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Part 32. Published Guidance and Other Guidance to Taxpayers

Chapter 1. Chief Counsel Regulation Handbook

Section 5. Required Format for Regulations

32.1.5  Required Format for Regulations

32.1.5.1  (08-11-2004)
Overview of Format Required by the OFR

  1. The Office of the Federal Register (OFR) has adopted certain format and content rules for regulations that are to be published in the Federal Register (FR). Regulations must include the following:

    • Billing Code

    • Headings

    • Preamble Requirements

    • List of Subjects

    • Regulatory Text

    • Signature Block

  2. Double-space the text of regulations, except for the following, which are single-spaced:

    • Titles

    • Tables of Content

    • Quotations

    • Examples

  3. When using "section" or "chapter" in the regulation preamble to refer to provisions of the Internal Revenue Code, the drafting team should include "of the Internal Revenue Code " only the first time. For example, the drafting team should use the phrase "section 382 of the Internal Revenue Code" for the first reference, and then use "section 382" for subsequent references. (A different rule, described in CCDM 32.1.5.7.3, applies to the regulation text.)

  4. The drafting team should use the section symbol, "§ " , to refer to a regulation section, unless it is the first word in a sentence. When "section" is the first word in a sentence, the drafting team should spell it out. Do not put a space between the "§" and the regulation section number. For example, "See §1.401(k)-1(a)(7) for rules applicable to collectively bargained plans."

  5. When citing a statute, the drafting team should spell out the word "section" (as opposed to using the section symbol, §), unless the drafting team is using a citation form such as " 26 U.S.C. 7805," in which case no words or symbol is used.

  6. OFR document formatting and content requirements may be found in the Federal Register Document Drafting Handbook. It is available on-line at the OFR web site.

32.1.5.2  (08-11-2004)
Billing Code

  1. The Government Printing Office (GPO) assigns a billing code to each agency that publishes documents in the FR. GPO uses this code to bill the agency for printing costs. The billing code must appear on each document submitted for publication.

  2. The IRS billing code is 4830-01-p.

  3. The billing code appears at the top of the first page, flush left, in brackets.

    Example:

    [4830-01-p]

32.1.5.3  (08-11-2004)
Headings

  1. The term "headings" refers to the general headings denoting sections and paragraphs (see CCDM 32.1.5.3.7), or the specific heading that must be included at the beginning of the document.

  2. General headings for sections and paragraphs identify the subject matter of the section or paragraph. Section and paragraph headings in the text of the regulation are underlined. However, when published in the FR, section headings appear in bold face and paragraph headings appear in italics.

  3. The document containing the regulation must contain the following specific headings:

    • Name of the department,

    • Name of the agency within the department,

    • CFR title and part(s) affected by the regulation,

    • TD identification number or NPRM identification number,

    • Regulation Identifier Number (RIN), and

    • Subject.

  4. Each specific heading is positioned flush left. Any specific heading that is over one line long is single-spaced.

  5. Each required specific heading is discussed below, followed by examples.

32.1.5.3.1  (08-11-2004)
Department Name

  1. The department name is: DEPARTMENT OF THE TREASURY.

    Note:

    This is the only heading that is typed in all capital letters.

32.1.5.3.2  (08-11-2004)
Agency Name

  1. The agency name is: Internal Revenue Service.

32.1.5.3.3  (08-11-2004)
CFR Title and Part Number

  1. This item identifies, in numerical order, the part or parts of title 26 of the CFR that the regulation amends or proposes to amend. Even if the regulation affects only one paragraph within a part, that part must be identified.

  2. The drafting team must determine the part in title 26 where the regulation belongs. For example, part 1 is income taxes, part 31 is employment taxes and collection of income tax at the source, part 52 is environmental taxes, and part 301 is procedure and administration.

  3. Sometimes the same rule needs to be added to two or more parts or a cross-reference to the new rule needs to be added in a different part.

  4. See CCDM 32.1.1.3.2.3 for a list of the most commonly used CFR parts. See Exhibit 32.1.5-1 for a complete list of the CFR parts and part headings,

    Example:

    26 CFR Parts 1 and 52

32.1.5.3.4  (08-11-2004)
TD, ANPRM, and NPRM Identification Number

  1. A Treasury decision (TD) number identifies final and temporary regulations. The FRL assigns the TD number after the Commissioner/Deputy Commissioner for Services and Enforcement and the Assistant Secretary of the Treasury (Tax Policy) sign the regulation document and before it is forwarded to the OFR.

  2. A CASE-MIS ID number that begins with "REG" identifies an ANPRM or an NPRM. See CCDM 32.1.2.2 and CCDM 32.1.2.2.2.

  3. The TD and CASE-MIS ID numbers are typed in brackets.

    Examples:

    [TD 7843]
    [REG-203796-96]

32.1.5.3.5  (08-11-2004)
RIN

  1. See CCDM 32.1.2.2.5 for more information about the RIN.

    Example:

    RIN 1545-AQ23

32.1.5.3.6  (08-11-2004)
Subject

  1. The subject is the title of the regulation and briefly describes the subject matter of the regulation. It is typed single-spaced. The drafting team should capitalize the first letter of each word, other than articles, conjunctions, and prepositions.

