Attained Age of the Insured Under Section 7702, 29671-29675 [05-10166]
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Federal Register / Vol. 70, No. 99 / Tuesday, May 24, 2005 / Proposed Rules
shows reasonable cause for the failure,
has made a good faith effort to comply
with the requirement to produce
records, and promptly remedies the
failure. For failures to maintain, or
timely produce, records, see paragraph
(m) of this section (allowing the
Commissioner, but not the taxpayer, to
use fair market values which clearly
reflect income, but which are different
from those values used on the
applicable financial statement, for
eligible positions that otherwise might
be subject to the safe harbor) and
paragraph (f)(3)(ii) of this section
(allowing the Commissioner to revoke
the election).
(4) Retention period for records. All
materials required by this paragraph (k)
and section 6001 must be retained as
long as their contents may become
material in the administration of any
internal revenue law.
(5) Agreements with the
Commissioner. The Commissioner and
an eligible taxpayer may enter into a
written agreement that establishes, for
purposes of this paragraph (k), which
records must be maintained, how they
must be maintained, and for how long
they must be maintained.
(l) [Reserved].
(m) Use of different values. If the
taxpayer fails to satisfy paragraph (k) of
this section (concerning record retention
and record production) with respect to
the records that relate to certain eligible
positions for a taxable year, the
Commissioner may, for those eligible
positions for that year, use fair market
values under section 475 that are
different from those values reported for
those positions on the applicable
financial statement and are values the
Commissioner determines to be
appropriate to clearly reflect income.
See paragraph (f)(3)(ii) of this section
concerning revocation of the election by
the Commissioner, when a taxpayer
does not produce required records and
fails to demonstrate reasonable cause for
such failure.
Par. 4. Section 1.475(e)–1 is amended
by redesignating paragraphs (d) through
(j) as paragraphs (e) through (k),
respectively and adding a new
paragraph (d) to read as follows:
§ 1.475(e)–1
Effective dates.
*
*
*
*
*
(d) Effective date. Section 1.475(a)–4
(concerning a safe harbor to use
applicable financial statement values for
purposes of section 475) applies to
taxable years ending on or after the date
on which the Treasury decision
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promulgating these regulations is
published in the Federal Register.
*
*
*
*
*
Mark E. Matthews,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 05–10167 Filed 5–20–05; 8:45 am]
BILLING CODE 4830–01–P
29671
FOR FURTHER INFORMATION CONTACT:
Concerning the regulations, Ann H.
Logan, (202) 622–3970. Concerning
submission of comments, the hearing, or
to be placed on the building access list
to attend the hearing, Lanita Van Dyke
of the Publication and Regulations
Branch, (202) 622–7180 (not toll-free
numbers).
SUPPLEMENTARY INFORMATION:
DEPARTMENT OF THE TREASURY
Background
Internal Revenue Service
Section 7702(a) of the Internal
Revenue Code (Code) provides that, for
a contract to qualify as a life insurance
contract for Federal income tax
purposes, the contract must be a life
insurance contract under the applicable
law and must either (1) satisfy the cash
value accumulation test of section
7702(b), or (2) both meet the guideline
premium requirements of section
7702(c) and fall within the cash value
corridor of section 7702(d). To
determine whether a contract satisfies
the cash value accumulation test, or
meets the guideline premium
requirements and falls within the cash
value corridor, it is necessary to
determine the attained age of the
insured.
A contract meets the cash value
accumulation test of section 7702(b) if,
by the terms of the contract, the cash
surrender value of the contract may not
at any time exceed the net single
premium that would have to be paid at
that time to fund future benefits under
the contract. Under section
7702(e)(1)(B), the maturity date of the
contract is deemed to be no earlier than
the day on which the insured attains age
95, and no later than the day on which
the insured attains age 100, for purposes
of applying the cash value accumulation
test.
A contract meets the guideline
premium requirements of section
7702(c) if the sum of the premiums paid
under the contract does not at any time
exceed the greater of the guideline
single premium or the sum of the
guideline level premiums as of such
time. The guideline single premium is
the premium that is needed at the time
the policy is issued to fund the future
benefits under the contract based on the
following three elements enumerated in
section 7702(c)(3)(B):
(i) Reasonable mortality charges that
meet the requirements (if any)
prescribed in regulations and that
(except as provided in regulations) do
not exceed the mortality charges
specified in the prevailing
commissioners’ standard tables (as
defined in section 807(d)(5)) as of the
time the contract is issued;
26 CFR Part 1
[REG–168892–03]
RIN 1545–BD00
Attained Age of the Insured Under
Section 7702
Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
AGENCY:
SUMMARY: This document contains
proposed regulations explaining how to
determine the attained age of an insured
for purposes of testing whether a
contract qualifies as a life insurance
contract for Federal income tax
purposes. This document also provides
notice of a public hearing on these
proposed regulations.
DATES: Written or electronic comments
must be received by August 24, 2005.
Requests to speak and outlines of topics
to be discussed at the public hearing
scheduled for Wednesday, September
14, 2005, must be received by August
24, 2005.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–168892–03), room
5203, Internal Revenue Service, POB
7604, Ben Franklin Station, Washington,
DC 20044. Comments may be hand
delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–168892–03),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue,
NW., Washington, DC, or submitted to
the IRS Web site at https://www.irs.gov/
regs or via the Federal eRulemaking
Portal at https://www.regulations.gov
(IRS–REG–168892–03). All comments
will be available for public inspection
and copying. Requests to speak, with
outlines of topics to be discussed, at the
hearing scheduled for September 14,
2005, at 10 a.m., must be received by
August 24, 2005. The public hearing
will be held in the IRS Auditorium (7th
Floor), Internal Revenue Building, 1111
Constitution Avenue, NW., Washington,
DC.
