Reporting of Original Issue Discount on Tax-Exempt Obligations; Basis and Transfer Reporting by Securities Brokers for Debt Instruments and Options, 13292-13295 [2015-05654]

Download as PDF 13292 Federal Register / Vol. 80, No. 49 / Friday, March 13, 2015 / Proposed Rules Current regulations Proposed revisions to regulations If before the expiration of the 30-month period, or 7 ⁄ years where applicable: • (ii) the court issues a final order that the patent is invalid, unenforceable, or not infringed, approval may be made effective on: — the date the court enters judgment; • (iii) the court issues a final order or judgment that the patent has been infringed, approval may be made effective on: — the date the court determines that the patent will expire or otherwise orders • (iv) the court grants a preliminary injunction prohibiting the applicant from engaging in the commercial manufacture or sale of the drug product until the court decides the issues of patent validity and infringement, and if the court later decides that the patent is invalid, unenforceable, or not infringed, approval may be made effective on: — the date the court enters a final order or judgment that the patent is invalid, unenforceable, or not infringed. 12 [FR Doc. C1–2015–01666 Filed 3–12–15; 8:45 am] BILLING CODE 1505–01–D If before the expiration of the 30-month period, or 71⁄2 years where applicable: • (ii) the district court decides that the patent is invalid, unenforceable, or not infringed (including any substantive determination that there is no cause of action for patent infringement or invalidity), the 505(b)(2) application or ANDA may be approved on: —(A) the date on which the court enters judgment reflecting the decision; or —(B) the date of a settlement order or consent decree signed and entered by the court stating that the patent that is the subject of the certification is invalid or not infringed. • (iii) the district court decides that the patent has been infringed and the judgment is appealed, the 505(b)(2) application or ANDA may be approved on: —(A) the date on which the mandate is issued by the court of appeals entering judgment that the patent is invalid or not infringed; or —(B) the date of a settlement order or consent decree signed and entered by the court of appeals stating that the patent is invalid or not infringed. • (iv) the district court decides that the patent has been infringed and the judgment is not appealed or is affirmed, the 505(b)(2) application or ANDA may be approved no earlier than the date specified by the district court in an order under 35 U.S.C. 271(e)(4)(A). • (v) the district court grants a preliminary injunction prohibiting the applicant from engaging in the commercial manufacture or sale of the drug product until the court decides the issues of patent validity and infringement: — if the court later decides the patent is invalid, unenforceable, or not infringed, the 505(b)(2) application or ANDA may be approved per § 314.107(b)(3)(ii). —if the court decides that the patent has been infringed, the 505(b)(2) application or ANDA may be approved per § 314.107(b)(3)(iii) or (b)(3)(iv), as applicable. • (vi) the patent owner or the exclusive patent licensee (or their representatives) agrees in writing that the 505(b)(2) application or ANDA may be approved any time on or after the date of the consent, approval may be granted on or after that date. • (vii) the court enters an order requiring the 30-month or 71⁄2-year period to be terminated, the 505(b)(2) application or ANDA may be approved in accordance with the court’s order. • (viii) the court enters an order of dismissal, with or without prejudice, without a finding of infringement, the 505(b)(2) application or ANDA may be approved on or after the date of the order. Notice of proposed rulemaking by cross-reference to temporary regulations. ACTION: In the Rules and Regulations section of this issue of the Federal Register, the IRS is issuing temporary regulations relating to information reporting by brokers for transactions involving debt instruments and options, including the reporting of original issue discount (OID) and acquisition premium on tax-exempt obligations, the treatment of certain holder elections for reporting a taxpayer’s adjusted basis in a debt instrument, and transfer reporting for section 1256 options and debt instruments. The text of those regulations also serves as the text of these proposed regulations. SUMMARY: DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG–143040–14] tkelley on DSK3SPTVN1PROD with PROPOSALS RIN 1545–BM59 Reporting of Original Issue Discount on Tax-Exempt Obligations; Basis and Transfer Reporting by Securities Brokers for Debt Instruments and Options Internal Revenue Service (IRS), Treasury. AGENCY: VerDate Sep<11>2014 20:40 Mar 12, 2015 Jkt 235001 Written or electronic comments must be received by June 11, 2015. DATES: PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 Send submissions to: CC:PA:LPD:PR (REG–143040–14), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG–143040– 14), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, DC, or sent electronically via the Federal eRulemaking Portal at www.regulations.gov (IRS REG–143040– 14). ADDRESSES: FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Pamela Lew, (202) 317–7053; concerning submissions of comments, Regina Johnson, (202) 317–6901 (not toll-free numbers). SUPPLEMENTARY INFORMATION: E:\FR\FM\13MRP1.SGM 13MRP1 tkelley on DSK3SPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 49 / Friday, March 13, 2015 / Proposed Rules Paperwork Reduction Act Section 1.6049–10T, which is published elsewhere in this issue of the Federal Register, requires a payor to report OID and acquisition premium on tax-exempt obligations acquired on or after January 1, 2017. This information is required to enable the IRS to verify that a taxpayer is reporting the correct amount of tax-exempt interest each year for alternative minimum tax and other purposes. In addition, because this information is used to report a taxpayer’s adjusted basis in a debt instrument under section 6045(g), this information is required to enable the IRS to verify that a taxpayer is reporting the correct amount of gain or loss upon the sale of a tax-exempt obligation. The burden for the collection of information contained in § 1.6049–10T and the corresponding proposed