Treasury And IRS Issue Proposed Regulations On ‘Next Day Rule’

The Treasury Department and the IRS recently issued proposed regulations ( REG-100400-14) under Treas. Reg. Sec. 1.1502-76(b) that would modify the application of the existing "end of day rule" and the "next day rule."

The current regulations under Treas. Reg. Sec. 1.1502-76(b) address the treatment of a corporation's tax items that accrue on the day the corporation ceases to be a member of an affiliated group that has elected to file a consolidated tax return (a consolidated group) or becomes a member of a different consolidated group. The end-of-day rule under the current regulations provides that a Subchapter C corporation is treated as becoming or ceasing to be a member of a consolidated group at the end of the day of the corporation's change in status. Accordingly, the corporation's tax items reportable on that day are generally included in the tax return for the taxable year that ends as a result of the corporation's change in status.