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(ii) Any reasonable charges (other
than mortality charges) that (on the
basis of the company’s experience, if
any, with respect to similar contracts)
are reasonably expected to be actually
paid; and
(iii) Interest at the greater of an annual
effective rate of six percent or the rate
or rates guaranteed on issuance of the
contract.
The guideline level premium is the
level annual amount, payable over a
period not ending before the insured
attains age 95, computed on the same
basis but using a minimum interest rate
of four percent, rather than six percent.
Like the cash value accumulation test,
the guideline premium requirements are
applied by deeming the maturity date of
the contract to be no earlier than the day
on which the insured attains age 95, and
no later than the day on which the
insured attains age 100. The deemed
maturity date generally is the
determination date set forth in the
contract or the end of the mortality table
(which, when section 7702 was enacted
in 1984, was age 100).
A contract falls within the cash value
corridor if the death benefit of the
contract at any time is not less than the
applicable percentage of the cash
surrender value. The applicable
percentage is determined based on the
attained age of the insured as of the
beginning of the contract year, as
follows:
APPLICABLE PERCENTAGE
In the case of an insured with an attained age as of the the beginning
of the contract year of:
The applicable percentage shall decrease by a ratable portion for
each full year:
More than:
But not more than:
From:
To:
0
40
45
50
55
60
65
70
75
90
40
45
50
55
60
65
70
75
90
95
250
250
215
185
150
130
120
115
105
105
250
215
185
150
130
120
115
105
105
100
The Code does not define the attained
age of the insured for purposes of
applying the cash value corridor, the
guideline premium limitations, and the
computational rules of section 7702(e).
The Senate Finance Committee
explanation of the Deficit Reduction Act
of 1984, Public Law 98–369 (98 Stat.
494), however, states that the attained
age of the insured means the insured’s
age determined by reference to contract
anniversaries (rather than the
individual’s actual birthdays), so long as
the age assumed under the contract is
within 12 months of the actual age. See
S. Prt. No. 98–169, Vol. 1, at 576 (1984).
Section 7702A defines a modified
endowment contract as a contract that
meets the requirements of section 7702
(that is, a contract that is a life insurance
contract), but that fails to meet the 7-pay
test set forth in section 7702A(b). A
contract fails to meet the 7-pay test if
the accumulated amount paid under the
contract at any time during the first 7
contract years exceeds the sum of the
net level premiums that would have
been paid on or before that time if the
contract provided for paid-up future
benefits after the payment of 7 level
annual premiums. Section
7702A(c)(1)(B) provides that, for
purposes of this test, the computational
rules of section 7702(e) generally apply,
including the contract’s deemed
maturity no earlier than the day on
which the insured attains age 95, and no
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later than the day on which the insured
attains age 100.
In sum, the attained age of an insured
under a contract that is a life insurance
contract under the applicable law must
be determined to test whether the
contract complies with the guideline
premium requirements of section
7702(c), the cash value corridor of
section 7702(d), and (by reason of the
computational rules of section 7702(e))
the cash value accumulation test of
section 7702(b) and the 7-pay test of
section 7702A(b), as applicable.
Discussion
Although most life insurance
contracts insure the life of one person,
some life insurance contracts insure
multiple lives. For example, a last-to-die
life insurance contract (sometimes
referred to as a survivorship or secondto-die life insurance contract) insures
two or more lives and pays death
benefits when the last insured dies.
Such contracts are sometimes used in
connection with business continuation
or estate tax planning; the contracts
typically involve lower premiums than
do contracts insuring a single life.
A first-to-die life insurance contract
(sometimes referred to as a joint life
insurance contract) also insures two or
more lives, but pays death benefits and
terminates upon the death of the first
insured. These contracts typically
involve higher risks and thus higher
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premiums than do contracts insuring a
single life. First-to-die life insurance
contracts represent a small percentage of
the multiple-life insurance contracts
that are issued.
Section 7702A, which defines the
term modified endowment contract
(MEC), incorporates the computational
rules of section 7702, both in its initial
determination of whether a contract is a
life insurance contract, and in its 7-pay
test calculations. Further, section
7702A(c)(6) provides a specific
computational rule that applies to
multiple life insurance contracts if the
death benefit under the contract is
reduced.
Neither section 7702, section 7702A,
nor the legislative history of either
provision, addresses how an insured’s
attained age is determined for purposes
of testing a life insurance contract
insuring multiple lives under the cash
value accumulation test of section
7702(b), the guideline premium
requirements of section 7702(c), or the
computational rules of section 7702(e).
Explanation of Provision
This document contains proposed
amendments to 26 CFR part 1 under
section 7702. The proposed regulations
provide guidance on how to determine
the attained age of an insured individual
under a contract that is a life insurance
contract under the applicable law, for
purposes of testing whether the contract
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qualifies as a life insurance contract
under section 7702 and is a MEC under
section 7702A. Under the proposed
regulations, the attained age of the
insured under a contract insuring the
life of a single individual is either (i) the
insured’s age determined by reference to
the individual’s actual birthday as of the
date of determination (actual age) or (ii)
the insured’s age determined by
reference to contract anniversary (rather
than the individual’s actual birthday),
so long as the age assumed under the
contract (contract age) is within 12
months of the actual age. The attained
age of the insured under a contract
insuring multiple lives on a last-to-die
basis is the attained age of the youngest
insured. The attained age of the insured
under a contract insuring multiple lives
on a first-to-die basis is the attained age
of the oldest insured. The Treasury
Department and the IRS understand that
the approach of the proposed
regulations is consistent with the
existing practice of many (but not all)
issuers of both contracts insuring a
single life and contracts insuring
multiple lives. In addition, by
mandating the use of a single,
predictable age, the proposed
regulations provide rules that are
straightforward for both issuers and the
IRS to administer.
