[Federal Register Volume 63, Number 127 (Thursday, July 2, 1998)]
[Rules and Regulations]
[Pages 36180-36181]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17697]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 602

[TD 8775]
RIN 1545-AV79


Election Not to Apply Look-Back Method in De Minimis Cases

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

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SUMMARY: This document contains regulations explaining how a taxpayer 
elects under section 460(b)(6) not to apply the look-back method to 
long-term contracts in de minimis cases. The regulations reflect 
changes to the law made by the Taxpayer Relief Act of 1997 and affect 
manufacturers and construction contractors whose long-term contracts 
otherwise are subject to the look-back method.

DATES: Effective date: These regulations are effective July 2, 1998.
    Applicability date: These regulations apply to long-term contracts 
completed in taxable years ending after August 5, 1997.

FOR FURTHER INFORMATION CONTACT: Leo F. Nolan II or John M. Aramburu at 
(202) 622-4960 (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. 3507) under 
control number 1545-1572. Responses to this collection of information 
are required for a taxpayer to elect not to apply the look-back method 
to long-term contracts in de minimis cases. 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 OMB 
control number. The estimated average burden per respondent is 0.2 
hours.
    Comments concerning the accuracy of this burden estimate should be 
sent to the Internal Revenue Service, Attn: IRS Reports Clearance 
Officer, OP:FS: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

    This document contains amendments to the Income Tax Regulations (26 
CFR part 1). Section 460(b)(6) of the Internal Revenue Code was added 
by section 1211 of the Taxpayer Relief Act of 1997, Public Law 105-34, 
111 Stat. 788, 998, to provide an election not to apply the look-back 
method of section 460(b)(2) to long-term contracts in de minimis cases. 
These regulations provide guidance concerning this new election.
    A notice of proposed rulemaking was published in the Federal 
Register for January 13, 1998 (63 FR 1932). No written comments were 
received, and no public hearing was requested or held. The proposed 
regulations under section 460 are adopted by this Treasury decision 
with one revision. The final regulations provide that for long-term 
contracts completed in taxable years ending after August 5, 1997, an 
election not to apply the look-back method under section 460(b)(6) 
automatically revokes an election under Sec. 1.460-6(e) to use the 
delayed reapplication method.

Special Analyses

    It has been determined that this final regulation 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) 
does not apply to these regulations. Moreover, it is hereby certified 
that the collection of information in these regulations will not have a 
significant economic impact on a substantial number of small entities. 
This certification is based on the fact that the time required to 
prepare and file an election statement is minimal and will not have a 
significant impact on those small entities that choose to make the 
election. In addition, the election need only be made once by a 
taxpayer. Therefore, a Regulatory Flexibility Analysis under the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required.
    Pursuant to section 7805(f) of the Internal Revenue Code, the 
notice of proposed rulemaking preceding these regulations was submitted 
to the Chief Counsel for Advocacy of the Small Business Administration 
for comment on the impact of the proposed regulations on small 
business.

Drafting Information

    The principal author of these regulations is Leo F. Nolan II, 
Office of Assistant Chief Counsel (Income Tax and Accounting). However, 
other personnel from the IRS and Treasury Department participated in 
their development.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 602

    Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

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

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 is amended by 
removing the entry for ``Sec. 1.460-6T'' to read in part as follows:


[[Page 36181]]


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

    Par. 2. In Sec. 1.460-0, the entry for Sec. 1.460-6 is amended by 
adding entries for paragraphs (i) and (j) and the entry for Sec. 1.460-
6T is removed to read as follows:


Sec. 1.460-0  Outline of regulations under section 460.

* * * * *

Sec. 1.460-6  Look-back method.

* * * * *
    (i) [Reserved].
    (j) Election not to apply look-back method in de minimis cases.
* * * * *
    Par. 3. In Sec. 1.460-6, paragraph (i) is added and reserved and 
paragraph (j) is added to read as follows:


Sec. 1.460-6  Look-back method.

* * * * *
    (i) [Reserved].
    (j) Election not to apply look-back method in de minimis cases. 
Section 460(b)(6) provides taxpayers with an election not to apply the 
look-back method to long-term contracts in de minimis cases, effective 
for contracts completed in taxable years ending after August 5, 1997. 
To make an election, a taxpayer must attach a statement to its timely 
filed original federal income tax return (including extensions) for the 
taxable year the election is to become effective or to an amended 
return for that year, provided the amended return is filed on or before 
March 31, 998. This statement must have the legend ``NOTIFICATION OF 
ELECTION UNDER SECTION 460(b)(6)''; provide the taxpayer's name and 
identifying number and the effective date of the election; and identify 
the trades or businesses that involve long-term contracts. An election 
applies to all long-term contracts completed during and after the 
taxable year for which the election is effective. An election may not 
be revoked without the Commissioner's consent. For taxpayers who 
elected to use the delayed reapplication method under paragraph (e) of 
this section, an election under this paragraph (j) automatically 
revokes the election to use the delayed reapplication method for 
contracts subject to section 460(b)(6). A consolidated group of 
corporations, as defined in Sec. 1.1502-1(h), is subject to consistency 
rules analogous to those in paragraph (e)(2) of this section and in 
paragraph (d)(4)(ii)(C) of this section (concerning election to use 
simplified marginal impact method).


Sec. 1.460-6T  [Removed]

    Par. 4. Section 1.460-6T is removed.

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

    Par. 5. The authority citation for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.

    Par. 6. In Sec. 602.101, paragraph (c) is amended by:
    1. Removing the following entry from the table:


Sec. 602.101  OMB Control numbers.

* * * * *
    (c) * * *

------------------------------------------------------------------------
                                                             Current OMB
     CFR part or section where identified and described      control No.
------------------------------------------------------------------------
                                                                        
                  *        *        *        *        *                 
1.460-6T...................................................    1545-1572
                                                                        
                  *        *        *        *        *                 
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    2. Revising the entry for Sec. 1.460-6 to read as follows:


Sec. 602.101  OMB Control numbers.

* * * * *
    (c) * * *

------------------------------------------------------------------------
                                                             Current OMB
     CFR part or section where identified and described      control No.
------------------------------------------------------------------------
                                                                        
                  *        *        *        *        *                 
1.460-6....................................................    1545-1031
                                                               1545-1572
                                                                        
                  *        *        *        *        *                 
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Michael P. Dolan,
Deputy Commissioner of Internal Revenue.

    Approved: June 12, 1998.
Donald C. Lubick,
Assistant Secretary of the Treasury.
[FR Doc. 98-17697 Filed 7-1-98; 8:45 am]
BILLING CODE 4830-01-U