Modifications of Certain Derivative Contracts, 66639-66641 [2013-26575]
Download as PDF
<![CDATA[
Federal Register / Vol. 78, No. 215 / Wednesday, November 6, 2013 / Rules and Regulations
meet the criteria for a significant
regulatory action under Executive Order
12866, as supplemented by Executive
Order 13563. Therefore, OMB did not
review it.
We also determined that this final
rule meets the plain language
requirement of Executive Order 12866.
Regulatory Flexibility Act
We certify that this final rule will not
have a significant economic impact on
a substantial number of small entities
because it affects individuals only.
Therefore, the Regulatory Flexibility
Act, as amended, does not require us to
prepare a regulatory flexibility analysis.
Paperwork Reduction Act
§ 404.1615 Making disability
determinations.
Final regulations and removal of
temporary regulations.
ACTION:
*
*
*
*
*
(c) * * *
(3) A State agency disability examiner
alone if the claim is adjudicated under
the quick disability determination
process (see § 404.1619) or the
compassionate allowance process (see
§ 404.1602), and the initial or
reconsidered determination is fully
favorable to you. This paragraph will no
longer be effective on November 14,
2014 unless we terminate it earlier or
extend it beyond that date by
publication of a final rule in the Federal
Register; or
*
*
*
*
*
This final rule does not create any
new or affect any existing collections
and, therefore, does not require OMB
approval under the Paperwork
Reduction Act.
PART 416—SUPPLEMENTAL
SECURITY INCOME FOR THE AGED,
BLIND, AND DISABLED
(Catalog of Federal Domestic Assistance
Program Nos. 96.001, Social Security—
Disability Insurance; 96.002, Social
Security—Retirement Insurance; 96.004,
Social Security—Survivors Insurance;
96.006, Supplemental Security Income.)
■
Subpart J—[Amended]
3. The authority citation for subpart J
continues to read as follows:
Authority: Secs. 702(a)(5), 1614, 1631, and
1633 of the Social Security Act (42 U.S.C.
902(a)(5), 1382c, 1383, and 1383b).
List of Subjects
4. Amend § 416.1015 by revising
paragraph (c)(3) to read as follows:
20 CFR Part 404
§ 416.1015 Making disability
determinations.
Administrative practice and
procedure; Blind, Disability benefits;
Old-age, Survivors and Disability
Insurance; Reporting and recordkeeping
requirements; Social security.
*
■
20 CFR Part 416
Administrative practice and
procedure; Reporting and recordkeeping
requirements; Supplemental Security
Income (SSI).
Dated: October 30, 2013.
Carolyn W. Colvin,
Acting Commissioner of Social Security.
For the reasons stated in the
preamble, we are amending subpart Q of
part 404 and subpart J of part 416 of title
20 of the Code of Federal Regulations as
set forth below:
*
*
*
*
(c) * * *
(3) A State agency disability examiner
alone if you are not a child (a person
who has not attained age 18), and the
claim is adjudicated under the quick
disability determination process (see
§ 416.1019) or the compassionate
allowance process (see § 416.1002), and
the initial or reconsidered
determination is fully favorable to you.
This paragraph will no longer be
effective on November 14, 2014 unless
we terminate it earlier or extend it
beyond that date by publication of a
final rule in the Federal Register; or
*
*
*
*
*
[FR Doc. 2013–26524 Filed 11–5–13; 8:45 am]
BILLING CODE 4191–02–P
DEPARTMENT OF THE TREASURY
Subpart Q—[Amended]
pmangrum on DSK3VPTVN1PROD with RULES
PART 404—FEDERAL OLD-AGE,
SURVIVORS AND DISABILITY
INSURANCE (1950–ll)
26 CFR Part 1
1. The authority citation for subpart Q
of part 404 continues to read as follows:
[TD 9639]
Internal Revenue Service
■
Authority: Secs. 205(a), 221, and 702(a)(5)
of the Social Security Act (42 U.S.C. 405(a),
421, and 902(a)(5)).
