Streamlining the Section 754 Election Statement, 47408-47409 [2017-22080]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 82, Number 196 (Thursday, October 12, 2017)]
[Proposed Rules]
[Pages 47408-47409]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-22080]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-116256-17]
RIN 1545-BN94


Streamlining the Section 754 Election Statement

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed amendments to the regulation 
relating to the requirements for making a valid election under section 
754 of the Internal Revenue Code of 1986 (Code), as amended. The 
proposed regulation affects partnerships and their partners by removing 
a regulatory burden in making an election to adjust the basis of 
partnership property.

DATES: Electronic or written comments and requests for a public hearing 
must be received by November 13, 2017.

ADDRESSES: Send submissions to Internal Revenue Service, CC:PA:LPD:PR 
(REG-116256-17), Room 5203, 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-
116256-17), Courier's Desk, 1111 Constitution Avenue NW., Washington, 
DC 20224, or sent electronically, via the Federal eRulemaking Portal at 
www.regulations.gov (indicate IRS and REG-116256-17).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulation, 
Meghan Howard, at (202) 317-5055; concerning submissions of comments 
and requests for a public hearing, Regina Johnson, at (202) 317-6901 
(not toll-free numbers).

SUPPLEMENTARY INFORMATION: 

Background and Explanation of Provision

    This document contains proposed amendments to 26 CFR part 1 under 
section 754 of the Code. Specifically, these proposed amendments would 
remove the signature requirement contained in Sec.  1.754-1(b) (current 
regulation) in order to eliminate a regulatory burden.
    Section 754 provides that if a partnership files an election 
(section 754 election), in accordance with regulations prescribed by 
the Secretary, the basis of partnership property shall be adjusted, in 
the case of a distribution of property, in the manner provided in 
section 734 and, in the case of a transfer of a partnership interest, 
in the manner provided in section 743. Such an election applies with 
respect to all distributions of property by the partnership and to all 
transfers of interests in the partnership during the taxable year with 
respect to which such election was filed and all subsequent taxable 
years. Such election may be revoked by the partnership, subject to such 
limitations as may be provided by regulations prescribed by the 
Secretary.
    The current regulation provides the method to make the section 754 
election and states in relevant part that a section 754 election shall 
be made in a written statement (section 754 election statement) filed 
with the partnership return for the taxable year during which the 
distribution or transfer occurs. For the section 754 election to be 
valid, the return must be filed not later than the time prescribed for 
filing the return for such taxable year, including extensions. The 
current regulation requires that the section 754 election statement (i) 
set forth the name and address of the partnership making the election, 
(ii) be signed by any one of the partners, and (iii) contain a 
declaration that the partnership elects under section 754 to apply the 
provisions of section 734(b) and section 743(b). Accordingly, under the 
current regulation, a partnership that files an unsigned section 754 
election statement with its partnership return (whether filed 
electronically or in paper) has not made a valid section 754 election.
    Currently the only remedy for failing to make a proper section 754 
election is to request ``9100 relief'' to make a late section 754 
election either: (1) Through automatic relief, if the error is 
discovered within 12 months pursuant to Sec.  301.9100-2 of the 
Procedure and Administration Regulations; or (2) through a private 
letter ruling request pursuant to Sec.  301.9100-3. The IRS has 
received numerous requests for 9100

[[Page 47409]]

relief with respect to unsigned section 754 election statements, 
especially where returns have been filed electronically. In order to 
ease the burden on partnerships seeking to make a valid section 754 
election and to eliminate the need to seek 9100 relief, the Treasury 
Department and the IRS are proposing to amend the current regulation to 
remove the signature requirement in Sec.  1.754-1(b)(1). The amended 
regulation will provide that a taxpayer making a section 754 election 
must file a statement with its return that: (i) Sets forth the name and 
address of the partnership making the section 754 election, and (ii) 
contains a declaration that the partnership elects under section 754 to 
apply the provisions of section 734(b) and section 743(b).

Proposed Applicability Date

    The amendments to this regulation are proposed to apply to taxable 
years ending on or after the date of publication of the Treasury 
decision adopting these rules as a final regulation in the Federal 
Register. Taxpayers, however, may rely on this proposed regulation for 
periods preceding the proposed applicability date. Accordingly, 
partnerships that filed a timely partnership return containing an 
otherwise valid section 754 election statement, but for the missing 
signature of a partner on the statement, will not need to seek 9100 
relief in such cases.

Special Analyses

    Certain IRS regulations, including this one, are exempt from the 
requirements of Executive Order 12866, as supplemented and reaffirmed 
by Executive Order 13563. Therefore, a regulatory impact assessment is 
not required. It is hereby certified that this regulation, if adopted, 
would not have a significant economic impact on a substantial number of 
small entities under the Regulatory Flexibility Act (5 U.S.C. chapter 
6). This certification is based on the fact that this regulation 
reduces the information currently required to be collected in making an 
election to adjust the basis of partnership property and thereby 
reduces burden on small entities. Pursuant to section 7805(f) of the 
Code, this regulation has been submitted to the Chief Counsel for 
Advocacy of the Small Business Administration for comment on its impact 
on small businesses.

Comments and Requests for a Public Hearing

    Before this proposed regulation is adopted as a final regulation, 
consideration will be given to any comments that are submitted timely 
to the IRS as prescribed in this preamble under the ADDRESSES heading. 
The Treasury Department and the IRS request comments on all aspects of 
the proposed regulation. All comments will be available at 
www.regulations.gov or upon request. A public hearing will 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 the public hearing will be published in the Federal 
Register.

Drafting Information

    The principal author of this regulation is Meghan M. Howard of the 
Office of the Associate Chief Counsel (Passthroughs and Special 
Industries). However, other personnel from the Treasury Department and 
the IRS participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendment 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 continues to read in 
part as follows:

    Authority:  26 U.S.C. 7805 * * *

    Section 1.754-1 also issued under 26 U.S.C. 754.

0
Par 2. Section 1.754-1 is amended by revising the fourth sentence of 
paragraph (b)(1) and adding new paragraph (d) to read as follows:


Sec.  1.754-1  Time and manner of making election to adjust basis of 
partnership property.

* * * * *
    (b) * * *
    (1) * * * The statement required by this paragraph (b)(1) must set 
forth the name and address of the partnership making the election, and 
contain a declaration that the partnership elects under section 754 to 
apply the provisions of section 734(b) and section 743(b). * * *
* * * * *
    (d) Applicability date. The fourth sentence of paragraph (b)(1) of 
this section applies to taxable years ending on or after the date these 
regulations are published as final regulations in the Federal Register. 
Taxpayers may, however, rely on the fourth sentence of paragraph (b)(1) 
of this section for periods prior to the date these regulations are 
published as final regulations in the Federal Register.

Kirsten Wielobob,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2017-22080 Filed 10-11-17; 8:45 am]
 BILLING CODE 4830-01-P