[Federal Register Volume 64, Number 96 (Wednesday, May 19, 1999)]
[Proposed Rules]
[Pages 27221-27223]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-12525]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-100905-97]
RIN 1545-AU96
Real Estate Mortgage Investment Conduits; Reporting Requirements
and Other Administrative Matters
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking and notice of public hearing.
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SUMMARY: This document proposes to eliminate the regulatory requirement
that certain information be set forth on the face of a collateralized
debt obligation (CDO) or regular interest in a Real Estate Mortgage
Investment
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Conduit (REMIC). Implementing the proposal should reduce the burden
imposed on issuers of CDOs and regular interests without impairing the
flow of tax information to either the holders of those instruments or
the IRS. This document also provides notice of a public hearing on
these proposed regulations.
DATES: Written and electronic comments must be received by July 19,
1999. Outlines of topics to be discussed at the public hearing
scheduled for September 13, 1999, at 10 a.m. must be received by August
23, 1999.
ADDRESSES: Send submissions to CC:DOM:CORP:R (REG-100905-97), Room
5226, Internal Revenue Service, POB 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand delivered Monday through
Friday between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG-
100905-97), 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/tax__regs/reglist.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 proposed regulations,
Kenneth Christman, (202) 622-3950; concerning submissions of comments,
the hearing, and/or to be placed on the building access list to attend
the hearing, Guy Traynor, (202) 622-7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
Final regulations (TD 8366) imposing reporting requirements with
regard to CDOs and REMIC regular interests were published in the
Federal Register for September 30, 1991 (56 FR 49512, as corrected by
56 FR 51175). Among other things, those regulations compel the issuer
of a CDO or REMIC regular interest to set forth certain information on
the face of the instrument (legending). Several commentators have asked
the IRS to reassess the need for this rule.
Explanation of Provisions
Section 1272(a)(6) of the Internal Revenue Code provides a special
rule for calculating the accrual of original issue discount (OID) on
REMIC regular interests and CDOs. Special rules are needed because the
timing of payments on these instruments is often uncertain. Although
CDOs and REMIC regular interests are issued with fixed maturity dates,
they may be accelerated to the extent that obligations collateralizing
them prepay.
Because the holder of a CDO or REMIC regular interest would not
necessarily have the information needed to calculate OID under section
1272(a)(6), Congress added section 6049(d)(7) to require enhanced
reporting for such instruments. In addition, Congress gave the IRS and
Treasury specific authority to issue regulations carrying out that
purpose. 2 H.R. Conf. Rep. 99th Cong. 2d Sess. II-237 (1986), 1986-3
(Vol. 4) C.B. 237.
The regulations issued under section 6049(d)(7) are comprehensive.
Sections 1.6049-7(a) through 1.6049-7(f) establish a chain of reporting
obligations that ensures essential tax information will flow to holders
of CDOs and REMIC regular interests. The information made available
includes the amount of a holder's OID accrued during the calendar year.
Importantly, this information is updated annually.
In addition to the ongoing information reporting provided under
Secs. 1.6049-7(a) through 1.6049-7(f), section 1.6049-7(g) provides for
certain information to be legended on the face of a CDO or REMIC
certificate when first issued. The information includes the total
amount of OID on the instrument, the issue date, the rate at which
interest is payable (if any) as of the issue date, and the yield to
maturity.
Legending appears to provide little practical benefit. Most CDOs
and REMIC regular interests are held through book-entry systems, which
means the legended information is rarely (if ever) reported to the
holders. Even if the information were reported, it would be of little
use. Holders who are entitled to have OID determined for them do not
need the information. Holders who need or want to determine OID
themselves cannot make the necessary section 1272(a)(6) calculations
without acquiring additional information. Furthermore, legended
information is available through other sources. It can be obtained from
vendors of financial information or requested under other section 6049
regulations. For these reasons, the IRS and Treasury propose to rescind
Sec. 1.6049-7(g).
Comments are invited on these proposed regulations. In particular,
any taxpayers that rely on legended information are asked to specify
the items relied on and suggest other ways to provide those items (such
as including them among the items that must be reported under
Secs. 1.6049-7(a) through 1.6049-7(f)).
Proposed Effective Date
The rescission of Sec. 1.6049-7(g) is proposed to be effective on
the date the regulations are published in the Federal Register as final
regulations.
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) does not apply to these regulations, and, because the
regulations do 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 (a signed original
and eight (8) copies) and electronic comments that are submitted timely
to the IRS. The IRS and Treasury Department specifically request
comments on the clarity of the proposed regulations and how they may be
made easier to understand. All comments will be available for public
inspection and copying.
A public hearing has been scheduled for September 13, 1999,
beginning at 10 a.m. in room 2615, Internal Revenue Building, 1111
Constitution Avenue, NW., Washington DC. Due to building security
procedures, visitors must enter at the 10th Street entrance, located
between Constitution and Pennsylvania Avenues, NW. In addition, all
visitors must present photo identification to enter the building.
Because of access restrictions, visitors will not be admitted beyond
the immediate entrance area more than 15 minutes before the hearing
starts. For further information about having your name placed on the
building access list to attend the hearing, see the FOR FURTHER
INFORMATION CONTACT section of this preamble.
The rules of 26 CFR 601.601(a)(3) apply to the hearing.
Persons who wish to present oral comments at the hearing must
submit written or electronic comments and an
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outline of the topics to be discussed and the time to be devoted to
each topic (a signed original and eight (8) copies) by August 23, 1999.
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 author of these regulations is Kenneth Christman,
Office of Assistant Chief Counsel (Financial Institutions and
Products). 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 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 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
Sec. 1.6049-7 [Amended]
Par. 2. In Sec. 1.6049-7, paragraph (g) is removed.
Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
[FR Doc. 99-12525 Filed 5-18-99; 8:45 am]
BILLING CODE 4830-01-P