[Federal Register Volume 64, Number 21 (Tuesday, February 2, 1999)]
[Rules and Regulations]
[Pages 4967-4975]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-1892]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 301 and 602

[TD 8813]
RIN 1545-AU74


Residence of Trusts and Estates--7701

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final Regulations.

-----------------------------------------------------------------------

SUMMARY: This document contains final regulations providing guidance 
regarding the definition of a trust as a United States person (domestic 
trust) or a foreign trust. This document also provides guidance 
regarding the election for certain trusts to remain domestic trusts for 
taxable years beginning after December 31, 1996. The regulations 
incorporate changes to the law made by the Small Business Job 
Protection Act of 1996 and by the Taxpayer Relief Act of 1997. The 
final regulations affect the determination of the residency of trusts 
as foreign or domestic for federal tax purposes.

DATES: Effective date: These regulations are effective February 2, 
1999.
    Dates of applicability: See Sec. 301.7701-7(e).

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, James A. 
Quinn at (202) 622-3060 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collections of information contained in these final regulations 
have been reviewed and approved by the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act (44 U.S.C. 
3507) under control number 1545-1600.
    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.
    The collections of information in these final regulations are in 
Sec. 301.7701-7 (d)(2)(ii) and (f). This information is required by the 
IRS to assure compliance with the provisions of the Small Business Job 
Protection Act of 1996 and by the Taxpayer Relief Act of 1997 for 
trusts seeking to retain their residency as domestic or foreign trusts 
in the event of an inadvertent change and for trusts electing to remain 
domestic trusts. The likely respondents are trusts. The estimated 
average annual burden per respondent is 0.5 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

    On June 5, 1997, the IRS published in the Federal Register a notice 
of proposed rulemaking (62 FR 30796) to provide guidance on the 
definition of a foreign trust and a domestic trust under section 
7701(a) (30) and (31), as amended by section 1907 of the Small Business 
Job Protection Act of 1996 (SBJP Act), Public Law 104-188, 110 Stat. 
1755 (August 20, 1996).
    Written comments responding to the notice of proposed rulemaking 
were received, and a public hearing was held on September 16, 1997. 
After consideration of the comments received, the proposed regulations 
are adopted as revised by this Treasury decision.
    Section 1161(a) of the Taxpayer Relief Act of 1997 (TRA 1997), 
Public Law 105-34, 111 Stat. 788 (August 5, 1997), provides that, to 
the extent prescribed in regulations by the Secretary of the Treasury 
or his delegate, a trust that was in existence on August 20, 1996 
(other than a trust treated as owned by the grantor under subpart E of 
part I of subchapter J of chapter 1 of the Internal Revenue Code of 
1986 (Code)), and that was treated as a United States person on August 
19, 1996, may elect to continue to be treated as a United States person 
notwithstanding the enactment of section 7701(a)(30)(E). Notice 98-25 
(1998-18 I.R.B. 11) provides guidance regarding the election to remain 
a domestic trust. The IRS and the Treasury Department are incorporating 
the guidance contained in Notice 98-25 concerning the election to 
remain a domestic trust in these final regulations. The final 
regulations also provide guidance regarding the circumstances that 
cause a termination of the election and guidance concerning revocation 
of the election to remain a domestic trust.
    In addition, section 1601(i)(3)(A) of TRA 1997 amended section 
7701(a)(30)(E)(ii) by striking the word ``fiduciaries'' and inserting 
``persons'' in its place. The final regulations have been drafted 
consistent with this change.

Explanation of Provisions

A. Court Test and Safe Harbor Issues

1. Foreign Classification Bias and Safe Harbor
    Some commentators point out generally that the Code and the 
proposed regulations are biased in favor of trusts being treated as 
foreign trusts. The commentators recommend that the regulations should 
reduce the bias in favor of foreign treatment. The safe harbor in the 
proposed regulations provides that a trust is a domestic trust if, 
pursuant to the terms of a trust instrument, the trust has only United 
States fiduciaries, such fiduciaries are administering the trust 
exclusively in the United States, and the trust is not subject to an 
automatic migration provision. One commentator recommends that the safe 
harbor be made clearly applicable in the case of any trust if a 
majority of the trustees are United States persons and the other 
requirements are met.
    The IRS and the Treasury Department agree with the commentator that 
the safe harbor should not be limited to trusts with only United States 
fiduciaries. Since the primary concern addressed by the safe harbor is 
the difficulty in determining whether the court of a particular state 
would assert primary supervision over the administration of a trust if 
that trust had never appeared before a court, the final regulations

[[Page 4968]]