regulations in this document will be reflected in the burden on Form 1099–OID (OMB control number 1545–0117) when revised to request the additional information in the regulations. Upon the transfer of a covered security, section 6045A and § 1.6045A– 1 require the transferring broker to provide to the transferee broker a transfer statement containing certain information relating to the security. This transfer statement generally provides the transferee broker the information needed to determine a customer’s adjusted basis and whether any gain or loss with respect to the security is longterm, short-term, or ordinary as required by section 6045(g). Prior to the publication of § 1.6045A–1T in this issue of the Federal Register, a broker did not have to provide a transfer statement for a section 1256 option. In addition, a broker did not have to provide the last date on or before the transfer date that the broker made an adjustment for a particular item relating to a debt instrument. Section 1.6045A– 1T, however, now requires a broker to transfer this information for a section 1256 option transferred on or after January 1, 2016, and for a debt instrument transferred on or after June 30, 2015. The collection of information contained in section 1.6045A–1 relating to the furnishing of information in connection with the transfer of securities has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control number 1545–2186. The collection of information in § 1.6045A–1T and the corresponding proposed regulations in this document is necessary to allow VerDate Sep<11>2014 17:15 Mar 12, 2015 Jkt 235001 brokers that effect sales of transferred section 1256 options and debt instruments that are covered securities to determine and report the adjusted basis of these securities in compliance with section 6045(g). This collection of information is required to comply with the provisions of section 403 of the Energy Improvement and Extension Act of 2008, Division B of Public Law 110– 343 (122 Stat. 3765, 3854 (2008)) (the Act). The collection of information contained in § 1.6045A–1T is an increase in the total annual burden under control number 1545–2186. The likely respondents are brokers transferring section 1256 options and debt instruments that are covered securities. Estimated total annual reporting burden is 3,333 hours. Estimated average annual burden per respondent is 2 hours. Estimated average burden per response is 4 minutes. Estimated number of respondents is 7,500. Estimated total frequency of responses is 200,000. The collection of information is required to comply with the provisions of section 403 of the Act. The holder of a debt instrument is permitted to make a number of elections that affect how basis is computed. To minimize the need for reconciliation between information reported by a broker to both a customer and the IRS and the amounts reported on the customer’s tax return, a broker is required to take into account certain specified elections in reporting information to the customer. A customer, therefore, must provide certain information concerning an election to the broker in a written notification. A written notification includes a writing in electronic format. See § 1.6045–1(n)(5). The collection of information contained in § 1.6045–1(n)(5) relating to the furnishing of information by a customer to a broker in connection with the sale or transfer of a debt instrument that is a covered security has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control number 1545–2186. Under § 1.6045– 1T(n)(11)(i)(A), which is published elsewhere in this issue of the Federal Register, unlike the rule in current § 1.6045–1(n)(5) adopted in 2013, a broker must not take into account the election under § 1.1272–3 in reporting a customer’s adjusted basis in a debt instrument. Therefore, a customer is no longer required to notify the broker that PO 00000 Frm 00006 Fmt 4702 Sfmt 4702 13293 the customer has made or revoked an election under § 1.1272–3. This change represents a decrease in the total annual burden under OMB control number 1545–2186. In addition, under § 1.6045– 1T(n)(11)(i)(B), a broker must take into account the election under section 1276(b)(2) unless the customer timely notifies the broker that the customer has not make the election. The temporary regulations reverse the assumption in current § 1.6045–1(n)(5) adopted in 2013. Because the section 1276(b)(2) election results in a more taxpayerfavorable result than the default ratable method for accruing market discount in most cases, it is anticipated that more customers will want to use this method and these customers will no longer need to notify their brokers that they have made the election. As a result, this change represents a decrease in the total annual burden under OMB control number 1545–2186. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by section 6103. Background and Explanation of Provisions Section 6045 generally requires a broker to report gross proceeds upon the sale of a security. Section 6045 was amended by section 403 of the Act to require the reporting of adjusted basis for a covered security and whether any gain or loss upon the sale of the security is long-term or short-term. In addition, the Act added section 6045A, which requires certain information to be reported in connection with a transfer of a covered security to another broker. Section 6049 requires the reporting of interest payments (including accruals of OID treated as payments). On April 18, 2013, the Treasury Department and the IRS published in the Federal Register (TD 9616 at 78 FR 23116) final regulations under sections 6045 and 6045A (the 2013 final basis reporting regulations). After the publication of the 2013 final basis reporting regulations in the Federal Register, the Treasury Department and the IRS received written comments on certain provisions of the 2013 final basis reporting regulations. In response to these written comments, temporary E:\FR\FM\13MRP1.SGM 13MRP1 13294 Federal Register / Vol. 80, No. 49 / Friday, March 13, 2015 / Proposed Rules regulations in the Rules and Regulations section of this issue of the Federal Register amend the Income Tax Regulations (26 CFR part 1) relating to sections 6045, 6045A, and 6049. The temporary regulations (1) amend § 1.6045–1(n) of the 2013 final basis reporting regulations to change a broker’s treatment of the election