Section 181-Deduction for Qualified Film and Television Production Costs, 6190-6192 [E7-2153]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 72, Number 27 (Friday, February 9, 2007)]
[Proposed Rules]
[Pages 6190-6192]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-2153]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-115403-05]
RIN 1545-BF94


Section 181--Deduction for Qualified Film and Television 
Production Costs

AGENCY: Internal Revenue Service (IRS), Treasury.

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

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SUMMARY: In the Rules and Regulations section of this issue of the 
Federal Register, the IRS is issuing temporary regulations under 
section 181 of the Internal Revenue Code relating to deductions for 
costs of producing qualified film and television productions. These 
temporary regulations reflect changes to the law made by the American 
Jobs Creation Act of 2004 and the Gulf Opportunity Zone Act of 2005, 
and affect taxpayers that produce films and television productions 
within the United States. This action is necessary to provide guidance 
for the application of section 181. The text of the temporary 
regulations also serves as the text of these proposed regulations. This 
document also provides notice of a public hearing on these proposed 
regulations.

DATES: Written comments and requests for a public hearing must be 
received by April 10, 2007.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-115403-05), room 
5203, Internal Revenue Service, PO 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-
115403-05), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue, NW., Washington, DC, or sent electronically, via the IRS 
Internet site at www.irs.gov/regs or via the Federal eRulemaking Portal 
at https://www.Regulations.gov/ (IRS REG-115403-05).

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Bernard P. 
Harvey, (202) 622-3110; concerning submissions and to request a 
hearing, Kelly Banks, (202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collections of information contained in this notice of proposed 
rulemaking have 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 collections 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 May 10, 2007. Comments are specifically requested 
concerning:
    Whether the proposed collection of information is necessary for the 
proper performance of the functions of the Internal Revenue Service, 
including whether the information will have practical utility;
    The accuracy of the estimated burden associated with the proposed 
collection of information;
    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 service to provide information.
    The collection of information in this proposed regulation is in 
Sec.  1.181-2T(c).

[[Page 6191]]

This information is required to verify that the production cost of the 
film or television production for which the deduction under section 181 
of the Internal Revenue Code is claimed does not exceed the statutory 
production cost limit, that at least 75 percent of the compensation 
from the production is compensation for services performed in the 
United States, that production costs deducted under section 
181(a)(2)(B) are sustantially incurred in the specific areas designated 
in section 181(a)(2)(B), and that, in situations in which more than one 
taxpayer is claiming a deduction for a single production, the total 
deduction for the production does not exceed the statutory limit. The 
collection of information is mandatory. The likely recordkeepers are 
business or other for-profit institutions, and small businesses or 
organizations.
    Estimated total annual recordkeeping burden: 1,500 hours.
    The estimated annual burden per recordkeeper varies from 2 to 4 
hours, depending on individual circumstances, with an estimated average 
of 3 hours.
    Estimated number of recordkeepers: 500.
    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

    The temporary regulations in the Rules and Regulations section of 
this issue of the Federal Register contain amendments to 26 CFR part 1 
to provide regulations under section 181 of the Internal Revenue Code 
of 1986 (Code). Section 181 was added to the Code by section 244 of the 
American Jobs Creation Act of 2004, Public Law No. 108-357 (118 Stat. 
1418) (Oct. 22, 2004), and was modified by section 403(e) of the Gulf 
Opportunity Zone Act of 2005, Public Law No. 109-135 (119 Stat. 2577) 
(Dec. 21, 2005).

Explanation of Provisions

    The temporary regulations in the Rules and Regulations section of 
this issue of the Federal Register amend the Income Tax Regulations (26 
CFR part 1) to add regulations under section 181 of the Internal 
Revenue Code of 1986 (Code). The text of the temporary regulations also 
serves as the text of these proposed regulations. The preamble to the 
temporary regulations explains these proposed 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 also has 
been determined that section 553(b) and (d) of the Administrative 
Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. 
It is hereby certified that this regulation will not have a significant 
economic impact on a substantial number of small entities. The proposed 
regulations impose a collection of information on small entities in 
order to demonstrate eligibilty for tax benefits under the statute, and 
this collection of information will require recordkeeping. This 
collection of information is discussed elsewhere in this preamble. 
However, the recordkeeping required by this collection of information 
does not differ significantly from the recordkeeping that a taxpayer 
must perform in order to determine whether the taxpayer is eligible to 
claim a deduction under the statute. Consequently, the economic impact 
on small entities resulting from the recordkeeping required under this 
regulation is de minimis. Accordingly, a regulatory flexibility 
analysis is not required. We request comment on the accuracy of this 
certification. Pursuant to section 7805(f) of the Code, this regulation 
has been 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 comments (a signed original 
and eight (8) copies) or electronically generated comments that are 
submitted timely to the IRS. The IRS and Treasury Department generally 
request comments on the clarity of the proposed rule and how it may be 
made easier to understand. All comments will be available for public 
inspection and copying. A public hearing may be scheduled if requested 
in writing by a person who timely submits comments. If a public hearing 
is scheduled, notice of the date, time, and place for the hearing will 
be published in the Federal Register.

Drafting Information

    The principal author of these regulations is Bernard P. Harvey, 
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 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

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

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

    Par. 2. Sections 1.181-0 through 1.181-6 are added as follows:


Sec.  1.181-0  Table of contents.

    [The text of this proposed section is the same as the text of Sec.  
1.181-0T published elsewhere in this issue of the Federal Register.]


Sec.  1.181-1  Deduction for qualified film and television production 
costs.

    [The text of this proposed section is the same as the text of Sec.  
1.181-1T published elsewhere in this issue of the Federal Register.]


Sec.  1.181-2  Election.

    [The text of this proposed section is the same as the text of Sec.  
1.181-2T published elsewhere in this issue of the Federal Register.]


Sec.  1.181-3  Qualified film or television production.

    [The text of this proposed section is the same as the text of Sec.  
1.181-3T published elsewhere in this issue of the Federal Register.]


Sec.  1.181-4  Special rules.

    [The text of this proposed section is the same as the text of Sec.  
1.181-4T published elsewhere in this issue of the Federal Register.]


Sec.  1.181-5  Examples.

    [The text of this proposed section is the same as the text of Sec.  
1.181-5T published elsewhere in this issue of the Federal Register.]


Sec.  1.181-6  Effective date.

    [The text of this proposed section is the same as the text of Sec.  
1.181-6T

[[Page 6192]]

published elsewhere in this issue of the Federal Register.]

Kevin M. Brown,
Deputy Commissioner for Services and Enforcement.
[FR Doc. E7-2153 Filed 2-8-07; 8:45 am]
BILLING CODE 4830-01-P