Deemed Election To Be an Association Taxable as a Corporation for a Qualified Electing S Corporation, 29452-29453 [05-10165]
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29452
Federal Register / Vol. 70, No. 98 / Monday, May 23, 2005 / Rules and Regulations
26 CFR Part 602
Reporting and recordkeeping
requirements.
Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 602
are amended as follows:
I
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read, in part, as
follows:
I
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.6050L–2T is added to
read as follows:
I
§ 1.6050L–2T Information returns by
donees relating to qualified intellectual
property contributions (temporary).
(a) In general. Each donee
organization described in section 170(c),
except a private foundation (as defined
in section 509(a)), other than a private
foundation described in section
170(b)(1)(E), that receives or accrues net
income during a taxable year from any
qualified intellectual property
contribution (as defined in section
170(m)(8)) must make an annual
information return on the form
prescribed by the Internal Revenue
Service. The information return is
required for any taxable year of the
donee that includes any portion of the
10-year period beginning on the date of
the contribution, but not for taxable
years beginning after the expiration of
the legal life of the qualified intellectual
property.
(b) Information required to be
provided on return. The information
return required by section 6050L and
paragraph (a) of this section shall
include the following—
(1) The name, address, taxable year,
and employer identification number of
the donee making the information
return;
(2) The name, address, and taxpayer
identification number of the donor;
(3) A description of the qualified
intellectual property in sufficient detail
to identify the qualified intellectual
property received by such donee;
(4) The date of the contribution to the
donee;
(5) The amount of net income of the
donee for the taxable year that is
properly allocable to the qualified
intellectual property (determined
without regard to paragraph (10)(B) of
section 170(m) and with the
modifications described in paragraphs
(5) and (6) of such section); and
(6) Such other information as may be
specified by the form or its instructions.
(c) Special rule—statement to be
furnished to donors—(1) In general.
VerDate jul<14>2003
14:30 May 20, 2005
Jkt 205001
Every donee making an information
return under section 6050L and this
section with respect to a qualified
intellectual property contribution shall
furnish a copy of the information return
to the donor of the property. The
information return required by section
6050L and this section shall be
furnished to the donor on or before the
date the donee is required to file the
return with the Internal Revenue
Service.
(2) Before a form is prescribed by the
Internal Revenue Service. Before a form
is prescribed by the Internal Revenue
Service, every donee required to make
an information return under section
6050L and this section with respect to
qualified intellectual property
contributions shall furnish, in lieu of
the prescribed form, a statement to the
donor that includes all information
required by paragraphs (b)(1) through
(b)(5) of this section. This statement
shall be furnished to the donor on or
before the date the donee would have
been required to file the return with the
Internal Revenue Service under
paragraph (d)(2)(i) of this section had a
form been prescribed.
(3) Donee taxable years ending prior
to or on the date of issuance of
regulations. If the donee’s taxable year
to which net income from the qualified
intellectual property is properly
allocable ends prior to or on May 23,
2005, the donee shall furnish the
information required under section
6050L and this section to the donor on
or before the 90th day following May 23,
2005.
(d) Place and time for filing
information return—(1) Place for filing.
The information return required by
section 6050L and this section shall be
filed with the Internal Revenue Service
location listed on the prescribed form or
in its instructions.
(2) Time for filing—(i) In general. A
donee is required to file the return
required by section 6050L and this
section on or before the last day of the
first full month following the close of
the donee’s taxable year to which net
income from the qualified intellectual
property is properly allocable.
(ii) Before a form is prescribed by the
Internal Revenue Service. If the
information return required by section
6050L and this section is required to be
filed before a form is prescribed by the
Internal Revenue Service, then an
information return for such taxable year
shall be filed on or before the last day
of the second full month following the
release of such prescribed form by the
Internal Revenue Service.
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Frm 00016
Fmt 4700
Sfmt 4700
(e) Penalties. For penalties for failure
to comply with the requirements of this
section, see sections 6721 through 6724.
(f) Effective date. The rules of this
section apply to qualified intellectual
property contributions made after June
3, 2004.
