Information Reporting for Discharges of Indebtedness, 66539-66541 [E8-26676]
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Federal Register / Vol. 73, No. 218 / Monday, November 10, 2008 / Rules and Regulations
other than natural rubber latex,
including natural membrane (skin) or
synthetic.
(2) Class II (special controls) for
natural rubber latex condoms. The
guidance document entitled ‘‘Class II
Special Controls Guidance Document:
Labeling for Natural Rubber Latex
Condoms Classified Under 21 CFR
884.5300’’ will serve as the special
control. See § 884.1(e) for the
availability of this guidance document.
Dated: October 28, 2008.
Jeffrey Shuren,
Associate Commissioner for Policy and
Planning.
[FR Doc. E8–26825 Filed 11–7–08; 8:45 am]
BILLING CODE 4160–01–S
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9430]
RIN 1545–BH99
Information Reporting for Discharges
of Indebtedness
Internal Revenue Service (IRS),
Treasury.
ACTION: Final and temporary
regulations.
dwashington3 on PRODPC61 with RULES
AGENCY:
SUMMARY: This document contains final
and temporary regulations relating to
information returns for cancellation of
indebtedness by certain entities. The
temporary regulations will avoid
premature information reporting from
certain businesses that are currently
required to report and will reduce the
number of information returns required
to be filed. The temporary regulations
will impact certain lenders who are
currently required to file information
returns under the existing regulations.
The text of these temporary regulations
also serves as the text of the proposed
regulations as set forth in the Proposed
Rules section in this issue of the Federal
Register.
DATES: Effective Date: These regulations
are effective on November 10, 2008.
Applicability Date: For dates of
applicability, see § 1.6050P–1T(h).
FOR FURTHER INFORMATION CONTACT:
Barbara Pettoni at (202) 622–4910 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments
to the Income Tax Regulations (26 CFR
part 1) under section 6050P relating to
VerDate Aug<31>2005
15:24 Nov 07, 2008
Jkt 217001
information reporting for cancellation of
indebtedness by certain entities. The
amendments will reduce the number of
information reports required to be filed
under section 6050P.
In general, section 6050P requires
certain entities to file information
returns with the IRS, and to furnish
information statements to debtors,
reporting discharges of indebtedness of
$600 or more. As originally enacted by
the Omnibus Budget Reconciliation Act
of 1993, Public Law 103–66 (107 Stat.
312, 531–532 (1993)), section 6050P
applied solely to ‘‘applicable financial
entities,’’ which was then defined to
include only financial institutions,
credit unions, and Federal executive
agencies.
In 1996, final regulations were
published implementing section 6050P.
See TD 8654, 61 FR 262 (January 4,
1996) (the 1996 regulations). The 1996
regulations required applicable financial
entities, as then defined, to issue Forms
1099–C, ‘‘Cancellation of Debt,’’ upon
the occurrence of one of several
‘‘identifiable events’’ as provided in
§ 1.6050P–1(b)(2)(i)(A) through (H). One
of these identifiable events requiring the
issuance of a Form 1099–C was the
expiration of a ‘‘non-payment testing
period’’ pursuant to § 1.6050P–
1(b)(2)(i)(H). The 1996 regulations
created a rebuttable presumption (the
‘‘36-month rule’’) under § 1.6050P–
1(b)(2)(iv) that this period expired if a
creditor had not received a payment for
36 months. Section 1.6050P–1(b)(2)(iv)
provides that the presumption that an
identifiable event occurred can be
rebutted by a creditor if the creditor had
engaged in significant, bona fide
collection activity.
After the issuance of the 1996
regulations, the Debt Collection
Improvement Act of 1996, Public Law
104–134 (110 Stat. 1321, 368–369
(1996)) (the 1996 Act), expanded section
6050P to cover any executive, judicial,
or legislative agency (as defined in 31
U.S.C. 3701(a)(4)) as well as any
applicable financial entity. The 1996
Act was effective April 26, 1996. The
Ticket to Work and Work Incentives
Improvement Act of 1999, Public Law
106–170 (113 Stat. 1860, 1931 (1999))
(the 1999 Act), further expanded section
6050P by expanding the definition of
‘‘applicable financial entity’’ to include
any organization ‘‘a significant trade or
business of which is the lending of
money.’’ The 1999 Act was effective for
discharges of indebtedness occurring
after December 31, 1999.
