[Federal Register Volume 61, Number 252 (Tuesday, December 31, 1996)]
[Rules and Regulations]
[Pages 69027-69031]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-32379]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 301, and 602

[TD 8703]
RIN 1545-AS04; RIN 1545-AU47


Automatic Extension of Time for Filing Individual Income Tax 
Returns; Automatic Extension of Time To File Partnership Return of 
Income, Trust Income Tax Return, and U.S. Real Estate Mortgage 
Investment Conduit Income Tax Return

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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[[Page 69028]]

SUMMARY: This document contains final regulations that reflect new and 
simpler procedures for an individual to obtain an automatic extension 
of time to file an individual income tax return. This document also 
contains final regulations that provide new and simpler procedures for 
a partnership, trust, and Real Estate Mortgage Investment Conduit 
(REMIC) to obtain an automatic extension of time to file partnership, 
trust, and REMIC returns.

EFFECTIVE DATE: The regulations are effective December 31, 1996.

FOR FURTHER INFORMATION CONTACT: Margaret A. Owens, (202) 622-6232 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in these final regulations 
has been reviewed and approved by the Office of Management and Budget 
in accordance with the Paperwork Reduction Act (44 U.S.C. 3504(h)) 
under control numbers 1545-1479 and 1545-0148. Responses to this 
collection of information are required to obtain a benefit (an 
automatic 4-month extension of time to file an individual income tax 
return or an automatic 3-month extension of time to file a partnership 
return of income, a trust income tax return, or a REMIC income tax 
return).
    An 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.
    Estimates of the reporting burden in these final regulations are 
reflected in the burden estimates of either Form 4868, Application for 
Automatic Extension of Time to File U.S. Individual Income Tax Return, 
or Form 8736, Application for Automatic Extension of Time To File U.S. 
Return for a Partnership, REMIC or for Certain Trusts.
    Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be sent to the Internal 
Revenue Service, Attn: IRS Reports Clearance Officer, T:FP, Washington, 
DC 20224, and to the Office of Management and Budget, Attn: Desk 
Officer for the Department of the Treasury, Office of Information and 
Regulatory Affairs, Washington, DC 20503.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background

Extensions for Individual Income Tax Returns

    On January 4, 1996, temporary regulations (TD 8651) providing new 
and simpler procedures for individuals to obtain an automatic extension 
of time to file an individual income tax return were published in the 
Federal Register (61 FR 260). A notice of proposed rulemaking (IA-41-
93) cross-referencing the temporary regulations was published in the 
Federal Register for the same day (61 FR 338).
    Written comments responding to the notice of proposed rulemaking 
were received. No public hearing was requested or held. After 
consideration of all the comments, the temporary regulations under 
sections 6081 and 6651 relating to the automatic extension of time to 
file individual income tax returns are adopted as revised by this 
Treasury Decision, and the corresponding temporary regulations are 
removed. The comments and revisions are discussed below in the section 
on Explanation of Provisions and Summary of Comments.

Extensions for Partnership Returns of Income and Trust Income Tax 
Returns

    On April 5, 1988, temporary regulations (TD 8190) relating to the 
automatic extension of time to file partnership returns of income and 
trust income tax returns were published in the Federal Register (53 FR 
11066). A notice of proposed rulemaking (LR-29-88) cross-referencing 
the temporary regulations was published in the Federal Register for the 
same day (53 FR 11103).
    In accordance with section 860F(e), REMICs have been generally 
treated as partnerships with regard to extensions of time to file. A 
REMIC has been allowed an automatic 3-month extension of time to file 
if (1) an application was prepared on Form 8736, (2) the application 
was signed by the person duly authorized, (3) the application was filed 
on or before the date Form 1066, U.S. Real Estate Mortgage Investment 
Conduit Income Tax Return, was due, (4) the application showed the full 
amount properly estimated as tax, and (5) the application was 
accompanied by full remittance of the amount properly estimated as tax 
that was unpaid as of the date prescribed for filing Form 1066.
    Written comments responding to the notice of proposed rulemaking 
and the request for comments were received. No public hearing was 
requested or held. After consideration of all the comments, the 
temporary regulations under section 6081 relating to the automatic 
extension of time to file partnership returns of income, trust income 
tax returns, and REMIC income tax returns are adopted as revised by 
this Treasury decision, and the corresponding temporary regulations are 
removed. The comments and revisions are discussed below.

