[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