In 2002, the IRS and the Treasury
Department published proposed
regulations to reflect the changes to
section 6050P. See REG–107524–00, 67
PO 00000
Frm 00053
Fmt 4700
Sfmt 4700
66539
FR 40629 (June 13, 2002). The IRS
received written (including electronic)
comments on the proposed regulations
and a public hearing was held on
October 8, 2002. After consideration of
the comments received, the IRS adopted
the proposed regulations with
amendments. See TD 9160, 69 FR 62181
(October 25, 2004) (the 2004
regulations). Section 1.6050P–2 of the
2004 regulations describes the
circumstances in which an organization
has a significant trade or business of
lending money, thereby triggering an
information reporting requirement when
it cancels debt.
Reasons for Change
The 36-month rule of § 1.6050P–
1(b)(2)(iv) was drafted at a time when
section 6050P applied only to financial
institutions, credit unions, and Federal
executive agencies and did not extend
to any executive, judicial, or legislative
agency or any organization ‘‘a
significant trade or business of which is
the lending of money.’’ Since the
publication of the 2004 regulations,
commenters have raised the concern
that the application of the 36-month
rule to entities with a significant trade
or business of lending money might
trigger a reporting requirement even
when the entity has not legally or
practically discharged the debt. The IRS
and the Treasury Department agree that
it is appropriate to limit the application
of the 36-month rule to the entities for
which it was originally intended in
order to avoid premature information
reporting of cancellation of
indebtedness income. Doing so will
reduce the information reporting burden
on entities that were not originally
within the scope of the 36-month rule
and will protect debtors from receiving
information returns that prematurely
report cancellation of indebtedness
income from such entities.
The Treasury Department and IRS are
still considering other comments
received since the publication of the
2004 regulations, including a request to
clarify the meaning of ‘‘stated principal’’
in § 1.6050P–1(c) and (d)(3) when it is
applied to those who acquire a loan
from a person other than the debtor.
Section 1.6050P–1(c) provides that
‘‘indebtedness’’ for purposes of section
6050P means any amount owed to an
applicable entity, including stated
principal, fees, stated interest, penalties,
administrative costs, and fines. Section
1.6050P–1(d)(3) further provides that, in
the case of a lending transaction, the
discharge of an amount other than
stated principal is not required to be
reported under section 6050P.
Commenters have stated that it is
E:\FR\FM\10NOR1.SGM
10NOR1
66540
Federal Register / Vol. 73, No. 218 / Monday, November 10, 2008 / Rules and Regulations
unclear whether the simplifying rule
limiting an information report to the
amount of stated principal can be
applied to loan acquirers. Commenters
have asserted that loan acquirers might
know only the aggregate amount due on
the loans they are purchasing, not the
breakdown of that amount into
principal and accrued interest or fees.
Therefore, if loan acquirers discharge an
aggregate amount, it is difficult for them
to determine how much is required to
be reported under section 6050P. The
Treasury Department and IRS is
considering issuing future guidance
under section 6050P to address these
concerns.
Explanation of Provisions
The temporary regulations and
amendments to existing regulations
limit the application of the 36-month
rule to the entities described in the 1993
Act. The temporary regulations avoid
premature information reporting from
certain entities that are currently
required to report under section 6050P.
Notwithstanding this limitation, the
temporary regulations provide that, in
the case of an entity previously subject
to the 36-month rule that was required
to file information returns in a tax year
prior to 2008 due to application of the
36-month rule, and who failed to so file,
the date of discharge is the first
identifiable event, if any, described in
§ 1.6050P–1(b)(2)(i)(A) through (G) that
occurs after 2007. Thus, any entity
previously subject to the 36-month rule
that has never filed an information
return remains subject to the
information reporting requirement upon
the occurrence of any of the other
identifiable events.
dwashington3 on PRODPC61 with RULES
Special Analyses
15:24 Nov 07, 2008
List of Subjects 26 CFR Part 1
Income tax, Reporting and
recordkeeping requirements.
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 in part as
follows:
■
Authority: 26 U.S.C. 7805 * * *
■ Par. 2. Section 1.6050P–0 is amended
as follows:
■ 1. The introductory text is revised.
■ 2. A new entry for § 1.6050P–
1(b)(2)(v) is added.
■ 3. The entry for § 1.6050P–1(h) is
revised.
■ 4. A new entry for § 1.6050P–1T is
added.
