Part IV. Items — Internal Revenue Bulletin 2001-8

March 23, 2000 (65 F.R. 15587), Q&A-8 is amended by removing the last four sentences of A-8 and adding a sentence in their place to read as follows:

§1.125–1 Questions and answers relating to cafeteria plan.

Q-8: What requirements apply to participants’ elections under a cafeteria plan?

A-8: * * * However, a cafeteria plan may permit a participant to revoke a benefit election after the period of coverage has commenced and make a new election with respect to the remainder of the period of coverage if both the revocation and the new election are permitted under § 1.125–4.

Par. 3. In §1.125–2, as proposed March 7, 1989 (54 F.R. 9460), and as amended March 23, 2000 (65 F.R. 15587), A-6 is amended by removing A6(b), A-6(c), and A-6(d), redesignating A-6(e) as paragraph A-6(b), removing the last 5 sentences of A-6(a) and adding a sentence in their place to read as follows:

Q-6: In what circumstance may participants revoke existing elections and make new elections under a cafeteria plan?

A-6: * * *

(a) * * * However, to the extent permitted under §1.125–4, the terms of a cafeteria plan may permit a participant to revoke an existing election and to make a new election with respect to the remaining portion of the period of coverage.

Robert E. Wenzel, Deputy Commissioner

of Internal Revenue .

(Filed by the Office of the Federal Register on January 9, 2001, 8:45 a.m., and published in the issue of the Federal Register for January 10, 2001, 66 F.R. 1923)

Notice of Proposed Rulemaking by Cross-Reference to Temporary Regulations

Partial Withdrawal of Notice of Proposed Rulemaking and Amendments to Notice of Proposed Rulemaking

Tax Treatment of Cafeteria Plans

REG–209461–79

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Partial withdrawal of notice of proposed rulemaking and amendments to notice of proposed rulemaking.

SUMMARY: This document withdraws §1.125–2 Q&A–6(b),(c), and (d), and amends §1.125–2 Q&A–6(a) in the notice of proposed rulemaking (EE–130–86, 1989–1 C.B. 944) relating to cafeteria plans that was published in the Federal Register on March 7, 1989. Further, this document amends §1.125–1 Q&A–8 in the notice of proposed rulemaking relating to cafeteria plans that was published in the Federal Register on May 7, 1984, and amended on November 7, 1997, and March 23, 2000. This withdrawal and amendment are made because of changes made to these rules in the §1.125–4 final regulations (T.D. 8921, 2001–7 I.R.B. 532) relating to cafeteria plans.

DATES: Written or electronically generated comments and requests for a public hearing must be received by April 10, 2001.

ADDRESSES: Send submission to: CC:M&SP:RU (REG–209461–79), 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:M&SP:RU (REG–209461–79), 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.gov/tax_regs/regslist.html.

FOR FURTHER INFORMATION CONTACT: Christine Keller or Janet Laufer at (202)622-6080 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

On March 7, 1989, the IRS issued proposed regulations §1.125–2 Q&A-6 relating to the circumstances under which participants may revoke existing elections and make new elections under a cafeteria plan. The IRS published final regulations (T.D. 8921, 2001–7 I.R.B. 532) under § 1.125–4 that address certain parts of this rule. Accordingly, §1.125–2 Q&A6(b), (c), and (d) are withdrawn and §1.125–2 Q&A-6(a) of this rule is amended.

Further, on May 7, 1984, the IRS issued proposed regulations §1.125–1 Q&A-8 relating to the requirements that apply to participants’ elections under a cafeteria plan. Q&A-8 of these regulations was amended on November 7, 1997, and March 23, 2000, to conform with the §1.125–4T and §1.125–4 regulations published on these dates, and is further amended to conform with the final §1.125–4 regulations published on January 10, 2001.

Partial Withdrawal of Notice of Proposed Rulemaking

Accordingly, under the authority of 26 U.S.C. 7805, §1.125–2 Q&A-6(b), (c) and (d) in the notice of proposed rulemaking that was published on March 7, 1989 (54 F.R. 9460), is withdrawn.