to treat all interest as OID under § 1.1272–3 and the election to accrue market discount based on a constant yield under section 1276(b)(2), (2) amend § 1.6045A–1 of the 2013 final basis reporting regulations to require transfer statement reporting under section 6045A for section 1256 options, (3) amend § 1.6045A–1 of the 2013 final basis reporting regulations to require an additional item of information to be provided on transfer statements for debt instruments, and (4) require information reporting under section 6049 for OID and acquisition premium on tax-exempt obligations. The text of the temporary regulations also serves as the text of these proposed regulations. tkelley on DSK3SPTVN1PROD with PROPOSALS Consideration of Administrative Burdens Related to Basis Reporting A number of commenters have indicated that compliance with basis reporting requirements and the use of basis and other information reported by brokers will require considerable resources and effort on the part of return preparers and information recipients. The Treasury Department and the IRS are continuing to review all aspects of the information reporting process and are exploring ways to reduce the compliance burden for both brokers and for information recipients. Special Analyses It has been determined that this notice of proposed rulemaking 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 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. It is hereby certified that the collection of information in these regulations will not have a significant economic impact on a substantial number of small entities. Therefore, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Any effect on small entities by the rules in the regulations generally flows directly from section 403 of the Act. In addition, it is anticipated that the requirements in the regulations in this document will fall VerDate Sep<11>2014 17:15 Mar 12, 2015 Jkt 235001 only on financial services firms with annual receipts greater than the $38.5 million threshold and, therefore, on no small entities. Section 403(a) of the Act requires a broker to report the adjusted basis of a debt instrument that is a covered security. Although a holder of a debt instrument (customer) is permitted to make a number of elections that affect how basis is computed, a broker only is required to take into account specified elections in reporting a debt instrument’s adjusted basis, including the election under section 1276(b)(2) to determine accruals of market discount on a constant yield method. Under the 2013 final basis reporting regulations, a customer had to notify the broker that the customer had made the section 1276(b)(2) election. However, § 1.6045– 1T(n)(11)(i)(B) requires a broker to take into account the election under section 1276(b)(2) in reporting a debt instrument’s adjusted basis unless the customer timely notifies the broker that the customer has not made the election. The notification must be in writing, which includes a writing in electronic format. In most cases, this election results in a more taxpayer-favorable result than the default ratable method. It is anticipated that this collection of information in the regulations will not fall on a substantial number of small entities, especially because fewer customers will need to notify brokers about the election. Further, the regulations generally implement the statutory requirements for reporting adjusted basis under section 403 of the Act. Moreover, any economic impact is expected to be minimal because it should take a customer no more than seven minutes to satisfy the information-sharing requirement in these regulations. Section 403(c) of the Act added section 6045A, which requires applicable persons to provide a transfer statement in connection with the transfer of custody of a covered security. Section 1.6045A–1T and the corresponding proposed regulations in this document effectuate the Act by giving the broker who receives the transfer statement the information necessary to determine and report adjusted basis and whether any gain or loss with respect to a debt instrument or section 1256 option is long-term or short-term as required by section 6045 when the security is subsequently sold. Consequently, § 1.6045A–1T and the corresponding proposed regulations in this document do not add to the impact on small entities imposed by the statutory provisions. Instead, the regulations limit the information to be PO 00000 Frm 00007 Fmt 4702 Sfmt 4702 reported to only those items necessary to effectuate the statutory scheme. The information required under § 1.6049–10T and the corresponding proposed regulations in this document will enable the IRS to verify that a taxpayer is reporting the correct amount of tax-exempt interest each year for alternative minimum tax and other purposes. In addition, because this information is used to report a taxpayer’s adjusted basis in a debt instrument under section 6045(g), this information is required to enable the IRS to verify that a taxpayer is reporting the correct amount of gain or loss upon the sale of a tax-exempt obligation. Any economic impact on small entities is expected to be minimal because a broker already is required to determine the accruals of OID and acquisition premium for purposes of determining and reporting a customer’s adjusted basis on Form 1099–B under section 6045. Moreover, any effect on small entities by the rules in the final regulations flows from section 6049 and section 403 of the Act. Pursuant to section 7805(f) of the Internal Revenue Code, this notice of proposed rulemaking has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small businesses. Comments and Request for Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any written (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS as prescribed in the preamble under the ADDRESSES heading. The Treasury Department and the IRS welcome comments on the clarity of the proposed rules and how they can be made easier to understand. All comments will be available at www.regulations.gov for public inspection and copying. A public hearing may be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for a public hearing will be published in the Federal Register. Drafting Information The principal author of these regulations is Pamela Lew, Office of Associate Chief Counsel (Financial Institutions and Products). However, other