provide a safe harbor only for the court test. A trust that satisfies 
the safe harbor, therefore, would also need to meet the control test in 
order to be a domestic trust. In addition, an example has been added to 
the control test illustrating that the control test is satisfied if 
United States persons control all substantial decisions by a majority 
vote.
    Commentators note that many trust instruments do not direct where 
the trust is to be administered. Therefore, they suggest that a trust 
should satisfy the safe harbor if the trust is in fact administered in 
the United States (regardless of whether this is mandated by the trust 
document).
    The IRS and the Treasury Department believe that, if a trust is 
administered exclusively in the United States, it is not necessary that 
the trust instrument actually direct that the trust be administered in 
the United States. Accordingly, the final regulations provide that a 
trust satisfies the safe harbor if the trust instrument does not direct 
that the trust be administered in a jurisdiction outside the United 
States, and the trust is in fact administered in the United States.
    These changes in the final regulations will allow more trusts to 
fall within the safe harbor.
2. Automatic Migration or Flee Clauses
    The proposed regulations provide that a trust will not satisfy the 
court test if the trust instrument contains an automatic migration 
clause that would cause the trust to migrate from the United States if 
a United States court attempts to assert jurisdiction or otherwise 
supervise the administration of the trust. Commentators argue that the 
rule in the proposed regulations concerning automatic migration clauses 
is too broad. They argue that an automatic migration clause should not 
cause a trust to be treated as a foreign trust if migration is 
triggered only by events that are not particular to a given trust, its 
trustees, beneficiaries, or grantors. For example, if a trust will 
migrate because of foreign invasion of the United States, the residency 
of the trust should not be affected.
    The final regulations adopt the suggestion and provide that a trust 
will not fail the court test if the trust instrument provides that the 
trust will migrate from the United States only in the case of foreign 
invasion of the United States or widespread confiscation or 
nationalization of property in the United States.
3. Clarify That the List of Specific Situations for Meeting the Court 
Test Is Not an Exclusive List
    Commentators recommend that the regulations be clarified to provide 
that the situations set forth in Sec. 301.7701-7(d)(2) of the proposed 
regulations that meet the court test are not the exclusive ways to meet 
the court test.
    The purpose of setting forth specific situations that meet the 
court test was to provide bright-line rules that would give taxpayers 
certainty of treatment to the extent possible. These rules, however, 
are not exclusive. The court test will also be satisfied by meeting the 
requirements set forth in the final regulations in Sec. 301.7701-7(c).
4. Disregard State Law
    A commentator recommends that the regulations should establish 
bright-line rules for the court test without reference to state law.
    The IRS and the Treasury Department believe that the proper 
interpretation of section 7701(a)(30)(E) requires that state law be 
applied under the court test. In addition, the proposed regulations 
provide bright-line rules for both the court test and the control test 
to the extent permitted by the statute. For example, the regulations 
provide a safe harbor and provide for specific cases where the court 
test is satisfied. Therefore, the final regulations remain unchanged in 
this regard.
5. Court Test Excessively Broad
    One commentator argues that the court test is excessively broad 
because many trusts that are, in the commentator's view, foreign trusts 
will potentially be deemed domestic trusts. Specifically, the 
commentator is concerned about a trust in which the only domestic 
aspect is a single United States trustee who controls all substantial 
decisions of the trust. Another commentator recommends that the 
regulations should make clear that trustee meetings and other trustee 
activities in the United States will not cause the court test to be 
met.
    The IRS and the Treasury Department do not believe that there is 
statutory authority for modifying the court test as suggested and, 
therefore, the final regulations remain unchanged. Furthermore, trustee 
meetings and activities in the United States may be a relevant factor 
to be taken into account in determining whether the court test has been 
met.
6. Petition of Court by a Single Beneficiary
    A commentator recommends that Sec. 301.7701-7(d)(2)(iii) of the 
proposed regulations should be clarified to provide that the court test 
is met only if either (i) a court within the United States actually 
exercises primary supervision over the trust, or (ii) a majority of 
beneficiaries take steps to cause a United States court to exercise 
primary supervision. The commentator expresses concern about a possible 
situation where, under the commentator's interpretation of the 
regulations, a single beneficiary of a foreign trust takes steps with a 
United States court petitioning it to assume primary supervision of the 
trust and, regardless of whether the court does in fact exercise 
primary supervision of the trust, the foreign trust becomes a domestic 
trust.
    While Sec. 301.7701-7(d)(2)(iii) of the proposed regulations 
permits the trustees and/or beneficiaries of a trust to take steps to 
ensure that the court test is satisfied, taking preliminary steps with 
a United States court without in fact causing the administration of the 
trust to be subject to the primary supervision of the United States 
court would not satisfy the court test. Thus, the concern about a 
single beneficiary altering the residence of the trust by merely taking 
preliminary steps is unwarranted.

B. Control Test Issues

1. Who Counts for Purposes of the Control Test
    The proposed regulations provide that substantial decisions do not 
include decisions exercisable by a grantor or by a beneficiary of the 
trust that affect solely the beneficiary's interest in the trust, 
unless the grantor or beneficiary is acting in a fiduciary capacity. 
The proposed regulations provide this rule because the statute prior to 
amendment by TRA 1997 provided that United States fiduciaries must 
control all substantial decisions of a domestic trust. Therefore, the 
proposed regulations exclude decisions by those who are not holding 
powers in a fiduciary capacity.
    As noted, TRA 1997 substituted ``persons'' for ``fiduciaries'' in 
the control test. In light of the change in the statute, commentators 
point out that there is no statutory basis for ignoring the powers held 
by grantors and beneficiaries for purposes of the control test.
    Therefore, the final regulations change the rule set forth in the 
proposed regulations and, for purposes of the control test, count all 
powers held by grantors and powers held by beneficiaries including 
those that affect solely the portion of the trust in which the 
beneficiary has an interest.

[[Page 4969]]