Amendments to Previously Proposed Rules

Accordingly, the proposed rules published on May 7, 1984 (49 F.R. 19321), and amended on November 7, 1997 (62 F.R. 60196), and March 23, 2000 (65 F.R. 15587), and the rules published on March 7, 1989 (54 F.R. 9460), are amended as follows:

PART 1— INCOME TAXES

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

Authority: 26 U.S.C. 7805 * * *

Par. 2. In §1.125–1, as proposed May 7, 1984 (49 F.R. 19321), and as amended

February 20, 2001 712 2001–8 I.R.B.

Failure by Certain Charitable Organizations to Meet Certain Qualification Requirements; Taxes on Excess Benefit Transactions, published August 4, 1998, at 63 F.R. 41486. The initial analysis was submitted to the Chief Counsel for Advocacy of the Small Business Administration pursuant to section 7805(f) of the Code for comment on its impact on business. The initial analysis continues to apply to this proposed rule. Pursuant to section 7805(f) of the 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 business.

Comments and Requests for a Public Hearing

Before these proposed regulations are adopted as final regulations, consideration will be given to any comments (a signed original and eight (8) copies) that are submitted timely to the IRS. The IRS and Treasury specifically request comments on the clarity of the proposed rule and how it may be made easier to understand. All comments will be available for public inspection and copying.

A public hearing may be scheduled if requested in writing by a person who timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place will be published in the Federal Register .

Drafting Information

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

26 CFR Part 301

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements. Accordingly, 26 CFR Parts 53 and 301 are proposed to be amended as follows:

PART 53—FOUNDATION AND SIMILAR EXCISE TAXES

Paragraph 1. The authority citation for part 53 continues to read as follows:

Excise Taxes on Excess Benefit Transactions

REG–246256–96

AGENCY: Internal Revenue Service (IRS), Treasury.

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

SUMMARY: In T.D. 8920 on page 654 of this Bulletin, the IRS is issuing temporary regulations relating to the excise taxes on excess benefit transactions under section 4958 of the Internal Revenue Code (Code), as well as certain amendments and additions to existing Income Tax Regulations affected by section 4958. Section 4958 was enacted in section 1311 of the Taxpayer Bill of Rights 2. Section 4958 generally is effective for transactions occurring on or after September 14, 1995.

Section 4958 imposes excise taxes on transactions that provide excess economic benefits to disqualified persons of public charities and social welfare organizations (referred to as applicable tax-exempt organizations). Disqualified persons who benefit from an excess benefit transaction with an applicable tax-exempt organization are liable for a tax of 25 percent of the excess benefit. Such persons are also liable for a tax of 200 percent of the excess benefit if the excess benefit is not corrected by a certain date. Additionally, organization managers who participate in an excess benefit transaction knowingly, willfully, and without reasonable cause, are liable for a tax of 10 percent of the excess benefit. The tax for which participating organization managers are liable cannot exceed $10,000 for any one excess benefit transaction.

DATES: Written comments and requests for a public hearing must be received by April 10, 2001. In addition to any comments addressing substantive issues of the proposed regulations, the IRS and Treasury specifically request comments on the clarity of the proposed rule and how it may be made easier to understand.

ADDRESSES: Send submissions to: CC:M&SP:RU (REG–246256–96), 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:M&SP:RU (REG–246256–96), 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. gov/prod/tax_regs/comments.html. A public hearing will be scheduled if requested.

FOR FURTHER INFORMATION CONTACT: Concerning submissions, Guy Traynor, (202) 622-7180; concerning the regulations, Phyllis D. Haney, (202) 6224290 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collections of information contained in these proposed regulations have 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 1545–1623, in conjunction with the notice of proposed rulemaking published August 4, 1998, 63 F.R. 41486, REG–246256–96, Failure by Certain Charitable Organizations to Meet Certain Qualification Requirements; Taxes on Excess Benefit Transactions.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget.

Books and records relating to the 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.

Special Analyses

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required.

An initial regulatory flexibility analysis was prepared as required for the collection of information under 5 U.S.C. 603 in the notice of proposed rulemaking, REG–246256–96,

2001–8 I.R.B. 713 February 20, 2001

Authority: 26 U.S.C. 7805.

