[Federal Register Volume 73, Number 56 (Friday, March 21, 2008)]
[Rules and Regulations]
[Pages 15064-15065]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-5686]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 9388]
RIN 1545-BH24


Classification of Certain Foreign Entities

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

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SUMMARY: This document contains temporary and final regulations 
relating to certain business entities included on the list of foreign 
business entities that are always classified as corporations for 
Federal tax purposes. The regulations are needed to make the Federal 
tax classification of Bulgarian public limited liability companies 
consistent with the Federal tax classification of public limited 
liability companies organized in other countries of the European 
Economic Area. The regulations will affect persons owning an interest 
in a Bulgarian aktsionerno druzhestvo on or after January 1, 2007. The 
text of the temporary regulations serves as the text of the proposed 
regulations (REG-143468-07) set forth in the notice of proposed 
rulemaking on this subject in this issue of the Federal Register.

DATES: Effective Date: These regulations are effective on March 21, 
2008.
    Applicability Date: For the dates of applicability of these 
regulations, see Sec.  301.7701-2T(e)(7).

FOR FURTHER INFORMATION CONTACT: S. James Hawes, (202) 622-3860 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION: 

Background

    The IRS and the Treasury Department issued final regulations 
concerning the Federal tax classification of entities under section 
7701 of the Internal Revenue Code on December 18, 1996. See TD 8697 
(1997-1 CB 215; 61 FR 66584) and Sec. Sec.  301.7701-1 through 
301.7701-3. Under those regulations, a business entity that is not 
specifically classified as a corporation can elect its classification 
for Federal tax purposes under certain circumstances. Section 301.7701-
2(b)(8) provides a list of certain foreign business entities that are 
nevertheless always classified as corporations for Federal tax 
purposes. This list is known as the per se corporation list. The 
foreign business entities on this list are referred to as per se 
corporations. Recent changes in European law require the IRS and the 
Treasury Department to amend the per se list. See Sec.  
601.601(d)(2)(ii)(b).
    On October 8, 2001, the Council of the European Union adopted 
Council Regulation 2157/2001 (2001 Official Journal of the European 
Communities, L 294/1) (the EU Regulation) to provide for a new business 
entity called the European public limited liability company, which is 
also known as a Societas Europaea or SE. The EU Regulation entered into 
force October 8, 2004. The EU Regulation provides general rules that 
govern the formation and operation of an SE. With respect to many 
issues, however, the EU Regulation defers to the laws of the country in 
which the SE has its registered office. An SE must have a registered 
office in one of the Member States of the European Economic Area, which 
includes Norway, Iceland, Liechtenstein, and every country in the 
European Union. For further background, see TD 9197 (2005-1 CB 985; 70 
FR 19697) and Notice 2004-68 (2004-43 IRB 706). See Sec.  
601.601(d)(2)(ii)(b).
    The IRS and the Treasury Department stated in Notice 2004-68 that 
the SE is properly classified as a per se corporation for Federal tax 
purposes. Consequently, the IRS and the Treasury Department issued 
regulations modifying Sec.  301.7701-2(b)(8) to include the SE on the 
per se corporation list. Those regulations included certain public 
limited liability companies organized in Member States that did not 
already appear on the per se list. See TD 9197 and TD 9235 (2006-1 CB 
338; 70 FR 74658). With the entry of Bulgaria into the European Union 
on January 1, 2007, an SE can now have its registered office in 
Bulgaria.

Explanation of Provisions

    Bulgaria's SE is called an aktsionerno druzhestvo. The IRS and the 
Treasury Department stated in Notice 2007-10 (2007-4 IRB 354) that 
Sec.  301.7701-2(b)(8) would be modified to include the aktsionerno 
druzhestvo on the per se corporation list. The temporary regulations in 
this document make that

[[Page 15065]]

modification. In accordance with Notice 2007-10, these regulations will 
be effective for any Bulgarian aktsionerno druzhestvo formed on or 
after January 1, 2007.
    Notice 2007-10 also stated that the regulations would be effective 
for any Bulgarian aktsionerno druzhestvo formed before January 1, 2007, 
upon a 50 percent or greater change of ownership in such entity 
subsequent to that date. See section 7805(b)(1)(C) and Sec.  
601.601(d)(2)(ii)(b). The temporary regulations therefore provide that 
a Bulgarian aktsionerno druzhestvo formed before January 1, 2007, will 
become a per se corporation on the date that, in the aggregate, a 50 
percent or more interest in the entity is owned by a person or persons 
who were not owners of the entity as of January 1, 2007. In the case of 
a partnership, an interest means a capital or profits interest. In the 
case of a corporation, an interest means an equity interest in the 
entity measured by vote or value.
    The standard provided by these temporary regulations for 
determining the application of the regulations to a Bulgarian 
aktsionerno druzhestvo formed before January 1, 2007, clarifies the 
standard described in Notice 2007-10 and the standard to be applied 
with respect to entities listed in Sec.  301.7701-2(b)(8), including 
those entities listed in TD 8697, TD 9197, and TD 9235. Comments are 
requested with respect to this clarification.

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 has been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. Chapter 5) does not apply to this regulation. For the 
applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6), 
refer to the Special Analyses section of the preamble to the notice of 
proposed rulemaking published in this issue of the Federal Register. 
Pursuant to section 7805(f) of the Internal Revenue Code, these 
regulations have been submitted to the Chief Counsel for Advocacy of 
the Small Business Administration for comment on their impact.

Drafting Information

    The principal author of these regulations is S. James Hawes of the 
Office of Associate Chief Counsel (International); however, other 
personnel from the IRS and the Treasury Department participated in 
their development.

List of Subjects in 26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

Amendments to the Regulations

0
Accordingly, 26 CFR part 301 is amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

0
Paragraph 1. The authority citation for part 301 continues to read in 
part as follows:

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

0
Par. 2. Section 301.7701-2(b)(8)(vi) and (e)(7) are added and the 
paragraph heading for paragraph (e) is revised to read as follows:


Sec.  301.7701-2  Business entities; definitions.

* * * * *
    (b) * * *
    (8) * * *
    (vi) [Reserved]. For further guidance, see Sec.  301.7701-
2T(b)(8)(vi).
* * * * *
    (e) Effective/applicability date.* * *
    (7) [Reserved]. For further guidance, see Sec.  301.7701-2T(e)(7).
0
Par. 3. Section 301.7701-2T is added to read as follows:


Sec.  301.7701-2T  Business entities; definitions (temporary).

    (a) through (b)(8)(v) [Reserved]. For further guidance, see Sec.  
301.7701-2(a) through (b)(8)(v).
    (b)(8)(vi) Certain European entities. The following business entity 
formed in the following jurisdiction:
    Bulgaria, Aktsionerno Druzhestvo.
    (c) through (e)(6) [Reserved]. For further guidance, see Sec.  
301.7701-2(c) through (e)(6).
    (7) The reference to the Bulgarian entity in paragraph (b)(8)(vi) 
of this section applies to such entities formed on or after January 1, 
2007, and to any such entity formed before such date from the date 
that, in the aggregate, a 50 percent or more interest in such entity is 
owned by any person or persons who were not owners of the entity as of 
January 1, 2007. For purposes of the preceding sentence, the term 
interest means--
    (i) In the case of a partnership, a capital or profits interest; 
and
    (ii) In the case of a corporation, an equity interest measured by 
vote or value.
    (8) Expiration date. The applicability of this section expires on 
or before March 18, 2011.

Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
    Approved: March 12, 2008.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. E8-5686 Filed 3-20-08; 8:45 am]
BILLING CODE 4830-01-P