Information Returns by Donees Relating to Qualified Intellectual Property Contributions, 29460-29461 [05-10228]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 70, Number 98 (Monday, May 23, 2005)]
[Proposed Rules]
[Pages 29460-29461]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-10228]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 70, No. 98 / Monday, May 23, 2005 / Proposed 
Rules

[[Page 29460]]



DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-158138-04]
RIN 1545-BE11


Information Returns by Donees Relating to Qualified Intellectual 
Property Contributions

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary 
regulations.

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SUMMARY: This document contains proposed regulations that provide 
guidance for the filing of information returns by donees relating to 
qualified intellectual property contributions. The text of the 
temporary regulations published in the Rules and Regulations section of 
this issue of the Federal Register also serves as the text of these 
proposed regulations. The regulations affect donees receiving qualified 
intellectual property contributions after June 3, 2004.

DATES: Written or electronic comments and requests for a public hearing 
must be received by August 22, 2005.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-158138-04), Room 
5203, Internal Revenue Service, POB 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-
158138-04), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue, NW., Washington, DC, or sent electronically, via the IRS 
Internet site at https://www.irs.gov/regs, or via the Federal 
eRulemaking Portal at https://www.regulations.gov (IRS-REG-158138-04). A 
public hearing may be scheduled if requested by any person who timely 
submits comments.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Donnell M. Rini-Swyers, (202) 622-4910; concerning submissions of 
comments, the hearing, and/or to be placed on the building access list 
to attend the hearing, Guy Traynor, (202) 622-7180 (not toll-free 
numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in this notice of proposed 
rulemaking has been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)). Comments on the collection of information should be 
sent to the Office of Management and Budget, Attn: Desk Officer for the 
Department of the Treasury, Office of Information and Regulatory 
Affairs, Washington, DC 20503, with copies to the Internal Revenue 
Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, 
Washington, DC 20224. Comments on the collection of information should 
be received by July 22, 2005. Comments are specifically requested 
concerning:
    Whether the proposed collection of information is necessary for the 
proper performance of the functions of the IRS, including whether the 
information will have practical utility;
    The accuracy of the estimated burden associated with the proposed 
collection of information (see below);
    How the quality, utility, and clarity of the information to be 
collected may be enhanced;
    How the burden of complying with the proposed collection of 
information may be minimized, including through the application of 
automated collection techniques or other forms of information 
technology; and
    Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information. The 
collections of information in this proposed regulation are in 1.6050L-
2. Section 6050L(b) requires certain donees of qualified intellectual 
property to annually report certain information regarding the qualified 
intellectual property to the Internal Revenue Service and to provide 
the information to the donor of the qualified intellectual property. 
Section 1.6050L-2 provides guidance for the filing of information 
returns by donees relating to qualified intellectual property 
contributions. These collections of information are required to obtain 
a tax benefit. The likely respondents are tax-exempt organizations.
    Estimated total annual reporting and/or recordkeeping burden: 200 
hours. Estimated average annual burden per respondent and/or 
recordkeeper is two hours.
    Estimated number respondents and/or recordkeepers: 100.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
return information are confidential, as required by 26 U.S.C. 6103.

Background

    Temporary regulations in the Rules and Regulations section of this 
issue of the Federal Register amend the Income Tax Regulations (26 CFR 
part 1) relating to section 6050L. The temporary regulations provide 
guidance for filing information returns by donees relating to qualified 
intellectual property contributions.
    This document contains proposed Income Tax Regulations under the 
American Jobs Creation Act of 2004 (Pub. L. 108-357, 118 Stat. 1418) 
(the Act). They are necessary to implement section 882 of that Act, 
which directs that regulations be issued regarding information returns 
by donees relating to qualified intellectual property contributions 
made after June 3, 2004.
    The Act provides rules that enable taxpayers who donate qualified 
intellectual property to receive additional charitable contribution 
deductions if and when their donated property produces net income for 
the donee (qualified donee income), under specified conditions. Section 
170(m)(2), (8), (9). Under the Act, a taxpayer who contributes a 
``patent, copyright (other than a copyright described in section 
1221(a)(3) or 1231(b)(1)(C)), trademark, trade name, trade secret, 
know-how, software (other than software described in section 
197(e)(3)(A)(i)), or similar property, or applications or registrations

