Utility Allowance Submetering, 7283-7285 [2019-03827]
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Federal Register / Vol. 84, No. 42 / Monday, March 4, 2019 / Rules and Regulations
in accordance with paragraph (c) of this
section, unless that person:
(i) Is already authorized to hold
interlocking positions of the type
governed by this section;
(ii) Is exempt from filing an
informational report pursuant to § 45.4;
or
(iii) Will hold a temporary
interlocking position pursuant to
§ 45.1(c).
(2) The Commission will consider
failures to timely file the informational
report on a case-by-case basis.
*
*
*
*
*
PART 46—PUBLIC UTILITY FILING
REQUIREMENTS AND FILING
REQUIREMENTS FOR PERSONS
HOLDING INTERLOCKING POSITIONS
9. The authority citation for part 46
continues to read as follows:
■
10. Amend § 46.2 by revising
paragraph (a), removing and reserving
paragraph (b), and revising paragraphs
(c) and (e) to read as follows:
■
Definitions.
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*
(a) Public utility has the same
meaning as in section 201(e) of the
Federal Power Act. Such term does not
include any rural electric cooperative
which is regulated by the Rural Utilities
Service of the Department of Agriculture
or any other entities covered in section
201(f) of the Federal Power Act.
*
*
*
*
*
(c) Purchaser means any individual or
corporation within the meaning of
section 3 of the Federal Power Act who
purchases electric energy from a public
utility. Such term does not include the
United States or any agency or
instrumentality of the United States or
any rural electric cooperative which is
regulated by the Rural Utilities Service
of the Department of Agriculture.
*
*
*
*
*
(e) Entity means any firm, company,
or organization including any
corporation, joint-stock company,
partnership, association, business trust,
organized group of persons, whether
incorporated or not, or a receiver or
receivers, trustee or trustees of any of
the foregoing. Such term does not
include municipality as defined in
section 3 of the Federal Power Act and
does not include any Federal, State, or
local government agencies or any rural
electric cooperative which is regulated
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[FR Doc. 2019–03419 Filed 3–1–19; 8:45 am]
BILLING CODE 6717–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9850]
RIN 1545–BM28
Utility Allowance Submetering
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations and removal of
temporary regulations.
AGENCY:
This document contains final
regulations that amend the utility
allowance regulations concerning the
low-income housing credit under
section 42 of the Internal Revenue Code
(Code). These final regulations extend
the principles of the current
submetering rules. The current rules
address situations in which a building
owner purchases a utility from a utility
company and then separately charges
the tenants for the utility. In those
situations, if the utility costs paid by a
tenant are based on actual consumption
in the tenant’s submetered, rentrestricted unit and if certain other
requirements are satisfied, then the
charges for the utility are treated as paid
by the tenant directly to the utility
company, even though the payment
passes through the building owner. The
final regulations extend these principles
and apply to situations in which a
building owner sells to tenants energy
that is produced from a renewable
source and that the owner did not
purchase from or through a local utility
company. The final regulations affect
owners of low-income housing projects
that claim the credit, the tenants in
those low-income housing projects, and
the State and local housing credit
agencies that administer the credit.
DATES:
Effective date: These final regulations
are effective on March 4, 2019.
Applicability date: For dates of
applicability, see § 1.42–12(a)(5).
FOR FURTHER INFORMATION CONTACT:
Dillon Taylor, (202) 317–4137 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
SUMMARY:
Authority: 16 U.S.C. 792–828c; 16 U.S.C.
2601–2645; 42 U.S.C. 7101–7352; E.O. 12009,
3 CFR 142.
§ 46.2
by the Rural Utilities Service of the
Department of Agriculture.
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*
Background
On March 3, 2016, the Department of
the Treasury (Treasury Department) and
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7283
the IRS published in the Federal
Register (81 FR 11104) final and
temporary regulations (TD 9755) that
amended § 1.42–10 of the Income Tax
Regulations. The final regulations in TD
9755 clarified the circumstances in
which utility costs paid by a tenant
based on actual consumption in a
submetered, rent-restricted unit are
treated as paid by the tenant directly to
the utility company and not to the
building owner. In such a case, for
purposes of section 42, the tenant’s
payments to the owner for the utilities
are not treated as payments of gross
rent, and the rent that the owner might
otherwise have collected for the unit is
reduced by an amount that is called a
‘‘utility allowance.’’ The temporary
regulations extended the principles of
those final regulations to situations in
which a building owner sold to tenants
energy that was produced from a
renewable source and that the owner
had not purchased from or through a
local utility company.
