Revising Qualified Domestic Trust Regulations Under Section 2056A To Update Outdated References and Procedures, 67580-67586 [2024-18437]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 89, Number 162 (Wednesday, August 21, 2024)]
[Proposed Rules]
[Pages 67580-67586]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18437]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 20

[REG-119683-22]
RIN 1545-BQ88


Revising Qualified Domestic Trust Regulations Under Section 2056A 
To Update Outdated References and Procedures

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed amendments to the Federal 
estate tax regulations applicable to estates of decedents passing 
property to or for the benefit of a noncitizen spouse in a domestic 
trust for which the executor of the decedent's estate has made an 
election to be a qualified domestic trust and the trust satisfies all 
of the requirements for such treatment under applicable Federal tax law 
and regulations. The proposed regulations would modify those 
regulations to update outdated references, information, and procedures. 
The proposed regulations primarily would affect the estates of 
decedents passing property to or for the benefit of a noncitizen spouse 
in such a trust pursuant to applicable Federal tax law.

DATES: Written or electronic comments as well as requests for a public 
hearing must be received by October 21, 2024.

ADDRESSES: Commenters are strongly encouraged to submit public comments 
electronically via the Federal eRulemaking Portal at https://www.regulations.gov (indicate IRS and REG-119683-22) by following the 
online instructions for submitting comments. Requests for a public 
hearing must be submitted as prescribed in the ``Comments and Requests 
for a Public Hearing'' section. Once submitted to the Federal 
eRulemaking Portal, comments cannot be edited or withdrawn. The 
Department of the Treasury (Treasury Department) and the IRS will 
publish for public availability any comment submitted to the IRS's 
public docket. Send paper submissions to: CC:PA:01:PR (REG-119683-22), 
Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin 
Station, Washington, DC 20044.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Donna Douglas, (202) 317-6859 (not a toll-free number); concerning the 
submission of comments and/or requests for a public hearing, Vivian 
Hayes by email at [email protected] or by phone at (202) 317-6901 
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains proposed amendments to the Estate Tax 
Regulations (26 CFR part 20) under section 2056A of the Internal 
Revenue Code (Code).

I. Statutory Overview

    Although section 2056(d)(1) of the Code generally disallows a 
marital deduction for the value of property passing to a noncitizen 
spouse of a decedent or donor, section 2056(d)(2)(A) allows a marital 
deduction for such property passing to the decedent's surviving spouse 
in a qualified domestic trust (QDOT), as defined in section 2056A. 
Section 2056A of the Code was added by the Technical and Miscellaneous 
Revenue Act of 1988 (Pub. L. 100-647) and further amended by the 
Revenue Reconciliation Act of 1989 (Pub. L. 101-239), the Revenue 
Reconciliation Act of 1990 (Pub. L. 101-508), the Taxpayer Relief Act 
of 1997 (Pub. L. 105-34), and the Economic Growth and Tax Relief 
Reconciliation Act of 2001 (Pub. L. 107-16).
    Generally, for purposes of sections 2056 and 2056A, section 
2056A(a) defines the term ``qualified domestic trust,'' with respect to 
any decedent, as any trust if (1) its trust instrument meets certain 
requirements regarding the identity and powers of the trustee, (2) such 
trust meets such requirements as the Secretary of the Treasury or her 
delegate (Secretary) may by regulations prescribe to ensure the 
collection of any tax imposed by section 2056A(b), and (3) an election 
under section 2056A by the executor of the decedent's estate applies to 
such trust. Section 2056A(b) generally prescribes rules relating to a 
deferred estate tax on distributions of corpus from the QDOT during the 
spouse's lifetime and on the balance of the corpus held in the QDOT on 
the date of the spouse's death (section 2056A estate tax). Section 
2056A(c) provides definitions of certain relevant terms, and section 
2056A(d) provides rules regarding the section 2056A election. Finally, 
section 2056A(e) directs the Secretary to prescribe regulations as may 
be necessary or appropriate to carry out the purposes of section 2056A.

II. Regulatory Overview

    Regulations addressing the application of sections 2056(d) and 
2056A were published in the Federal Register (58 FR 305) as proposed

[[Page 67581]]