PART 602—OMB CONTROL NUMBERS
UNDER THE PAPERWORK
REDUCTION ACT
I Par. 8. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 9. In § 602.101, paragraph (b) is
amended by adding an entry to the table
in numerical order to read as follows:
I
§ 602.101
*
OMB Control numbers.
*
*
(b) * * *
*
*
CFR part or section where
identified and described
*
*
*
1.6050L–2T ...........................
*
*
*
Current OMB
control No.
*
*
1545–1932
*
*
Mark E. Matthews,
Deputy Commissioner for Services and
Enforcement.
Approved: May 16, 2005.
Eric Solomon,
Acting Deputy Assistant Secretary of the
Treasury.
[FR Doc. 05–10229 Filed 5–20–05; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[TD 9203]
RIN 1545–BC32
Deemed Election To Be an Association
Taxable as a Corporation for a
Qualified Electing S Corporation
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations and removal of
temporary regulations.
AGENCY:
SUMMARY: This document contains final
regulations that deem certain eligible
entities that file timely S corporation
elections to have elected to be classified
as associations taxable as corporations.
These regulations affect certain eligible
entities filing timely elections to be S
corporations on or after July 20, 2004.
E:\FR\FM\23MYR1.SGM
23MYR1
Federal Register / Vol. 70, No. 98 / Monday, May 23, 2005 / Rules and Regulations
Effective Date: These regulations
are effective July 20, 2004.
FOR FURTHER INFORMATION CONTACT:
Rebekah A. Myers, (202) 622–3050 (not
a toll free number).
SUPPLEMENTARY INFORMATION:
DATES:
Background
This document contains amendments
to 26 CFR part 301. On July 20, 2004,
temporary regulations (TD 9139)
relating to entity classification elections
for entities that elect to be S
corporations under section 1362(a) were
published in the Federal Register (69
FR 43317). A notice of proposed
rulemaking (REG–131786–03) crossreferencing the temporary regulations
also was published in the Federal
Register on July 20, 2004. No public
hearing was requested or held. No
written or electronic comments
responding to the notice of proposed
rulemaking were received. The
proposed regulations are adopted by
this Treasury decision, and the
corresponding temporary regulations are
removed.
Section 301.7701–3(a) provides that
an eligible entity with two or more
owners may elect to be classified as an
association (and thus a corporation
under § 301.7701–2(b)(2)) or a
partnership, and an eligible entity with
a single owner may elect to be classified
as an association or to be disregarded as
an entity separate from its owner.
Section 301.7701–3(b) provides that,
unless the entity elects otherwise, a
domestic eligible entity is a partnership
if it has two or more owners or is
disregarded as an entity separate from
its owner if it has a single owner.
Section 301.7701–3(c) describes the
time and place for filing an entity
classification election. Section
301.7701–3(c)(1)(i) provides that an
eligible entity may elect to be classified
as other than its default classification or
to change its classification by filing
Form 8832, ‘‘Entity Classification
Election’’, with the service center
designated on the form.
A taxpayer whose default
classification is a partnership or a
disregarded entity may seek to be
classified as an S corporation. For S
elections that were filed prior to the
effective date of these regulations, the
taxpayer was required to elect to be
classified as an association under
§ 301.7701–3(c)(1)(i) by filing Form
8832 and to elect to be an S corporation
under section 1362(a) by filing Form
2553, ‘‘Election by a Small Business
Corporation.’’ These regulations
simplify these paperwork requirements
by eliminating, in certain cases, the
VerDate jul<14>2003
14:30 May 20, 2005
Jkt 205001
requirement that the entity elect to be
classified as an association. Instead, an
eligible entity that makes a timely and
valid election to be classified as an S
corporation will be deemed to have
elected to be classified as an association
taxable as a corporation.
If the S election and the entity
classification election are filed late, the
entity may need to submit a ruling
request under § 301.9100–3 to file a late
entity classification election and under
section 1362(b)(5) to file a late S
corporation election. However, Rev.
Proc. 2004–48 (2004–32 I.R.B. 172)
provides relief for these entities in some
cases.
Effective Dates
These final regulations apply to
elections to be an S corporation filed on
or after July 20, 2004. However, eligible
entities that timely filed S elections
before July 20, 2004 may also rely on the
provisions of the regulation.