    Example:

    Exports of Ozone-Depleting Chemicals; Special Rules for Certain Medical Uses of Ozone-Depleting Chemicals

32.1.5.3.7  (08-11-2004)
Examples of Headings

  1. Headings for ANPRMs, NPRMs, and TDs are illustrated by the following examples.

    ANPRM and NPRM [4830-01-p]

    DEPARTMENT OF THE TREASURY

    Internal Revenue Service

    26 CFR Part 52

    [REG-203796-96]

    RIN 1545-AQ23

    Exports of Ozone-Depleting Chemicals; Special Rules for Certain Medical Uses of Ozone-Depleting Chemicals
    TD [4830-01-p]

    DEPARTMENT OF THE TREASURY

    Internal Revenue Service

    26 CFR Part 52

    [TD 7843]

    RIN 1545-AQ23

    Exports of Ozone-Depleting Chemicals; Special Rules for Certain Medical Uses of Ozone-Depleting Chemicals

32.1.5.4  (08-11-2004)
Preamble

  1. The preamble contains explanatory information that informs the reader of what is being proposed or adopted and enables the reader to determine whether it is affected by the regulation. The preamble contains no regulation text.

  2. The following captions, in the order shown, are used for the preamble. The drafting team should type the captions in all capital letters, flush left, followed by a colon.

    • AGENCY:

    • ACTION:

    • SUMMARY:

    • DATES:

    • ADDRESSES: (for ANPRMs and NPRMs)

    • FOR FURTHER INFORMATION CONTACT:

    • SUPPLEMENTARY INFORMATION:

32.1.5.4.1  (08-11-2004)
AGENCY Caption

  1. For IRS/Treasury regulations, this caption is:

    • AGENCY: Internal Revenue Service (IRS), Treasury.

32.1.5.4.2  (08-11-2004)
ACTION Caption

  1. This caption identifies the type of regulation. It does not summarize the subject matter of a particular regulation. Frequently used ACTION captions are:

    • ACTION: Advance notice of proposed rulemaking,

    • ACTION: Notice of proposed rulemaking and notice of public hearing,

    • ACTION: Notice of proposed rulemaking,

    • ACTION: Temporary regulation,

    • ACTION: Notice of proposed rulemaking by cross-reference to temporary regulation,

    • ACTION: Final regulation,

    • ACTION: Final and temporary regulations,

    • ACTION: Withdrawal of notice of proposed rulemaking,

    • ACTION: Notice of public hearing on proposed rulemaking, and

    • ACTION: Statement of procedural rules.

32.1.5.4.3  (08-11-2004)
SUMMARY Caption

  1. The SUMMARY briefly answers the following three questions:

    • What action is the agency taking?

    • Why is this action necessary?

    • Who will be affected by this action?

  2. When preparing the SUMMARY the drafting team should:

    • Be brief

    • Use language a nonexpert will understand

    • State what the regulation does, not how it affects the CFR

    • Refer to an act of Congress by its popular name

    • Do not use legal citations

    • Do not include regulatory history or extensive background

    • Do not include qualifications, exceptions, or specific details

  3. The drafting team should not use the SUMMARY to prove or argue a point. The drafting team should provide supporting information, details, discussion of the regulatory history, and precise legal citations under the SUPPLEMENTARY INFORMATION caption. See CCDM 32.1.5.4.7 for further information.

    Example 1: ANPRM

    SUMMARY: This document describes and explains rules and standards that the IRS and Treasury expect to propose in 2002 in a notice of proposed rulemaking that will clarify the application of section 263(a) of the Internal Revenue Code to expenditures incurred in acquiring, creating, or enhancing certain intangible assets or benefits. This document also invites comments from the public regarding these standards. All materials submitted will be available for public inspection and copying.

    Example 2: NPRM (with Notice of public hearing)

    SUMMARY: This document contains proposed regulations that provide guidance regarding the allowance of certain charitable contribution deductions, the substantiation requirements for charitable contributions of $250 or more, and the disclosure requirements for quid pro quo contributions in excess of $75. The regulations reflect changes to the law made by the Omnibus Budget Reconciliation Act of 1993. The regulations will affect certain charitable organizations and individuals and entities that make payments to those organizations. This document also provides a notice of a public hearing on these proposed regulations.

    Example 3: TEMP

    SUMMARY: This document contains temporary regulations that provide rules for obtaining and using IRS adoption taxpayer identification numbers. The regulations affect individuals who are in the process of adopting children and will be claiming certain tax benefits with respect to those children. The text of these temporary regulations also serves as the text of the proposed regulations set forth in the Proposed Rules section in this issue of the Federal Register.

    Example 4: FINAL

    SUMMARY: This document contains final regulations relating to certain adoptions, changes, and retentions of annual accounting periods. The final regulations are necessary to update, clarify, and reorganize the rules and procedures for adopting, changing, and retaining a taxpayer’s annual accounting period. The final regulations primarily affect taxpayers that want to adopt an annual accounting period under section 441 or that must receive approval from the Commissioner to adopt, change, or retain their annual accounting periods under section 442.

