Internal Revenue Service January 5, 2005 – Federal Register Recent Federal Regulation Documents

This document contains proposed regulations amending the regulations that provide for the flat rate of withholding applicable to calculating the amount of income tax withholding on supplemental wages. The proposed amendment to the regulations reflects changes in the law made by the Revenue Reconciliation Act of 1993, the Economic Growth and Tax Relief Reconciliation Act of 2001, the Jobs and Growth Tax Relief Reconciliation Act of 2003, and the American Jobs Creation Act of 2004. Under the American Jobs Creation Act of 2004, the optional flat rate for withholding on supplemental wages will generally remain at 25 percent for payments made after December 31, 2004, but may change if income tax rates change. However, the 2004 Act also provides that, after 2004, if an employee receives supplemental wages in excess of one million dollars from an employer in a calendar year, the excess of the supplemental wages over one million dollars is subject to mandatory income tax withholding at the highest income tax rate. The highest income tax rate is currently 35 percent. In determining whether an employer has reached the one million dollar threshold for an employee, supplemental wage payments from all businesses under common control and from agents will be taken into account.

This document contains proposed regulations amending the income tax regulations under various provisions of the Internal Revenue Code (Code) to account for statutory mergers and consolidations under section 368(a)(1)(A) (including reorganizations described in section 368(a)(2)(D) and (E)) involving one or more foreign corporations. These proposed regulations are issued concurrently with proposed regulations (REG-117969-00) that would amend the definition of a reorganization under section 368(a)(1)(A) to include certain statutory mergers or consolidations effected pursuant to foreign law.

These final regulations adopt as final without change the temporary regulations published in the Federal Register on July 9, 2003, which amended the then-existing regulations regarding fees for copies of exempt organizations' material the IRS must make available to the public under section 6104 of the Internal Revenue Code (Code). These final regulations also adopt as final without change the conforming amendment included in the temporary regulations concerning the fees that an exempt organization may charge for furnishing copies of such material when required to do so.