Accordingly, all persons with any power over substantial decisions of 
the trust, whether acting in a fiduciary capacity or not, must be 
counted for purposes of the control test.
    Under the proposed regulations, excluding grantors (and 
beneficiaries) from the control test would have allowed certain 
individual retirement accounts (IRAs) and other tax-exempt trusts to 
continue to be treated as domestic trusts and thus retain their tax-
exempt status even if the grantor/beneficiary of the trust is a foreign 
person. The IRS and the Treasury Department believe that Congress did 
not intend the TRA 1997 changes to affect the tax-exempt status of IRAs 
and other tax-exempt trusts whose tax-exempt status depends on their 
being domestic trusts. Because these trusts are required to be created 
or organized in the United States, and are subject to other detailed 
requirements for qualification under the Code, the final regulations 
provide that these trusts satisfy the control test, provided that 
United States fiduciaries control all of the substantial decisions of 
the trust that are made by trust fiduciaries. This provision of the 
final regulations generally reaches the same result as the provision in 
the proposed regulations.
2. Time to Correct Inadvertent Changes in Fiduciaries
    The proposed regulations provide that in the event of an 
inadvertent change in the fiduciaries that would cause a change in the 
residency of a trust, the trust is allowed six months from the date of 
change in the fiduciaries to adjust either the fiduciaries or the 
residence of the fiduciaries so as to avoid a change in the residence 
of the trust.
    Commentators recommend that trusts be given more time to take 
corrective action to avoid a change in residency or, alternatively, the 
regulations should give the IRS discretionary authority to continue 
treating a trust that inadvertently fails the control test as a 
domestic trust even if the control test is not met within six months.
    The final regulations extend the period of time to 12 months from 
the date of the change to complete corrective action. The final 
regulations also provide that the district director may grant an 
extension of time to make the modification if the failure to make the 
modification within the 12-month period was due to reasonable cause. In 
addition, the final regulations define the term inadvertent change to 
mean a change with respect to a person who has a power to make a 
substantial decision of the trust, if such change (if not corrected) 
would cause an unintended change to the foreign or domestic residency 
of the trust.
3. Effect of Power To Veto Decisions
    The proposed regulations define control to mean having the power, 
by vote or otherwise, to make all of the substantial decisions of the 
trust, with no other person having the power to veto any of the 
substantial decisions. Thus, if United States fiduciaries have the 
power to make all the substantial decisions of the trust, but a foreign 
person could veto one of the decisions, the trust would fail the 
control test and would be a foreign trust. A commentator disagrees with 
the conclusion that the power to veto decisions may be determinative of 
who has control.
    The final regulations retain the definition of control set forth in 
the proposed regulations. The effect of a veto power is specifically 
noted in the legislative history. H.R. Rep. No. 542, Part 2, 104th 
Cong., 2d Sess. 31 (1996). Furthermore, control should be defined to 
mean full power over the trust consistent with a trustee's traditional 
role in trust administration. Accordingly, if a United States person 
only has the power to veto the decisions of a foreign trustee, the 
control test is not satisfied. Likewise, if a foreign person has the 
power to veto the decisions of a United States trustee, the control 
test is not satisfied. Thus, in both cases, the trust would be a 
foreign trust.
4. Power To Remove, Add, or Replace a Trustee
    Some commentators disagree with treating a decision to remove, add, 
or replace a trustee as a substantial decision. Commentators also argue 
that the proposed regulations are not consistent with the rules that 
apply for determining the ownership of grantor trusts or with the rules 
for determining whether property is included in a decedent's estate for 
estate tax purposes. A commentator recommends that the final 
regulations provide that a decision to appoint a trustee to succeed a 
trustee who has died, resigned, or otherwise ceased to act as a 
trustee, without the power to remove the trustee, is not a substantial 
decision.
    The IRS and the Treasury Department believe that the purpose of the 
control test is to determine the residence of a trust and therefore is 
different from the purpose of the rules for grantor trusts and for 
estate taxes. The final regulations continue to treat the decision to 
remove, add, or replace a trustee as a substantial decision. In 
addition, the final regulations provide that the decision to appoint a 
successor fiduciary to succeed a fiduciary who has died, resigned, or 
otherwise ceased to act as a trustee, even if it is not accompanied by 
an unrestricted power to remove a trustee, is a substantial decision, 
unless this power is limited such that it cannot be exercised in a 
manner that would change the trust's residency from foreign to 
domestic, or vice versa.
5. Investment Decisions
    Commentators argue that investment decisions should not be treated 
as substantial decisions.
    The final regulations continue to treat investment decisions as 
substantial decisions. However, the final regulations provide that if a 
United States fiduciary contracts for the services of an investment 
advisor, and the advisor's power to make investment decisions can be 
terminated at the will of the United States fiduciary, the United 
States fiduciary will be treated as retaining control over the 
investment decisions made by the investment advisor, whether the 
investment advisor is foreign or domestic.

C. Transition Rule and Grandfathering Issues

1. Pre-existing Foreign Trusts
    Commentators recommend various grandfathering rules for pre-
existing foreign trusts that would allow them to remain treated as 
foreign trusts. A commentator recommends that a trust would be deemed 
to be a foreign trust prior to the effective date of section 7701(a) 
(30) and (31), as amended by the SBJP Act (new law), if the trust is 
treated as a foreign trust under the new law. In particular, the 
commentator expresses concern that some trusts believed to be foreign 
trusts under section 7701(a) (30) and (31), prior to amendment by the 
SBJP Act (prior law), may have in fact been domestic trusts under prior 
law. If such trusts qualify as foreign trusts under the new law, they 
will be considered to have changed their classification from domestic 
to foreign on January 1, 1997. Trusts that change from domestic to 
foreign may be subject to tax for the deemed transfer to a foreign 
trust under section 1491 (as in effect prior to its repeal by TRA 1997) 
and subject to penalties for failure to report such transfer under 
section 6677 if they continue to treat themselves as foreign trusts.
    In addition, a commentator recommends that trusts that were formed 
prior to August 20, 1996, as group trust arrangements exempt from tax 
under sections 501(a) and 408(e) and

[[Page 4970]]

described in Rev. Rul. 81-100 (1981-1 C.B. 326) not be subject to 
section 7701(a) (30) and (31) as amended by the SBJP Act, but should be 
subject to section 7701(a) (30) and (31) as in effect prior to August 
20, 1996.
    The IRS and the Treasury Department do not believe that there is 
statutory authority for adopting the requested grandfathering rules for 
pre-existing foreign trusts or for applying prior law to group trust 
arrangements described in Rev. Rul. 81-100. The election provision 
included in TRA 1997 provides specific transition relief only for 
trusts that treated themselves as domestic trusts prior to August 20, 
1996, not for trusts that treated themselves as foreign trusts. 
Therefore, the final regulations do not include the recommended 
transition rules.
2. Foreign Trust Safe Harbor
    A commentator recommends that newly-created trusts established 
under foreign law should benefit from a foreign trust safe harbor. The 
commentator suggests a safe harbor that would provide that a trust 
established under foreign law, which does not by its terms provide for 
administration in the United States, and which does not file United 
States federal income tax returns as a United States trust will fail 
the court test and will be treated as a foreign trust unless the trust 
is described in Sec. 301.7701-7(d)(2) (i) or (ii) of the proposed 
regulations (situations that meet the court test).
    Given the statutory bias towards foreign trust classification, the 
IRS and Treasury Department do not agree that a safe harbor for foreign 
trusts is necessary because sufficient guidance is given as to the 
circumstances that will cause a trust to be foreign. Therefore, the 
final regulations do not include the recommended rules.

D. Puerto Rico Trusts

    The statute uses the term the United States in a geographical sense 
and thus, for purposes of the court test, the United States includes 
only the States and the District of Columbia. See Section 7701(a)(9). 
Accordingly, a court within a territory or possession of the United 
States is not a court within the United States and all trusts subject 
to the supervision of such a court are thereby foreign. That rule was 
stated explicitly in the proposed regulations.
    Some commentators argue that adverse tax consequences result from 
this rule. Therefore, they recommend that the final regulations 
provide, contrary to what the statute implies, that Puerto Rico courts 
are ``courts within the United States'' for purposes of section 
7701(a)(30)(E)(i) and, therefore, that Puerto Rico trusts will meet the 
court test.
    The final regulations do not adopt the suggestion. Rather, the 
final regulations continue to provide that a trust that is subject to 
the primary supervision of the Puerto Rico courts will be treated as a 
foreign trust for federal tax purposes.

