[Federal Register Volume 68, Number 204 (Wednesday, October 22, 2003)]
[Proposed Rules]
[Page 60305]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-26546]


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

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[REG-110385-99]
RIN 1545-AX39


Partial Withdrawal of Proposed Regulations Relating to Changes in 
Entity Classification.

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Partial withdrawal of notice of proposed rulemaking.

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

SUMMARY: This document withdraws a portion of a notice of proposed 
rulemaking published on November 29, 1999, addressing certain 
transactions that occur within a specified period before or after a 
foreign entity changed its classification to disregarded-entity status.

DATES: Proposed Sec.  301.7701-3(h) is withdrawn as of October 22, 
2003.

FOR FURTHER INFORMATION CONTACT: Ronald M. Gootzeit, (202) 622-3860 
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    On December 18, 1996, Treasury and IRS published in the Federal 
Register (61 FR 66584) final regulations (TD 8697) relating to the 
classification of business entities under section 7701 (check-the-box 
regulations). On November 29, 1999, Treasury and the IRS published in 
the Federal Register (64 FR 66591) a notice of proposed rulemaking 
(REG-110385-99) proposing to amend Sec. Sec.  301.7701-2 and 301.7701-3 
of the current check-the-box regulations (proposed regulations). A 
public hearing on the proposed regulations was held on January 31, 
2000. In addition, written comments were received. Most of the written 
and oral comments related to proposed Sec.  301.7701-3(h), which 
provided a rule that would have operated to change the classification 
of a foreign disregarded entity if a so-called ``extraordinary 
transaction'' occurred one day before or within one year after the 
election to treat the entity as disregarded. In general, commentators 
criticized the approach adopted in this rule as overly broad and 
expressed concern that it would mitigate the increased certainty 
promoted by the check-the-box regulations in 1996.
    After considering the comments received, Treasury and the IRS 
issued Notice 2003-46 (2003-28 IRB 53) on June 26, 2003, announcing the 
intention to withdraw the extraordinary transaction rule in proposed 
Sec.  301.7701-3(h) and to finalize the remaining provisions of the 
proposed regulations addressing grandfathered entities and the 
relevancy of classification status.
    With the publication of this document, proposed Sec.  301.7701-3(h) 
is withdrawn. Final regulations adopting without substantive change the 
portions of the proposed regulations relating to grandfathered entities 
and the relevancy of classification status are being published in the 
Rules and Regulations section elsewhere in this issue of the Federal 
Register. These final regulations do not adopt the extraordinary 
transaction rule in proposed Sec.  301.7701-3(h).

Drafting Information

    The principal author of this withdrawal notice is Ronald M. 
Gootzeit, Office of Associate Chief Counsel (International). However, 
other personnel from Treasury and the IRS participated in its 
development.

List of Subjects in 26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

Partial Withdrawal of a Notice of Proposed Rulemaking

    Accordingly, under the authority of 26 U.S.C. 7805, Sec.  301.7701-
3(h) of the notice of proposed rulemaking published in the Federal 
Register on November 29, 1999, (64 FR 66591) is withdrawn.

Robert E. Wenzel,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 03-26546 Filed 10-21-03; 8:45 am]
BILLING CODE 4830-01-P