regulations on January 5, 1993 (1993 proposed regulations). The 1993 
proposed regulations included proposed rules under Sec. Sec.  20.2056A-
1 through 20.2056A-13. Relevant to these proposed regulations, Sec.  
20.2056A-2 of the 1993 proposed regulations sets forth the proposed 
qualification requirements for a QDOT; Sec.  20.2056A-4 of the 1993 
proposed regulations sets forth the proposed procedures for conforming 
marital trust and nontrust marital transfers to the requirements of a 
QDOT; and Sec.  20.2056A-11 of the 1993 proposed regulations sets forth 
the proposed rules relating to filing requirements and payment of the 
section 2056A estate tax.
    On August 22, 1995, after consideration of all written comments and 
public hearing testimony, the 1993 proposed regulations were adopted as 
final regulations by the publication of TD 8612 in the Federal Register 
(60 FR 43531), with one exception: section 20.2056A-2(d) of the 1993 
proposed regulations, which had proposed additional requirements to 
ensure collection of the section 2056A estate tax, was not finalized. 
On the same date, the Treasury Department and the IRS published TD 8613 
in the Federal Register (60 FR 43554), which included temporary 
regulations under Sec.  20.2056A-2T(d) (1995 temporary regulations). 
The text of the 1995 temporary regulations also served, by cross-
reference, as the text of reissued proposed regulations published on 
the same date in the Federal Register (60 FR 43574) to address and 
solicit further commentary on the additional requirements necessary to 
ensure collection of the section 2056A estate tax (1995 proposed 
regulations). On November 29, 1996, the Treasury Department and the IRS 
published TD 8686 in the Federal Register (61 FR 60551) to adopt Sec.  
20.2056A-2(d) of the 1995 proposed regulations as final regulations 
(1996 final regulations). In an apparent oversight, the 1996 final 
regulations did not update the references to Sec.  20.2056A-2T(d) found 
in Sec. Sec.  20.2056A-2, 20.2056A-4, and 20.2056A-11.

Explanation of Provisions

    The Treasury Department and the IRS have determined that an update 
of Sec. Sec.  20.2056A-2, 20.2056A-4, and 20.2056A-11 of the Estate Tax 
Regulations is required to remove outdated references to Sec.  
20.2056A-2T(d). An update of Sec.  20.2056A-2 is also required to 
correct outdated references to a publication, to IRS officials and 
offices, and to procedures and addresses to be used by certain trustees 
to provide a security instrument to satisfy the requirements of a QDOT. 
In addition, an update to the definition of ``finally determined'' in 
Sec.  20.2056A-2(d)(1)(iii) is needed because the current definition of 
that term includes an outdated reference to the issuance of an estate 
tax closing letter. An update of Sec. Sec.  20.2056A-4 and 20.2056A-11 
is required to properly identify the titles of IRS officials authorized 
to enter into agreements with respect to the section 2056A estate tax 
and to grant extensions of time to file a Form 706-QDT, U.S. Estate Tax 
Return for Qualified Domestic Trusts, or to pay any section 2056A 
estate tax.
    The Treasury Department and the IRS are aware that other matters in 
the current regulations under section 2056A may be outdated, but these 
matters do not cause the current regulations to be substantively 
inaccurate. For instance, the examples in Sec.  20.2056A-6 use outdated 
figures but accurately illustrate the application of the rules of the 
regulations. Modifications to update information that does not impede 
the ability of taxpayers and their representatives to comply with the 
regulations, or the ability of the IRS to process information provided 
by taxpayers or their representatives, are outside the scope of these 
proposed regulations.

I. Section 20.2056A-2--Qualification Requirements for QDOT

A. Updating References to the 1995 Temporary Regulations in Sec.  
20.2056A-2(a) and (b)
    Current Sec.  20.2056A-2(a) and (b)(2) and (3) refer to Sec.  
20.2056A-2T(d) in describing certain qualification requirements for 
QDOTs. Because the 1995 proposed regulations have been finalized, the 
Treasury Department and the IRS propose to update these paragraphs to 
reference Sec.  20.2056A-2(d) instead of Sec.  20.2056A-2T(d).
B. Updating the Definition of Finally Determined in Sec.  20.2056A-
2(d)(1)(iii)
    Current Sec.  20.2056A-2(d)(1)(i) and (ii) provide alternate 
additional requirements, one of which will apply to a QDOT depending 
upon the fair market value, as finally determined for Federal estate 
tax purposes, of the assets passing to the QDOT. Current Sec.  
20.2056A-2(d)(1)(iii) provides the definition of ``finally determined'' 
for purposes of Sec.  20.2056A-2(d)(1)(i) and (ii). This definition 
relies in part on the issuance by the IRS of an estate tax closing 
letter, an IRS practice that was routine prior to June 1, 2015, for 
every Federal estate tax return filed. Estate tax closing letters are 
no longer routinely issued by the IRS. The Treasury Department and the 
IRS propose to update Sec.  20.2056A-2(d)(1)(iii) to conform to current 
IRS procedures for establishing the final value of an asset for Federal 
estate tax purposes.
C. Updating the Name of Offices, Addresses, Titles of Officials, 
Reference to the Uniform Customs and Practice for Documentary Credits, 
and Procedure for Filing Required Security Instruments Set Forth in 
Sec.  20.2056A-2(d)(1)(i)(B) and (C)
    Current Sec.  20.2056A-2(d)(1)(i) requires that QDOTs with assets 
whose value exceeds $2 million must satisfy one of three alternative 
security arrangements to secure the payment of the section 2056A estate 
tax. Paragraphs (B) and (C) of Sec.  20.2056A-2(d)(1)(i), respectively, 
describe the requirements and form of the bond and the letter of credit 
that may be used as the required security arrangement. Both the 
provisions describing the requirements for each type of security, and 
the forms themselves, detail the notifications that must be given to 
the IRS of a decision not to renew the security arrangement and of the 
establishment of a replacement arrangement, if any. Precise addresses 
and IRS officials are identified in these paragraphs as the recipients 
of these notices but, as a result of changes in the titles of various 
IRS officials and the identification and location of the IRS offices 
responsible for the functions relevant to these security arrangements, 
this information is no longer accurate. Specifically, with respect to 
decedents who are residents of the United States, the required forms 
refer to the District Director of the District Office for Estate and 
Gift Tax Examination Group at the address of the District Office of the 
IRS that has examination jurisdiction over the decedent's estate. With 
respect to decedents who are nonresident noncitizens and U.S. citizens 
who die domiciled outside the United States, the current regulations 
direct these notices to the Estate Tax Group, Assistant Commissioner 
(International) at 950 L'Enfant Plaza, CP:IN:D:C:EX:HQ:1114, 
Washington, DC 20241. Neither of these tax examination groups currently 
exists, and the examination of estate and gift tax returns is now part 
of a specialty examination group that keeps a national inventory. The 
Estate Tax Advisory Group currently is the collection advisory office 
of the IRS tasked with monitoring the bond or letter of credit until 
there is a taxable disposition of the QDOT's assets or until the IRS 
determines that no tax will be owed (for

