[Federal Register Volume 61, Number 214 (Monday, November 4, 1996)]
[Proposed Rules]
[Pages 56647-56648]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28103]


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DEPARTMENT OF THE TREASURY
Internal Revenue Service

26 CFR Part 1

[SPR-247516-96]


Financial Asset Securitization Investment Trusts (FASITs); 
Solicitation for Comments

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Solicitation for comments.

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SUMMARY: The Treasury Department and the IRS are soliciting comments on 
issues to be considered in developing guidance under the newly enacted 
FASIT provisions of the Internal Revenue Code.

DATES: Comments are requested on or before December 31, 1996.

ADDRESSES: Send written comments to: Internal Revenue Service, Attn: 
CC:DOM:CORP:R (FASIT solicitation), room 5226, POB 7604, Ben Franklin 
Station, Washington, DC 20044. Alternatively, taxpayers may submit 
comments in writing, by hand delivery to CC:DOM:CORP:R (FASIT 
solicitation), Courier's Desk, Internal Revenue Service, 1111 
Constitution Ave., NW., Washington, D.C., or, electronically, via the 
IRS Internet site at: http://www.irs.ustreas.gov/prod/tax_regs/
comments.html.

FOR FURTHER INFORMATION CONTACT: David L. Meyer at 202-622-3960 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    Section 1621(a) of the Small Business Job Protection Act of 1996, 
Public Law 104-188, 110 Stat. 1755 (August 20, 1996), amends the 
Internal Revenue Code (Code) by adding new part V (sections 860H-860L) 
to subchapter M of chapter 1. These provisions authorize a new 
statutory vehicle, called a Financial Asset Securitization Investment 
Trust (FASIT), that will facilitate the securitization of debt 
obligations, including credit card receivables and automobile loans. In 
general, a FASIT will use such obligations to issue new, debt-like 
securities, referred to as regular interests. No Federal income tax is 
imposed on a FASIT, even if the underlying arrangement is otherwise 
regarded for tax purposes as a corporation, trust, partnership, or 
segregated pool of assets.
    A FASIT must have a single ownership interest, which has to be held 
entirely by a non-exempt domestic C corporation other than a 
corporation that qualifies as a RIC, REIT, REMIC, or subchapter T 
cooperative. Because a FASIT is not subject to income tax, the holder 
of the ownership interest generally includes in its taxable income all 
of the FASIT's items of income, gain, deduction and loss. In addition, 
the holder recognizes gain (but not loss) when (1) the FASIT acquires 
property from the holder or an unrelated third party, or (2) the holder 
uses property to support a regular interest issued by the FASIT.
    A FASIT may issue one or more classes of regular interests. Regular 
interests are treated as debt for all purposes of the Code. Ordinarily, 
a regular interest may be held by any person, unless the interest is a 
high-yield interest, in which case it may be held only by another FASIT 
or a corporation that is allowed to hold an ownership interest.
    The FASIT provisions become effective on September 1, 1997. Special 
transitional rules apply to a securitization arrangement existing on 
August 31, 1997, that elects FASIT treatment (a pre-effective date 
FASIT).
    In addition to the general authority under section 7805 to 
prescribe regulations, the Treasury and IRS have specific authority 
under section 860L(h) to issue regulations that carry out the purposes 
of the FASIT provisions, including rules to prevent the abuse of the 
purposes of the FASIT provisions through transactions that are not 
primarily related to securitization of debt instruments by a FASIT.

[[Page 56648]]

Comments

    To develop needed guidance timely, the Treasury Department and the 
IRS invite interested persons to submit comments (in the manner 
described under the ADDRESSES caption) on issues arising under the 
FASIT provisions. Treasury and the IRS encourage respondents to give 
particular attention to the following: rules that would allow more than 
one member of an affiliated group to hold ownership interests in the 
same FASIT; transitional rules for pre-effective date FASITs; and any 
other rules that should be in place before September 1, 1997.
    If a respondent is submitting written comments, a signed original 
and eight (8) copies are requested. All comments will be available for 
public inspection and copying in their entirety.
Judith C. Dunn,
Associate Chief Counsel (Domestic).
[FR Doc. 96-28103 Filed 11-1-96; 8:45 am]
BILLING CODE 4830-01-U