Special Analysis
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in
Executive Order 12866. Therefore a
regulatory assessment is not required. It
has also been determined that section
553(b) of the Administrative Procedure
Act (5 U.S.C. chapter 5) does not apply
to these regulations, and because the
regulations do not impose a collection
of information on small entities, the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to
section 7805(f) of the Internal Revenue
Code, the notice of proposed rulemaking
that preceded these regulations was
submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on its
impact on small business.
Drafting Information
The principal author of this regulation
is Rebekah A. Myers, Office of Associate
Chief Counsel (Passthroughs and
Special Industries). However, other
personnel from the IRS and Treasury
Department participated in their
development.
List of Subjects in 26 CFR Part 301
Employment taxes, Estate and excise
taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping
requirements.
Adoption of Amendments to the
Regulations
PART 301—PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation for
part 301 continues to read, in part, as
follows:
I
Authority: 26 U.S.C. 7805 * * *
I Par. 2. Section 301.7701–3 is amended
by revising paragraphs (c)(1)(v)(C) and
(h)(3) to read as follows:
§ 301.7701–3 Classification of certain
business entities.
*
*
*
*
*
(c) * * *
(1) * * *
(v) * * *
(C) S corporations. An eligible entity
that timely elects to be an S corporation
under section 1362(a)(1) is treated as
having made an election under this
section to be classified as an association,
provided that (as of the effective date of
the election under section 1362(a)(1))
the entity meets all other requirements
to qualify as a small business
corporation under section 1361(b).
Subject to § 301.7701–3(c)(1)(iv), the
deemed election to be classified as an
association will apply as of the effective
date of the S corporation election and
will remain in effect until the entity
makes a valid election, under
§ 301.7701–3(c)(1)(i), to be classified as
other than an association.
*
*
*
*
*
(h) * * *
(3) Deemed elections for S
corporations. Paragraph (c)(1)(v)(C) of
this section applies to timely S
corporation elections under section
1362(a) filed on or after July 20, 2004.
Eligible entities that filed timely S
elections before July 20, 2004 may also
rely on the provisions of the regulation.
§ 301.7701–3T
Mark E. Mattews,
Deputy Commissioner for Services and
Enforcement.
Approved: May 12, 2005.
Eric Solomon,
Acting Deputy Assistant Secretary for Tax
Policy.
[FR Doc. 05–10165 Filed 5–20–05; 8:45 am]
BILLING CODE 4830–01–P
Accordingly, 26 CFR part 301 is
amended as follows:
Frm 00017
Fmt 4700
Sfmt 4700
[Removed]
I Par. 3. Section 301.7701–3T is
removed.
I
PO 00000
29453
E:\FR\FM\23MYR1.SGM
23MYR1
Agencies
[Federal Register Volume 70, Number 98 (Monday, May 23, 2005)]
[Rules and Regulations]
[Pages 29452-29453]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-10165]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[TD 9203]
RIN 1545-BC32
Deemed Election To Be an Association Taxable as a Corporation for
a Qualified Electing S Corporation
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations and removal of temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations that deem certain
eligible entities that file timely S corporation elections to have
elected to be classified as associations taxable as corporations. These
regulations affect certain eligible entities filing timely elections to
be S corporations on or after July 20, 2004.
[[Page 29453]]
DATES: Effective Date: These regulations are effective July 20, 2004.
FOR FURTHER INFORMATION CONTACT: Rebekah A. Myers, (202) 622-3050 (not
a toll free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to 26 CFR part 301. On July 20,
2004, temporary regulations (TD 9139) relating to entity classification
elections for entities that elect to be S corporations under section
1362(a) were published in the Federal Register (69 FR 43317). A notice
of proposed rulemaking (REG-131786-03) cross-referencing the temporary
regulations also was published in the Federal Register on July 20,
2004. No public hearing was requested or held. No written or electronic
comments responding to the notice of proposed rulemaking were received.
The proposed regulations are adopted by this Treasury decision, and the
corresponding temporary regulations are removed.
