Allocation and Reporting of Mortgage Insurance Premiums, 21256-21258 [E9-10662]
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21256
Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations
making certain corrections to conform to
technical amendments adopted in
Release No. 33–9002A (April 1, 2009),
which appeared in the Federal Register
on April 7, 2009 (74 FR 15666).
DATES: Effective Date: July 15, 2009.
FOR FURTHER INFORMATION CONTACT:
Deborah D. Skeens, Senior Counsel,
Office of Disclosure Regulation, at (202)
551–6784, Division of Investment
Management, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–5720.
SUPPLEMENTARY INFORMATION: The
Commission is making the following
corrections to Release No. 33–9006
(February 11, 2009), which was
published in FR Doc E9–3359 appearing
on page 7748 in the Federal Register on
February 19, 2009. We are correcting
cross-references in preliminary note 1
and paragraph (a) of Rule 405 1 of
Regulation S–T.2
§ 232.405
[Corrected]
1. Beginning on page 7775, second
column and continuing on the third
column, the last nineteen lines of
Preliminary Note 1 to § 232.405 are
corrected to read as follows:
‘‘paragraph (101) of Part II—
Information Not Required to be
Delivered to Offerees or Purchasers of
both Form F–9 (§ 239.39 of this chapter)
and Form F–10 (§ 239.40 of this
chapter), paragraph 101 of the
Instructions as to Exhibits of Form 20–
F (§ 249.220f of this chapter), paragraph
B.(15) of the General Instructions to
Form 40–F (§ 249.240f of this chapter),
paragraph C.(6) of the General
Instructions to Form 6–K (§ 249.306 of
this chapter), and General Instruction
C.3.(g) of Form N–1A (§§ 239.15A and
274.11A of this chapter) specify when
electronic filers are required or
permitted to submit or post an
Interactive Data File (§ 232.11), as
further described in the Note to
§ 232.405.’’
2. On page 7775, third column, the
introductory text of paragraph (a)(2) of
§ 232.405 is corrected to read as follows:
‘‘(2) Be submitted only by an
electronic filer either required or
permitted to submit an Interactive Data
File as specified by Item 601(b)(101) of
Regulation S–K, paragraph (101) of Part
II—Information Not Required to be
Delivered to Offerees or Purchasers of
either Form F–9 or Form F–10,
paragraph 101 of the Instructions as to
Exhibits of Form 20–F, paragraph B.(15)
of the General Instructions to Form 40–
F, paragraph C.(6) of the General
1 17
2 17
CFR 232.405.
CFR 232.10 et seq.
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Instructions to Form 6–K, or General
Instruction C.3.(g) of Form N–1A, as
applicable, as an exhibit to:’’
3. On page 7775, in the third column,
paragraph (a)(3) of § 232.405 is corrected
to read as follows:
‘‘(3) Be submitted in accordance with
the EDGAR Filer Manual and, as
applicable, either Item 601(b)(101) of
Regulation S–K, paragraph (101) of Part
II—Information Not Required to be
Delivered to Offerees or Purchasers of
either Form F–9 or Form F–10,
paragraph 101 of the Instructions as to
Exhibits of Form 20–F, paragraph B.(15)
of the General Instructions to Form 40–
F, paragraph C.(6) of the General
Instructions to Form 6–K, or General
Instruction C.3.(g) of Form N–1A; and’’
4. Beginning on page 7775, third
column and continuing on page 7776 in
the first column, paragraph (a)(4) of
§ 232.405 is corrected to read as follows:
‘‘(4) Be posted on the electronic filer’s
corporate Web site, if any, in accordance
with, as applicable, either Item
601(b)(101) of Regulation S–K,
paragraph (101) of Part II—Information
Not Required to be Delivered to Offerees
or Purchasers of either Form F–9 or
Form F–10, paragraph 101 of the
Instructions as to Exhibits of Form 20–
F, paragraph B.(15) of the General
Instructions to Form 40–F, paragraph
C.(6) of the General Instructions to Form
6–K, or General Instruction C.3.(g) of
Form N–1A.’’
Dated: May 1, 2009.