E. Effective Date

    The proposed regulations provide that the regulations would be 
applicable to trusts for taxable years beginning after December 31, 
1996, and to trusts whose trustees have elected to apply sections 
7701(a)(30) and (31) to the trusts for taxable years ending after 
August 20, 1996, under section 1907(a)(3)(B) of the SBJP Act.
    The final regulations modify the effective date in the proposed 
regulations. Except for Sec. 301.7701-7(f) of the final regulations, 
which applies beginning February 2, 1999, the final regulations are 
applicable to trusts for taxable years ending after February 2, 1999. 
In addition, trusts may rely on the final regulations (i) for taxable 
years of the trusts beginning after December 31, 1996, and (ii) for 
taxable years ending after August 20, 1996, in the case of trusts 
electing under section 1907(a)(3)(B) of the SBJP Act.
    If a trust is created after August 19, 1996, and before April 5, 
1999, and the trust satisfies the control test set forth in the 
proposed regulations published under section 7701(a)(30) and (31) (62 
FR 30796, June 5, 1997), but does not satisfy the control test set 
forth in the final regulations, the trust may be modified to satisfy 
the control test of the final regulations by December 31, 1999. If the 
modification is completed by December 31, 1999, the trust will be 
treated as satisfying the control test of the final regulations for 
taxable years beginning after December 31, 1996 (and for taxable years 
ending after August 20, 1996, if the election under section 
1907(a)(3)(B) of the SBJP Act has been made for the trust).

Effect on Other Documents

    Notice 98-25 (1998-18 I.R.B. 11) is obsolete as of February 2, 
1999.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in EO 12866. Therefore, a 
regulatory assessment is not required. It is hereby certified that the 
collections of information in these regulations will not have a 
significant economic impact on a substantial number of small entities. 
This certification is based upon the fact that the estimated average 
burden per trust in complying with the collection of information in 
Sec. 301.7701-7(d)(2)(ii) and (f) is 0.5 hours. In addition, each trust 
will only have to file the election statement to remain a domestic 
trust once. 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 Code, the notice of proposed 
rulemaking preceding these regulations was submitted to the Small 
Business Administration for comment on its impact on small business.
    Drafting Information: The principal author of these regulations is 
James A. Quinn of the Office of Assistant Chief Counsel (Passthroughs 
and Special Industries). However, other personnel from the IRS and 
Treasury Department participated in their development.

List of Subjects

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 301 and 602 are amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

    Paragraph 1. The authority citation for part 301 continues to read 
in part as follows:

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


Sec. 301.7701-5  [Amended]

    Par. 2. The last sentence of Sec. 301.7701-5 is removed.
    Par. 3. Section 301.7701-7 is added to read as follows:


Sec. 301.7701-7  Trusts--domestic and foreign.

    (a) In general. (1) A trust is a United States person if--
    (i) A court within the United States is able to exercise primary 
supervision over the administration of the trust (court test); and
    (ii) One or more United States persons have the authority to 
control all substantial decisions of the trust (control test).
    (2) A trust is a United States person for purposes of the Internal 
Revenue Code (Code) on any day that the trust meets both the court test 
and the control

[[Page 4971]]

test. For purposes of the regulations in this chapter, the term 
domestic trust means a trust that is a United States person. The term 
foreign trust means any trust other than a domestic trust.
    (3) Except as otherwise provided in part I, subchapter J, chapter 1 
of the Code, the taxable income of a foreign trust is computed in the 
same manner as the taxable income of a nonresident alien individual who 
is not present in the United States at any time. Section 641(b). 
Section 7701(b) is not applicable to trusts because it only applies to 
individuals. In addition, a foreign trust is not considered to be 
present in the United States at any time for purposes of section 
871(a)(2), which deals with capital gains of nonresident aliens present 
in the United States for 183 days or more.
    (b) Applicable law. The terms of the trust instrument and 
applicable law must be applied to determine whether the court test and 
the control test are met.
    (c) The court test--(1) Safe harbor. A trust satisfies the court 
test if--
    (i) The trust instrument does not direct that the trust be 
administered outside of the United States;
    (ii) The trust in fact is administered exclusively in the United 
States; and
    (iii) The trust is not subject to an automatic migration provision 
described in paragraph (c)(4)(ii) of this section.
    (2) Example. The following example illustrates the rule of 
paragraph (c)(1) of this section:

    Example. A creates a trust for the equal benefit of A's two 
children, B and C. The trust instrument provides that DC, a State Y 
corporation, is the trustee of the trust. State Y is a state within 
the United States. DC administers the trust exclusively in State Y 
and the trust instrument is silent as to where the trust is to be 
administered. The trust is not subject to an automatic migration 
provision described in paragraph (c)(4)(ii) of this section. The 
trust satisfies the safe harbor of paragraph (c)(1) of this section 
and the court test.