The proposed regulations generally
would be applicable for contracts issued
on or after the date that is one year after
the regulations are published as final
regulations in the Federal Register. This
applicability date recognizes that some
issuers will need time to conform their
compliance system to the proposed
standard for the issuance of new
contracts, to file policy forms with State
authorities, or both. Taxpayers also
would be permitted to apply the
regulations retroactively for contracts
issued before the date that is one year
after the regulations are published as
final regulations, provided they do not
later determine qualification of those
contracts under section 7702 in a
manner inconsistent with the
regulations.
The proposed regulations defining the
attained age for purposes of these
provisions are not intended to specify
which multiple-life actuarial
methodologies are appropriate to
determine reasonable mortality charges
under sections 7702 and 7702A, or how
any such methodology should be
applied.
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
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regulatory assessment is not required. It
also has 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 Code, the notice
of proposed rulemaking will be
submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on their
impact on small business.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations,
consideration will be given to any
written (a signed original and eight (8)
copies) or electronic comments that are
timely submitted to the IRS. In addition
to comments on the proposed
regulations more generally, the IRS and
Treasury Department specifically
request comments on (i) the clarity of
the proposed regulations and how they
can be made easier to understand, (ii)
the industry’s existing practice for
determining the attained age to use
under both last-to-die and first-to-die
life insurance contracts, (iii) the need
for special rules for determining the
attained age of one or more insureds to
calculate mortality charges under
section 7702(c)(3)(B)(i), and (iv) the
effective date of the proposed
regulations. All comments will be
available for public inspection and
copying.
A public hearing has been scheduled
for September 14, 2005, at 10 a.m., in
the IRS Auditorium (7th Floor), Internal
Revenue Building, 1111 Constitution
Avenue, NW., Washington, DC. All
visitors must present a photo
identification to enter the building.
Because of access restrictions, visitors
must use the Constitution Avenue
entrance and will not be admitted
beyond the Internal Revenue Building
lobby more than 30 minutes before the
hearing starts. For information about
having your name placed on the
building access list to attend the
hearing, see the FOR FURTHER
INFORMATION CONTACT section of this
preamble.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing.
Persons who wish to present oral
comments at the hearing must submit
written comments by August 24, 2005,
and submit an outline of the topics to
be discussed and the time to be devoted
to each topic (a signed original and eight
(8) copies) by that same date.
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A period of 10 minutes will be
allotted to each person(s) for making
comments. An agenda showing the
scheduling of the speakers will be
prepared after the deadline for receiving
outlines has passed. Copies of the
agenda will be available free of charge
at the hearing.
Drafting Information
The principal author of these
proposed regulations is Ann H. Logan,
Office of the Associate Chief Counsel
(Financial Institutions and Products),
Office of Chief Counsel, Internal
Revenue Service. However, personnel
from other offices of the IRS and the
Treasury Department participated in
their development.
List of Subjects in 26 CFR Part 1
Income Taxes.
Adoption of 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 is amended by adding entries
in numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.7702–2 also issued under 26
U.S.C. 7702(k). * * *
Par. 2. Section 1.7702–0, proposed to
be added at 56 FR 30720 and published
on July 5, 1991, and further proposed to
be amended at 57 FR 59321 and
published December 15, 1992, is further
proposed to be revised to read as
follows:
§ 1.7702–0
Table of contents.
This section lists the captions that
appear in §§ 1.7702–1, 1.7702–2, and
1.7702–3:
§ 1.7702–1 Mortality charges.
(a) General rule.
(b) Reasonable mortality charges.
(1) Actually expected to be imposed.
(2) Limit on charges.
(c) Safe harbors.
(1) 1980 C.S.O. Basic Mortality Tables.
(2) Unisex tables and smoker/nonsmoker
tables.
(3) Certain contracts based on 1958 C.S.O.
table.
(d) Definitions.
(1) Prevailing commissioners’ standard
tables.
(2) Substandard risk.
(3) Nonparticipating contract.
(4) Charge reduction mechanism.
(5) Plan of insurance.
(e) Effective date.
§ 1.7702–2 Definitions.
(a) In general.
(b) Cash value.
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(1) In general.
(2) Amounts excluded from cash value.
(c) Death benefit.
(1) In general.
(2) Qualified accelerated death benefit treated
as death benefit.
(d) Qualified accelerated death benefit.
(1) In general.
(2) Determination of present value of the
reduction in death benefit.
(3) Examples.
(e) Terminally ill defined.
(f) Certain other additional benefits.
(1) In general.
(2) Examples.
(g) Adjustments under section 7702(f)(7)
(h) Cash surrender value.
(1) In general.
(2) For purposes of section 7702(f)(7)
(i) Net surrender value.
(j) Effective date and special rules.
(1) In general.
(2) Provision of certain benefits before July 1,
1993.
(i) Not treated as cash value.
(ii) No effect on date of issuance.
(iii) Special rule for addition of benefit or
loan provision after December 15, 1992.
(3) Addition of qualified accelerated death
benefit.
(4) Addition of other additional benefits.
§ 1.7702–3 Attained age of the insured
under a life insurance contract.
(a) In general.
(b) Contract insuring a single life.
(c) Contract insuring multiple lives on a lastto-die basis.
(d) Contract insuring multiple lives on a firstto-die basis.
(e) Examples.
(f) Effective dates.
(1) In general.
(2) Contracts issued before the general
effective date.
Par. 3. Section 1.7702–3 is added to
read as follows:
§ 1.7702–3 Attained age of the insured
under a life insurance contract.
(a) In general. This section provides
guidance on determining the attained
age of an insured under a contract that
is a life insurance contract under the
applicable law, for purposes of testing
whether the contract complies with the
guideline premium requirements of
section 7702(c), the cash value corridor
of section 7702(d), and the
computational rules of section 7702(e),
as applicable.
