[Federal Register Volume 66, Number 7 (Wednesday, January 10, 2001)]
[Proposed Rules]
[Pages 2173-2174]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-257]



  Federal Register / Vol. 66, No. 7 / Wednesday, January 10, 2001 / 
Proposed Rules  

[[Page 2173]]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 53 and 301

[REG-246256-96]
RIN 1545-AY65


Excise Taxes on Excess Benefit Transactions

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary 
regulations.

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SUMMARY: In the Rules and Regulations section of this issue of the 
Federal Register, the IRS is issuing temporary regulations relating to 
the excise taxes on excess benefit transactions under section 4958 of 
the Internal Revenue Code (Code), as well as certain amendments and 
additions to existing Income Tax Regulations affected by section 4958. 
Section 4958 was enacted in section 1311 of the Taxpayer Bill of Rights 
2. Section 4958 generally is effective for transactions occurring on or 
after September 14, 1995.
    Section 4958 imposes excise taxes on transactions that provide 
excess economic benefits to disqualified persons of public charities 
and social welfare organizations (referred to as applicable tax-exempt 
organizations). Disqualified persons who benefit from an excess benefit 
transaction with an applicable tax-exempt organization are liable for a 
tax of 25 percent of the excess benefit. Such persons are also liable 
for a tax of 200 percent of the excess benefit if the excess benefit is 
not corrected by a certain date. Additionally, organization managers 
who participate in an excess benefit transaction knowingly, willfully, 
and without reasonable cause, are liable for a tax of 10 percent of the 
excess benefit. The tax for which participating organization managers 
are liable cannot exceed $10,000 for any one excess benefit 
transaction.

DATES: Written comments and requests for a public hearing must be 
received by April 10, 2001. In addition to any comments addressing 
substantive issues of the proposed regulations, the IRS and Treasury 
specifically request comments on the clarity of the proposed rule and 
how it may be made easier to understand.

ADDRESSES: Send submissions to: CC:M&SP:RU (REG-246256-96), 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:M&SP:RU (REG-246256-96), 
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.gov/prod/tax_regs/comments.html. A 
public hearing will be scheduled if requested.

FOR FURTHER INFORMATION CONTACT: Concerning submissions, Guy Traynor, 
(202) 622-7180; concerning the regulations, Phyllis D. Haney, (202) 
622-4290 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collections of information contained in these proposed 
regulations have 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 1545-1623, in conjunction with the notice of 
proposed rulemaking published August 4, 1998, 63 FR 41486, REG-246256-
96, Failure by Certain Charitable Organizations to Meet Certain 
Qualification Requirements; Taxes on Excess Benefit Transactions.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    Books and records relating to the 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.

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.
    An initial regulatory flexibility analysis was prepared as required 
for the collection of information under 5 U.S.C. 603 in the notice of 
proposed rulemaking, REG-246256-96, Failure by Certain Charitable 
Organizations to Meet Certain Qualification Requirements; Taxes on 
Excess Benefit Transactions, published August 4, 1998, at 63 FR 41486. 
The initial analysis was submitted to the Chief Counsel for Advocacy of 
the Small Business Administration pursuant to section 7805(f) of the 
Code for comment on its impact on business. The initial analysis 
continues to apply to this proposed rule. Pursuant to section 7805(f) 
of the 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 business.

Comments and Requests for a Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any comments (a signed original and 
eight (8) copies) that are submitted timely to the IRS. The IRS and 
Treasury specifically request comments on the clarity of the proposed 
rule and how it may be made easier to understand. All comments will be 
available for public inspection and copying.
    A public hearing may be scheduled if requested in writing by a 
person who timely submits written comments. If a public hearing is 
scheduled, notice of the date, time, and place will be published in the 
Federal Register.

Drafting Information

    The principal author of these regulations is Phyllis D. Haney, 
Office of Division Counsel/Associate Chief Counsel (Tax-Exempt and 
Government Entities). However, other personnel from the IRS and 
Treasury Department participated in their development.

[[Page 2174]]

List of Subjects

26 CFR Part 53

    Excise taxes, Foundations, Investments, Lobbying, Reporting and 
recordkeeping requirements, Trusts and trustees.

26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.
    Accordingly, 26 CFR Parts 53 and 301 are proposed to be amended as 
follows:

PART 53--FOUNDATION AND SIMILAR EXCISE TAXES

    Paragraph 1. The authority citation for part 53 continues to read 
as follows:

    Authority: 26 U.S.C. 7805.
    Par. 2. Sections 53.4958-0 through 53.4958-8 are added to read as 
follows: [The text of proposed Secs. 53.4958-0 through 53.4958-8 is the 
same as the text of Sec. 53.4958-0T through 53.4958-8T published 
elsewhere in this issue of the Federal Register].

Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
[FR Doc. 01-257 Filed 1-9-01; 8:45 am]
BILLING CODE 4830-01-U