Part IV. Items of General Interest

Notice of Proposed Rulemaking by Cross-Reference to Temporary Regulations and Notice of Public Hearing

Information Reporting for Discharges of Indebtedness

REG–118327–08

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary regulations and notice of public hearing.

SUMMARY: In this issue of the Bulletin, the IRS is issuing final and temporary regulations (T.D. 9430) relating to information returns for cancellation of indebtedness by certain entities. The temporary regulations will avoid premature information reporting from certain businesses that are currently required to report and will reduce the number of information returns required to be filed. The regulations will impact certain lenders who are currently required to file information returns under the existing regulations. The text of those temporary regulations also serves as text of these proposed regulations. This document also provides a notice of public hearing on these proposed regulations.

DATES: Written or electronic comments must be received by February 9, 2009. Outlines of topics to be discussed at the public hearing scheduled for March 13, 2009, must be received by February 13, 2009.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–118327–08), 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–118327–08), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC, or sent electronically

via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG–118327–08). The public hearing will be held in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Barbara Pettoni at (202) 622–4910; concerning submission of comments, the hearing, and/or to be placed on the building access list to attend the hearing, Oluwafunmilayo Taylor at (202) 622–7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

Temporary regulations in this issue of the Bulletin contain amendments to the Income Tax Regulations (26 CFR Part 1) under section 6050P relating to information reporting for cancellation of indebtedness by certain entities. 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. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. The proposed regulations under section 6050P do not impose a collection of information on small entities. Therefore, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. The proposed regulations will reduce the number of information returns required to be filed under section 6050P rather than impose a collection of information on entities. Pursuant to section 7805(f) of the Internal Revenue Code, these regulations have been submitted to the Chief Counsel

for Advocacy of the Small Business Administration for comment on its impact on small business.

Comments and Public Hearing

Before these proposed regulations are adopted as final regulations, consideration will be given to any electronic or written comments (a signed original and eight (8) copies) that are submitted timely to the IRS. The Treasury Department and the IRS request comments on the clarity of the proposed rules and how they may be made easier to understand. All comments will be available for public inspection and copying. A public hearing has been scheduled for March 13, 2009, beginning at 10:00 a.m. in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section of this preamble.

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing must submit electronic or written comments by February 9, 2009, and an outline of the topics to be discussed and the time to be devoted to each topic (signed original and eight (8) copies) by February 13, 2009.

A period of 10 minutes will be allotted to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing.

Drafting Information

The principal author of these proposed regulations is Barbara Pettoni, Office of Associate Chief Counsel (Procedure and Administration).

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announcement. Upon completion of the two-year pilot period, TE/GE and Appeals will evaluate the program, consider necessary adjustments, and determine whether to make the program permanent.

RELIANCE ON AND DIFFERENCES FROM LMSB AND SB/SE FAST TRACK SETTLEMENT

The procedures for using TE/GE FTS rely on the provisions of Revenue Procedure 2003–40, 2003–1 C.B. 1044, and Announcement 2006–61, 2006–2 C.B. 390, which implement Large and Mid-Size Business (LMSB) and Small Business/Self-Employed (SB/SE) Taxpayer FTS Dispute Resolution Programs, respectively.

TE/GE FTS, during the two-year pilot period, extends the provisions of the LMSB and SB/SE FTS programs to TE/GE cases and provides for direct oversight of the program by TE/GE and Appeals. TE/GE FTS therefore involves procedures almost identical to the LMSB and SB/SE FTS procedures described in Rev. Proc. 2003–40 and Ann. 2006–61. The key differences between the LMSB, SB/SE and TE/GE FTS procedures are as follows:

signee fulfills the duties of the LMSB Team Manager or SB/SE Group Manager;

after consultation with the TE/GE Group Manager, selects and manages cases eligible for TE/GE FTS. The Appeals Team Manager responsible for TE/GE Programs serves as the FTS Program Manager; and

be completed within 60 days of acceptance of the TE/GE FTS Application. The process can be extended beyond the 60-day period if agreed to by all parties.

CASE ELIGIBILITY AND EXCLUSIONS

Generally, TE/GE FTS is available for cases involving: income tax, exclusion of income from interest paid on municipal obligations, employment tax, estate and gift tax, excise tax, and exemption,

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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

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

Authority: 26 U.S.C. 7805 * * * Par. 2. Section 1.6050P–0 is amended as follows:

1. The introductory text is revised.

2. The entries in §1.6050P–1(b)(2)(v) and (h)(1) are revised.

3. The entry for §1.6050P–1T is removed.

The revisions read as follows: §1.6050P–0 Table of contents .—This section lists the major captions that appear in §1.6050–P–1 and §1.6050P–2.

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§1.6050P–1 Information reporting for discharges of indebtedness by certain entities.

• • • • (b) - - (2) - - (v) [The text of the proposed entry for §1.6050P–1(b)(2)(v) is the same as the text in §1.6050P–1T(b)(2)(v) in §1.6050P–0 published elsewhere in this issue of the Bulletin].
• • • • (h) - - (1) [The text of the proposed entry for §1.6050P–1(h)(1) is the same as the text of §1.6050P–1T(h)(1) in §1.6050P–0 published elsewhere in this issue of the Bulletin].

Par. 3. Section 1.6050P–1 is amended by revising paragraphs (b)(2)(i)(H), (b)(2)(v) and (h)(1) to read as follows:

§1.6050P–1 Information reporting for discharges of indebtedness by certain entities.

