[Federal Register Volume 78, Number 251 (Tuesday, December 31, 2013)]
[Proposed Rules]
[Pages 79650-79652]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-30845]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-140974-11]
RIN 1545-BK66


Definitions and Reporting Requirements for Shareholders of 
Passive Foreign Investment Companies

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 and the Department of the Treasury (Treasury 
Department) are issuing temporary regulations that provide guidance on 
determining the ownership of a passive foreign investment company 
(PFIC), the annual filing requirements for shareholders of PFICs, and 
an exclusion from certain filing requirement for shareholders that 
constructively own interests in certain foreign corporations. The 
temporary regulations primarily affect shareholders of PFICs that do 
not currently file Form 8621, ``Information Return by a Shareholder of 
a Passive Foreign Investment Company or Qualified Electing Fund'', with 
respect to their PFIC interests. The temporary regulations also affect 
certain shareholders that rely on a constructive ownership exception to 
the requirement to file Form 5471, ``Information Return of U.S. Persons 
with Respect to Certain Foreign Corporations.'' The text of those 
temporary regulations published in this issue of the Federal Register 
also serves as the text of these proposed regulations.

DATES: Comments and requests for a public hearing must be received by 
March 31, 2014.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-140974-11), Room 
5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
140974-11), 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-140974-11).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Susan E. Massey or Barbara E. Rasch, (202) 317-6934; concerning 
submissions of comments or requests for a public hearing, 
Oluwafunmilayo Taylor, (202) 317-6901 (not toll-free numbers).

SUPPLEMENTARY INFORMATION: 

Background and Explanation of Provisions

    The temporary regulations in the Rules and Regulations section of 
this issue of the Federal Register amend the Income Tax Regulations (26 
CFR part 1) under sections 1291 and 1298 of the Internal Revenue Code 
(Code). 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, as supplemented by Executive Order 13653. Accordingly, a 
regulatory assessment is not required.
    It is hereby certified that the collection of information in this 
regulation will not have a significant economic impact on a substantial

[[Page 79651]]

number of small entities within the meaning of section 601(6) of the 
Regulatory Flexibility Act (5 U.S.C. chapter 6). This certification is 
based on the fact that most small entities do not own an interest in a 
PFIC, and the fact that PFIC shareholders (including small entities) 
that currently report information on Form 8621, ``Information Return by 
a Shareholder of a Passive Foreign Investment Company or Qualified 
Electing Fund'', with respect to a PFIC will not be required to file 
additional reports with respect to the same PFIC under these proposed 
regulations. Most small entities that are shareholders of a PFIC either 
make a qualified electing fund (QEF) election under section 1295 or 
make a mark to market election under section 1296 and, therefore, 
already file Form 8621 with respect to the PFIC stock. In addition, 
shareholders that are subject to section 1291 as a result of receiving 
a distribution from a PFIC or disposing of their interest in a PFIC are 
currently required to file Form 8621. Thus, there is a limited class of 
PFIC shareholders that will be required to file Form 8621 under these 
regulations that are not currently required to do so. Accordingly, the 
collection of information required by these proposed regulations does 
not affect a substantial number of small entities.
    Further, the collection of information required under these 
proposed regulations does not have a significant economic impact 
because neither the time nor the costs necessary for shareholders to 
comply with the collection of information requirements is significant. 
Therefore, a Regulatory Flexibility Analysis under the Regulatory 
Flexibility Act is not required. 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 businesses.
    It also has been determined that section 553(b) and (d) of the 
Administrative Procedure Act (5 U.S.C. chapter 5) do not apply to these 
regulations.

Comments and Requests for Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any comments that are timely submitted 
to the IRS as prescribed in this preamble under the Addresses heading. 
The IRS and the Treasury Department request comments on all aspects of 
the proposed rules.
    In addition, the IRS and the Treasury Department request comments 
on whether, for ease of administration, the section 1291(d)(2) deemed 
dividend and deemed sale elections should be available at the domestic 
partnership level. In particular, the IRS and the Treasury Department 
request comments on how the election can be effectuated in a manner 
consistent with the PFIC regimes and Subchapter K of chapter 1 of the 
Code. The IRS and the Treasury Department also request comments on the 
determination of proportionate ownership by a beneficiary of PFIC stock 
held through a domestic or foreign estate or nongrantor trust.
    All comments will be available for public inspection and copying at 
www.regulations.gov or upon request. A public hearing will be scheduled 
if requested in writing by any person that timely submits electronic or 
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 proposed regulations are Susan E. 
Massey and Barbara E. Rasch 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 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

0
Paragraph 1. The authority citation for part 1 is amended by adding 
entries in numerical order to read in part as follows:

    Authority:  26 U.S.C. 7805 * * *
    Sections 1.1291-1 and 1.1291-9 also issued under 26 U.S.C. 
1298(a) and (g) * * *
    Section 1.1298-1 also issued under 26 U.S.C. 1298(f) * * *
    Section 1.6038-2 also issued under 26 U.S.C. 6038(d) * * *
    Section 1.6046-1 also issued under 26 U.S.C. 6046(b) * * *
* * * * *
0
Par. 2. Section 1.1291-0 is amended by adding a listing of the 
paragraph headings for Sec. Sec.  1.1291-1 and 1.1291-9 as follows:


Sec.  1.1291-0  Passive foreign investment companies--table of 
contents.