(b) Contract insuring a single life. (1)
If a contract insures the life of a single
individual, either of the following two
ages may be treated as the attained age
of the insured with respect to that
contract—
(i) The insured’s age determined by
reference to the individual’s actual
birthday as of the date of determination
(actual age); or
(ii) The insured’s age determined by
reference to contract anniversary (rather
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than the individual’s actual birthday),
so long as the age assumed under the
contract (contract age) is within 12
months of the actual age.
(2) Whichever attained age is used
with respect to a contract must be used
consistently from year to year and
consistently for purposes of sections
7702(c), 7702(d), and 7702(e), as
applicable.
(c) Contract insuring multiple lives on
a last-to-die basis. If a contract insures
the lives of more than one individual on
a last-to-die basis, the attained age of the
insured is determined by applying
paragraph (b) of this section as if the
youngest individual were the only
insured under the contract.
(d) Contract insuring multiple lives on
a first-to-die basis. If a contract insures
the lives of more than one individual on
a first-to-die basis, the attained age of
the insured is determined by applying
paragraph (b) of this section as if the
oldest individual were the only insured
under the contract.
(e) Examples. The following examples
illustrate the determination of the
attained age of the insured for purposes
of testing whether the contract complies
with the guideline premium
requirements of section 7702(c), the
cash value corridor of section 7702(d),
and the computational rules of section
7702(e), as applicable. The examples are
as follows:
Example 1. (i) X was born on May 1, 1947.
On January 1, 2008, X purchases from IC a
contract insuring X’s life. January 1 is the
contract anniversary date for all future years.
Under the contract, X’s premiums are
determined on an age-last-birthday basis. X
became 60 years old on May 1, 2007. Based
on the method used under the contract to
determine age, X has an attained age of 60
for the first contract year, 61 for the second
contract year, and so on.
(ii) Section 1.7702–3(b) provides that, if a
contract insures the life of a single
individual, the insured’s age may be
determined by reference to contract
anniversary (rather than the individual’s
actual birthday), so long as the contract age
is within 12 months of the actual age. For
each contract year, X’s contract age,
determined on an age-last-birthday basis, is
within 12 months of X’s actual age.
Accordingly, provided it does so consistently
from year to year, IC may compute X’s
attained age on an age-last-birthday basis for
purposes of testing whether a contract
complies with the guideline premium
requirements of section 7702(c), the cash
value corridor of section 7702(d), and the
computational rules of section 7702(e), as
applicable.
Example 2. (i) The facts are the same as in
Example 1 except that, under the contract,
X’s premiums are determined on an agenearest-birthday basis. X’s nearest birthday to
January 1, 2008, is May 1, 2008, when X will
become 61 years old. Based on the method
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used under the contract to determine age, X
has an attained age of 61 for the first contract
year, 62 for the second contract year, and so
on.
(ii) Section 1.7702–3(b) provides that, if a
life insurance contract insures the life of a
single individual, the insured’s age may be
determined by reference to contract
anniversary (rather than the individual’s
actual birthday), so long as the contract age
is within 12 months of the actual age. For
each contract year, X’s contract age,
determined on an age-nearest-birthday basis,
is within 12 months of X’s actual age.
Accordingly, provided it does so consistently
from year to year, IC may compute X’s
attained age on an age-nearest-birthday basis
for purposes of testing whether the contract
complies with the guideline premium
requirements of section 7702(c), the cash
value corridor of section 7702(d), and the
computational rules of section 7702(e), as
applicable.
Example 3. (i) The facts are the same as in
Example 1 except that in addition to X, the
insurance contract also insures the life of Y.
Y was born on September 1, 1942. The death
benefit will be paid when the last of the two
insureds dies.
(ii) Section 1.7702–3(c) provides that if a
life insurance contract insures the lives of
more than one individual on a last-to-die
basis, the attained age of the insured is
determined by applying § 1.7702–3(b) as if
the youngest individual were the only
insured under the contract. Because X is
younger than Y, the attained age of X must
be used for purposes of testing whether the
contract complies with the guideline
premium requirements of section 7702(c), the
cash value corridor of section 7702(d), and
the computational rules of section 7702(e), as
applicable. The attained ages of X and Y are
determined as set forth in Example 1.
Example 4. (i) The facts are the same as
Example 1 except that in addition to X, the
insurance contract also insures the life of Y.
Y was born on September 1, 1952. The death
benefit will be paid when the first of the two
insureds dies.
(ii) Section 1.7702–3(d) provides that if a
life insurance contract insures the lives of
more than one individual on a first-to-die
basis, the attained age of the insured is
determined by applying § 1.7702–3(b) as if
the oldest individual were the only insured
under the contract. Because X is older than
Y, the attained age of X must be used for
purposes of testing whether the contract
complies with the guideline premium
requirements of section 7702(c), the cash
value corridor of section 7702(d), and the
computational rules of section 7702(e), as
applicable. The attained ages of X and Y are
determined as set forth in Example 1.
(f) Effective dates—(1) In general.
Except as provided in paragraph (f)(2),
these regulations apply to contracts
issued on or after the date that is one
year after the regulations are published
as final regulations in the Federal
Register.
(2) Retroactive application. Pursuant
to section 7805(b)(7), a taxpayer may
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elect to apply these regulations
retroactively for contracts issued before
the date that is one year after the
regulations are published as final
regulations in the Federal Register,
provided that the taxpayer does not later
determine qualification of those
contracts in a manner that is
inconsistent with these regulations.
RIN 1545–BB92
Box 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–105346–
03), 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–105346–
03).
FOR FURTHER INFORMATION CONTACT:
Concerning the section 83 regulations,
Stephen Tackney at (202) 622–6030;
concerning the subchapter K
regulations, Audrey Ellis or Demetri
Yatrakis at (202) 622–3060; concerning
submissions, the hearing, and/or to be
placed on the building access list to
attend the hearing, Robin Jones, (202)
622–7180 (not toll free numbers).