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9–10525 Filed 5–6–09; 8:45 am]
BILLING CODE P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9449]
RIN 1545–BH84
Allocation and Reporting of Mortgage
Insurance Premiums
AGENCY: Internal Revenue Service (IRS),
Treasury.
ACTION: Temporary regulations.
SUMMARY: This document contains
temporary regulations that explain how
to allocate prepaid qualified mortgage
insurance premiums to determine the
amount of the prepaid premium that is
treated as qualified residence interest
each taxable year under section
163(h)(4)(F) of the Internal Revenue
PO 00000
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Fmt 4700
Sfmt 4700
Code (Code). The temporary regulations
also provide guidance to reporting
entities receiving premiums, including
prepaid premiums, for mortgage
insurance. The temporary regulations
reflect changes to the law made by the
Tax Relief and Health Care Act of 2006
and the Mortgage Forgiveness Debt
Relief Act of 2007. The text of the
temporary regulations also serves as the
text of the proposed regulations set forth
in the notice of proposed rulemaking on
this subject in the Proposed Rules
section of this issue of the Federal
Register.
DATES: Effective Date: These regulations
are effective on May 7, 2009.
Applicability Dates: For dates of
applicability, see §§ 1.163–11T(d) and
1.6050H–3T(e).
FOR FURTHER INFORMATION CONTACT:
Concerning § 1.163–11T, Angela
Warren, (202) 622–4950; concerning
§ 1.6050H–3T, Stephen Coleman (202)
622–4910 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
Section 419 of the Tax Relief and
Health Care Act of 2006, Public Law
109–432 (120 Stat. 2967) (2006 Act),
added sections 163(h)(3)(E), (h)(4)(E),
and (h)(4)(F) to the Code. Section 3 of
the Mortgage Forgiveness Debt Relief
Act of 2007, Public Law 110–142 (121
Stat. 1803) (2007), amended section
163(h)(3)(E)(iv). In general, these new
provisions treat certain qualified
mortgage insurance premiums as
qualified residence interest. This
treatment applies only to certain
qualified mortgage insurance premiums
paid or accrued on or after January 1,
2007, and on or before December 31,
2010, on mortgage insurance contracts
issued on or after January 1, 2007.
Section 163(h)(3)(E)(i) provides that
premiums paid or accrued for qualified
mortgage insurance in connection with
acquisition indebtedness for a qualified
residence are treated as qualified
residence interest for purposes of
section 163. Section 163(h)(4)(E) defines
qualified mortgage insurance as (i)
mortgage insurance provided by the
Veterans Administration (VA), the
Federal Housing Administration (FHA),
or the Rural Housing Administration
(Rural Housing),1 and (ii) private
mortgage insurance (as defined by
section 2 of the Homeowners Protection
Act of 1998 (12 U.S.C. 4901) as in effect
on December 20, 2006). The amount
1 References in section 163(h)(4)(E)(i) to the
Veterans Administration and Rural Housing
Administration are interpreted to mean their
respective successors, the Department of Veterans
Affairs and Rural Housing Service.
E:\FR\FM\07MYR1.SGM
07MYR1
Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations
treated as qualified residence interest
may be reduced or eliminated under
section 163(h)(3)(E)(ii), which provides
that the amount allowed as a deduction
is phased out ratably by 10 percent for
each $1,000 ($500 in the case of a
married individual filing a separate
return) that the taxpayer’s adjusted gross
income exceeds $100,000 ($50,000 in
the case of a married individual filing a
separate return).
Section 163(h)(4)(F) states that any
amount paid by the taxpayer for
qualified mortgage insurance that is
properly allocable to any mortgage the
payment of which extends to periods
that are after the close of the taxable
year in which the amount is paid shall
be chargeable to capital account and
shall be treated as paid in the periods
to which the amount is allocated. No
deduction shall be allowed for the
unamortized balance of the account if
the mortgage is satisfied before the end
of its term. The allocation rules in
section 163(h)(4)(F) do not apply to
amounts paid for qualified mortgage
insurance provided by the VA or Rural
Housing. Additionally, section
163(h)(3)(E)(iv)(II) disallows a
deduction for amounts allocable to any
period after December 31, 2010.
