Disregarded Entities; Excise Taxes and Employment Taxes, 66181-66183 [2011-27720]
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<![CDATA[
Federal Register / Vol. 76, No. 207 / Wednesday, October 26, 2011 / Rules and Regulations
North Bend, OR, Southwest Oregon Rgnl,
RNAV (GPS) Y RWY 4, Orig-A
North Bend, OR, Southwest Oregon Rgnl,
VOR–A, Amdt 5A
North Bend, OR, Southwest Oregon Rgnl,
VOR/DME–B, Amdt 4A
Scappoose, OR, Scappoose Industrial
Airpark, LOC/DME RWY 15, Amdt 2
Bay City, TX, Bay City Muni, Takeoff
Minimums and Obstacle DP, Orig
Denton, TX, Denton Muni, ILS OR LOC RWY
18, Amdt 9
Devine, TX, Devine Muni, Takeoff
Minimums and Obstacle DP, Amdt 1
Kenedy, TX, Karnes County, RNAV (GPS)
RWY 16, Orig
Kenedy, TX, Karnes County, RNAV (GPS)
RWY 34, Orig
Kenedy, TX, Karnes County, VOR/DME–A,
Amdt 7
Paducah, TX, Dan E. Richards Muni, Takeoff
Minimums and Obstacle DP, Orig
Williamsburg, VA, Williamsburg-Jamestown,
Takeoff Minimums and Obstacle DP, Amdt
2
Walla Walla, WA, Walla Walla Rgnl, NDB
RWY 20, Amdt 6
Milwaukee, WI, General Mitchell Intl, ILS OR
LOC RWY 19R, Amdt 12
Phillips, WI, Price County, Takeoff
Minimums and Obstacle DP, Amdt 1
Fairmont, WV, Fairmont Muni-Frankman
Field, VOR/DME–A, Amdt 1
[FR Doc. 2011–27371 Filed 10–25–11; 8:45 am]
BILLING CODE 4910–13–P
Bureau of Industry and Security
15 CFR Part 774
The Commerce Control List
CFR Correction
In Title 15 of the Code of Federal
Regulations, Parts 300–799, revised as of
January 1, 2011, in Supplement No. 1 to
Part 774, in ECCN 2B008, the ‘‘Items’’
paragraph on page 719 is revised to read
as follows:
erowe on DSK2VPTVN1PROD with RULES
Supplement No. 1 to PART 774—THE
COMMERCE CONTROL LIST
*
*
*
*
*
2B008 Assemblies or Units, Specially
Designed for Machine Tools, or
Dimensional Inspection or Measuring
Systems and Equipment, as Follows
(See List of Items Controlled).
*
*
*
*
*
Items:
a. Linear position feedback units (e.g.,
inductive type devices, graduated
scales, infrared systems or ‘‘laser’’
systems) having an overall ‘‘accuracy’’
less (better) than (800 + (600 × L ×
10¥3)) nm (L equals the effective length
in mm);
N.B.: For ‘‘laser’’ systems see also
2B006.b.1.c and d.
16:14 Oct 25, 2011
Jkt 226001
[FR Doc. 2011–27753 Filed 10–25–11; 8:45 am]
BILLING CODE 1505–01–D
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[TD 9553]
RIN 1545–BH90
Disregarded Entities; Excise Taxes and
Employment Taxes
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations and removal of
temporary regulations.
AGENCY:
This document contains final
regulations relating to disregarded
entities and excise taxes. These
regulations also make conforming
changes to the tax liability rule for
disregarded entities and the treatment of
entity rule for disregarded entities with
respect to employment taxes. These
regulations affect disregarded entities in
general and, in particular, disregarded
entities that pay or pay over certain
federal excise taxes or that are required
to be registered by the IRS.
DATES: Effective Date: These regulations
are effective on October 26, 2011.
Applicability Date: For dates of
applicability, see §§ 301.7701–2(e)(2),
301.7701–2(e)(5), and 301.7701–2(e)(6).