[[Page 29461]]

of such property,'' to a donee described in section 170(c) (other than 
to a private foundation referred to in section 170(e)(1)(B)(ii)) may be 
allowed an initial charitable contribution deduction limited to the 
lesser of the taxpayer's basis or the fair market value of the 
qualified intellectual property. In addition, the taxpayer may be 
permitted to deduct certain additional amounts in the year of 
contribution or in subsequent taxable years based on a specified 
percentage of the qualified donee income received by the donee with 
respect to the qualified intellectual property.
    Section 882(c)(1) of the Act amended section 6050L to require 
donees to make an annual information return that reports the qualified 
donee income for the taxable year and other specified information 
relating to qualified intellectual property contributions. The IRS 
expects to issue a new Form 8899 on which donees will report qualified 
donee income.
    Under section 170(m)(8)(B), a donor must notify the donee of the 
donor's intent to treat a charitable contribution as a qualified 
intellectual property contribution under sections 170(m) and 6050L. For 
rules relating to donor notification see section 170(m)(8)(B) and 
Notice 2005-41, I.R.B. 2005-23 issued thereunder. Unless timely notice 
is provided, the donor has not made a qualified intellectual property 
contribution, and the donee has no reporting obligation under section 
6050L or these regulations.
    The donee is not required to make an information return if the 
qualified intellectual property produced no net income for the donee's 
taxable year. Under section 170(m)(5) and (m)(6), income received or 
accrued during the donee's taxable year is not treated as allocated to 
qualified intellectual property if such income is received or accrued 
after the 10-year period beginning on the date of the contribution or 
after the expiration of the legal life of the qualified intellectual 
property. Thus, the donee is not required to make a return with regard 
to a qualified intellectual property contribution for taxable years 
beginning after the expiration of the legal life of such qualified 
intellectual property. Additionally, section 6050L(b) requires a return 
only for specified taxable years of the donee, which years are defined 
in section 6050L(b)(2)(B) as any taxable year any portion of which is 
part of the 10-year period beginning on the date of contribution of the 
qualified intellectual property. Therefore, the donee is not required 
to make a return for taxable years beginning more than 10 years after 
the date of the qualified intellectual property contribution.
    Under these regulations, the donee generally is required to file an 
information return (with a copy of such return to the donor) on or 
before the last day of the first full month following the close of the 
donee's taxable year. See section 7701(a)(23) for the definition of 
taxable year. Transition rules are provided to take into account these 
filing requirements before a form is prescribed by the Internal Revenue 
Service and for donees' taxable years ending prior to or on the date of 
issuance of these regulations.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required. It is hereby 
certified that these regulations will not have a significant economic 
impact on a substantial number of small entities. This certification is 
based upon the fact that few, if any, small entities will be required 
to file under these regulations. Therefore, a Regulatory Flexibility 
Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is 
not required. Pursuant to section 7805(f) of the Internal Revenue Code, 
this notice of proposed rulemaking will be submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on its impact on small business.

Comments and Requests for a Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written (a signed original and 8 
copies) or electronic comments that are submitted timely to the IRS. 
The IRS and Treasury Department request comments on the clarity of the 
proposed rules and how they can be made easier to understand. All 
comments will be available for public inspection and copying. A public 
hearing will be scheduled if requested in writing by any person that 
timely submits written comments. If a public hearing is scheduled, 
notice of the date, time, and place for the public hearing will be 
published in the Federal Register.

Drafting Information

    The principal author of these regulations is Donnell M. Rini-
Swyers, Office of Assistant Chief Counsel (Procedure & Administration).

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 continues to read, 
in part, as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. Section 1.6050L-2 is added to read as follows:


Sec.  1.6050L-2  Information returns by donees relating to qualified 
intellectual property contributions.

    [The text of Sec.  1.6050L-2 is the same as the text of Sec.  
1.6050L-2T published elsewhere in this issue of the Federal Register].

Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 05-10228 Filed 5-20-05; 8:45 am]
BILLING CODE 4830-01-P