Section 419 of the 2006 Act also
added section 6050H(h) to the Code,
which generally provides that any
person who, in the course of a trade or
business, receives from an individual
premiums for mortgage insurance
aggregating $600 or more for any
calendar year, shall make an
information return in the form
prescribed by the Secretary. As defined
in section 6050H(h)(3)(B), the term
mortgage insurance has the same
meaning as qualified mortgage
insurance in section 163(h)(4)(E). See
also Tax Technical Corrections Act of
2007, Public Law 110–172 (121 Stat.
2473) § 11(b)(2).
On January 8, 2008, the IRS and the
Treasury Department published Notice
2008–15 (2008–4 IRB 4) (see
§ 601.601(d)(2)(ii)(b)) to provide
guidance to individual taxpayers in
determining the amount of prepaid
qualified mortgage insurance premiums
that is treated as qualified residence
interest under section 163(h)(3)(E) that
may be deducted in 2007, and to
reporting entities receiving premiums,
including prepaid premiums, for
mortgage insurance in 2007. The notice
provides that an individual taxpayer
may allocate the prepaid premium
ratably over the shorter of (1) the stated
term of the mortgage, or (2) 84 months,
beginning with the month in which the
insurance was obtained. The notice also
provides that reporting entities that
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16:03 May 06, 2009
Jkt 217001
receive mortgage insurance premiums of
$600 or more in 2007 may report either
the portion of the amount received that
is allocable to 2007, the amount actually
received, or the amount determined
under an 84-month allocation method.
The notice requested comments
regarding the appropriate allocation
method and reporting requirements that
should apply to future years.
Summary of Comments on Notice 2008–
15 and Explanation of Provisions
In response to Notice 2008–15, the
Treasury Department and the IRS
received several comments concerning
the appropriate allocation methodology
for prepaid qualified mortgage
insurance premiums that are treated as
qualified residence interest under
section 163(h)(3)(E). One commenter
recommended adopting the rule from
Notice 2008–15 permitting taxpayers to
allocate a prepaid premium ratably over
the shorter of (1) the stated term of the
mortgage, or (2) 84 months. According
to this commenter, an 84-month
allocation rule closely approximates the
actual duration of the average mortgage
insurance contract. Another commenter
suggested adopting a three-year
allocation period to coincide with the
Department of Housing and Urban
Development’s (HUD) policy of
refunding prepaid premiums on FHA
loans. Under this policy, HUD refunds
prepaid FHA mortgage insurance
premiums if the borrower refinances the
mortgage through another FHA loan
within the first three years of the
original loan term.
After consideration of these
comments, the Treasury Department
and the IRS are adopting the rule from
Notice 2008–15 concerning allocation of
prepaid qualified mortgage insurance
premiums based on the understanding
that the average life of a mortgage
insurance contract on home mortgages
generally is seven years (84 months).
Accordingly, the temporary regulations
add a new provision to the regulations
under section 163. Notwithstanding the
general rules for the treatment of
qualified residence interest (for
example, the period over which certain
points paid to refinance a mortgage are
allocable), § 1.163–11T provides that an
individual taxpayer may allocate
prepaid qualified mortgage insurance
premiums that are treated as qualified
residence interest under section
163(h)(3)(E) over the shorter of (a) the
stated term of the mortgage, or (b) a
period of 84 months. Instructions for
calculating the portion of prepaid
qualified mortgage insurance premiums
that are deductible in a particular
PO 00000
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Fmt 4700
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21257
taxable year are in Publication 936,
‘‘Home Mortgage Interest Deduction.’’
The Treasury Department and the IRS
received several comments in response
to Notice 2008–15 concerning the
appropriate reporting requirement.
Some commenters suggested that
mortgage servicers be required to report
all mortgage insurance premiums
received during the taxable year,
including prepayments. Others
suggested allowing mortgage servicers to
report either (1) the amount of mortgage
insurance premiums received, or (2) the
amount disbursed during the taxable
year to the issuer of the mortgage
insurance policy.
After consideration of these
comments, the Treasury Department
and the IRS are adopting a rule
requiring mortgage servicers to report
the amount of all mortgage insurance
premiums, including prepaid mortgage
insurance premiums, received in the
calendar year. The temporary
regulations accordingly add a new
provision to the regulations under
section 6050H. Section 1.6050H–3T
provides that a reporting entity that
receives mortgage insurance premiums
of $600 or more from an individual
taxpayer during a calendar year shall
make an information return setting forth
the total amount received from that
individual during the calendar year
pursuant to the forms and instructions
prescribed by the Secretary (currently
reported in Box 4 of Form 1098
‘‘Mortgage Interest Statement’’).