FOR FURTHER INFORMATION CONTACT:
Michael H. Beker, (202) 622–3070 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
SUMMARY:
DEPARTMENT OF COMMERCE
Bureau of Industry and Security
15 CFR Part 774
The Commerce Control List
CFR Correction
In Title 15 of the Code of Federal
Regulations, Parts 300–799, revised as of
January 1, 2011, on page 684, in
Supplement No. 1 to Part 774, in ECCN
1C118, the ‘‘Items’’ paragraph is revised
to read as follows:
Supplement No. 1 to PART 774—THE
COMMERCE CONTROL LIST
DEPARTMENT OF COMMERCE
VerDate Mar<15>2010
b. Rotary position feedback units (e.g.,
inductive type devices, graduated
scales, infrared systems or ‘‘laser’’
systems) having an ‘‘accuracy’’ less
(better) than 0.00025°;
N.B.: For ‘‘laser’’ systems see also
2B006.b.2.
c. ‘‘Compound rotary tables’’ and
‘‘tilting spindles’’, capable of upgrading,
according to the manufacturer’s
specifications, machine tools to or above
the levels controlled by 2B001 to 2B009.
*
*
*
*
*
66181
*
*
*
*
*
1C118 Titanium-stabilized duplex
stainless steel (Ti-DSS), having all of the
following characteristics (see List of
Items Controlled).
*
*
*
*
*
Items:
a. Having all of the following
characteristics:
a.1. Containing 17.0–23.0 weight
percent chromium and 4.5–7.0 weight
percent nickel;
a.2. Having a titanium content of
greater than 0.10 weight percent; and
a.3. A ferritic-austenitic
microstructure (also referred to as a twophase microstructure) of which at least
10 percent is austenite by volume
(according to ASTM E–1181–87 or
national equivalents), and
b. Having any of the following forms:
b.1. Ingots or bars having a size of 100
mm or more in each dimension;
b.2. Sheets having a width of 600 mm
or more and a thickness of 3 mm or less;
or
b.3. Tubes having an outer diameter of
600 mm or more and a wall thickness
of 3 mm or less.
*
*
*
*
*
[FR Doc. 2011–27751 Filed 10–25–11; 8:45 am]
BILLING CODE 1505–01–D
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Background
This document contains amendments
to the Procedure and Administration
Regulations (26 CFR part 301) under
section 7701 of the Internal Revenue
Code (Code).
Temporary regulations (TD 9462, 74
FR 46903) and a cross-reference notice
of proposed rulemaking (REG–116614–
08, 74 FR 46957) were published in the
Federal Register on September 14, 2009
(the 2009 proposed regulations). On
October 14, 2009, corrections to the
temporary regulations (74 FR 52677)
and to the cross-reference notice of
proposed rulemaking (74 FR 52708)
were published in the Federal Register.
The 2009 proposed regulations clarify
that a single-owner eligible entity that is
disregarded as an entity separate from
its owner for any purpose under
§ 301.7701–2, but regarded as an entity
for certain excise tax purposes under
§ 301.7701–2(c)(2)(v), is treated as a
corporation with respect to those excise
taxes. In addition, the 2009 proposed
regulations make conforming changes to
the tax liability rule for disregarded
entities in § 301.7701–2(c)(2)(iii) and the
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26OCR1
66182
Federal Register / Vol. 76, No. 207 / Wednesday, October 26, 2011 / Rules and Regulations
treatment of entity rule for disregarded
entities with respect to employment
taxes in § 301.7701–2(c)(2)(iv)(B).
No public hearing was requested or
held. One written comment was
received. After consideration of the
comment, the proposed regulations are
adopted by this Treasury decision and
the temporary regulations are removed.
Summary of the Comment and
Explanation of Provisions
erowe on DSK2VPTVN1PROD with RULES
A. Air Transportation Excise Tax
The commenter asked whether an
amount paid to a single-member limited
liability company (SMLLC) by its owner
for air transportation provided to its
owner will be deemed to be paid to a
separate corporation and therefore
subject to federal transportation excise
taxes under section 4261.
On August 16, 2007, final regulations
under § 301.7701–2(c)(2)(v)(A) were
published in the Federal Register (TD
9356, 72 FR 45891) (the 2007 final
regulations). The 2007 final regulations
provide that a single-owner eligible
entity that is disregarded as an entity
separate from its owner for Federal tax
purposes is treated as a separate entity
for certain excise tax purposes,
including Federal tax liabilities imposed
by Chapter 33 of the Code. Under this
rule, amounts paid after December 31,
2007, to an SMLLC by its owner for air
transportation are subject to the tax
imposed by section 4261. The
commenter suggested that the rule in
the 2007 final regulations created a tax
liability where one did not exist before.