Par. 2. Sections 53.4958–0 through 53.4958–8 are added to read as follows:

[The text of proposed §§53.4958–0 through 53.4958–8 is the same as the text of §53.4958–0T through 53.4958–8T published in T.D. 8920.]

Robert E. Wenzel, Deputy Commissioner

of Internal Revenue .

(Filed by the Office of the Federal Register on January 9, 2001, 8:45 a.m., and published in the issue of the Federal Register for January 10, 2001, 66 F.R. 2173)

Notice of Proposed Rulemaking

Disclosure of Returns and Return Information to Designee of Taxpayer

REG –103320–00

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: In T.D. 8935 on page 702 of this Bulletin, the IRS is issuing a temporary regulation relating to the disclosure of returns and return information to the designee of a taxpayer. The text of that temporary regulation also serves as the text of this regulation.

DATES: Written and electronic comments and requests for a public hearing must be received by April 11, 2001.

ADDRESSES: Send submissions to: CC:M&SP:RU (REG–103320–00), room 5226, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, D.C. 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 5 p.m. to: CC:M&SP:RU (REG–103320–00), 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: http://www.irs.gov/prod/tax_regs/comments/html.

FOR FURTHER INFORMATION CONTACT: Joseph Conley (202) 622-4580 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

Section 6103(c), as amended by section 1207 of the Taxpayer Bill of Rights II, Public Law 104–168 (110 Stat. 1452), authorizes the IRS to disclose returns and return information to such person or persons as the taxpayer may designate in a request for or consent to disclosure or to any other person at the taxpayer’s request to the extent necessary to comply with a request for information or assistance made by the taxpayer to such other person. Disclosure is permitted subject to such requirements and conditions as may be prescribed by regulations. With the amendment in 1996, Congress eliminated the longstanding requirement that disclosures to designees of the taxpayer must be pursuant to the written request or consent of the taxpayer. The purpose of this amendment to section 6103(c) was to assist the IRS in developing a paperless tax administration system that relies on, among other things, electronic communication. H.R. Rep. No. 104–506, at 49 (1996), reprinted in 1996 U.S.C.A.N. 1143, 1172. On October 3, 1980, a final regulation (T.D. 7723, 1980–2 C.B. 346) relating to the disclosure of tax returns and return information to a person designated by the taxpayer in a written request or consent was published in the Federal Register (45 F.R. 65564). Since the publication of this final regulation, the IRS has determined that further guidance on written consent requirements is necessary.

This document contains a proposed regulation that authorizes the disclosure of tax returns and return information to a designee of the taxpayer pursuant to nonwritten requests or consents authorizing the disclosures. Such proposed regulation also amends the existing regulation to clarify the rules applicable to written requests or consents to disclosure.

The text of the temporary regulation (T.D. 8935) on page 702 of this Bulletin serves as the text of this proposed regulation. The preamble to the temporary regulation explains the regulation.

Special Analysis

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It is hereby certified that this proposed regulation will not impose a significant economic impact on a substantial number of small entities. The regulation is intended to reduce the burden on taxpayers and to facilitate the development of a paperless tax administration system. The prior regulation required that a taxpayer provide a written request or consent before the IRS could disclose the taxpayer’s return information to a designee of the taxpayer; this regulation permits such a disclosure, under certain specified circumstances, pursuant to the taxpayer’s nonwritten request or consent. The regulation also provides parameters for the development of consents for the electronic filing program, and it reduces the burden on taxpayers in combined Federal-State return filing programs by facilitating the electronic filing of a Federal-State return by means of a single electronic transmission.

Pursuant to section 7805(f) of the Internal Revenue Code, this notice of proposed rulemaking will be submitted to the Chief Counsel of Small Business Administration for comment on its impact on small businesses.

Comments and Requests for a Public Hearing

Before the proposed regulation is adopted as a final regulation, consideration will be given to any electronic and written comments (a signed original and eight (8) copies) that are submitted timely to the IRS. The IRS and Treasury Department specifically request comments on consents or notices authorizing disclosures in an electronic environment. Additionally, the IRS and Treasury Department specifically request comments on the clarity of the proposed regulation and how it can be made easier to understand. All comments will be available for public inspection and copying. A public hearing may be scheduled if requested in writing by a person that timely submits comments. If a public hearing is scheduled, notice of the date, time, and place for the hearing will be published in the Federal Register .