In the same issue of the Federal
Register (81 FR 11160), the Treasury
Department and the IRS published a
notice of proposed rulemaking (REG–
123867–14) (the proposed regulations).
The text of the proposed regulations
incorporated by cross-reference the text
of the temporary regulations. The
Treasury Department and the IRS
received written and electronic
comments responding to the proposed
regulations. No requests for a public
hearing were made, and no public
hearing was held.
After consideration of all the
comments, the proposed regulations are
adopted as amended by this Treasury
Decision.
Summary of Comments and
Explanation of Provisions
The temporary regulations in TD 9755
applied the submetering principles to
energy that the building owner sold to
tenants if the energy was ‘‘produced
from a renewable source’’ and if the
owner had acquired it from the
renewable source without the
intervention of a local utility company.
Qualification for this submetering
treatment, however, depended on the
charges to the tenants for this energy
being comparable to local utility rates.
That is, under the temporary
regulations, to the extent that tenants
consumed this energy, the rate charged
by the building owner could not exceed
the rate at which the local utility
company would have charged the
tenants if they had instead acquired the
energy from that company.
A commenter requested that the final
regulations clarify how a building
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7284
Federal Register / Vol. 84, No. 42 / Monday, March 4, 2019 / Rules and Regulations
owner may demonstrate that the rate
that the owner charges tenants for
renewable energy satisfies this
requirement (the evidentiary issue). In
addition, if there are multiple local
utility rates that the tenants might have
been charged (possibly from multiple
utility companies), the commenter
asked for clarification as to which rate
or rates should be taken into account in
determining whether the owner’s
charges to the tenants qualify (the
reference-rate issue).
The final regulations resolve both of
these issues. Addressing the referencerate issue, the final regulations require
that the rate that the owner charges
must not exceed the highest rate at
which the tenants might have obtained
energy from a local utility company.
This criterion has several advantages
over alternatives. For example, it is
easily administrable (as compared, for
example, with a requirement that the
owner’s rate not exceed the ‘‘most
typical rate’’ in the community). Also,
the criterion protects an owner’s
qualifying rate from being disqualified
by the introduction of new rates in the
community (as might be the case, for
example, if the reference for the
criterion were the average or median of
local rates).
Regarding the evidentiary issue, in
determining the acceptability of the rate
that a building owner charges tenants,
the owner may rely on the rates
published by local utility companies.
The temporary regulations in TD 9755
provide that, for purposes of qualifying
for submetering treatment, energy is
‘‘produced from a renewable source’’ if
it is energy that is produced from energy
property described in section 48; energy
that is produced from a facility
described in section 45(d)(1), (2), (3),
(4), (6), (9), or (11); or energy that is
described in guidance published for this
purpose in the Internal Revenue
Bulletin. Sections 45 and 48 of the Code
determine whether a taxpayer is entitled
to certain energy-related credits. A
commenter requested that the final
regulations clarify the extent to which
these cross-references to ‘‘energy
property’’ and ‘‘facility’’ incorporate the
various requirements for earning those
credits.
The final regulations clarify that the
building owner need not own the source
from which the utility is produced and
need not qualify for, or receive, any
credit under section 45 or 48 associated
with the source. Indeed, energy may
qualify as ‘‘produced from a renewable
resource’’ even if potential entitlement
to credits under these Code sections has
expired. Thus, the final regulations
clarify that they refer to ‘‘energy
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property’’ and ‘‘facility’’ as a means of
describing certain types of production of
renewable energy but that they do not
also incorporate any other criteria from
those Code sections.
Under section 42(g)(1) and (2), a
residential unit may qualify as a lowincome unit only if it is ‘‘rentrestricted.’’ The amount that qualifies as
restricted rent is determined based on
the assumption that most utilities are
generally covered by that rent. See H.R.
Conf. Rep. 99–841, at II–94 (1986). For
that reason, if the tenant pays for a
utility directly, the rent that the owner
may require from the tenant is reduced.