Prior to the adoption of the
§ 301.7701–2 regulations in 1997,
amounts paid from one state law entity
to another for air transportation were
potentially subject to the section 4261
tax, regardless of the relationship
between the entities. See for example,
Rev. Ruls. 76–394 (1976–2 CB 355) and
70–325 (1970–1 CB 231), which involve
transportation between related
corporations and between corporations
and their shareholders. Because there
are separate and distinct entities in each
case, these rulings hold that payments
made from one entity to another for
taxable air transportation are ‘‘amounts
paid’’ for purposes of the section 4261
tax. While section 4282 provides a
limited exception in the case of air
transportation excise taxes for certain
affiliated groups that do not offer air
transportation services to non-affiliated
members, no exception had been
provided prior to 1997 for other
situations.
The adoption of the § 301.7701–2
regulations in 1997 departed from this
long-standing precedent by making
VerDate Mar<15>2010
15:10 Oct 25, 2011
Jkt 226001
those previously taxable transactions no
longer subject to excise tax when the
owner of an eligible entity elected to be
a disregarded entity. The 2007
regulations merely restored the longstanding and reasonable pre-1997 rule.
Accordingly, the final regulations retain
the rule that excise taxes imposed on
amounts paid for covered services (such
as air transportation) apply to amounts
paid between state law entities for such
services (unless a statutory exception
applies).
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
proposed regulations preceding these
regulations were submitted to the Chief
Counsel for Advocacy of the Small
Business Administration for comment
on its impact on small business.
B. Indoor Tanning Services Excise Tax
After the 2009 proposed regulations
were published, section 10907 of the
Patient Protection and Affordable Care
Act, Public Law 111–148 (124 Stat. 119
(2010)) added new Chapter 49 to the
Code, which contains an excise tax on
amounts paid for indoor tanning
services under new section 5000B. The
IRS and Treasury Department are aware
of issues relating to the treatment of
qualified subchapter S subsidiaries and
single-owner eligible entities that are
disregarded as entities separate from
their owners with respect to tax
liabilities imposed by Chapter 49 of the
Code. The issues are similar to those
addressed in § 301.7701–2(c)(2)(v).
Accordingly, the IRS and the Treasury
Department plan to issue regulations
addressing the treatment of those
entities with respect to tax liabilities
imposed by Chapter 49 of the Code.
The principal author of these
regulations is Michael H. Beker, Office
of the Associate Chief Counsel
(Passthroughs and Special Industries).
However, other personnel from the IRS
and the Treasury Department
participated in their development.
C. Firearms Excise Tax and Harbor
Maintenance Tax
The rules in the final regulations do
not apply to the firearms excise tax
administered by the Alcohol and
Tobacco Tax and Trade Bureau (TTB)
and the harbor maintenance tax
administered by U.S. Customs and
Border Protection (Customs). Rules in
26 CFR part 301 generally do not apply
for purposes of these taxes and
taxpayers should not assume that a
single owner entity will be disregarded
under applicable TTB or Customs rules.
Availability of IRS Documents
The IRS revenue rulings cited in this
preamble are published in the Internal
Revenue Cumulative Bulletin and are
available from the Superintendent of
Documents, P.O. Box 371954,
Pittsburgh, PA 15250–7954.
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
has also been determined that section
553(b) of the Administrative Procedure
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Drafting Information
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes,
Excise taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping
requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 301 is
amended as follows:
PART 301—PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation
for part 301 continues to read in part as
follows:
■
Authority: 26 U.S.C. 7805. * * *
Par. 2. Section 301.7701–2 is
amended by:
■ 1. Revising paragraphs (c)(2)(iii),
(c)(2)(iv)(B), (c)(2)(v)(B), (c)(2)(v)(C)
Example (iv), (e)(2), and (e)(6).
■ 2. Adding two sentences at the end of
paragraph (e)(5).
The additions and revisions read as
follows:
■
§ 301.7701–2
definitions.
*
Business entities;
*
*
*
*
(c) * * *
(2) * * *
(iii) Tax liabilities of certain
disregarded entities—(A) In general. An
entity that is disregarded as separate
from its owner for any purpose under
this section is treated as an entity
separate from its owner for purposes
of—
(1) Federal tax liabilities of the entity
with respect to any taxable period for
which the entity was not disregarded;
(2) Federal tax liabilities of any other
entity for which the entity is liable; and
(3) Refunds or credits of Federal tax.