personnel from the IRS and the Treasury Department participated in their development. E:\FR\FM\13MRP1.SGM 13MRP1 Federal Register / Vol. 80, No. 49 / Friday, March 13, 2015 / Proposed Rules List of Subjects in 26 CFR Part 1 DEPARTMENT OF LABOR Income Taxes, Reporting and recordkeeping requirements. Occupational Safety and Health Administration Proposed Amendments to the Regulations 29 CFR Parts 1910, 1915, 1917, 1918, and 1926 Accordingly, 26 CFR part 1 is proposed to be amended as follows: [Docket No. OSHA–2014–0024] RIN 1218–AC87 PART 1—INCOME TAXES Paragraph 1. The authority citation for part 1 is amended by adding entries in numerical order to read in part as follows: ■ Authority: 26 U.S.C. 7805 * * * Section 1.6045–1(n)(11) also issued under 26 U.S.C. 6045(g). * * * Section 1.6045A–1(e) and (f) also issued under 26 U.S.C. 6045A(a). * * * Section 1.6049–10 also issued under 26 U.S.C. 6049(a). * * * Par. 2. Section 1.6045–1(n)(11) is added to read as follows: ■ § 1.6045–1 Returns of information of brokers and barter exchanges. [The text of proposed § 1.6045– 1(n)(11) is the same as the text of § 1.6045–1T(n)(11) published elsewhere in this issue of the Federal Register]. ■ Par. 3. Sections 1.6045A–1(e) and (f) are added to read as follows: § 1.6045A–1 Statements of information required in connection with transfers of securities. [The text of proposed § 1.6045A–1(e) and (f) is the same as the text of § 1.6045A–1T(e) and (f) published elsewhere in this issue of the Federal Register]. ■ Par. 4. Section 1.6049–10 is added to read as follows: § 1.6049–10 Reporting of original issue discount on a tax-exempt obligation. [The text of proposed § 1.6049–10 is the same as the text of § 1.6049–10T published elsewhere in this issue of the Federal Register]. John Dalrymple, Deputy Commissioner for Services and Enforcement. tkelley on DSK3SPTVN1PROD with PROPOSALS [FR Doc. 2015–05654 Filed 3–12–15; 8:45 am] BILLING CODE P VerDate Sep<11>2014 17:15 Mar 12, 2015 Jkt 235001 Updating OSHA Standards Based on National Consensus Standards; Eye and Face Protection Occupational Safety and Health Administration (OSHA), Department of Labor. ACTION: Notice of proposed rulemaking. AGENCY: The Occupational Safety and Health Administration (‘‘OSHA’’ or ‘‘Agency’’) is issuing this notice of proposed rulemaking to update its general industry, shipyard employment, marine terminals, longshoring, and construction eye and face protection standards by incorporating by reference the three most recent versions of the American National Standards Institute (‘‘ANSI’’ or ‘‘national consensus standard’’) Occupational and Educational Eye and Face Protection standard. In addition, OSHA proposes to change language in the construction eye and face protection standard to make it consistent with both the general industry and maritime standards. DATES: Submit comments on this notice of proposed rule (including comments on the information-collection (paperwork) determination described under the section titled Procedural Determinations, hearing requests, and other information) by April 13, 2015. All submissions must bear a postmark or provide other evidence of the submission date (the following section titled ADDRESSES describes the available methods of making submissions). ADDRESSES: Submit comments, hearing requests, and other information as follows: • Electronic. Submit comments electronically to http:// www.regulations.gov, which is the Federal eRulemaking Portal. Follow the instructions online for submitting comments. • Facsimile. OSHA allows facsimile transmission of comments and hearing requests that are 10 pages or fewer in length (including attachments). Send these documents to the OSHA Docket Office at (202) 693–1648; OSHA does not require hard copies of these documents. Instead of transmitting facsimile copies of attachments that supplement these documents (e.g., SUMMARY: PO 00000 Frm 00008 Fmt 4702 Sfmt 4702 13295 studies, journal articles), commenters must submit these attachments to the OSHA Docket Office, Technical Data Center (TDC), Room N–2625, OSHA, U.S. Department of Labor, 200 Constitution Ave. NW., Washington, DC 20210. These attachments must clearly identify the sender’s name, date, subject, and docket number (i.e., OSHA–2014–0024 so that the Agency can attach them to the appropriate document. • Regular mail, express delivery, hand delivery, and messenger (courier) service. Submit comments and any additional material (e.g., studies, journal articles) to the OSHA Docket Office, Docket No. OSHA–2013–0024 or RIN 1218–AC8708 Technical Data Center, Room N–2625, OSHA, U.S. Department of Labor, 200 Constitution Ave. NW., Washington, DC 20210; telephone: (202) 693–2350. (OSHA’s TTY number is (877) 889–5627)). Note that security procedures may result in significant delays in receiving comments and other written materials by regular mail. Contact the OSHA Docket Office for information about security procedures for delivery of materials by express delivery, hand delivery, and messenger service. The hours of operation for the OSHA Docket Office are 8:15 a.m. to 4:45 p.m., e.t. • Instructions. All submissions must include the Agency name and the OSHA docket number (i.e., OSHA Docket No. OSHA–2014–0024). OSHA will place comments and other material, including any personal information, in the public docket without revision, and these materials will be available online at: http://www.regulations.gov. Therefore, the Agency cautions commenters about submitting statements they do not want made public, or submitting comments that contain personal information (either about themselves or others), such as social security numbers, birth dates, and medical data. OSHA invites comments on all issues related to this notice of proposed rulemaking. The Agency also welcomes comments on its findings that this notice of proposed rulemaking will have no impact on the regulated community. • Docket. To read or download comments or other material in the docket, go to http:// www.regulations.gov. The electronic docket for this notice of proposed rule established at http:// www.regulations.gov contains most of the documents in the docket. Some information (e.g., copyrighted material), however, cannot be read or downloaded through this Web site. All submissions, including copyrighted material, are accessible at the OSHA Docket Office. E:\FR\FM\13MRP1.SGM 13MRP1