    [The text of the proposed amendments to Sec.  1.1291-0 is the 
same as the text of Sec.  1.1291-0T published elsewhere in this 
issue of the Federal Register].
0
Par. 3. Section 1.1291-1 is amended by revising the section heading and 
adding paragraphs (b)(2)(ii), (b)(2)(v), (b)(7), (b)(8), and (k) as 
follows:


Sec.  1.1291-1  Taxation of United States persons that are shareholders 
of section 1291 funds.

    (a) through (b)(2)(i) [Reserved].
    (b)(2)(ii) [The text of the proposed amendments to Sec.  1.1291-
1(b)(2)(ii) is the same as the text of Sec.  1.1291-1T(b)(2)(ii) 
published elsewhere in this issue of the Federal Register].
    (b)(2)(iii) and (iv) [Reserved].
    (v) [The text of the proposed amendments to Sec.  1.1291-1(b)(2)(v) 
is the same as the text of Sec.  1.1291-1T(b)(2)(v) published elsewhere 
in this issue of the Federal Register].
    (3) through (6) [Reserved].
    (7) [The text of the proposed amendments to Sec.  1.1291-1(b)(7) is 
the same as the text of Sec.  1.1291-1T(b)(7) published elsewhere in 
this issue of the Federal Register].
    (8) [The text of the proposed amendments to Sec.  1.1291-1(b)(8) is 
the same as the text of Sec.  1.1291-1T(b)(8) published elsewhere in 
this issue of the Federal Register].
* * * * *
    (k) [The text of the proposed amendments to Sec.  1.1291-1(k) is 
the same as the text of Sec.  1.1291-1T(k) published elsewhere in this 
issue of the Federal Register].
0
Par. 4. Section 1.1291-9 is amended by revising paragraph (j)(3) and 
adding paragraph (k)(3) as follows:


Sec.  1.1291-9  Deemed dividend election.

* * * * *
    (j) * * *
    (3) [Reserved]. For further guidance, see Sec.  1.1291-9T(j)(3).
    (k) * * *
    (3) [The text of the proposed amendments to Sec.  1.1291-9(k)(3) is 
the same as the text of Sec.  1.1291-9T(k)(3) published elsewhere in 
this issue of the Federal Register].
0
Par. 5. Section 1.1298-0 is amended by adding a listing of the 
paragraph headings for Sec.  1.1298-1 as follows:


Sec.  1.1298-0  Table of contents.

    [The text of the proposed amendments to Sec.  1.1298-0 is the same 
as the text of Sec.  1.1298-0T published elsewhere in this issue of the 
Federal Register].
0
Par. 6. Section 1.1298-1 is added to read as follows:

[[Page 79652]]

Sec.  1.1298-1  Section 1298(f) annual reporting requirements for 
United States persons that are shareholders of a passive foreign 
investment company.

    [The text of the proposed amendments to Sec.  1.1298-1 is the same 
as the text of Sec.  1.1298-1T(h) published elsewhere in this issue of 
the Federal Register].
0
Par. 7. Section 1.6038-2 is amended by revising paragraph (j)(3) to 
read as follows:


Sec.  1.6038-2  Information returns required of United States persons 
with respect to annual accounting periods of certain foreign 
corporations beginning after December 31, 1962.

* * * * *
    (j) * * *
    (3) [The text of the proposed amendments to Sec.  1.6038-2(j)(3) is 
the same as the text of Sec.  1.6038-2T(j)(3) published elsewhere in 
this issue of the Federal Register].
* * * * *
0
Par. 8. Section 1.6046-1 is amended by revising paragraph (e)(5) to 
read as follows:


Sec.  1.6046-1  Returns as to organizations or reorganizations of 
foreign corporations and as to acquisitions of their stock.

* * * * *
    (e) * * *
    (5) [The text of the proposed amendments to Sec.  1.6046-1(e)(5) is 
the same as the text of Sec.  1.6046-1T(e)(5) published elsewhere in 
this issue of the Federal Register].
* * * * *

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2013-30845 Filed 12-30-13; 8:45 am]
BILLING CODE 4830-01-P