2. Amend § 404.1615 by revising
paragraph (c)(3) to read as follows:
■
VerDate Mar<15>2010
15:05 Nov 05, 2013
Jkt 232001
RIN 1545–BK13
Modifications of Certain Derivative
Contracts
Internal Revenue Service (IRS),
Treasury.
AGENCY:
PO 00000
Frm 00019
Fmt 4700
Sfmt 4700
66639
This document contains final
regulations relating to the transfer or
assignment of certain derivative
contracts. The final regulations provide
guidance to the nonassigning
counterparty to a derivative contract
and an assignee on certain notional
principal contracts that are derivative
contracts. The final regulations provide
that the nonassigning counterparty does
not have an exchange for purposes of
§ 1.1001–1(a) when certain derivative
contracts are transferred or assigned and
clarify that the embedded loan rules of
§ 1.446–3(g)(4) do not apply to such
transactions.
SUMMARY:
Effective Date: These regulations
are effective on November 6, 2013.
Applicability Date: For the date of
applicability, see § 1.1001–4(d).
FOR FURTHER INFORMATION CONTACT:
Andrea M. Hoffenson, (202) 622–3920
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
DATES:
Background
This document contains amendments
to 26 CFR part 1. On July 22, 2011,
temporary regulations (TD 9538)
relating to the effect of the transfer or
assignment of certain derivative
contracts under section 1001 of the
Internal Revenue Code (Code) were
published in the Federal Register (76
FR 43892). A notice of proposed
rulemaking (REG–109006–11) crossreferencing the temporary regulations
was published in the Federal Register
for the same day (76 FR 43957). A
correction to the temporary regulations
was published on August 19, 2011, in
the Federal Register (76 FR 51878). No
public hearing was requested or held.
No written or electronic comments
responding to the notice of proposed
rulemaking were received. The
proposed regulations are adopted as
amended by this Treasury decision, and
the corresponding temporary
regulations are removed.
Section 1001 provides rules for the
computation and recognition of gain or
loss from a sale or other disposition of
property. For purposes of section 1001,
§ 1.1001–1(a) of the Income Tax
Regulations generally provides that gain
or loss is realized upon an exchange of
property for other property differing
materially either in kind or in extent. As
a general matter, the assignment of a
derivative contract is treated as a taxable
disposition to a nonassigning
counterparty if the resulting contract
differs materially either in kind or in
extent. See Cottage Savings Association
E:\FR\FM\06NOR1.SGM
06NOR1
66640
Federal Register / Vol. 78, No. 215 / Wednesday, November 6, 2013 / Rules and Regulations
pmangrum on DSK3VPTVN1PROD with RULES
v. Commissioner, 499 U.S. 554, 566
(1991) [1991–2 CB 34, 38] (‘‘Under [the
Court’s] interpretation of [section]
1001(a), an exchange of property gives
rise to a realization event so long as the
exchanged properties are ‘materially
different’—that is, so long as they
embody legally distinct entitlements.’’).
The temporary regulations provide,
however, that the transfer or assignment
of a derivative contract by a dealer or
clearinghouse to another dealer or
clearinghouse is not treated as a deemed
exchange of the contract by the
nonassigning counterparty for purposes
of § 1.1001–1(a) provided that the
transfer or assignment is permitted by
the terms of the contract and the terms
of the contract are not otherwise
modified.
Explanation of Revisions
The final regulations adopt the
general rule in the temporary
regulations providing that a transfer or
assignment of a derivative contract that
satisfies the conditions specified in the
regulations is generally not treated by
the nonassigning counterparty as a
deemed exchange of the original
contract under § 1.1001–1(a). As
explained below, a sentence has been
added to the final regulations to clarify
that a loan is not created when a
notional principal contract (NPC) is
transferred or assigned under the
conditions specified in these final
regulations.