Agencies

[Federal Register Volume 80, Number 49 (Friday, March 13, 2015)]
[Proposed Rules]
[Pages 13292-13295]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-05654]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-143040-14]
RIN 1545-BM59


Reporting of Original Issue Discount on Tax-Exempt Obligations; 
Basis and Transfer Reporting by Securities Brokers for Debt Instruments 
and Options

AGENCY: Internal Revenue Service (IRS), Treasury.

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

-----------------------------------------------------------------------

SUMMARY: In the Rules and Regulations section of this issue of the 
Federal Register, the IRS is issuing temporary regulations relating to 
information reporting by brokers for transactions involving debt 
instruments and options, including the reporting of original issue 
discount (OID) and acquisition premium on tax-exempt obligations, the 
treatment of certain holder elections for reporting a taxpayer's 
adjusted basis in a debt instrument, and transfer reporting for section 
1256 options and debt instruments. The text of those regulations also 
serves as the text of these proposed regulations.

DATES: Written or electronic comments must be received by June 11, 
2015.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-143040-14), Room 
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
143040-14), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC, or sent electronically via the Federal 
eRulemaking Portal at www.regulations.gov (IRS REG-143040-14).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Pamela Lew, (202) 317-7053; concerning submissions of comments, Regina 
Johnson, (202) 317-6901 (not toll-free numbers).