February 20, 2001 714 2001–8 I.R.B.

separate elections for any subdivision, subsidiary, or business enterprise wholly owned by it.

The new law also includes a transition rule that may eliminate an Indian tribal government’s obligation to pay FUTA taxes for certain services rendered during 2000, but before December 21, of that year. Under the transition rule, an Indian tribal government has no FUTA tax liability for services performed by its employees if the following conditions are satisfied: (1) the service was performed before December 21, 2000; (2) the tax imposed under FUTA was not paid; and (3) the Indian tribal government reimburses a State unemployment fund for unemployment benefits actually paid for services performed before December 21, 2000.

The due date for Form 940, for services rendered in 2000, is January 31, 2001, and FUTA taxes deposited during 2000, generally are deemed not paid until that date. Therefore, FUTA tax deposits for services performed from January 1, 2000, through December 20, 2000, were not paid by December 21, 2000, and are therefore not considered paid for purposes of the transition rule. Note, however, that FUTA tax liability paid before the enactment of the Community Renewal Tax Relief Act of 2000 (i.e., for years before 2000), may not be refunded under the terms of the law. Therefore, the transition rule options described in this announcement apply to Form 940 only for year 2000.

Because this law was enacted in December of 2000, many Indian tribal governments may not have had time to consider the options available and may not know how they plan to proceed by January 31, 2001, under this new law. Furthermore, the State governments have not yet had time to establish procedures for the reimbursement of the State unemployment funds.

Indian tribal governments may use one of the following options in filing Form 940 for 2000:

OPTION 1

If the Indian tribal government knows before January 31, 2001, that it wishes to use the transition rule for all of its 2000 FUTA liabilities and will satisfy the terms

Drafting Information

The principal author of this regulation is Jamie Bernstein, Office of the Associate Chief Counsel, Procedure and Administration (Disclosure & Privacy Law Division). However, other personnel from the IRS and Treasury Department participated in its development.

Adoption of Amendments to the Regulations

Accordingly, 26 CFR Part 301 is amended as follows:

PART 301—PROCEDURE AND ADMINISTRATION

Paragraph 1. The authority citation for part 301 is amended by adding an entry in numerical order to read in part as follows:

Authority: 26 U.S.C. 7805 * * * Section 301.6103(c)–1 also issued under 26 U.S.C. 6103(c). ***

Par. 2. Section 301.6103(c)–1 is added to read as follows:

§301.6103(c)–1 Disclosure of returns and return information to designee of taxpayer.

[The text of this proposed section is the same as the text of §301.6103(c)–1T published in T.D. 8935.]

Robert E. Wenzel, Deputy Commissioner

of Internal Revenue.

(Filed by the Office of the Federal Register on January 10, 2001, 8:45 a.m., and published in the issue of the Federal Register for January 11, 2001, F.R. 2373)

Extended Time for Use of the Revised Form W-9

Announcement 2001–15

Purpose

This is to advise persons required to file information returns of the availability and required use of Form W-9, Request for Taxpayer Identification Number and Certification (Rev. December, 2000). In response to payor concerns about imple

menting the new certification requirements, the use of revised Form W-9 is optional until July 1, 2001.

Certification of U.S. Status

The major change to the form is that under Part III, Certification, a payee must now certify that he or she is a U.S. person (including a U.S. resident alien). Payors must use the revised Form W-9 for all new solicitations after June 30, 2001.

Foreign Payees

A foreign person may not use Form W9 to furnish his or her taxpayer identification number to the payor after December 31, 2000. Instead, foreign payees must use the appropriate Form W-8.

Guidance to Federally Recognized Indian Tribal Governments About Their Federal Unemployment Tax Act Obligations for 2000

Announcement 2001–16

This announcement provides guidance to federally recognized Indian tribal governments, including any subdivision, subsidiary, or wholly-owned business enterprise, about their Federal Unemployment Tax Act (FUTA) obligations for 2000. The announcement is being made because the recent enactment of Section 166 of the Community Renewal Tax Relief Act of 2000 (H.R. 5662, incorporated in H.R. 4577, the Consolidated Appropriations Act, 2001) (Pub. L. No. 106–554, 114 Stat. 2763) changed how FUTA applies to Indian tribal governments.

