[Federal Register Volume 77, Number 80 (Wednesday, April 25, 2012)]
[Rules and Regulations]
[Pages 24611-24612]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-9887]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 31

[TD 9586]
RIN 1545-BK83


Removal of Regulations Requiring 3% Withholding by Government 
Entities

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document provides a Treasury decision that removes the 
final regulations contained in TD 9524 relating to withholding by 
government entities on payments to persons providing property or 
services, and makes conforming amendments to regulations to reflect the 
removal of these regulations. The final regulations are removed because 
the 3% Withholding Repeal and Job Creation Act repealed the provision 
of the Internal Revenue Code underlying the final regulations before 
the provision became effective. The guidance affects government 
entities that would have been required to withhold and report tax from 
payments to persons providing property or services and also affects the 
persons receiving payments for property or services from these 
government entities.

DATES: Effective Date: These regulations are effective on April 25, 
2012.
    Applicability Date: For dates of applicability, see Sec. Sec.  
31.6011(a)-4(d) and 31.6302-1(n).

FOR FURTHER INFORMATION CONTACT: A. G. Kelley, (202) 622-6040 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains amendments to 26 CFR part 31 under section 
3402(t) of the Internal Revenue Code (Code), relating to three percent 
withholding by government entities on payments for property or 
services. Section 3402(t) of the Code was added by section 511 of the 
Tax Increase Prevention and Reconciliation Act of 2005, Public Law 109-
222 (TIPRA), 120 Stat. 345, which was enacted on May 17, 2006. The 
Treasury Department and the IRS issued final regulations under sections 
3402(t), 3406, 6011, 6051, 6071, and 6302 of the Code that were 
published in the Federal Register on May 9, 2011 (TD 9524, 76 FR 26583, 
2011-23 IRB 843) (the May 2011 final regulations). Those regulations 
were issued to implement the requirements of section 3402(t) and 
conform existing regulations to section 3402(t).
    Section 102 of the 3% Withholding Repeal and Job Creation Act (Pub. 
L. 112-56, 125 Stat. 711), which was enacted on November 21, 2011, 
repealed section 3402(t) of the Code. Section 3402(t) was repealed 
before it became effective.
    This document, therefore, removes the regulatory provisions issued 
under section 3402(t) and related sections, and makes conforming 
amendments to certain regulations to reflect the removal of the section 
3402(t) regulations.
    At the same time as the issuance of the May 2011 final regulations, 
the Treasury Department and the IRS also issued proposed regulations 
under section 3402(t), published in the Federal Register on May 9, 2011 
(REG-151687-10, 76 FR 26678, 2011-23 IRB 867). A related document 
withdraws those proposed regulations in light of the repeal of section 
3402(t). See REG-151687-10.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866, as 
supplemented by Executive Order 13563. Therefore, a regulatory 
assessment is not required. It also has been determined that section 
553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does 
not apply to this regulation, and because no notice of proposed rule 
making is required for this rule, the Regulatory Flexibility Act (5 
U.S.C. chapter 6) does not apply.

Drafting Information

    The principal author of these final regulations is A. G. Kelley, 
Office of the Division Counsel/Associate Chief Counsel (Tax Exempt and 
Government Entities). However, other personnel from the IRS and the 
Treasury Department participated in their development.

List of Subjects in 26 CFR Part 31

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

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 31 is amended as follows:

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

0
Paragraph 1. The authority citation for part 31 continues to read in 
part as follows:

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


Sec. Sec.  31.3402 and 31.3406  [Amended]

0
Par. 2. The following sections and paragraphs are removed:
0
1. Remove section 31.3402(t)-0.
0
2. Remove section 31.3402(t)-1.
0
3. Remove section 31.3402(t)-2.
0
4. Remove section 31.3402(t)-3.
0
5. Remove section 31.3402(t)-4.
0
6. Remove section 31.3402(t)-5.
0
7. Remove section 31.3402(t)-6.
0
8. Remove section 31.3402(t)-7.
0
9. Remove paragraphs (h) and (i) of section 31.3406(g)-2.

0
Par. 3. Section 31.6011(a)-4 is amended by:
0
1. Revising paragraphs (b)(4), (b)(5), and (d).
0
2. Removing paragraph (b)(6).
    The revisions read as follows:


Sec.  31.6011(a)-4  Returns of income tax withheld.