SUPPLEMENTARY INFORMATION: 

[[Page 13293]]

Paperwork Reduction Act

    Section 1.6049-10T, which is published elsewhere in this issue of 
the Federal Register, requires a payor to report OID and acquisition 
premium on tax-exempt obligations acquired on or after January 1, 2017. 
This information is required to enable the IRS to verify that a 
taxpayer is reporting the correct amount of tax-exempt interest each 
year for alternative minimum tax and other purposes. In addition, 
because this information is used to report a taxpayer's adjusted basis 
in a debt instrument under section 6045(g), this information is 
required to enable the IRS to verify that a taxpayer is reporting the 
correct amount of gain or loss upon the sale of a tax-exempt 
obligation. The burden for the collection of information contained in 
Sec.  1.6049-10T and the corresponding proposed regulations in this 
document will be reflected in the burden on Form 1099-OID (OMB control 
number 1545-0117) when revised to request the additional information in 
the regulations.
    Upon the transfer of a covered security, section 6045A and Sec.  
1.6045A-1 require the transferring broker to provide to the transferee 
broker a transfer statement containing certain information relating to 
the security. This transfer statement generally provides the transferee 
broker the information needed to determine a customer's adjusted basis 
and whether any gain or loss with respect to the security is long-term, 
short-term, or ordinary as required by section 6045(g). Prior to the 
publication of Sec.  1.6045A-1T in this issue of the Federal Register, 
a broker did not have to provide a transfer statement for a section 
1256 option. In addition, a broker did not have to provide the last 
date on or before the transfer date that the broker made an adjustment 
for a particular item relating to a debt instrument. Section 1.6045A-
1T, however, now requires a broker to transfer this information for a 
section 1256 option transferred on or after January 1, 2016, and for a 
debt instrument transferred on or after June 30, 2015.
    The collection of information contained in section 1.6045A-1 
relating to the furnishing of information in connection with the 
transfer of securities has been reviewed and approved by the Office of 
Management and Budget in accordance with the Paperwork Reduction Act of 
1995 (44 U.S.C. 3507(d)) under control number 1545-2186. The collection 
of information in Sec.  1.6045A-1T and the corresponding proposed 
regulations in this document is necessary to allow brokers that effect 
sales of transferred section 1256 options and debt instruments that are 
covered securities to determine and report the adjusted basis of these 
securities in compliance with section 6045(g). This collection of 
information is required to comply with the provisions of section 403 of 
the Energy Improvement and Extension Act of 2008, Division B of Public 
Law 110-343 (122 Stat. 3765, 3854 (2008)) (the Act). The collection of 
information contained in Sec.  1.6045A-1T is an increase in the total 
annual burden under control number 1545-2186. The likely respondents 
are brokers transferring section 1256 options and debt instruments that 
are covered securities.
    Estimated total annual reporting burden is 3,333 hours.
    Estimated average annual burden per respondent is 2 hours.
    Estimated average burden per response is 4 minutes.
    Estimated number of respondents is 7,500.
    Estimated total frequency of responses is 200,000.
    The collection of information is required to comply with the 
provisions of section 403 of the Act.
    The holder of a debt instrument is permitted to make a number of 
elections that affect how basis is computed. To minimize the need for 
reconciliation between information reported by a broker to both a 
customer and the IRS and the amounts reported on the customer's tax 
return, a broker is required to take into account certain specified 
elections in reporting information to the customer. A customer, 
therefore, must provide certain information concerning an election to 
the broker in a written notification. A written notification includes a 
writing in electronic format. See Sec.  1.6045-1(n)(5).
    The collection of information contained in Sec.  1.6045-1(n)(5) 
relating to the furnishing of information by a customer to a broker in 
connection with the sale or transfer of a debt instrument that is a 
covered security has been reviewed and approved by the Office of 
Management and Budget in accordance with the Paperwork Reduction Act of 
1995 (44 U.S.C. 3507(d)) under control number 1545-2186. Under Sec.  
1.6045-1T(n)(11)(i)(A), which is published elsewhere in this issue of 
the Federal Register, unlike the rule in current Sec.  1.6045-1(n)(5) 
adopted in 2013, a broker must not take into account the election under 
Sec.  1.1272-3 in reporting a customer's adjusted basis in a debt 
instrument. Therefore, a customer is no longer required to notify the 
broker that the customer has made or revoked an election under Sec.  
1.1272-3. This change represents a decrease in the total annual burden 
under OMB control number 1545-2186. In addition, under Sec.  1.6045-
1T(n)(11)(i)(B), a broker must take into account the election under 
section 1276(b)(2) unless the customer timely notifies the broker that 
the customer has not make the election. The temporary regulations 
reverse the assumption in current Sec.  1.6045-1(n)(5) adopted in 2013. 
Because the section 1276(b)(2) election results in a more taxpayer-
favorable result than the default ratable method for accruing market 
discount in most cases, it is anticipated that more customers will want 
to use this method and these customers will no longer need to notify 
their brokers that they have made the election. As a result, this 
change represents a decrease in the total annual burden under OMB 
control number 1545-2186.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by section 6103.