Several commenters suggested
clarifying that there are separate $600
thresholds for reporting mortgage
interest under section 6050H(a) and
mortgage insurance premiums under
section 6050H(h). Several commenters
also requested inclusion of a separate
standard for penalty relief for reporting
mortgage insurance premiums in
compliance with section 6050H(h).
Such guidance is unnecessary, as
sections 6050H(a) and 6050H(h) set
forth separate $600 reporting thresholds
for mortgage interest received and
mortgage insurance premiums received,
and the good faith standard for penalty
relief in § 301.6724–1(a)(2)(i) applies to
the reporting of mortgage insurance
premiums.
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 applicability of
E:\FR\FM\07MYR1.SGM
07MYR1
21258
Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations
the Regulatory Flexibility Act (5 U.S.C.
chapter 5), please refer to the Special
Analyses section in the preamble to the
cross-referenced notice of proposed
rulemaking published in the Proposed
Rules section in this issue of the Federal
Register. Pursuant to section 7805(f) of
the Code, these regulations have been
submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on their
impact on small business.
Drafting Information
The principal authors of these
regulations are Angella Warren, Office
of the Associate Chief Counsel (Income
Tax and Accounting), and Stephen
Coleman, Office of the Associate Chief
Counsel (Procedure and
Administration). However, other
personnel from the IRS and the Treasury
Department participated in their
development.
List of Subjects in 26 CFR Part 1
Income taxes, 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 * * *
(2) Limitation. If a mortgage is
satisfied before the end of its stated
term, no deduction as qualified
residence interest shall be allowed for
any amount of the premium that is
allocable to periods after the mortgage is
satisfied.
(b) Scope. The allocation requirement
in paragraph (a) of this section applies
only to mortgage insurance provided by
the Federal Housing Administration or
private mortgage insurance (as defined
by section 2 of the Homeowners
Protection Act of 1998 (12 U.S.C. 4901)
as in effect on December 20, 2006). It
does not apply to mortgage insurance
provided by the Department of Veterans
Affairs or the Rural Housing Service.
Paragraph (a) of this section applies
whether the qualified mortgage
insurance premiums are paid in cash or
are financed, without regard to source.
(c) Cross reference. For rules
concerning the information reporting of
premiums, including prepaid
premiums, for mortgage insurance, see
§ 1.6050H–3T.
(d) Effective/applicability date. This
section applies to prepaid qualified
mortgage insurance premiums described
in paragraph (a) of this section paid or
accrued on or after January 1, 2008, and
on or before December 31, 2010, for
mortgage insurance provided by the
Federal Housing Administration or
private mortgage insurers issued on or
after January 1, 2007.
(e) Expiration date. The applicability
of this section expires on May 7, 2012.
to the receipt of all payments of
mortgage insurance premiums, by cash
or financing, without regard to source.
(c) Aggregation. Whether a person
receives $600 or more of mortgage
insurance premiums is determined on a
mortgage-by-mortgage basis. A recipient
need not aggregate mortgage insurance
premiums received on all of the
mortgages of an individual to determine
whether the $600 threshold is met.
Therefore, a recipient need not report
mortgage insurance premiums of less
than $600 received on a mortgage, even
though it receives a total of $600 or
more of mortgage insurance premiums
on all of the mortgages for an individual
for a calendar year.
(d) Cross reference. For rules
concerning the allocation of certain
prepaid qualified mortgage insurance
premiums, see § 1.163–11T of this
chapter.
(e) Effective/applicability date. This
section applies to mortgage insurance
premiums received on or after January
1, 2008.
(f) Expiration date. The applicability
of this section expires on May 4, 2012.
Linda E. Stiff,
Deputy Commissioner for Services and
Enforcement.
Approved: April 23, 2009.
Bernard J. Knight, Jr,
Acting General Counsel of the Treasury.
