[Federal Register Volume 72, Number 218 (Tuesday, November 13, 2007)]
[Proposed Rules]
[Pages 63838-63839]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-22136]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-115910-07]
RIN 1545-BG58


Information Reporting on Employer-Owned Life Insurance Contracts

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary 
regulations.

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SUMMARY: Elsewhere in this issue of the Federal Register, the IRS is 
issuing temporary regulations concerning information reporting on 
employer-owned life insurance contracts under section 6039I of the 
Internal Revenue Code (Code). The temporary regulations generally apply 
to taxpayers that are engaged in a trade or business and that are 
directly or indirectly a beneficiary of a life insurance contract 
covering the life of an insured who is an employee of the trade or 
business on the date the contract is issued. 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 January 14, 2008.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-115910-07), 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-
115910-07), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue, NW., Washington, DC, or sent via the Federal eRulemaking Portal 
at http://www.regulations.gov (IRS REG-115910-07).

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Linda K. 
Boyd, 202-622-3970; concerning submissions and requests for a public 
hearing, contact Kelly Banks, 202-622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

    The Pension Protection Act of 2006, Public Law 109-280, 120 Stat. 
780 (2006), added sections 101(j) and 6039I to the Internal Revenue 
Code concerning employer-owned life insurance contracts.
    Section 101(j)(1) provides that in the case of an employer-owned 
life insurance contract, the amount of death benefits excluded from 
gross income under section 101(a) shall not exceed an amount equal to 
the sum of the premiums and other amounts paid by the policyholder for 
the contract. Section 101(j)(2), however, sets forth exceptions to this 
rule for certain contracts for which notice and consent and other 
requirements are met. Section 6039I requires information reporting with 
respect to certain employer-owned life insurance contracts at such time 
and in such manner as the Secretary shall by regulations prescribe.
    Temporary regulations in this issue of the Federal Register provide 
that the Commissioner may prescribe the form and manner of satisfying 
the reporting requirements imposed by section 6039I. The preamble to 
the temporary regulations explains the temporary regulations.

Special Analyses

    It has been determined that this proposed regulation is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It has also been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to this regulation.
    The Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply 
to this proposed regulation because the regulation does not impose a 
collection of information on small entities. Even though a substantial 
number of small businesses may be subject to the requirements of 
section 6039I, it is anticipated that whatever requirements the 
Commissioner may prescribe pursuant to this regulation will not impose 
a ``significant economic impact'' because the information requested 
will already be available to taxpayers and the burden of compliance 
will be minimal.
    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 (a signed original and eight 
(8) copies) or electronic comments that are submitted timely to the 
IRS. The IRS and Treasury Department request comments on the clarity of 
the proposed rules and how they can be made easier to understand. 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.
    The IRS and Treasury Department are aware that guidance may be 
needed under section 101(j) and request comments on that provision as 
well. In particular, comments are requested on the need for guidance 
concerning (1)

[[Page 63839]]

determination of the status of insured individuals as ``highly 
compensated employees'' or ``highly compensated individuals''; (2) 
requirements a taxpayer must meet to satisfy the notice and consent 
requirements of section 101(j)(4); and (3) the consequences of a 
section 1035 exchange of an employer-owned life insurance contract. The 
IRS and Treasury Department anticipate that future guidance, if any, 
under section 101(j) will not be applied retroactively to the detriment 
of taxpayers who make a good faith effort to comply with section 101(j) 
based on a reasonable interpretation of that provision.

Drafting Information

    The principal author of these regulations is Linda K. Boyd, Office 
of Associate Chief Counsel (Financial Institutions & Products). 
However, other personnel from the IRS and 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 
an entry in numerical order to read in part as follows:

    Authority: 26 U.S.C. 7805 * * *
    Section 1.6039I-1 also issued under 26 U.S.C. 6039I. * * *

    Par. 2. Section 1.6039I-1 is added to read as follows:


Sec.  1. 6039I-1  Reporting of certain employer-owned life insurance 
contracts.

    [The text of this proposed section is the same as the text of Sec.  
1.6039I-1T published elsewhere in this issue of the Federal Register].

 Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
[FR Doc. E7-22136 Filed 11-9-07; 8:45 am]
BILLING CODE 4830-01-P