    (3) Definitions. The following definitions apply for purposes of 
this section:
    (i) Court. The term court includes any federal, state, or local 
court.
    (ii) The United States. The term the United States is used in this 
section in a geographical sense. Thus, for purposes of the court test, 
the United States includes only the States and the District of 
Columbia. See section 7701(a)(9). Accordingly, a court within a 
territory or possession of the United States or within a foreign 
country is not a court within the United States.
    (iii) Is able to exercise. The term is able to exercise means that 
a court has or would have the authority under applicable law to render 
orders or judgments resolving issues concerning administration of the 
trust.
    (iv) Primary supervision. The term primary supervision means that a 
court has or would have the authority to determine substantially all 
issues regarding the administration of the entire trust. A court may 
have primary supervision under this paragraph (c)(3)(iv) 
notwithstanding the fact that another court has jurisdiction over a 
trustee, a beneficiary, or trust property.
    (v) Administration. The term administration of the trust means the 
carrying out of the duties imposed by the terms of the trust instrument 
and applicable law, including maintaining the books and records of the 
trust, filing tax returns, managing and investing the assets of the 
trust, defending the trust from suits by creditors, and determining the 
amount and timing of distributions.
    (4) Situations that cause a trust to satisfy or fail to satisfy the 
court test. (i) Except as provided in paragraph (c)(4)(ii) of this 
section, paragraphs (c)(4)(i) (A) through (D) of this section set forth 
some specific situations in which a trust satisfies the court test. The 
four situations described are not intended to be an exclusive list.
    (A) Uniform Probate Code. A trust meets the court test if the trust 
is registered by an authorized fiduciary or fiduciaries of the trust in 
a court within the United States pursuant to a state statute that has 
provisions substantially similar to Article VII, Trust Administration, 
of the Uniform Probate Code, 8 Uniform Laws Annotated 1 (West Supp. 
1998), available from the National Conference of Commissioners on 
Uniform State Laws, 676 North St. Clair Street, Suite 1700, Chicago, 
Illinois 60611.
    (B) Testamentary trust. In the case of a trust created pursuant to 
the terms of a will probated within the United States (other than an 
ancillary probate), if all fiduciaries of the trust have been qualified 
as trustees of the trust by a court within the United States, the trust 
meets the court test.
    (C) Inter vivos trust. In the case of a trust other than a 
testamentary trust, if the fiduciaries and/or beneficiaries take steps 
with a court within the United States that cause the administration of 
the trust to be subject to the primary supervision of the court, the 
trust meets the court test.
    (D) A United States court and a foreign court are able to exercise 
primary supervision over the administration of the trust. If both a 
United States court and a foreign court are able to exercise primary 
supervision over the administration of the trust, the trust meets the 
court test.
    (ii) Automatic migration provisions. Notwithstanding any other 
provision in this section, a court within the United States is not 
considered to have primary supervision over the administration of the 
trust if the trust instrument provides that a United States court's 
attempt to assert jurisdiction or otherwise supervise the 
administration of the trust directly or indirectly would cause the 
trust to migrate from the United States. However, this paragraph 
(c)(4)(ii) will not apply if the trust instrument provides that the 
trust will migrate from the United States only in the case of foreign 
invasion of the United States or widespread confiscation or 
nationalization of property in the United States.
    (5) Examples. The following examples illustrate the rules of this 
paragraph (c):

    Example 1. A, a United States citizen, creates a trust for the 
equal benefit of A's two children, both of whom are United States 
citizens. The trust instrument provides that DC, a domestic 
corporation, is to act as trustee of the trust and that the trust is 
to be administered in Country X, a foreign country. DC maintains a 
branch office in Country X with personnel authorized to act as 
trustees in Country X. The trust instrument provides that the law of 
State Y, a state within the United States, is to govern the 
interpretation of the trust. Under the law of Country X, a court 
within Country X is able to exercise primary supervision over the 
administration of the trust. Pursuant to the trust instrument, the 
Country X court applies the law of State Y to the trust. Under the 
terms of the trust instrument the trust is administered in Country 
X. No court within the United States is able to exercise primary 
supervision over the administration of the trust. The trust fails to 
satisfy the court test and therefore is a foreign trust.
    Example 2. A, a United States citizen, creates a trust for A's 
own benefit and the benefit of A's spouse, B, a United States 
citizen. The trust instrument provides that the trust is to be 
administered in State Y, a state within the United States, by DC, a 
State Y corporation. The trust instrument further provides that in 
the event that a creditor sues the trustee in a United States court, 
the trust will automatically migrate from State Y to Country Z, a 
foreign country, so that no United States court will have 
jurisdiction over the trust. A court within the United States is not 
able to exercise primary supervision over the administration of the 
trust because the United States court's jurisdiction over the 
administration of the trust is automatically terminated in the event 
the court attempts to assert jurisdiction. Therefore, the trust 
fails to satisfy the court test from the time of its creation and is 
a foreign trust.

    (d) Control test--(1) Definitions--(i) United States person. The 
term United States person means a United States

[[Page 4972]]

person within the meaning of section 7701(a)(30). For example, a 
domestic corporation is a United States person, regardless of whether 
its shareholders are United States persons.
    (ii) Substantial decisions. The term substantial decisions means 
those decisions that persons are authorized or required to make under 
the terms of the trust instrument and applicable law and that are not 
ministerial. Decisions that are ministerial include decisions regarding 
details such as the bookkeeping, the collection of rents, and the 
execution of investment decisions. Substantial decisions include, but 
are not limited to, decisions concerning--
    (A) Whether and when to distribute income or corpus;
    (B) The amount of any distributions;
    (C) The selection of a beneficiary;
    (D) Whether a receipt is allocable to income or principal;
    (E) Whether to terminate the trust;
    (F) Whether to compromise, arbitrate, or abandon claims of the 
trust;
    (G) Whether to sue on behalf of the trust or to defend suits 
against the trust;
    (H) Whether to remove, add, or replace a trustee;
    (I) Whether to appoint a successor trustee to succeed a trustee who 
has died, resigned, or otherwise ceased to act as a trustee, even if 
the power to make such a decision is not accompanied by an unrestricted 
power to remove a trustee, unless the power to make such a decision is 
limited such that it cannot be exercised in a manner that would change 
the trust's residency from foreign to domestic, or vice versa; and
    (J) Investment decisions; however, if a United States person under 
section 7701(a)(30) hires an investment advisor for the trust, 
investment decisions made by the investment advisor will be considered 
substantial decisions controlled by the United States person if the 
United States person can terminate the investment advisor's power to 
make investment decisions at will.
    (iii) Control. The term control means having the power, by vote or 
otherwise, to make all of the substantial decisions of the trust, with 
no other person having the power to veto any of the substantial 
decisions. To determine whether United States persons have control, it 
is necessary to consider all persons who have authority to make a 
substantial decision of the trust, not only the trust fiduciaries.
    (iv) Treatment of certain employee benefit trusts. Provided that 
United States fiduciaries control all of the substantial decisions made 
by the trustees or fiduciaries, the following types of trusts are 
deemed to satisfy the control test set forth in paragraph (a)(1)(ii) of 
this section--
    (A) A qualified trust described in section 401(a);
    (B) A trust described in section 457(g);
    (C) A trust that is an individual retirement account described in 
section 408(a);
    (D) A trust that is an individual retirement account described in 
section 408(k) or 408(p);
    (E) A trust that is a Roth IRA described in section 408A;
    (F) A trust that is an education individual retirement account 
described in section 530;
    (G) A trust that is a voluntary employees' beneficiary association 
described in section 501(c)(9);
    (H) Such additional categories of trusts as the Commissioner may 
designate in revenue procedures, notices, or other guidance published 
in the Internal Revenue Bulletin (see Sec. 601.601(d)(2)(ii)(b)).
    (v) Examples. The following examples illustrate the rules of 
paragraph (d)(1) of this section:

    Example 1. Trust has three fiduciaries, A, B, and C. A and B are 
United States citizens and C is a nonresident alien. No persons 
except the fiduciaries have authority to make any decisions of the 
trust. The trust instrument provides that no substantial decisions 
of the trust can be made unless there is unanimity among the 
fiduciaries. The control test is not satisfied because United States 
persons do not control all the substantial decisions of the trust. 
No substantial decisions can be made without C's agreement.
    Example 2. Assume the same facts as in Example 1, except that 
the trust instrument provides that all substantial decisions of the 
trust are to be decided by a majority vote among the fiduciaries. 
The control test is satisfied because a majority of the fiduciaries 
are United States persons and therefore United States persons 
control all the substantial decisions of the trust.
    Example 3. Assume the same facts as in Example 2, except that 
the trust instrument directs that C is to make all of the trust's 
investment decisions, but that A and B may veto C's investment 
decisions. A and B cannot act to make the investment decisions on 
their own. The control test is not satisfied because the United 
States persons, A and B, do not have the power to make all of the 
substantial decisions of the trust.
    Example 4. Assume the same facts as in Example 3, except A and B 
may accept or veto C's investment decisions and can make investments 
that C has not recommended. The control test is satisfied because 
the United States persons control all substantial decisions of the 
trust.

    (2) Replacement of any person who had authority to make a 
substantial decision of the trust--(i) Replacement within 12 months. In 
the event of an inadvertent change in any person that has the power to 
make a substantial decision of the trust that would cause the domestic 
or foreign residency of the trust to change, the trust is allowed 12 
months from the date of the change to make necessary changes either 
with respect to the persons who control the substantial decisions or 
with respect to the residence of such persons to avoid a change in the 
trust's residency. For purposes of this section, an inadvertent change 
means the death, incapacity, resignation, change in residency or other 
change with respect to a person that has a power to make a substantial 
decision of the trust that would cause a change to the residency of the 
trust but that was not intended to change the residency of the trust. 
If the necessary change is made within 12 months, the trust is treated 
as retaining its pre-change residency during the 12-month period. If 
the necessary change is not made within 12 months, the trust's 
residency changes as of the date of the inadvertent change.
    (ii) Request for extension of time. If reasonable actions have been 
taken to make the necessary change to prevent a change in trust 
residency, but due to circumstances beyond the trust's control the 
trust is unable to make the modification within 12 months, the trust 
may provide a written statement to the district director having 
jurisdiction over the trust's return setting forth the reasons for 
failing to make the necessary change within the required time period. 
If the district director determines that the failure was due to 
reasonable cause, the district director may grant the trust an 
extension of time to make the necessary change. Whether an extension of 
time is granted is in the sole discretion of the district director and, 
if granted, may contain such terms with respect to assessment as may be 
necessary to ensure that the correct amount of tax will be collected 
from the trust, its owners, and its beneficiaries. If the district 
director does not grant an extension, the trust's residency changes as 
of the date of the inadvertent change.
    (iii) Examples. The following examples illustrate the rules of 
paragraphs (d)(2)(i) and (ii) of this section:

    Example 1. A trust that satisfies the court test has three 
fiduciaries, A, B, and C. A and B are United States citizens and C 
is a nonresident alien. All decisions of the trust are made by 
majority vote of the fiduciaries. The trust instrument provides that 
upon the death or resignation of any of the fiduciaries, D, is the 
successor fiduciary. A dies and D automatically becomes a fiduciary 
of the trust. When D becomes a fiduciary of the trust, D is a 
nonresident alien. Two months

[[Page 4973]]

after A dies, B replaces D with E, a United States person. Because D 
was replaced with E within 12 months after the date of A's death, 
during the period after A's death and before E begins to serve, the 
trust satisfies the control test and remains a domestic trust.
    Example 2. Assume the same facts as in Example 1 except that at 
the end of the 12-month period after A's death, D has not been 
replaced and remains a fiduciary of the trust. The trust becomes a 
foreign trust on the date A died unless the district director grants 
an extension of the time period to make the necessary change.

    (3) Automatic migration provisions. Notwithstanding any other 
provision in this section, United States persons are not considered to 
control all substantial decisions of the trust if an attempt by any 
governmental agency or creditor to collect information from or assert a 
claim against the trust would cause one or more substantial decisions 
of the trust to no longer be controlled by United States persons.
    (4) Examples. The following examples illustrate the rules of this 
paragraph (d):

    Example 1. A, a nonresident alien individual, is the grantor 
and, during A's lifetime, the sole beneficiary of a trust that 
qualifies as an individual retirement account (IRA). A has the 
exclusive power to make decisions regarding withdrawals from the IRA 
and to direct its investments. The IRA's sole trustee is a United 
States person within the meaning of section 7701(a)(30). The control 
test is satisfied with respect to this trust because the special 
rule of paragraph (d)(1)(iv) of this section applies.
    Example 2. A, a nonresident alien individual, is the grantor of 
a trust and has the power to revoke the trust, in whole or in part, 
and revest assets in A. A is treated as the owner of the trust under 
sections 672(f) and 676. A is not a fiduciary of the trust. The 
trust has one trustee, B, a United States person, and the trust has 
one beneficiary, C. B has the discretion to distribute corpus or 
income to C. In this case, decisions exercisable by A to have trust 
assets distributed to A are substantial decisions. Therefore, the 
trust is a foreign trust because B does not control all substantial 
decisions of the trust.
    Example 3. A trust, Trust T, has two fiduciaries, A and B. Both 
A and B are United States persons. A and B hire C, an investment 
advisor who is a foreign person, and may terminate C's employment at 
will. The investment advisor makes the investment decisions for the 
trust. A and B control all other decisions of the trust. Although C 
has the power to make investment decisions, A and B are treated as 
controlling these decisions. Therefore, the control test is 
satisfied.
    Example 4. G, a United States citizen, creates a trust. The 
trust provides for income to A and B for life, remainder to A's and 
B's descendants. A is a nonresident alien and B is a United States 
person. The trustee of the trust is a United States person. The 
trust instrument authorizes A to replace the trustee. The power to 
replace the trustee is a substantial decision. Because A, a 
nonresident alien, controls a substantial decision, the control test 
is not satisfied.