[FR Doc. E9–10662 Filed 5–6–09; 8:45 am]
BILLING CODE 4830–01–P
Par. 2. Section 1.163–11T is added to
read as follows:
■
Par. 3. Section 1.6050H–3T is added
to read as follows:
§ 1.163–11T Allocation of certain prepaid
qualified mortgage insurance premiums
(temporary).
DEPARTMENT OF VETERANS
AFFAIRS
§ 1.6050H–3T Information reporting of
mortgage insurance premiums (temporary).
38 CFR Part 3
(a) Allocation—(1) In general. As
provided in section 163(h)(3)(E),
premiums paid or accrued for qualified
mortgage insurance during the taxable
year in connection with acquisition
indebtedness with respect to a qualified
residence (as defined in section
163(h)(4)(A)) of the taxpayer shall be
treated as qualified residence interest
(as defined in section 163(h)(3)(A)). If an
individual taxpayer pays such a
premium that is properly allocable to a
mortgage the payment of which extends
to periods beyond the close of the
taxable year (prepaid premium), the
taxpayer must allocate the premium to
determine the amount treated as
qualified residence interest for each
taxable year. The premium must be
allocated ratably over the shorter of—
(i) The stated term of the mortgage; or
(ii) A period of 84 months, beginning
with the month in which the insurance
was obtained.
(a) Information reporting
requirements. Any person who, in the
course of a trade or business receives
premiums, including prepaid
premiums, for mortgage insurance (as
described in paragraph (b) of this
section) from any individual aggregating
$600 or more for any calendar year,
shall make an information return setting
forth the total amount received from
that individual during the calendar year
pursuant to the forms and instructions
prescribed by the Secretary.
(b) Scope. Paragraph (a) of this section
applies to mortgage insurance provided
by the Federal Housing Administration,
Department of Veterans Affairs, or the
Rural Housing Service (or their
successor organizations), or to private
mortgage insurance (as defined by
section 2 of the Homeowners Protection
Act of 1998 (12 U.S.C. 4901) as in effect
on December 20, 2006). The rule stated
in paragraph (a) of this section applies
RIN 2900–AN01
■
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Presumptive Service Connection for
Disease Associated With Exposure to
Certain Herbicide Agents: AL
Amyloidosis
Department of Veterans Affairs.
Final rule.
AGENCY:
ACTION:
SUMMARY: This document amends the
Department of Veterans Affairs (VA)
adjudication regulations concerning
presumptive service connection for a
certain disease based on the most recent
National Academy of Sciences (NAS)
Institute of Medicine committee report,
‘‘Veterans and Agent Orange: Update
2006’’ (Update 2006). This amendment
is necessary to implement a decision of
the Secretary of Veterans Affairs that
there is a positive association between
exposure to herbicides used in the
Republic of Vietnam during the Vietnam
era and the subsequent development of
E:\FR\FM\07MYR1.SGM
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]]>Agencies
[Federal Register Volume 74, Number 87 (Thursday, May 7, 2009)]
[Rules and Regulations]
[Pages 21256-21258]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-10662]
=======================================================================
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9449]
RIN 1545-BH84
Allocation and Reporting of Mortgage Insurance Premiums
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains temporary regulations that explain how
to allocate prepaid qualified mortgage insurance premiums to determine
the amount of the prepaid premium that is treated as qualified
residence interest each taxable year under section 163(h)(4)(F) of the
Internal Revenue Code (Code). The temporary regulations also provide
guidance to reporting entities receiving premiums, including prepaid
premiums, for mortgage insurance. The temporary regulations reflect
changes to the law made by the Tax Relief and Health Care Act of 2006
and the Mortgage Forgiveness Debt Relief Act of 2007. The text of the
temporary regulations also serves as the text of the proposed
regulations set forth in the notice of proposed rulemaking on this
subject in the Proposed Rules section of this issue of the Federal
Register.
DATES: Effective Date: These regulations are effective on May 7, 2009.
Applicability Dates: For dates of applicability, see Sec. Sec.
1.163-11T(d) and 1.6050H-3T(e).