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Federal Register / Vol. 76, No. 207 / Wednesday, October 26, 2011 / Rules and Regulations
(B) Examples. The following
examples illustrate the application of
paragraph (c)(2)(iii)(A) of this section:
erowe on DSK2VPTVN1PROD with RULES
Example 1. In 2006, X, a domestic
corporation that reports its taxes on a
calendar year basis, merges into Z, a
domestic LLC wholly owned by Y that is
disregarded as an entity separate from Y, in
a state law merger. X was not a member of
a consolidated group at any time during its
taxable year ending in December 2005. Under
the applicable state law, Z is the successor
to X and is liable for all of X’s debts. In 2009,
the Internal Revenue Service (IRS) seeks to
extend the period of limitations on
assessment for X’s 2005 taxable year. Because
Z is the successor to X and is liable for X’s
2005 taxes that remain unpaid, Z is the
proper party to sign the consent to extend the
period of limitations.
Example 2. The facts are the same as in
Example 1, except that in 2007, the IRS
determines that X miscalculated and
underreported its income tax liability for
2005. Because Z is the successor to X and is
liable for X’s 2005 taxes that remain unpaid,
the deficiency may be assessed against Z and,
in the event that Z fails to pay the liability
after notice and demand, a general tax lien
will arise against all of Z’s property and
rights to property.
(iv) * * *
(B) Treatment of entity. An entity that
is disregarded as an entity separate from
its owner for any purpose under this
section is treated as a corporation with
respect to taxes imposed under Subtitle
C—Employment Taxes and Collection of
Income Tax (Chapters 21, 22, 23, 23A,
24, and 25 of the Internal Revenue
Code).
*
*
*
*
*
(v) * * *
(B) Treatment of entity. An entity that
is disregarded as an entity separate from
its owner for any purpose under this
section is treated as a corporation with
respect to items described in paragraph
(c)(2)(v)(A) of this section.
(C) * * *
Example. * * *
(iv) Assume the same facts as in
paragraph (c)(2)(v)(C) Example (i) and
(ii) of this section. If LLCB does not pay
the tax on its sale of coal under chapter
32 of the Internal Revenue Code, any
notice of lien the Internal Revenue
Service files will be filed as if LLCB
were a corporation.
*
*
*
*
*
(e) * * *
(2) Paragraph (c)(2)(iii) of this section
applies on and after September 14,
2009. For rules that apply before
September 14, 2009, see 26 CFR part
301, revised as of April 1, 2009.
*
*
*
*
*
(5) * * * However, paragraph
(c)(2)(iv)(B) of this section applies with
respect to wages paid on or after
VerDate Mar<15>2010
15:10 Oct 25, 2011
Jkt 226001
September 14, 2009. For rules that apply
before September 14, 2009, see 26 CFR
part 301 revised as of April 1, 2009.
(6)(i) Except as provided in this
paragraph (e)(6), paragraph (c)(2)(v) of
this section applies to liabilities
imposed and actions first required or
permitted in periods beginning on or
after January 1, 2008.
(ii) Paragraphs (c)(2)(v)(B) and
(c)(2)(v)(C) Example (iv) of this section
apply on and after September 14, 2009.
*
*
*
*
*
§ 301.7701–2T
[Removed]
Par. 3. Section 301.7701–2T is
removed.
■
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
Approved: October 18, 2011.
Emily S. McMahon,
Acting, Assistant Secretary of the Treasury
(Tax Policy).
[FR Doc. 2011–27720 Filed 10–25–11; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Part 117
[Docket No. USCG–2011–0960]
Drawbridge Operation Regulations;
Trent River, New Bern, NC
Coast Guard, DHS.
Notice of temporary deviation
from regulations.
AGENCY:
ACTION:
The Commander, Fifth Coast
Guard District, has issued a temporary
deviation from the regulations
governing the operation of the US 70
(Alfred Cunningham) Bridge, at mile
0.0, over the Trent River, at New Bern,
NC. The deviation restricts the
operation of the draw span to facilitate
the general maintenance of the Bridge.
DATES: This deviation is effective from
8 p.m. October 26, 2011 through 11:59
p.m. on October 27, 2011.