SUPPLEMENTARY INFORMATION:
Partnership Equity for Services
Paperwork Reduction Act
Internal Revenue Service (IRS),
Treasury.
ACTION: Partial withdrawal of notice of
proposed rulemaking, notice of
proposed rulemaking, and notice of
public hearing.
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
25, 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.
Mark E. Matthews,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 05–10166 Filed 5–20–05; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG–105346–03]
AGENCY:
SUMMARY: This document withdraws the
remaining portion of the notice of
proposed rulemaking published in the
Federal Register on June 3, 1971 (36 FR
10787) and contains proposed
regulations relating to the tax treatment
of certain transfers of partnership equity
in connection with the performance of
services. The proposed regulations
provide that the transfer of a partnership
interest in connection with the
performance of services is subject to
section 83 of the Internal Revenue Code
(Code) and provide rules for
coordinating section 83 with
partnership taxation principles. The
proposed regulations also provide that
no gain or loss is recognized by a
partnership on the transfer or vesting of
an interest in the transferring
partnership in connection with the
performance of services for the
transferring partnership. This document
also provides a notice of public hearing
on these proposed regulations.
DATES: Written or electronic comments
must be received by August 22, 2005.
Outlines of topics to be discussed at the
public hearing scheduled for October 5,
2005, at 10 a.m. must be received by
September 14, 2005.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–105346–03), room
5203, Internal Revenue Service, P.O.
VerDate jul<14>2003
15:14 May 23, 2005
Jkt 205001
PO 00000
Frm 00018
Fmt 4702
Sfmt 4702
29675
The following collections of
information in this proposed regulation
are in § 1.83–3(l):
(1) Requirement that electing
partnerships submit an election with the
partnership tax return.
(2) Requirement that certain partners
submit a document to the partnership;
(3) Requirement that such documents
be retained; and
(4) Requirement that partnerships
submit a termination document with the
partnership tax return as one method of
terminating the election.
These collections of information are
required by the IRS to determine
whether the amount of tax has been
calculated correctly. The respondents
are partnerships and partners or other
service providers.
The estimated total annual reporting
and/or recordkeeping burden is 112,500
hours.
The estimated annual burden per
respondent/recordkeeper varies from .10
hours to 10 hours, depending on
individual circumstances, with an
estimated average of 1 hour for
partnerships and .25 hour for a partner
or service provider. The estimated
number of respondents and/or
recordkeepers is 100,000 partnerships
and 50,000 partners or other service
providers.
The estimated annual frequency of
responses (used for reporting
requirements only) is on occasion.
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 tax return information
are confidential as required by 26 U.S.C.
6103.
Background
Partnerships issue a variety of
instruments in connection with the
performance of services. These
instruments include interests in
partnership capital, interests in
partnership profits, and options to
acquire such interests (collectively,
partnership equity). On June 5, 2000,
the Treasury Department and the IRS
issued Notice 2000–29 (2000–1 C.B.
1241), inviting public comment on the
Federal income tax treatment of the
exercise of an option to acquire a
partnership interest, the exchange of
convertible debt for a partnership
interest, and the exchange of a preferred
E:\FR\FM\24MYP1.SGM
24MYP1
]]>Agencies
[Federal Register Volume 70, Number 99 (Tuesday, May 24, 2005)]
[Proposed Rules]
[Pages 29671-29675]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-10166]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-168892-03]
RIN 1545-BD00
Attained Age of the Insured Under Section 7702
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking and notice of public hearing.
-----------------------------------------------------------------------
SUMMARY: This document contains proposed regulations explaining how to
determine the attained age of an insured for purposes of testing
whether a contract qualifies as a life insurance contract for Federal
income tax purposes. This document also provides notice of a public
hearing on these proposed regulations.
DATES: Written or electronic comments must be received by August 24,
2005. Requests to speak and outlines of topics to be discussed at the
public hearing scheduled for Wednesday, September 14, 2005, must be
received by August 24, 2005.
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-168892-03), room
5203, Internal Revenue Service, POB 7604, Ben Franklin Station,
Washington, DC 20044. Comments may be hand delivered Monday through
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
168892-03), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue, NW., Washington, DC, or submitted to the IRS Web site at http:/
/www.irs.gov/regs or via the Federal eRulemaking Portal at https://
www.regulations.gov (IRS-REG-168892-03). All comments will be available
for public inspection and copying. Requests to speak, with outlines of
topics to be discussed, at the hearing scheduled for September 14,
2005, at 10 a.m., must be received by August 24, 2005. The public
hearing will be held in the IRS Auditorium (7th Floor), Internal
Revenue Building, 1111 Constitution Avenue, NW., Washington, DC.
FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Ann H.
Logan, (202) 622-3970. Concerning submission of comments, the hearing,
or to be placed on the building access list to attend the hearing,
Lanita Van Dyke of the Publication and Regulations Branch, (202) 622-
7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
Section 7702(a) of the Internal Revenue Code (Code) provides that,
for a contract to qualify as a life insurance contract for Federal
income tax purposes, the contract must be a life insurance contract
under the applicable law and must either (1) satisfy the cash value
accumulation test of section 7702(b), or (2) both meet the guideline
premium requirements of section 7702(c) and fall within the cash value
corridor of section 7702(d). To determine whether a contract satisfies
the cash value accumulation test, or meets the guideline premium
requirements and falls within the cash value corridor, it is necessary
to determine the attained age of the insured.
A contract meets the cash value accumulation test of section
7702(b) if, by the terms of the contract, the cash surrender value of
the contract may not at any time exceed the net single premium that
would have to be paid at that time to fund future benefits under the
contract. Under section 7702(e)(1)(B), the maturity date of the
contract is deemed to be no earlier than the day on which the insured
attains age 95, and no later than the day on which the insured attains
age 100, for purposes of applying the cash value accumulation test.