The amount of this reduction is called
a ‘‘utility allowance.’’ See section
42(g)(2)(B)(ii) and § 1.42–10(a).
Language in the preamble of TD 9755
states that utility costs paid by a tenant
based on actual consumption in a
submetered, rent-restricted unit are
treated as paid by the tenant directly to
the utility and thus do not count against
the maximum rent that the building
owner can charge. Referencing this
language, one commenter requested that
the final regulations clarify whether a
building owner of a submetered
building is required to reduce its
maximum gross rents by the amount of
a utility allowance. Because § 1.42–10(e)
treats a tenant in a submetered, rentrestricted unit as having paid for a
utility directly and not by or through the
owner of the building, the proper
treatment of the tenant’s submetered
utility payments is the same as if the
tenant had made those payments
directly to the utility company—(1)
Although the payments pass through the
building owner, they are not treated for
purposes of the rent restriction as if they
were payments of rent; and (2) The
amount of rent that the owner might
otherwise have demanded from the
tenant is reduced by the amount of an
applicable utility allowance.
Special Analyses
This regulation is not subject to
review under section 6(b) of Executive
Order 12866 pursuant to the
Memorandum of Agreement (April 11,
2018) between the Department of the
Treasury and the Office of Management
and Budget regarding review of tax
regulations. Therefore, a regulatory
impact assessment is not required. It has
also been determined that the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply because the
regulations do not impose a collection
of information on small entities.
Pursuant to section 7805(f) of the
Internal Revenue Code, this proposed
rule preceding these final regulations
was submitted to the Chief Counsel for
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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 this regulation
is James W. Rider, formerly of the Office
of the Associate Chief Counsel
(Passthroughs and Special Industries).
However, other personnel from the
Treasury Department and the IRS
participated in its 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 is amended by removing the
entry for § 1.42–10T to read in part as
follows:
■
Authority: 26 U.S.C. 7805 * * *
Sections 1.42–6, 1.42–8, 1.42–9, 1.42–10,
1.42–11, and 1.42–12, also issued under 26
U.S.C. 42(n).
§ 1.42–0T
[Amended]
Par. 2. Section 1.42–0T is amended by
removing the entries for § 1.42–10T.
■ Par. 3. Section 1.42–10 is amended
by:
■ 1. Revising paragraph (e)(1)(i)
introductory text.
■ 2. Revising paragraph (e)(1)(i)(B).
■ 3. Adding paragraphs (e)(1)(i)(C) and
(D).
■ 4. Revising paragraph (e)(1)(iv)(B).
The revisions and additions read as
follows:
■
§ 1.42–10
Utility allowances.
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(e) * * *
(1) * * *
(i) The utility consumed in the unit is
described in paragraph (e)(1)(i)(A) or
(e)(1)(i)(B) of this section;
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(B) The utility is not purchased from
or through a local utility company and
is produced from a renewable source
(within the meaning of paragraph
(e)(1)(i)(C) of this section).
(C) For purposes of paragraph
(e)(1)(i)(B) of this section, a utility is
produced from a renewable source if—
(1) It is energy that is produced from
energy property described in section 48;
(2) It is energy that is produced from
a facility described in section 45(d)(1),
(2), (3), (4), (6), (9), or (11); or
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Federal Register / Vol. 84, No. 42 / Monday, March 4, 2019 / Rules and Regulations
(3) It is a utility that is described in
guidance published for this purpose in
the Internal Revenue Bulletin (see
§ 601.601(d)(2)(ii) of this chapter).
(D) Determinations under paragraphs
(e)(1)(i)(C)(1) and (2) of this section take
into account only the manner in which
the energy is produced and not who
owns the energy property or the facility
or whether the applicability of relevant
portions of sections 45 and 48 has
expired.
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(iv) * * *
(B) To the extent that the utility
consumed is described in paragraph
(e)(1)(i)(B) of this section, the utility rate
charged to the tenants of the unit does
not exceed the highest rate that the
tenants would have paid if they had
obtained the utility from a local utility
company. In determining whether a rate
satisfies the preceding sentence, a
building owner may rely on the rates
published by local utility companies.
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*
§ 1.42–10T
[Removed]
Par. 5. Section 1.42–10T is removed.
