Part IV. Items of General Interest

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG–103694–99), room 5226, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG–103694–99), 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 http://www. irs.ustreas.gov/tax_regs/regslist.html (the IRS Internet address).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Forest Boone, (202) 622-4960; concerning submissions of comments, Michael L. Slaughter, (202) 622-7190 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

This document contains proposed amendments to section 467 of the Income Tax Regulations (26 CFR Part 1). Section 467 was added to the Internal Revenue Code by section 92(a) of the Tax Reform Act of 1984 (Public Law 98-369 (98 Stat. 609)). On June 3, 1996, the IRS and Treasury Department issued a notice of proposed rulemaking (61 F.R. 27834 [IA– 292–84, 1996–2 C.B. 462]) relating to section 467. Comments responding to the notice were received, and a public hearing was held on September 25, 1996. After considering the comments received and the statements made at the public hearing, final regulations under section 467 have been completed and appear in T.D. 8820, page 3. This regulation proposes to amend the section 467 regulations and, for purposes of the application of constant rental accrual, treat rental agreements involving payments of $2,000,000 or less in the same manner as those agreements involving payments of more than $2,000,000.

Notice of Proposed Rulemaking

Withdrawal of Guidance Under Section 1291 Relating to Mark- to-Market Elections for Regulated Investment Companies (RICs)

INTL–941–86

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Partial withdrawal of proposed regulations.

SUMMARY: This document withdraws Section 1.1291–8 of the notice of proposed rulemaking INTL–941–86, 1992–1 C.B. 1124, that was published in the Federal Register on April 1, 1992, providing guidance under the passive foreign investment company (PFIC) rules relating to the mark-to-market election for regulated investment companies (RICs) that are shareholders of PFICs.

DATES: Section 1.1291–8 of the proposed regulations published at 57 F.R. 11024 (April 1, 1992) is withdrawn February 2, 1999.

FOR FURTHER INFORMATION CONTACT: Robert Laudeman of the Office of Associate Chief Counsel (International), Internal Revenue Service, 1111 Constitution Ave., NW, Washington, DC 20224. Telephone (202) 622-3840, not a toll-free number.

SUPPLEMENTARY INFORMATION:

Background

On April 1, 1992 (57 F.R. 11024), the IRS issued proposed regulations providing, in part, an election under which certain RICs could mark to market their stock in certain PFICs. In the Taxpayer Relief Act of 1997, Congress enacted section 1296(e)(2) of the Internal Revenue Code, which allows certain RICs to elect to mark to market their PFIC stock. Accordingly, the IRS is withdrawing proposed regulations Section 1.1291–8. Future guidance will be issued providing rules for all PFIC shareholders, including RICs, on how to mark to market certain PFIC stock.

Drafting Information

The principal author of this withdrawal notice is Robert Laudeman, Office of the Associate Chief Counsel (International). However, other personnel from the IRS and Treasury Department participated in developing the withdrawal notice.

- - - -

Partial Withdrawal of Proposed Amendments to the Regulations

Accordingly, under the authority of 26 U.S.C. 7805, Section 1.1291–8 of the proposed amendments to 26 CFR part 1 published at 57 F.R. 11024, April 1, 1992, is withdrawn.

Robert E. Wenzel, Deputy Commissioner of

Internal Revenue.

(Filed by the Office of the Federal Register on February 1, 1999, 8:45 a.m., and published in the issue of the Federal Register for February 2, 1999, 64 F.R. 5015)

Notice of Proposed Rulemaking

Section 467 Rental Agreements Involving Payments of $2,000,000 or Less

REG–103694–99

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains proposed regulations concerning section 467 rental agreements. The regulations remove the constant rental accrual exception for rental agreements involving payments of $2,000,000 or less. The regulations affect taxpayers that are parties to a section 467 rental agreement entered into on or after July 19, 1999.

DATES: Written or electronically generated comments and requests for a public hearing must be received by August 16, 1999.

1999–24 I.R.B. 49 June 14, 1999

(b) Disqualified leaseback or long-term agreement —(1) In general. A leaseback (as defined in paragraph (b)(2) of this section) or a long-term agreement (as defined in paragraph (b)(3) of this section) is disqualified only if—

(i) A principal purpose for providing increasing or decreasing rent is the avoidance of Federal income tax (as described in paragraph (c) of this section); and

(ii) The Commissioner determines that, because of the tax avoidance purpose, the section 467 rental agreement should be treated as a disqualified leaseback or long-term agreement.

