[Federal Register Volume 61, Number 17 (Thursday, January 25, 1996)]
[Proposed Rules]
[Pages 2214-2215]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-716]



-----------------------------------------------------------------------


DEPARTMENT OF THE TREASURY
26 CFR Part 31

[EE-55-95]
RIN 1545-AT99


FUTA Taxation of Amounts Under Employee Benefit Plans

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: This document contains proposed regulations under section 
3306(r)(2) of the Internal Revenue Code, relating to when amounts 
deferred under or paid from certain nonqualified deferred compensation 
plans are taken into account as ``wages'' for purposes of the 
employment taxes imposed by the Federal Unemployment Tax Act (FUTA). 
The regulations provide guidance to taxpayers who must comply with 
section 3306(r)(2), which was added to the Code by section 324 of the 
Social Security Amendments of 1983.

DATES: Written comments and requests for a public hearing must be 
received by April 24, 1996.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (EE-55-95), room 5228, 
Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. In the alternative, submissions may be hand 
delivered between the hours of 8 a.m. and 5 p.m. to CC:DOM:CORP:R (EE-
55-95), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW, Washington, DC.

FOR FURTHER INFORMATION CONTACT: David N. Pardys, (202) 622-4606 (not a 
toll-free number), concerning the regulations, and Michael Slaughter, 
(202) 622-7190 (not a toll-free number), concerning submissions.

SUPPLEMENTARY INFORMATION:

Background

    This document contains proposed amendments to the Employment Tax 
Regulations (26 CFR part 31) under section 3306(r)(2) of the Internal 
Revenue Code of 1986 (the ``Code'') relating to the employment tax 
treatment of amounts deferred under or paid from certain nonqualified 
compensation plans. These amendments are proposed to reflect the 
statutory changes made by section 324 of the Social Security Amendments 
of 1983 (the ``1983 Amendments''), which added section 3306(r)(2) to 
the Code, and section 2662(f)(2) of the Deficit Reduction Act of 1984 
(DEFRA), which amended section 324 of the 1983 Amendments.

Explanation of Provisions

    These proposed regulations provide guidance under section 
3306(r)(2) of the Internal Revenue Code, relating to when amounts 
deferred under or paid from certain nonqualified deferred compensation 
plans are taken into account as wages for FUTA purposes. These rules 
are substantially similar to the rules applicable to the FICA (Federal 
Insurance Contributions Act) tax treatment of such amounts deferred 
under section 3121(v)(2) of the Internal Revenue Code. Thus, these 
regulations cross-reference the proposed regulations under section 
3121(v)(2).

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in EO 12866. Therefore, 
a regulatory assessment is not required. It also has been determined 
that section 553(b) of the Administrative Procedure Act (5 U.S.C. 
chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do 
not apply to these regulations, and, therefore, a Regulatory 
Flexibility Analysis is not required. Pursuant to section 7805(f) of 
the Internal Revenue Code, the notice of proposed rulemaking will be 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on their impact on small business.

Comments and Requests for a Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) that are submitted timely to the IRS. All 
comments will be available for public inspection and copying. A public 
hearing may 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 hearing will be published 
in the Federal Register.

Drafting Information

    The principal author of these regulations is David N. Pardys, 
Office of the Associate Chief Counsel (Employee Benefits and Exempt 
Organizations), IRS. However, other personnel from the IRS and Treasury 
Department participated in their development.

List of Subjects in 26 CFR Part 31

    Employment taxes, Income taxes, Penalties, Pensions, Railroad 
retirement, Reporting and recordkeeping requirements, Social security, 
Unemployment compensation.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 31 is proposed to be amended as follows:

PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE

    Paragraph 1. The authority citation for part 31 continues to read 
in part as follows:

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

    Par. 2. Section 31.3306(r)(2)-1 is added to read as follows:


Sec. 31.3306(r)(2)-1  Treatment of amounts deferred under certain 
nonqualified deferred compensation plans.

    (a) In general. Section 3306(r)(2) provides a special timing rule 
for the tax imposed by section 3301 with respect to any amount deferred 
under a nonqualified deferred compensation plan. Section 31.3121(v)(2)-
1 \1\ contains rules relating to when amounts deferred under certain 
nonqualified deferred compensation plans are wages for purposes of 
sections 3121(v)(2), 3101, and 3111. Those rules also apply to the 
special timing rule of section 3306(r)(2). For purposes of applying 
those rules to section 3306(r)(2) and this paragraph (a), references in 
those rules to the Federal Insurance Contributions Act are considered 
references to the Federal Unemployment Tax Act (26 U.S.C. 3301 et 
seq.), references to FICA are considered references to FUTA, references 
to section 3101 or 3111 are considered references to section 3301, 
references to section 3121(v)(2) are considered references to section 

[[Page 2215]]
3306(r)(2), references to section 3121(a), 3121(a)(5), and 3121(a)(13) 
are considered references to sections 3306(b), 3306(b)(5), and 
3306(b)(10), respectively, and references to Sec. 31.3121(a)-2(a) are 
considered references to Sec. 31.3301-4.

    \1\ This section appears as a notice of proposed rulemaking 
published elsewhere in this issue of the Federal Register.
---------------------------------------------------------------------------

    (b) Effective dates and transition rules. Except as otherwise 
provided, section 3306(r)(2) applies to remuneration paid after 
December 31, 1984. Section 31.3121(v)(2)-2 \2\ contains effective date 
rules for certain remuneration paid after December 31, 1983, for 
purposes of section 3121(v)(2). Those rules also apply to section 
3306(r)(2). For purposes of applying those rules to section 3306(r)(2) 
and this paragraph (b), references to section 3121(v)(2) are considered 
references to section 3306(r)(2), and references to section 3121(a)(2), 
3121(a)(3), or 3121(a)(13) are considered references to section 
3306(b)(2), 3306(b)(3), or 3306(b)(10), respectively. In addition, 
references to section 324(d)(1) of the Social Security Amendments of 
1983 are considered references to section 324(d)(2) of the Social 
Security Amendments of 1983, and references to Sec. 31.3121(v)(2)-1 are 
considered references to paragraph (a) of this section. In addition, 
the rules of Sec. 31.3121(v)(2)-2 shall apply to this paragraph by--

    \2\ This section appears as a notice of proposed rulemaking 
published elsewhere in this issue of the Federal Register.
---------------------------------------------------------------------------

    (1) References to ``December 31, 1983'' are considered references 
to ``December 31, 1984'';
    (2) References to ``before 1984'' are considered references to 
``before 1985'';
    (3) References to ``Federal Insurance Contributions Act'' are 
considered references to ``Federal Unemployment Tax Act''; and
    (4) References to ``FICA'' are considered references to ``FUTA''.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
[FR Doc. 96-716 Filed 1-19-96; 12:52 pm]
BILLING CODE 4830-01-U