[Federal Register Volume 68, Number 171 (Thursday, September 4, 2003)]
[Proposed Rules]
[Pages 52543-52544]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-22459]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-141402-02]
RIN 1545-BB43


Limitation on Use of the Nonaccrual-Experience Method of 
Accounting Under Section 448(d)(5)

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 section of this issue of the 
Federal Register, the IRS is issuing temporary regulations relating to 
the use of the nonaccrual-experience method of accounting by taxpayers 
using an accrual method of accounting and performing services. The text 
of those regulations also serves as the text of these proposed 
regulations. This document also provides notice of a public hearing on 
these proposed regulations.

DATES: Written or electronic comments must be received by December 3, 
2003. Outlines of topics to be discussed at the public hearing 
scheduled for December 10, 2003, at 10 a.m. must be received by 
November 19, 2003.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-141402-02), room 
5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-
141402-02), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue, NW., Washington, DC. Alternatively, taxpayers may submit 
electronic comments directly to the IRS Internet site at http://www.irs.gov/regs. The public hearing will be held in the IRS Auditorium 
of the Internal Revenue Building, 1111 Constitution Avenue, NW., 
Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Terrance McWhorter, 202-622-4970; concerning submissions of comments, 
Treena Garrett, 202-622-3401 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in this notice of proposed 
rulemaking has been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)). Comments on the collection of information should be 
sent 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, with copies to the Internal Revenue 
Service, Attn: IRS Reports Clearance Officer, W:CAR:MP:T:T:SP, 
Washington, DC 20224. Comments on the collection of information should 
be received by November 3, 2003. Comments are specifically requested 
concerning:
    Whether the proposed collection of information is necessary for the 
proper performance of the functions of the Internal Revenue Service, 
including whether the information will have practical utility;
    The accuracy of the estimated burden associated with the proposed 
collection of information (see below);
    How the quality, utility, and clarity of the information to be 
collected may be enhanced;
    How the burden of complying with the proposed collection of 
information may be minimized, including through the application of 
automated collection techniques or other forms of information 
technology; and
    Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of service to provide information.
    The collection of information in this proposed regulation is in 
Sec.  1.448-2T. This information is required to verify that an 
alternative nonaccrual-experience method of accounting selected and 
used by a taxpayer to compute the amount of its otherwise accruable 
income that will not be collected will, based on the taxpayer's 
experience, accurately reflect the amount of income that the taxpayer 
will not collect and will clearly reflect the taxpayer's experience 
under section 448(d)(5) of the Internal Revenue Code. The collection of 
information is mandatory. The likely recordkeepers are business or 
other for-profit institutions, and small businesses or organizations.
    Estimated total annual recordkeeping burden: 24,000 hours.
    The estimated annual burden per recordkeeper varies from 1 to 5 
hours, depending on individual circumstances, with an estimated average 
of 3 hours.
    Estimated number of recordkeepers: 8,000.
    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 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 and Explanation of Provisions

    Section 448(d)(5) was added to the Code by section 801 of the Tax 
Reform Act of 1986 (Pub. L. 99-514, 100 Stat. 2085) and was amended by 
section 403 of the Job Creation and Worker Assistance Act of 2002 (Pub. 
L. 107-147, 116 Stat. 21) (the 2002 Act), effective for taxable years 
ending after

[[Page 52544]]

March 9, 2002. Temporary regulations in the Rules and Regulations 
section of this issue of the Federal Register revise Sec.  1.448-2T of 
part 1 of title 26 of the Code of Federal Regulations. Those 
regulations pertain to the nonaccrual of certain amounts by taxpayers 
using an accrual method of accounting and performing services. The text 
of those regulations also serves as the text of these proposed 
regulations. The preamble to the temporary regulations explains the 
amendments and these proposed regulations.

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. It also has 
been determined that section 553(b) of the Administrative Procedure Act 
(5 U.S.C. chapter 5) does not apply to these regulations. It is hereby 
certified that the collection 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, as previously 
noted, the estimated burden associated with the information collection 
averages three hours per respondent. Moreover, for taxpayers who are 
eligible to use these regulations and who follow these regulations, any 
burden imposed on taxpayers due to the collection of information in 
these regulations will be outweighed by the benefit taxpayers will 
receive by accruing less income than otherwise would be required. 
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 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.

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) or electronic comments that are submitted timely 
to the IRS. The IRS and Treasury Department 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 has been scheduled for December 10, 2003, 
beginning at 10 a.m. in the IRS Auditorium of the Internal Revenue 
Building, 1111 Constitution Avenue, NW., Washington, DC. Due to 
building security procedures, visitors must enter at the Constitution 
Avenue entrance. 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 30 minutes before the hearing starts. For 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 electronic or 
written comments and an outline of the topics to be discussed and the 
time to be devoted to each topic (signed original and eight (8) copies) 
by November 19, 2003.
    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 Terrance McWhorter, 
Office of Associate Chief Counsel (Income Tax and Accounting). 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 for part 1 continues to read in part as 
follows:

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

    Par. 2. Section 1.448-2 is added as follows:


Sec.  1.448-2  Nonaccrual of certain amounts by service providers.

[The text of proposed Sec.  1.448-2 is the same as the text of Sec.  
1.448-2T published elsewhere in this issue of the Federal Register.]

Judith B. Tomaso,
Acting Deputy Commissioner for Services and Enforcement.
[FR Doc. 03-22459 Filed 9-3-03; 8:45 am]
BILLING CODE 4830-01-P