In general, § 1.446–3(h) provides rules
that prescribe the treatment of a
termination payment made or received
by the assignor or assignee pursuant to
an assignment of an NPC, while the
consequences to the nonassigning
counterparty are governed by section
1001. A termination payment made or
received on an NPC is treated by the
assignee as a nonperiodic payment
under § 1.446–3(h)(3). See § 1.446–
3(h)(5), Example 2. In addition, § 1.446–
3(h)(3) makes the special rules of
§ 1.446–3(g)(4) applicable to a
termination payment made pursuant to
an NPC. Section 1.446–3(g)(4) generally
provides that a swap with significant
nonperiodic payments is treated as two
transactions, an on-market, level
payment swap and a loan.
These final regulations expressly
provide that a payment between the
party transferring or assigning its rights
and obligations under the contract and
the party to which the rights and
obligations are transferred or assigned
pursuant to the transfer or assignment of
an NPC that meets the conditions
specified in these regulations is not
subject to the embedded loan rules in
§ 1.446–3(g)(4). Thus, neither the
VerDate Mar<15>2010
15:05 Nov 05, 2013
Jkt 232001
assignee nor the nonassigning
counterparty is treated as having an
embedded loan under § 1.446–3(g)(4) as
a result of a payment made between the
assignor and the assignee of an NPC
pursuant to a transfer or assignment that
satisfies the requirements of § 1.1001–
4(a). The Treasury Department and the
IRS believe that it would be inconsistent
for an embedded loan to result from
such a payment in circumstances in
which the general rule in § 1.1001–4(a)
treats the transfer or assignment of an
NPC as not creating a taxable event for
the nonassigning counterparty.
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in
Executive Order 12866, as
supplemented by Executive Order
13563. 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, these
regulations have been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment
on its impact on small business, and no
comments were received.
Drafting Information
The principal author of these
regulations is Andrea M. Hoffenson,
Office of Associate Chief Counsel
(Financial Institutions and Products).
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.
Adoption of 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 1.1001–4 is revised to
read as follows:
■
PO 00000
Frm 00020
Fmt 4700
Sfmt 4700
§ 1.1001–4 Modifications of certain
derivative contracts.
(a) Certain assignments. For purposes
of § 1.1001–1(a), the transfer or
assignment of a derivative contract is
not treated by the nonassigning
counterparty as a deemed exchange of
the original contract for a modified
contract that differs materially either in
kind or in extent if—
(1) Both the party transferring or
assigning its rights and obligations
under the derivative contract and the
party to which the rights and obligations
are transferred or assigned are either a
dealer or a clearinghouse;
(2) The terms of the derivative
contract permit the transfer or
assignment of the contract, whether or
not the consent of the nonassigning
counterparty is required for the transfer
or assignment to be effective; and
(3) The terms of the derivative
contract are not otherwise modified in
a manner that results in a taxable
exchange under section 1001.
(b) Definitions—(1) Dealer. For
purposes of this section, a dealer is a
taxpayer who meets the definition of a
dealer in securities in section 475(c)(1)
or is a dealer in commodities derivative
contracts.
(2) Clearinghouse. For purposes of
this section, a clearinghouse is a
derivatives clearing organization (as
such term is defined in section 1a of the
Commodity Exchange Act (7 U.S.C. 1a))
or a clearing agency (as such term is
defined in section 3 of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)))
that is registered, or exempt from
registration, under each respective Act.
(3) Derivative contract. For purposes
of this section, a derivative contract is
a contract described in—
(i) Section 475(c)(2)(D), 475(c)(2)(E),
or 475(c)(2)(F) without regard to the last
sentence of section 475(c)(2) referencing
section 1256;
(ii) Section 475(e)(2)(B), 475(e)(2)(C),
or 475(e)(2)(D); or
(iii) Section 1.446–3(c)(1).
(c) Consideration for the assignment.
Any payment between a party
transferring or assigning its rights and
obligations under the contract and the
party to which the rights and obligations
are transferred or assigned pursuant to
a transfer or assignment described in
paragraph (a) of this section will not
affect the treatment of the nonassigning
counterparty for purposes of this
section. A payment described in the
preceding sentence made or received to
transfer or assign rights and obligations
under a notional principal contract (as
defined in § 1.446–3(c)(1)) is not subject
to § 1.446–3(g)(4).