The revisions and additions read as
follows:
§ 1.6050P–0.
Jkt 217001
Table of contents.
This section lists the major captions
that appear in § 1.6050P–1, § 1.6050P–
1T, and § 1.6050P–2.
*
*
*
*
*
§ 1.6050P–1 Information reporting for
discharges of indebtedness by certain
entities.
(b) * * *
(2) * * *
(v) [Reserved] For further guidance, see the
entry for § 1.6050P–1T(b)(2)(v).
*
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in
Executive Order 12866. Therefore, a
regulatory assessment is not required. It
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.
For the applicability of the Regulatory
Flexibility Act (5 U.S.C. chapter 6) refer
to the Special Analyses section of the
preamble to 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 have been
submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on its
impact on small business.
VerDate Aug<31>2005
Drafting Information
The principal author of these
temporary regulations is Barbara
Pettoni, Office of Associate Chief
Counsel (Procedure and
Administration).
*
*
*
*
(h) Effective/applicability date.
*
*
*
*
*
§ 1.6050P–1T Information reporting for
discharges of indebtedness by certain
entities (temporary).
(b) * * *
(2) * * *
(v) Special rule for certain entities required
to file in a year prior to 2008.
*
*
*
*
*
Par. 3. Section 1.6050P–1 is amended
as follows:
■ 1. Paragraph (b)(2)(i)(H) and the
heading for paragraph (h) are revised.
■ 2. A new entry for (b)(2)(v) is added.
The addition and revisions read as
follows:
■
§ 1.6050P–1 Information reporting for
discharges of indebtedness by certain
entities.
*
PO 00000
*
*
Frm 00054
*
Fmt 4700
*
Sfmt 4700
(b) * * *
(2) * * *
(i) * * *
(H) [Reserved]. For further guidance,
see § 1.6050P–1T(b)(2)(i)(H).
*
*
*
*
*
(v) [Reserved]. For further guidance,
see § 1.6050P–1T(b)(2)(v).
*
*
*
*
*
(h) Effective/applicability date. * * *
■ Par. 4. Section 1.6050P–1T is added
to read as follows:
§ 1.6050P–1T Information reporting for
discharges of indebtedness by certain
entities (temporary).
(a) through (b)(2)(i)(G) [Reserved]. For
further guidance, see 1.6050P–1(a)
through (b)(2)(i)(G).
(H) In the case of an entity described
in section 6050P(c)(2)(A) through (C),
the expiration of the non-payment
testing period, as described in
§ 1.6050P–1(b)(2)(iv).
(b)(2)(ii) through (iv) [Reserved]. For
further guidance, see § 1.6050P–
1(b)(2)(ii) through (iv).
(v) Special rule for certain entities
required to file in a year prior to 2008.
In the case of an entity described in
section 6050P(c)(1)(A) or (c)(2)(D)
required to file an information return in
a tax year prior to 2008 due to an
identifiable event described in
paragraph (b)(2)(i)(H), and who failed to
so file, the date of discharge is the first
event, if any, described in paragraphs
(b)(2)(i)(A) through (G) of this section
that occurs after 2007.
(b)(3) through (g) [Reserved]. For
further guidance see § 1.6050P–1(b)(3)
through (g).
(h) Effective/applicability date—(1) In
general. The rules in this section apply
to discharges of indebtedness after
December 21, 1996, except paragraphs
(e)(1) and (e)(3) of this section, which
apply to discharges of indebtedness
after December 31, 1994, except
paragraph (e)(5) of this section, which
applies to discharges of indebtedness
occurring after December 31, 2004, and
except paragraphs (b)(2)(i)(H) and
(b)(2)(v) of this section, which apply to
discharges of indebtedness occurring
after November 10, 2008.
(2) [Reserved]. For further guidance,
see § 1.6050P–1(h)(2).
(i) Expiration date. The applicability
of this section will expire on or before
November 7, 2011.
E:\FR\FM\10NOR1.SGM
10NOR1
Federal Register / Vol. 73, No. 218 / Monday, November 10, 2008 / Rules and Regulations
Approved: October 28, 2008.
Linda E. Stiff,
Deputy Commissioner for Services and
Enforcement.
Eric Solomon,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. E8–26676 Filed 11–7–08; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Office of Foreign Assets Control
31 CFR Part 560
Iranian Transactions Regulations
Office of Foreign Assets
Control, Treasury.
