Part IV. Items — Internal Revenue Bulletin 2007-10

Notice of Proposed Rulemaking by Cross-Reference to Temporary Regulations

Certain Transfers of Stock or Securities by U.S. Persons to Foreign Corporations

REG–147144–06

AGENCY: Internal Revenue Service (IRS), Treasury.

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

SUMMARY: In this issue of the Bulletin, the IRS is issuing temporary regulations (T.D. 9311) under section 367(a) of the Internal Revenue Code (Code) regarding gain recognition agreements. These regulations are necessary to respond to comments requested in Notice 2005–74. The regulations primarily affect U.S. persons that transfer stock or securities to foreign corporations or corporations engaged in transactions that affect existing gain recognition agreements. The text of those regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the temporary regulations and these proposed regulations.

DATES: Written or electronic comments and requests for a public hearing must be received by May 7, 2007.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–147144–06), 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–147144–06), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC, or sent electronically, via the IRS Internet site at www.irs.gov/regs or via the Federal eRulemaking Portal at www.regulations.gov (IRS REG–147144–06).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Daniel McCall, (202) 622–3860; concerning submissions of comments, requests for a public hearing, and/or to be placed on the building access list to attend a hearing, contact Richard Hurst at (202) 622–7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collections of information contained in this notice of proposed rulemaking have been submitted to the Office of Management and Budget for review in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collection of information should be sent 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, with copies to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 20224. Comments on the collection of information should be received by May 7, 2007. Comments are specifically requested concerning:

Whether the proposed collections of information are necessary for the proper performance of the functions of the Internal Revenue Service, including whether the information will have practical utility;

The accuracy of the estimated burden associated with the proposed collection of information;

How the quality, utility, and clarity of the information to be collected may be enhanced;

How the burden of complying with the proposed collections of information may be minimized, including through the application of automated collection techniques or other forms of information technology; and

Estimates of capital and start-up costs of operation, maintenance, and purchase of service to provide information.

The collections of information in this proposed regulation is in §1.367(a)–8(b)(3)(iii), (e)(1) through

(e)(8), and (g). Responses to these collections of information are required to prevent triggering gain recognition agreements—for example, by submitting new gain recognition agreements or by submitting elections to reduce basis in certain stock. Responses are also required to facilitate electronic filing. These regulations include a rule requiring that gain or interest due under section 367(a) be included in a schedule that can be attached to a taxpayer’s electronically-filed return. Response to these collections of information is mandatory. The likely respondents are large corporations.

Estimated total annual reporting burden: 240.

Estimated average annual burden hours per respondent: from 1 hour to 2 hours, depending on individual circumstances.

Estimated number of respondents: 170. 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.

Books or records relating to these collections 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 and Explanation of Provisions

Temporary regulations in this issue of the Bulletin amend the Income Tax Regulations (26 CFR part 1) relating to section 367(a) of the Internal Revenue Code (Code) and gain recognition agreements. The text of those regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the temporary regulations and these proposed regulations.

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.

March 5, 2007 680 2007–10 I.R.B.

Par. 3. Section 1.367(a)–8 is revised to read as follows:

§1.367(a)–8 Gain recognition agreement requirements.

[The text of proposed §1.367(a)–8 is the same as the text of §1.367(a)–8T published elsewhere in this issue of the Bulletin.]

Kevin M. Brown, Deputy Commissioner for Services and Enforcement.

(Filed by the Office of the Federal Register on February 1, 2007, 10:34 a.m., and published in the issue of the Federal Register for February 5, 2007, 72 F.R. 5228)

Archer Medical Savings Accounts — Trustees’ Reports on the Number of Archer MSAs Established Between January 1, 2005 and June 30, 2005 and Between January 1, 2006 and June 30, 2006

Announcement 2007–24

PURPOSE

The purpose of this announcement is to notify trustees and custodians that they must report to the Internal Revenue Service (IRS) the number of Archer MSAs established (1) between January 1, 2005 and June 30, 2005 and (2) between January 1, 2006 and June 30, 2006. Trustees must report this information to IRS on separate Forms 8851 for 2005 and 2006, no later than March 20, 2007. Form 8851 (revised 2007) is currently available at www.irs.gov .

