Information Returns by Donees Relating to Qualified Intellectual Property Contributions, 29450-29452 [05-10229]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 70, Number 98 (Monday, May 23, 2005)]
[Rules and Regulations]
[Pages 29450-29452]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-10229]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 602

[TD 9206]
RIN 1545-BE12


Information Returns by Donees Relating to Qualified Intellectual 
Property Contributions

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations.

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[[Page 29451]]

SUMMARY: This document contains temporary regulations that provide 
guidance for the filing of information returns by donees relating to 
qualified intellectual property contributions. These temporary 
regulations affect donees receiving net income from qualified 
intellectual property contributions made after June 3, 2004. The text 
of these temporary regulations also serves as the text of the proposed 
regulations set forth in the notice of proposed rulemaking on this 
subject in the Proposed Rules section in this issue of the Federal 
Register.

DATES: Effective date: These regulations are effective May 23, 2005.

FOR FURTHER INFORMATION CONTACT: Donnell M. Rini-Swyers, (202) 622-4910 
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    These temporary regulations are being issued without prior notice 
and public procedure pursuant to the Administrative Procedure Act (5 
U.S.C. 553). For this reason, the collection of information contained 
in these regulations has been reviewed and, pending receipt and 
evaluation of public comments, approved by the Office of Management and 
Budget under control number 1545-1932. Responses to this collection of 
information are required to obtain a tax benefit.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid OMB control number. For further 
information concerning this collection of information, and where to 
submit comments on the collection of information and the accuracy of 
the estimated burden, and suggestions for reducing this burden, please 
refer to the preamble to the cross referencing notice of proposed 
rulemaking published in the Proposed Rules section of this issue of the 
Federal Register.
    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.

Explanation of Provisions

    This document contains temporary 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 the 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 under specified conditions 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). 
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 
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 Service 
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-XX 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 these temporary regulations are not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. For the 
applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6) 
refer to the Special Analyses section of the preamble of the cross-
reference notice of proposed rulemaking published in the Proposed Rules 
section in this issue of the Federal Register. Pursuant to section 
7805(f) of the Internal Revenue Code, these regulations will be 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on their impact on small business.

Drafting Information

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

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

[[Page 29452]]

26 CFR Part 602

    Reporting and recordkeeping requirements.

Amendments to the Regulations

0
Accordingly, 26 CFR parts 1 and 602 are amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read, in 
part, as follows:

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


0
Par. 2. Section 1.6050L-2T is added to read as follows:


Sec.  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. 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.
    (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

0
Par. 8. The authority citation for part 602 continues to read as 
follows:

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


0
Par. 9. In Sec.  602.101, paragraph (b) is amended by adding an entry 
to the table in numerical order to read as follows:


Sec.  602.101  OMB Control numbers.

* * * * *
    (b) * * *

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                                                            Current OMB
   CFR part or section where identified and described       control No.
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                                * * * * *
1.6050L-2T..............................................       1545-1932
 
                                * * * * *
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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