ACTION: Final rule.
AGENCY:
SUMMARY: The Office of Foreign Assets
Control of the U.S. Department of the
Treasury (‘‘OFAC’’) is amending the
Iranian Transactions Regulations, to
narrow the scope of existing section by
revoking an authorization previously
granted to U.S. depository institutions
to process ‘‘U-turn’’ transfers, and to
make certain other conforming and
technical changes.
DATES: Effective Date: November 10,
2008.
FOR FURTHER INFORMATION CONTACT:
Assistant Director for Compliance,
Outreach & Implementation, tel.: 202/
622–2490, Assistant Director for
Licensing, tel.: 202/622–2480, Assistant
Director for Policy, tel.: 202/622–4855,
Office of Foreign Assets Control, or
Chief Counsel (Foreign Assets Control),
tel.: 202/622–2410, Office of the General
Counsel, Department of the Treasury,
Washington, DC 20220 (not toll free
numbers).
SUPPLEMENTARY INFORMATION:
dwashington3 on PRODPC61 with RULES
Electronic and Facsimile Availability
This document and additional
information concerning the Office of
Foreign Assets Control (‘‘OFAC’’) are
available from OFAC’s Web site (https://
www.treas.gov/ofac) or via facsimile
through a 24-hour fax on-demand
service, tel.: 202/622–0077.
Background
The Iranian Transactions Regulations,
31 CFR part 560 (the ‘‘ITR’’), implement
a series of Executive Orders that began
with Executive Order 12613 of October
30, 1987, issued pursuant to authorities
including the International Security and
Development Cooperation Act of 1985
(22 U.S.C. 2349aa–9). In that order, after
finding, inter alia, that the Government
of Iran was actively supporting
VerDate Aug<31>2005
15:24 Nov 07, 2008
Jkt 217001
terrorism as an instrument of state
policy, the President prohibited the
importation of Iranian-origin goods and
services. Subsequently, in Executive
Order 12957, issued on March 15, 1995,
under the authority of, inter alia, the
International Emergency Economic
Powers Act (50 U.S.C. 1701–1706)
(‘‘IEEPA’’), the President declared a
national emergency with respect to the
actions and policies of the Government
of Iran, including its support for
international terrorism, its efforts to
undermine the Middle East peace
process, and its efforts to acquire
weapons of mass destruction and the
means to deliver them. To deal with that
threat, Executive Order 12957 imposed
prohibitions on certain transactions
with respect to the development of
Iranian petroleum resources. On May 6,
1995, to further respond to this threat,
the President issued Executive Order
12959, which imposed comprehensive
trade and financial sanctions on Iran.
Finally, on August 19, 1997, the
President issued Executive Order 13059
consolidating and clarifying the
previous orders.
Section § 560.516 of the ITR contains
authorizations with respect to certain
transactions that are processed by U.S.
depository institutions, as well as by
U.S. registered brokers or dealers in
securities. OFAC now is amending
§ 560.516 to narrow the scope of
authority provided in paragraph (a) of
this section. As amended, paragraph (a)
of § 560.516 authorizes U.S. depository
institutions to process transfers of funds
to or from Iran, or for the direct or
indirect benefit of persons in Iran or the
Government of Iran, only if the transfer
meets one of the conditions set forth in
the sub-paragraphs to paragraph (a) and
does not involve debiting or crediting an
Iranian account, as defined in § 560.320
of the ITR. Prior to this amendment,
sub-paragraph (a)(1) authorized such
transactions when the transfer was by
order of a non-Iranian foreign bank from
its own account in a domestic bank to
an account held by a domestic bank for
a non-Iranian foreign bank. This is
commonly referred to as the ‘‘U-turn’’
authorization. It is so termed because it
is initiated offshore as a dollardenominated transaction by order of a
foreign bank’s customer; it then
becomes a transfer from a correspondent
account held by a domestic bank for the
foreign bank to a correspondent account
held by a domestic bank for another
foreign bank; and it ends up offshore as
a transfer to a dollar-denominated
account of the second foreign bank’s
customer. OFAC now is narrowing the
scope of authority provided by
PO 00000
Frm 00055
Fmt 4700
Sfmt 4700
66541
paragraph (a) of § 560.516 by deleting
sub-paragraph (a)(1) and, thereby,
revoking the authorization for ‘‘U-turn’’
transfers.
