[Federal Register Volume 68, Number 244 (Friday, December 19, 2003)]
[Proposed Rules]
[Pages 70747-70749]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31239]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 301

[REG-116664-01]
RIN 1545-BC15


Guidance Necessary to Facilitate Business Electronic Filing

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 designed to 
eliminate regulatory impediments to the electronic filing of certain 
business income tax returns and other forms. Those regulations affect 
business taxpayers who file income tax returns electronically. The text 
of those regulations also serves as the text of these proposed 
regulations.

DATES: Written or electronic comments and requests for a public hearing 
must be received by March 18, 2004.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-116641-01), room 
5203, 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 4 p.m. to: CC:PA:LPD:PR (REG-
116641-01), 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.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Nathan 
Rosen (202) 622-4910; concerning submissions of comments and/or 
requests for a hearing, Robin Jones (202) 622-3521 (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, SE:W:CAR:MP:T:T:SP, 
Washington, DC 20224. Comments on the collection of information should 
be received by February 17, 2004. 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.  1.170A-11T. Section 170 of the Code permits tax deductions, 
within limits, for charitable contributions by individuals and 
corporations. Section 170(a)(2) provides that under certain conditions, 
corporations may treat a charitable contribution as paid during the 
taxable year even if the contribution occurs in the following taxable 
year. Existing regulations provide that to invoke this provision, a 
corporation must submit with its income tax return a supporting 
statement and a copy of the board of directors' resolution authorizing 
the contribution. The proposed regulation eliminates the need to submit 
the resolution with the return, but provides that the supporting 
statement must identify the date of the resolution. This information 
regarding the timing of board action is required to be reported to help 
ensure that taxpayers properly document their entitlement to deductions 
for charitable contributions. The IRS cannot ascertain this information 
from the board resolution itself since, as noted above, taxpayers will 
no longer have to submit that document with their returns. The 
collection of information is mandatory. The likely respondents are for-
profit corporations.
    Estimated total annual reporting burden: 250,000 hours.
    Estimated average annual burden hours per respondent: .25 hours.
    Estimated number of respondents: 1,000,000
    Estimated annual frequency of responses: annually
    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,

[[Page 70748]]

tax returns and tax return information are confidential, as required by 
26 U.S.C. 6103.

Background and Explanation of Provisions

    Temporary regulations in the Rules and Regulations section of this 
issue of the Federal Register contain amendments to the Income Tax 
Regulations (26 CFR part 1) and the Procedure and Administration 
Regulations (26 CFR part 301) designed to eliminate regulatory 
impediments to the electronic filing of certain income tax returns and 
other forms. The text of those regulations also serves as the text of 
these proposed regulations. The preamble to the temporary regulations 
explains the temporary regulations and these proposed regulations. The 
regulations generally affect taxpayers who must file any of the 
following forms: Form 926, ``Return by a U.S. Transferor of Property to 
a Foreign Corporation'' Form 972, ``Consent of Shareholder To Include 
Specific Amount in Gross Income''; Form 973, ``Corporation Claim for 
Deduction for Consent Dividends''; Form 982, ``Reduction of Tax 
Attributes Due to Discharge of Indebtedness (and Section 1082 Basis 
Adjustment)''; Form 1120, ``U.S. Corporation Income Tax Return''; Form 
1120S, ``U.S. Income Tax Return for an S Corporation''; Form 1122, 
``Authorization and Consent of Subsidiary Corporation To Be Included in 
a Consolidated Income Tax Return''; Form 5471, ``Information Return of 
U.S. Persons With Respect To Certain Foreign Corporations''; Form 5712-
A, ``Election and Verification of the Cost Sharing or Profit Split 
Method Under Section 936(h)(5)''; and Form 8832, ``Entity 
Classification Election.''

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 on the fact that the collection 
of information described above under the heading ``Paperwork Reduction 
Act'' does not affect corporations that elect to be taxed under 
Subtitle A, Chapter 1, Subchapter S of the Code. Moreover, requiring a 
corporation to report the information described above concerning board 
of directors' approval of certain charitable contributions imposes 
virtually no incremental burden in time or expense. 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 
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 (a signed original and eight 
(8) copies) or electronic comments that are submitted timely to the 
IRS. The IRS and the Treasury Department specifically request comments 
on the clarity of the proposed regulations and how they can be made 
easier to understand. All comments will be available for public 
inspection and copying. A public hearing may be scheduled if requested 
by any person who timely submits comments. If a public hearing is 
scheduled, notice of the date, time and place for the hearing will be 
published in the Federal Register.

