Part I. Rulings — Internal Revenue Bulletin 2001-2

Section 41.—Credit for Increasing Research Activities

Notice 2001–2 provides guidance to help taxpayers compute and report their credit for increasing research activities (research credit) under section 41 of the Code for taxable years that include the research credit suspension periods described in section 502(d)(2) of the Tax Relief Extension Act of 1999, Pub. L. No. 106-170 (Dec. 17, 1999) (the Act). Further, this notice explains how to take into account any research credits attributable to a research credit suspension period. See Notice 2001–2, page 265.

Section 42.—Low-Income Housing Credit

Low-income housing credit; satisfac- tory bond; “bond factor” amounts for the period October through December 2000. This ruling announces the monthly bond factor amounts to be use by taxpayers who dispose of qualified low-income buildings or interests therein during the period October through December 2000. This ruling also announces errors in bond factor amounts for dispositions of 1987 properties in 1998 and of all properties in 1999 and January through June 2000, and sets forth summaries for 1998, 1999, and 2000 that contain the corrected bond factor amounts.

Rev. Rul. 2001–2

In Rev. Rul. 90–60, 1990–2 C.B. 4, the Internal Revenue Service provided guidance to taxpayers concerning the general

methodology used by the Treasury Department in computing the bond factor amounts used in calculating the amount of bond considered satisfactory by the Secretary under § 42(j)(6) of the Internal Revenue Code. It further announced that the Secretary would publish in the Internal Revenue Bulletin a table of “bond factor” amounts for dispositions occurring during each calendar month.

This revenue ruling provides in Table 1 the bond factor amounts for calculating the amount of bond considered satisfactory under § 42(j)(6) for dispositions of qualified low-income buildings or interests therein during the period October through December 2000. Table 1 also provides a summary of the bond factor amounts for dispositions occurring during the period January through September 2000. Table 2 provides a summary of bond factor amounts for dispositions occurring during the period January through December 1999. Table 3 provides a summary of the bond factor amounts for dispositions occurring during the period January through December 1998.

Due to a miscalculation, Rev. Rul. 98–13, 1998–1 C.B. 686; Rev. Rul. 98–31, 1998–1 C.B. 1269; Rev. Rul. 98–45, 1998–2 C.B. 364; and Rev. Rul. 99–1, 1999–1 C.B. 265, are in error regarding the specific bond factor amounts for buildings placed in service in calendar year 1987 and disposed of in calendar year 1998. Further, Rev. Rul. 99–18, 1999–1 C.B. 868; Rev. Rul. 99–24,

1999–1 C.B. 1096; Rev. Rul. 99–38, 1999–2 C.B. 335; Rev. Rul. 99–54, 1999–2 C.B. 675; Rev. Rul. 2000–22, 2000–16 I.R.B. 880; and Rev. Rul. 2000–31, 2000–26 I.R.B. 1269, are in error regarding the bond factor amounts for buildings placed in service in calendar years 1987 through 2000 and disposed of in calendar year 1999 and January 2000 through June 2000. The present revenue ruling provides a complete list of the corrected bond factor amounts.

Under the authority of § 7805(b), taxpayers that posted bonds and taxpayers that established Treasury Direct Accounts with the Service pursuant to Rev. Proc. 99–11, 1999–1 C.B. 275, based upon the above mentioned bond factor amounts may continue to rely on those figures. Taxpayers that choose to amend their previously posted bonds by using the corrected bond factor amounts listed in this revenue ruling may do so by submitting an amended Form 8693, Low-Income Housing Tax Credit Disposition Bond, to the Internal Revenue Service Center, Philadelphia, PA 19255. The amended form may be submitted by either the taxpayer or the surety. Taxpayers that choose to amend the amount of securities pledged in their previously established Treasury Direct Accounts with the Service by using the corrected bond factor amounts listed in this revenue ruling should contact the Bureau of the Public Debt, Division of Customer Service, IRS Collateral Desk at (304) 480-6158 for further information.