32.1.5.4.4  (08-11-2004)
DATES Caption

  1. The drafting team should insert a specific date or direct the OFR to compute and insert a date that is tied to the date the regulation is filed with, or published in, the FR. In computing a date, the OFR begins counting on or after (as instructed) the date of filing or publication. If the date to be inserted falls on a weekend or a Federal holiday, the OFR uses the next Federal business day. See CCDM 32.1.1.3.2.4 and CCDM 32.1.6.11.2 for further information.

  2. To direct the OFR to compute and insert a date, the drafting team should bracket, capitalize, bold, and underline the date instructions.

    Example:

    DATES: Written or electronic comments must be received by [INSERT DATE 90 DAYS AFTER PUBLICATION OF THIS DOCUMENT IN THE FEDERAL REGISTER].

32.1.5.4.4.1  (08-11-2004)
ANPRM and NPRM

  1. When setting deadlines for comments on regulations or scheduling public hearings regarding regulations, the drafting team must consider the requirements of Executive Order 12866. Executive Order 12866, section 6(a)(1), states that

    1. Before issuing an NPRM, an agency should, where appropriate, seek the involvement of those who are intended to benefit from, and those expected to be burdened by any regulation (including specifically, State, local, and tribal officials); and

    2. An agency should afford the public a meaningful opportunity to comment on any proposed regulation, which, in most cases, should include a comment period of at least 60 days.

  2. The DATES caption of an ANPRM provides the deadline for submitting written or electronic comments.

  3. The DATES caption of an NPRM provides the:

    • Deadline for submitting written or electronic comments

    • Date of the public hearing, if one has been scheduled, or deadline for requesting a public hearing, if one has not been scheduled ( see CCDM 32.1.7.3)

    • Deadline for submitting outlines of topics, if a public hearing has been scheduled (see CCDM 32.1.7.3)

  4. The deadline for submitting written or electronic comments (and for requesting a public hearing if one has not been scheduled) is usually 90 days (but not less than 60 days) after the date of publication in the FR. If a public hearing has been scheduled, the deadline for outlines of topics is usually three weeks prior to the hearing date. See CCDM 32.1.7.3.1 for specific information regarding teleconferenced public hearings.

  5. If the preamble to the NPRM discusses the proposed effective date of a regulation, the drafting team should set out that discussion under the SUPPLEMENTARY INFORMATION caption, in a paragraph designated as "Proposed Effective Date." The drafting team should not discuss the proposed effective date of a regulation in the DATES section of an NPRM.

    Examples:

    DATES: Written or electronic comments must be received by [ INSERT DATE 90 DAYS AFTER PUBLICATION OF THIS DOCUMENT IN THE FEDERAL REGISTER ]. Outlines of topics to be discussed at the public hearing scheduled for Tuesday, June 3, 2003, at 10 a.m. must be received by Tuesday, May 13, 2003.
    DATES: Written or electronic comments and requests for a public hearing must be received by [INSERT DATE 90 DAYS AFTER PUBLICATION OF THIS DOCUMENT IN THE FEDERAL REGISTER].

32.1.5.4.4.2  (08-11-2004)
TD

  1. The DATES caption of a TD provides the

    • Effective Date [Mandatory]

    • Date(s) of Applicability [Optional]

  2. The OFR defines "effective date" as the date on which the amendments in the TD would be added to the CFR, if the OFR updated the CFR daily. This date is mandatory and applies to all final and temporary regulations.

  3. Some IRS/Treasury regulations apply only on or after a certain date (for example, final regulations may provide that substantive rules apply on or after a particular date). This date is known as the "date of applicability." The date of applicability appears in the regulatory text in the "Effective Date" section.

  4. For purposes of the Administrative Procedure Act and section 7805(b) of the Code, the applicability date, and not the effective date, is used to determine when the regulations have force and effect.

  5. If adding the date of applicability to the DATES caption, the drafting team may either:

    1. Repeat the effective date section of the regulation, or

    2. Provide a cross-reference to either the effective date section of the regulation or the "Effective Date" under the SUPPLEMENTAL INFORMATION caption of the preamble.

    Example:

    The TD is published in the FR on November 1, 1999. The regulatory text provides for a January 1, 2000, effective date (the date of applicability).

    (g) Effective date. This section applies to qualified escrow accounts and qualified trusts established after December 31, 1999.

    Note:

    The DATES section of the preamble may read as one of the following:

    DATES: Effective Date: These regulations are effective [INSERT DATE OF PUBLICATION OF THIS DOCUMENT IN THE FEDERAL REGISTER].
       Applicability Date: These regulations apply to qualified escrow accounts and qualified trusts established after December 31, 1999.     		DATES: Effective Date: These regulations are effective [INSERT DATE OF PUBLICATION OF THIS DOCUMENT IN THE FEDERAL REGISTER].
       Applicability Date: For dates of applicability, see §1.468B-6(g).

