Part IV. Items — Internal Revenue Bulletin 1998-40

Notice of Proposed Rulemaking and Notice of Public Hearing

Section 411(d)(6) Protected Benefits (Taxpayer Relief Act of 1997); Qualified Retirement Plan Benefits

REG–101363–98

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary regulations.

SUMMARY: In T.D. 8781, page 4, the IRS is issuing temporary regulations providing for changes to the rules regarding qualified retirement plan benefits that are protected from reduction by plan amendment, that have been made necessary by the Taxpayer Relief Act of 1997. The text of those temporary regulations also serves as the text of these proposed regulations.

DATES: Written comments and requests for a public hearing must be received by December 3, 1998.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG–101363–98), room 5228, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG–101363–98), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, DC. Alternatively, taxpayers may submit comments electronically via the internet by selecting the “Tax Regs” option on the IRS Home Page, or by submitting comments directly to the IRS internet site at http://www.irs/ ustreas.gov/prod/tax_regs/comments.html.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Linda S. F. Marshall, (202) 622-6030 (not a tollfree call); concerning submissions, Michael Slaughter, (202) 622-7190 (not a toll-free call).

SUPPLEMENTARY INFORMATION:

Background

Temporary regulations in T.D. 8781 amend the Income Tax Regulations (26 CFR part 1) relating to section 411(d)(6), to provide for changes that have been made necessary by the Taxpayer Relief Act of 1997 (TRA ’97), Public Law 105–34, 111 Stat. 788 (1997). The temporary regulations change the existing regulations to conform with the TRA ’97 rules regarding in-kind distribution requirements for certain employee stock ownership plans, and specify the time period during which certain plan amendments for which relief has been granted by TRA ’97 may be made without violating the prohibition against plan amendments that reduce accrued benefits.

The text of those temporary regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the temporary regulations.

Special Analyses

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in EO 12866. 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 these regulations, and because the regulation does not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Internal Revenue 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 business.

Comments and Requests for a Public Hearing

Before these proposed regulations are adopted as final regulations, consideration will be given to any written comments (a signed original and eight (8)

copies) that are submitted timely to the IRS. All comments will be available for public inspection and copying. A public hearing may be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the hearing will be published in the Federal Register.

Drafting Information

The principal author of these regulations is Linda S. F. Marshall, Office of the Associate Chief Counsel (Employee Benefits and Exempt Organizations. However, other personnel from the IRS and Treasury Department participated in their development.

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Proposed Amendments to the Regulations

Accordingly, 26 CFR part 1 is proposed to be 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 1.411(d)–4 is amended by:

Revising paragraph (d)(1)(ii) of Q&A-2.
Adding Q&A-11. The addition and revisions read as follows:

§1.411(d)–4 Section 411(d)(6) protected benefits.

Q&A-2 * * * (d)(1)(ii) [The text of proposed paragraph (d)(1)(ii) of Q&A-2 is the same as the text of §1.411(d)–4T Q&A-2(d)(1)(ii) published in T.D. 8781.]

Q&A-11 [The text of proposed Q&A11 is the same as the text of §1.411(d)–4T Q&A-11 published in T.D. 8781.]

Michael P. Dolan, Deputy Commissioner of

Internal Revenue.

October 5, 1998 10 1998–40 I.R.B.

dertaken a new initiative to improve its procedures for handling bankruptcy cases. The new procedures are intended to minimize the likelihood that IRS collection actions will inadvertently violate the bankruptcy laws, to facilitate prompt correction of any violations that do occur, and to provide an administrative process for handling any claims for damages against the IRS that arise from such violations.

The initiative includes new administrative measures to speed the processing of bankruptcy matters. The IRS has designated specific points of contact who will coordinate the handling of violations of the automatic stay and the discharge injunction of the bankruptcy laws. These contact points will be part of the Special Procedures Function (SPF) in the local IRS Collection Division. SPF will expeditiously handle these cases according to specific time guidelines in order to ensure compliance with the bankruptcy laws. These procedures will be reflected in the next version of IRM Part V Bankruptcy Handbook 5.9. In addition, the IRS is notifying bankruptcy practitioners throughout the country of the address in each district to which bankruptcy petitions and all other bankruptcy correspondence should be sent.