The reasons OFAC is revoking this
authorization include the need to
further protect the U.S. financial system
from the threat of illicit finance posed
by Iran and its banks. This threat was
highlighted in March of 2008 when the
United Nations Security Council
adopted Resolution 1803, which calls
upon all states ‘‘to exercise vigilance
over the activities of financial
institutions in their territories with all
banks domiciled in Iran...in order to
avoid such activities contributing to the
proliferation [of] sensitive nuclear
activities, or to the development of
nuclear weapon delivery systems
* * *.’’ Moreover, on October 16, 2008,
the Financial Action Task Force
(‘‘FATF’’), the world’s premier standardsetting body for anti-money laundering
and counter-terrorist financing (‘‘AML/
CFT’’), warned for the fourth time about
the risks posed to the international
financial system by continuing
deficiencies in Iran’s AML/CFT regime,
and in particular emphasized Iran’s lack
of effort in addressing the risk of
terrorist financing. The FATF called on
all countries to strengthen preventive
measures to protect their financial
systems from the risk.
As a result of this amendment,
effective November 10, 2008, U.S.
depository institutions no longer will be
allowed to process ‘‘U-turn’’ transfers
involving Iran, thereby precluding
transfers designed to dollarize
transactions through the U.S. financial
system for the direct or indirect benefit
of Iranian banks or other persons in Iran
or the Government of Iran. OFAC is
revising and republishing § 560.516 of
the ITR in its entirety because, in
addition to removing sub-paragraph
(a)(1), OFAC also is amending this
section to delete references to outdated
provisions and make other minor
technical changes. OFAC also is revising
§ 560.405 and § 560.532 of the ITR to
make certain conforming changes by
deleting references to outdated
provisions.
Public Participation
Because the amendment of the ITR
involves a foreign affairs function, the
provisions of Executive Order 12866
and the Administrative Procedure Act (5
U.S.C. 553) requiring notice of proposed
rulemaking, opportunity for public
participation, and delay in effective
date, are inapplicable. Because no
notice of proposed rulemaking is
required for this rule, the Regulatory
E:\FR\FM\10NOR1.SGM
10NOR1
]]>Agencies
[Federal Register Volume 73, Number 218 (Monday, November 10, 2008)]
[Rules and Regulations]
[Pages 66539-66541]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-26676]
=======================================================================
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9430]
RIN 1545-BH99
Information Reporting for Discharges of Indebtedness
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final and temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final and temporary regulations
relating to information returns for cancellation of indebtedness by
certain entities. The temporary regulations will avoid premature
information reporting from certain businesses that are currently
required to report and will reduce the number of information returns
required to be filed. The temporary regulations will impact certain
lenders who are currently required to file information returns under
the existing regulations. The text of these temporary regulations also
serves as the text of the proposed regulations as set forth in the
Proposed Rules section in this issue of the Federal Register.
DATES: Effective Date: These regulations are effective on November 10,
2008.
Applicability Date: For dates of applicability, see Sec. 1.6050P-
1T(h).
FOR FURTHER INFORMATION CONTACT: Barbara Pettoni at (202) 622-4910 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to the Income Tax Regulations (26
CFR part 1) under section 6050P relating to information reporting for
cancellation of indebtedness by certain entities. The amendments will
reduce the number of information reports required to be filed under
section 6050P.
In general, section 6050P requires certain entities to file
information returns with the IRS, and to furnish information statements
to debtors, reporting discharges of indebtedness of $600 or more. As
originally enacted by the Omnibus Budget Reconciliation Act of 1993,
Public Law 103-66 (107 Stat. 312, 531-532 (1993)), section 6050P
applied solely to ``applicable financial entities,'' which was then
defined to include only financial institutions, credit unions, and
Federal executive agencies.
In 1996, final regulations were published implementing section
6050P. See TD 8654, 61 FR 262 (January 4, 1996) (the 1996 regulations).
The 1996 regulations required applicable financial entities, as then
defined, to issue Forms 1099-C, ``Cancellation of Debt,'' upon the
occurrence of one of several ``identifiable events'' as provided in
Sec. 1.6050P-1(b)(2)(i)(A) through (H). One of these identifiable
events requiring the issuance of a Form 1099-C was the expiration of a
``non-payment testing period'' pursuant to Sec. 1.6050P-1(b)(2)(i)(H).
