[Federal Register Volume 63, Number 41 (Tuesday, March 3, 1998)]
[Proposed Rules]
[Pages 10351-10352]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-5127]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-102144-98]
RIN 1545-AV90


Source and Grouping Rules for Foreign Sales Corporation Transfer 
Pricing

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary 
regulations and notice of public hearing.

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SUMMARY: In the Rules and Regulations section of this issue of the 
Federal Register, the IRS is issuing temporary regulations that provide 
guidance to taxpayers who have made an election to be treated as a 
foreign sales corporation (FSC). The regulations provide rules 
clarifying the special sourcing rules under section 927(e)(1) and 
provide a deadline for the election to group transactions. This 
document also provides notice of a public hearing on these proposed 
regulations. The text of the temporary regulations also serves as the 
text of the proposed regulations.

DATES: Written comments must be received by June 1, 1998. Requests to 
speak (with outlines of oral comments) to be discussed at the public 
hearing scheduled for June 24, 1998, at 10 a.m., must be received by 
June 3, 1998.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-102144-98), room 
5226, Internal Revenue Service, POB 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand delivered between the 
hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG-102144-98), Courier's 
Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., 
Washington, DC. Alternatively, taxpayers may submit comments 
electronically via the Internet by selecting the ``Tax Regs'' option on 
the IRS Home Page, or by submitting comments directly to the IRS 
Internet site at http://www.irs.ustreas.gov/prod/tax__regs/
comments.html. The public hearing will be held in Room 2615, Internal 
Revenue Service, 1111 Constitution Avenue, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Elizabeth 
Beck (202) 622-3880; concerning submissions and the hearing, Michael 
Slaughter, (202) 622-7190 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    Temporary regulations in the Rules and Regulations portion of this 
issue of the Federal Register amend the Income Tax Regulations (26 CFR 
part 1) relating to sections 925 and 927. The temporary regulations 
contain rules relating to the grouping of transactions under the FSC 
transfer pricing rules and the special source rules under section 
927(e)(1). The preamble to the temporary regulations explains the 
temporary regulations.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required. It has also 
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 regulation does not impose a collection of information on small 
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
apply. Pursuant to section 7805(f) of the Internal Revenue Code, this 
notice of proposed rulemaking will be submitted to the Chief Counsel 
for Advocacy of the Small Business Administration for comment on its 
impact on small business.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (preferably 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 has been scheduled for June 24, 1998, at 10 a.m., 
in room 2615, Internal Revenue Building, 1111 Constitution Avenue, NW., 
Washington, DC. Because of access restrictions, visitors will not be 
admitted beyond the Internal Revenue lobby more than 15 minutes before 
the hearing starts.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing.
    Persons that wish to present oral comments at the hearing must 
submit written comments by June 1, 1998 and submit an outline of the 
topics to be discussed and the time to be devoted to each topic 
(preferably a signed original and eight (8) copies) by June 3, 1998.
    A period of 10 minutes will be allotted to each person for making 
comments.
    An agenda showing the schedule of speakers will be prepared after 
the deadline for receiving outlines has passed. Copies of the agenda 
will be available free of charge at the hearing.
    Drafting Information: The principal author of the proposed 
regulations is Elizabeth Beck, of the Office of the Associate Chief 
Counsel (International). Other personnel from the IRS and Treasury 
Department also participated in the development of these regulations.

List of Subjects in 26 CFR Part 1

    Income taxes, reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

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

    Authority: 26 U.S.C. 7805 * * *
    Section 1.925(a)-1 is also issued under 26 U.S.C. 925(b)(1) and 
(2) and 927(d)(2)(B).
    Section 1.925(b)-1 is also issued under 26 U.S.C. 925(b)(1) and 
(2) and 927(d)(2)(B). * * *


Sec. 1.925(a)-1  [Added]

    Par. 2. Section 1.925(a)-1 is added as follows:

[The text of proposed Sec. 1.925(a)-1 consisting of paragraphs 
(c)(8)(i) and (e)(4) is the same as the text of Sec. 1.925(a)-
1T(c)(8)(i) and (e)(4) as amended elsewhere in this issue of the 
Federal Register].


Sec. 1.925(b)-1  [Added]

    Par. 3. Section 1.925(b)-1 is added as follows:


[[Page 10352]]


[The text of proposed Sec. 1.925(b)-1 consisting of paragraph (b)(3)(i) 
is the same as the text of Sec. 1.925(b)-1T(b)(3)(i) as amended 
elsewhere in this issue of the Federal Register].


Sec. 1.927(c)-1  [Added]

    Par. 4. Section 1.927(e)-1 is amended as follows:

[The text of proposed Sec. 1.927(e)-1 is the same as the text of 
Sec. 1.927(e)-1T published elsewhere in this issue of the Federal 
Register].
Michael P. Dolan,
Deputy Commissioner of Internal Revenue.
[FR Doc. 98-5127 Filed 3-2-98; 8:45 am]
BILLING CODE 4830-01-U