Archer Medical Savings Accounts (Archer MSAs)

Archer MSAs are authorized by section 220 of the Internal Revenue Code. The Tax Relief and Health Care Act of 2006 § 117, Pub. Law. No. 109–432, amends sections 220(j)(4), (5) of the Code to require that trustees of Archer MSAs report the number of Archer MSAs established (1) between January 1, 2005 and June 30, 2005 and (2) between January 1, 2006 and June 30, 2006. Trustees must report this information to IRS by March 20, 2007. Archer MSAs will terminate if the number

It is hereby certified that the collections of information contained in these regulations will not have a significant economic impact on a substantial number of small entities. Accordingly, a regulatory flexibility analysis is not required. These regulations primarily will affect United States persons that are large corporations engaged in cross-border corporate transactions. Thus, the number of affected small entities—in whichever of the three categories defined in the Regulatory Flexibility Act (small businesses, small organizations, and small governmental jurisdictions)—will not be substantial. The IRS and Treasury Department estimate that small organizations and small governmental jurisdictions are likely to be affected only insofar as they might hold a portfolio interest in stock or securities and in the unlikely event that they transfer such stock or securities to a foreign corporation. While a certain number of small entities may transfer stock or securities to a foreign corporation in connection with an acquisition or reorganization, the IRS and Treasury Department do not anticipate the number to be substantial. Furthermore, the IRS and Treasury Department estimate that those small entities that are affected by the regulations will likely face a burden of approximately two hours at an hourly rate of $200. Considering that the collections of information enable taxpayers to defer or avoid the recognition of potentially large amounts of gain that is subject to a gain recognition agreement, IRS and Treasury believe that $400 is not a significant economic impact. Comments about the accuracy of this certification may be submitted to the addresses provided in the preamble. 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.

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) or electronic comments that are submitted timely to the IRS. The IRS and Treasury Department specifically request comments

on the clarity of the proposed rules and how they can be made easier to understand. For additional requests for comments, see the section “Request for Comments,” in the preamble to the cross-referenced temporary regulations of this issue of the Bulletin. 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 these proposed regulations is Daniel McCall of the Office of Associate Chief Counsel (International). However, other personnel from the IRS and the 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 is amended by adding new entries to read as follows:

Authority: 26 U.S.C. 7805* * * Section 1.367(a)–3T(e) also issued under 367(a) and (b).* * *

Section 1.367(a)–8T also issued under 367(a) and (b).* * * Par. 2. Section 1.367(a)–3 is amended by revising paragraphs (e) and (f) to read as follows:

§1.367(a)–3 Treatment of transfers of stock or securities to foreign corporations.

- - - (e) [The text of this proposed amendment is the same as the text of §1.367(a)–3T(e) published elsewhere in this issue of the Bulletin].

(f) [The text of this proposed amendment is the same as the text of §1.367(a)–3T(f) published elsewhere in this issue of the Bulletin].

2007–10 I.R.B. 681 March 5, 2007

shareholders immediately before the transfer), or any combination thereof, must be in control of the transferee corporation; but only if, in pursuance of the plan, stock or securities of the transferee corporation are distributed in a transaction which qualifies under section 354, 355, or 356.

LaNita Van Dyke, Chief, Publications and

Regulations Branch, Legal Processing Division, Office of Associate Chief Counsel

(Procedure and Administration).

(Filed by the Office of the Federal Register on January 23, 2007, 8:45 a.m., and published in the issue of the Federal Register for January 24, 2007, 72 F.R. 3057)

Corporate Reorganizations; Distributions Under Sections 368(a)(1)(D) and 354(b)(1)(B); Correction Notice

Announcement 2007–26

AGENCY: Internal Revenue Service (IRS), Treasury.

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

SUMMARY: This document contains corrections to notice of proposed rulemaking by cross-reference to temporary regulations (REG–125632–06, 2007–5 I.R.B. 415) that was published in the Federal Register on Tuesday, December 19, 2006 (71 FR 75898) providing guidance regarding the qualification of certain transactions as reorganizations described in section 368(a)(1)(D) where no stock and/or securities of the acquiring corporation are issued and distributed in the transaction.

FOR FURTHER INFORMATION CONTACT: Bruce A. Decker at (202) 622–7550 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The notice of proposed rulemaking by cross-reference to temporary regulations (REG–125632–06) that is the subject of

of individuals establishing Archer MSAs exceeds certain numerical limits. If these limitations are exceeded in 2005 or 2006, April 19, 2007 will be a “cut-off date” after which, in general, no new Archer MSAs can be established. IRS will publish no later than April 19, 2007 the number of Archer MSAs established and whether April 19, 2007 is a “cut-off date.”

Questions regarding this announcement may be directed to Shoshanna Tanner in the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities) at (202) 622–6080 (not a toll-free number).

Corporate Reorganizations; Distributions Under Sections 368(a)(1)(D) and 354(b)(1)(B)

Announcement 2007–25

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations; correction notice.