The 1996 regulations created a rebuttable presumption (the ``36-month
rule'') under Sec. 1.6050P-1(b)(2)(iv) that this period expired if a
creditor had not received a payment for 36 months. Section 1.6050P-
1(b)(2)(iv) provides that the presumption that an identifiable event
occurred can be rebutted by a creditor if the creditor had engaged in
significant, bona fide collection activity.
After the issuance of the 1996 regulations, the Debt Collection
Improvement Act of 1996, Public Law 104-134 (110 Stat. 1321, 368-369
(1996)) (the 1996 Act), expanded section 6050P to cover any executive,
judicial, or legislative agency (as defined in 31 U.S.C. 3701(a)(4)) as
well as any applicable financial entity. The 1996 Act was effective
April 26, 1996. The Ticket to Work and Work Incentives Improvement Act
of 1999, Public Law 106-170 (113 Stat. 1860, 1931 (1999)) (the 1999
Act), further expanded section 6050P by expanding the definition of
``applicable financial entity'' to include any organization ``a
significant trade or business of which is the lending of money.'' The
1999 Act was effective for discharges of indebtedness occurring after
December 31, 1999.
In 2002, the IRS and the Treasury Department published proposed
regulations to reflect the changes to section 6050P. See REG-107524-00,
67 FR 40629 (June 13, 2002). The IRS received written (including
electronic) comments on the proposed regulations and a public hearing
was held on October 8, 2002. After consideration of the comments
received, the IRS adopted the proposed regulations with amendments. See
TD 9160, 69 FR 62181 (October 25, 2004) (the 2004 regulations). Section
1.6050P-2 of the 2004 regulations describes the circumstances in which
an organization has a significant trade or business of lending money,
thereby triggering an information reporting requirement when it cancels
debt.
Reasons for Change
The 36-month rule of Sec. 1.6050P-1(b)(2)(iv) was drafted at a
time when section 6050P applied only to financial institutions, credit
unions, and Federal executive agencies and did not extend to any
executive, judicial, or legislative agency or any organization ``a
significant trade or business of which is the lending of money.'' Since
the publication of the 2004 regulations, commenters have raised the
concern that the application of the 36-month rule to entities with a
significant trade or business of lending money might trigger a
reporting requirement even when the entity has not legally or
practically discharged the debt. The IRS and the Treasury Department
agree that it is appropriate to limit the application of the 36-month
rule to the entities for which it was originally intended in order to
avoid premature information reporting of cancellation of indebtedness
income. Doing so will reduce the information reporting burden on
entities that were not originally within the scope of the 36-month rule
and will protect debtors from receiving information returns that
prematurely report cancellation of indebtedness income from such
entities.
The Treasury Department and IRS are still considering other
comments received since the publication of the 2004 regulations,
including a request to clarify the meaning of ``stated principal'' in
Sec. 1.6050P-1(c) and (d)(3) when it is applied to those who acquire a
loan from a person other than the debtor. Section 1.6050P-1(c) provides
that ``indebtedness'' for purposes of section 6050P means any amount
owed to an applicable entity, including stated principal, fees, stated
interest, penalties, administrative costs, and fines. Section 1.6050P-
1(d)(3) further provides that, in the case of a lending transaction,
the discharge of an amount other than stated principal is not required
to be reported under section 6050P. Commenters have stated that it is
[[Page 66540]]
unclear whether the simplifying rule limiting an information report to
the amount of stated principal can be applied to loan acquirers.
Commenters have asserted that loan acquirers might know only the
aggregate amount due on the loans they are purchasing, not the
breakdown of that amount into principal and accrued interest or fees.
Therefore, if loan acquirers discharge an aggregate amount, it is
difficult for them to determine how much is required to be reported
under section 6050P. The Treasury Department and IRS is considering
issuing future guidance under section 6050P to address these concerns.
Explanation of Provisions
The temporary regulations and amendments to existing regulations
limit the application of the 36-month rule to the entities described in
the 1993 Act. The temporary regulations avoid premature information
reporting from certain entities that are currently required to report
under section 6050P. Notwithstanding this limitation, the temporary
regulations provide that, in the case of an entity previously subject
to the 36-month rule that was required to file information returns in a
tax year prior to 2008 due to application of the 36-month rule, and who
failed to so file, the date of discharge is the first identifiable
event, if any, described in Sec. 1.6050P-1(b)(2)(i)(A) through (G)
that occurs after 2007. Thus, any entity previously subject to the 36-
month rule that has never filed an information return remains subject
to the information reporting requirement upon the occurrence of any of
the other identifiable events.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It 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.