Drafting Information

    The principal author of these regulations is Nathan Rosen, Office 
of Associate Chief Counsel (Procedure and Administration), 
Administrative Provisions and Judicial Practice Division.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 301

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

Proposed Amendments to the Regulations

    Accordingly, 26 CFR parts 1 and 301 are proposed to be amended as 
follows:

PART 1--INCOME TAXES

    Par. 1. The authority citation for part 1 continues to read in part 
as follows:

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

    Par. 2. Section 1.170A-11 is amended by revising paragraph (b)(2) 
to read as follows:


Sec.  1.170A-11  Limitation on, and carryover of, contributions by 
corporations.

* * * * *
    (b) * * *
    (2) [The text of the proposed amendment to Sec.  1.170A-11(b)(2) is 
the same as the text of Sec.  1.170A-11T(b)(2) published elsewhere in 
this issue of the Federal Register].
* * * * *
    Par. 3. Section 1.556-2 is amended by:
    1. Revising paragraph (e)(2)(vii).
    2. Adding paragraph (e)(3).
    The revision and addition read as follows:


Sec.  1.556-2  Adjustments to taxable income.

* * * * *
    (e) * * *
    (2) * * *
    (vii) [The text of the proposed amendment to Sec.  1.556-
2(e)(2)(vii) is the same as the text of Sec.  1.556-2T(e)(2)(vii) 
published elsewhere in this issue of the Federal Register.
* * * * *
    (3) [The text of the proposed amendment to Sec.  1.556-2(e)(3) is 
the same as the text of Sec.  1.556-2T(e)(3) published elsewhere in 
this issue of the Federal Register].
* * * * *
    Par. 4. Section 1.565-1 is amended by revising paragraph (b)(3) to 
read as follows:


Sec.  1.565-1  General rule.

* * * * *
    (b) * * *
    (3) [The text of the proposed amendment to Sec.  1.565-1(b)(3) is 
the same as the text of Sec.  1.565-1T(b)(3) published elsewhere in 
this issue of the Federal Register].
* * * * *
    Par. 5. Section 1.936-7 is amended by revising paragraph (b), Q.&A. 
1 to read as follows:


Sec.  1.936-7  Manner of making elections under section 936(h)(5); 
special election for export sales; revocation of election under section 
936(a).

* * * * *
    (b) * * *
    Q.& A. 1 [The text of the proposed amendment to Sec.  1.936-7(b), 
Q.& A. 1 is the same as the text of Sec.  1.936-7T(b), Q.& A. 1, 
published elsewhere in the issue of the Federal Register].
* * * * *
    Par. 6. Section 1.1017-1 is amended by revising paragraph 
(g)(2)(iii)(B) to read as follows:


Sec.  1.1017-1  Basis reductions following a discharge of indebtedness.

* * * * *

[[Page 70749]]

    (g) * * *
    (2) * * *
    (iii) * * *
    (B) [The text of the proposed amendment to Sec.  1.1017-
1(g)(2)(iii)(B) is the same as the text of Sec.  1.1017-
1T(g)(2)(iii)(B) published elsewhere in this issue of the Federal 
Register].
* * * * *
    Par. 7. Section 1.1368-1 is amended by revising paragraphs 
(f)(5)(iii) and (g)(2)(iii) to read as follows:


Sec.  1.1368-1  Distributions by S corporations.

* * * * *
    (f) * * *
    (5) * * *
    (iii) [The text of the proposed amendment to Sec.  1.1368-
1(f)(5)(iii) is the same as the text of Sec.  1.1368-1T(f)(5)(iii) 
published elsewhere in this issue of the Federal Register].
* * * * *
    (g) * * *
    (2) * * *
    (iii) [The text of the proposed amendment to Sec.  1.1368-
1(g)(2)(iii) is the same as the text of Sec.  1.1368-1T(g)(2)(iii) 
published elsewhere in this issue of the Federal Register].
* * * * *
    Par. 8. Section 1.1377-1 is amended by revising paragraph 
(b)(5)(i)(C) to read as follows:


Sec.  1.1377-1  Pro rata share.

