Respondent contends that, despite the enactment of section 312(l) and our holding in 85 T.C. 274">Woods Inv. Co. v. Commissioner, supra, COD income should not be included in earnings and profits for purposes of determining the balance of a taxpayer's 103 T.C. 398">*406 excess loss account. Respondent argues that, because neither section 312(l) nor section 1.1502-32, Income Tax Regs., specifically requires the inclusion of Sea Level's COD income in its earnings and profits for purposes of the investment basis adjustment rules of section 1.1502-32, Income Tax Regs., Sea Level's COD income should not be included in its earnings and profits when calculating the balance of CSI's excess loss account under section 1.1502-19, Income Tax Regs. We disagree. In 85 T.C. 274">Woods Inv. Co. v. Commissioner, supra, we held that section 312(k) required that the earnings and profits of the parent's subsidiary corporations had to be computed using the straight-line method of depreciation for purposes of the investment basis adjustment rules of section 1.1502-32(b), Income Tax Regs. Neither section 312(k) nor section 1.1502-32, Income Tax Regs., however, specifically 1994 U.S. Tax Ct. LEXIS 71">*86 states that section 312(k) applies to the investment basis adjustment rules of section 1.1502-32, Income Tax Regs.Section 1.1502-32(b)(1), Income Tax Regs., only provides for a positive adjustment to the parent corporation's investment basis in its subsidiary's stock in an amount equal to the subsidiary's undistributed earnings and profits. The earnings and profits of a corporation are determined according to the provisions of section 312. Accordingly, respondent's contention that either section 312(l) or section 1.1502-32(b), Income Tax Regs., must specifically state that section 312(l) applies to the investment basis adjustment rules in order to include COD income in earnings and profits when computing the balance of an excess loss account is contrary to our holding in Woods Inv. Co. v. Commissioner, 85 T.C. 274">85 T.C. 274 (1985).

In 89 T.C. 207">Wyman-Gordon Co. v. Commissioner, supra, we rejected a taxpayer's argument that section 312(l) supported its contention that the COD income of an insolvent second-tier subsidiary should be included in the second-tier subsidiary's earnings and profits for purposes of calculating the first-tier subsidiary's1994 U.S. Tax Ct. LEXIS 71">*87 excess loss account on the grounds that section 312(l) was enacted subsequent to the taxable years in issue. We did, however, state the following with regard to the impact of section 312(l) on a parent corporation's calculation of its excess loss account balance:

The significance of the addition of section 312(l) to the Code cannot be understood without considering important amendments to section 108 that 103 T.C. 398">*407 also were made by the Bankruptcy Tax Act of 1980. That section was significantly rewritten to provide, among other things, that a taxpayer who under new section 312(l) excludes discharge of indebtedness income from taxable income due to insolvency and does not elect to reduce basis in its depreciable assets under section 1017, must reduce certain other tax attributes. The first tax attribute to be reduced under section 108 is the debtor's net operating losses. Thus, under amended sections 108 and 312(l), if these provisions were applicable to petitioners in 1978, * * * [the second-tier subsidiary] would be entitled to exclude the * * * discharge of indebtedness from its taxable income, and it would be entitled to increase its earnings and profits (and thereby 1994 U.S. Tax Ct. LEXIS 71">*88 reduce its excess loss account) by the amount of the discharge of indebtedness income. * * * [Wyman-Gordon Co. v. Commissioner, 89 T.C. 207">89 T.C. 222-223; fn. ref. omitted.]

The foregoing quote was based on our holding in 85 T.C. 274">Woods Inv. Co. v. Commissioner, supra, requiring that earnings and profits be computed, for purposes of the investment basis adjustment rules of section 1.1502-32, Income Tax Regs., in accordance with the provisions of section 312. 89 T.C. 207">Wyman-Gordon Co. v. Commissioner, supra at 218-219.

