[Federal Register Volume 81, Number 188 (Wednesday, September 28, 2016)]
[Notices]
[Pages 66743-66745]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-23424]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service


Proposed Collection; Comment Request for Forms 1065, 1065-B, 
1066, 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-S, 1120-SF, 1120-FSC, 
1120-L, 1120-PC, 1120-REIT, 1120-RIC, 1120-POL and Related Attachments

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice and request for comments.

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SUMMARY: The Internal Revenue Service, as part of its continuing effort 
to reduce paperwork and respondent burden, invites the general public 
and other Federal agencies to take this opportunity to comment on 
proposed and continuing information collections, as required by the 
Paperwork Reduction Act of 1995 (PRA), Public Law 104-13 (44 U.S.C. 
3506(c)(2)(A)). This notice requests comments on all forms used by 
business entity taxpayers: Forms 1065, 1065-B, 1066, 1120, 1120-C, 
1120-F, 1120-H, 1120-ND, 1120-S, 1120-SF, 1120-FSC, 1120-L, 1120-PC, 
1120-REIT, 1120-RIC, 1120-POL; and all attachments to these forms (see 
the Appendix to this notice). With this notice, the IRS is also 
announcing significant changes to (1) the manner in which tax forms 
used by business taxpayers will be approved under the PRA and (2) its 
method of estimating the paperwork burden imposed on all business 
taxpayers.

DATES: Written comments should be received on or before November 28, 
2016 to be assured of consideration.

ADDRESSES: Direct all written comments to Tuawana Pinkston, Internal 
Revenue Service, Room 6526, 1111 Constitution Avenue NW., Washington, 
DC 20224.

FOR FURTHER INFORMATION CONTACT: Requests for additional information or 
copies of the form and instructions should be directed to Allan 
Hopkins, at Internal Revenue Service, Room 6129, 1111 Constitution 
Avenue NW., Washington, DC 20224, or through the internet, at 
[email protected].

SUPPLEMENTARY INFORMATION: 

Change in PRA Approval of Forms Used by Business Taxpayers

    Under the PRA, OMB assigns a control number to each ``collection of 
information'' that it reviews and approves for use by an agency. A 
single information collection may consist of one or more forms, 
recordkeeping requirements, and/or third-party disclosure requirements. 
Under the PRA and OMB regulations, agencies have the discretion to seek 
separate OMB approvals for business forms, recordkeeping requirements, 
and third-party reporting requirements or to combine any number of 
forms, recordkeeping requirements, and/or third-party disclosure 
requirements (usually related in subject matter) under one OMB Control 
Number. Agency decisions on whether to group individual requirements 
under a single OMB Control Number or to disaggregate them and request 
separate OMB Control Numbers are based largely on considerations of 
administrative practicality.
    The PRA also requires agencies to estimate the burden for each 
collection of information. Accordingly, each OMB Control Number has an 
associated burden estimate. The burden estimates for each control 
number are displayed in (1) the PRA notices that accompany collections 
of information, (2) Federal Register notices such as this one, and (3) 
in OMB's database of approved information collections. If more than one 
form, recordkeeping requirement, and/or third-party disclosure 
requirement is approved under a single control number, then the burden 
estimate for that control number reflects the burden associated with 
all of the approved forms, recordkeeping requirements, and/or third-
party disclosure requirements.
    As described below under the heading ``New Burden Model,'' the 
IRS's new Business Taxpayer Burden Model (BTBM) estimates of taxpayer 
burden are based on taxpayer characteristics and activities, taking 
into account, among other things, the forms and schedules generally 
used by those groups of business taxpayers and the recordkeeping and 
other activities needed to complete those forms. The BTBM represents 
the second phase of a long-term effort to improve the ability of IRS to 
measure the burden imposed on various groups of taxpayers by the 
federal tax system. While the new methodology provides a more accurate 
and comprehensive description of business taxpayer burden, it will not 
provide burden estimates on a form-by-form basis, as has been done 
under the previous methodology. When the prior model was developed in 
the mid-1980s, almost all tax returns were prepared manually, either by 
the taxpayer or a paid provider. In this context, it was determined 
that estimating burden on a form-by-form basis was an appropriate 
methodology. Today, over 90 percent of all business entity tax returns 
are prepared using software or with preparer assistance. In this 
environment, in which many taxpayers' activities are no longer as 
directly associated with particular forms, estimating burden on a form-
by-form basis is not an appropriate measurement of taxpayer burden. The 
new model, which takes into account broader and more comprehensive 
taxpayer characteristics and activities, provides a much more accurate 
and useful estimate of taxpayer burden.
    Currently, there are 206 forms used by business taxpayers. These 
include Forms 1065, 1065-B, 1066, 1120, 1120-C, 1120-F, 1120-H, 1120-
ND, 1120-S, 1120-SF, 1120-FSC, 1120-L, 1120-PC, 1120-REIT, 1120-RIC, 
1120-POL, and their schedules and all the forms business entity 
taxpayers attach to their tax returns (see the Appendix to this 
notice). For most of these forms, IRS has in the past obtained separate 
OMB approvals under unique OMB Control Numbers and separate burden 
estimates.
    The BTBM estimates the aggregate burden imposed on business 
taxpayers, based upon their tax-related characteristics and activities. 
IRS therefore will seek OMB approval of all 206 business-related tax 
forms as a single ``collection of information.'' The aggregate burden 
of these tax forms will be accounted for under OMB Control Number 1545-
0123, which is currently assigned to Form 1120 and its schedules. OMB 
Control Number 1545-0123 will be displayed on all business tax forms 
and other information collections. As a result of this change, burden 
estimates for business taxpayers will now be displayed differently in 
PRA Notices on tax forms and other information collections, and in 
Federal Register notices. This new way of displaying burden is 
presented below under the heading ``Proposed PRA Submission to OMB.'' 
Because 44 of the 206 forms used by business taxpayers are also used by 
tax-exempt organizations, trusts and estates and other kinds of 
taxpayers, there will be a transition period during which IRS will 
report different burden estimates for individual taxpayers (OMB Control 
Number 1545-0074), business taxpayers (OMB Control Number 1545-0123), 
and another OMB Control Number for other taxpayers using the same 
forms. For