[[Page 67582]]

example, when a noncitizen spouse becomes a citizen and the 
requirements of section 2056A(b)(12) are met). Accordingly, to correct 
the outdated references and to avoid future obsolescence if an office 
is moved, renamed, or eliminated, the Treasury Department and the IRS 
propose to update Sec.  20.2056A-2(d)(1)(i)(B)(1) and (2), and Sec.  
20.2056A-2(d)(1)(i)(C)(1) and (2) to direct trustees, taxpayers, and 
their representatives to IRS Publication 4235, Collection Advisory 
Offices Contact Information, or as otherwise provided in IRS forms and 
instructions or on https://www.irs.gov, to determine the correct 
address to use when submitting the notices required in these sections 
of the regulations.
    The text required by current Sec.  20.2056A-2(d)(1)(i)(C)(2) and 
(3) to be included in certain documents includes a reference to the 
Uniform Customs and Practice for Documentary Credits, 1993 Revision, 
ICC Publication No. 500 (Publication 500), which is published by the 
International Chamber of Commerce. The 1993 revision of Publication 500 
is no longer the most recent edition of that publication. Accordingly, 
to correct the outdated references and to avoid any future obsolete 
references, the Treasury Department and the IRS propose to update these 
regulations to include language directing trustees, taxpayers, and 
their representatives to the most recent revision of Publication 500, 
which can be found on www.iccwbo.org.
    Current Sec.  20.2056A-2(d)(1)(i)(B)(4) and (C)(5), respectively, 
provide that the bond or letter of credit is to be filed with the 
decedent's Federal estate tax return (Form 706, United States Estate 
(and Generation-Skipping Transfer) Tax Return, or Form 706-NA, United 
States Estate (and Generation-Skipping Transfer) Tax Return, Estate of 
nonresident not a citizen of the United States). Security instruments 
attached to a decedent's Federal estate tax return are not easily 
identified, which hinders prompt forwarding to the Estate Tax Advisory 
Group. Accordingly, the Treasury Department and the IRS propose to 
update these paragraphs to provide that a security instrument provided 
in compliance with Sec.  20.2056A-2(d) is not to be attached to the 
decedent's Federal estate tax return (Form 706 or Form 706-NA), but 
instead is to be filed by submitting it directly to the Estate Tax 
Advisory Group. In addition, the Treasury Department and the IRS 
propose to update these paragraphs to direct trustees, taxpayers, and 
their representatives to IRS Publication 4235, Collection Advisory 
Offices Contact Information, or as otherwise provided in IRS forms and 
instructions or on https://www.irs.gov, to determine the correct 
address that must be used to submit a security instrument provided in 
compliance with Sec.  20.2056A-2(d).

II. Section 20.2056A-4--Procedures for Conforming Marital Trusts and 
Nontrust Marital Transfers to the Requirements of a QDOT