E:\FR\FM\06NOR1.SGM
06NOR1
Federal Register / Vol. 78, No. 215 / Wednesday, November 6, 2013 / Rules and Regulations
(d) Effective/applicability date. This
section applies to transfers or
assignments of derivative contracts on
or after July 22, 2011.
§ 1.1001–4T
■
[Removed]
Par. 3. Section 1.1001–4T is removed.
Heather C. Maloy,
Acting Deputy Commissioner for Services and
Enforcement.
Approved: October 29, 2013.
Mark Mazur,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2013–26575 Filed 11–5–13; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF LABOR
Occupational Safety and Health
Administration
29 CFR Parts 1910 and 1926
[Docket No. OSHA–2013–0005]
RIN 1218–AC77
Incorporation by Reference; Accident
Prevention Signs and Tags; Correction
Occupational Safety and Health
Administration (OSHA), Department of
Labor.
ACTION: Correcting amendments.
AGENCY:
This document contains
corrections to the final regulations,
which were published in the Federal
Register of Thursday, June 13, 2013 (78
FR 35559). The regulations update
OSHA’s general industry and
construction signage standards by
adding references to the latest American
National Standards Institute (ANSI)
standards on specifications for accident
prevention signs and tags.
DATES: Effective on November 6, 2013.
FOR FURTHER INFORMATION CONTACT:
General information and press
inquiries: Frank Meilinger, OSHA Office
of Communications, Room N–3647, U.S.
Department of Labor, 200 Constitution
Ave. NW., Washington, DC 20210;
telephone: (202) 693–1999; email:
meilinger.francis2@dol.gov.
Technical inquiries: Kenneth
Stevanus, Directorate of Standards and
Guidance, Room N–3609, OSHA, U.S.
Department of Labor, 200 Constitution
Ave. NW., Washington, DC 20210;
telephone: (202) 693–2260; fax: (202)
693–1663; email: stevanus.ken@dol.gov.
SUPPLEMENTARY INFORMATION:
pmangrum on DSK3VPTVN1PROD with RULES
SUMMARY:
Background
The final regulations that are the
subject of these corrections superseded
VerDate Mar<15>2010
15:05 Nov 05, 2013
Jkt 232001
their predecessor regulations in 29 CFR
parts 1910 and 1926 on the effective
date, and affect employers required to
use accident prevention signs and tags
under the specified standards.
Need for Correction
As published, the final regulations
contain errors that may prove to be
misleading and ambiguous references to
illustrative figures in incorporated-byreference ANSI standards. Specifically,
the incorporation-by-reference
provisions in 29 CFR 1910.6(e)(66) and
(e)(67) and 1926.6(h)(28)–(h)(30)
misidentify the vendors and locations
where the public can purchase the
updated ANSI Z535 standards. In
addition, the references in 29 CFR
1926.200(b) and (c), ‘‘Accident
prevention signs and tags,’’ to figures in
ANSI Z535.2–2011 are ambiguous.
These references need to be clarified
because the figures they denote
illustrate sign specifications that
employers have the option of following.
List of Subjects in 29 CFR Parts 1910
and 1926
Construction, General industry,
Incorporation by reference, Safety,
Signs, Tags.
Accordingly, 29 CFR parts 1910 and
1926 are corrected by making the
following correcting amendments:
66641
Street, 4th Floor, New York, NY 10036;
telephone: 212–642–4980; Web site:
https://webstore.ansi.org/;
(ii) IHS Standards Store, 15 Inverness
Way East, Englewood, CO 80112;
telephone: 877–413–5184; Web site:
www.global.ihs.com; or
(iii) TechStreet Store, 3916 Ranchero
Dr., Ann Arbor, MI 48108; telephone:
877–699–9277; Web site:
www.techstreet.com.