• ---

Robert E. Wenzel, Deputy Commissioner of

Internal Revenue.

(Filed by the Office of the Federal Register on May 17, 1999, 8:45 a.m., and published in the issue of the Federal Register for May 18, 1999, 64 F.R. 26924)

Time for Recharacterizing 1998 IRA Contributions

Announcement 99–57

Purpose

The Internal Revenue Service has been informed that some taxpayers who have already timely filed their 1998 Federal income tax returns would like to recharacterize 1998 IRA contributions, including amounts contributed to Roth IRAs as conversions for which the taxpayers were not eligible (because their modified adjusted gross income exceeded $100,000 or because they were married individuals filing separate returns). For these taxpayers, the deadline for making the election to recharacterize is 6 months after the unextended due date of their returns, as described below.

Background

Section 408A(d)(6) of the Internal Revenue Code and § 1.408A–5 of the regulations provide that a taxpayer may elect to recharacterize an IRA contribution made to one type of IRA as having been made to another type of IRA by transferring in a trustee-to-trustee transfer the IRA contribution, plus earnings, to the other type of IRA. For this purpose, the redesignation

Explanation of Provisions

Under the section 467 final regulations, section 467 applies only in the case of rental agreements with increasing or decreasing rent or deferred or prepaid rent. However, section 467 is not applicable in the case of rental agreements involving payments and other consideration of $250,000 or less. See section 467(d)(2).

The section 467 final regulations provide that if section 467 is applicable, the amount of fixed rent that must be taken into account by a lessor and lessee for a rental period is either the amount of fixed rent allocated to the period under the agreement, the proportional rental amount, or the constant rental amount (constant rental accrual). Constant rental accrual is to be used only where the section 467 rental agreement is a disqualified leaseback or long-term agreement. Under the section 467 final regulations, a rental agreement will not be a disqualified leaseback or long-term agreement, and, consequently, will not be subject to constant rental accrual, if it requires $2,000,000 or less in rental payments and other consideration.

The IRS and Treasury Department have reconsidered the $2,000,000 constant rental accrual exception and have determined that it should be eliminated from the section 467 final regulations. The original purpose of the $2,000,000 exception was to simplify the section 467 rules for small businesses. Upon further reflection, however, the IRS and Treasury Department believe that the $2,000,000 exception inappropriately permits certain rental agreements to avoid the application of constant rental accrual, and that the inappropriate avoidance of constant rental accrual outweighs the need for simplification. Further, section 467(d)(2) provides an exception from section 467 for rental agreements with payments and other consideration of $250,000 or less. However, because the $2,000,000 constant rental accrual exception was included in the proposed regulations, the $2,000,000 exception will continue to apply to agreements entered into on or before July 19, 1999.

Special Analyses

It has been determined that these proposed regulations are 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 regulations do 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), this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.

Comments and Public Hearing

Before these proposed regulations are adopted as final regulations, consideration will be given to any written (a signed original and 8 copies) and electronic comments that are submitted timely to the IRS. The IRS and Treasury Department request comments on the clarity of the proposed rules and how they can be made easier to understand. All comments will be available for public inspection and copying. A public hearing will 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 public hearing will be published in the Federal Register.

Drafting Information

The principal author of the regulations is Forest Boone, Office of Assistant Chief Counsel (Income Tax and Accounting). However, other personnel from the IRS and Treasury Department participated in the development of the regulations.

- - - -

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. In §1.467–3, paragraph (b)(1) is revised to read as follows:

§1.467–3 Disqualified leasebacks and long-term agreements.

• ---

June 14, 1999 50 1999–24 I.R.B.

of an account with the same IRA trustee is treated as a trustee-to-trustee transfer. In a recharacterization, the IRA contribution is treated as having been made to the transferee IRA and not the transferor IRA. Under § 408A(d)(6) and § 1.408A–5, this recharacterization election must occur on or before the date prescribed by law, including extensions, for filing the taxpayer’s Federal income tax return for the year of the contribution.