A. Updating References to the 1995 Temporary Regulations in Sec.  
20.2056A-4(a)(1), (2), and (c)(1)
    Current Sec.  20.2056A-4(a)(1) applies the requirements of Sec.  
20.2056A-2T(d) in setting out the procedures for conforming marital 
trusts and nontrust marital transfers to the requirements of a QDOT. 
Current Sec.  20.2056A-4(a)(2) refers to Sec.  20.2056A-2T(d)(1) in 
describing the consequences of failing to comply with applicable 
requirements in the case of a judicial reformation, and to Sec.  
20.2056A-2T(d)(3) with regard to the required annual statement. Current 
Sec.  20.2056A-4(c)(1) refers to Sec.  20.2056A-2T(d) in describing the 
circumstances under which property passing to a surviving spouse under 
a plan, annuity, or other arrangement which is not assignable or 
transferable (or is treated as such) can be treated as passing to the 
surviving spouse in the form of a QDOT. The Treasury Department and the 
IRS propose to update current Sec.  20.2056A-4(a)(1), (2), and (c)(1) 
to reference Sec.  20.2056A-2(d) instead of Sec.  20.2056A-2T(d) to 
reflect the publication of the 1996 final regulations.
B. Updating Titles of Officials in Sec.  20.2056A-4(c)(6) and (7)
    Current Sec.  20.2056A-4(c)(2) and (3) describe alternative 
procedures the executor may use to cause a plan, annuity, or other 
arrangement which is not assignable or transferable (or is treated as 
such) to be treated as passing to the surviving spouse in the form of a 
QDOT. To conform a nonassignable annuity or other payment under current 
Sec.  20.2056A-4(c)(2) or (3), current Sec.  20.2056A-4(c)(6) requires 
the executor to file with the Federal estate tax return an Agreement to 
Pay Section 2056A Estate Tax, whose required language is included in 
this paragraph. Alternatively, current Sec.  20.2056A-4(c)(7) requires 
an Agreement to Roll Over Annuity Payments, whose required language is 
included in that paragraph. The required agreement under current Sec.  
20.2056A-4(c)(6) refers to the District Director, and the required 
agreement under current Sec.  20.2056A-4(c)(7) refers to the Assistant 
Commissioner (International).
    As discussed in part I.C. of this Explanation of Provisions, the 
examination of estate and gift tax returns is now handled by a 
specialty examination group that keeps a national inventory, and the 
Estate Tax Advisory Group is tasked with monitoring the bond or letter 
of credit until there is a taxable disposition of the QDOT's assets or 
until the IRS determines that no tax will be owed (for example, when a 
noncitizen spouse becomes a citizen and the requirements of section 
2056A(b)(12) are met). Accordingly, the Treasury Department and the IRS 
propose to update current Sec.  20.2056A-4(c)(6) and (7) by replacing 
each reference to the District Director and Assistant Commissioner 
(International) with a reference to the Chief Tax Compliance Officer, 
IRS (or their delegate or designee or as otherwise provided in IRS 
forms and instructions or on https://www.irs.gov).

III. Section 20.2056A-11--Filing Requirements and Payment of the 
Section 2056A Estate Tax

A. Updating References to the 1995 Temporary Regulations in Sec.  
20.2056A-11(a)
    Current Sec.  20.2056A-11(a) provides guidance on the due date of 
the section 2056A estate tax and on obtaining an extension of time for 
filing a Form 706-QDT. That paragraph also directs the reader to Sec.  
20.2056A-2T(d)(3) regarding the requirements for filing Form 706-QDT in 
the case of the required annual statement. The Treasury Department and 
the IRS propose to update current Sec.  20.2056A-11(a) to reference 
Sec.  20.2056A-2(d)(3) instead of Sec.  20.2056A-2T(d)(3) to reflect 
the publication of the 1996 final regulations.
B. Updating Titles of Officials in Sec.  20.2056A-11(c)(1) and (2)
    Current Sec.  20.2056A-11(c)(1) and (2) provide guidance on 
obtaining an extension of time for paying the section 2056A estate tax, 
and states that an extension may be granted by the District Director or 
the Director of the service center where the Form 706-QDT is filed. The 
Treasury Department and the IRS propose to update current Sec.  
20.2056A-11(c)(1) and (2) by replacing each reference to ``the district 
director or director of the service center where the Form 706-QDT is 
filed'' with a reference to ``the Advisory Group Managers (or their 
delegate or designee or as otherwise provided in IRS forms and 
instructions or on https://www.irs.gov).''

[[Page 67583]]

IV. Section 20.2056A-13--Applicability Dates

    Current Sec.  20.2056A-13 provides the effective dates for all of 
the provisions of Sec.  20.2056A. Because these regulations propose 
applicability dates that are specific to the sections in which changes 
are being proposed, the Treasury Department and the IRS propose to make 
a coordinating change to Sec.  20.2056A-13 to reflect these specific 
exceptions.

Proposed Applicability Date

    The regulations are proposed to apply with respect to estates of 
decedents dying on or after the date of publication of final 
regulations in the Federal Register. For dates of applicability, see 
proposed Sec. Sec.  20.2056A-2(e), 20.2056A-4(e), 20.2056A-11(e), and 
20.2056A-13.

Special Analyses

I. Regulatory Planning and Review

    Pursuant to the Memorandum of Agreement, Review of Treasury 
Regulations under Executive Order 12866 (June 9, 2023), tax regulatory 
actions issued by the IRS are not subject to the requirements of 
section 6 of Executive Order 12866, as amended. Therefore, a regulatory 
impact assessment is not required.

II. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) (PRA) 
requires that a Federal agency obtain the approval of the Office of 
Management and Budget (OMB) before collecting information from the 
public, whether such collection of information is mandatory, voluntary, 
or required to obtain or retain a benefit. A Federal agency may not 
conduct or sponsor, and a person is not required to respond to, a 
collection of information unless the collection of information displays 
a valid control number.
    The proposed regulations would update the current regulations under 
section 2056A by modifying and replacing outdated references, 
information, and procedures, such as references to IRS officials, 
offices, and addresses that no longer exist and references to temporary 
regulations. The collections of information within these proposed 
regulations include reporting and third-party disclosure requirements 
imposed by the IRS to ensure that the IRS has been provided with 
adequate security for the collection of the section 2056A estate tax, 
to allow marital trusts and nontrust marital transfers to be conformed 
to the requirements of a QDOT, and to provide extensions of time for 
the payment of section 2056A estate tax.
    The proposed regulations include third-party disclosure and 
reporting requirements under proposed Sec.  20.2056A-2(d)(1)(i) for 
surety and banks to notify trustees and the IRS of the failure to renew 
a bond or letter of credit. These collection requirements are already 
approved by OMB under 1545-1443 for all filers. These proposed 
regulations would not change the already approved collection 
requirements, and only would modify the location of where to file. An 
update to the filing location does not change the already approved 
burden.
    The proposed regulations include reporting requirements related to 
a security instrument used to meet the qualifications of a QDOT and 
filed at the time the executor of an estate files a Form 706 or 706-NA. 
The proposed regulations also include reporting requirements related to 
Form 706-QDT used to calculate and report the section 2056A estate tax 
due or to notify the IRS that the trust is exempt from future filing 
because a noncitizen spouse has become a citizen. These reporting 
requirements are already approved by OMB under 1545-1443 for all 
filers. These proposed regulations would not substantively change the 
collection requirements, and only would modify the location of where to 
file the security instruments and arrangements. An update to the filing 
location does not change the already approved burden.
    The proposed regulations include reporting requirements related to 
requesting extensions using Form 4768 to file Form 706-QDT, Form 706, 
and Form 706-NA. These reporting requirements are already approved by 
OMB under 1545-0181 for all filers. These proposed regulations would 
not substantively change the collection requirements, and only would 
modify the location of where to file the extension. An update to the 
filing location does not change the already approved burden.
    Books and records relating to a collection of information must be 
retained as long as their contents might become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by section 6103 of 
the Code.

III. Regulatory Flexibility Act

    Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it 
is hereby certified that the proposed regulations would not have a 
significant economic impact on a substantial number of small entities. 
This rule primarily affects individuals (or their estates) and trusts, 
which are not small entities for purposes of the Regulatory Flexibility 
Act. Although it is anticipated that there may be an incremental 
economic impact on executors that are small entities, including 
entities that provide tax and legal services that assist individuals in 
preparing tax returns, any impact would not be significant and would 
not affect 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.

IV. Section 7805(f)

    Pursuant to section 7805(f) of the Code, this regulation has been 
submitted to the Chief Counsel for the Office of Advocacy of the Small 
Business Administration for comment on its impact on small business.

V. 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.

VI. Executive Order 13132: Federalism

    Executive Order 13132 (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.

Comments and Requests for Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any comments that are submitted timely 
to the IRS as prescribed in this preamble under the ADDRESSES heading. 
In addition to requesting comments on all

[[Page 67584]]

aspects of the proposed regulations, the Treasury Department and the 
IRS request comments on whether other rules in the current regulations 
under section 2056A require revision or removal to update information 
that is outdated (e.g., as a result of amendments to the Code, 
regulations, or local laws made after such rules were promulgated). All 
commenters are strongly encouraged to submit comments electronically. 
The Treasury Department and the IRS will publish for public 
availability any comment submitted electronically or on paper to its 
public docket at https://www.regulations.gov.
    A public hearing will be scheduled if requested in writing by any 
person who timely submits electronic or written comments. Requests for 
a public hearing are encouraged to be made electronically. If a public 
hearing is scheduled, a notice of the date and time for the public 
hearing will be published in the Federal Register.

Drafting Information

    The principal author of these proposed regulations is Donna Douglas 
of the Office of 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 20

    Estate taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, the Treasury Department and the IRS propose to amend 
26 CFR part 20 as follows:

PART 20--ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16, 
1954

0
Paragraph 1. The authority citation for part 20 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805.
* * * * *
0
Par. 2. Section 20.2056A-0 is amended by:
0
1. Revising the entry for paragraph (d)(6) of Sec.  20.2056A-2;
0
2. Adding an entry for paragraph (e) of Sec.  20.2056A-2;
0
3. Adding an entry for paragraph (e) of Sec.  20.2056A-4; and
0
4. Adding an entry for paragraph (e) of Sec.  20.2056A-11.
    The revision and additions read as follows:


Sec.  20.2056A-0   Table of contents.

* * * * *


Sec.  20.2056A-2   Requirements for qualified domestic trust.

* * * * *
    (d) * * *
    (6) Special rules.
    (e) Applicability date.
* * * * *


Sec.  20.2056A-4   Procedures for conforming marital trusts and 
nontrust marital transfers to the requirements of a qualified domestic 
trust.

* * * * *
    (e) Applicability date.
* * * * *


Sec.  20.2056A-11  Filing requirements and payment of the section 2056A 
estate tax.