■ Par. 6. Section 1.42–12 is amended
by:
■ 1. Revising paragraph (a)(5)(i)(E).
■ 2. Revising paragraph (a)(5)(ii).
■ 3. Adding paragraph (a)(5)(iii).
The revisions and addition read as
follows:
■
§ 1.42–12
rules.
Effective dates and transitional
(a) * * *
(5) * * *
(i) * * *
(E) Section 1.42–10(e), except as
provided in paragraph (a)(5)(iii) of this
section.
(ii) Except as provided in paragraph
(a)(5)(iii) of this section, a building
owner may apply the provisions
described in paragraphs (a)(5)(i)(A)
through (E) of this section to the
building owner’s taxable years
beginning before March 3, 2016.
Otherwise, the utility allowance
provisions that apply to those taxable
years are contained in § 1.42–10, as
contained in 26 CFR part 1, revised as
of April 1, 2015.
(iii) The provisions in § 1.42–
10(e)(1)(i) introductory text, (e)(1)(i)(B)
through (D), and (e)(1)(iv)(B) apply to a
building owner’s taxable years
beginning on or after March 4, 2019. A
building owner, however, may apply
these provisions to earlier taxable years.
Otherwise, the submetering provisions
that apply to taxable years beginning
after March 3, 2016, and before March
4, 2019, are contained in § 1.42–10 and
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Jkt 247001
§ 1.42–10T as contained in 26 CFR part
1 revised as of April 1, 2016. In
addition, a building owner may apply
those submetering provisions to taxable
years beginning before March 3, 2016.
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*
Kirsten Wielobob,
Deputy Commissioner for Services and
Enforcement.
Approved: February 26, 2019.
David J. Kautter,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2019–03827 Filed 2–27–19; 4:15 pm]
BILLING CODE 4830–01–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Parts 100 and 165
[Docket No. USCG–2018–0231]
RIN 1625–AA00, 1625–AA08, 1625–AA11,
1625–AA87
Removal of Regulated Navigation
Areas, Safety Zones, Security Zones,
and Special Local Regulations Within
District 7
Coast Guard, DHS.
Final rule.
AGENCY:
ACTION:
The Coast Guard is updating
District 7 regulations to reflect the
current status of identified regulated
navigation areas, special local
regulations, safety zones, and security
zones within the District. This rule
removes safety zones and special local
regulations for rules where the
enforcement period has expired or
where the event is no longer held. This
rule also removes special local
regulations where the event no longer
meets the criteria for a permitted event
and is not suitable for coverage under a
special local regulation in accordance
with Coast Guard regulations.
DATES: This rule is effective April 3,
2019.
ADDRESSES: To view documents
mentioned in this preamble as being
available in the docket, go to https://
www.regulations.gov, type USCG–2018–
0231 in the ‘‘SEARCH’’ box and click
‘‘SEARCH.’’ Click on Open Docket
Folder on the line associated with this
rule.
FOR FURTHER INFORMATION CONTACT: For
information about this document, call or
email Paul Lehmann, District Seven
Prevention Division, U.S. Coast Guard;
telephone 301–415–6796, email
Paul.D.Lehmann@uscg.mil.
SUMMARY:
PO 00000
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7285
SUPPLEMENTARY INFORMATION:
I. Table of Abbreviations
CATEX Criteria for Categorical Exclusion
CFR Code of Federal Regulations
COTP Captain of the Port
DHS Department of Homeland Security
FR Federal Register
OMB Office of Management and Budget
§ Section
U.S.C. United States Code
II. Background, Purpose, and Legal
Basis
This rulemaking project was
identified as part of the Coast Guard’s
Regulatory Reform Task Force initiative.
These District 7 field regulation changes
were identified as part of the
deregulation identification process
required by Executive Order 13771
(Reducing Regulation and Controlling
Regulatory Costs), Executive Order
13777 (Enforcing the Regulatory Reform
Agenda Deregulatory Process), and
associated guidance issued in 2017.
This rule provides updates and
clarifications to existing regulatory text
in title 33 of the Code of Federal
Regulations (CFR) parts 100 and 165.