    (e) Effective date--(1) General rule. Except for the election to 
remain a domestic trust provided in paragraph (f) of this section, this 
section is applicable to trusts for taxable years ending after February 
2, 1999. This section may be relied on by trusts for taxable years 
beginning after December 31, 1996, and also may be relied on by trusts 
whose trustees have elected to apply sections 7701(a)(30) and (31) to 
the trusts for taxable years ending after August 20, 1996, under 
section 1907(a)(3)(B) of the Small Business Job Protection Act of 1996, 
(the SBJP Act) Public Law 104-188, 110 Stat. 1755 (26 U.S.C. 7701 
note).
    (2) Trusts created after August 19, 1996. If a trust is created 
after August 19, 1996, and before April 5, 1999, and the trust 
satisfies the control test set forth in the regulations project REG-
251703-96 published under section 7701(a)(30) and (31) (1997-1 C.B. 
795) (See Sec. 601.601(d)(2) of this chapter), but does not satisfy the 
control test set forth in paragraph (d) of this section, the trust may 
be modified to satisfy the control test of paragraph (d) by December 
31, 1999. If the modification is completed by December 31, 1999, the 
trust will be treated as satisfying the control test of paragraph (d) 
for taxable years beginning after December 31, 1996, (and for taxable 
years ending after August 20, 1996, if the election under section 
1907(a)(3)(B) of the SBJP Act has been made for the trust).
    (f) Election to remain a domestic trust--(1) Trusts eligible to 
make the election to remain domestic. A trust that was in existence on 
August 20, 1996, and that was treated as a domestic trust on August 19, 
1996, as provided in paragraph (f)(2) of this section, may elect to 
continue treatment as a domestic trust notwithstanding section 
7701(a)(30)(E). This election is not available to a trust that was 
wholly-owned by its grantor under subpart E, part I, subchapter J, 
chapter 1, of the Code on August 20, 1996. The election is available to 
a trust if only a portion of the trust was treated as owned by the 
grantor under subpart E on August 20, 1996. If a partially-owned 
grantor trust makes the election, the election is effective for the 
entire trust. Also, a trust may not make the election if the trust has 
made an election pursuant to section 1907(a)(3)(B) of the SBJP Act to 
apply the new trust criteria to the first taxable year of the trust 
ending after August 20, 1996, because that election, once made, is 
irrevocable.
    (2) Determining whether a trust was treated as a domestic trust on 
August 19, 1996--(i) Trusts filing Form 1041 for the taxable year that 
includes August 19, 1996. For purposes of the election, a trust is 
considered to have been treated as a domestic trust on August 19, 1996, 
if: the trustee filed a Form 1041, ``U.S. Income Tax Return for Estates 
and Trusts,'' for the trust for the period that includes August 19, 
1996 (and did not file a Form 1040NR, ``U.S. Nonresident Alien Income 
Tax Return,'' for that year); and the trust had a reasonable basis 
(within the meaning of section 6662) under section 7701(a)(30) prior to 
amendment by the SBJP Act (prior law) for reporting as a domestic trust 
for that period.
    (ii) Trusts not filing a Form 1041. Some domestic trusts are not 
required to file Form 1041. For example, certain group trusts described 
in Rev. Rul. 81-100 (1981-1 C.B. 326) (See Sec. 601.601(d)(2) of this 
chapter) consisting of trusts that are parts of qualified retirement 
plans and individual retirement accounts are not required to file Form 
1041. Also, a domestic trust whose gross income for the taxable year is 
less than the amount required for filing an income tax return and that 
has no taxable income is not required to file a Form 1041. Section 
6012(a)(4). For purposes of the election, a trust that filed neither a 
Form 1041 nor a Form 1040NR for the period that includes August 19, 
1996, will be considered to have been treated as a domestic trust on 
August 19, 1996, if the trust had a reasonable basis (within the 
meaning of section 6662) under prior law for being treated as a 
domestic trust for that period and for filing neither a Form 1041 nor a 
Form 1040NR for that period.
    (3) Procedure for making the election to remain domestic--(i) 
Required Statement. To make the election, a statement must be filed 
with the Internal Revenue Service in the manner and time described in 
this section. The statement must be entitled ``Election to Remain a 
Domestic Trust under Section 1161 of the Taxpayer Relief Act of 1997,'' 
be signed under penalties of perjury by at least one trustee of the 
trust, and contain the following information--
    (A) A statement that the trust is electing to continue to be 
treated as a domestic trust under section 1161 of the Taxpayer Relief 
Act of 1997;
    (B) A statement that the trustee had a reasonable basis (within the 
meaning of section 6662) under prior law for treating the trust as a 
domestic trust on August 19, 1996. (The trustee need not

[[Page 4974]]