* * * * *
    (e) Applicability date.
* * * * *
0
Par. 3. Section 20.2056A-2 is amended by:
0
1. Revising the first sentence of paragraph (a);
0
2. Revising paragraph (b)(2);
0
3. Revising the first sentence of paragraph (b)(3);
0
4. Removing the fourth sentence of paragraph (d)(1)(i)(B)(1) and adding 
in its place two new sentences;
0
5. Revising the ninth and tenth sentences of paragraph (d)(1)(i)(B)(2);
0
6. Revising the first sentence of paragraph (d)(1)(i)(B)(4), and adding 
a new sentence at the end of the paragraph;
0
7. Removing the fourth sentence of paragraph (d)(1)(i)(C)(1) and adding 
in its place two new sentences;
0
8. Revising the first, fourteenth, and fifteenth sentences of paragraph 
(d)(1)(i)(C)(2);
0
9. Revising the first, tenth, and eleventh sentences of paragraph 
(d)(1)(i)(C)(3);
0
10. Revising the first sentence of paragraph (d)(1)(i)(C)(5), and 
adding a new sentence at the end of the paragraph;
0
11. Revising paragraph (d)(1)(iii);
0
12. Revising the paragraph heading of paragraph (d)(6);
0
13. Deleting paragraph (d)(6)(i);
0
14. Redesignating paragraphs (d)(6)(ii) and (iii) as paragraphs 
(d)(6)(i) and (ii) respectively; and
0
15. Adding paragraph (e).
    The revisions and addition read as follows:


Sec.  20.2056A-2   Requirements for qualified domestic trust.

    (a) In general. To qualify as a qualified domestic trust (QDOT), 
the requirements of paragraphs (b) through (d) of this section must be 
satisfied. * * *
    (b) * * *
    (2) Property passing outright to spouse. If property does not pass 
from a decedent to a QDOT, but passes to a noncitizen surviving spouse 
in a form that meets the requirements for a marital deduction without 
regard to section 2056(d)(1)(A), and that is not described in paragraph 
(b)(1) of this section, the surviving spouse must either actually 
transfer the property, or irrevocably assign the property, to a trust 
(whether created by the decedent, by the decedent's executor, or by the 
surviving spouse) that meets the requirements of paragraphs (c) and (d) 
of this section (pertaining, respectively, to statutory requirements 
and regulatory requirements imposed to ensure collection of tax) prior 
to the filing of the estate tax return for the decedent's estate and on 
or before the last date prescribed by law that the QDOT election may be 
made (see Sec.  20.2056A-3(a)).
    (3) * * * If property does not pass from a decedent to a QDOT, but 
passes under a plan or other arrangement that meets the requirements 
for a marital deduction without regard to section 2056(d)(1)(A) and 
whose payments are not assignable or transferable (see Sec.  20.2056A-
4(c)), the property is treated as meeting the requirements of this 
section, and the requirements of Sec.  20.2056A-2(d), if the 
requirements of Sec.  20.2056A-4(c) are satisfied. * * *
* * * * *
    (d) * * *
    (1) * * *
    (i) * * *
    (B) * * *
    (1) * * * Any notice of failure to renew is required to be sent to 
the Estate Tax Advisory Group of the Internal Revenue Service. See IRS 
Publication 4235, Collection Advisory Offices Contact Information, or 
as otherwise provided in IRS forms and instructions or on https://www.irs.gov, to determine the correct address to use when submitting 
the required documentation. * * *
    (2) * * * All notices required to be sent to the Internal Revenue 
Service under this instrument should be sent to the Estate Tax Advisory 
Group of the Internal Revenue Service. See IRS Publication 4235, 
Collection Advisory Offices Contact Information, or as otherwise 
provided in IRS forms and instructions or on https://www.irs.gov, to 
determine the correct address to use when submitting the required 
documentation. * * *
* * * * *
    (4) * * * The bond is to be filed (separately from the decedent's 
Federal estate tax return) by submitting it

[[Page 67585]]

directly to the Estate Tax Advisory Group of the Internal Revenue 
Service on or before the later of the filing date or due date of the 
decedent's Federal estate tax return (Form 706 or 706-NA) unless an 
extension for filing the bond is granted under Sec.  301.9100 of this 
chapter. * * * See IRS Publication 4235, Collection Advisory Offices 
Contact Information, or as otherwise provided in IRS forms and 
instructions or on https://www.irs.gov, to determine the correct 
address to use when submitting the required documentation.
    (C) * * *
    (1) * * * Any notice of failure to renew or closure of a U.S. 
branch of a foreign bank required to be sent to the Internal Revenue 
Service must be sent to the Estate Tax Advisory Group of the Internal 
Revenue Service. See IRS Publication 4235, Collection Advisory Offices 
Contact Information, or as otherwise provided in the IRS forms and 
instructions or on https://www.irs.gov, to determine the correct 
address to use when submitting the required documentation. * * *
    (2) * * * The letter of credit must be made in the following form 
(or in the form that is the same as the following form in all material 
respects), or an alternative form that the Commissioner prescribes by 
guidance published in the Internal Revenue Bulletin (see Sec.  
601.601(d)(2) of this chapter):