32.1.5.4.4.3  (08-11-2004)
Table of Effective Dates and Time Periods

  1. The OFR uses the Table of Effective Dates and Time Periods (Table) to compute certain dates such as effective dates (see CCDM 32.1.5.4.4.2) and comment deadlines (see CCDM 32.1.5.4.4.1) that appear in regulations. In computing these dates, the day after publication is counted as the first day. If a date falls on a weekend or holiday, use the next Federal business day. The OFR publishes the Table in the first FR issued each month.

32.1.5.4.5  (08-11-2004)
ADDRESSES Caption

  1. The ADDRESSES caption is always plural. This caption always appears in an ANPRM and an NPRM and appears in a TD that requests comments on issues discussed in the preamble. Under this caption, addresses are provided where to

    1. Mail, hand deliver, or electronically submit public comments and other submissions, such as a request to speak at a public hearing,

    2. Attend a public hearing, and

    3. Examine any material available for public inspection.

32.1.5.4.5.1  (08-11-2004)
Addresses for Submitting Comments

  1. The public may submit comments in three ways:

    • U.S. Mail Address

      Internal Revenue Service
      CC:PA:LPD:PR (REG-XXXXXX-XX)
      Room 5203
      Post Office Box 7604
      Ben Franklin Station
      Washington, DC 20044

    • Hand deliveries

      CC:PA:LPD:PR (REG-XXXXXX-XX)
      Courier’s Desk
      1111 Constitution Ave., N.W.
      Washington, DC 20224

    • Electronic comments

      www.irs.gov/regs or www.regulations.gov

      Example:

      ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-XXXXXX-XX), 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. and 4 p.m. to CC:PA:LPD:PR (REG-XXXXXX-XX), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, DC, or sent electronically, via the IRS Internet site at www.irs.gov/regs or via the Federal eRulemaking Portal at http://www.regulations.gov/ (indicate IRS and REG-XXXXXX-XX). The public hearing will be held in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, N.W., Washington, DC.

32.1.5.4.5.2  (08-11-2004)
Public Hearing Address, Including Hearing Room

  1. Public hearings are held in several rooms in the National Office at 1111 Constitution Avenue. The Publications and Regulations Branch will reserve a hearing room and will furnish the drafting attorney with the hearing room information.

32.1.5.4.6  (08-11-2004)
FOR FURTHER INFORMATION CONTACT Caption

  1. This caption identifies the individual or individuals who will receive telephone inquiries and answer questions about the regulation, submission of comments, and hearing.

  2. The name, telephone number, and a statement that the telephone number is not a toll-free number must be included.

    Example 1: FOR FURTHER INFORMATION CONTACT: Drafting Attorney, (202) 622-XXXX (not a toll-free number).

    Example 2: FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Drafting Attorney, (202) 622-XXXX; concerning submissions of comments, the hearing, or to be placed on the building access list to attend the hearing, Publications and Regulations Branch Specialist, (202) 622-7180 (not toll-free numbers).

32.1.5.4.7  (08-11-2004)
SUPPLEMENTARY INFORMATION Caption

  1. In the SUPPLEMENTARY INFORMATION caption, the drafting team should provide the history of the regulation, other background information, and an explanation of the basis and purpose of the regulation. This section also includes information about Service compliance with Federal administrative laws (such as the Paperwork Reduction Act, Administrative Procedure Act, and Regulatory Flexibility Act), IRS policies, and Executive Orders (such as Executive Order 12866).

  2. The SUPPLEMENTARY INFORMATION caption generally includes the following descriptive, first level headings. The drafting team should type first level headings capitalizing the first letter of each word, except articles and prepositions consisting of fewer than five letters (for example "for," "to," v. "Under" ) in bold font, printed flush left. The drafting team should present first level headings in the following order:

    • Paperwork Reduction Act (if applicable)

    • Background

    • Explanation of Provisions (for ANPRMs, NPRMs, and TEMPs) or Summary of Comments or Explanation and Summary of Comments (for final regulations)

    • Effect on Other Documents (if applicable)

    • Special Analyses

    • Comments and Public Hearing (if applicable)

    • Drafting Information

    • List of Subjects

32.1.5.4.7.1  (08-11-2004)
Paperwork Reduction Act

  1. As discussed in CCDM 32.1.2.5, regulations containing a collection of information requirement are subject to the Paperwork Reduction Act (PRA) (44 U.S.C. 3501-3520). Regulations not containing a collection of information requirement are not subject to the PRA, and thus, are not required to have a Paperwork Reduction Act heading. For regulations subject to the PRA, the regulations must include text for the Paperwork Reduction Act heading that:

    1. Notifies the public that the agency submitted the collection of information requirement to OMB,

    2. Provides the OMB address where taxpayers should send comments on the collection of information requirement and the IRS address where taxpayers may submit copies of the comments,

    3. Identifies specific collection of information matters on which the agency would like taxpayers to submit comments,

    4. Provides a description of and need for the collection of information requirement,

    5. Identifies likely respondents,

    6. Provides a burden estimate,

    7. Notifies taxpayers that the collection of information requirement is not enforceable unless it displays an OMB control number (see CCDM 32.5.7.5), and

    8. Instructs taxpayers to retain material related to the collection of information as long as it may be necessary to administer the internal revenue laws.