[[Page 66744]]

those forms covered under OMB Control Numbers 1545-0074 and/or 1545-
0123 and also used by other taxpayers, IRS will display the OMB Control 
Number related to the other filers on the form and provide the burden 
estimate for those taxpayers in the form instructions. The form 
instructions will refer readers to the burden estimates for individual 
and/or business taxpayers, as applicable. The burden estimates for 
business taxpayers will be reported and accounted for as described in 
this notice. The burden estimates for individual taxpayers will 
continue to be reported and accounted for under OMB Control Number 
1545-0074 using a method similar to the method described in this 
notice. The burden estimates for other users of these forms will be 
determined under prior methodology based on form length and complexity.

New Burden Model

    Data from the new BTBM revise the estimates of the levels of burden 
experienced by business taxpayers when complying with the federal tax 
laws. It replaces the earlier burden measurement developed in the mid-
1980s. Since that time, improved technology and modeling sophistication 
have enabled the IRS to improve the burden estimates. The new model 
provides taxpayers and the IRS with a more comprehensive understanding 
of the current levels of taxpayer burden. It reflects major changes 
over the past two decades in the way taxpayers prepare and file their 
returns. The new BTBM also represents a substantial step forward in the 
IRS's ability to assess likely impacts of administrative and 
legislative changes on business taxpayers.
    The BTBM's approach to measuring burden focuses on the 
characteristics and activities of business taxpayers rather than the 
forms they use. Key determinants of taxpayer burden in the model are 
the type of entity, total assets, total receipts, and activities 
reported on the tax return (income, deductions, credits, etc). In 
contrast, the previous estimates primarily focused on the length and 
complexity of each tax form. The changes between the old and new burden 
estimates are due to the improved ability of the new methodology to 
measure burden and the expanded scope of what is measured. These 
changes create a one-time shift in the estimate of burden levels that 
reflects the better measurement of the new model. The differences in 
estimates between the models do not reflect any change in the actual 
burden experienced by taxpayers. Comparisons should not be made between 
these and the earlier published estimates, because the models measure 
burden in different ways.