FOR FURTHER INFORMATION CONTACT: Concerning Sec. 1.163-11T, Angela
Warren, (202) 622-4950; concerning Sec. 1.6050H-3T, Stephen Coleman
(202) 622-4910 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
Section 419 of the Tax Relief and Health Care Act of 2006, Public
Law 109-432 (120 Stat. 2967) (2006 Act), added sections 163(h)(3)(E),
(h)(4)(E), and (h)(4)(F) to the Code. Section 3 of the Mortgage
Forgiveness Debt Relief Act of 2007, Public Law 110-142 (121 Stat.
1803) (2007), amended section 163(h)(3)(E)(iv). In general, these new
provisions treat certain qualified mortgage insurance premiums as
qualified residence interest. This treatment applies only to certain
qualified mortgage insurance premiums paid or accrued on or after
January 1, 2007, and on or before December 31, 2010, on mortgage
insurance contracts issued on or after January 1, 2007.
Section 163(h)(3)(E)(i) provides that premiums paid or accrued for
qualified mortgage insurance in connection with acquisition
indebtedness for a qualified residence are treated as qualified
residence interest for purposes of section 163. Section 163(h)(4)(E)
defines qualified mortgage insurance as (i) mortgage insurance provided
by the Veterans Administration (VA), the Federal Housing Administration
(FHA), or the Rural Housing Administration (Rural Housing),\1\ and (ii)
private mortgage insurance (as defined by section 2 of the Homeowners
Protection Act of 1998 (12 U.S.C. 4901) as in effect on December 20,
2006). The amount
[[Page 21257]]
treated as qualified residence interest may be reduced or eliminated
under section 163(h)(3)(E)(ii), which provides that the amount allowed
as a deduction is phased out ratably by 10 percent for each $1,000
($500 in the case of a married individual filing a separate return)
that the taxpayer's adjusted gross income exceeds $100,000 ($50,000 in
the case of a married individual filing a separate return).
---------------------------------------------------------------------------
\1\ References in section 163(h)(4)(E)(i) to the Veterans
Administration and Rural Housing Administration are interpreted to
mean their respective successors, the Department of Veterans Affairs
and Rural Housing Service.
---------------------------------------------------------------------------
Section 163(h)(4)(F) states that any amount paid by the taxpayer
for qualified mortgage insurance that is properly allocable to any
mortgage the payment of which extends to periods that are after the
close of the taxable year in which the amount is paid shall be
chargeable to capital account and shall be treated as paid in the
periods to which the amount is allocated. No deduction shall be allowed
for the unamortized balance of the account if the mortgage is satisfied
before the end of its term. The allocation rules in section
163(h)(4)(F) do not apply to amounts paid for qualified mortgage
insurance provided by the VA or Rural Housing. Additionally, section
163(h)(3)(E)(iv)(II) disallows a deduction for amounts allocable to any
period after December 31, 2010.
Section 419 of the 2006 Act also added section 6050H(h) to the
Code, which generally provides that any person who, in the course of a
trade or business, receives from an individual premiums for mortgage
insurance aggregating $600 or more for any calendar year, shall make an
information return in the form prescribed by the Secretary. As defined
in section 6050H(h)(3)(B), the term mortgage insurance has the same
meaning as qualified mortgage insurance in section 163(h)(4)(E). See
also Tax Technical Corrections Act of 2007, Public Law 110-172 (121
Stat. 2473) Sec. 11(b)(2).
On January 8, 2008, the IRS and the Treasury Department published
Notice 2008-15 (2008-4 IRB 4) (see Sec. 601.601(d)(2)(ii)(b)) to
provide guidance to individual taxpayers in determining the amount of
prepaid qualified mortgage insurance premiums that is treated as
qualified residence interest under section 163(h)(3)(E) that may be
deducted in 2007, and to reporting entities receiving premiums,
including prepaid premiums, for mortgage insurance in 2007. The notice
provides that an individual taxpayer may allocate the prepaid premium
ratably over the shorter of (1) the stated term of the mortgage, or (2)
84 months, beginning with the month in which the insurance was
obtained. The notice also provides that reporting entities that receive
mortgage insurance premiums of $600 or more in 2007 may report either
the portion of the amount received that is allocable to 2007, the
amount actually received, or the amount determined under an 84-month
allocation method. The notice requested comments regarding the
appropriate allocation method and reporting requirements that should
apply to future years.
