[Federal Register Volume 66, Number 128 (Tuesday, July 3, 2001)]
[Proposed Rules]
[Pages 35112-35113]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-16717]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-113910-98]
RIN 1545-AW54


Special Rules Regarding the Simplified Production and Simplified 
Resale Methods With Historic Absorption Ratio Election

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Withdrawal of notice of proposed rulemaking.

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SUMMARY: This document withdraws the notice of proposed rulemaking 
requiring that a historic absorption ratio used with either the 
simplified production or simplified resale methods be recalculated when 
the ratio becomes materially inaccurate that was published in the 
Federal Register on May 24, 1999. The withdrawal is in response to 
written comments received, oral comments presented at a public hearing 
and an internal IRS survey.

FOR FURTHER INFORMATION CONTACT: Cheryl Oseekey, (202) 622-4970 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    On May 24, 1999, the IRS issued proposed regulations (REG-113910-
98) in the Federal Register (64 FR 27936) under section 263A, that 
required that the historic absorption ratio used with either the 
simplified production or simplified resale methods be reviewed

[[Page 35113]]

for accuracy. If the historic absorption ratio is found to be 
materially inaccurate, the ratio could no longer be used. The proposed 
regulations defined an historic absorption ratio as being materially 
inaccurate when (1) the taxpayer's actual absorption ratio deviates by 
more than 50 percent from the taxpayer's historic absorption ratio, (2) 
the taxpayer's actual absorption ratio deviates by more than one-half 
of one percentage point from the taxpayer's historic absorption ratio, 
and (3) the amount of additional section 263A costs capitalizable to 
items on hand at year-end using the actual absorption ratio deviates by 
more than $100,000 from the amount of additional section 263A costs 
capitalizable to items on hand at year-end using the historic 
absorption ratio. In response to the written comments received and the 
oral comments presented at a public hearing held on September 1, 1999, 
and based on an internal IRS survey, it has been determined that the 
potential for abuse using the current regulations' rule of reviewing a 
historic absorption ratio every six years is small. Further, this 
potential for abuse is outweighed by the burden that would be placed on 
taxpayers by requiring an annual review of the accuracy of their 
ratios. Accordingly, these proposed regulations are being withdrawn.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Withdrawal of Notice of Proposed Rulemaking

    Accordingly, under the authority of 26 U.S.C. 7805, the notice of 
proposed rulemaking (REG-113910-98) that was published in the Federal 
Register on May 24, 1999 (64 FR 27936) is withdrawn.

Robert E. Wenzel,
Deputy Commissioner of Internal Revenue Service.
[FR Doc. 01-16717 Filed 7-2-01; 8:45 am]
BILLING CODE 4830-01-P