This rule removes safety zones and
special local regulations for regulations
where the enforcement period has
expired or where the event is no longer
held. This rule also removes special
local regulations where the event no
longer meets the criteria for a permitted
event and is not suitable for coverage
under a special local regulation in
accordance with 33 CFR 100.35. District
7 has determined that normal navigation
rules cover the safety of participants and
spectators at these events adequately. If
a change in circumstance indicates that
additional safety measures are
necessary, the Coast Guard might
choose to promulgate new regulations
for safety zones at these events at that
time.
The changes to 33 CFR part 100 are
specifically authorized under 33 U.S.C.
1233, which vests the Commandant of
the Coast Guard with authority to issue
regulations to promote the safety of life
on navigable waters during regattas or
marine parades. The changes to 33 CFR
part 165 are authorized under the
general authority of 22 U.S.C. 1231,
which grants the Secretary of the
Department of Homeland Security broad
authority to issue, amend, or repeal
regulations necessary to implement 33
U.S.C. chapter 25, Ports and Waterways
Safety Program. The Secretary has
delegated rulemaking authority under
33 U.S.C. 1231 to the Commandant via
Department of Homeland Security
Delegation No. 0170.1.
The Coast Guard is issuing this rule
without prior notice and opportunity to
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]]>Agencies
[Federal Register Volume 84, Number 42 (Monday, March 4, 2019)]
[Rules and Regulations]
[Pages 7283-7285]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-03827]
=======================================================================
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9850]
RIN 1545-BM28
Utility Allowance Submetering
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations and removal of temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations that amend the
utility allowance regulations concerning the low-income housing credit
under section 42 of the Internal Revenue Code (Code). These final
regulations extend the principles of the current submetering rules. The
current rules address situations in which a building owner purchases a
utility from a utility company and then separately charges the tenants
for the utility. In those situations, if the utility costs paid by a
tenant are based on actual consumption in the tenant's submetered,
rent-restricted unit and if certain other requirements are satisfied,
then the charges for the utility are treated as paid by the tenant
directly to the utility company, even though the payment passes through
the building owner. The final regulations extend these principles and
apply to situations in which a building owner sells to tenants energy
that is produced from a renewable source and that the owner did not
purchase from or through a local utility company. The final regulations
affect owners of low-income housing projects that claim the credit, the
tenants in those low-income housing projects, and the State and local
housing credit agencies that administer the credit.
DATES:
Effective date: These final regulations are effective on March 4,
2019.
Applicability date: For dates of applicability, see Sec. 1.42-
12(a)(5).
FOR FURTHER INFORMATION CONTACT: Dillon Taylor, (202) 317-4137 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On March 3, 2016, the Department of the Treasury (Treasury
Department) and the IRS published in the Federal Register (81 FR 11104)
final and temporary regulations (TD 9755) that amended Sec. 1.42-10 of
the Income Tax Regulations. The final regulations in TD 9755 clarified
the circumstances in which utility costs paid by a tenant based on
actual consumption in a submetered, rent-restricted unit are treated as
paid by the tenant directly to the utility company and not to the
building owner. In such a case, for purposes of section 42, the
tenant's payments to the owner for the utilities are not treated as
payments of gross rent, and the rent that the owner might otherwise
have collected for the unit is reduced by an amount that is called a
``utility allowance.'' The temporary regulations extended the
principles of those final regulations to situations in which a building
owner sold to tenants energy that was produced from a renewable source
and that the owner had not purchased from or through a local utility
company.
In the same issue of the Federal Register (81 FR 11160), the
Treasury Department and the IRS published a notice of proposed
rulemaking (REG-123867-14) (the proposed regulations). The text of the
proposed regulations incorporated by cross-reference the text of the
temporary regulations. The Treasury Department and the IRS received
written and electronic comments responding to the proposed regulations.
No requests for a public hearing were made, and no public hearing was
held.
After consideration of all the comments, the proposed regulations
are adopted as amended by this Treasury Decision.
Summary of Comments and Explanation of Provisions
The temporary regulations in TD 9755 applied the submetering
principles to energy that the building owner sold to tenants if the
energy was ``produced from a renewable source'' and if the owner had
acquired it from the renewable source without the intervention of a
local utility company. Qualification for this submetering treatment,
however, depended on the charges to the tenants for this energy being
comparable to local utility rates. That is, under the temporary
regulations, to the extent that tenants consumed this energy, the rate
charged by the building owner could not exceed the rate at which the
local utility company would have charged the tenants if they had
instead acquired the energy from that company.
