Streamlining the Section 754 Election Statement, 47931-47932 [2022-16271]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 87, Number 150 (Friday, August 5, 2022)]
[Rules and Regulations]
[Pages 47931-47932]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-16271]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9963]
RIN 1545-BN94


Streamlining the Section 754 Election Statement

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations relating to the 
requirements for making a valid election to adjust the basis of 
partnership property in the case of a distribution of property by the 
partnership or a transfer of an interest in the partnership. These 
regulations affect partnerships and their partners by removing a 
regulatory burden in making an election to adjust the basis of 
partnership property.

DATES: 
    Effective date: These regulations are effective on August 5, 2022.
    Applicability date: For dates of applicability, see Sec.  1.754-
1(d).

FOR FURTHER INFORMATION CONTACT: Charles D. Wien, at (202) 317-5279 
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains amendments to the Income Tax Regulations (26 
CFR part 1) under section 754 of the Internal Revenue Code (Code). 
Section 754 provides that if a partnership files an election (section 
754 election), in accordance with regulations prescribed by the 
Secretary of the Treasury or her delegate (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. The section 754 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 the election 
was filed and all subsequent taxable years. The section 754 election 
may be revoked by the partnership, subject to such limitations as may 
be provided by regulations prescribed by the Secretary.
    Section 1.754-1(b) prescribes the requirements for making the 
section 754 election. Generally, a partnership makes the section 754 
election in a written statement (section 754 election

[[Page 47932]]

statement) filed with the partnership return (whether filed 
electronically or on paper) 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. Under 
Sec.  1.754-1(b) of the existing regulations, one of the partners must 
sign the section 754 election statement.
    On October 12, 2017, the Department of the Treasury (Treasury 
Department) and the IRS published a notice of proposed rulemaking (REG-
116256-17) in the Federal Register (82 FR 47408) to remove the 
signature requirement from Sec.  1.754-1(b). The IRS did not receive 
any substantive written public comments in response to the notice of 
proposed rulemaking. No public hearing was requested or held. 
Therefore, the proposed regulations are adopted by this Treasury 
decision without change.

Special Analyses

I. Regulatory Planning and Review

    These regulations are not subject to review under section 6(b) of 
Executive Order 12866 pursuant to the Memorandum of Agreement (April 
11, 2018) between the Treasury Department and the Office of Management 
and Budget regarding review of tax regulations.

II. Regulatory Flexibility Act

    It is hereby certified that these regulations will 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 these regulations reduce the 
information currently required to be collected in making an election to 
adjust the basis of partnership property and thereby will reduce burden 
on small entities. Accordingly, a regulatory flexibility analysis is 
not required. Pursuant to section 7805(f) of the Code, the notice of 
proposed rulemaking preceding these regulations was submitted to the 
Chief Counsel for the Office of Advocacy of the Small Business 
Administration for comment on its impact on small business, and no 
comments were received from the Chief Counsel for the Office of 
Advocacy of the Small Business Administration.

III. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that agencies assess anticipated costs and benefits and take 
certain other actions before issuing a final rule that includes any 
Federal mandate that may result in expenditures in any one year by a 
state, local, or tribal government, in the aggregate, or by the private 
sector, of $100 million in 1995 dollars, updated annually for 
inflation. This rule does not include any Federal mandate that may 
result in expenditures by state, local, or tribal governments, or by 
the private sector in excess of that threshold.

IV. Executive Order 13132 Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial, direct compliance costs on state and local 
governments, and is not required by statute, or preempts state law, 
unless the agency meets the consultation and funding requirements of 
section 6 of the Executive Order. These proposed regulations do not 
have federalism implications and do not impose substantial direct 
compliance costs on state and local governments or preempt state law 
within the meaning of the Executive Order.

V. Paperwork Reduction Act

    Under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.), 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. The 
information collection described in this final rule has been assigned 
control number 1545-0123.

Drafting Information

    The principal author of these regulations is Charles D. Wien 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.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

0
Par. 1. The authority citation for part 1 is amended by adding an entry 
for Sec.  1.754-1 in numerical order to read as follows:
* * * * *
    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 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 August 5, 
2022.Taxpayers may, however, apply the fourth sentence of paragraph 
(b)(1) of this section to taxable years ending before August 5, 2022.

    Approved: June 7, 2022.
Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement.
Lily Batchelder,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2022-16271 Filed 8-4-22; 8:45 am]
BILLING CODE 4830-01-P