32.1.5.4.7.2  (08-11-2004)
Background

  1. In the Background section, the drafting team should briefly discuss the history of the project. For example, if the IRS issues proposed, final, or temporary regulations in response to legislation, the drafting team should identify the legislation addressed. Also, the drafting team should discuss any significant case law that is contrary to the regulation. Also, if the IRS issues a final regulation, the drafting team should provide a citation to the underlying NPRM and any ANPRM. If the agency issues an NPRM cross-referenced to a TEMP, the drafting team should provide the citation to the TEMP. Do not provide a citation to the cross-referenced NPRM in the corresponding temporary regulation.

    Example 1: NPRM

    Background

     This document contains proposed amendments to 26 CFR part 1 under section 468B of the Internal Revenue Code (Code). Section 468B was added to the Code by section 1807(a)(7)(A) of the Tax Reform Act of 1986 (Public Law 99-514, 100 Stat. 2814) and was amended by section 1018(f) of the Technical and Miscellaneous Revenue Act of 1988 (Public Law 100-647, 102 Stat. 3582). Section 468B(g) provides that nothing in any provision of law shall be construed as providing that an escrow account, settlement fund, or similar fund is not subject to current income tax. Section 468B(g) further provides that the Secretary shall prescribe regulations providing for the taxation of such accounts or funds as a grantor trust or otherwise.


     Final regulations (TD 8459) under section 468B(g) were published in the Federal Register for December 23, 1992 (57 FR 60983) to provide guidance concerning qualified settlement funds but not other types of escrow accounts, settlement funds, or similar funds. These proposed regulations provide guidance with respect to section 1031 qualified escrow accounts, pre-closing and post-closing escrows, and disputed ownership funds.

    Example 2: NPRM by cross-reference to temporary regulations

    Background

     Temporary regulations in the Rules and Regulations section of this issue of the Federal Register (64 FR 43910) amend 26 CFR part 1. The temporary regulations provide that an income tax return preparer who is an individual may furnish either a social security number or an alternative identifying number to satisfy the requirements of section 6109(a)(4). The text of those regulations also serves as the text of these regulations. The preamble to the temporary regulations explains the temporary regulations and these proposed regulations.

    Example 3: Temporary regulation

    Background

     This document contains amendments to 26 CFR part 1. Section 6109(a)(4) of the Internal Revenue Code (Code) provides that any return or claim for refund prepared by an income tax return preparer must bear the identifying number of the preparer as required by regulations prescribed by the Secretary. Prior to its amendment by the Internal Revenue Service Restructuring and Reform Act of 1998 (Public Law 105-206, 112 Stat. 685 (RRA ’98)), section 6109(a) provided that the identifying number of an individual preparer was that preparer’s social security number (SSN).


     Section 3710 of RRA ’98 amended section 6109(a) by removing the requirement that an individual preparer’s identifying number be the preparer’s SSN. Instead, the Secretary may prescribe alternatives to the SSN for purposes of identifying individual preparers.

    Example 4: Final regulation

    Background

     This document contains amendments to 26 CFR part 52. On September 6, 1990, a temporary regulation (TD 8311) relating to returns, payments, and deposits of tax under sections 4681 and 4682 (relating to the tax imposed on ozone-depleting chemicals) was published in the Federal Register (55 FR 36612). A notice of proposed rulemaking (REG-120200-87) cross-referencing the temporary regulations was published in the Federal Register for the same day (55 FR 36659). No public hearing was requested or held. Written or electronic comments responding to the notice of proposed rulemaking were received.After consideration of all the comments, the proposed regulations are adopted as amended by this Treasury decision, and the corresponding temporary regulations are removed. The revisions are discussed below.

    Example 5: Final regulation (no change TD)

    Background

     This document contains amendments to 26 CFR part 1. On January 22, 1999, a notice of proposed rulemaking (REG-XXXXXX-XX) relating to the taxation of capital gains on installment sales of depreciable real property was published in the Federal Register (64 FR 3457). No comments were received from the public in response to the notice of proposed rulemaking. No public hearing was requested or held. The proposed regulations are adopted by this Treasury decision.

32.1.5.4.7.3  (08-11-2004)
Explanation of Provisions

  1. In the Explanation of Provisions section, the drafting team should describe the substantive provisions of the regulation in clear, concise, plain language without restating particular rules contained in the regulatory text. It is not necessary to justify the rules that are being proposed or adopted or alternatives that were considered.