ADDRESSES: Documents mentioned in
this preamble as being available in the
docket are part of docket USCG–2011–
0960 and are available online by going
to https://www.regulations.gov, inserting
USCG–2011–0960 in the ‘‘Keywords’’
box, and then clicking ‘‘Search’’. This
material is also available for inspection
or copying at the Docket Management
Facility (M–30), U.S. Department of
Transportation, West Building Ground
Floor, Room W12–140, 1200 New Jersey
SUMMARY:
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66183
Avenue, SE., Washington, DC 20590,
between 9 a.m. and 5 p.m., Monday
through Friday, except Federal
Holidays.
If
you have questions on this rule, call or
e-mail Mr. Bill H. Brazier, Bridge
Management Specialist, Fifth Coast
Guard District, telephone (757) 398–
6422, e-mail Bill.H.Brazier@uscg.mil. If
you have questions on reviewing the
docket, call Renee V. Wright, Program
Manager, Docket Operations, (202) 366–
9826.
FOR FURTHER INFORMATION CONTACT:
The North
Carolina Department of Transportation
(NCDOT), who owns and operates this
bascule lift bridge, has requested a
temporary deviation from the current
operating regulations set out in 33 CFR
117.843(a), to facilitate the general
maintenance of the bridge.
In the closed position to vessels, the
US 70 (Alfred Cunningham) Bridge, at
mile 0.0, at New Bern, NC has a vertical
clearance of 14 feet, above mean high
water.
Under this temporary deviation, the
drawbridge will be closed to vessels
requiring an opening each day from 8
p.m. until 11:59 p.m. on October 26,
2011 and October 27, 2011. There are no
alternate routes for vessels transiting
this section of the Trent River.
The Coast Guard reviewed the 2010
drawbridge logs provided by NCDOT. In
the month of October 2010, between the
hours of 8 p.m. and 11:59 p.m., there
were approximately four recorded
vessel openings of the drawbridge. The
drawbridge will be able to open for
emergencies. Most vessel traffic
utilizing this bridge consists of
recreational boaters. October is outside
of the high recreational boating season
therefore, only a small number of
boaters may be affected by this
temporary closure. There are no
alternate routes on this section of Trent
River. Vessels that can pass through the
bridge in the closed position may do so
at any time.
The Coast Guard will inform all users
of the waterway through our Local and
Broadcast Notice to Mariners of the
closure periods for the bridge so that
vessels can arrange their transits to
minimize any impacts caused by the
temporary deviation.
In accordance with 33 CFR 117.35(e),
the draw must return to its original
operating schedule immediately at the
end of the designated time period. This
deviation from the operating regulations
is authorized under 33 CFR 117.35.
SUPPLEMENTARY INFORMATION:
E:\FR\FM\26OCR1.SGM
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]]>Agencies
[Federal Register Volume 76, Number 207 (Wednesday, October 26, 2011)]
[Rules and Regulations]
[Pages 66181-66183]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-27720]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[TD 9553]
RIN 1545-BH90
Disregarded Entities; Excise Taxes and Employment Taxes
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations and removal of temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations relating to
disregarded entities and excise taxes. These regulations also make
conforming changes to the tax liability rule for disregarded entities
and the treatment of entity rule for disregarded entities with respect
to employment taxes. These regulations affect disregarded entities in
general and, in particular, disregarded entities that pay or pay over
certain federal excise taxes or that are required to be registered by
the IRS.
DATES: Effective Date: These regulations are effective on October 26,
2011.
Applicability Date: For dates of applicability, see Sec. Sec.
301.7701-2(e)(2), 301.7701-2(e)(5), and 301.7701-2(e)(6).
FOR FURTHER INFORMATION CONTACT: Michael H. Beker, (202) 622-3070 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to the Procedure and
Administration Regulations (26 CFR part 301) under section 7701 of the
Internal Revenue Code (Code).
Temporary regulations (TD 9462, 74 FR 46903) and a cross-reference
notice of proposed rulemaking (REG-116614-08, 74 FR 46957) were
published in the Federal Register on September 14, 2009 (the 2009
proposed regulations). On October 14, 2009, corrections to the
temporary regulations (74 FR 52677) and to the cross-reference notice
of proposed rulemaking (74 FR 52708) were published in the Federal
Register.