A commenter requested that the final regulations clarify how a
building
[[Page 7284]]
owner may demonstrate that the rate that the owner charges tenants for
renewable energy satisfies this requirement (the evidentiary issue). In
addition, if there are multiple local utility rates that the tenants
might have been charged (possibly from multiple utility companies), the
commenter asked for clarification as to which rate or rates should be
taken into account in determining whether the owner's charges to the
tenants qualify (the reference-rate issue).
The final regulations resolve both of these issues. Addressing the
reference-rate issue, the final regulations require that the rate that
the owner charges must not exceed the highest rate at which the tenants
might have obtained energy from a local utility company. This criterion
has several advantages over alternatives. For example, it is easily
administrable (as compared, for example, with a requirement that the
owner's rate not exceed the ``most typical rate'' in the community).
Also, the criterion protects an owner's qualifying rate from being
disqualified by the introduction of new rates in the community (as
might be the case, for example, if the reference for the criterion were
the average or median of local rates).
Regarding the evidentiary issue, in determining the acceptability
of the rate that a building owner charges tenants, the owner may rely
on the rates published by local utility companies.
The temporary regulations in TD 9755 provide that, for purposes of
qualifying for submetering treatment, energy is ``produced from a
renewable source'' if it is energy that is produced from energy
property described in section 48; energy that is produced from a
facility described in section 45(d)(1), (2), (3), (4), (6), (9), or
(11); or energy that is described in guidance published for this
purpose in the Internal Revenue Bulletin. Sections 45 and 48 of the
Code determine whether a taxpayer is entitled to certain energy-related
credits. A commenter requested that the final regulations clarify the
extent to which these cross-references to ``energy property'' and
``facility'' incorporate the various requirements for earning those
credits.
The final regulations clarify that the building owner need not own
the source from which the utility is produced and need not qualify for,
or receive, any credit under section 45 or 48 associated with the
source. Indeed, energy may qualify as ``produced from a renewable
resource'' even if potential entitlement to credits under these Code
sections has expired. Thus, the final regulations clarify that they
refer to ``energy property'' and ``facility'' as a means of describing
certain types of production of renewable energy but that they do not
also incorporate any other criteria from those Code sections.
Under section 42(g)(1) and (2), a residential unit may qualify as a
low-income unit only if it is ``rent-restricted.'' The amount that
qualifies as restricted rent is determined based on the assumption that
most utilities are generally covered by that rent. See H.R. Conf. Rep.
99-841, at II-94 (1986). For that reason, if the tenant pays for a
utility directly, the rent that the owner may require from the tenant
is reduced. The amount of this reduction is called a ``utility
allowance.'' See section 42(g)(2)(B)(ii) and Sec. 1.42-10(a). Language
in the preamble of TD 9755 states that utility costs paid by a tenant
based on actual consumption in a submetered, rent-restricted unit are
treated as paid by the tenant directly to the utility and thus do not
count against the maximum rent that the building owner can charge.
Referencing this language, one commenter requested that the final
regulations clarify whether a building owner of a submetered building
is required to reduce its maximum gross rents by the amount of a
utility allowance. Because Sec. 1.42-10(e) treats a tenant in a
submetered, rent-restricted unit as having paid for a utility directly
and not by or through the owner of the building, the proper treatment
of the tenant's submetered utility payments is the same as if the
tenant had made those payments directly to the utility company--(1)
Although the payments pass through the building owner, they are not
treated for purposes of the rent restriction as if they were payments
of rent; and (2) The amount of rent that the owner might otherwise have
demanded from the tenant is reduced by the amount of an applicable
utility allowance.
Special Analyses
This regulation is not subject to review under section 6(b) of
Executive Order 12866 pursuant to the Memorandum of Agreement (April
11, 2018) between the Department of the Treasury and the Office of
Management and Budget regarding review of tax regulations. Therefore, a
regulatory impact assessment is not required. It has also been
determined that the Regulatory Flexibility Act (5 U.S.C. chapter 6)
does not apply because the regulations do not impose a collection of
information on small entities. Pursuant to section 7805(f) of the
Internal Revenue Code, this proposed rule preceding these final
regulations was 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 this regulation is James W. Rider, formerly
of the Office of the Associate Chief Counsel (Passthroughs and Special
Industries). However, other personnel from the Treasury Department and
the IRS participated in its 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 is amended by removing
the entry for Sec. 1.42-10T to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Sections 1.42-6, 1.42-8, 1.42-9, 1.42-10, 1.42-11, and 1.42-12,
also issued under 26 U.S.C. 42(n).