Approximately 6 months after we rendered our opinion in 89 T.C. 207">Wyman-Gordon Co. v. Commissioner, supra, Congress enacted section 1503(e). ⁷1994 U.S. Tax Ct. LEXIS 71">*90 Section 1503(e)(1) was amended in 103 T.C. 398">*408 the Technical and Miscellaneous Revenue Act of 1988 (TAMRA).⁸Amended section 1503(e)(1) provides that, solely for the purpose of determining gain or loss on a disposition of a subsidiary's stock and the amount of any inclusion in income of an excess loss account, the positive investment adjustment to the stock's basis under the consolidated return regulations will not include earnings and 1994 U.S. Tax Ct. LEXIS 71">*89 profits from COD income excluded from the subsidiary's taxable income under section 108, to the extent tax attributes, other than basis, are not reduced. Congress made the application of section 1503(e) prospective and adopted a generous transition rule. ⁹ As Congress made the amendment to section 1503(e) prospective only, we will follow our statement in Wyman-Gordon that section 312(l) would require a taxpayer to include COD income in earnings and profits for purposes of the investment basis adjustment rules (to the extent the taxpayer's basis in depreciable assets is not reduced). Wyman-Gordon Co. v. Commissioner, 89 T.C. 207">89 T.C. 223-224.

1994 U.S. Tax Ct. LEXIS 71">*91 Respondent also contends that, because section 312(l) does not speak to the precise question in issue, we should defer to respondent's interpretation of section 312(l) and section 1.1502-32, Income Tax Regs., as argued in the instant case, even though respondent has not published any interpretation of such Code and regulatory provisions. Respondent relies on Chevron v. Natural Resources Defense Council, Inc., 467 U.S. 837">467 U.S. 837 (1984), for the proposition that an agency's interpretation of its own regulation is entitled to deference.

103 T.C. 398">*409 Although such an interpretation generally is entitled to deference, Bowles v. Seminole Rock Co., 325 U.S. 410">325 U.S. 410, 325 U.S. 410">413-414 (1945), in the absence of a contrary published, or at least longstanding, interpretation of the regulation in question, deference is not the rule. As the Supreme Court recently stated in Bowen v. Georgetown Univ. Hosp., 488 U.S. 204">488 U.S. 204, 488 U.S. 204">212 (1988):

Despite the novelty of this interpretation, the Secretary contends that it is entitled to deference under Young v. Community Nutrition Institute, 476 U.S. 974">476 U.S. 974, 476 U.S. 974">980-981 (1986),1994 U.S. Tax Ct. LEXIS 71">*92 Chemical Mfrs. Assn. v. Natural Resources Defense Council, Inc., 470 U.S. 116">470 U.S. 116, 470 U.S. 116">125 (1985), and Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837">467 U.S. 837, 467 U.S. 837">842-844 (1984). We have never applied the principle of those cases to agency litigating positions that are wholly unsupported by regulations, rulings, or administrative practice. To the contrary, we have declined to give deference to an agency counsel's interpretation of a statute where the agency itself has articulated no position on the question, on the ground that "Congress has delegated to the administrative official and not to appellate counsel the responsibility for elaborating and enforcing statutory commands." * * * Deference to what appears to be nothing more than an agency's convenient litigating position would be entirely inappropriate. * * *

In short, unless an agency's interpretation of a statute or a regulation is a matter of public record and is an interpretation upon which the public is entitled to rely when planning their affairs, it will not be accorded any special deference. Southern Pac. Transp. Co. v. Commissioner, 75 T.C. 497">75 T.C. 497, 75 T.C. 497">541-542 (1980).1994 U.S. Tax Ct. LEXIS 71">*93 Respondent has not cited any published ruling, procedure, or practice ¹⁰ interpreting the interplay of section 312(l) and section 1.1502-32, Income Tax Regs. Consequently, we do not give any deference to respondent's position in the instant case.

1994 U.S. Tax Ct. LEXIS 71">*94 Respondent next contends that the purpose of section 1.1502-19, Income Tax Regs., will be defeated if we adopt petitioner's position, and that we should therefore not follow our analysis in Wyman-Gordon Co. v. Commissioner, 89 T.C. 207">89 T.C. 207103 T.C. 398">*410 (1987), of the effect of section 312(l) on the investment basis adjustment rules of section 1.1502-32, Income Tax Regs. As to the effect of section 108(b) on section 1.1502-19, Income Tax Regs., respondent argues:

There is no nexus between the NOL carryovers of a subsidiary that are reduced under I.R.C. section 108 and the NOL's of the subsidiary already used by the group in excess of the group's investment in the subsidiary. Thus, even though reducing a subsidiary's NOL carryovers under I.R.C. section 108 may give rise to future consolidated income, that income will not correspond to the amount of the subsidiary's losses used by the group that exceeded the group's investment in the subsidiary. The only way to insure that the group will not deduct losses it has not "paid" for is to require that the [excess loss account] * * * be recognized as income.