Section 1.408A-5, Q&A-6, describes how a taxpayer makes the election to recharacterize an IRA contribution. To recharacterize an amount that has been converted from a traditional IRA to a Roth IRA: (1) the taxpayer must notify the Roth IRA trustee of the taxpayer’s intent to recharacterize the amount, (2) the taxpayer must provide the trustee (and the transferee trustee, if different from the transferor trustee) with specified information that is sufficient to effect the recharacterization transfer and (3) the trustee must make the transfer.

Section 301.9100–2(b) of the regulations generally provides for an automatic extension of 6 months from the due date of a return, excluding extensions, to make elections that otherwise must be made by the due date of the return or the due date

of the return plus extensions, provided (1) the taxpayer’s return was timely filed for the year the election should have been made and (2) the taxpayer takes appropriate corrective action within this 6-month period.

Application of Section 301.9100–2(b) to Recharacterization Elections

Pursuant to § 301.9100–2(b), in the case of a calendar-year-basis taxpayer who has timely filed his or her 1998 Federal income tax return, he or she can elect to recharacterize a 1998 IRA contribution, including a Roth IRA conversion for which the taxpayer was not eligible, provided the appropriate corrective action occurs on or before October 15, 1999. In this case, the appropriate corrective action requires taking the action described in § 1.408A-5, Q&A-6, including notifying the trustee (or trustees) and the trustee making the actual transfer (or account redesignation). The Service may invalidate a taxpayer’s recharacterization election if the election is not properly reflected on the taxpayer’s 1998 Federal income tax return. Thus, if the recharacterization election was not properly reflected on the return, a taxpayer taking advantage of the

automatic extension described in this announcement must file an amended 1998 Federal income tax return properly reflecting the recharacterization. The amended return does not have to be filed by October 15, 1999, but must be filed by the normal deadline for amended returns.

Revision of Form 3115

Announcement 99–58

Form 3115, Application for Change in Accounting Method, and its instructions have been revised. This May 1999 revision replaces the November 1997 version.

The only changes to the Form 3115 (Rev. May 1999) are to question 18 (page 3) to clarify the tax year to which that question relates and to question 28 (page 3) to update the cite to Rev. Proc. 99–1, 1999–1 I.R.B. 6. The instructions were revised to update the list of automatic change procedures and the user fee provisions.

Copies of the revised form and instructions are available at most IRS offices. In addition, they may be downloaded with a personal computer and modem, or ordered by telephone, as follows:

1999–24 I.R.B. 51 June 14, 1999

IRS/SSA Information Reporting Seminars

Announcement 99–59

Representatives from the Martinsburg Computing Center (MCC), Information Returns Branch (IRB), will conduct seminars in 34 cities during the months of August, September, and October. The seminar format will be geared toward electronic/magnetic media filers. No tax law representative will be present to answer information reporting tax law questions. In the first session, MCC representatives will focus on electronic filing of Forms 1099, and current year changes to the Publication 1220. Additional clarification regarding the record format changes that began for Tax Year 1998 will also be provided.

A representative of the Social Security Administration will immediately follow the IRS/MCC representative, during the morning session, to discuss magnetic media reporting and electronic filing specifications of Forms W-2/W-3. There may be an IRS District Office session at some sites in the afternoon.

Following is a schedule of seminar sites and dates, as well as telephone numbers of the Internal Revenue Service office closest to the sites. Please contact the appropriate office after July 10 for the exact location and times. The agenda for the day has also been included for your convenience.