The 2009 proposed regulations clarify that a single-owner eligible
entity that is disregarded as an entity separate from its owner for any
purpose under Sec. 301.7701-2, but regarded as an entity for certain
excise tax purposes under Sec. 301.7701-2(c)(2)(v), is treated as a
corporation with respect to those excise taxes. In addition, the 2009
proposed regulations make conforming changes to the tax liability rule
for disregarded entities in Sec. 301.7701-2(c)(2)(iii) and the
[[Page 66182]]
treatment of entity rule for disregarded entities with respect to
employment taxes in Sec. 301.7701-2(c)(2)(iv)(B).
No public hearing was requested or held. One written comment was
received. After consideration of the comment, the proposed regulations
are adopted by this Treasury decision and the temporary regulations are
removed.
Summary of the Comment and Explanation of Provisions
A. Air Transportation Excise Tax
The commenter asked whether an amount paid to a single-member
limited liability company (SMLLC) by its owner for air transportation
provided to its owner will be deemed to be paid to a separate
corporation and therefore subject to federal transportation excise
taxes under section 4261.
On August 16, 2007, final regulations under Sec. 301.7701-
2(c)(2)(v)(A) were published in the Federal Register (TD 9356, 72 FR
45891) (the 2007 final regulations). The 2007 final regulations provide
that a single-owner eligible entity that is disregarded as an entity
separate from its owner for Federal tax purposes is treated as a
separate entity for certain excise tax purposes, including Federal tax
liabilities imposed by Chapter 33 of the Code. Under this rule, amounts
paid after December 31, 2007, to an SMLLC by its owner for air
transportation are subject to the tax imposed by section 4261. The
commenter suggested that the rule in the 2007 final regulations created
a tax liability where one did not exist before.
Prior to the adoption of the Sec. 301.7701-2 regulations in 1997,
amounts paid from one state law entity to another for air
transportation were potentially subject to the section 4261 tax,
regardless of the relationship between the entities. See for example,
Rev. Ruls. 76-394 (1976-2 CB 355) and 70-325 (1970-1 CB 231), which
involve transportation between related corporations and between
corporations and their shareholders. Because there are separate and
distinct entities in each case, these rulings hold that payments made
from one entity to another for taxable air transportation are ``amounts
paid'' for purposes of the section 4261 tax. While section 4282
provides a limited exception in the case of air transportation excise
taxes for certain affiliated groups that do not offer air
transportation services to non-affiliated members, no exception had
been provided prior to 1997 for other situations.
The adoption of the Sec. 301.7701-2 regulations in 1997 departed
from this long-standing precedent by making those previously taxable
transactions no longer subject to excise tax when the owner of an
eligible entity elected to be a disregarded entity. The 2007
regulations merely restored the long-standing and reasonable pre-1997
rule. Accordingly, the final regulations retain the rule that excise
taxes imposed on amounts paid for covered services (such as air
transportation) apply to amounts paid between state law entities for
such services (unless a statutory exception applies).
B. Indoor Tanning Services Excise Tax
After the 2009 proposed regulations were published, section 10907
of the Patient Protection and Affordable Care Act, Public Law 111-148
(124 Stat. 119 (2010)) added new Chapter 49 to the Code, which contains
an excise tax on amounts paid for indoor tanning services under new
section 5000B. The IRS and Treasury Department are aware of issues
relating to the treatment of qualified subchapter S subsidiaries and
single-owner eligible entities that are disregarded as entities
separate from their owners with respect to tax liabilities imposed by
Chapter 49 of the Code. The issues are similar to those addressed in
Sec. 301.7701-2(c)(2)(v). Accordingly, the IRS and the Treasury
Department plan to issue regulations addressing the treatment of those
entities with respect to tax liabilities imposed by Chapter 49 of the
Code.
C. Firearms Excise Tax and Harbor Maintenance Tax
The rules in the final regulations do not apply to the firearms
excise tax administered by the Alcohol and Tobacco Tax and Trade Bureau
(TTB) and the harbor maintenance tax administered by U.S. Customs and
Border Protection (Customs). Rules in 26 CFR part 301 generally do not
apply for purposes of these taxes and taxpayers should not assume that
a single owner entity will be disregarded under applicable TTB or
Customs rules.
Availability of IRS Documents
The IRS revenue rulings cited in this preamble are published in the
Internal Revenue Cumulative Bulletin and are available from the
Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-
7954.