* * * * *
    (b) * * *
    (4) Pensions, annuities, IRAs, and certain other deferred income 
subject to withholding under section 3405; and

[[Page 24612]]

    (5) Reportable payments subject to backup withholding under section 
3406.
* * * * *
    (d) Effective/applicability dates. Paragraphs (a)(1) and (a)(4)(i) 
of this section apply to taxable years beginning on or after December 
30, 2008. Paragraph (a)(4)(ii) of this section applies to taxable years 
beginning on or after January 1, 2010. The rules of paragraph (a)(1) of 
this section that apply to taxable years beginning before December 30, 
2008, are contained in Sec.  31.6011(a)-4 as in effect prior to 
December 30, 2008. The rules of paragraph (a)(4)(ii) of this section 
that apply to taxable years beginning before January 1, 2010, but on or 
after December 30, 2008, are contained in Sec.  31.6011(a)-4T as in 
effect on or after December 30, 2008. The rules of paragraph (a)(4) of 
this section that apply to taxable years beginning before December 30, 
2008, are contained in Sec.  31.6011(a)-4T as in effect prior to 
December 30, 2008.


Sec.  31.6051-5  [Removed]

0
Par. 4. Section 31.6051-5 is removed.

0
Par. 5. Section 31.6071(a)-1 is amended by:
0
1. Revising paragraph (a)(3)(i).
0
2. Removing paragraph (g).
    The revision reads as follows:


Sec.  31.6071(a)-1  Time for filing returns and other documents.

    (a) * * *
    (3) Information returns-(i) General rule. Each information return 
in respect of wages as defined in Federal Insurance Contributions Act 
or of income tax withheld from wages as required under Sec.  31.6051-2 
must be filed on or before the last day of February (March 31 if filed 
electronically) of the year following the calendar year for which it is 
made, except that, if a tax return under Sec.  31.6011(a)-5(a) is filed 
as a final return for a period ending prior to December 31, the 
information return must be filed on or before the last day of the 
second calendar month following the period for which the tax return is 
filed.
* * * * *

0
Par. 6. Section 31.6302-1 is amended by:
0
1. Revising paragraph (e)(1)(iii)(C).
0
2. Removing paragraph (e)(1)(iii)(E).
0
3. Revising paragraph (n).
    The revisions read as follows:


Sec.  31.6302-1  Deposit rules for taxes under the Federal Insurance 
Contributions Act (FICA) and withheld income taxes.

* * * * *
    (e) * * *
    (1) * * *
    (iii) * * *
    (C) Certain annuities described in section 3402(o)(1)(B); and
* * * * *
    (n) Effective/applicability dates. Sections 31.6302-1 through 
31.6302-3 apply with respect to the deposit of employment taxes 
attributable to payments made after December 31, 1992. To the extent 
that the provisions of Sec. Sec.  31.6302-1 through 31.6302-3 are 
inconsistent with the provisions of Sec. Sec.  31.6302(c)-1 and 
31.6302(c)-2, a taxpayer will be considered to be in compliance with 
Sec. Sec.  31.6302-1 through 31.6302-3 if the taxpayer makes timely 
deposits during 1993 in accordance with Sec. Sec.  31.6302(c)-1 and 
31.6302(c)-2. Paragraphs (b)(4), (c)(5), (c)(6), (d) Example 6, (e)(2), 
(f)(4)(i), (f)(4)(iii), (f)(5) Example 3, and (g)(1) of this section 
apply to taxable years beginning on or after December 30, 2008. 
Paragraph (f)(4)(ii) of this section applies to taxable years beginning 
on or after January 1, 2010. The rules of paragraphs (e)(2) and (g)(1) 
of this section that apply to taxable years beginning before December 
30, 2008, are contained in Sec.  31.6302-1 as in effect prior to 
December 30, 2008. The rules of paragraphs (b)(4), (c)(5), (c)(6), (d) 
Example 6, (f)(4)(i), (f)(4)(iii), and (f)(5) Example 3 of this section 
that apply to taxable years beginning on or after January 1, 2006, and 
before December 30, 2008, are contained in Sec.  31.6302-1T as in 
effect prior to December 30, 2008. The rules of paragraphs (b)(4) and 
(f)(4) of this section that apply to taxable years beginning before 
January 1, 2006, are contained in Sec.  31.6302-1 as in effect prior to 
January 1, 2006. The rules of paragraph (g) of this section eliminating 
use of Federal tax deposit coupons apply to deposits and payments made 
after December 31, 2010.

0
Par. 7. Section 31.6302-4 is amended by:
0
1. Revising paragraphs (b)(4) and (b)(5).
0
2. Removing paragraph (b)(6).
0
3. Revising paragraph (e).
    The revisions read as follows:


Sec.  31.6302-4  Deposit rules for withheld income taxes attributable 
to nonpayroll payments.

* * * * *
    (b) * * *
    (4) Annuities withheld under section 3405, relating to withholding 
on pensions, annuities, IRAs, and certain other deferred income; and
    (5) Amounts withheld under section 3406, relating to backup 
withholding with respect to reportable payments.
* * * * *
    (e) Effective/applicability date. Section 31.6302-4(d) applies to 
deposits and payments made after December 31, 2010.

Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
    Approved: April 17, 2012.
Emily S. McMahon,
Acting Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2012-9887 Filed 4-24-12; 8:45 am]
BILLING CODE 4830-01-P