  2. For final regulations, the drafting team should use the heading title Summary of Comments or Summary of Comments and Explanation of Revisions, if appropriate. In this section, the drafting team should identify and describe the significant differences, if any, between the rules adopted in the final regulation and those proposed in the underlying NPRM. Do not repeat material stated in the preamble to the NPRM. Also, the drafting team should address the public comments submitted in writing and the oral comments presented at the public hearing on the NPRM (generally, including late comments). The drafting team should explain why the agency found some comments persuasive, and others not, in issuing the final regulations. When discussing public comments, the IRS generally does not identify the parties submitting them. However, the drafting team should identify and discuss the comments submitted by the Chief Counsel for Advocacy of the Small Business Administration. See CCDM 32.1.5.4.7.5.2 for further information.

  3. The drafting team should use 2nd level through 5th level headings, as necessary, to organize the text of the Explanation of Provisions, highlight individual rules or issues, explain particularly complicated issues, or identify issues on which the agency would like to receive public comments. Second through 5th level headings are printed flush left and single-spaced. The first word may be a symbol (for example "§" ). These headings may be numbered or unnumbered. If numbered, OFR does not require any particular numbering convention (as it does for headings in the regulation text). When the Explanation of Provisions contains 2nd level through 5th level headings, the correct format is as follows:

    • 2nd level heading: Capitalize the first letter of each word, except articles and prepositions with less than five letters (for example, "for," "to," and "Under" ), underlined and not in bold font,

    • 3rd level heading: Capitalize the first letter of the first word, underlined and not in bold font,

    • 4th level heading: Capitalize the first letter of each word, except articles and prepositions that are less than five letters, not underlined and not in bold font, and

    • 5th level heading: Capitalize the first letter of the first word, not underlined and not in bold font.

      Example:

      Summary of Comments and Explanation of Revisions
      1. Comments and Changes Relating to §1.441 of the Proposed Regulations
      A. Definition of 52-53-week taxable year
        *****
      B. Changes to or from a 52-53-week taxable year
        *****
      C. Short periods of 6 days or less
        *****
      2. Comments and Changes Relating to §1.442 of the Proposed Regulations Time and Manner for Filing an Application
      3. Comments and Changes Relating to Partnerships, S Corporations, and Personal Service Corporations (PSCs)

32.1.5.4.7.4  (08-11-2004)
Effect on Other Documents

  1. A regulation is the highest form of published guidance and has the force and effect of law unless invalidated. A regulation may be used to affect a lower form of published guidance (i.e., revenue ruling, revenue procedure, or notice). However, a lower form of published guidance may not be used to affect a regulation.

  2. If the regulation obsoletes, clarifies, or modifies a revenue ruling, revenue procedure, or notice, describe the change in the Effect on Other Documents section. The drafting team must notify the Internal Revenue Bulletin Unit of any effect the regulation has on other documents to ensure that the information is printed in the Internal Revenue Bulletin and the effect on other documents is made available to the public.

    Example:

    Effect on Other Documents
        The following publications are obsolete as of [INSERT DATE OF PUBLICATION OF THIS DOCUMENT IN THE FEDERAL REGISTER]:
      Notice 90-8 (1990-1 CB 305).
      Notice 90-9 (1990-1 CB 312).

32.1.5.4.7.5  (08-11-2004)
Special Analyses

  1. The drafting team should use the Special Analyses section to describe IRS compliance with (or the inapplicability of) Federal statutory (including the Code), regulatory, and Executive Branch mandates governing the regulatory process. The Administrative Procedure Act, the Regulatory Flexibility Act, Executive Order 12866, and sections 7805(e) and (f) of the Code contain some of these mandates.

32.1.5.4.7.5.1  (08-11-2004)
Administrative Procedure Act

  1. In the Special Analyses section, the drafting team should state whether the regulation is subject to the Administrative Procedure Act (APA), 5 U.S.C. 553(b), (c), and (d).

  2. In general, 5 U.S.C. 553(b) and (c) require agencies to publish NPRMs in the FR and provide interested persons the opportunity to comment on the proposed rules before adopted as final regulations. These provisions do not apply if the agency finds that publishing an NPRM is impracticable, unnecessary, or contrary to the public interest.

  3. 5 U.S.C. 553(d) requires agencies to publish regulations at least 30 days before their effective date. This provision does not apply to regulations

    • That adopt a substantive rule that grants or recognizes an exemption, or relieves a restriction, or

    • For which the agency has good cause.

  4. If the agency determines that notice and comment is contrary to public interest, the regulations should include language similar to the following:

      "These regulations are necessary to provide taxpayers with immediate guidance. Accordingly, good cause is found for dispensing with notice and public comment pursuant to 5 U.S.C. 553(b) and (c) and with a delayed effective date pursuant to 5 U.S.C. 553(d)."

  5. Interpretative rules are not subject to the provisions of 5 U.S.C. 553(b), (c), and (d). Although most IRS/Treasury regulations are interpretative, and therefore not subject to these provisions of the APA, the IRS usually solicits public comment on all NPRMs.

