[Federal Register Volume 63, Number 145 (Wednesday, July 29, 1998)]
[Proposed Rules]
[Pages 40383-40384]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20024]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-110332-98]
RIN 1545-AW43


Conversion to the Euro

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 of this issue of the Federal 
Register, the IRS is issuing temporary regulations relating to the 
change to the euro. The text of those temporary regulations also serves 
as the text of these proposed regulations. This document also provides 
a notice of public hearing on these proposed regulations.

DATES: Written comments must be received by October 1, 1998. Requests 
to speak and outlines of oral comments to be discussed at the public 
hearing scheduled for October 20, at 10 a.m., must be received by 
September 29, 1998.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-110332-98), 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-110332-98) 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 of 
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 Building, 1111 Constitution Avenue NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Howard 
Wiener, (202) 622-3870 or Thomas Preston, (202) 622-3930; concerning 
submissions and the hearing, LaNita VanDyke, 202-622-7190 (not toll-
free numbers).

SUPPLEMENTARY INFORMATION:

Background

    Temporary regulations in the Rules and Regulations section of this 
issue of the Federal Register amend the Income Tax Regulations (26 CFR 
part 1) relating

[[Page 40384]]

to sections 985 and 1001. The temporary regulations contain rules 
relating to conversion to the euro.
    The text of those temporary regulations also serves as the text of 
these proposed regulations. The preamble to the temporary regulations 
explains the temporary regulations.

Request for Additional Comments

    The Treasury and IRS request additional comments on the following 
issues.
    (1) Whether the final regulations should contain guidance (and the 
substance of any such guidance) concerning the application of sections 
1092 and 1259. Comments should separately address the rules for periods 
before May 3, 1998, between May 3, 1998 and December 31, 1998, and 
after December 31, 1998.
    (2) Whether guidance is necessary with respect to section 905, 
relating to the redetermination of taxes in post-conversion years.
    (3) Whether a QBU whose functional currency was a currency other 
than a legacy currency, but whose functional currency should properly 
be the euro after the conversion, should be deemed to have 
automatically changed its functional currency to the euro.
    (4) Whether the regulations adequately address QBUs with functional 
currencies of countries that adopt the euro in the future. The Treasury 
and IRS also request comments regarding guidance clarifying the 
treatment of section 988 transactions that are held by euro functional 
currency QBUs and that are denominated in a currency that is replaced 
by the euro in the future.
    (5) Whether guidance is necessary to address integrated section 988 
hedging transactions. It is intended that these regulations be applied 
to section 988 integrated hedging transactions under section 988(d) on 
an integrated basis. If a QBU subsequently legs out of a position of a 
section 988 integrated hedging transaction after the euro conversion, a 
leg that formerly was a legacy currency position prior to the 
conversion will be a euro denominated position after the conversion, 
and the section 988 rules should then be applied to the euro 
denominated position.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in EO 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) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do 
not apply to these regulations, and, therefore, a Regulatory 
Flexibility Analyses is not required. 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 Tuesday, October 20, 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 building 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 October 1, 1998, and submit an outline of 
the topics to be discussed and the time to be devoted to each topic 
(signed original and eight (8) copies) by September 29, 1998.
    A period of 10 minutes will be allotted to each person for making 
comments.
    An agenda showing the scheduling of the 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 authors of these regulations are Howard A. Wiener, of 
the Office of Associate Chief Counsel (International) and Thomas 
Preston of the Office of Associate Chief Counsel (Domestic). However, 
other personnel from the IRS and Treasury Department participated in 
their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendment 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 continues to read in 
part as follows:

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

    Par. 2. Section 1.985-8 is added to read as follows:


Sec. 1.985-8  Special rules applicable to the European Monetary Union 
(conversion to the euro).

    [The text of this proposed section is the same as the text of 
Sec. 1.985-8T published elsewhere in this issue of the Federal 
Register.]
    Par. 3. Section 1.1001-5 is added to read as follows:


Sec. 1.1001-5  European Monetary Union (conversion to the euro).

    [The text of this proposed section is the same as the text of 
Sec. 1.1001-5T published elsewhere in this issue of the Federal 
Register.]
Michael P. Dolan,
Deputy Commissioner of Internal Revenue Service.
[FR Doc. 98-20024 Filed 7-28-98; 8:45 am]
BILLING CODE 4830-01-P