Explanation of Provisions and Summary of Comments

    These final regulations provide that individuals may obtain an 
automatic 4-month extension of time to file an individual income tax 
return without remitting the unpaid amount of any tax properly 
estimated to be due with the application for extension of time to file. 
Under these final regulations, an individual's inability to pay is not 
a condition for obtaining an automatic 4-month extension. However, 
taxpayers are encouraged to make payments in order to minimize interest 
and penalties imposed on unpaid amounts.
    The final regulations remove the regulatory requirement that Forms 
4868 be signed.
    Most commentators responded favorably to the proposed and temporary 
regulations. Some commentators suggested that the IRS should develop a 
bulk method for submitting applications for automatic extensions so 
that return preparers could submit a list of the required information 
for all their clients on one Form 4868. The final regulations provide 
that the IRS may prescribe other methods for submitting an application 
in lieu of a paper application on Form 4868. In April 1996, the IRS 
provided a method of filing Forms 4868 electronically through the 
Electronic Transmitted Documents System. See Publication 1346. The IRS 
continues to offer this method of filing Forms 4868. If there is still 
a need for other methods, suggestions should be sent to: CC:DOM:CORP:R 
(REG-209643-93), Room 5226, Internal Revenue Service, POB 7604, Ben 
Franklin Station, Washington, DC 20044.
    One commentator recommended that the requirement to ``properly 
estimate'' the tax be dropped, since payment of the unpaid amount of 
tax due is not a condition of obtaining an automatic 4-month extension 
of time to file an individual income tax return. The requirement has 
been retained to assist taxpayers in determining the amount of interest 
and penalties for which they will be liable if timely tax payments are 
not made, and to thereby encourage

[[Page 69029]]

payments, as large as possible, with the application for extension of 
time to file.
    The final regulations provide the requirements for partnerships, 
trusts, and REMICs to obtain an automatic 3-month extension of time to 
file partnership, trust, and REMIC returns. The final regulations 
remove the regulatory requirement that Forms 8736 be signed. 
Notwithstanding the current instructions to Form 8736, an unsigned Form 
8736 will be processed. In addition, these final regulations provide 
that trusts and REMICs may obtain an automatic 3-month extension of 
time to file a trust income tax return or a REMIC income tax return 
without remitting the unpaid amount of any tax properly estimated to be 
due with the application for extension of time to file.
    The final regulations provide that the IRS may prescribe additional 
methods of obtaining an extension of time to file in lieu of a paper 
application on Form 8736.
    Some commentators suggested that allowing automatic extensions for 
partnership returns of income and trust income tax returns will give 
rise to filing difficulties for partners and trust beneficiaries. The 
Treasury and the IRS took this concern into account when limiting 
partnership and trust extensions to 3 months rather than the 4 months 
permitted individuals.

Special Analyses

    It has been determined that these final regulations are 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) 
does not apply to these regulations, and because the notices of 
proposed rulemaking preceding the regulations were issued prior to 
March 29, 1996, a Regulatory Flexibility Analysis is not required. 
Pursuant to section 7805(f) of the Internal Revenue Code, a copy of the 
notice of proposed rulemaking providing an automatic extension of time 
to file an individual income tax return that precedes these regulations 
was submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on their impact on small business.

Drafting Information

    The principal authors of these regulations are Margaret A. Owens, 
and Philip E. Bennet, Office of the Assistant Chief Counsel (Income Tax 
& Accounting), IRS. However, other personnel from the IRS and the 
Treasury Department participated in their development.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

26 CFR Part 602

    Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR parts 1, 301, and 602 are amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 is amended by adding 
new entries in numerical order to read as follows:

    Authority: 26 U.S.C. 7805 * * *
    Section 1.6081-2 also issued under 26 U.S.C. 6081(a).
    Section 1.6081-4 also issued under 26 U.S.C. 6081(a).
    Section 1.6081-6 also issued under 26 U.S.C. 6081(a).
    Section 1.6081-7 also issued under 26 U.S.C. 6081(a). * * *

    Par. 2. Section 1.6081-2 is added to read as follows:


Sec. 1.6081-2  Automatic extension of time to file partnership return 
of income.