* * *

Further, the reduced NOL's [under section 108(b)] 1994 U.S. Tax Ct. LEXIS 71">*95 should not be viewed as generating future income to "pay" for losses used by the group in excess of its investment in a subsidiary. This is contrary to the purpose of I.R.C. section 108 which requires that NOL's are instead reduced to "pay" for the exclusion of discharge of indebtedness income from gross income.

In short, respondent contends that, unless the balance in a parent corporation's excess loss account is included in the parent corporation's income when the subsidiary becomes insolvent, the consolidated group will have received tax benefits it will never have to "pay" for, which is contrary to the purpose of section 1.1502-19, Income Tax Regs. Respondent's argument rests upon the lack of correlation between the excess loss account provisions of section 1.1502-19, Income Tax Regs., and the tax attributes reduced under amended section 108(b). Respondent argues that we should therefore not follow our Wyman-Gordon analysis of the effect of section 312(l) on the investment basis adjustment rules.

We disagree. In the instant case, we conclude that our reasoning in both Woods Inv. Co. v. Commissioner, 85 T.C. 274">85 T.C. 274 (1985), and 89 T.C. 207">Wyman-Gordon Co. v. Commissioner, supra,1994 U.S. Tax Ct. LEXIS 71">*96 makes clear that the enactment of section 312(l) requires COD income to be included in earnings and profits for purposes of the investment basis adjustment rules of section 1.1502-32, Income Tax Regs.

Pursuant to section 1.1502-32(b)(1)(ii), Income Tax Regs., a positive basis adjustment is to be made in an amount equal to an allocable part of the undistributed earnings and profits of a subsidiary for the taxable year. Section 312(l) provides 103 T.C. 398">*411 that COD income is to be included in the earnings and profits of a corporation to the extent that the corporation's basis in its depreciable assets is not reduced. In Wyman-Gordon Co. v. Commissioner, 89 T.C. 207">89 T.C. 221, we stated that the balance in an excess loss account is determined according to the provisions of section 1.1502-32, Income Tax Regs. We find nothing in sections 1.1502-32 and 1.1502-19, Income Tax Regs., which prevents the application of section 312(l) when calculating a subsidiary's earnings and profits for the purpose of either the investment basis adjustment rules or the requirement that the balance of an excess loss account be included in a parent corporation's income when its subsidiary1994 U.S. Tax Ct. LEXIS 71">*97 becomes insolvent. Consequently, COD income is included in a subsidiary's earnings and profits for purposes of computing the parent corporation's balance in its excess loss account in the stock of its subsidiary under section 1.1502-19, Income Tax Regs.

Respondent's argument that the inclusion of COD income in earnings and profits undermines the purpose of the excess loss account rules is a problem of respondent's own making: respondent chose to use earnings and profits as the measuring rod of the investment basis adjustment rules of section 1.1502-32(b), Income Tax Regs. Respondent was aware that section 312(l), which was enacted subsequent to the adoption of section 1.1502-32, Income Tax Regs., undermined the purpose of the excess loss account rules, but respondent chose not to amend the regulations to correct the problem. As we stated in Woods, we will apply the consolidated return regulations and the Code as written. Respondent's failure to amend either the investment basis adjustment rules of section 1.1502-32, Income Tax Regs., or the excess loss account rules of section 1.1502-19, Income Tax Regs., "does not justify judicial interference in what is essentially a legislative1994 U.S. Tax Ct. LEXIS 71">*98 and administrative matter." Woods Inv. Co. v. Commissioner, 85 T.C. 274">85 T.C. 282. Accordingly, we hold that CSI is entitled to include Sea Level's COD income in Sea Level's earnings and profits (to the extent basis was not reduced under section 1017) for purposes of the investment basis adjustment rules of section 1.1502-32, Income Tax Regs., and that CSI properly included Sea Level's COD income in Sea Level's earnings and profits when computing its excess loss account balance under section 1.1502-19, Income Tax Regs.