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 has also 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 proposed
regulations preceding these regulations were 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 regulations is Michael H. Beker,
Office of the Associate Chief Counsel (Passthroughs and Special
Industries). However, other personnel from the IRS and the Treasury
Department participated in their development.
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR part 301 is amended as follows:
PART 301--PROCEDURE AND ADMINISTRATION
0
Paragraph 1. The authority citation for part 301 continues to read in
part as follows:
Authority: 26 U.S.C. 7805. * * *
0
Par. 2. Section 301.7701-2 is amended by:
0
1. Revising paragraphs (c)(2)(iii), (c)(2)(iv)(B), (c)(2)(v)(B),
(c)(2)(v)(C) Example (iv), (e)(2), and (e)(6).
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2. Adding two sentences at the end of paragraph (e)(5).
The additions and revisions read as follows:
Sec. 301.7701-2 Business entities; definitions.
* * * * *
(c) * * *
(2) * * *
(iii) Tax liabilities of certain disregarded entities--(A) In
general. An entity that is disregarded as separate from its owner for
any purpose under this section is treated as an entity separate from
its owner for purposes of--
(1) Federal tax liabilities of the entity with respect to any
taxable period for which the entity was not disregarded;
(2) Federal tax liabilities of any other entity for which the
entity is liable; and
(3) Refunds or credits of Federal tax.
[[Page 66183]]
(B) Examples. The following examples illustrate the application of
paragraph (c)(2)(iii)(A) of this section:
Example 1. In 2006, X, a domestic corporation that reports its
taxes on a calendar year basis, merges into Z, a domestic LLC wholly
owned by Y that is disregarded as an entity separate from Y, in a
state law merger. X was not a member of a consolidated group at any
time during its taxable year ending in December 2005. Under the
applicable state law, Z is the successor to X and is liable for all
of X's debts. In 2009, the Internal Revenue Service (IRS) seeks to
extend the period of limitations on assessment for X's 2005 taxable
year. Because Z is the successor to X and is liable for X's 2005
taxes that remain unpaid, Z is the proper party to sign the consent
to extend the period of limitations.
Example 2. The facts are the same as in Example 1, except that
in 2007, the IRS determines that X miscalculated and underreported
its income tax liability for 2005. Because Z is the successor to X
and is liable for X's 2005 taxes that remain unpaid, the deficiency
may be assessed against Z and, in the event that Z fails to pay the
liability after notice and demand, a general tax lien will arise
against all of Z's property and rights to property.
(iv) * * *
(B) Treatment of entity. An entity that is disregarded as an entity
separate from its owner for any purpose under this section is treated
as a corporation with respect to taxes imposed under Subtitle C--
Employment Taxes and Collection of Income Tax (Chapters 21, 22, 23,
23A, 24, and 25 of the Internal Revenue Code).
* * * * *
(v) * * *
(B) Treatment of entity. An entity that is disregarded as an entity
separate from its owner for any purpose under this section is treated
as a corporation with respect to items described in paragraph
(c)(2)(v)(A) of this section.
(C) * * *
Example. * * *
(iv) Assume the same facts as in paragraph (c)(2)(v)(C) Example (i)
and (ii) of this section. If LLCB does not pay the tax on its sale of
coal under chapter 32 of the Internal Revenue Code, any notice of lien
the Internal Revenue Service files will be filed as if LLCB were a
corporation.
* * * * *
(e) * * *
(2) Paragraph (c)(2)(iii) of this section applies on and after
September 14, 2009. For rules that apply before September 14, 2009, see
26 CFR part 301, revised as of April 1, 2009.
* * * * *
(5) * * * However, paragraph (c)(2)(iv)(B) of this section applies
with respect to wages paid on or after September 14, 2009. For rules
that apply before September 14, 2009, see 26 CFR part 301 revised as of
April 1, 2009.
(6)(i) Except as provided in this paragraph (e)(6), paragraph
(c)(2)(v) of this section applies to liabilities imposed and actions
first required or permitted in periods beginning on or after January 1,
2008.
(ii) Paragraphs (c)(2)(v)(B) and (c)(2)(v)(C) Example (iv) of this
section apply on and after September 14, 2009.
* * * * *
Sec. 301.7701-2T [Removed]
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Par. 3. Section 301.7701-2T is removed.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
Approved: October 18, 2011.
Emily S. McMahon,
Acting, Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2011-27720 Filed 10-25-11; 8:45 am]
BILLING CODE 4830-01-P