Sec. 1.42-0T [Amended]
0
Par. 2. Section 1.42-0T is amended by removing the entries for Sec.
1.42-10T.
0
Par. 3. Section 1.42-10 is amended by:
0
1. Revising paragraph (e)(1)(i) introductory text.
0
2. Revising paragraph (e)(1)(i)(B).
0
3. Adding paragraphs (e)(1)(i)(C) and (D).
0
4. Revising paragraph (e)(1)(iv)(B).
The revisions and additions read as follows:
Sec. 1.42-10 Utility allowances.
* * * * *
(e) * * *
(1) * * *
(i) The utility consumed in the unit is described in paragraph
(e)(1)(i)(A) or (e)(1)(i)(B) of this section;
* * * * *
(B) The utility is not purchased from or through a local utility
company and is produced from a renewable source (within the meaning of
paragraph (e)(1)(i)(C) of this section).
(C) For purposes of paragraph (e)(1)(i)(B) of this section, a
utility is produced from a renewable source if--
(1) It is energy that is produced from energy property described in
section 48;
(2) It is energy that is produced from a facility described in
section 45(d)(1), (2), (3), (4), (6), (9), or (11); or
[[Page 7285]]
(3) It is a utility that is described in guidance published for
this purpose in the Internal Revenue Bulletin (see Sec.
601.601(d)(2)(ii) of this chapter).
(D) Determinations under paragraphs (e)(1)(i)(C)(1) and (2) of this
section take into account only the manner in which the energy is
produced and not who owns the energy property or the facility or
whether the applicability of relevant portions of sections 45 and 48
has expired.
* * * * *
(iv) * * *
(B) To the extent that the utility consumed is described in
paragraph (e)(1)(i)(B) of this section, the utility rate charged to the
tenants of the unit does not exceed the highest rate that the tenants
would have paid if they had obtained the utility from a local utility
company. In determining whether a rate satisfies the preceding
sentence, a building owner may rely on the rates published by local
utility companies.
* * * * *
Sec. 1.42-10T [Removed]
0
Par. 5. Section 1.42-10T is removed.
0
Par. 6. Section 1.42-12 is amended by:
0
1. Revising paragraph (a)(5)(i)(E).
0
2. Revising paragraph (a)(5)(ii).
0
3. Adding paragraph (a)(5)(iii).
The revisions and addition read as follows:
Sec. 1.42-12 Effective dates and transitional rules.
(a) * * *
(5) * * *
(i) * * *
(E) Section 1.42-10(e), except as provided in paragraph (a)(5)(iii)
of this section.
(ii) Except as provided in paragraph (a)(5)(iii) of this section, a
building owner may apply the provisions described in paragraphs
(a)(5)(i)(A) through (E) of this section to the building owner's
taxable years beginning before March 3, 2016. Otherwise, the utility
allowance provisions that apply to those taxable years are contained in
Sec. 1.42-10, as contained in 26 CFR part 1, revised as of April 1,
2015.
(iii) The provisions in Sec. 1.42-10(e)(1)(i) introductory text,
(e)(1)(i)(B) through (D), and (e)(1)(iv)(B) apply to a building owner's
taxable years beginning on or after March 4, 2019. A building owner,
however, may apply these provisions to earlier taxable years.
Otherwise, the submetering provisions that apply to taxable years
beginning after March 3, 2016, and before March 4, 2019, are contained
in Sec. 1.42-10 and Sec. 1.42-10T as contained in 26 CFR part 1
revised as of April 1, 2016. In addition, a building owner may apply
those submetering provisions to taxable years beginning before March 3,
2016.
* * * * *
Kirsten Wielobob,
Deputy Commissioner for Services and Enforcement.
Approved: February 26, 2019.
David J. Kautter,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2019-03827 Filed 2-27-19; 4:15 pm]
BILLING CODE 4830-01-P