Background and Explanation of Provisions

    Section 6045 generally requires a broker to report gross proceeds 
upon the sale of a security. Section 6045 was amended by section 403 of 
the Act to require the reporting of adjusted basis for a covered 
security and whether any gain or loss upon the sale of the security is 
long-term or short-term. In addition, the Act added section 6045A, 
which requires certain information to be reported in connection with a 
transfer of a covered security to another broker. Section 6049 requires 
the reporting of interest payments (including accruals of OID treated 
as payments).
    On April 18, 2013, the Treasury Department and the IRS published in 
the Federal Register (TD 9616 at 78 FR 23116) final regulations under 
sections 6045 and 6045A (the 2013 final basis reporting regulations). 
After the publication of the 2013 final basis reporting regulations in 
the Federal Register, the Treasury Department and the IRS received 
written comments on certain provisions of the 2013 final basis 
reporting regulations. In response to these written comments, temporary

[[Page 13294]]

regulations in the Rules and Regulations section of this issue of the 
Federal Register amend the Income Tax Regulations (26 CFR part 1) 
relating to sections 6045, 6045A, and 6049. The temporary regulations 
(1) amend Sec.  1.6045-1(n) of the 2013 final basis reporting 
regulations to change a broker's treatment of the election to treat all 
interest as OID under Sec.  1.1272-3 and the election to accrue market 
discount based on a constant yield under section 1276(b)(2), (2) amend 
Sec.  1.6045A-1 of the 2013 final basis reporting regulations to 
require transfer statement reporting under section 6045A for section 
1256 options, (3) amend Sec.  1.6045A-1 of the 2013 final basis 
reporting regulations to require an additional item of information to 
be provided on transfer statements for debt instruments, and (4) 
require information reporting under section 6049 for OID and 
acquisition premium on tax-exempt obligations. The text of the 
temporary regulations also serves as the text of these proposed 
regulations.

Consideration of Administrative Burdens Related to Basis Reporting

    A number of commenters have indicated that compliance with basis 
reporting requirements and the use of basis and other information 
reported by brokers will require considerable resources and effort on 
the part of return preparers and information recipients. The Treasury 
Department and the IRS are continuing to review all aspects of the 
information reporting process and are exploring ways to reduce the 
compliance burden for both brokers and for information recipients.