103 T.C. 398">*412 Respondent alternatively contends that if we should decide that CSI is entitled to include Sea Level's COD income in Sea Level's earnings and profits for purposes of computing the balance of CSI's excess loss account under section 1.1502-19, Income Tax Regs., then the amount of COD income Sea Level is entitled to include in its earnings and profits should be limited to an amount equal to the tax attributes it reduced pursuant to section 108(b)(2)(A). In connection with this argument, respondent contends that the NOL's and NOL carryovers that Sea Level reduced pursuant to section 108(b)(2)(A) should be treated as "absorbed" for purposes1994 U.S. Tax Ct. LEXIS 71">*99 of section 1.1502-32(b)(2)(ii), Income Tax Regs.¹¹

We conclude that respondent's contention is without support in either the Code or the regulations. In 89 T.C. 207">Wyman-Gordon Co. v. Commissioner, supra at 223 n.13, we stated that a subsidiary's COD income would increase its earnings and profits without regard to any of the subsidiary's1994 U.S. Tax Ct. LEXIS 71">*100 other tax attributes adjusted under section 108(b). Moreover, respondent has failed to cite, and we have not found, any applicable statutory or regulatory authority which would support respondent's position. Consequently, we hold that for the purposes of the investment basis adjustment rules, the amount of COD income Sea Level is entitled to include in its earnings and profits is not limited to the amount of tax attributes it reduced under section 108(b)(2)(A).

Respondent contends that NOL's and NOL carryovers that are reduced under section 108(b)(2)(A) should be considered as having been "absorbed" for purposes of section 1.1502-32(b)(2)(ii), Income Tax Regs. Respondent argues as follows:

NOL's and NOL carryovers must be reduced under I.R.C. section 108 as the price of eliminating the discharge of indebtedness income. If the taxpayer pays the price of excluding discharge of indebtedness income from gross income by reducing its existing NOL's or NOL carryovers, as required by Congress, it obtains a tax benefit from reducing the losses. 103 T.C. 398">*413 Thus, the reduction produces a tax benefit to the taxpayer and should be viewed as "absorbed" for tax purposes.

Additionally, it may1994 U.S. Tax Ct. LEXIS 71">*101 be argued that a subsidiary's NOL carryover is utilized by a consolidated group when it is reduced under I.R.C. section 108 in the sense that the reduction of the NOL produces a positive adjustment to the parent's basis in the stock of the subsidiary. This occurs because under the alternative approach, a parent's basis in its subsidiary's stock is increased to account for the subsidiary's increase in earnings and profits from discharge of indebtedness income to the extent the subsidiary's tax attributes are reduced (the subsidiary's NOL carryovers being the first attribute to be reduced under I.R.C. section 108). Since the reduction (or utilization) of the loss produces a tax benefit to the parent in the form of an increase to the parent's basis in the stock of its subsidiary it should be viewed as an absorption and as such should cause the parent to reduce its basis in the subsidiary stock by the amount of the loss used up, under the second negative adjustment of Treas. Reg. section 1.1502-32(b)(2)(ii).

Under this view, discharge of indebtedness income creates a positive adjustment to the parent's basis in the stock of its subsidiary to the extent of the reduced NOL and a 1994 U.S. Tax Ct. LEXIS 71">*102 corresponding negative adjustment is caused by the absorption ( I.R.C. section 108(b) reduction). The net effect of these two provisions is that the basis of the stock remains the same.

Finally, respondent cites the legislative history of section 1503(e) as further support for respondent's contention that a reduced NOL carryover should be treated as "absorbed" for purposes of section 1.1502-32(b)(2)(ii), Income Tax Regs.