Table 1 Rev. Rul. 2001–2 Monthly Bond Factor Amounts for Dispositions Expressed As a Percentage of Total Credits
Calendar Year Building Placed in Service or, if Section 42(f)(1) Election Was Made, the Succeeding Calendar Year
Month of Disposition	1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Jan ’00 Feb ’00 Mar ’00 Apr ’00 May ’00 Jun ’00 Jul ’00	37.59 51.81 63.64 73.62 75.52 77.92 80.36 82.70 85.05 87.63 90.38 93.52 96.69 97.21 37.59 51.81 63.64 73.62 75.31 77.69 80.12 82.44 84.78 87.35 90.08 93.17 96.26 97.21 37.59 51.81 63.64 73.62 75.09 77.47 79.88 82.20 84.53 87.07 89.79 92.85 95.88 97.21 39.75 54.78 67.30 77.84 79.96 83.31 86.76 90.16 93.64 97.41 101.43 105.89 110.31 112.52 39.75 54.78 67.30 77.84 79.74 83.07 86.51 89.90 93.36 97.12 101.11 105.54 109.93 112.52 39.75 54.78 67.30 77.84 79.52 82.84 86.26 89.64 93.09 96.83 100.81 105.22 109.59 112.52 39.75 54.78 67.30 77.84 79.31 82.61 86.02 89.38 92.82 96.56 100.53 104.92 109.29 112.52

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January 8, 2001 256 2001–2 I.R.B.

Table 3 (cont’d) Rev. Rul. 2001–2 Monthly Bond Factor Amounts for Dispositions Expressed As a Percentage of Total Credits
Calendar Year Building Placed in Service or, if Section 42(f)(1) Election Was Made, the Succeeding Calendar Year
Month of Disposition	1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Jun ’98 Jul ’98 Aug ’98 Sep ’98 Oct ’98 Nov ’98 Dec ’98	65.52 75.25 75.54 77.44 79.71 82.31 84.95 87.43 89.85 92.46 95.05 97.21 65.52 75.25 75.33 77.22 79.49 82.08 84.70 87.18 89.60 92.21 94.81 97.21 65.52 75.25 75.13 77.01 79.27 81.85 84.47 86.93 89.35 91.97 94.61 97.21 65.52 75.25 74.93 76.81 79.06 81.63 84.23 86.70 89.12 91.74 94.42 97.21 65.52 75.25 74.73 76.61 78.85 81.41 84.01 86.47 88.89 91.53 94.25 97.21 65.52 75.25 74.54 76.41 78.65 81.20 83.79 86.25 88.68 91.33 94.09 97.21 65.52 75.25 74.35 76.22 78.45 80.99 83.58 86.04 88.47 91.14 93.94 97.21

For a list of bond factor amounts applicable to dispositions occurring during other calendar years, see Rev. Rul. 98–3, 1998–1 C.B. 248.

EFFECT ON OTHER REVENUE RULINGS

Rev. Rul. 98–13, 1998–1 C.B. 686; Rev. Rul. 98–31, 1998–1 C.B. 1269; Rev. Rul. 98–45, 1998–2 C.B. 364; Rev. Rul. 99–1, 1999–1 C.B. 265; Rev. Rul. 99–18, 1999–1 C.B. 868; Rev. Rul. 99–24, 1999–1 C.B. 1096; Rev. Rul. 99–38, 1999–36 I.R.B. 335; Rev. Rul. 99–54, 1999–51 I.R.B. 675; Rev. Rul. 2000–22, 2000–16 I.R.B. 880; Rev. Rul. 2000–31, 2000–26 I.R.B. 1269; and Rev. Rul. 2000–48, 2000–42 I.R.B. 349, are revoked.

DRAFTING INFORMATION

The principal author of this revenue ruling is Gregory N. Doran of the Office of Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this revenue ruling, contact Mr. Doran at (202) 622-3040 (not a toll-free call).

Section 162.—Trade or Business Expenses

26 CFR 1.162–3: Cost of materials.

Qualifying taxpayers with average annual gross receipts of $1,000,000 or less are excepted from the requirement under § 471 of the Code to account for inventories, and instead may account for inventori

able items as materials and supplies that are not incidental under §1.162–3 of the regulations. See Rev. Proc. 2001–10, page 272.

Section 263A.—Capitalization and Inclusion in Inventory Costs of Certain Expenses

26 CFR 1.263A–1: Uniform capitalization of costs.

Section 263A does not apply to inventoriable items of qualifying taxpayers with average annual gross receipts of $1,000,000 or less that are treated as materials and supplies that are not incidental under §1.162–3 of the regulations. See Rev. Proc. 2001–10, page 272.

Section 446.—General Rule for Methods of Accounting

26 CFR 1.446–1: General rule for methods of accounting.

Qualifying taxpayers with average annual gross receipts of $1,000,000 or less are excepted from the requirement to use an accrual method of accounting under § 446 of the Code and to account for inventories under § 471. See Rev. Proc. 2001–10, page 272.