    (a) In general. A partnership required to file a return of income 
on Form 1065, U.S. Partnership Return of Income, for any taxable year 
will be allowed an automatic 3-month extension of time to file the 
return after the date prescribed for filing the return if an 
application under this section is filed in accordance with paragraph 
(b) of this section. In the case of a partnership described in 
Sec. 1.6081-5(a)(1), the automatic extension allowed under this section 
runs concurrently with an extension of time to file granted pursuant to 
Sec. 1.6081-5(a).
    (b) Requirements. In order to satisfy this paragraph (b), an 
application for an automatic extension under this section must be--
    (1) Submitted on Form 8736, Application for Automatic Extension of 
Time To File U.S. Return for a Partnership, REMIC or for Certain 
Trusts, or in any other manner as may be prescribed by the 
Commissioner;
    (2) Filed on or before the later of--
    (i) The date prescribed for filing the partnership return (without 
regard to any extensions of the time for filing such return); or
    (ii) The expiration of any extension of time to file granted such 
partnership pursuant to Sec. 1.6081-5(a); and
    (3) Filed with the Internal Revenue Service office designated in 
the application's instructions.
    (c) Payment of section 7519 amount. An automatic extension of time 
for filing a partnership return under this section does not extend the 
time for payment of any amount due under section 7519, relating to 
required payments for entities electing not to have a required taxable 
year.
    (d) Section 444 election. An automatic extension of time for filing 
a partnership return will run concurrently with any extension of time 
for filing a return allowed because of section 444, relating to the 
election of a taxable year other than a required taxable year.
    (e) Effect of extension on partner. An automatic extension of time 
for filing a partnership return under this section does not operate to 
extend the time for filing a partner's income tax return or the time 
for the payment of any tax due on the partner's income tax return.
    (f) Termination of automatic extension. The district director, 
including the Assistant Commissioner (International), or the director 
of a service center may terminate at any time an automatic extension by 
mailing to the partnership a notice of termination. The notice must be 
mailed at least 10 days prior to the termination date designated in 
such notice. The notice of termination must be mailed to the address 
shown on Form 8736 or to the partnerships's last known address.
    (g) Penalties. See section 6698 for failure to file a partnership 
return.
    (h) Coordination with Sec. 1.6081-1. Except in undue hardship 
cases, no extension of time for filing a partnership return of income 
will be granted under Sec. 1.6081-1 until an automatic extension has 
been allowed pursuant to the provisions of this section.
    (i) Effective date. This section is effective for applications for 
an automatic extension of time to file a partnership return of income 
filed on or after December 31, 1996.


Sec. 1.6081-2T  [Removed]

    Par. 3. Section 1.6081-2T is removed.


Sec. 1.6081-3T  [Removed]

    Par. 4. Section 1.6081-3T is removed.
    Par. 5. Section 1.6081-4 is amended as follows:
    1. Paragraphs (a) and (c) are revised.
    2. Paragraphs (d) and (e) are added.
    The revised and added provisions read as follows:

[[Page 69030]]

Sec. 1.6081-4  Automatic extension of time for filing individual income 
tax returns.