Internal Revenue Service/Martinsburg Computing Center

Information Reporting Seminar Schedule 1999

CITY DATE PHONE FAX

Albuquerque, NM August 26 505/837-5515 505/837-5793 Anchorage, AK September 28 907/271-6458 Atlanta, GA September 1 404/338-8670 Baltimore, MD August 10 410/962-3547 410/962-0823 Boston, MA August 24 617/565-4325 617/565-1379 Buffalo, NY September 14 716/686-4777 716/686-4705 Chicago, IL September 30/October 1 312/886-3784 Cincinnati, OH August 17 513/684-2400 Dallas, TX September 14 214/767-3755 214/767-1149 Denver, CO August 31 303/446-1756 Des Moines, IA September 23 515/284-4870 515-284-4299 Fargo, ND August 24 651/312-7634 651/312-7625 Fresno, CA September 28 408/494-8123 Houston, TX September 14 713/209-4178 Indianapolis, IN August 19 317/226-6543 317/226-5724 Kansas City, MO September 21 314/612-4530 314/612-4700 Las Vegas, NV September 21 (PM) 702/455-1029 702/455-1225 Los Angeles, CA September 30 213/894-4574 Louisville, KY September 16 615/250-5659 Madison, WI September 28 414/297-3302 414/297-1600 Minneapolis, MN August 26 651/312-7634 651/312-7625 Nashville, TN August 24 615/250-5659 New Orleans, LA September 21 504/558-3011 504/558-3061 New York, NY September 30 212/436-1021 212/436-1629 Philadelphia, PA September 28 215/861-1405 Phoenix, AZ September 3 (PM) 602/207-8337 602/207-8630 Pittsburgh, PA August 26 412/395-4692 X100 412/395-4722 Portland, OR September 2 503/326-6565 Salt Lake City, UT September 2 801/799-6873 801/799-6873 San Francisco, CA September 23, 24 510/637-2482 510/637-2494 Seattle, WA August 31 206/220-5803 St. Louis, MO September 16 314/612-4530 314/612-4700 Tampa, FL September 23 904/232-2514 904/232-3036 Tulsa, OK September 16 405/297-4120

June 14, 1999 52 1999–24 I.R.B.

AGENDA

MORNING SESSION AFTERNOON SESSION IRS/MARTINSBURG COMPUTING CENTER IRS/DISTRICT OFFICE PRESENTATI ON 9:00a Welcome 1:30p (This is optional and some districts may IRS-Magnetic Media and Electronic not plan a presentation.) Filing of Forms 1099, 1098, 5498, and W-2G. 10:30a Break 10:45a SSA-Magnetic Media and Electronic Filing of Forms W-2 and W-3. 12:30p Lunch

zations are no longer described in section 170(c)(2) and are not recognized as exempt under section 501(c)(3) of the Code.

Eastern Orthodox Christian Church in

Deletions from Cumulative List of Organizations Contributions to Which are Deductible Under Section 170 of the Code

Announcement 99–60

The names of organizations that no longer qualify as organizations described in section 170(c)(2) of the Internal Revenue Code of 1986 are listed below.

Generally, the Service will not disallow deductions for contributions made to a listed organization on or before the date of announcement in the Internal Revenue Bulletin that an organization no longer qualifies. However, the Service is not precluded from disallowing a deduction for any contributions made after an organization ceases to qualify under section 170(c)(2) if the organization has not timely filed a suit for declaratory judgment under section 7428 and if the contributor (1) had knowledge of the revocation of the ruling or determination letter, (2) was aware that such revocation was imminent, or (3) was in part responsible for or was aware of the activities or omissions of the organization that brought about this revocation.

If on the other hand a suit for declaratory judgment has been timely filed, contributions from individuals and organizations described in section 170(c)(2) that

are otherwise allowable will continue to be deductible. Protection under section 7428(c) would begin on ( Date ) 1999, and would end on the date the court first determines that the organization is not described in section 170(c)(2) as more particularly set forth in section 7428 (c)(1). For individual contributors, the maximum deduction protected is $1,000, with a husband and wife treated as one contributor. This benefit is not extended to any individual, in whole or in part, for the acts or omissions of the organization that were the basis for revocation.

AIDS Countrywide Testing Information

Notice of Disposition of Declaratory Judgement Proceedings Under Section 7428

This announcement serves notice to potential donors that on March 16, 1999, the United States Tax Court entered decisions declaring that the organizations listed below are not described in section 501©(3) and are not exempt from taxation under section 501(a) of the Internal Revenue Code. Therefore, these organi

America, Inc., New Albany, OH Saint Ignatius Orthodox Church

New Albany, OH Saint Nicholas Orthodox Church

New Albany, OH

Act 1, Kenner, LA American Heart Foundation

Des Moines, IA

Notice of Disposition of Declaratory Judgment Proceedings Under Section 7428

This announcement serves notice to potential donors that by agreement of the parties and by Stipulation of Dismissal entered by the United States Court of Federal Claims on March 26, 1999, the organization listed below is an organization exempt from taxes under section 501(a) as an organization described in section 501(c)(3) and section 170(c)(2) of the Internal Revenue Code from July 1, 1993. The organization is not recognized as an organization exempt from tax for the period from June 30, 1987 through June 30, 1993.

Student Ministries, Inc.

Milwaukee, OR

1999–24 I.R.B. 53 June 14, 1999