A contract meets the guideline premium requirements of section
7702(c) if the sum of the premiums paid under the contract does not at
any time exceed the greater of the guideline single premium or the sum
of the guideline level premiums as of such time. The guideline single
premium is the premium that is needed at the time the policy is issued
to fund the future benefits under the contract based on the following
three elements enumerated in section 7702(c)(3)(B):
(i) Reasonable mortality charges that meet the requirements (if
any) prescribed in regulations and that (except as provided in
regulations) do not exceed the mortality charges specified in the
prevailing commissioners' standard tables (as defined in section
807(d)(5)) as of the time the contract is issued;
[[Page 29672]]
(ii) Any reasonable charges (other than mortality charges) that (on
the basis of the company's experience, if any, with respect to similar
contracts) are reasonably expected to be actually paid; and
(iii) Interest at the greater of an annual effective rate of six
percent or the rate or rates guaranteed on issuance of the contract.
The guideline level premium is the level annual amount, payable
over a period not ending before the insured attains age 95, computed on
the same basis but using a minimum interest rate of four percent,
rather than six percent. Like the cash value accumulation test, the
guideline premium requirements are applied by deeming the maturity date
of the contract to be no earlier than the day on which the insured
attains age 95, and no later than the day on which the insured attains
age 100. The deemed maturity date generally is the determination date
set forth in the contract or the end of the mortality table (which,
when section 7702 was enacted in 1984, was age 100).
A contract falls within the cash value corridor if the death
benefit of the contract at any time is not less than the applicable
percentage of the cash surrender value. The applicable percentage is
determined based on the attained age of the insured as of the beginning
of the contract year, as follows:
Applicable Percentage
------------------------------------------------------------------------
In the case of an insured with an The applicable percentage shall
attained age as of the the beginning decrease by a ratable portion for
of the contract year of: each full year:
------------------------------------------------------------------------
But not more
More than: than: From: To:
------------------------------------------------------------------------
0 40 250 250
40 45 250 215
45 50 215 185
50 55 185 150
55 60 150 130
60 65 130 120
65 70 120 115
70 75 115 105
75 90 105 105
90 95 105 100
------------------------------------------------------------------------
The Code does not define the attained age of the insured for
purposes of applying the cash value corridor, the guideline premium
limitations, and the computational rules of section 7702(e). The Senate
Finance Committee explanation of the Deficit Reduction Act of 1984,
Public Law 98-369 (98 Stat. 494), however, states that the attained age
of the insured means the insured's age determined by reference to
contract anniversaries (rather than the individual's actual birthdays),
so long as the age assumed under the contract is within 12 months of
the actual age. See S. Prt. No. 98-169, Vol. 1, at 576 (1984).
Section 7702A defines a modified endowment contract as a contract
that meets the requirements of section 7702 (that is, a contract that
is a life insurance contract), but that fails to meet the 7-pay test
set forth in section 7702A(b). A contract fails to meet the 7-pay test
if the accumulated amount paid under the contract at any time during
the first 7 contract years exceeds the sum of the net level premiums
that would have been paid on or before that time if the contract
provided for paid-up future benefits after the payment of 7 level
annual premiums. Section 7702A(c)(1)(B) provides that, for purposes of
this test, the computational rules of section 7702(e) generally apply,
including the contract's deemed maturity no earlier than the day on
which the insured attains age 95, and no later than the day on which
the insured attains age 100.
In sum, the attained age of an insured under a contract that is a
life insurance contract under the applicable law must be determined to
test whether the contract complies with the guideline premium
requirements of section 7702(c), the cash value corridor of section
7702(d), and (by reason of the computational rules of section 7702(e))
the cash value accumulation test of section 7702(b) and the 7-pay test
of section 7702A(b), as applicable.
Discussion
Although most life insurance contracts insure the life of one
person, some life insurance contracts insure multiple lives. For
example, a last-to-die life insurance contract (sometimes referred to
as a survivorship or second-to-die life insurance contract) insures two
or more lives and pays death benefits when the last insured dies. Such
contracts are sometimes used in connection with business continuation
or estate tax planning; the contracts typically involve lower premiums
than do contracts insuring a single life.
A first-to-die life insurance contract (sometimes referred to as a
joint life insurance contract) also insures two or more lives, but pays
death benefits and terminates upon the death of the first insured.
These contracts typically involve higher risks and thus higher premiums
than do contracts insuring a single life. First-to-die life insurance
contracts represent a small percentage of the multiple-life insurance
contracts that are issued.
Section 7702A, which defines the term modified endowment contract
(MEC), incorporates the computational rules of section 7702, both in
its initial determination of whether a contract is a life insurance
contract, and in its 7-pay test calculations. Further, section
7702A(c)(6) provides a specific computational rule that applies to
multiple life insurance contracts if the death benefit under the
contract is reduced.
Neither section 7702, section 7702A, nor the legislative history of
either provision, addresses how an insured's attained age is determined
for purposes of testing a life insurance contract insuring multiple
lives under the cash value accumulation test of section 7702(b), the
guideline premium requirements of section 7702(c), or the computational
rules of section 7702(e).
Explanation of Provision
This document contains proposed amendments to 26 CFR part 1 under
section 7702. The proposed regulations provide guidance on how to
determine the attained age of an insured individual under a contract
that is a life insurance contract under the applicable law, for
purposes of testing whether the contract
[[Page 29673]]
qualifies as a life insurance contract under section 7702 and is a MEC
under section 7702A. Under the proposed regulations, the attained age
of the insured under a contract insuring the life of a single
individual is either (i) the insured's age determined by reference to
the individual's actual birthday as of the date of determination
(actual age) or (ii) the insured's age determined by reference to
contract anniversary (rather than the individual's actual birthday), so
long as the age assumed under the contract (contract age) is within 12
months of the actual age. The attained age of the insured under a
contract insuring multiple lives on a last-to-die basis is the attained
age of the youngest insured. The attained age of the insured under a
contract insuring multiple lives on a first-to-die basis is the
attained age of the oldest insured. The Treasury Department and the IRS
understand that the approach of the proposed regulations is consistent
with the existing practice of many (but not all) issuers of both
contracts insuring a single life and contracts insuring multiple lives.
