[Federal Register Volume 72, Number 215 (Wednesday, November 7, 2007)]
[Proposed Rules]
[Pages 62805-62807]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-21727]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 301

[REG-209020-86]
RIN 1545-AC09


Foreign Tax Credit: Notification of Foreign Tax Redeterminations

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Partial withdrawal of notice of proposed rulemaking and notice 
of proposed rulemaking by cross-reference to temporary regulations.

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

SUMMARY: This document withdraws portions of the notice of proposed 
rulemaking published on June 23, 1988, relating to sections 905(c) and 
6689 (the 1988 proposed regulations). In addition, in the Rules and 
Regulations section of this issue of the Federal Register, the IRS and 
the Treasury Department are issuing temporary regulations relating to a 
taxpayer's obligation under section 905(c) of the Internal Revenue Code 
to

[[Page 62806]]

notify the IRS of a foreign tax redetermination. The IRS and the 
Treasury Department are also issuing temporary regulations on Procedure 
and Administration under section 6689 relating to the civil penalty for 
failure to notify the IRS of a foreign tax redetermination as required 
under section 905(c). These temporary regulations affect taxpayers that 
have paid foreign taxes which have been redetermined and provide 
guidance needed to comply with statutory changes made to the applicable 
law by the Taxpayer Relief Act of 1997 and the American Jobs Creation 
Act of 2004. The text of those temporary 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 February 5, 2008.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-209020-86), room 
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered between the 
hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-209020-90), Courier's 
Desk, Internal Revenue Service, 1111 Constitution Ave., NW., 
Washington, DC or sent electronically via the Federal eRulemaking 
Portal at www.regulations.gov (IRS REG-209020-86).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Teresa Burridge Hughes, (202) 622-3850 (not a toll-free number); 
concerning the submission of comments, Kelly Banks, (202) 622-7180 (not 
a toll-free number).

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 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 
January 7, 2008. Comments are specifically requested concerning:
    Whether the proposed collections of information is necessary for 
the proper performance of the functions of the IRS, including whether 
the information will have practical utility;
    The accuracy of the estimated burden associated with the proposed 
collections 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 or start-up costs and costs of operation, 
maintenance, and purchase of service to provide information.
    The collections of information in this notice of proposed 
rulemaking are in Sec.  1.905-4. This information is required to enable 
the IRS to verify the amounts of the foreign tax redeterminations and 
to determine the amount of the penalty under section 6689, if a 
taxpayer fails to notify the IRS of a foreign tax redetermination. This 
information will be used by the IRS for examination purposes. The 
collections of information are mandatory. The likely respondents are 
individuals and business or other for-profit institutions.
    Estimated total annual reporting: 54,000 hours.
    The estimated annual burden per respondent varies from 3 hours to 8 
hours, depending on individual circumstances, with an estimated average 
of 4.2 hours.
    Estimated number of respondents: 13,000.
    Estimated 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, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background and Explanation of Provisions

    On June 23, 1988, the IRS published in the Federal Register a 
notice of proposed rulemaking (53 FR 23659) (INTL-061-86) (the 1988 
proposed regulations) that would have provided rules with respect to 
the time and manner of reporting a foreign tax redetermination and to 
the penalty under section 6689. Written comments were received; 
however, no hearing was requested or held. Subsequently, section 
1102(a)(1) and 1102(a)(2) of the Taxpayer Relief Act of 1997, Public 
Law 105-34 (111 Stat. 788, 963-966 (1997)), amended section 905(c), 
effective for taxes paid or accrued in taxable years beginning after 
December 31, 1997. Subsequently, section 408(a) of the American Jobs 
Creation Act of 2004, Public Law 108-357 (118 Stat. 1418, 1499 (2004)), 
modified section 986(a), effective for taxable years beginning after 
December 31, 2004. In light of the comments received on the 1988 
proposed regulations and the statutory changes to sections 905(c) and 
986(a), sections of the 1988 proposed regulations are revised and other 
sections are withdrawn. 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 also has 
been determined that section 553(b) of the Administrative Procedure Act 
(5 U.S.C. chapter 5) does not apply to the following regulations, 
Sec. Sec.  1.905-3, 1.905-4, 1.905-5, and 301.6689-1. With respect to 
Sec.  1.905-4, it is hereby certified that this regulation 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 requirement under Sec.  1.905-4 that is imposed on small 
entities flows directly from section 905(c), which states that, ``[T]he 
taxpayer shall notify the Secretary,'' of a foreign tax redetermination 
that may result in a redetermination of the taxpayer's United States 
tax liability. In order for the taxpayer to satisfy this notification 
requirement, information with respect to all foreign tax 
redeterminations must be collected. Therefore, a regulatory flexibility 
analysis is not required. 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 their 
impact on small businesses.

Comments and Requests for a 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. All

[[Page 62807]]

comments will be available for public inspection and copying. A public 
hearing may be scheduled if requested in writing by any person that 
timely submits written or electronic 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 this document is Teresa Burridge Hughes, 
Office of Associate Chief Counsel (International). However, other 
personnel from the IRS and the Treasury Department participated in its 
development.

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.

Partial Withdrawal of a Notice of Proposed Rulemaking

    Under the authority of 26 U.S.C. 7805, Sec.  1.905-3(d)(2)(iii) and 
(iv) and Sec.  1.905-3(d)(4) of the notice of proposed rulemaking 
(INTL-061-86, REG-209020-86) published in the Federal Register on June 
23, 1988 (53 FR 23659) are withdrawn.

Proposed Amendments to the Regulations

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

PART 1--INCOME TAXES

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

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

    Par. 2. Section 1.905-3 is added to read as follows:


Sec.  1.905-3  Adjustments to United States tax liability and to the 
pools of post-1986 undistributed earnings and post-1986 foreign income 
taxes as a result of a foreign tax redetermination.

    [The text of this section is the same as the text of Sec.  1.905-
3T(a) through (e) published elsewhere in this issue of the Federal 
Register.]
    Par. 3. Section 1.905-4 is added to read as follows:


Sec.  1.905-4  Notification of foreign tax redetermination.

    [The text of this section is the same as the text of Sec.  1.905-
4T(a) through (f)(2) published elsewhere in this issue of the Federal 
Register.]


Sec.  1.905-5  Foreign tax redeterminations and currency translation 
rules for foreign tax redeterminations occurring in taxable years 
beginning prior to January 1, 1987 (temporary).

    [The text of this section is the same as the text of Sec.  1.905-
5T(a) through (f) published elsewhere in this issue of the Federal 
Register.]

PART 301--PROCEDURE AND ADMINISTRATION

    Par. 4. The citation authority for part 301 continues to read as 
follows:

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

    Par. 5. Section 301.6689-1 is added to read as follows:


Sec.  301.6689-1  Failure to file notice of redetermination of foreign 
tax.

    (a) [The text of the proposed amendments to Sec.  301.6689-1(a) is 
the same as the text of Sec.  301.6689-1T(a) published elsewhere in 
this issue of the Federal Register.]
    (b) through (d) [Reserved]. For further guidance, see Sec.  
301.6689-1T(b) through (d).
    (e) [The text of the proposed amendments to Sec.  301.6689-1(e)(1) 
is the same as the text of Sec.  301.6689-1T(e)(1) published elsewhere 
in this issue of the Federal Register.]

Kevin M. Brown,
Deputy Commissioner for Services and Enforcement.
 [FR Doc. E7-21727 Filed 11-6-07; 8:45 am]
BILLING CODE 4830-01-P