For services rendered after December 20, 2000, federally recognized Indian tribal governments are exempt from FUTA. Instead, an Indian tribal government may elect to make contributions to the State unemployment fund as if services by its employees were employment under FUTA, or it may make payments in lieu of the contributions in amounts equal to the unemployment benefits attributable under the State law to such service; and Indian tribal governments may make

2001–8 I.R.B. 715 February 20, 2001

of that rule, including the reimbursement of the State, it may file a Form 940 filled out in the following way:

Write across the top of the Form 940: “Announcement 2001–16.”
Check the box stating that it is not required to file Form 940 in the future.
Total payments made in 2000 for services rendered for the year 2000, should be entered on line 1 of Part I of Form 940.
The amount entered on line 1 of Part I should also be entered on line 2.
Line 2 also requests an explanation about why the amounts are exempt. The Indian tribal government should state: “Announcement 2001–16.”
On line 5, enter zero as FUTA tax liability.
On line 7 of Part II, enter zero.
On line 8 of Part II, enter the total FUTA tax deposited for the year.
On line 10 of Part II, enter the amount from line 8.

OPTION 2

If the Indian tribal government has not determined how it wishes to proceed concerning the transition rule, it should file the Form 940 for 2000 claiming exemption only for services performed after December 20, 2000. The Indian tribal government may later use an amended return for 2000 to exercise its option to use the transition rule and receive a refund for amounts deposited. If the Indian tribal government chooses to amend its return, it should file another Form 940 and check the box that indicates it is an amended return. It should follow the directions in Option 1 when it prepares this amended Form 940. These amended Forms 940 for 2000 must be filed no later than January 31, 2004.

In the alternative, recognizing the limited period of time the Indian tribal government has to react to the new law, it may file the Form 940 for 2000 as if the new law had not been enacted. The Indian tribal government should later use an amended return for 2000 to receive a refund for amounts deposited for services after December 21, 2000, but before January 1, 2001, even if the Indian tribal government decides not to use the transition rule.

TRANSITION RULE ELECTIONS FOR SUBDIVISIONS, SUBSIDIARIES, OR WHOLLY-OWNED BUSINESS ENTERPRISES

An Indian tribal government may choose to apply the transition rule separately to each subdivision, subsidiary, or wholly-owned business enterprise. For example, the Indian tribal government could elect to reimburse the State unemployment funds for one wholly-owned business enterprise, and receive a refund of amounts deposited with respect to that wholly-owned business enterprise, but not make the election for another whollyowned business enterprise. If the Indian tribal government decides to apply the transition rule differently to different subdivisions, subsidiaries, or wholly-owned business enterprises, it may use either Option 1 or Option 2, but should enter on line 2 of Part I ONLY those amounts attributable to subdivisions, subsidiaries, or wholly-owned business enterprises to which its transition rule election applies, then complete the calculations by following the form instructions.

For further information regarding this announcement, contact the Tax Exempt and Government Entities Customer Account Services call site at 1-877-8295500 (toll-free).

New Form 8875, Taxable REIT Subsidiary Election

Announcement 2001–17

New Form 8875 is now available for tax years beginning after 2000. An eligible corporation and a REIT use Form 8875 to jointly elect to have the corporation treated as a taxable REIT subsidiary. The corporation and the REIT can make this election if the REIT directly or indirectly owns stock in the corporation.

You can obtain Form 8875 by telephone or by using IRS electronic information services.

Request by Number or address

Telephone 1-800-TAX-FORM

(1-800-829-3676)

Personal computer:

IRS Web Site www.irs.gov

File transfer protocol ftp://ftp.irs.gov

Deletions From Cumulative List of Organizations Contributions to Which Are Deductible Under Section 170 of the Code

Announcement 2001–20

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 February 20, 2001, 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. Hemotec Medical Research Foundation

Ontario, CA St. David’s Health Care System, Inc.

Austin, TX Watts 13 Foundation

Los Angeles, CA

February 20, 2001 716 2001–8 I.R.B.