.B. 546
2020-40, 2020-38 I.R.B. 575
2020-41, 2020-40 I.R.B. 793
2020-42, 2020-41 I.R.B. 891
2020-43, 2020-45 I.R.B. 991
2020-44, 2020-45 I.R.B. 991
2020-46, 2020-45 I.R.B. 995
2020-45, 2020-46 I.R.B. 1016
Revenue Rulings:
2020-14, 2020-28 I.R.B. 33
2020-15, 2020-32 I.R.B. 233
2020-16, 2020-37 I.R.B. 550
2020-17, 2020-37 I.R.B. 552
2020-18, 2020-39 I.R.B. 584
2020-19, 2020-40 I.R.B. 611
2020-20, 2020-41 I.R.B. 880
2020-21, 2020-41 I.R.B. 882
2020-22, 2020-45 I.R.B. 963
2020-24, 2020-45 I.R.B. 965
2020-23, 2020-47 I.R.B. 1028
Treasury Decisions:
9899, 2020-29 I.R.B. 62
9900, 2020-30 I.R.B. 143
9903, 2020-32 I.R.B. 235
9901, 2020-33 I.R.B. 266
9902, 2020-33 I.R.B. 349
9904, 2020-34 I.R.B. 413
9907, 2020-38 I.R.B. 559
9906, 2020-39 I.R.B. 579
9905, 2020-40 I.R.B. 614
9915, 2020-41 I.R.B. 882
9908, 2020-42 I.R.B. 894
Treasury Decisions:—Continued
9920, 2020-43 I.R.B. 909
9910, 2020-44 I.R.B. 915
9924, 2020-44 I.R.B. 943
9911, 2020-45 I.R.B. 966
9913, 2020-45 I.R.B. 975
9927, 2020-47 I.R.B. 1031
9918, 2020-45 I.R.B. 979
9914, 2020-46 I.R.B. 1000
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2019–27 through 2019–52 is in Internal Revenue Bulletin
2019–52, dated December 27, 2019.

Bulletin No. 2020–47 iii November 16, 2020
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2020–47
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2019–27 through 2019–52 is in Internal Revenue Bulletin
2019–52, dated December 27, 2019.

Internal Revenue Service
Washington, DC 20224
Official Business
Penalty for Private Use, $300
INTERNAL REVENUE BULLETIN
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