[Federal Register Volume 72, Number 23 (Monday, February 5, 2007)]
[Proposed Rules]
[Pages 5228-5230]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-496]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-147144-06]
RIN 1545-BG09


Certain Transfers of Stock or Securities by U.S. Persons to 
Foreign Corporations

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 under 
section 367(a) of the Internal Revenue Code (Code) regarding gain 
recognition agreements. These regulations are necessary to respond to 
comments requested in Notice 2005-74. The regulations primarily affect 
U.S. persons that transfer stock or securities to foreign corporations 
or corporations engaged in transactions that affect existing gain 
recognition agreements. 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.

DATES: Written or electronic comments and requests for a public hearing 
must be received by May 7, 2007.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-147144-06), 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-
147144-06), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC, or sent electronically, via the IRS 
Internet site at http://www.irs.gov/regs or via the Federal eRulemaking 
Portal at http://

[[Page 5229]]

www.regulations.gov (IRS REG-147144-06).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Daniel McCall, (202) 622-3860; concerning submissions of comments, 
requests for a public hearing, and/or to be placed on the building 
access list to attend a hearing, contact Richard Hurst at (202) 622-
7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collections of information contained in this notice of proposed 
rulemaking have 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 May 7, 2007.
    Comments are specifically requested concerning:
    Whether the proposed collections of information are 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;
    How the quality, utility, and clarity of the information to be 
collected may be enhanced;
    How the burden of complying with the proposed collections of 
information may be minimized, including through the application of 
automated collection techniques or other forms of information 
technology; and
    Estimates of capital and start-up costs of operation, maintenance, 
and purchase of service to provide information.
    The collections of information in this proposed regulation is in 
Sec.  1.367(a)-8(b)(3)(iii), (e)(1) through (e)(8), and (g). Responses 
to these collections of information are required to prevent triggering 
gain recognition agreements--for example, by submitting new gain 
recognition agreements or by submitting elections to reduce basis in 
certain stock. Responses are also required to facilitate electronic 
filing. These regulations include a rule requiring that gain or 
interest due under section 367(a) be included in a schedule that can be 
attached to a taxpayer's electronically-filed return. Response to these 
collections of information is mandatory. The likely respondents are 
large corporations.
    Estimated total annual reporting burden: 240.
    Estimated average annual burden hours per respondent: from 1 hour 
to 2 hours, depending on individual circumstances.
    Estimated number of respondents: 170.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information, unless the collection of 
information displays a valid control number assigned by the Office of 
Management and Budget.
    Books or records relating to these collections 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

    Temporary regulations in the Rules and Regulations section of this 
issue of the Federal Register amend the Income Tax Regulations (26 CFR 
part 1) relating to section 367(a) of the Internal Revenue Code (Code) 
and gain recognition agreements. 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.

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 is hereby certified that the collections of information 
contained in these regulations will not have a significant economic 
impact on a substantial number of small entities. Accordingly, a 
regulatory flexibility analysis is not required. These regulations 
primarily will affect United States persons that are large corporations 
engaged in cross-border corporate transactions. Thus, the number of 
affected small entities--in whichever of the three categories defined 
in the Regulatory Flexibility Act (small businesses, small 
organizations, and small governmental jurisdictions)--will not be 
substantial. The IRS and Treasury Department estimate that small 
organizations and small governmental jurisdictions are likely to be 
affected only insofar as they might hold a portfolio interest in stock 
or securities and in the unlikely event that they transfer such stock 
or securities to a foreign corporation. While a certain number of small 
entities may transfer stock or securities to a foreign corporation in 
connection with an acquisition or reorganization, the IRS and Treasury 
Department do not anticipate the number to be substantial. Furthermore, 
the IRS and Treasury Department estimate that those small entities that 
are affected by the regulations will likely face a burden of 
approximately two hours at an hourly rate of $200. Considering that the 
collections of information enable taxpayers to defer or avoid the 
recognition of potentially large amounts of gain that is subject to a 
gain recognition agreement, IRS and Treasury believe that $400 is not a 
significant economic impact. Comments about the accuracy of this 
certification may be submitted to the addresses provided in the 
preamble. Pursuant to section 7805(f) of the Internal Revenue Code, 
this regulation has been submitted to the Chief Counsel for Advocacy of 
the Small Business Administration for comment on its impact on small 
business.

Comments and Requests for a 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 rules and how they can be made 
easier to understand. For additional requests for comments, see the 
section ``Request for Comments,'' in the preamble to the cross-
referenced temporary regulations of this issue of the Federal Register. 
All comments will be available for public inspection and copying. A 
public hearing will be scheduled if requested in writing by any person 
that timely submits written comments. If a public hearing is scheduled, 
notice of the date, time, and place for the public hearing will be 
published in the Federal Register.

Drafting Information

    The principal author of these proposed regulations is Daniel McCall 
of the Office of Associate Chief Counsel

[[Page 5230]]

(International). However, other personnel from the IRS and the 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 citation for part 1 is amended by adding 
the following new entries:

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

    Section 1.367(a)-3T(e) also issued under 367(a) and (b).* * *
    Section 1.367(a)-8T also issued under 367(a) and (b).* * *
    Par. 2. Section 1.367(a)-3 is amended by revising paragraphs (e) 
and (f) to read as follows:


Sec.  1.367(a)-3  Treatment of transfers of stock or securities to 
foreign corporations.

* * * * *
    (e) [The text of this proposed amendment is the same as the text of 
Sec.  1.367(a)-3T(e) published elsewhere in this issue of the Federal 
Register].
    (f) [The text of this proposed amendment is the same as the text of 
Sec.  1.367(a)-3T(f) published elsewhere in this issue of the Federal 
Register].
* * * * *
    Par. 3. Section 1.367(a)-8 is revised to read as follows:


Sec.  1.367(a)-8  Gain recognition agreement requirements.

    [The text of proposed Sec.  1.367(a)-8 is the same as the text of 
Sec.  1.367(a)-8T published elsewhere in this issue of the Federal 
Register.]

Kevin M. Brown,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 07-496 Filed 2-1-07; 10:34 am]
BILLING CODE 4830-01-P