The initiative also provides for a pilot program to test new administrative procedures for handling any claims for damages debtors may have in cases where the IRS fails to properly comply with the bankruptcy laws. Under Section 7433 of the Internal Revenue Code, as amended by the Internal Revenue Service Reform and Restructuring Act of 1998, debtors may be entitled to recover damages for actual economic losses they sustain as a result of willful violations of the bankruptcy laws by the IRS. Attorney’s fees in these cases may also be available pursuant to Internal Revenue Code Section 7430. While the new procedures for processing bankruptcy cases are intended to minimize any such violations, the IRS believes it is appropriate to test a simplified administrative process for handling cases in which debtors believe they have suffered damages because of improper IRS actions. Under this process, debtors may elect to file claims for damages with the local SPF office rather than with the

(Filed by the Office of the Federal Register on September 8, 1998, 8:45 a.m., and published in the issue of the Federal Register for September 9, 1998, 63 F.R. 47214)

Pending Finalization of Proposed Regulations Regarding Timing Requirements for Satisfying Notice and Consent Requirements Under Sections 411 and 417 of the Code

Announcement 98–87

The Internal Revenue Service and the Department of the Treasury intend to take into account public comments that are currently being received regarding the use of new technologies (sometimes referred to as “paperless” technologies) in the administration of qualified plans when amending and finalizing proposed regulations relating to notice and consent requirements under sections 411(a)(11) and 417 of the Internal Revenue Code (the “Code”). The Service and Treasury intend to finalize these regulations in the near future. In the meanwhile, plan sponsors may continue to rely on these regulations as proposed.

Background

A notice of proposed rulemaking (EE– 24–93) containing proposed amendments to the Income Tax Regulations under sections 411(a)(11) and 417 of the Code (that would amend section 1.411(a)– 11(c)(2) and (8) and section 1.417(e)– 1(b)(3) and (4)) was published in the Fed- eral Register (60 F.R. 49236) on September 22, 1995. Temporary Income Tax Regulations (T.D. 8620) under sections 411(a)(11) and 417 (section 1.411(a)– 11T(c)(2) and (8) and section 1.417(e)– 1T(b)(3) and (4)) were published on the same day (60 F.R. 49218). The text of the proposed regulations and temporary regulations is the same. Under section 7805(e), temporary regulations expire within three years after issuance.

The proposed and temporary regulations set forth rules concerning the timing requirements for satisfying the notice and consent requirements under sections 411(a)(11) and 417 of the Code in connection with distributions from qualified plans. The regulations did not provide guidance on the use of paperless tech

nologies, although the preamble to the regulations invited comments on possible modifications to the notice and consent requirements to accommodate paperless technologies, if adequate safeguards are provided.

Section 1510 of the Taxpayer Relief Act of 1997, Pub. L. 105–34, provides that the Secretary of the Treasury and the Secretary of Labor each shall issue guidance designed to interpret the notice, election, consent, disclosure, and time requirements (and related recordkeeping requirements) under the Code and the Employee Retirement Income Security Act of 1974 relating to retirement plans as applied to the use of new technologies by plan sponsors and administrators. Section 1510 requires the guidance to maintain the protection of the rights of participants and beneficiaries. Announcement 98–62, 1998–29 I.R.B. 13, requested public comments, by October 5, 1998, on the use of paperless technologies and, among other issues, the application of these technologies to the notice and consent requirements under sections 411(a)(11) and 417.

Reliance on Proposed Regulations

The Service and Treasury plan to issue amended and final regulations relating to the timing requirements for satisfying the notice and consent requirements under sections 411(a)(11) and 417 of the Code only after careful consideration of the public comments on paperless technologies received by October 5, 1998. Accordingly, it is intended that the temporary regulations under sections 411(a)(11) and 417 (section 1.411(a)–11T(c)(2) and (8) and section 1.417(e)–1T(b)(3) and (4)) will not be finalized prior to their automatic expiration under section 7805(e). Pursuant to this announcement, plan sponsors may rely on the proposed regulations under sections 411(a)(11) and 417 (that would amend section 1.411(a)– 11(c)(2) and (8) and section 1.417(e)– 1(b)(3) and (4)) until the proposed regulations are amended or finalized.

IRS Announces New Procedures For Handling Matters In Bankruptcy

Announcement 98–89

The Internal Revenue Service has un

1998–40 I.R.B. 11 October 5, 1998

Longview, TX People Against Racism &

Discrimination, Calumet, IL Raptor Education Group Inc., Antigo,

bankruptcy court. Claims for damages must be made in writing and must include supporting documentation requested by the SPF office. SPF will evaluate and respond to these claims within sixty days.

