[Federal Register Volume 73, Number 129 (Thursday, July 3, 2008)]
[Proposed Rules]
[Pages 38162-38163]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-14918]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-138355-07]
RIN 1545-BG98


Modifications to Subpart F Treatment of Aircraft and Vessel 
Leasing Income

AGENCY: Internal Revenue Service (IRS), Treasury.

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

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SUMMARY: In the Rules and Regulations section of this issue of the 
Federal Register, the IRS is issuing temporary regulations relating to 
the subpart F treatment of aircraft and vessel leasing income under 
sections 954 and 956 of the Internal Revenue Code (Code) and the 
transfer of tangible property incorporated in aircraft and vessels that 
are used predominantly outside the United States under section 367 of 
the Code. The regulations reflect statutory changes made by section 415 
of the American Jobs Creation Act of 2004 (AJCA). In general, the 
regulations will affect United States shareholders of controlled 
foreign corporations that derive income from the leasing of aircraft or 
vessels in foreign commerce and that transfer property subject to these 
leases to a foreign corporation. 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 October 1, 2008.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-138355-07), Internal 
Revenue Service, PO 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-138355-07), Courier's Desk, Internal 
Revenue Service, 1111 Constitution Avenue, NW., Washington, DC., or 
sent electronically, via the Federal eRulemaking Portal at http://www.regulations.gov (IRS-REG-138355-07).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations 
under section 367, John H. Seibert, at (202) 622-3860; concerning the 
proposed regulations under section 954 or 956, Paul J. Carlino at (202) 
622-3840; concerning submissions of comments or a public hearing, 
Richard Hurst, at (202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION: 

Background and Explanation of Provisions

    Temporary regulations in this issue of the Federal Register provide 
guidance under section 367 of the Code, relating to the nonrecognition 
of gain on certain property transferred to a foreign corporation if the 
property is used by the foreign corporation in the active conduct of a 
trade or business outside of the United States. The regulations also 
provide guidance under section 954 relating to the determination of 
whether rents derived from leasing an aircraft or vessel in foreign 
commerce will be treated as derived in the active conduct of a trade or 
business under section 954(c)(2)(A), and section 956, relating to 
whether an aircraft or vessel used in the transportation of persons or 
property in foreign commerce is excluded from U.S. property. The text 
of the temporary regulations also serves as the text of these proposed 
regulations. 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 has also 
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 proposed regulation does not impose a collection of information on 
small entities, the Regulatory Flexibility Act (5 U.S.C. Ch. 6) does 
not apply.

[[Page 38163]]

Pursuant to section 7805(f) of the 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.

Drafting Information

    The principal authors of these regulations are John H. Seibert and 
Paul J. Carlino, Office of Associate Chief Counsel (International). 
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 continues to read in 
part as follows:

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

    Par. 2. In Sec.  1.367(a)-2 is added to read as follows:


Sec.  1.367(a)-2  Exception for transfers of property for use in the 
active conduct of a trade or business.

    [The text of the proposed Sec.  1.367(a)-2 is the same as the text 
for Sec.  1.367(a)-2T(a) through (e)(2) published elsewhere in this 
issue of the Federal Register.]
    Par. 3. In Sec.  1.367(a)-4 is added to read as follows:


Sec.  1.367(a)-4  Special rules applicable to specified transfers of 
property (temporary).

    [The text of the proposed Sec.  1.367(a)-4 is the same as the text 
for Sec.  1.367(a)-4T(a) through (i)(1) published elsewhere in this 
issue of the Federal Register.]
    Par. 4. In Sec.  1.367(a)-5 is added to read as follows:


Sec.  1.367(a)-5  Property subject to section 367(a)(1) regardless of 
use in trade or business.

    [The text of the proposed Sec.  1.367(a)-5 is the same as the text 
for Sec.  1.367(a)-5T(a) through (f)(3)(ii) published elsewhere in this 
issue of the Federal Register.]
    Par. 5. Section 1.954-2(c)(2)(ii), (c)(2)(v) and (c)(3) Example 6 
and (i) are revised to read as follows:


Sec.  1.954-2  Foreign personal holding company income.

* * * * *
    (c) * * *
    (2) * * *
    (ii) [The text of the proposed amendment to Sec.  1.954-2(c)(2)(ii) 
is the same as the text of Sec.  1.954-2T(c)(2)(ii) published elsewhere 
in this issue of the Federal Register.]
* * * * *
    (v) [The text of the proposed amendment to Sec.  1.954-2(c)(2)(v) 
is the same as the text for Sec.  1.954-2T(c)(2)(v) published elsewhere 
in this issue of the Federal Register.]
    (vi) [The text of the proposed amendment to Sec.  1.954-2(c)(2)(vi) 
is the same as the text for Sec.  1.954-2T(c)(2)(vi) published 
elsewhere in this issue of the Federal Register.]
    (vii) [The text of the proposed amendment to Sec.  1.954-
2(c)(2)(vii) is the same as the text for Sec.  1.954-2T(c)(2)(vii) 
published elsewhere in this issue of the Federal Register.]
    (3) * * *
    Example 6. [The text of the proposed amendment to Sec.  1.954-
2(c)(3) Example 6 is the same as the text for Sec.  1.954-2T(c)(3) 
Example 6 published elsewhere in this issue of the Federal Register.]
    (i) [The text of the proposed amendment to Sec.  1.954-2(c)(3)(i) 
is the same as the text for Sec.  1.954-2T(c)(3)(i) published elsewhere 
in this issue of the Federal Register.]
    Par. 6. Section 1.956-2(b)(1)(vi) and (e) are revised to read as 
follows:


Sec.  1.956-2  Definition of United States Property.

* * * * *
    (b) * * *
    (1) * * *
    (vi) [The text of the proposed amendment to Sec.  1.956-2(b)(1)(vi) 
is the same as the text for Sec.  1.956-2T(b)(1)(vi) published 
elsewhere in this issue of the Federal Register.]
* * * * *
    (e) [The text of the proposed amendment to Sec.  1.956-2(e) is the 
same as the text of Sec.  1.956-2T(e) published elsewhere in this issue 
of the Federal Register].

Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
[FR Doc. E8-14918 Filed 7-2-08; 8:45 am]
BILLING CODE 4830-01-P