In addition, by mandating the use of a single, predictable age, the
proposed regulations provide rules that are straightforward for both
issuers and the IRS to administer.
The proposed regulations generally would be applicable for
contracts issued on or after the date that is one year after the
regulations are published as final regulations in the Federal Register.
This applicability date recognizes that some issuers will need time to
conform their compliance system to the proposed standard for the
issuance of new contracts, to file policy forms with State authorities,
or both. Taxpayers also would be permitted to apply the regulations
retroactively for contracts issued before the date that is one year
after the regulations are published as final regulations, provided they
do not later determine qualification of those contracts under section
7702 in a manner inconsistent with the regulations.
The proposed regulations defining the attained age for purposes of
these provisions are not intended to specify which multiple-life
actuarial methodologies are appropriate to determine reasonable
mortality charges under sections 7702 and 7702A, or how any such
methodology should be applied.
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 also has
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 Code, the notice of proposed
rulemaking will be submitted to the Chief Counsel for Advocacy of the
Small Business Administration for comment on their impact on small
business.
Comments and Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any written (a signed original and eight
(8) copies) or electronic comments that are timely submitted to the
IRS. In addition to comments on the proposed regulations more
generally, the IRS and Treasury Department specifically request
comments on (i) the clarity of the proposed regulations and how they
can be made easier to understand, (ii) the industry's existing practice
for determining the attained age to use under both last-to-die and
first-to-die life insurance contracts, (iii) the need for special rules
for determining the attained age of one or more insureds to calculate
mortality charges under section 7702(c)(3)(B)(i), and (iv) the
effective date of the proposed regulations. All comments will be
available for public inspection and copying.
A public hearing has been scheduled for September 14, 2005, at 10
a.m., in the IRS Auditorium (7th Floor), Internal Revenue Building,
1111 Constitution Avenue, NW., Washington, DC. All visitors must
present a photo identification to enter the building. Because of access
restrictions, visitors must use the Constitution Avenue entrance and
will not be admitted beyond the Internal Revenue Building lobby more
than 30 minutes before the hearing starts. For information about having
your name placed on the building access list to attend the hearing, see
the FOR FURTHER INFORMATION CONTACT section of this preamble.
The rules of 26 CFR 601.601(a)(3) apply to the hearing.
Persons who wish to present oral comments at the hearing must
submit written comments by August 24, 2005, and submit an outline of
the topics to be discussed and the time to be devoted to each topic (a
signed original and eight (8) copies) by that same date.
A period of 10 minutes will be allotted to each person(s) for
making comments. An agenda showing the scheduling of the speakers will
be prepared after the deadline for receiving outlines has passed.
Copies of the agenda will be available free of charge at the hearing.
Drafting Information
The principal author of these proposed regulations is Ann H. Logan,
Office of the Associate Chief Counsel (Financial Institutions and
Products), Office of Chief Counsel, Internal Revenue Service. However,
personnel from other offices of the IRS and the Treasury Department
participated in their development.
List of Subjects in 26 CFR Part 1
Income Taxes.
Adoption of 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 is amended by adding
entries in numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.7702-2 also issued under 26 U.S.C. 7702(k). * * *
Par. 2. Section 1.7702-0, proposed to be added at 56 FR 30720 and
published on July 5, 1991, and further proposed to be amended at 57 FR
59321 and published December 15, 1992, is further proposed to be
revised to read as follows:
Sec. 1.7702-0 Table of contents.
This section lists the captions that appear in Sec. Sec. 1.7702-1,
1.7702-2, and 1.7702-3:
Sec. 1.7702-1 Mortality charges.
(a) General rule.
(b) Reasonable mortality charges.
(1) Actually expected to be imposed.
(2) Limit on charges.
(c) Safe harbors.
(1) 1980 C.S.O. Basic Mortality Tables.
(2) Unisex tables and smoker/nonsmoker tables.
(3) Certain contracts based on 1958 C.S.O. table.
(d) Definitions.
(1) Prevailing commissioners' standard tables.
(2) Substandard risk.
(3) Nonparticipating contract.
(4) Charge reduction mechanism.
(5) Plan of insurance.
(e) Effective date.
Sec. 1.7702-2 Definitions.
(a) In general.
(b) Cash value.
[[Page 29674]]
(1) In general.
(2) Amounts excluded from cash value.
(c) Death benefit.
(1) In general.
(2) Qualified accelerated death benefit treated as death benefit.
(d) Qualified accelerated death benefit.
(1) In general.
(2) Determination of present value of the reduction in death
benefit.
(3) Examples.
(e) Terminally ill defined.
(f) Certain other additional benefits.
(1) In general.
(2) Examples.
(g) Adjustments under section 7702(f)(7)
(h) Cash surrender value.
(1) In general.
(2) For purposes of section 7702(f)(7)
(i) Net surrender value.
(j) Effective date and special rules.
(1) In general.
(2) Provision of certain benefits before July 1, 1993.
(i) Not treated as cash value.
(ii) No effect on date of issuance.
(iii) Special rule for addition of benefit or loan provision after
December 15, 1992.
(3) Addition of qualified accelerated death benefit.
(4) Addition of other additional benefits.
Sec. 1.7702-3 Attained age of the insured under a life insurance
contract.
(a) In general.
(b) Contract insuring a single life.
(c) Contract insuring multiple lives on a last-to-die basis.
(d) Contract insuring multiple lives on a first-to-die basis.
(e) Examples.
(f) Effective dates.
(1) In general.
(2) Contracts issued before the general effective date.