[Issue Date]
To: Internal Revenue Service

    Attention: Estate Tax Advisory Group. (See IRS Publication 4235, 
Collection Advisory Offices Contact Information, or as otherwise 
provided in IRS forms and instructions or on https://www.irs.gov, to 
determine the correct address to use when submitting the required 
documentation). * * *
    Except where otherwise stated herein, this Letter of Credit is 
subject to the most recent revision of the Uniform Customs and Practice 
for Documentary Credits published by the International Chamber of 
Commerce (ICC), which can be found on https://www.iccwbo.org. If we 
notify you of our election not to consider this Letter of Credit 
renewed and the expiration date occurs during an interruption of 
business described in the most recent revision of that publication, 
unless you had consented to cancellation prior to the expiration date, 
the bank hereby specifically agrees to effect payment if this Letter of 
Credit is drawn against within 30 days after the resumption of 
business. * * *
    (3) Form of confirmation. If the requirements of this paragraph 
(d)(1)(i)(C) are satisfied by the issuance of a letter of credit by a 
foreign bank with confirmation by a bank as defined in section 581, the 
confirmation must be made in the following form (or in a form that is 
the same as the following form in all material respects), or an 
alternative form that the Commissioner prescribes by guidance published 
in the Internal Revenue Bulletin (see Sec.  601.601(d)(2) of this 
chapter):

[Issue Date]
To: Internal Revenue Service

    Attention: Estate Tax Advisory Group. (See IRS Publication 4235, 
Collection Advisory Offices Contact Information, or as otherwise 
provided in IRS forms and instructions or on https://www.irs.gov, to 
determine the correct address to use when submitting the required 
documentation). * * *
    Except where otherwise stated herein, this Confirmation is subject 
to the most recent version of the Uniform Customs and Practice for 
Documentary Credits published by the International Chamber of Commerce 
(ICC), which can be found on https://www.iccwbo.org. If we notify you 
of our election not to consider this Confirmation renewed and the 
expiration date occurs during an interruption of business described in 
the most recent version of that publication, unless you had consented 
to cancellation prior to the expiration date, the bank hereby 
specifically agrees to effect payment if this Confirmation is drawn 
against within 30 days after the resumption of business. * * *
* * * * *
    (5) Procedure. The letter of credit (and confirmation, if 
applicable) is to be filed separately from the decedent's Federal 
estate tax return (Form 706 or Form 706-NA) by submitting it directly 
to the Estate Tax Advisory Group of the Internal Revenue Service on or 
before the later of the filing date or the due date of the decedent's 
Federal estate tax return (unless an extension for filing the letter of 
credit is granted under Sec.  301.9100 of this chapter). * * * See IRS 
Publication 4235, Collection Advisory Offices Contact Information, or 
as otherwise provided in IRS forms and instructions or on https://www.irs.gov, to determine the correct address to use when submitting 
the required documentation.
* * * * *
    (iii) Definition of finally determined--(A) In general. For 
purposes of Sec.  20.2056A-2(d)(1)(i) and (ii), the fair market value 
of assets is the fair market value of those assets as finally 
determined for Federal estate tax purposes. That value is--
    (1) The value reported on an estate tax return filed with the 
Internal Revenue Service, once the period of limitations on assessment 
(see section 6501) of estate tax has expired without that value having 
been timely adjusted by the Internal Revenue Service;
    (2) The value determined or specified by the Internal Revenue 
Service for unreported property, or for reported property where the 
value determined or specified by the Internal Revenue Service differs 
from the value reported on an estate tax return filed with the Internal 
Revenue Service, once the period of limitations on assessment 
applicable to the estate tax has expired without that value having been 
timely contested by the executor;
    (3) The value determined in a written agreement with the Internal 
Revenue Service (whether entered into during the course of the 
administrative proceedings between the estate and the Internal Revenue 
Service or after the commencement of litigation) once that written 
agreement has been executed by both the executor and the Internal 
Revenue Service and is binding on all parties (including, but not 
limited to, the executor, the Internal Revenue Service, and the 
beneficiaries); or
    (4) The value determined by a court for the purpose of determining 
the estate tax liability of the estate, once the court's determination 
no longer can be appealed to any court.
    (B) Contested and Executor defined. For purposes of this paragraph 
(d)(1)(iii), the term contested means to put at issue the value of 
property in a written communication to the Internal Revenue Service 
that identifies the specific property, states that the executor does 
not accept as correct the value of that property as determined or 
specified by the Internal Revenue Service, and provides the executor's 
claimed value for that property as determined in accordance with the 
requirements of section 2031, the corresponding regulations, and other 
applicable guidance. An issue cannot be contested by a general 
protective statement or written communication that does not include 
each of these specified elements. For purposes of this paragraph 
(d)(1)(iii), the term executor includes any person described in section 
2203, as expanded to include all persons required under section 6018(b) 
to file an estate tax return.
* * * * *
    (6) Special rules.
* * * * *
    (e) Applicability date. This section applies with respect to 
estates of decedents dying on or after [the date of publication of 
final regulations in the Federal Register].