32.1.5.4.7.5.2  (08-11-2004)
Section 7805(e) and (f) of the Code

  1. Section 7805(e) of the Code provides that any temporary regulation issued must also be issued as an NPRM.

  2. Section 7805(f) provides that after publishing NPRMs and temporary regulations, the IRS will submit the regulations to the Chief Counsel for Advocacy (CCA) of the Small Business Administration (SBA) for comment on the impact of the regulations on small business. (The Publications and Regulations Branch is responsible for submitting regulations to the SBA after publication in the FR.)

    1. IRS will consider the comments of the CCA when issuing final regulations and will respond to those comments in the preamble (see CCDM 32.1.8.3), and

    2. At least four weeks prior to publication in the FR, the Publications and Regulations Branch will submit to the CCA for comment final regulations not preceded by an NPRM. The drafting team must consider any comments received in drafting the final regulations and must discuss the comments in the preamble to the final regulations.

  3. If the regulation is an NPRM or temporary regulation, the drafting team should include the following statement:

      "Pursuant to section 7805(f) of the Internal Revenue Code, this regulation has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. "

  4. If the regulation is a final regulation that supersedes an NPRM or temporary regulation, the drafting team should include the following statement:

      "Pursuant to section 7805(f) of the Internal Revenue Code, the NPRM preceding this regulation was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business." OR "The Chief Counsel for Advocacy submitted comments on the regulation, which are discussed elsewhere in this preamble."

  5. If the regulation is a final regulation without a prior NPRM, the drafting team should include the following statement:

      "Pursuant to section 7805(f) of the Internal Revenue Code, this regulation was submitted to the Chief Counsel for Advocacy of the SBA for comment on its impact on small business." OR " The Chief Counsel for Advocacy submitted comments on the regulation, which are discussed elsewhere in this preamble."

32.1.5.4.7.5.3  (08-11-2004)
Executive Order 12866

  1. The drafting team should state in the Special Analyses section whether the regulation is a significant regulatory action pursuant to E.O. 12866. Ordinarily, IRS/Treasury regulations are not "significant regulatory actions" because the effect of the rule is almost always a result of the underlying statute, rather than the regulation.

  2. Section 3(a)(4)(B) of E.O. 12866 requires agencies to prepare a regulatory assessment for "significant regulatory actions."

  3. Section 3(f) of E.O. 12866 defines "significant regulatory action" as any regulatory action that is likely to result in a rule that may :

    • Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal governments or communities;

    • Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

    • Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or

    • Raise novel legal or policy issues arising out of legal mandates, the President’s priorities, or the principles of the Order.

  4. If the regulation is a significant regulatory action, the drafting team should include the following statement:

      "Executive Order 12866 requires certain regulatory assessments and procedures for a significant regulatory action, defined as [insert applicable definition under E.O. 12866]. This rule has been designated as significant and has been reviewed by the Office of Management and Budget as required under the provisions of E.O. 12866."

32.1.5.4.7.5.4  (08-11-2004)
Regulatory Flexibility Act

  1. Congress enacted the Regulatory Flexibility Act (5 U.S.C. 601) (RFA) in 1980 to reduce the regulatory burden on small businesses. Section 603 of the RFA required agencies to prepare a regulatory flexibility analysis of proposed and final regulations (other than interpretive regulations), assessing their impact on small businesses. Treasury took the position that most IRS/Treasury regulations were interpretative and therefore not subject to the RFA of 1980.

  2. In 1996, Congress passed the Small Business Regulatory Fairness and Enforcement Act (SBRFEA) (5 U.S.C. 801), amending the RFA. Pursuant to sections 603 and 604, as amended by SBRFEA, the RFA became applicable to interpretative rules (proposed on or after March 29, 1996) involving the internal revenue laws of the United States, but only to the extent they impose a collection of information requirement on small businesses.

  3. Executive Order 13272, published in the FR on August 16, 2002, requires each agency to establish procedures and policies to promote compliance with the RFA, as amended. In 2003, the Department of the Treasury issued an Attachment to Treasury Directive 28-01 (Preparation and Review of Regulations), titled "Policy and Procedures to Ensure Consideration of Potential Impacts of Regulations on Small Entities," which provides guidance for complying with E.O. 13272. TD-28-01 is posted at www.treas.gov/regs/2002-rfa-compliance .

  4. TD-28-01 articulates the Department of the Treasury policy that all offices and bureaus:

    1. Seek to minimize, consistent with statutory requirements and sound regulatory policy, the compliance and paperwork burdens of all their regulations on small entities. Small entities include small businesses, small not-for-profit enterprises, and small governmental jurisdictions.

    2. Adhere to the requirements of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) and other applicable law when developing regulations subject to that Act.

  5. In the Special Analyses section, the regulations must state (as applicable):

    1. That the regulation is not subject to the Regulatory Flexibility Act (RFA) and why,

    2. That a regulatory flexibility analysis is not required. Include a certification that the regulation will not have a significant economic impact on a substantial number of small entities. Follow the certification with an explanation of the basis for the certification (and, if appropriate ask for comment on the accuracy of the certification), or

    3. That the agency has prepared a[n] [initial/final] regulatory flexibility analysis. Include the full analysis under the [Initial/Final] Regulatory Flexibility Analysis heading, which follows the Special Analyses heading.