Special Analyses

    It has been determined that this notice of proposed rulemaking 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 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.
    It is hereby certified that the collection of information in these 
regulations will not have a significant economic impact on a 
substantial number of small entities. Therefore, a Regulatory 
Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. 
chapter 6) is not required. Any effect on small entities by the rules 
in the regulations generally flows directly from section 403 of the 
Act. In addition, it is anticipated that the requirements in the 
regulations in this document will fall only on financial services firms 
with annual receipts greater than the $38.5 million threshold and, 
therefore, on no small entities.
    Section 403(a) of the Act requires a broker to report the adjusted 
basis of a debt instrument that is a covered security. Although a 
holder of a debt instrument (customer) is permitted to make a number of 
elections that affect how basis is computed, a broker only is required 
to take into account specified elections in reporting a debt 
instrument's adjusted basis, including the election under section 
1276(b)(2) to determine accruals of market discount on a constant yield 
method. Under the 2013 final basis reporting regulations, a customer 
had to notify the broker that the customer had made the section 
1276(b)(2) election. However, Sec.  1.6045-1T(n)(11)(i)(B) requires a 
broker to take into account the election under section 1276(b)(2) in 
reporting a debt instrument's adjusted basis unless the customer timely 
notifies the broker that the customer has not made the election. The 
notification must be in writing, which includes a writing in electronic 
format. In most cases, this election results in a more taxpayer-
favorable result than the default ratable method. It is anticipated 
that this collection of information in the regulations will not fall on 
a substantial number of small entities, especially because fewer 
customers will need to notify brokers about the election. Further, the 
regulations generally implement the statutory requirements for 
reporting adjusted basis under section 403 of the Act. Moreover, any 
economic impact is expected to be minimal because it should take a 
customer no more than seven minutes to satisfy the information-sharing 
requirement in these regulations.
    Section 403(c) of the Act added section 6045A, which requires 
applicable persons to provide a transfer statement in connection with 
the transfer of custody of a covered security. Section 1.6045A-1T and 
the corresponding proposed regulations in this document effectuate the 
Act by giving the broker who receives the transfer statement the 
information necessary to determine and report adjusted basis and 
whether any gain or loss with respect to a debt instrument or section 
1256 option is long-term or short-term as required by section 6045 when 
the security is subsequently sold. Consequently, Sec.  1.6045A-1T and 
the corresponding proposed regulations in this document do not add to 
the impact on small entities imposed by the statutory provisions. 
Instead, the regulations limit the information to be reported to only 
those items necessary to effectuate the statutory scheme.
    The information required under Sec.  1.6049-10T and the 
corresponding proposed regulations in this document will enable the IRS 
to verify that a taxpayer is reporting the correct amount of tax-exempt 
interest each year for alternative minimum tax and other purposes. In 
addition, because this information is used to report a taxpayer's 
adjusted basis in a debt instrument under section 6045(g), this 
information is required to enable the IRS to verify that a taxpayer is 
reporting the correct amount of gain or loss upon the sale of a tax-
exempt obligation. Any economic impact on small entities is expected to 
be minimal because a broker already is required to determine the 
accruals of OID and acquisition premium for purposes of determining and 
reporting a customer's adjusted basis on Form 1099-B under section 
6045. Moreover, any effect on small entities by the rules in the final 
regulations flows from section 6049 and section 403 of the Act.
    Pursuant to section 7805(f) of the Internal Revenue Code, this 
notice of proposed rulemaking has been submitted to the Chief Counsel 
for Advocacy of the Small Business Administration for comment on its 
impact on small businesses.

Comments and Request for Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written (a signed original and eight 
(8) copies) or electronic comments that are submitted timely to the IRS 
as prescribed in the preamble under the Addresses heading. The Treasury 
Department and the IRS welcome comments on the clarity of the proposed 
rules and how they can be made easier to understand. All comments will 
be available at www.regulations.gov for public inspection and copying. 
A public hearing may be scheduled if requested in writing by any person 
that timely submits written comments. If a public hearing is scheduled, 
notice of the date, time, and place for a public hearing will be 
published in the Federal Register.

Drafting Information

    The principal author of these regulations is Pamela Lew, Office of 
Associate Chief Counsel (Financial Institutions and Products). However, 
other personnel from the IRS and the Treasury Department participated 
in their development.

[[Page 13295]]

List of Subjects in 26 CFR Part 1

    Income Taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by adding 
entries in numerical order to read in part as follows:

    Authority:  26 U.S.C. 7805 * * *
    Section 1.6045-1(n)(11) also issued under 26 U.S.C. 6045(g). * * 
*
    Section 1.6045A-1(e) and (f) also issued under 26 U.S.C. 
6045A(a). * * *
    Section 1.6049-10 also issued under 26 U.S.C. 6049(a). * * *

0
Par. 2. Section 1.6045-1(n)(11) is added to read as follows:


Sec.  1.6045-1  Returns of information of brokers and barter exchanges.

    [The text of proposed Sec.  1.6045-1(n)(11) is the same as the text 
of Sec.  1.6045-1T(n)(11) published elsewhere in this issue of the 
Federal Register].
0
Par. 3. Sections 1.6045A-1(e) and (f) are added to read as follows:


Sec.  1.6045A-1  Statements of information required in connection with 
transfers of securities.

    [The text of proposed Sec.  1.6045A-1(e) and (f) is the same as the 
text of Sec.  1.6045A-1T(e) and (f) published elsewhere in this issue 
of the Federal Register].
0
Par. 4. Section 1.6049-10 is added to read as follows:


Sec.  1.6049-10  Reporting of original issue discount on a tax-exempt 
obligation.

[The text of proposed Sec.  1.6049-10 is the same as the text of 
Sec.  1.6049-10T published elsewhere in this issue of the Federal 
Register].

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2015-05654 Filed 3-12-15; 8:45 am]
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