explain the reasonable basis on the election statement.);
    (C) A statement either that the trust filed a Form 1041 treating 
the trust as a domestic trust for the period that includes August 19, 
1996, (and that the trust did not file a Form 1040NR for that period), 
or that the trust was not required to file a Form 1041 or a Form 1040NR 
for the period that includes August 19, 1996, with an accompanying 
brief explanation as to why a Form 1041 was not required to be filed; 
and
    (D) The name, address, and employer identification number of the 
trust.
    (ii) Filing the required statement with the Internal Revenue 
Service. (A) Except as provided in paragraphs (f)(3)(ii)(E) through (G) 
of this section, the trust must attach the statement to a Form 1041. 
The statement may be attached to either the Form 1041 that is filed for 
the first taxable year of the trust beginning after December 31, 1996 
(1997 taxable year), or to the Form 1041 filed for the first taxable 
year of the trust beginning after December 31, 1997 (1998 taxable 
year). The statement, however, must be filed no later than the due date 
for filing a Form 1041 for the 1998 taxable year, plus extensions. The 
election will be effective for the 1997 taxable year, and thereafter, 
until revoked or terminated. If the trust filed a Form 1041 for the 
1997 taxable year without the statement attached, the statement should 
be attached to the Form 1041 filed for the 1998 taxable year.
    (B) If the trust has insufficient gross income and no taxable 
income for its 1997 or 1998 taxable year, or both, and therefore is not 
required to file a Form 1041 for either or both years, the trust must 
make the election by filing a Form 1041 for either the 1997 or 1998 
taxable year with the statement attached (even though not otherwise 
required to file a Form 1041 for that year). The trust should only 
provide on the Form 1041 the trust's name, name and title of fiduciary, 
address, employer identification number, date created, and type of 
entity. The statement must be attached to a Form 1041 that is filed no 
later than October 15, 1999.
    (C) If the trust files a Form 1040NR for the 1997 taxable year 
based on application of new section 7701(a)(30)(E) to the trust, and 
satisfies paragraph (f)(1) of this section, in order for the trust to 
make the election the trust must file an amended Form 1040NR return for 
the 1997 taxable year. The trust must note on the amended Form 1040NR 
that it is making an election under section 1161 of the Taxpayer Relief 
Act of 1997. The trust must attach to the amended Form 1040NR the 
statement required by paragraph (f)(3)(i) of this section and a 
completed Form 1041 for the 1997 taxable year. The items of income, 
deduction and credit of the trust must be excluded from the amended 
Form 1040NR and reported on the Form 1041. The amended Form 1040NR for 
the 1997 taxable year, with the statement and the Form 1041 attached, 
must be filed with the Philadelphia Service Center no later than the 
due date, plus extensions, for filing a Form 1041 for the 1998 taxable 
year.
    (D) If a trust has made estimated tax payments as a foreign trust 
based on application of section 7701(a)(30)(E) to the trust, but has 
not yet filed a Form 1040NR for the 1997 taxable year, when the trust 
files its Form 1041 for the 1997 taxable year it must note on its Form 
1041 that it made estimated tax payments based on treatment as a 
foreign trust. The Form 1041 must be filed with the Philadelphia 
Service Center (and not with the service center where the trust 
ordinarily would file its Form 1041).
    (E) If a trust forms part of a qualified stock bonus, pension, or 
profit sharing plan, the election provided by this paragraph (f) must 
be made by attaching the statement to the plan's annual return required 
under section 6058 (information return) for the first plan year 
beginning after December 31, 1996, or to the plan's information return 
for the first plan year beginning after December 31, 1997. The 
statement must be attached to the plan's information return that is 
filed no later than the due date for filing the plan's information 
return for the first plan year beginning after December 31, 1997, plus 
extensions. The election will be effective for the first plan year 
beginning after December 31, 1996, and thereafter, until revoked or 
terminated.
    (F) Any other type of trust that is not required to file a Form 
1041 for the taxable year, but that is required to file an information 
return (for example, Form 5227) for the 1997 or 1998 taxable year must 
attach the statement to the trust's information return for the 1997 or 
1998 taxable year. However, the statement must be attached to an 
information return that is filed no later than the due date for filing 
the trust's information return for the 1998 taxable year, plus 
extensions. The election will be effective for the 1997 taxable year, 
and thereafter, until revoked or terminated.
    (G) A group trust described in Rev. Rul. 81-100 consisting of 
trusts that are parts of qualified retirement plans and individual 
retirement accounts (and any other trust that is not described above 
and that is not required to file a Form 1041 or an information return) 
need not attach the statement to any return and should file the 
statement with the Philadelphia Service Center. The trust must make the 
election provided by this paragraph (f) by filing the statement by 
October 15, 1999. The election will be effective for the 1997 taxable 
year, and thereafter, until revoked or terminated.
    (iii) Failure to file the statement in the required manner and 
time. If a trust fails to file the statement in the manner or time 
provided in paragraphs (f)(3)(i) and (ii) of this section, the trustee 
may provide a written statement to the district director having 
jurisdiction over the trust setting forth the reasons for failing to 
file the statement in the required manner or time. If the district 
director determines that the failure to file the statement in the 
required manner or time was due to reasonable cause, the district 
director may grant the trust an extension of time to file the 
statement. Whether an extension of time is granted shall be in the sole 
discretion of the district director. However, the relief provided by 
this paragraph (f)(3)(iii) is not ordinarily available if the statute 
of limitations for the trust's 1997 taxable year has expired. 
Additionally, if the district director grants an extension of time, it 
may contain terms with respect to assessment as may be necessary to 
ensure that the correct amount of tax will be collected from the trust, 
its owners, and its beneficiaries.
    (4) Revocation or termination of the election--(i) Revocation of 
election. The election provided by this paragraph (f) to be treated as 
a domestic trust may only be revoked with the consent of the 
Commissioner. See sections 684, 6048, and 6677 for the federal tax 
consequences and reporting requirements related to the change in trust 
residence.
    (ii) Termination of the election. An election under this paragraph 
(f) to remain a domestic trust terminates if changes are made to the 
trust subsequent to the effective date of the election that result in 
the trust no longer having any reasonable basis (within the meaning of 
section 6662) for being treated as a domestic trust under section 
7701(a)(30) prior to its amendment by the SBJP Act. The termination of 
the election will result in the trust changing its residency from a 
domestic trust to a foreign trust on the effective date of the 
termination of the election. See sections 684, 6048, and 6677 for the 
federal tax consequences and reporting requirements related to the 
change in trust residence.
    (5) Effective date. This paragraph (f) is applicable beginning on 
February 2, 1999.

[[Page 4975]]

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

    Par. 4. The authority citation for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.

    Par. 5. In Sec. 602.101, paragraph (c) is amended by adding an 
entry in numerical order to the table to read as follows:


Sec. 602.101  OMB Control numbers.

* * * * *
    (c) * * *

------------------------------------------------------------------------
                                                           Current OMB
   CFR part of section where identified and described      control No.
------------------------------------------------------------------------
 
                  *        *        *        *        *
301.7701-7.............................................        1545-1600
 
                  *        *        *        *        *
------------------------------------------------------------------------

    Dated: January 13, 1999.
Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
Donald C. Lubick,
Assistant Secretary of the Treasury.
[FR Doc. 99-1892 Filed 2-1-99; 8:45 am]
BILLING CODE 4830-01-U