    (a) In general--(1) Period of extension. An individual who is 
required to file an individual income tax return will be allowed an 
automatic 4-month extension of time to file the return after the date 
prescribed for filing the return provided the requirements contained in 
paragraphs (a)(2), (3), and (4) of this section are met. In the case of 
an individual described in Sec. 1.6081-5(a)(5) or (6), the automatic 4-
month extension will run concurrently with the extension of time to 
file granted pursuant to Sec. 1.6081-5.
    (2) Manner for submitting an application. An application must be 
submitted--
    (i) On Form 4868, Application for Automatic Extension of Time to 
File U.S. Individual Income Tax Return; or
    (ii) In any other manner as may be prescribed by the Commissioner.
    (3) Time and place for filing application. Except in the case of an 
individual described in Sec. 1.6081-5(a)(5) or (6), the application 
must be filed on or before the date prescribed for filing the 
individual income tax return. In the case of an individual described in 
Sec. 1.6081-5(a)(5) or (6), the application must be filed on or before 
the expiration of the extension of time to file granted pursuant to 
Sec. 1.6081-5. The application must be filed with the Internal Revenue 
Service office designated in the application's instructions.
    (4) Proper estimate of tax. An application for extension must show 
the full amount properly estimated as tax for the taxable year.
    (5) Coordination with Sec. 1.6081-1. Except in undue hardship 
cases, no extension of time for filing an individual income tax return 
will be granted under Sec. 1.6081-1 until an automatic extension has 
been allowed pursuant to the provisions of this paragraph (a).
* * * * *
    (c) Termination of automatic extension. The district director, 
including the Assistant Commissioner (International), or the director 
of a service center may terminate at any time an automatic extension by 
mailing to the taxpayer a notice of termination. The notice must be 
mailed at least 10 days prior to the termination date designated in 
such notice. The notice of termination must be mailed to the taxpayer 
at the address shown on Form 4868 or to the taxpayer's last known 
address.
    (d) Penalties. See section 6651 for failure to file an individual 
income tax return or failure to pay the amount shown as tax on the 
return. In particular, see Sec. 301.6651-1(c)(3) of this chapter 
(relating to a presumption of reasonable cause in certain circumstances 
involving an automatic extension of time for filing an individual 
income tax return).
    (e) Effective date. This section is effective for applications for 
an automatic extension of time to file an individual income tax return 
filed on or after December 31, 1996.


Sec. 1.6081-4T  [Removed]

    Par. 6. Section 1.6081-4T is removed.
    Par. 7. Section 1.6081-6 is added under the undesignated 
centerheading ``Extension of Time for Filing Returns'' to read as 
follows:


Sec. 1.6081-6  Automatic extension of time to file trust income tax 
return.

    (a) In general. A trust required to file an income tax return on 
Form 1041, U.S. Income Tax Return for Estates and Trusts, for any 
taxable year will be allowed an automatic 3-month extension of time to 
file the return after the date prescribed for filing the return if an 
application under this section is filed in accordance with paragraph 
(b) of this section.
    (b) Requirements. To satisfy this paragraph (b), an application for 
an automatic extension under this section must--
    (1) Be submitted on Form 8736, Application for Automatic Extension 
of Time To File U.S. Return for a Partnership, REMIC or for Certain 
Trusts, or in any other manner as may be prescribed by the 
Commissioner;
    (2) Be filed on or before the date prescribed for filing the trust 
income tax return with the Internal Revenue Service office designated 
in the application's instructions; and
    (3) Show the full amount properly estimated as tax for the trust 
for the taxable year.
    (c) Effect of extension on beneficiary. An automatic extension of 
time to file a trust income tax return under this section will not 
operate to extend the time for filing the income tax return of a 
beneficiary of the trust or the time for the payment of any tax due on 
the beneficiary's income tax return.
    (d) Termination of automatic extension. The district director, 
including the Assistant Commissioner (International), or the director 
of a service center may terminate at any time an automatic extension by 
mailing to the trust a notice of termination. The notice must be mailed 
at least 10 days prior to the termination date designated in such 
notice. The notice of termination must be mailed to the address shown 
on Form 8736 or to the trust's last known address.
    (e) Penalties. See section 6651 for failure to file a trust income 
tax return or failure to pay the amount shown as tax on the return.
    (f) Coordination with Sec. 1.6081-1. Except in undue hardship 
cases, no extension of time for filing a trust income tax return will 
be granted under Sec. 1.6081-1 until an automatic extension has been 
allowed pursuant to the provisions of this section.
    (g) Effective date. This section is effective for applications for 
an automatic extension of time to file a trust income tax return filed 
on or after December 31, 1996.
    Par. 8. Section 1.6081-7 is added under the undesignated 
centerheading ``Extension of Time for Filing Returns'' to read as 
follows:


Sec. 1.6081-7  Automatic extension of time to file Real Estate Mortgage 
Investment Conduit (REMIC) income tax return.