Methodology

    Burden is defined as the time and out-of-pocket costs incurred by 
taxpayers to comply with the federal tax system. As has been done for 
individual taxpayer burden since 2005, both the time expended and the 
out-of-pocket costs for business taxpayers are estimated. The burden 
estimation methodology relies on surveys that measure time and out-of-
pocket costs that taxpayers spend on pre-filing and filing activities. 
The methodology establishes econometric relationships between tax 
return characteristics and reported compliance costs. The methodology 
controls for the substitution of time and money by monetizing time and 
reporting total compliance costs in dollars. This methodology better 
reflects taxpayer compliance burden, because in a world of electronic 
tax preparation, time and out-of-pocket costs are governed by the 
information required rather than the form on which it is ultimately 
reported. Importantly, even where various businesses complete the same 
tax form lines, the new methodology differentiates the cost incurred to 
complete those forms based on characteristics of those businesses. Key 
business characteristics that serve as coefficients in the BTBM are:
     Entity type.
     Total assets.
     Total receipts.
     Return complexity.
    The new model uses the following classifications of business 
taxpayers:
     Partnerships (Forms 1065, 1065-B, 1066).
     Taxable corporations (Forms 1120, 1120-C, 1120-F, 1120-H, 
1120-ND, 1120-SF, 1120-FSC, 1120-L, 1120-PC, 1120-POL).
     Pass-through corporations (Forms 1120-REIT, 1120-RIC, 
1120-S).
    Each classification is further refined to separate large and small 
businesses, where a large business is generally defined as one having 
end of year assets totaling more than $10 million.

Taxpayer Burden Estimates

    Tables 1, 2, and 3 below show the burden model estimates for each 
of the three classifications of business taxpayers. The data shown are 
the best estimates for 2013 business entity income tax returns 
available as of February 2016. The estimates are subject to change as 
new forms and data become available.

Proposed PRA Submission to OMB

    Title: U.S. Business Income Tax Return.
    OMB Number: 1545-0123.
    Form Numbers: Forms 1065, 1065-B, 1066, 1120, 1120-C, 1120-F, 1120-
H, 1120-ND, 1120-S, 1120-SF, 1120-FSC, 1120-L, 1120-PC, 1120-REIT, 
1120-RIC, 1120-POL and all attachments to these forms (see the Appendix 
to this notice).
    Abstract: These forms are used by businesses to report their income 
tax liability. The data is used to verify that the items reported on 
the forms are correct, and also for general statistics use.
    Current Actions: Changes are being made to the forms and the method 
of burden computation.
    Type of Review: Extension of currently approved collections.
    Affected Public: Businesses.
    Estimated Number of Respondents: 10,900,000.
    Total Estimated Time: 2.997 billion hours.
    Estimated Time per Respondent: 275 hours.
    Total Estimated Out-of-Pocket Costs: $52.56 billion.
    Estimated Out-of-Pocket Cost per Respondent: $4,822.

    Note: Amounts below are for FY2015. Reported time and cost 
burdens are national averages and do not necessarily reflect a 
``typical'' case. Most taxpayers experience lower than average 
burden, with taxpayer burden varying considerably by taxpayer type. 
Detail may not add due to rounding.


                                                     Table 1
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                                                                                           Burden
         Primary form filed or type of taxpayer          Number of returns -------------------------------------
                                                             (millions)        Average time       Average cost
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All Partnerships.......................................                3.9                290              5,700
Small..................................................                3.7                270              4,400

[[Page 66745]]

 
Large *................................................                0.2                610             29,000
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Forms 1065, 1065-B, 1066 and all attachments.


                                                     Table 2
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                                                                                           Burden
         Primary form filed or type of taxpayer          Number of returns -------------------------------------
                                                             (millions)        Average time       Average cost
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All Taxable Corporations...............................                2.1                315              6,300
Small..................................................                2.0                280              4,000
Large *................................................                0.1              1,250             68,900
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Forms 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-SF, 1120-FSC, 1120-L, 1120-PC, 1120-POL and all attachments.


                                                     Table 3
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                                                                                           Burden
         Primary form filed or type of taxpayer          Number of returns -------------------------------------
                                                             (millions)        Average time       Average cost
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All Pass-Through Corporations..........................                4.9                245              3,500
Small..................................................                4.8                240              3,100
Large **...............................................                0.1                610             30,800
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Forms 1120-REIT, 1120-RIC, 1120-S and all attachments.
* A large business is defined as one having end of year assets greater than $10 million.

    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid OMB Control Number.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Request for Comments

    Comments submitted in response to this notice will be summarized 
and/or included in the request for OMB approval. All comments will 
become a matter of public record. Comments are invited on: (a) Whether 
the collection of information is necessary for the proper performance 
of the functions of the agency, including whether the information will 
have practical utility; (b) the accuracy of the agency's estimate of 
the burden of the collection of information; (c) ways to enhance the 
quality, utility, and clarity of the information to be collected; (d) 
ways to minimize the burden of the collection of information on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and (e) estimates 
of capital or start-up costs and costs of operation, maintenance, and 
purchase of services to provide information.

    Approved: September 19, 2016.
Allan Hopkins,
Tax Analyst.
[FR Doc. 2016-23424 Filed 9-27-16; 8:45 am]
 BILLING CODE 4830-01-P