(67) ANSI Z535.2–2011,
Environmental and Facility Safety
Signs, published September 15, 2011;
IBR approved for § 1910.261(c). Copies
available for purchase from the:
(i) American National Standards
Institute’s e-Standards Store, 25 W 43rd
Street, 4th Floor, New York, NY 10036;
telephone: 212–642–4980; Web site:
https://webstore.ansi.org/;
(ii) IHS Standards Store, 15 Inverness
Way East, Englewood, CO 80112;
telephone: 877–413–5184; Web site:
www.global.ihs.com; or
(iii) TechStreet Store, 3916 Ranchero
Dr., Ann Arbor, MI 48108; telephone:
877–699–9277; Web site:
www.techstreet.com.
*
*
*
*
*
PART 1926—SAFETY AND HEALTH
REGULATIONS FOR CONSTRUCTION
Subpart A—General
PART 1910—OCCUPATIONAL SAFETY
AND HEALTH STANDARDS
■
Subpart A—General
Authority: 40 U.S.C. 333; 29 U.S.C. 653,
655, 657; Secretary of Labor’s Order No. 12–
71 (36 FR 8754), 8–76 (41 FR 25059), 9–83
(48 FR 35736), 6–96 (62 FR 111), 5–2007 (72
FR 31160), 4–2010 (75 FR 55355), or 1–2012
(77 FR 3912), as applicable; and 29 CFR part
1911.
1. The authority citation for subpart A
continues to read as follows:
■
Authority: 29 U.S.C. 653, 655, 657;
Secretary of Labor’s Order No. 12–71 (36 FR
8754), 8–76 (41 FR 25059), 9–83 (48 FR
35736), 1–90 (55 FR 9033), 6–96 (62 FR 111),
3–2000 (65 FR 50017), 5–2002 (67 FR 65008),
5–2007 (72 FR 31159), 4–2010 (75 FR 55355),
or 1–2012 (77 FR 3912), as applicable.
Sections 1910.6, 1910.7, 1910.8 and 1910.9
also issued under 29 CFR 1911. Section
1910.7(f) also issued under 31 U.S.C. 9701,
29 U.S.C. 9a, 5 U.S.C. 553; Public Law 106–
113 (113 Stat. 1501A–222); Pub. L. 11–8 and
111–317; and OMB Circular A–25 (dated July
8, 1993) (58 FR 38142, July 15, 1993).
2. In § 1910.6, revise paragraphs
(e)(66) and (e)(67) to read as follows:
■
§ 1910.6
Incorporation by reference.
*
*
*
*
*
(e) * * *
(66) ANSI Z535.1–2006 (R2011),
Safety Colors, reaffirmed July 19, 2011;
IBR approved for §§ 1910.97(a) and
1910.145(d). Copies available for
purchase from the:
(i) American National Standards
Institute’s e-Standards Store, 25 W 43rd
PO 00000
Frm 00021
Fmt 4700
Sfmt 4700
3. The authority citation for subpart A
continues to read as follows:
4. In § 1926.6, revise paragraphs
(h)(28), (h)(29), and (h)(30) to read as
follows:
■
§ 1926.6
Incorporation by reference.
*
*
*
*
*
(h) * * *
(28) ANSI Z535.1–2006 (R2011),
Safety Colors, reaffirmed July 19, 2011;
IBR approved for § 1926.200(c). Copies
available for purchase from the:
(i) American National Standards
Institute’s e-Standards Store, 25 W 43rd
Street, 4th Floor, New York, NY 10036;
telephone: 212–642–4980; Web site:
https://webstore.ansi.org/;
(ii) IHS Standards Store, 15 Inverness
Way East, Englewood, CO 80112;
telephone: 877–413–5184; Web site:
www.global.ihs.com; or
(iii) TechStreet Store, 3916 Ranchero
Dr., Ann Arbor, MI 48108; telephone:
877–699–9277; Web site:
www.techstreet.com.