Summary of Comments on Notice 2008-15 and Explanation of Provisions
In response to Notice 2008-15, the Treasury Department and the IRS
received several comments concerning the appropriate allocation
methodology for prepaid qualified mortgage insurance premiums that are
treated as qualified residence interest under section 163(h)(3)(E). One
commenter recommended adopting the rule from Notice 2008-15 permitting
taxpayers to allocate a prepaid premium ratably over the shorter of (1)
the stated term of the mortgage, or (2) 84 months. According to this
commenter, an 84-month allocation rule closely approximates the actual
duration of the average mortgage insurance contract. Another commenter
suggested adopting a three-year allocation period to coincide with the
Department of Housing and Urban Development's (HUD) policy of refunding
prepaid premiums on FHA loans. Under this policy, HUD refunds prepaid
FHA mortgage insurance premiums if the borrower refinances the mortgage
through another FHA loan within the first three years of the original
loan term.
After consideration of these comments, the Treasury Department and
the IRS are adopting the rule from Notice 2008-15 concerning allocation
of prepaid qualified mortgage insurance premiums based on the
understanding that the average life of a mortgage insurance contract on
home mortgages generally is seven years (84 months). Accordingly, the
temporary regulations add a new provision to the regulations under
section 163. Notwithstanding the general rules for the treatment of
qualified residence interest (for example, the period over which
certain points paid to refinance a mortgage are allocable), Sec.
1.163-11T provides that an individual taxpayer may allocate prepaid
qualified mortgage insurance premiums that are treated as qualified
residence interest under section 163(h)(3)(E) over the shorter of (a)
the stated term of the mortgage, or (b) a period of 84 months.
Instructions for calculating the portion of prepaid qualified mortgage
insurance premiums that are deductible in a particular taxable year are
in Publication 936, ``Home Mortgage Interest Deduction.''
The Treasury Department and the IRS received several comments in
response to Notice 2008-15 concerning the appropriate reporting
requirement. Some commenters suggested that mortgage servicers be
required to report all mortgage insurance premiums received during the
taxable year, including prepayments. Others suggested allowing mortgage
servicers to report either (1) the amount of mortgage insurance
premiums received, or (2) the amount disbursed during the taxable year
to the issuer of the mortgage insurance policy.
After consideration of these comments, the Treasury Department and
the IRS are adopting a rule requiring mortgage servicers to report the
amount of all mortgage insurance premiums, including prepaid mortgage
insurance premiums, received in the calendar year. The temporary
regulations accordingly add a new provision to the regulations under
section 6050H. Section 1.6050H-3T provides that a reporting entity that
receives mortgage insurance premiums of $600 or more from an individual
taxpayer during a calendar year shall make an information return
setting forth the total amount received from that individual during the
calendar year pursuant to the forms and instructions prescribed by the
Secretary (currently reported in Box 4 of Form 1098 ``Mortgage Interest
Statement'').
Several commenters suggested clarifying that there are separate
$600 thresholds for reporting mortgage interest under section 6050H(a)
and mortgage insurance premiums under section 6050H(h). Several
commenters also requested inclusion of a separate standard for penalty
relief for reporting mortgage insurance premiums in compliance with
section 6050H(h). Such guidance is unnecessary, as sections 6050H(a)
and 6050H(h) set forth separate $600 reporting thresholds for mortgage
interest received and mortgage insurance premiums received, and the
good faith standard for penalty relief in Sec. 301.6724-1(a)(2)(i)
applies to the reporting of mortgage insurance premiums.
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
applicability of
[[Page 21258]]
the Regulatory Flexibility Act (5 U.S.C. chapter 5), please refer to
the Special Analyses section in the preamble to the cross-referenced
notice of proposed rulemaking published in the Proposed Rules section
in this issue of the Federal Register. Pursuant to section 7805(f) of
the Code, these regulations have been submitted to the Chief Counsel
for Advocacy of the Small Business Administration for comment on their
impact on small business.
Drafting Information
The principal authors of these regulations are Angella Warren,
Office of the Associate Chief Counsel (Income Tax and Accounting), and
Stephen Coleman, Office of the Associate Chief Counsel (Procedure and
Administration). However, other personnel from the IRS and the Treasury
Department participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, 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 1.163-11T is added to read as follows:
Sec. 1.163-11T Allocation of certain prepaid qualified mortgage
insurance premiums (temporary).
