[Federal Register: December 23, 2002 (Volume 67, Number 246)]
[Rules and Regulations]
[Page 78174-78176]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23de02-9]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
[TD 9033]
RIN 1545-BB36
Section 6038--Returns Required With Respect to Controlled Foreign
Partnerships
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final and temporary regulation.
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SUMMARY: This document contains final and temporary regulations
relating to controlled foreign partnerships. This document requires
that the United States partner must follow the filing requirements that
are specified in the
[[Page 78175]]
instructions for Form 8865. The text of the temporary regulation also
serves as the text of the proposed regulation set forth in the Proposed
Rules section in this issue of the Federal Register.
DATES: Effective Date: These regulations are effective December 23,
2002.
Applicability Date: For dates of applicability, see Sec. Sec.
1.6038-3(l) and 1.6038-3T(l).
FOR FURTHER INFORMATION CONTACT: Tasheaya Warren, (202) 622-3860 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
These regulations are being issued without prior notice and public
procedure pursuant to the Administrative Procedure Act (5 U.S.C. 553).
For this reason, the collection of information contained in these
regulations has been reviewed and, pending receipt and evaluation of
public comments, approved by the Office of Management and Budget under
control number 1545-1617. Responses to this collection of information
are mandatory.
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.
For further information concerning this collection of information,
and where to submit comments on the collection of information and the
accuracy of the estimated burden, and suggestions for reducing this
burden, please refer to the preamble to the cross-referencing notice of
proposed rulemaking published in the Proposed Rules section of this
issue of the Federal Register.
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.
Background
In 1997, Congress amended section 6038 to require information
reporting by certain United States persons with direct and indirect
interests in controlled foreign partnerships (CFPs). Treas. Reg. Sec.
1.6038-3 was published in 1999 (TD 8850, 64 FR 72545 (1999)) (the
``1999 Final Regulations'') and provides guidance regarding the
reporting requirements under section 6038 with respect to CFPs. A
United States person required to report under section 6038 with respect
to a CFP must file Form 8865, Return of U.S. Persons With Respect To
Certain Foreign Partnerships. In addition to the reporting obligation
imposed on certain partners in foreign partnerships under section 6038,
section 6031 requires certain foreign partnerships to file Form 1065,
U.S. Return of Partnership Income or Form 1065-B, U.S. Return for
Electing Large Partnerships.
Treas. Reg. Sec. 1.6038-3(j)(1) provides that if a foreign
partnership completes and files Form 1065 and a United States partner
is required to file Form 8865 with respect to that partnership, the
United States partner must attach to its Form 8865 copies of the Form
1065 schedules filed by the partnership instead of completing the Form
8865 schedules that are equivalent to Form 1065 schedules. This rule
was added to the 1999 Final Regulations to reduce the burden imposed by
those regulations where there is an overlap between section 6038 and
section 6031. However, this rule does not directly address the filing
requirements for Form 8865, when a United States partner files
electronically its income tax return (including any attachments such as
Form 8865).
Explanation of Provisions
To facilitate revisions to the filing requirements for Form 8865
(such as electronic filing of Form 8865), the temporary regulation
amends Treas. Reg. Sec. 1.6038-3 to provide that a United States
partner must follow the filing requirements that are specified in the
instructions for Form 8865 when the United States partner must file
Form 8865 and the partnership completes and files Form 1065 or Form
1065-B. As a transitional matter, for the next filing season it is
anticipated that the instructions for Form 8865 will continue to
provide for the existing filing procedure pursuant to which a United
States partner attaches certain schedules from Form 1065 or Form 1065-B
to its Form 8865 as well as provide for an alternative electronic
filing procedure for Form 8865.
The final regulation also makes two revisions to the 1999 Final
Regulations. If a U.S. person is required to file Form 8865, Treas.