SUMMARY: This document contains corrections to temporary regulations (T.D. 9303, 2007–5 I.R.B. 379) that was published in the Federal Register on Tuesday, December 19, 2006 (71 FR 75879) regarding the qualification of certain transactions as reorganizations described in section 368(a)(1)(D).

DATES: These corrections are effective December 19, 2006.

FOR FURTHER INFORMATION CONTACT: Bruce A. Decker at (202) 622–7550 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The temporary regulations (T.D. 9303) that is the subject of these corrections are under sections 368 and 354 of the Internal Revenue Code.

Need for Correction

As published, the temporary regulations (T.D. 9303) contain errors that may prove to be misleading and are in need of correction.

Correction of Publication

Accordingly, the temporary regulations (T.D. 9303) that was the subject of FR Doc. E6–21565, is corrected as follows:

On page 75879, column 1, in the preamble, under the caption “SUMMARY:”, line 9, the language “securities of the acquiring corporation is” is corrected to read “securities of the acquiring corporation are.”
On page 75880, column 1, in the preamble, under the paragraph heading “Background”, first full paragraph of the column, line 5, the language “its operating assets to Y for $34x dollars,” is corrected to read “its operating assets to Y for $34x,.”
On page 75880, column 1, in the preamble, under the paragraph heading “Background”, second full paragraph of the column, line 7, the language “requirements of section 354 and 356, is corrected to read “requirements of sections 354 and 356,.”
On page 75881, column 1, in the preamble, under the paragraph heading “Special Analyses”, line 7 from the bottom of the paragraph, the language “published elsewhere in this Federal ” is corrected to read “published elsewhere in this issue of the Federal .”

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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 * * *

§ 1.368–2T [Corrected]

Par. 2. Section 1.368–2T is amended by revising paragraph (l)(1) to read as follows:

§ 1.368–2T Definition of terms (temporary).

- - - (l) - - 1) General rule . In order to qualify as a reorganization under section 368(a)(1)(D), a corporation (transferor corporation) must transfer all or part of its assets to another corporation (transferee corporation) and immediately after the transfer the transferor corporation, or one or more of its shareholders (including persons who were

March 5, 2007 682 2007–10 I.R.B.

these corrections are under sections 368 and 354 of the Internal Revenue Code.

Need for Correction

As published, notice of proposed rulemaking by cross-reference to temporary regulations (REG–125632–06) contains errors that may prove to be misleading and are in need of clarification.

Correction of Publication

Accordingly, the notice of proposed rulemaking by cross-reference to temporary regulations (REG–125632–06) that was the subject of FR Doc. E6–21572, is corrected as follows:

On page 75898, column 3, in the preamble, under the caption “SUMMARY:”, line 9, the language “acquiring corporation is issued and” is corrected to read “acquiring corporation are issued and.”

LaNita Van Dyke, Chief, Publications and

Regulations Branch, Legal Processing Division, Office of Associate Chief Counsel

(Procedure and Administration).

(Filed by the Office of the Federal Register on January 23, 2007, 8:45 a.m., and published in the issue of the Federal Register for January 24, 2007, 72 F.R. 3087)

Extension of Deadline for Settlement Offered to Certain Foreign Embassy Staff

Announcement 2007–28

Following is a copy of the News Release issued by the Office of Deputy Commissioner, International on February 13, 2007 (IR–2007–34).

IRS Extends Deadline for Settlement Offered to Certain Foreign Embassy Staff

IR–2007–34, Feb. 13, 2007

WASHINGTON — The Internal Revenue Service will extend until March 30 the deadline for current and former U.S.-based employees of foreign embassies, consular offices and missions and international organizations to participate in a one-time settlement initiative to resolve outstanding tax matters related to their employment.

The deadline for participating in the offer, first announced November 17, had originally been February 20. Following requests from several embassies, the date is being extended to make certain those wishing to participate in the initiative have the opportunity to do so.

The offer is open to employees of those organizations who are U.S. citizens, green-card holders and foreign employees who have U.S. tax obligations. Accredited diplomatic personnel are generally exempt from income taxes on their wages under international treaties or agreements.

The IRS estimates that as many as half of these employees subject to U.S. tax either fail to report their wages, claim deductions they are not entitled to, incorrectly establish SEP/IRA retirement plans, fail to pay self-employment tax or fail to file tax returns at all.

To participate, employees must submit amended or original tax returns, which properly reflect their income and expenses, for tax years 2003, 2004 and 2005.

Failure to act now could mean facing a costly audit process in the future. Foreign embassy, consular office or international organization employees who fail to come forward may be subject to IRS audits and penalties which could cover more than just three years.

Additional guidance on the extension will be announced soon and will be posted on IRS.gov .

2007–10 I.R.B. 683 March 5, 2007