(a) Allocation--(1) In general. As provided in section
163(h)(3)(E), premiums paid or accrued for qualified mortgage insurance
during the taxable year in connection with acquisition indebtedness
with respect to a qualified residence (as defined in section
163(h)(4)(A)) of the taxpayer shall be treated as qualified residence
interest (as defined in section 163(h)(3)(A)). If an individual
taxpayer pays such a premium that is properly allocable to a mortgage
the payment of which extends to periods beyond the close of the taxable
year (prepaid premium), the taxpayer must allocate the premium to
determine the amount treated as qualified residence interest for each
taxable year. The premium must be allocated ratably over the shorter
of--
(i) The stated term of the mortgage; or
(ii) A period of 84 months, beginning with the month in which the
insurance was obtained.
(2) Limitation. If a mortgage is satisfied before the end of its
stated term, no deduction as qualified residence interest shall be
allowed for any amount of the premium that is allocable to periods
after the mortgage is satisfied.
(b) Scope. The allocation requirement in paragraph (a) of this
section applies only to mortgage insurance provided by the Federal
Housing Administration or private mortgage insurance (as defined by
section 2 of the Homeowners Protection Act of 1998 (12 U.S.C. 4901) as
in effect on December 20, 2006). It does not apply to mortgage
insurance provided by the Department of Veterans Affairs or the Rural
Housing Service. Paragraph (a) of this section applies whether the
qualified mortgage insurance premiums are paid in cash or are financed,
without regard to source.
(c) Cross reference. For rules concerning the information reporting
of premiums, including prepaid premiums, for mortgage insurance, see
Sec. 1.6050H-3T.
(d) Effective/applicability date. This section applies to prepaid
qualified mortgage insurance premiums described in paragraph (a) of
this section paid or accrued on or after January 1, 2008, and on or
before December 31, 2010, for mortgage insurance provided by the
Federal Housing Administration or private mortgage insurers issued on
or after January 1, 2007.
(e) Expiration date. The applicability of this section expires on
May 7, 2012.
0
Par. 3. Section 1.6050H-3T is added to read as follows:
Sec. 1.6050H-3T Information reporting of mortgage insurance premiums
(temporary).
(a) Information reporting requirements. Any person who, in the
course of a trade or business receives premiums, including prepaid
premiums, for mortgage insurance (as described in paragraph (b) of this
section) from any individual aggregating $600 or more for any calendar
year, shall make an information return setting forth the total amount
received from that individual during the calendar year pursuant to the
forms and instructions prescribed by the Secretary.
(b) Scope. Paragraph (a) of this section applies to mortgage
insurance provided by the Federal Housing Administration, Department of
Veterans Affairs, or the Rural Housing Service (or their successor
organizations), or to private mortgage insurance (as defined by section
2 of the Homeowners Protection Act of 1998 (12 U.S.C. 4901) as in
effect on December 20, 2006). The rule stated in paragraph (a) of this
section applies to the receipt of all payments of mortgage insurance
premiums, by cash or financing, without regard to source.
(c) Aggregation. Whether a person receives $600 or more of mortgage
insurance premiums is determined on a mortgage-by-mortgage basis. A
recipient need not aggregate mortgage insurance premiums received on
all of the mortgages of an individual to determine whether the $600
threshold is met. Therefore, a recipient need not report mortgage
insurance premiums of less than $600 received on a mortgage, even
though it receives a total of $600 or more of mortgage insurance
premiums on all of the mortgages for an individual for a calendar year.
(d) Cross reference. For rules concerning the allocation of certain
prepaid qualified mortgage insurance premiums, see Sec. 1.163-11T of
this chapter.
(e) Effective/applicability date. This section applies to mortgage
insurance premiums received on or after January 1, 2008.
(f) Expiration date. The applicability of this section expires on
May 4, 2012.
Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
Approved: April 23, 2009.
Bernard J. Knight, Jr,
Acting General Counsel of the Treasury.
[FR Doc. E9-10662 Filed 5-6-09; 8:45 am]
BILLING CODE 4830-01-P