Par. 3. Section 1.7702-3 is added to read as follows:
Sec. 1.7702-3 Attained age of the insured under a life insurance
contract.
(a) In general. This section provides guidance on determining the
attained age of an insured under a contract that is a life insurance
contract under the applicable law, for purposes of testing whether the
contract complies with the guideline premium requirements of section
7702(c), the cash value corridor of section 7702(d), and the
computational rules of section 7702(e), as applicable.
(b) Contract insuring a single life. (1) If a contract insures the
life of a single individual, either of the following two ages may be
treated as the attained age of the insured with respect to that
contract--
(i) The insured's age determined by reference to the individual's
actual birthday as of the date of determination (actual age); or
(ii) The insured's age determined by reference to contract
anniversary (rather than the individual's actual birthday), so long as
the age assumed under the contract (contract age) is within 12 months
of the actual age.
(2) Whichever attained age is used with respect to a contract must
be used consistently from year to year and consistently for purposes of
sections 7702(c), 7702(d), and 7702(e), as applicable.
(c) Contract insuring multiple lives on a last-to-die basis. If a
contract insures the lives of more than one individual on a last-to-die
basis, the attained age of the insured is determined by applying
paragraph (b) of this section as if the youngest individual were the
only insured under the contract.
(d) Contract insuring multiple lives on a first-to-die basis. If a
contract insures the lives of more than one individual on a first-to-
die basis, the attained age of the insured is determined by applying
paragraph (b) of this section as if the oldest individual were the only
insured under the contract.
(e) Examples. The following examples illustrate the determination
of the attained age of the insured for purposes of testing whether the
contract complies with the guideline premium requirements of section
7702(c), the cash value corridor of section 7702(d), and the
computational rules of section 7702(e), as applicable. The examples are
as follows:
Example 1. (i) X was born on May 1, 1947. On January 1, 2008, X
purchases from IC a contract insuring X's life. January 1 is the
contract anniversary date for all future years. Under the contract,
X's premiums are determined on an age-last-birthday basis. X became
60 years old on May 1, 2007. Based on the method used under the
contract to determine age, X has an attained age of 60 for the first
contract year, 61 for the second contract year, and so on.
(ii) Section 1.7702-3(b) provides that, if a contract insures
the life of a single individual, the insured's age may be determined
by reference to contract anniversary (rather than the individual's
actual birthday), so long as the contract age is within 12 months of
the actual age. For each contract year, X's contract age, determined
on an age-last-birthday basis, is within 12 months of X's actual
age. Accordingly, provided it does so consistently from year to
year, IC may compute X's attained age on an age-last-birthday basis
for purposes of testing whether a contract complies with the
guideline premium requirements of section 7702(c), the cash value
corridor of section 7702(d), and the computational rules of section
7702(e), as applicable.
Example 2. (i) The facts are the same as in Example 1 except
that, under the contract, X's premiums are determined on an age-
nearest-birthday basis. X's nearest birthday to January 1, 2008, is
May 1, 2008, when X will become 61 years old. Based on the method
used under the contract to determine age, X has an attained age of
61 for the first contract year, 62 for the second contract year, and
so on.
(ii) Section 1.7702-3(b) provides that, if a life insurance
contract insures the life of a single individual, the insured's age
may be determined by reference to contract anniversary (rather than
the individual's actual birthday), so long as the contract age is
within 12 months of the actual age. For each contract year, X's
contract age, determined on an age-nearest-birthday basis, is within
12 months of X's actual age. Accordingly, provided it does so
consistently from year to year, IC may compute X's attained age on
an age-nearest-birthday basis for purposes of testing whether the
contract complies with the guideline premium requirements of section
7702(c), the cash value corridor of section 7702(d), and the
computational rules of section 7702(e), as applicable.
Example 3. (i) The facts are the same as in Example 1 except
that in addition to X, the insurance contract also insures the life
of Y. Y was born on September 1, 1942. The death benefit will be
paid when the last of the two insureds dies.
(ii) Section 1.7702-3(c) provides that if a life insurance
contract insures the lives of more than one individual on a last-to-
die basis, the attained age of the insured is determined by applying
Sec. 1.7702-3(b) as if the youngest individual were the only
insured under the contract. Because X is younger than Y, the
attained age of X must be used for purposes of testing whether the
contract complies with the guideline premium requirements of section
7702(c), the cash value corridor of section 7702(d), and the
computational rules of section 7702(e), as applicable. The attained
ages of X and Y are determined as set forth in Example 1.
Example 4. (i) The facts are the same as Example 1 except that
in addition to X, the insurance contract also insures the life of Y.
Y was born on September 1, 1952. The death benefit will be paid when
the first of the two insureds dies.
(ii) Section 1.7702-3(d) provides that if a life insurance
contract insures the lives of more than one individual on a first-
to-die basis, the attained age of the insured is determined by
applying Sec. 1.7702-3(b) as if the oldest individual were the only
insured under the contract. Because X is older than Y, the attained
age of X must be used for purposes of testing whether the contract
complies with the guideline premium requirements of section 7702(c),
the cash value corridor of section 7702(d), and the computational
rules of section 7702(e), as applicable. The attained ages of X and
Y are determined as set forth in Example 1.
(f) Effective dates--(1) In general. Except as provided in
paragraph (f)(2), these regulations apply to contracts issued on or
after the date that is one year after the regulations are published as
final regulations in the Federal Register.
(2) Retroactive application. Pursuant to section 7805(b)(7), a
taxpayer may
[[Page 29675]]
elect to apply these regulations retroactively for contracts issued
before the date that is one year after the regulations are published as
final regulations in the Federal Register, provided that the taxpayer
does not later determine qualification of those contracts in a manner
that is inconsistent with these regulations.
Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 05-10166 Filed 5-20-05; 8:45 am]
BILLING CODE 4830-01-P