* * * * *
    (b) * * *
    (5) * * *
    (i) * * *
    (C) [The text of the proposed amendment to Sec.  1.1377-
1(b)(5)(i)(C) is the same as the text of Sec.  1.1377-1T(b)(5)(i)(C) 
published elsewhere in this issue of the Federal Register].
* * * * *
    Par. 9. Section 1.1502-21 is amended by revising paragraphs 
(b)(2)(iii), (b)(3)(i) and (b)(3)(ii)(B) to read as follows:


Sec.  1.1502-21  Net operating losses.

* * * * *
    (b)(2)(iii) [The text of the proposed amendment to Sec.  1.1502-
21(b)(2)(iii) is the same as the text of Sec.  1.1502-21T(b)(2)(iii) 
published elsewhere in this issue of the Federal Register].
* * * * *
    (3) * * * (i) [The text of the proposed amendment to Sec.  1.1502-
21(b)(3)(i) is the same as the text of Sec.  1.1502-21T(b)(3)(i) 
published elsewhere in this issue of the Federal Register].
    (ii) * * *
    (B) [The text of the proposed amendment to Sec.  1.1502-
21(b)(3)(ii)(B) is the same as the text ofSec.  1.1502-21T(b)(3)(ii)(B) 
published elsewhere in this issue of the Federal Register.
* * * * *
    Par. 10. Section 1.1502-75 is amended by revising paragraph (h)(2) 
to read as follows:


Sec.  1.1502-75  Filing of consolidated returns.

* * * * *
    (h) * * *
    (2) [The text of the proposed amendment to Sec.  1.1502-75(h)(2) is 
the same as the text of Sec.  1.1502-75T(h)(2) published elsewhere in 
the issue of the Federal Register].
* * * * *
    Par. 11. Section 1.1503-2 is amended by revising paragraphs 
(g)(2)(i), (g)(2)(iv)(B)(3)(iii) and (g)(2)(vi)(B) to read as follows:


Sec.  1.1503-2  Dual consolidated loss.

* * * * *
    (g) * * *
    (2) * * * (i) [The text of the proposed amendment to Sec.  1.1503-
2(g)(2)(i) is the same as the text of Sec.  1.1503-2T(g)(2)(i) 
published elsewhere in this issue of the Federal Register].
* * * * *
    (iv) * * *
    (B) * * *
    (3) * * *
    (iii) [The text of the proposed amendment to Sec.  1.1503-
2(g)(2)(iv)(B)(3)(iii) is the same as the text of Sec.  1.1503-
2T(g)(2)(iv)(B)(3)(iii) published elsewhere in this issue of the 
Federal Register].
* * * * *
    (vi) * * *
    (B) [The text of the proposed amendment to Sec.  1.1503-
2(g)(2)(vi)(B) is the same as the text of Sec.  1.1503-2T(g)(2)(vi)(B) 
published elsewhere in this issue of the Federal Register].
* * * * *
    Par. 12. Section 1.6038B-1 is amended by revising paragraphs 
(b)(1)(i) and (b)(1)(ii) to read as follows:


Sec.  1.6038B-1  Reporting of certain transfers to foreign 
corporations.

* * * * *
    (b) * * * (1) * * * (i) [The text of the proposed amendments to 
Sec.  1.6038B-1(b)(1)(i) is the same as the text of Sec.  1.6038B-
1T(b)(1)(i) published elsewhere in this issue of the Federal Register].
    (ii) [The text of the proposed amendment to Sec.  1.6038B-
1(b)(1)(ii) is the same as the text of Sec.  1.6038B-1T(b)(1)(ii) 
published elsewhere in this issue of the Federal Register].
* * * * *

PART 301--PROCEDURE AND ADMINISTRATION

    Par. 13. The authority citation for part 301 continues to read as 
follows:

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

    Par. 14. Section 301.7701-3 is amended by revising paragraph 
(c)(1)(ii) to read as follows:


Sec.  301.7701-3  Classification of certain business entities.

* * * * *
    (c) * * * (1) * * *
    (ii) [The text of the proposed amendment to Sec.  301.7701-3 
(c)(1)(ii) is the same as the text of Sec.  301.7701-3T(c)(1)(ii) 
published elsewhere in this issue of the Federal Register].
* * * * *

Robert E. Wenzel,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 03-31239 Filed 12-18-03; 8:45 am]
BILLING CODE 4830-01-P