[Federal Register Volume 72, Number 145 (Monday, July 30, 2007)]
[Rules and Regulations]
[Pages 41441-41442]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-13489]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9336]
RIN 1545-BF82


Return Required by Subchapter T Cooperatives Under Section 6012

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations that prescribe the 
form that cooperatives must use to file their income tax returns. The 
regulations affect all cooperatives that are currently required to file 
an income tax return on either Form 1120, ``U.S. Corporation Income Tax 
Return,'' or Form 990-C, ``Farmers' Cooperative Association Income Tax 
Return.'' The new form will help the IRS to properly identify 
cooperatives and differentiate between cooperatives that must file 
returns within 2\1/2\ months of the end of the taxable year and those 
that must file within 8\1/2\ months of the end of the taxable year.

DATES: Effective date: July 30, 2007.
    Applicability date: These regulations apply to returns for taxable 
years ending on or after December 31, 2007. In addition, taxpayers may 
rely on the regulations in filing returns for taxable years ending on 
or after December 31, 2006, and before December 31, 2007.

FOR FURTHER INFORMATION CONTACT: Matthew P. Howard, (202) 622-4910 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION: 

Background

    Under existing regulations, all cooperatives to which subchapter T 
applies (Subchapter T cooperatives) are required to make income tax 
returns. Except in the case of farmers' cooperatives, the regulations 
require that the return be made on Form 1120. In the case of farmers' 
cooperatives, the regulations require that the return be made on Form 
990-C.
    Most taxpayers required to make an income tax return on Form 1120 
must file their return on or before the 15th day of the third month 
following the close of the taxpayer's taxable year (2\1/2\ month 
deadline). Some Subchapter T cooperatives that make their returns on 
Form 1120 are required to file by the 2\1/2\ month deadline, but others 
are not required to file their returns until the 15th day of the ninth 
month following the close of the taxpayer's taxable year

[[Page 41442]]

(8\1/2\ month deadline). Because the Form 1120 does not distinguish 
between Subchapter T cooperatives that must file by the 2\1/2\ month 
deadline and those that must file by the 8\1/2\ month deadline, the IRS 
has difficulty determining which filing deadline applies and deciding 
whether to assert delinquency and failure to pay penalties in the case 
of returns filed after the 2\1/2\ month deadline.

The Proposed Regulations

    On July 29, 2005, a notice of proposed rulemaking was published in 
the Federal Register (REG-149436-04, 70 FR 43811). The proposed 
regulations in this notice of proposed rulemaking would require all 
Subchapter T cooperatives to make their income tax returns on Form 
1120-C, ``U.S. Income Tax Return for Cooperative Associations,'' or 
such other form as may be designated by the Commissioner.
    One telephone comment was received in response to the notice of 
proposed rulemaking. The comment suggested that the new form might have 
a negative effect on consolidated filing. No public hearing was 
requested or held.

Explanation of Provisions

    After consideration of the comment, the proposed regulations are 
adopted as revised by this Treasury decision. The final regulations 
retain the requirement that Subchapter T cooperatives file their 
returns on Form 1120-C. The information that Subchapter T cooperatives 
will be required to provide on new Form 1120-C will assist taxpayers 
and the IRS in determining the appropriate filing deadline. Having that 
information will reduce the burden on taxpayers and will help the IRS 
avoid asserting penalties in inappropriate cases. Having all Subchapter 
T cooperatives make their income tax returns on Form 1120-C will also 
eliminate confusion over which form to file and will promote efficiency 
in addressing income tax issues common to Subchapter T cooperatives.
    The IRS and Treasury Department believe that this requirement will 
not have a negative effect on consolidated filing. Subchapter T 
cooperatives may continue to file returns on behalf of consolidated 
groups by indicating their filing status on Form 1120-C and complying 
with the regulations under section 1502 of the Internal Revenue Code 
(Code).
    This requirement to use Form 1120-C was proposed to be effective 
for taxable years ending on or after December 31, 2006. Because the 
regulations were not finalized before the end of 2006, the final 
regulations delay the proposed effective date. The final regulations 
apply beginning with the first taxable year ending on or after December 
31, 2007. Cooperatives may rely on the regulations as proposed, 
however, and file returns on Form 1120-C for taxable years ending on or 
after December 31, 2006, and before December 31, 2007.

Effect on Other Documents

    The following publications are removed as of July 30, 2007: 
Announcement 84-26, 1984-11 IRB 42. Announcement 84-37, 1984-17 IRB 32.

Special Analyses

    It has been determined that this Treasury decision 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, and because the 
regulation does not impose a collection of information on small 
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
apply. Pursuant to section 7805(f) of the Code, the notice of proposed 
rulemaking preceding this regulation was submitted to the Chief Counsel 
for Advocacy of the Small Business Administration for comment on its 
impact on small businesses.

Drafting Information

    The principal author of these regulations is Matthew P. Howard, 
Office of Assistant Chief Counsel (Procedure & Administration).

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read, in 
part, as follows:

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


0
Par. 2. Section 1.6012-2 is amended by revising paragraph (f) to read 
as follows:


Sec.  1.6012-2  Corporations required to make returns of income.

* * * * *
    (f) Subchapter T cooperatives--(1) In general. For taxable years 
ending on or after December 31, 2007, a cooperative organization 
described in section 1381 (including a farmers' cooperative exempt from 
tax under section 521) is required to make a return, whether or not it 
has taxable income and regardless of the amount of its gross income, on 
Form 1120-C, ``U.S. Income Tax Return for Cooperative Associations,'' 
or such other form as may be designated by the Commissioner.
    (2) Farmers' cooperatives. For taxable years ending before December 
31, 2007, a farmers' cooperative organization described in section 
521(b)(1) (including a farmers' cooperative that is not exempt from tax 
under section 521) is required to make a return on Form 990-C, 
``Farmers' Cooperative Association Income Tax Return.''
    (3) Effective/applicability date. This paragraph (f) is applicable 
on or after July 30, 2007.
* * * * *

Kevin M. Brown,
Deputy Commissioner of Services and Enforcement.
    Approved: June 27, 2007.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
 [FR Doc. E7-13489 Filed 7-27-07; 8:45 am]
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