E:\FR\FM\06NOR1.SGM
06NOR1
]]>Agencies
[Federal Register Volume 78, Number 215 (Wednesday, November 6, 2013)]
[Rules and Regulations]
[Pages 66639-66641]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-26575]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9639]
RIN 1545-BK13
Modifications of Certain Derivative Contracts
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations and removal of temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations relating to the
transfer or assignment of certain derivative contracts. The final
regulations provide guidance to the nonassigning counterparty to a
derivative contract and an assignee on certain notional principal
contracts that are derivative contracts. The final regulations provide
that the nonassigning counterparty does not have an exchange for
purposes of Sec. 1.1001-1(a) when certain derivative contracts are
transferred or assigned and clarify that the embedded loan rules of
Sec. 1.446-3(g)(4) do not apply to such transactions.
DATES: Effective Date: These regulations are effective on November 6,
2013.
Applicability Date: For the date of applicability, see Sec.
1.1001-4(d).
FOR FURTHER INFORMATION CONTACT: Andrea M. Hoffenson, (202) 622-3920
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to 26 CFR part 1. On July 22,
2011, temporary regulations (TD 9538) relating to the effect of the
transfer or assignment of certain derivative contracts under section
1001 of the Internal Revenue Code (Code) were published in the Federal
Register (76 FR 43892). A notice of proposed rulemaking (REG-109006-11)
cross-referencing the temporary regulations was published in the
Federal Register for the same day (76 FR 43957). A correction to the
temporary regulations was published on August 19, 2011, in the Federal
Register (76 FR 51878). No public hearing was requested or held. No
written or electronic comments responding to the notice of proposed
rulemaking were received. The proposed regulations are adopted as
amended by this Treasury decision, and the corresponding temporary
regulations are removed.
Section 1001 provides rules for the computation and recognition of
gain or loss from a sale or other disposition of property. For purposes
of section 1001, Sec. 1.1001-1(a) of the Income Tax Regulations
generally provides that gain or loss is realized upon an exchange of
property for other property differing materially either in kind or in
extent. As a general matter, the assignment of a derivative contract is
treated as a taxable disposition to a nonassigning counterparty if the
resulting contract differs materially either in kind or in extent. See
Cottage Savings Association
[[Page 66640]]
v. Commissioner, 499 U.S. 554, 566 (1991) [1991-2 CB 34, 38] (``Under
[the Court's] interpretation of [section] 1001(a), an exchange of
property gives rise to a realization event so long as the exchanged
properties are `materially different'--that is, so long as they embody
legally distinct entitlements.''). The temporary regulations provide,
however, that the transfer or assignment of a derivative contract by a
dealer or clearinghouse to another dealer or clearinghouse is not
treated as a deemed exchange of the contract by the nonassigning
counterparty for purposes of Sec. 1.1001-1(a) provided that the
transfer or assignment is permitted by the terms of the contract and
the terms of the contract are not otherwise modified.
Explanation of Revisions
The final regulations adopt the general rule in the temporary
regulations providing that a transfer or assignment of a derivative
contract that satisfies the conditions specified in the regulations is
generally not treated by the nonassigning counterparty as a deemed
exchange of the original contract under Sec. 1.1001-1(a). As explained
below, a sentence has been added to the final regulations to clarify
that a loan is not created when a notional principal contract (NPC) is
transferred or assigned under the conditions specified in these final
regulations.
In general, Sec. 1.446-3(h) provides rules that prescribe the
treatment of a termination payment made or received by the assignor or
assignee pursuant to an assignment of an NPC, while the consequences to
the nonassigning counterparty are governed by section 1001. A
termination payment made or received on an NPC is treated by the
assignee as a nonperiodic payment under Sec. 1.446-3(h)(3). See Sec.
1.446-3(h)(5), Example 2. In addition, Sec. 1.446-3(h)(3) makes the
special rules of Sec. 1.446-3(g)(4) applicable to a termination
payment made pursuant to an NPC. Section 1.446-3(g)(4) generally
provides that a swap with significant nonperiodic payments is treated
as two transactions, an on-market, level payment swap and a loan.