Section 471.—General Rule for Inventories

26 CFR 1.471–1: Need for inventories.

Qualifying taxpayers with average annual gross receipts of $1,000,000 or less are expected from the requirement to use an accrual method of accounting under § 446 of the Code and to ac

count for inventories under § 471, and may instead treat inventoriable items as materials and supplies that are not incidental under § 1.162–3 of the regulations. See Rev. Proc. 2001–10, page 272.

Section 481.—Adjustments Required for Changes in Method of Accounting

26 CFR 1.481–1: Adjustments in general. 26 CFR 1.481–4: Adjustments taken into account with consent.

Procedures are provided for qualifying taxpayers with average annual gross receipts of $1,000,000 or less to obtain automatic consent to change to the cash receipts and disbursements method of accounting and to a method of accounting for inventory as materials and supplies that are not incidental under § 1.162–3 of the regulations. See Rev. Proc. 2001–10, page 272.

Section 1001.—Determination of Amount of and Recognition of Gain or Loss

26 CFR 1.1001–1: Computation of gain or loss.

Notwithstanding § 1001 and the regulations thereunder, qualifying taxpayers that use the cash receipts and disbursements method of accounting include amounts in income attributable to open accounts receivable ( i.e., receivables due in 120 days or less) as amounts are actually or constructively received. See Rev. Proc. 2001–10, page 272.

2001–2 I.R.B. 257 January 8, 2001

Section 3221.—Rate of Tax

Determination of Quarterly Rate of Excise Tax for Railroad Retirement Supplemental Annuity Program

In accordance with directions in section 3221(c) of the Railroad Retirement Tax Act (26 U.S.C., 3221(c)), the Railroad Retirement Board has determined that the excise tax imposed by such section 3221(c) on every employer, with respect to having individuals in his employ, for each work-hour for which compensation is paid by such employer for services rendered to him during the quarter beginning January 1, 2001, shall be at the rate of 26 cents.

In accordance with directions in section 15(a) of the Railroad Retirement Act of 1974, the Railroad Retirement Board has determined that for the quarter beginning January 1, 2001, 39.7 percent of the taxes collected under sections 3221(b) and 3221(c) of the Railroad Retirement Tax Act shall be credited to the Railroad Retirement Account and 60.3 percent of the taxes collected under such sections 3211(b) and 3221(c) plus 100 percent of the taxes collected under section 3221(d) of the Railroad Retirement Tax Act shall be credited to the Railroad Retirement Supplemental Account.

Dated December 1, 2000. By Authority of the Board.

Beatrice Ezerski, Secretary to the Board.

(Filed by the Office of the Federal Register on December 12, 2000, 8:45 a.m., and published in the issue of the Federal Register for December 13, 2000, 65 F.R. 77938)

Section 6053.—Reporting of Tips

26 CFR 31.6053–1: Report of tips by employee to employer.

T.D. 8910

DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 31 and 602

Electronic Tip Reports

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

SUMMARY: This document amends the regulations dealing with the requirement that tipped employees report their tips to their employer. These final regulations permit employers to establish electronic systems for use by their tipped employees in reporting tips to the employer. These final regulations also address substantiation requirements for employees using the electronic system.

DATES: Effective Date : These regulations are effective December 13, 2000.

Applicability Dates : For dates of applicability, see §31.6053–1(d)(6) of these regulations.

FOR FURTHER INFORMATION CONTACT: Karin Loverud at 202-622-6080 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information contained in these final regulations has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 15451603. 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 control number assigned by the Office of Management and Budget.

The estimated annual burden per respondent varies from 1 hour to 3 hours, depending on individual circumstances, with an estimated average of 2 hours.

Comments concerning the accuracy of this burden estimate and suggestions for reducing this burden should be sent to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, W:CAR:MP:FP, Washington, DC 20224, and to the Office of Management and Budget, Attn: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503.

Books or records relating to this 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

On January 26, 1998, the IRS published in the Federal Register (63 F.R. 3681) a notice of proposed rulemaking (REG–104691–97, 1998–1 C.B. 695) under section 6053 of the Internal Revenue Code relating to electronic tip reports. The notice proposed to amend §31.6053–1 and §31.6053–4 of the employment tax regulations.

No written comments responding to the notice of proposed rulemaking were received. No public hearing was requested or held. Accordingly, the proposed regulations are adopted as final regulations.

The final regulations are consistent with the provisions of the Electronic Signatures in Global and National Commerce Act.