Reg. Sec. 1.6038-3(g)(1) provides that a U.S. person must submit any
information that Form 8865 or its accompanying instructions require to
be submitted. The final regulation clarifies the requirement under
Treas. Reg. Sec. 1.6038-3, as reflected in the Form 8865 instructions,
that the United States partner must include the foreign partnership's
name, address and taxpayer identification number on Form 8865. The
final regulation also corrects a cross reference in Treas. Reg. Sec.
1.6038-3(b)(9) (Example 1).
Special Analyses
It has been determined that this Treasury decision 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 this regulation. For the
applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6)
refer to the Special Analyses section of the preamble to the cross-
reference notice of proposed rulemaking published in the Proposed Rules
section of this issue of the Federal Register. Pursuant to section
7805(f) of the Internal Revenue Code, this temporary regulation will be
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small businesses.
Drafting Information
The principal author of this regulation is Tasheaya Warren, Office
of the Associate Chief Counsel (International). However, other
personnel from the IRS and Treasury Department participated in its
development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements.
Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 602 are 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. Section 1.6038-3 is amended as follows:
1. The last sentence in paragraph (b)(9) Example 1 is revised.
2. Paragraphs (g)(1)(i) through (g)(1)(v) are redesignated as
paragraphs (g)(1)(ii) through (g)(1)(vi), respectively.
3. New paragraph (g)(1)(i) is added.
4. Paragraphs (j) and (l) are revised.
The revisions and addition read as follows:
Sec. 1.6038-3 Information returns required of certain United States
persons with respect to controlled foreign partnerships (CFPs).
* * * * *
[[Page 78176]]
(b) * * *
(9) * * *
Example 1. Sole U.S. partner does not own more than a fifty-
percent interest. * * *
See also Sec. 1.6046A-1(f)(1) regarding the overlap between
sections 6038B and 6046A).
* * * * *
(g) * * * (1) * * *
(i) The name, address, and taxpayer identification number (if any)
of the foreign partnership of which the person qualified as a
controlling fifty-percent partner or a controlling ten-percent partner;
* * * * *
(j) [Reserved]. For further guidance, see Sec. 1.6038-3T(j).
* * * * *
(l) Effective date. Except as otherwise provided, this section
shall apply for tax years of a foreign partnership ending on or after
December 31, 2000. For tax years of a foreign partnership prior to
December 23, 2002, see Sec. 1.6038-3(j) in effect prior to these
amendments (see 26 CFR part 1 revised April 1, 2002).
Par. 3. Section 1.6038-3T is added to read as follows:
Sec. 1.6038-3T Information returns required of certain United States
persons with respect to controlled foreign partnership (CFPs)
(temporary).
(a) Through (i)(2) [Reserved]. For further guidance, see Sec.
1.6038-3(a) through (i)(2).
(j) Overlap with section 6031. A partner may be required to file
Form 8865 under this section and the foreign partnership in which it is
a partner may also be required to file a Form 1065 or Form 1065-B under
section 6031(e) for the same partnership tax year. For cases where a
United States person is a controlling fifty-percent partner or a
controlling ten-percent partner with respect to a foreign partnership,
and that foreign partnership completes and files Form 1065 or Form
1065-B, the instructions for Form 8865 will specify the filing
requirements that address this overlap in reporting obligations.
(k) [Reserved]. For further guidance, see Sec. 1.6038-3(k).
(l) Effective date. This section shall apply to tax years of a
foreign partnership ending on or after December 23, 2002. The
applicability of this section expires on December 20, 2005.
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
Par. 4. The authority citation for part 602 continues to read as
follows:
Authority: 26 U.S.C. 7805.
Par. 5. In Sec. 602.101, paragraph (b) is amended by adding the
following entry in numerical order to the table to read as follows:
Sec. 602.101 OMB Control numbers.
* * * * *
(b) * * *
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Current OMB
CFR part or section where identified and described control No.
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* * * * *
1.6038-3T.................................................. 1545-1617
* * * * *
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Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
Approved: December 5, 2002.
Pamela F. Olson,
Assistant Secretary of the Treasury.
[FR Doc. 02-32152 Filed 12-20-02; 8:45 am]
BILLING CODE 4830-01-P