For the applicability of the Regulatory Flexibility Act (5 U.S.C.
chapter 6) refer to the Special Analyses section of the preamble to 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 have
been submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
Drafting Information
The principal author of these temporary regulations is Barbara
Pettoni, Office of Associate Chief Counsel (Procedure and
Administration).
List of Subjects 26 CFR Part 1
Income tax, Reporting and recordkeeping requirements.
Amendments to the Regulations
0
Accordingly, 26 CFR part 1 is 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 1.6050P-0 is amended as follows:
0
1. The introductory text is revised.
0
2. A new entry for Sec. 1.6050P-1(b)(2)(v) is added.
0
3. The entry for Sec. 1.6050P-1(h) is revised.
0
4. A new entry for Sec. 1.6050P-1T is added.
The revisions and additions read as follows:
Sec. 1.6050P-0. Table of contents.
This section lists the major captions that appear in Sec. 1.6050P-
1, Sec. 1.6050P-1T, and Sec. 1.6050P-2.
* * * * *
Sec. 1.6050P-1 Information reporting for discharges of indebtedness
by certain entities.
(b) * * *
(2) * * *
(v) [Reserved] For further guidance, see the entry for Sec.
1.6050P-1T(b)(2)(v).
* * * * *
(h) Effective/applicability date.
* * * * *
Sec. 1.6050P-1T Information reporting for discharges of indebtedness
by certain entities (temporary).
(b) * * *
(2) * * *
(v) Special rule for certain entities required to file in a year
prior to 2008.
* * * * *
0
Par. 3. Section 1.6050P-1 is amended as follows:
0
1. Paragraph (b)(2)(i)(H) and the heading for paragraph (h) are
revised.
0
2. A new entry for (b)(2)(v) is added.
The addition and revisions read as follows:
Sec. 1.6050P-1 Information reporting for discharges of indebtedness
by certain entities.
* * * * *
(b) * * *
(2) * * *
(i) * * *
(H) [Reserved]. For further guidance, see Sec. 1.6050P-
1T(b)(2)(i)(H).
* * * * *
(v) [Reserved]. For further guidance, see Sec. 1.6050P-
1T(b)(2)(v).
* * * * *
(h) Effective/applicability date. * * *
0
Par. 4. Section 1.6050P-1T is added to read as follows:
Sec. 1.6050P-1T Information reporting for discharges of indebtedness
by certain entities (temporary).
(a) through (b)(2)(i)(G) [Reserved]. For further guidance, see
1.6050P-1(a) through (b)(2)(i)(G).
(H) In the case of an entity described in section 6050P(c)(2)(A)
through (C), the expiration of the non-payment testing period, as
described in Sec. 1.6050P-1(b)(2)(iv).
(b)(2)(ii) through (iv) [Reserved]. For further guidance, see Sec.
1.6050P-1(b)(2)(ii) through (iv).
(v) Special rule for certain entities required to file in a year
prior to 2008. In the case of an entity described in section
6050P(c)(1)(A) or (c)(2)(D) required to file an information return in a
tax year prior to 2008 due to an identifiable event described in
paragraph (b)(2)(i)(H), and who failed to so file, the date of
discharge is the first event, if any, described in paragraphs
(b)(2)(i)(A) through (G) of this section that occurs after 2007.
(b)(3) through (g) [Reserved]. For further guidance see Sec.
1.6050P-1(b)(3) through (g).
(h) Effective/applicability date--(1) In general. The rules in this
section apply to discharges of indebtedness after December 21, 1996,
except paragraphs (e)(1) and (e)(3) of this section, which apply to
discharges of indebtedness after December 31, 1994, except paragraph
(e)(5) of this section, which applies to discharges of indebtedness
occurring after December 31, 2004, and except paragraphs (b)(2)(i)(H)
and (b)(2)(v) of this section, which apply to discharges of
indebtedness occurring after November 10, 2008.
(2) [Reserved]. For further guidance, see Sec. 1.6050P-1(h)(2).
(i) Expiration date. The applicability of this section will expire
on or before November 7, 2011.
[[Page 66541]]
Approved: October 28, 2008.
Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. E8-26676 Filed 11-7-08; 8:45 am]
BILLING CODE 4830-01-P