Section 1.1502-32(b)(2)(ii), Income Tax Regs., was adopted in 1966, long before Congress enacted either section 312(l) or 108(b). See T.D. 6909, 1967-1 C.B. 240. Consequently, we do not believe that the term "absorbed", as used in section 1.1502-32(b)(2)(ii), Income Tax Regs., was ever intended to apply to the NOL's or the NOL carryovers of an insolvent subsidiary that are reduced pursuant to section 108(b)(2)(A). For purposes of section 1.1502-32(b)(2)(ii), Income Tax Regs., an NOL or an NOL carryover is usually considered to have been "absorbed" in the taxable year the NOL is used to offset the taxable income of the consolidated group. See Crestol et al., The Consolidated Tax Return, pars. 6.03[2], 8.02[3] (4th ed. 1988). The purpose1994 U.S. Tax Ct. LEXIS 71">*103 of the negative adjustment under section 1.1502-32(b)(2)(ii), Income Tax Regs., for an NOL "absorbed" or used during a subsidiary's taxable year is to offset the positive adjustment required by section 1.1502-32(b)(1)(ii), Income Tax Regs., ¹² to the parent corporation's 103 T.C. 398">*414 investment basis in the stock of the subsidiary for an NOL attributable to the subsidiary which is not carried back and "absorbed" in a prior tax year. Peel, Consolidated Tax Returns, sec. 16.05, at 16-17 (3d ed. 1984) ("Treating a subsidiary's portion of a consolidated net operating loss * * * available for carryforward to subsequent years as a positive adjustment is an ingenious device for relating the adjustment to possible subsequent tax benefits." Id. sec. 16.04, at 14.). The potential tax benefit is the use of the NOL carryover attributable to the subsidiary to offset the affiliated group's consolidated income in a future tax year. The potential tax benefit does not include, as respondent contends, the reduction of a subsidiary's tax attributes pursuant to section 108(b)(2)(A). The reduction of tax attributes pursuant to section 108(b)(2)(A) is the price the taxpayer pays for the exclusion1994 U.S. Tax Ct. LEXIS 71">*104 of COD income under section 108(a) and does not produce a tax benefit to the consolidated group that is "absorbed" within the meaning of section 1.1502-32(b)(2)(ii), Income Tax Regs.

Moreover, section 108(b)(4)(A)¹³ provides that the tax attribute reductions that are required under section 108(b)(2) shall be made after the determination of the tax imposed by chapter 1 of the Code for the taxable year of the discharge1994 U.S. Tax Ct. LEXIS 71">*105 of indebtedness. Section 1.1502-19(a), Income Tax Regs., provides that the balance of an excess loss account is required to be included in the parent corporation's income immediately before the disposition of the stock of its subsidiary. Consequently, the reduction of tax attributes under section 108(b)(2)(A) cannot be considered to have been "absorbed" for purposes of section 1.1502-32(b)(2)(ii), Income Tax Regs., until the next taxable year. Because the consolidated regulations do not preclude, indeed, do not even mention, the 103 T.C. 398">*415 application of section 108(b)(4)(A), we conclude that the provisions of that section are applicable in the instant case. Sec. 1.1502-80, Income Tax Regs. Consequently, even if we were to accept respondent's interpretation of the term "absorbed" in section 1.1502-32(b)(2)(ii), Income Tax Regs., the outcome respondent seeks in the instant case would not be possible.

1994 U.S. Tax Ct. LEXIS 71">*106 Finally, respondent's reliance on the legislative history of section 1503(e) as support for the argument that NOL's which are reduced under section 108(b)(2)(A) should be considered "absorbed" for purposes of section 1.1502-32(b)(2)(ii), Income Tax Regs., is misplaced. The conference report to the Omnibus Budget Reconciliation Act of 1987, Pub. L. 100-203, 101 Stat. 1330, states that section 1503(e) eliminates the positive basis adjustment for earnings and profits arising from COD that has been excluded from a subsidiary's taxable income "where the amount excluded was applied to reduce tax attributes, such as net operating losses, that were immediately reflected in basis under the consolidated return regulations." H. Conf. Rept. 100-495, at 963 (1987), 1987-3 C.B. 193, 243. The conference report provides no analysis to support such an interpretation. Moreover, it is well settled that the view of one Congress as to the construction of a statute or a regulation adopted many years before is not entitled to substantial weight. See Mars, Inc. v. Commissioner, 88 T.C. 428">88 T.C. 428, 88 T.C. 428">435 (1987) (citing United States v. Southwestern Cable Co., 392 U.S. 157">392 U.S. 157, 392 U.S. 157">170 (1968)).1994 U.S. Tax Ct. LEXIS 71">*107

For the reasons stated above, we reject respondent's alternative argument. We hold that, for purposes of the investment basis adjustment rules of section 1.1502-32, Income Tax Regs., Sea Level is entitled to include its COD income in its earnings and profits, and CSI is entitled to adjust its investment basis in its Sea Level stock to reflect the increase in Sea Level's earnings and profits. Section 1.1502-19(a), Income Tax Regs., provides that the balance of an excess loss account is to be computed in accordance with the rules of section 1.1502-32, Income Tax Regs. Accordingly, no further negative adjustment to CSI's basis in its Sea Level stock is required.

103 T.C. 398">*416 In order to reflect the foregoing,

Decision will be entered for petitioners.