These final regulations expressly provide that a payment between
the party transferring or assigning its rights and obligations under
the contract and the party to which the rights and obligations are
transferred or assigned pursuant to the transfer or assignment of an
NPC that meets the conditions specified in these regulations is not
subject to the embedded loan rules in Sec. 1.446-3(g)(4). Thus,
neither the assignee nor the nonassigning counterparty is treated as
having an embedded loan under Sec. 1.446-3(g)(4) as a result of a
payment made between the assignor and the assignee of an NPC pursuant
to a transfer or assignment that satisfies the requirements of Sec.
1.1001-4(a). The Treasury Department and the IRS believe that it would
be inconsistent for an embedded loan to result from such a payment in
circumstances in which the general rule in Sec. 1.1001-4(a) treats the
transfer or assignment of an NPC as not creating a taxable event for
the nonassigning counterparty.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866, as
supplemented by Executive Order 13563. 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, these regulations have been submitted to
the Chief Counsel for Advocacy of the Small Business Administration for
comment on its impact on small business, and no comments were received.
Drafting Information
The principal author of these regulations is Andrea M. Hoffenson,
Office of Associate Chief Counsel (Financial Institutions and
Products). 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.
Adoption of Amendments to the Regulations
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 1.1001-4 is revised to read as follows:
Sec. 1.1001-4 Modifications of certain derivative contracts.
(a) Certain assignments. For purposes of Sec. 1.1001-1(a), the
transfer or assignment of a derivative contract is not treated by the
nonassigning counterparty as a deemed exchange of the original contract
for a modified contract that differs materially either in kind or in
extent if--
(1) Both the party transferring or assigning its rights and
obligations under the derivative contract and the party to which the
rights and obligations are transferred or assigned are either a dealer
or a clearinghouse;
(2) The terms of the derivative contract permit the transfer or
assignment of the contract, whether or not the consent of the
nonassigning counterparty is required for the transfer or assignment to
be effective; and
(3) The terms of the derivative contract are not otherwise modified
in a manner that results in a taxable exchange under section 1001.
(b) Definitions--(1) Dealer. For purposes of this section, a dealer
is a taxpayer who meets the definition of a dealer in securities in
section 475(c)(1) or is a dealer in commodities derivative contracts.
(2) Clearinghouse. For purposes of this section, a clearinghouse is
a derivatives clearing organization (as such term is defined in section
1a of the Commodity Exchange Act (7 U.S.C. 1a)) or a clearing agency
(as such term is defined in section 3 of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a))) that is registered, or exempt from
registration, under each respective Act.
(3) Derivative contract. For purposes of this section, a derivative
contract is a contract described in--
(i) Section 475(c)(2)(D), 475(c)(2)(E), or 475(c)(2)(F) without
regard to the last sentence of section 475(c)(2) referencing section
1256;
(ii) Section 475(e)(2)(B), 475(e)(2)(C), or 475(e)(2)(D); or
(iii) Section 1.446-3(c)(1).
(c) Consideration for the assignment. Any payment between a party
transferring or assigning its rights and obligations under the contract
and the party to which the rights and obligations are transferred or
assigned pursuant to a transfer or assignment described in paragraph
(a) of this section will not affect the treatment of the nonassigning
counterparty for purposes of this section. A payment described in the
preceding sentence made or received to transfer or assign rights and
obligations under a notional principal contract (as defined in Sec.
1.446-3(c)(1)) is not subject to Sec. 1.446-3(g)(4).
[[Page 66641]]
(d) Effective/applicability date. This section applies to transfers
or assignments of derivative contracts on or after July 22, 2011.
Sec. 1.1001-4T [Removed]
0
Par. 3. Section 1.1001-4T is removed.
Heather C. Maloy,
Acting Deputy Commissioner for Services and Enforcement.
Approved: October 29, 2013.
Mark Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2013-26575 Filed 11-5-13; 8:45 am]
BILLING CODE 4830-01-P
