[Federal Register Volume 76, Number 211 (Tuesday, November 1, 2011)]
[Proposed Rules]
[Pages 67384-67385]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-28177]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 31 and 301

[REG-136565-09]
RIN 1545-BJ06


Extending Religious and Family Member FICA and FUTA Exceptions To 
Disregard Entities

AGENCY: Internal Revenue Service (IRS), Treasury.

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

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SUMMARY: In the Rules and Regulations section of this issue of the 
Federal Register, the IRS is issuing temporary regulations to extend 
the exceptions from taxes under the Federal Insurance Contributions Act 
(``FICA'') and the Federal Unemployment Tax Act (``FUTA'') under 
sections 3121(b)(3), 3127, and 3306(c)(5) to entities that are 
disregarded as separate from their owners for federal tax purposes. The 
temporary regulations also clarify the existing rule that the owners of 
disregarded entities, except for qualified subchapter S subsidiaries, 
are responsible for backup withholding and related information 
reporting requirements under section 3406. The text of those 
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 30, 2012.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG-136565-09), 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. to 4 p.m. to CC:PA:LPD:PR (REG-
136565-09), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Ave. NW., Washington, DC. Alternatively, taxpayers may submit 
electronic comments via the Federal eRulemaking Portal at http://www.regulations.gov (indicate IRS and REG-136565-09).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Joseph Perera, at (202) 622-6040; concerning submissions of comments or 
requests for a hearing, Oluwafunmilayo (Funmi) Taylor at (202) 622-7180 
(not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

    Temporary regulations in the Rules and Regulations section of this 
issue of the Federal Register contain amendments to Employment Tax 
Regulations (26 CFR part 31) and the Procedure and Administration 
Regulations (26 CFR part 301). The text of those regulations also 
serves as the text of these proposed regulations. The preamble to the 
temporary regulations explains the temporary regulations and these 
proposed regulations. Generally, the regulations allow certain 
disregarded entities under Sec.  301.7701-2 that are treated as 
corporations for employment tax purposes, to qualify for the FICA and 
FUTA exceptions of sections 3121(b)(3), 3127, and 3306(c)(5) by 
treating the owner of the disregarded entity as the employer for 
purposes of applying those sections. Additionally, the regulations 
clarify the existing rule that the owners of disregarded entities, 
other than qualified subchapter S subsidiaries are responsible for 
backup withholding and related information reporting requirements on 
reportable payments.

Proposed Effective/Applicability Date

    The regulations, as proposed, apply to wages paid on or after 
November 1, 2011.
    However, the rules in these proposed regulations may be relied on 
by taxpayers for wages paid after December 31, 2008.

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 regulations do not impose a collection of information on small 
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
apply. Pursuant to section 7805(f) of the Code, this notice of proposed 
rulemaking will be submitted to the Chief Counsel for Advocacy of the 
Small Business Administration for comment on its impact on small 
business.

Comments and 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 made available for public inspection and copying.

Drafting Information

    The principal author of these regulations is Joseph Perera, Office 
of Associate Chief Counsel (Tax Exempt & Government Entities).

List of Subjects

26 CFR Part 31

    Employment taxes, Income Taxes, Penalties, Pensions, Railroad 
retirement, Reporting and recordkeeping requirements, Social Security, 
Unemployment compensation.

26 CFR Part 301

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

Proposed Amendments to the Regulations

    Accordingly, 26 CFR parts 31 and 301 are proposed to be amended as 
follows:

PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE

    Paragraph 1. The authority citation for part 31 continues to read 
in part as follows:

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

[[Page 67385]]

    Par. 2. Section 31.3121(b)(3)-1 is amended by:
    1. Revising paragraph (c).
    2. Adding paragraphs (d) and (e).
    The revision and addition read as follows:


Sec.  31.3121(b)(3)-1  Family Employment.

* * * * *
    (c) [The text of the proposed amendment to Sec.  31.3121(b)(3)-1(c) 
is the same as the text of Sec.  31.3121(b)(3)-1T(c) published 
elsewhere in this issue of the Federal Register].
    (d) [The text of the proposed amendment to Sec.  31.3121(b)(3)-1(d) 
is the same as the text of Sec.  31.3121(b)(3)-1T(d) published 
elsewhere in this issue of the Federal Register].
    (e) [The text of the proposed amendment to Sec.  31.3121(b)(3)-1(e) 
is the same as the text of Sec.  31.3121(b)(3)-1T(e) published 
elsewhere in this issue of the Federal Register].
    Par. 3. Section 31.3127-1 is added to read as follows:


Sec.  31.3127-1  Exceptions for employers and their employees where 
both are members of religious faiths opposed to participation in Social 
Security Act programs.

    [The text of the proposed Sec.  31.3127-1 is the same as the text 
of Sec.  31.3127-1T published elsewhere in this issue of the Federal 
Register].
    Par. 4. Section 31.3306(c)(5)-1 is amended by:
    1. Revising paragraph (c).
    2. Adding paragraphs (d) and (e).
    The revision and addition read as follows:


Sec.  31.3306(c)(5)-1  Family Employment.

* * * * *
    (c) [The text of the proposed amendment to Sec.  31.3306(c)(5)-1(c) 
is the same as the text of Sec.  31.3306(c)(5)-1T(c) published 
elsewhere in this issue of the Federal Register].
    (d) [The text of the proposed amendment to Sec.  31.3306(c)(5)-1(d) 
is the same as the text of Sec.  31.3306(c)(5)-1T(d) published 
elsewhere in this issue of the Federal Register].
    (e) [The text of the proposed amendment to Sec.  31.3306(c)(5)-1(e) 
is the same as the text of Sec.  31.3306(c)(5)-1T(e) published 
elsewhere in this issue of the Federal Register].

PART 301--PROCEDURE AND ADMINISTRATION

    Par. 5. The authority citation for part 301 continues to read in 
part as follows:

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

    Par. 6. Section 301.7701-2 is amended by:
    1. Revising paragraph (c)(2)(iv)(A).
    2. Redesignating paragraph (c)(2)(iv)(C) as paragraph (c)(2)(iv)(D) 
and adding new paragraph (c)(2)(iv)(C).
    3. Adding a sentence at the end of paragraph (e)(5).
    The additions and revisions read as follows:


Sec.  301.7701-2  Business entities; definitions.

* * * * *
    (c) * * *
    (2) * * *
    (iv) * * *
    (A) [The text of the proposed amendment to Sec.  301.7701-
2(c)(2)(iv)(A) is the same as the text of Sec.  301.7701-
2T(c)(2)(iv)(A) published elsewhere in this issue of the Federal 
Register].
    (B) * * *
    (C) [The text of the proposed amendment to Sec.  301.7701-
2(c)(2)(iv)(C) is the same as the text of Sec.  301.7701-
2T(c)(2)(iv)(C) published elsewhere in this issue of the Federal 
Register].
* * * * *
    (e) * * *
    (5) * * * [The text of the proposed amendment to Sec.  301.7701-
2(e)(5) is the same as the text of Sec.  301.7701-2T(e)(5) published 
elsewhere in this issue of the Federal Register].
* * * * *

Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2011-28177 Filed 10-31-11; 8:45 am]
BILLING CODE 4830-01-P