[[Page 67586]]

0
Par. 4. Section 20.2056A-4 is amended by:
0
1. Revising the second sentence of paragraph (a)(1).
0
2. Revising the fifth and sixth sentences of paragraph (a)(2).
0
3. Revising the sixth sentence of paragraph (c)(1).
0
4. Revising the final sentence of (c)(6)(ii).
0
5. Revising the final sentence of (c)(7)(ii).
0
6. Revising paragraph (e).
    The revisions read as follows:


Sec.  20.2056A-4   Procedures for conforming marital trusts and 
nontrust marital transfers to the requirements of a qualified domestic 
trust.

    (a) * * *
    (1) * * * For this purpose, the requirements of a QDOT include all 
of the applicable requirements set forth in Sec.  20.2056A-2. * * *
    (2) * * * Thus, the trustee of the trust is responsible for filing 
the Form 706-QDT, paying any section 2056A estate tax that becomes due, 
and filing the annual statement required under Sec.  20.2056A-2(d)(3), 
if applicable. Failure to comply with these requirements may cause the 
trust to be subject to the anti-abuse rule under Sec.  20.2056A-
2(d)(1)(v). * * *
* * * * *
    (c) * * *
    (1) * * * In the case of a plan, annuity, or other arrangement 
which is not assignable or transferable (or is treated as such), the 
property passing under the plan from the decedent is treated as meeting 
the requirements of Sec.  20.2056A-2 (pertaining to the general 
requirements, qualified marital interest requirements, statutory 
requirements, and requirements to ensure collection of the tax) if the 
requirements of either paragraph (c)(2) or (3) of this section are 
satisfied. * * *
* * * * *
    (6) * * *
    (ii) * * * I agree, at the request of the Chief Tax Compliance 
Officer, IRS (or their delegate or designee or as otherwise provided in 
IRS forms and instructions or on https://www.irs.gov), to enter into a 
security agreement to secure my undertakings under this agreement.
    (7) * * *
    (ii) * * * I agree, at the request of the Chief Tax Compliance 
Officer, IRS (or their delegate or designee or as otherwise provided in 
IRS forms and instructions or on https://www.irs.gov), to enter into a 
security agreement to secure my undertakings under this agreement.
* * * * *
    (e) Applicability date. This section applies with respect to 
estates of decedents dying on or after [the date of publication of the 
final regulations in the Federal Register].
0
Par. 5. Section 20.2056A-11 is amended by:
0
1. Revising the final sentence of paragraph (a);
0
2. Revising the final sentence of paragraph (c)(1);
0
3. Revising paragraph (c)(2); and
0
4. Adding paragraph (e).
    The revisions and addition read as follows:


Sec.  20.2056A-11   Filing requirements and payment of the section 
2056A estate tax.

    (a) * * * See also Sec.  20.2056A-5(c)(1) regarding the 
requirements for filing a Form 706-QDT in the case of a distribution to 
the surviving spouse on account of hardship, and Sec.  20.2056A-2(d)(3) 
regarding the requirements for filing Form 706-QDT in the case of the 
required annual statement.
* * * * *
    (c) * * *
    (1) * * * Such extension may be granted by the Advisory Group 
Managers (or their delegate or designee or as otherwise provided in IRS 
forms and instructions or on https://www.irs.gov).
    (2) Extension of time for paying tax under section 6161(a)(1). An 
extension of time beyond the due date to pay any part of the estate tax 
imposed on lifetime distributions under section 2056A(b)(1)(A), or 
imposed at the death of the surviving spouse under section 
2056A(b)(1)(B), or imposed at the termination of the QDOT (such as on 
the death or resignation of the U.S. trustee), may be granted for a 
reasonable period of time, not to exceed 6 months (12 months in the 
case of the estate tax imposed under section 2056A(b)(1)(B) at the 
surviving spouse's death), by the Advisory Group Managers (or their 
delegate or designee or as otherwise provided in IRS forms and 
instructions or on https://www.irs.gov).
* * * * *
    (e) Applicability date. This section applies with respect to 
estates of decedents dying on or after [the date of publication of the 
final regulations in the Federal Register].
0
Par. 6. Section 20.2056A-13 is amended by revising the section heading 
and the first sentence to read as follows:


Sec.  20.2056A-13   Applicability dates.

    Except as provided in this section and in Sec. Sec.  20.2056A-2(e), 
20.2056A-4(e), and 20.2056A-11(e), the provisions of Sec. Sec.  
20.5056A-1 through 20.2056A-12 are applicable with respect to estates 
of decedents dying on or after August 22, 1995. * * *

Douglas W. O'Donnell,
Deputy Commissioner.
[FR Doc. 2024-18437 Filed 8-20-24; 8:45 am]
BILLING CODE 4830-01-P