The IRS will be undertaking outreach efforts to explain its new procedures to bankruptcy practitioners and other interested parties across the country. For additional information about these new procedures, contact the local Special Procedures Function office.

Foundations Status of Certain Organizations

Announcement 98–91

Christion Legal Services Inc., Bangor, MI Coastnet, Beaufort, SC Corestates Community Development

San Marcos, TX God Rules Ministry, Inc., Baton Rouge,

Paula Martin Jones Charities, Inc.,

Corporation, Philadelphia, PA Cross Keys Retirement, Inc., Sewell, NJ Earl Kouba Memorial Foundation,

WI Somerville Community Schools Council

Kasson, MN Earth Preservation Funds, Inc.,

Milwaukee, WI Families United By Adoption, Berlin, NJ Film Foundation Inc., New York, NY For A Better Life Foundation, Chicago,

Inc., Somerville, MA Special Program for Adolescents,

Raleigh, NC Sterling Foundation Inc., Pittsburgh, PA Sthle Wildlife Foundation, Brewer, ME Tanzania Children Development

Evanston, IL Sports Pride of America Foundation, Inc.,

IL Freed Hurwitz Memorial Fund, Inc.,

Hollywood, FL Fritz & Alice Anton Scholarship Fund,

Association, Hazel Crest, IL Think First of New York, Inc.,

Schenectady, NY The Silver Spring Historical Trust, Cape

The following organizations have failed to establish or have been unable to maintain their status as public charities or as operating foundations. Accordingly, grantors and contributors may not, after this date, rely on previous rulings or designations in the Cumulative List of Organizations (Publication 78), or on the presumption arising from the filing of notices under section 508(b) of the Code. This listing does not indicate that the organizations have lost their status as organizations described in section 501(c)(3), eligible to receive deductible contributions.

Former Public Charities. The following organizations (which have been treated as organizations that are not private foundations described in section 509(a) of the Code) are now classified as private foundations: Abundant Waters Inc., New York, NY Akron Coalition for Education

LA Goddard Historical & Genealogical

King City, CA Largess, South Euclid, OH Living God Ministries, Inc., Bastrop,

Society Inc., Stow, OH Good Stewards, Woodbury, MN Gulf Coast Research and Development

Laboratory Inc., Tampa, FL Haviland Heartland Housing, Haviland

KS Hollyfield Foundation, Houston, TX Indiana Civic and Cultural Association,

Incorporated, Indiana, PA Jewish Radical Education Project, Inc.,

New York, NY Johns Gospel Mission, Troy, MI Joseph Ministries Inc., Nixa, MO Juanita Maldon Foundation, Richmond,

CA Kate Sidran Family Foundation, Dallas,

Girardeau, MO The Sumter Foundation Inc., Americus,

GA Trades Awareness Program Inc., Franklin,

WI Union Missionary Baptist Neighborhood

Redevelopment Corp., Lansing, MI United Students Association, Inc.,

Chestnut Hill, MA Urban Ministries Development

Corporation, Columbus, OH Versin House Inc. Community/Living

Facility, Dolton, IL Victory Home Health Hospice, Las

TX King City Police Activities League, Inc.,

Vegas, NM Wisconsin Rural Leadership Program,

Inc., Madison, WI World Farmers Hall of Fame, Pawnee

Foundation, Akron, OH American Computer Scientists

Association, Inc., Cranford, NJ Belize Foundation, Detroit, MI Berdan Support Fund, Mendenhall, PA Bonsall Village Inc., Yeadon, PA Center for Health and Long Term Care

TX Lutheran Housing Service Number 8

Incorporated, Toledo, OH Lutheran Radio Incorporated, Nevada, IA Mesoamerican Research Foundation, Salt

City, NE If an organization listed above submits information that warrants the renewal of its classification as a public charity or as a private operating foundation, the Internal Revenue Service will issue a ruling or determination letter with the revised classification as to foundation status. Grantors and contributors may thereafter rely upon such ruling or determination letter as provided in section 1.509(a)–7 of the Income Tax Regulations. It is not the practice of the Service to announce such revised classification of foundation status in the Internal Revenue Bulletin.

Research, Inc., Waltham, MA Chicago Community Outreach, Chicago,

Lake City, UT Na Vision Ministries Inc., Sunrise, FL Network 2000, Kansas City, KS Ontohealth, Inc., Xenia, OH Ozark Mountain Adventure, Fort Smith,

IL Christ Crusade Community Center,

Fayetteville, NC

October 5, 1998 12 1998–40 I.R.B.