[Federal Register Volume 72, Number 218 (Tuesday, November 13, 2007)]
[Rules and Regulations]
[Pages 63806-63807]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-22137]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9364]
RIN 1545-BG59


Information Reporting on Employer-Owned Life Insurance Contracts

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations.

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SUMMARY: This document contains temporary regulations concerning 
information reporting on employer-owned life insurance contracts under 
section 6039I of the Internal Revenue Code (Code). This temporary 
regulation is necessary to provide taxpayers with immediate guidance as 
to how the requirements of section 6039I should be applied. 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 these temporary regulations also serves as the text of 
proposed regulations set forth in the notice of proposed rulemaking on 
this subject elsewhere in this issue of the Federal Register.

DATES: Effective Date: These regulations are effective on November 13, 
2007.
    Applicability Date: For date of applicability, see Sec.  1.6039I-
1T(b).

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Linda K. 
Boyd, 202-622-3970 (not a toll-free number).

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 (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

[[Page 63807]]

under section 101(a)(1) shall not exceed an amount equal to the sum of 
the premiums and other amounts paid by the policyholder for the 
contract. For this purpose, an employer-owned life insurance contract 
is a life insurance contract that (i) is owned by a person engaged in a 
trade or business and under which such person is directly or indirectly 
a beneficiary under the contract, and (ii) covers the life of an 
insured who is an employee with respect to the trade or business on the 
date the contract is issued. An applicable policyholder is generally a 
person who owns an employer-owned life insurance contract, or a related 
person as described in section 101(j)(3).
    Section 101(j)(2) provides exceptions to the general rule of 
section 101(j)(1) in the case of certain employer-owned life insurance 
contracts with respect to which certain notice and consent requirements 
are met. Those exceptions are based either on (i) the insured's status 
as an employee within 12 months of death or as a highly compensated 
employee or highly compensated individual, or (ii) the extent to which 
death benefits are paid to a family member, trust, or estate of the 
insured employee, or are used to purchase an equity interest in the 
applicable policyholder from a family member, trust or estate.
    Section 6039I provides that every applicable policyholder that owns 
one or more employer-owned life insurance contracts shall file a 
return, at such time and in such manner as the Secretary shall 
prescribe by regulations, showing for each year the contracts are 
owned--
    (1) The number of employees of the applicable policyholder at the 
end of the year;
    (2) The number of such employees insured under such contracts at 
the end of the year;
    (3) The total amount of insurance in force at the end of the year 
under such contracts;
    (4) The name, address, and taxpayer identification number of the 
applicable policyholder and the type of business in which the 
policyholder is engaged; and
    (5) That the policyholder has a valid consent for each insured 
employee (or, if not all such consents are obtained, the number of 
insured employees for whom such consent was not obtained).
    Section 6039I(c) provides that any term used in section 6039I that 
is used in section 101(j) has the same meaning given that term by 
section 101(j).
    Sections 101(j) and 6039I apply to life insurance contracts issued 
after August 17, 2006, except for a contract issued after that date 
pursuant to a section 1035 exchange for a contract issued before that 
date. For this purpose, a material increase in the death benefit or 
other material change causes the contract to be treated as a new 
contract except that, in the case of a master contract within the 
meaning of section 264(f)(4)(E), the addition of covered lives is 
treated as a new contract only with respect to those additional covered 
lives.
    These temporary regulations provide that the Commissioner may 
prescribe the form and manner of satisfying the reporting requirements 
imposed by section 6039I on applicable policyholders owning one or more 
employer-owned life insurance contracts issued after August 17, 2006. 
The regulations are effective on November 13, 2007, and apply to 
taxable years ending after that date.

Special Analyses

    It has been determined that this temporary 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 temporary 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.

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.

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 is amended by adding an 
entry in numerical order to read in part as follows:

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


0
Par. 2. Section 1.6039I-1T is added to read as follows:


Sec.  1.6039I-1T  Reporting of certain employer-owned life insurance 
contracts (temporary).

    (a) In general. The Commissioner may prescribe the form and manner 
of satisfying the reporting requirements imposed by section 6039I on 
applicable policyholders owning one or more employer-owned life 
insurance contracts issued after August 17, 2006.
    (b) Effective/applicability date. These regulations are applicable 
for tax years ending after November 13, 2007.
    (c) Expiration date. The applicability of this section expires on 
or before November 9, 2010.

Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
    Approved: November 2, 2007.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
 [FR Doc. E7-22137 Filed 11-9-07; 8:45 am]
BILLING CODE 4830-01-P