Special Analyses

It has been determined that these final regulations are not a significant regulatory action as defined in Executive Order 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. Further, it is hereby certified, pursuant to sections 603(a) and 605(b) of the Regulatory Flexibility Act (5 U.S.C. chapter 6), that the collection of information contained in these regulations will not have a significant economic impact on a substantial number of small entities. The collection of information in §31.6053–1 is imposed solely on individuals, not on any small entities, and the regulations provide flexibility to employees who must provide the information required by statute, thereby reducing burden. With respect to the collection of information in §31.6053–4, the certification is based on the expectation of the IRS that most businesses that choose to implement the electronic tip reporting provisions will be larger businesses with many employees and sophisticated computer systems. Moreover, because the provision is wholly elective, any small business that would be adversely impacted may choose not to use electronic tip reporting. Finally, the Service expects that for those small entities that choose to implement the provision, the use of electronic tip reporting will reduce overall burden by re

January 8, 2001 258 2001–2 I.R.B.

ducing paper collections. Therefore, a regulatory flexibility analysis under the Regulatory Flexibility Act is not required. Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed rulemaking preceding these regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Drafting Information

The principal author of these regulations is Karin Loverud, Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS and the Treasury Department participated in their development.

Adoption of Amendments to the Regulations

Accordingly, 26 CFR parts 31 and 602 are amended as follows:

PART 31–EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE

Paragraph 1. The authority citation for part 31 continues to read in part as follows:

Authority: 26 U.S.C. 7805. * * * Par. 2. Section 31.6053–1 is amended as follows:

Paragraph (a) is revised.
The introductory text of paragraph (b)(1) is revised.
The last sentence of paragraph (b)(1)(iii) is revised.
Paragraph (b)(2) is revised.
Paragraph (c) is revised.
Paragraph (d) is added. The revisions and additions read as follows:

§31.6053–1 Report of tips by employee to employer.

(a) Requirement that tips be reported (1) In general . An employee who receives, in the course of employment by an employer, tips that constitute wages as defined in section 3121(a) or section 3401, or compensation as defined in section 3231(e), must furnish to the employer a

statement, or statements, disclosing the total amount of the tips received by the employee in the course of employment by the employer. Tips received by an employee in a calendar month in the course of employment by an employer that are required to be reported to the employer must be reported on or before the 10th day of the following month. For example, tips received by an employee in January 2000 are required to be reported by the employee to the employer on or before February 10, 2000. (2) Cross references . For provisions relating to the treatment of tips as wages for purposes of the Federal Insurance Contributions Act (FICA) tax under sections 3101 and 3111, see sections 3102(c), 3121(a)(12), and 3121(q) and §§31.3102–3 and 31.3121(a)(12)–1. For provisions relating to the treatment of tips as wages for purposes of the tax under section 3402 (income tax withholding), see sections 3401(a)(16), 3401(f), and 3402(k) and §§31.3401(a)(16)–1, 31.3401(f)–1, and 31.3402(k)–1. For provisions relating to the treatment of tips as compensation for purposes of the Railroad Retirement Tax Act (RRTA) tax under sections 3201 and 3221, see section 3231(e) and §31.3231(e)–1(a). (b) * * * (1) In general . The statement described in paragraph (a) of this section can be provided on paper or transmitted electronically. The statement must be signed by the employee and must disclose:

(iii) * * * If the statement is for a period of less than 1 calendar month, the beginning and ending dates of the period must be included (for example, January 1 through January 8, 1998).

(2) Form of statement —(i) In general . No particular form is prescribed for use in furnishing the statement required by this section. The statement may be furnished on paper or transmitted electronically. An electronic system and all tip statements generated by that system must meet the requirements of paragraph (d) of this section. If the employer does not provide any other means for the employee to report tips, the employee may use Form 4070, “Employee’s Report of Tips to Employer.”

(ii) Single-purpose forms . A statement may be furnished on an employer-provided form. The form may be on paper or in electronic form. An employer that provides a paper form must make blank copies of the form readily available to all tipped employees. Any form, whether paper or electronic, provided by an employer for use by its tipped employees solely to report tips must meet all the requirements of paragraph (b)(1) of this section.