    (a) In general. A Real Estate Mortgage Investment Conduit (REMIC) 
required to file an income tax return on Form 1066, U.S. Real Estate 
Mortgage Investment Conduit Income Tax Return, for any taxable year 
will be allowed an automatic 3-month extension of time to file the 
return after the date prescribed for filing the return if an 
application under this section is filed in accordance with paragraph 
(b) of this section.
    (b) Requirements. To satisfy this paragraph (b), an application for 
an automatic extension under this section must--
    (1) Be submitted on Form 8736, Application for Automatic Extension 
of Time To File U.S. Return for a Partnership, REMIC or for Certain 
Trusts, or in any other manner as may be prescribed by the 
Commissioner;
    (2) Be filed on or before the date prescribed for filing the REMIC 
income tax return with the Internal Revenue Service office designated 
in the application's instructions; and
    (3) Show the full amount properly estimated as tax for the REMIC 
for the taxable year.
    (c) Effect of extension on residual or regular interest holders. An 
automatic extension of time to file a REMIC income tax return under 
this section will not operate to extend the time for filing the income 
tax return of a residual or regular interest holder of the REMIC or the 
time for the payment of any tax due on the residual or regular interest 
holder's income tax return.
    (d) Termination of automatic extension. The district director, 
including the Assistant Commissioner (International), or the director 
of a

[[Page 69031]]

service center may terminate at any time an automatic extension by 
mailing to the REMIC a notice of termination. The notice must be mailed 
at least 10 days prior to the termination date designated in such 
notice. The notice of termination must be mailed to the address shown 
on Form 8736 or to the REMIC's last known address.
    (e) Penalties. See sections 6698 and 6651 for failure to file a 
REMIC income tax return or failure to pay the amount shown as tax on 
the return.
    (f) Coordination with Sec. 1.6081-1. Except in undue hardship 
cases, no extension of time for filing a REMIC income tax return will 
be granted under Sec. 1.6081-1 until an automatic extension has been 
allowed pursuant to the provisions of this section.
    (g) Effective date. This section is effective for applications for 
an automatic extension of time to file a REMIC income tax return filed 
on or after December 31, 1996.

PART 301--PROCEDURE AND ADMINISTRATION

    Par. 9. The authority citation for part 301 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805. * * *
    Par. 10. Section 301.6651-1 is amended by revising paragraph (c)(3) 
to read as follows:


Sec. 301.6651-1  Failure to file tax return or to pay tax.

* * * * *
    (c) * * *
    (3) If, for a taxable year ending on or after December 31, 1995, an 
individual taxpayer satisfies the requirement of Sec. 1.6081-4(a) of 
this chapter (relating to automatic extension of time for filing an 
individual income tax return), reasonable cause will be presumed, for 
the period of the extension of time to file, with respect to any 
underpayment of tax if--
    (i) The excess of the amount of tax shown on the individual income 
tax return over the amount of tax paid on or before the regular due 
date of the return (by virtue of tax withheld by the employer, 
estimated tax payments, and any payment with an application for 
extension of time to file pursuant to Sec. 1.6081-4 of this chapter) is 
no greater than 10 percent of the amount of tax shown on the individual 
income tax return; and
    (ii) Any balance due shown on the individual income tax return is 
remitted with the return.
* * * * *


Sec. 301.6651-1T  [Removed]

    Par. 11. Section 301.6651-1T is removed.

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

    Par. 12. The authority citation for part 602 continues to read as 
follow:

    Authority: 26 U.S.C. 7805.

    Par. 13. In Sec. 602.101, paragraph (c) is amended by removing the 
entries for Secs. 1.6081-2T, 1.6081-3T, and 1.6081-4T from the table, 
revising the entry for Sec. 1.6081-4, and adding the following entries 
in numerical order to the table to read as follows:


Sec. 602.101  OMB Control numbers.

* * * * *
    (c) * * *

                                                                        
------------------------------------------------------------------------
                                                            Current OMB 
   CFR part or section where identified and described       control No. 
------------------------------------------------------------------------
                                                                        
                  *        *        *        *        *                 
1.6081-2................................................       1545-0148
                                                               1545-1054
                                                               1545-1036
                                                                        
                  *        *        *        *        *                 
1.6081-4................................................       1545-0188
                                                               1545-1479
1.6081-6................................................       1545-0148
                                                               1545-1054
1.6081-7................................................       1545-0148
                                                               1545-1054
                                                                        
                  *        *        *        *        *                 
------------------------------------------------------------------------

Margaret Milner Richardson,
Commissioner of Internal Revenue.
    Approved: December 11, 1996.
Donald C. Lubick,
Acting Assistant Secretary of the Treasury.
[FR Doc. 96-32379 Filed 12-30-96; 8:45 am]
BILLING CODE 4830-01-P