  6. Pursuant to section 605(b) of the RFA, an agency is not required to prepare the regulatory flexibility analysis if the head of the agency certifies that the collection of information requirement (for interpretative regulations) or the regulation itself (for legislative regulations) will not impose a significant economic impact on a substantial number of small entities. If in doubt about the accuracy of the certification, the drafting team should request comment on the accuracy of the certification.

  7. Notwithstanding a certification that an NPRM will not have a significant economic impact on a substantial number of small entities, if at any time prior to issuing a final regulation the IRS/Treasury finds that the regulation is likely to have a significant economic impact, the drafting team should notify the Senior Advisor to the General Counsel for Regulatory Affairs. The drafting team may need to prepare an analysis for the final rule.

  8. If a regulatory flexibility analysis is required under the RFA, the drafting team must prepare a regulatory flexibility analysis for the regulation both when the regulation is issued as a proposed regulation and when it is issued as a final regulation. The drafting team must include the information set forth in 5 U.S.C. 603(b) and (c) (for NPRMs) or 5 U.S.C. 604(a) (for final regulations). An example of the type of information required to be included in the analysis is a description and estimate, where feasible, of the number of small entities to which the regulations will apply. See 5 U.S.C. 603(b)(3).

  9. Executive Order 13272 requires that agencies notify the Chief Counsel for Advocacy of the Small Business Administration (SBA) of NPRMs that require the preparation of an initial regulatory flexibility analysis prior to publication of the NPRM.

  10. The RFA is available at www.archives.gov/federal_register/public_laws/acts.html#rfa .

  11. SBRFEA is available at www.archives.gov/federal_register/public_laws/acts.html#sbr .

  12. Treasury Directive TD-28-01 is available at www.treas.gov/regs/2002-rfa-compliance.pdf .

  13. Additional information, including the Small Business Administration (SBA) RFA Guide, is available on the Small Business Administration’s web site at www.sba.gov/advo.

32.1.5.4.7.5.4.1  (08-11-2004)
RFA Definitions

  1. The term "collection of information requirement" , as defined in the RFA, is synonymous, in all meaningful respects, to the term as defined in the PRA. See CCDM 32.1.2.5. Generally, a collection of information includes:

    1. A requirement that a small entity report information to the Federal Government,

    2. A requirement that a small entity maintain specified records, whether or not the information in those records is reported to the Federal government, and

    3. A requirement that a small entity disclose information to a third party or to the public in general. See TD-28-01.

  2. The RFA defines "small entities" to include small businesses, small organizations, and small governmental jurisdictions. Small businesses include businesses that satisfy the Small Business Administrations’ size standards (see 15 U.S.C. 632; 14 C.F.R. part 121). These size standards vary for different industries, but most businesses likely will be classified as "small" under those standards.

  3. The RFA does not define "substantial number." Whether a number of affected small entities is substantial is based on all relevant facts and circumstances. Tax regulations targeting a specific industry and affecting a large percentage of the small entities in that industry are likely to affect a "substantial number" of small entities. Treasury advises that tax regulations with a broad affect on business have an impact on a "substantial number" of small entities. Treasury does not include foreign entities or corporations filing consolidated returns when assessing the impact of a regulation. Obtain statistical and other data concerning the number of affected small entities from IRS Statistics of Income Division, the IRS Tax Forms and Publications Division, the SBSE Operating Division, tax practitioners, trade associations, small businesses, other organizations, Treasury’s Office of Tax Analysis, other government agencies, revenue estimates and legislative history of the underlying statute, and other resources available in the Chief Counsel library.

  4. The RFA also does not define "significant economic impact. " For interpretative regulations, the drafting team should estimate the economic impact of the collection of information requirement in a manner similar to determining the burden estimates under the PRA. The drafting team should calculate the annual economic impact based on all relevant facts and circumstances, including the hours necessary to comply with the collection of information and the costs of purchasing equipment that is necessary to comply with the collection of information. One common method of estimating the economic impact of a collection of information is to multiply the PRA burden estimate (stated in terms of total hours) by an appropriate hourly rate. Consider the purpose and complexity of the rule to determine whether its economic impact is "significant."

32.1.5.4.7.5.4.2  (08-11-2004)
Applicability of RFA: General Criteria

  1. The RFA applies, in general, to:

    1. Any NPRM, or final regulation preceded by an NPRM published after 12/31/80, for which 5 U.S.C. 553 or any other law requires the agency to publish general notice of proposed rulemaking for any proposed rule (primarily legislative regulations), and

    2. Any interpretative NPRM, or final interpretative regulation preceded by an interpretive NPRM published after March 29, 1996, involving the internal revenue laws of the United States to the extent that the interpretative rule imposes (or a proposed rule would impose) a collection of information requirement on small entities.

  2. The drafting team must determine who is affected by the regulation, and, if the regulation affects small entities, the nature (quantified to the extent practicable) of that effect.

  3. To determine the effect of the RFA on the regulation, the drafting team should determine whether the regulation is an interpretative regulation or a legislative regulation.


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