Section 301.7701-3(a) provides that an eligible entity with two or
more owners may elect to be classified as an association (and thus a
corporation under Sec. 301.7701-2(b)(2)) or a partnership, and an
eligible entity with a single owner may elect to be classified as an
association or to be disregarded as an entity separate from its owner.
Section 301.7701-3(b) provides that, unless the entity elects
otherwise, a domestic eligible entity is a partnership if it has two or
more owners or is disregarded as an entity separate from its owner if
it has a single owner. Section 301.7701-3(c) describes the time and
place for filing an entity classification election. Section 301.7701-
3(c)(1)(i) provides that an eligible entity may elect to be classified
as other than its default classification or to change its
classification by filing Form 8832, ``Entity Classification Election'',
with the service center designated on the form.
A taxpayer whose default classification is a partnership or a
disregarded entity may seek to be classified as an S corporation. For S
elections that were filed prior to the effective date of these
regulations, the taxpayer was required to elect to be classified as an
association under Sec. 301.7701-3(c)(1)(i) by filing Form 8832 and to
elect to be an S corporation under section 1362(a) by filing Form 2553,
``Election by a Small Business Corporation.'' These regulations
simplify these paperwork requirements by eliminating, in certain cases,
the requirement that the entity elect to be classified as an
association. Instead, an eligible entity that makes a timely and valid
election to be classified as an S corporation will be deemed to have
elected to be classified as an association taxable as a corporation.
If the S election and the entity classification election are filed
late, the entity may need to submit a ruling request under Sec.
301.9100-3 to file a late entity classification election and under
section 1362(b)(5) to file a late S corporation election. However, Rev.
Proc. 2004-48 (2004-32 I.R.B. 172) provides relief for these entities
in some cases.
Effective Dates
These final regulations apply to elections to be an S corporation
filed on or after July 20, 2004. However, eligible entities that timely
filed S elections before July 20, 2004 may also rely on the provisions
of the regulation.
Special Analysis
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866.
Therefore a regulatory assessment is not required. It has also been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these regulations, and because the
regulations do not impose a collection of information on small
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f) of the Internal Revenue Code, the
notice of proposed rulemaking that preceded these regulations was
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
Drafting Information
The principal author of this regulation is Rebekah A. Myers, Office
of Associate Chief Counsel (Passthroughs and Special Industries).
However, other personnel from the IRS and Treasury Department
participated in their development.
List of Subjects in 26 CFR Part 301
Employment taxes, Estate and excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
0
Accordingly, 26 CFR part 301 is amended as follows:
PART 301--PROCEDURE AND ADMINISTRATION
0
Paragraph 1. The authority citation for part 301 continues to read, in
part, as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 301.7701-3 is amended by revising paragraphs
(c)(1)(v)(C) and (h)(3) to read as follows:
Sec. 301.7701-3 Classification of certain business entities.
* * * * *
(c) * * *
(1) * * *
(v) * * *
(C) S corporations. An eligible entity that timely elects to be an
S corporation under section 1362(a)(1) is treated as having made an
election under this section to be classified as an association,
provided that (as of the effective date of the election under section
1362(a)(1)) the entity meets all other requirements to qualify as a
small business corporation under section 1361(b). Subject to Sec.
301.7701-3(c)(1)(iv), the deemed election to be classified as an
association will apply as of the effective date of the S corporation
election and will remain in effect until the entity makes a valid
election, under Sec. 301.7701-3(c)(1)(i), to be classified as other
than an association.
* * * * *
(h) * * *
(3) Deemed elections for S corporations. Paragraph (c)(1)(v)(C) of
this section applies to timely S corporation elections under section
1362(a) filed on or after July 20, 2004. Eligible entities that filed
timely S elections before July 20, 2004 may also rely on the provisions
of the regulation.
Sec. 301.7701-3T [Removed]
0
Par. 3. Section 301.7701-3T is removed.
Mark E. Mattews,
Deputy Commissioner for Services and Enforcement.
Approved: May 12, 2005.
Eric Solomon,
Acting Deputy Assistant Secretary for Tax Policy.
[FR Doc. 05-10165 Filed 5-20-05; 8:45 am]
BILLING CODE 4830-01-P