(iii) Regularly used forms. Instead of requiring that tips be reported as described in paragraph (b)(2)(ii) of this section on a special form used solely for tip reporting, an employer may prescribe regularly used forms for use by employees in reporting tips. A regularly used form may be on paper or in electronic form (such as a time card or report), must meet the requirements of paragraph (b)(1)(iii) and (iv) of this section, must contain identifying information that will ensure accurate identification of the employee by the employer, and is permitted to be used only if the employer furnishes the employee a statement suitable for retention showing the amount of tips reported by the employee for the period. The employer statement may be furnished when the employee reports the tips, when wages are first paid following the reporting of tips by the employee, or within a short time after the wages are paid. The employer may meet this requirement, for example, through the use of a payroll check stub or other payroll document regularly furnished (if not less frequent than monthly) by the employer to the employee showing gross pay and deductions.

(c) Period covered by, and due date of, tip statement —(1) In general . A tip statement furnished by an employee to an employer may not cover a period greater than 1 calendar month. An employer may, however, require the submission of a statement in respect of a specified period of time, for example, on a weekly or biweekly basis, regular payroll period, etc. An employer may specify, subject to the limitation in paragraph (a) of this section, the time within which, or the date on which, the statement for a specified period of time should be submitted by the employee. For example, a statement covering a payroll period may be required to be submitted on

2001–2 I.R.B. 259 January 8, 2001

the first (or second) day following the close of the payroll period. A statement submitted by an employee after the date specified by the employer for its submission nevertheless is a statement furnished pursuant to section 6053(a) and this section if it is submitted to the employer on or before the 10th day following the month in which the tips were received.

(2) Termination of employment . If an employee’s employment terminates, the employee must furnish a tip statement to the employer when the employee ceases to perform services for the employer. A statement submitted by an employee after the date on which the employee ceases to perform services for the employer is a statement furnished pursuant to section 6053(a) and this section if the statement is submitted to the employer on or before the earlier of the day on which the final wage payment is made by the employer to the employee or the 10th day following the month in which the tips were received.

(d) Requirements for electronic sys- tems —(1) In general . The electronic system must ensure that the information received is the information transmitted by the employee and must document all occasions of access that result in the transmission of a tip statement. In addition, the design and operation of the electronic system, including access procedures, must make it reasonably certain that the person accessing the system and transmitting the statement is the employee identified in the statement transmitted.

(2) Same information as on paper statement . The electronic tip statement must provide the employer with all the information required by paragraph (b)(1) of this section.

(3) Signature . The electronic tip state

ment must be signed by the employee. The electronic signature must identify the employee transmitting the electronic tip statement and must authenticate and verify the transmission. For this purpose, the terms authenticate and verify have the same meanings as they do when applied to a written signature on a paper tip statement. Any form of electronic signature that satisfies the foregoing requirements is permissible.

(4) Copies of electronic tip statements . Upon request by the Internal Revenue Service (IRS), the employer must supply the IRS with a hard copy of the electronic tip statement and a statement that, to the best of the employer’s knowledge, the electronic tip statement was filed by the named employee. The hard copy of the electronic tip statement must provide the information required by paragraph (b)(1) of this section, but need not be a facsimile of Form 4070 or any employerdesigned form.

(5) Record retention . The record retention requirements applicable to automatic data processing systems also apply to electronic tip reporting systems.

(6) Effective date . The provisions pertaining to electronic systems and electronic tip reports are applicable as of December 13, 2000. However, employers may apply these provisions to earlier periods.

Par. 3. Section 31.6053–4 is amended as follows:

A sentence is added to paragraph (a)(1) after the third sentence.
A sentence is added to paragraph (a)(2) after the fourth sentence. The additions read as follows:

§31.6053–4 Substantiation requirements for tipped employees.

(a)(1) * * * The Commissioner may by revenue ruling, procedure or other guidance of general applicability provide for other methods of demonstrating evidence of tip income. * * *

(2) * * * In addition, an electronic system maintained by the employer that collects substantially similar information as Form 4070A may be used to maintain such daily record, provided the employee receives and maintains a paper copy of the daily record. * * *

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 §602.101, paragraph (b) is amended by revising the entries for 31.6053–1 and 31.6053–4 to read as follows:

§602.101 OMB Control numbers.

(b) * * *

Robert E. Wenzel, Deputy Commissioner

of Internal Revenue.

Approved August 25, 2000.

Jonathan Talisman, Acting Assistant Secretary

of the Treasury.

(Filed by the Office of the Federal Register on December 12, 2000, 8:45 a.m., and published in the issue of the Federal Register for December 13, 2000, 65 F.R. 77818)

CFR part or section where Current OMB identified and described control No.

31.6053–1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1545–0029 1545–0062 1545–0064 1545–0065 1545–1603

31.6053–4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1545–0065 1545–1603

January 8, 2001 260 2001–2 I.R.B.