Part III. — Internal Revenue Bulletin 2007-49

Effective Dates of Regulations Under Section 901

Notice 2007–95

PURPOSE

The purpose of this notice is to provide guidance relating to the effective dates of final regulations to be issued under section 901.

BACKGROUND

On August 3, 2006, the Internal Revenue Service (IRS) and Treasury Department issued proposed regulations that would provide guidance relating to the determination of who is considered to pay a foreign tax for purposes of section 901 and section 903. In particular, the proposed regulations would provide guidance under section 1.901–2(f) relating to the person on whom foreign law imposes legal liability for tax, including in the case of taxes imposed on the income of foreign consolidated groups and entities that have different classifications for U.S. and foreign tax law purposes. The proposed regulations provide that the final regulations will be effective for foreign taxes paid or accrued during taxable years of the taxpayer beginning on or after January 1, 2007. The IRS and Treasury Department have received written comments on the proposed regulations and held a hearing on the proposed regulations on October 13, 2006. On March 29, 2007, the IRS and Treasury Department issued proposed regulations that would provide guidance under section 1.901–2(e)(5) relating to the amount of taxes paid for purposes of section 901. The proposed regulations would revise section 1.901–2(e)(5) in two ways. First, for purposes of determining compliance with section 1.901–2(e)(5), the proposed regulations would treat as a single taxpayer all foreign entities in which the same U.S. person has a direct or indirect interest of 80 percent or more (a “U.S.-owned foreign group”). Second, the proposed regulations would treat amounts paid to a foreign taxing authority as noncompulsory payments if those amounts are attributable to certain structured passive

investments. The proposed regulations provide that the final regulations will be effective for foreign taxes paid or accrued during taxable years of the taxpayer ending on or after the date on which the regulations are finalized. The IRS and Treasury Department have received written comments on the proposed regulations and held a hearing on the proposed regulations on July 30, 2007.

DISCUSSION

The IRS and Treasury Department are considering the comments received on the two proposed regulations.

The IRS and Treasury Department intended to finalize the proposed section 1.901–2(f) regulations in 2007. However, the IRS and Treasury Department are still in the process of considering comments received on the proposed regulations and no longer expect to finalize these proposed regulations in 2007. Because the proposed regulations will not be finalized in 2007, the IRS and Treasury Department believe it is appropriate to revise the effective date for the regulations. Accordingly, the final regulations relating to the determination of who is considered to pay a foreign tax will be effective for taxable years beginning after the final regulations are published in the Federal Register.

In reviewing comments received, the IRS and Treasury Department have determined that the proposed change to section 1.901–2(e)(5) relating to U.S.-owned foreign groups may lead to inappropriate results in certain cases. The IRS and Treasury Department have therefore decided to sever the proposed rule for U.S.-owned foreign groups from the portion of the proposed section 1.901–2(e)(5) regulation addressing the treatment of foreign payments attributable to certain structured passive investment arrangements while continuing to study the appropriate treatment of U.S.owned foreign groups. The IRS and Treasury Department also believe it is appropriate to revise the proposed effective date for the rules addressing the treatment of U.S.-owned foreign groups. Therefore, final regulations addressing U.S.-owned foreign groups will be effective for taxable years beginning after the final regulations are published in the Federal Register. For

taxable years ending on or after March 29, 2007, and beginning on or before the date on which the final regulations are published, taxpayers may rely on the portion of the proposed regulations addressing U.S.-owned foreign groups. No inference is intended as to whether an amount paid by a foreign entity that is not a member of a U.S.-owned foreign group is a compulsory payment under existing section 1.901–2(e)(5).

The principal author of this notice is Bethany A. Ingwalson of the Office of Associate Chief Counsel (International). For further information regarding this notice, contact Bethany A. Ingwalson at (202) 622–3850 (not a toll-free call).

Payments From the Presidential Election Campaign Fund

Notice 2007–96

This notice supersedes Notice 96–13, 1996–1 C.B. 366, and announces that the Department of the Treasury (the Treasury) will change the procedures for making payments from the Presidential Primary Matching Payment Account (the Account). This notice also announces that the Treasury intends to modify the regulations under § 9037 of the Internal Revenue Code (26 U.S.C. § 9037 (2000)) to reflect the changed procedures.

Section 9006(a) established the Presidential Election Campaign Fund (the Fund) on the books of the U.S. Treasury. Section 9006(a) requires the Secretary to transfer to the Fund, from time to time, an amount equal to the individual taxpayer designations for the Fund under § 6096. See § 701.9006–1(a) of the Financing of Presidential Election Campaigns Regulations (26 C.F.R. § 701.9006–1(a) (2007)).

Section 701.9006–1(a) requires the Secretary to determine the amounts designated by individuals for the Fund at least once a month.

Section 9037(a) requires the Secretary to maintain within the Fund a separate account known as the Presidential Primary Matching Payment Account. The Secretary is required to deposit into the Account

2007–49 I.R.B. 1091 December 3, 2007

amounts from the Fund after determining that there are amounts available and set aside in the Fund to make the payments described in § 9006 (payments for the general election) and § 9008 (payments for the presidential nominating conventions). The amounts in the Account are for presidential primary candidates who are certified for payments by the Federal Election Commission (the Commission).

Section 702.9037–2(a) provides that, except in the case of a shortfall described in § 702.9037–2(c), promptly after the end of each calendar month, but not before the beginning of the calendar year of a presidential election, the Secretary shall pay the amounts certified by the Commission in the preceding calendar month from the Account to the primary candidates.

Section 702.9037–2(c) provides that if the amount certified by the Commission for primary candidates in a calendar month exceeds the balance in the Account on the last day of the calendar month, the amount paid to a candidate for that month from the Account is determined by multiplying the amount certified by the Commission for the candidate during that month by the ratio of the balance in the Account on the last day of the calendar month over the total amount certified by the Commission for all the candidates during that month. Any amount certified by the Commission, but not paid to a candidate because of the operation of this shortfall rule, is treated as an amount certified by the Commission for that candidate during the succeeding calendar month. Section 702.9037–2(d) provides an example illustrating the shortfall rule of § 702.9037–2(c).

Notice 96–13 announced a change in the payment procedures contained in § 702.9037–2(c). The notice states that when the Account is in a shortfall position, the Secretary may make an additional payment between regular payment dates promptly after funds are available. Such payment is determined by multiplying the amount certified by the Commission for the candidate in month 1 by the ratio of the balance in the Account (but not to exceed the shortfall) on the 15th day of month 2 (or the first business day thereafter if the 15th is not a business day) over the total amount certified by the Commission for all the candidates in month 1.

Section 9037(b) contemplates that the Secretary should pay certified primary

candidates as promptly as possible. Therefore, the Treasury will change the procedures, currently described in § 702.9037–2 and Notice 96–13, for making payments from the Account. Under the changed procedures, the Secretary may make payments as soon as funds become available in the Account rather than monthly (or, in the event of a shortfall, with an additional payment on the 15 ^th of the next month, as required by Notice 96–13).

The Treasury intends to amend the regulations in § 702.9037–2 accordingly. As provided in Notice 96–13, the effective date of these amendments to the regulations will be February 2, 1996.

EFFECT ON OTHER DOCUMENTS

Notice 96–13 is superseded.

DRAFTING INFORMATION

The principal authors of this notice are Karla M. Meola and John Roman Faron of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this notice, contact Ms. Meola or Mr. Faron at (202) 622–4930 (not a toll-free call).

Alternative Fuel; Definition of Liquid Hydrocarbon

Notice 2007–97