• • • • (b) - - (2) - - (i) - -

(H) [The text of the proposed amendments to §1.6050P–1(b)(2)(i)(H) is the same as the text of §1.6050P–1T(b)(2)(i)(H) published elsewhere in this issue of the Bulletin].

• • • • (v) [The text of the proposed amendments to §1.6050P–1(b)(2)(v) is the same as the text of §1.6050P–1T(b)(2)(v) published elsewhere in this issue of the Bulletin].
• • • • (h)(1) [The text of the proposed amendments to §1.6050P–1(h) is the same as the text of §1.6050P–1T(h) published elsewhere in this issue of the Bulletin].

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Linda E. Stiff, Deputy Commissioner for Services and Enforcement.

(Filed by the Office of the Federal Register on November 7, 2008, 8:45 a.m., and published in the issue of the Federal Register for November 10, 2008, 73 F.R. 66568)

Fast Track Settlement For TE/GE Taxpayers

Announcement 2008–105

DESCRIPTION OF TE/GE FAST TRACK SETTLEMENT

This announcement provides an opportunity for entities with issues under examination by the Tax Exempt and Governmental Entities Division (TE/GE) to use Fast Track Settlement (FTS) to expedite case resolution. The TE/GE FTS will enable TE/GE entities that currently have unagreed issues in at least one open period under examination to work together with TE/GE and the Office of Appeals (Appeals) to resolve outstanding disputed issues while the case is still in TE/GE jurisdiction. TE/GE and Appeals will jointly administer the TE/GE FTS process. TE/GE FTS will be used to resolve factual and legal issues, and it may be initiated at any time after an issue has been fully developed, but before the issuance of a 30-day letter (or its equivalent). TE/GE FTS will be available to taxpayers for a pilot period of up to two years, beginning upon the date of publication of this

2008–48 I.R.B. 1219 December 1, 2008

limited cases, a mediation-trained Appeals Team Case Leader, will serve as the neutral FTS Appeals Official.

During TE/GE FTS, the taxpayer (or taxpayer’s authorized representative) and TE/GE representatives, including at least one representative with decision-making authority from both TE/GE and the taxpayer, will meet with the FTS Appeals Official. Any person engaged in practice before the IRS must have a power of attorney from the taxpayer (Form 2848, Power of Attorney and Declaration of Represen- tative ). The taxpayer and TE/GE representatives should include individuals with the information and expertise necessary to assist the parties and the FTS Appeals Official during the settlement process. The FTS Appeals Official may ask the parties to limit the number of participants to facilitate the process.

The FTS Appeals Official will hold the FTS session at the date and location agreed to by both parties. Prior to the FTS session, the FTS Appeals Official will advise the participants of the procedures and establish ground rules. The FTS Appeals Official may modify the rules and procedures during the session to adapt to changes in circumstances. The FTS session may include joint sessions with all parties, separate meetings, or both as determined appropriate in the sole judgment of the FTS Appeals Official.

The FTS Appeals Official will use a FTS Session Report to assist in planning the FTS session and to report on developments during the session. The FTS Session Report will include a list of all issues approved for the FTS program, a description of the issues, the amounts in dispute, conference dates, a plan of action for the FTS session and other information useful to the process as determined by the parties and the FTS Appeals Official. The FTS Appeals Official also will prepare and update an Agenda to guide the communication, set the order of issue discussion, and pose questions to clarify the issues. During the session, the FTS Appeals Official will provide decision makers from both parties with copies of the Agenda and the FTS Session Report.

Generally, the FTS Appeals Official will consider only those issues outlined in the FTS Session Report, except by mutual agreement of the parties. If the taxpayer presents information during the session

foundation or qualification issues or other such TE/GE functional issues as appropriate when:

agreed issues.

TE/GE FTS will not be available for:

other established settlement initiatives, such as, but not limited to, the Self Correction Program “SCP”, the Audit Closing Agreement Program “Audit CAP”, or other programs described in Rev. Proc. 2006–27, 2006–1 C.B. 945;

to respond to IRS communications and no documentation has been previously submitted for consideration by TE/GE;

jurisdiction (including determination of penalties under § 6700 of the Code);

an annual basis by the TE/GE Commissioner or his delegate;

ited to, those identified in Rev. Proc. 2008–2, 2008–1 I.R.B. 90, or any successor guidance;

which resolution with respect to one party might result in inconsistent treatment in the absence of the participation of another party; or

Chief Counsel Notice, or equivalent publication, as excluded from the FTS process.

If an issue is determined not to be eligible for the FTS program, all issues in the case are not eligible for the FTS program. Additionally, the Appeals FTS Pro

gram Manager will determine whether Appeals has the necessary staffing resources before accepting the case into the program.

TE/GE FTS will not be the appropriate dispute resolution process for all cases involving TE/GE taxpayers. The TE/GE Group Manager or designee and the taxpayer will evaluate their individual circumstances of their case to determine if this process meets their needs.

APPLICATION PROCESS

A taxpayer that is interested in participating in TE/GE FTS, or that has questions about the program and its suitability for the taxpayer’s case, may contact the TE/GE Group Manager of the Examining Agent conducting the audit for the period(s) currently under examination. Either the taxpayer, Examining Agent or the TE/GE Group Manager may initiate an application to the TE/GE FTS process at any time after an issue has been fully developed but before a 30-day letter (or its equivalent) is issued.

A FTS Application, attached as Exhibit 1, should be submitted. A Form 5701, ( Notice of Proposed Adjustment ) or a Revenue Agent Report will be prepared by the TE/GE Examining Agent. To facilitate the understanding of the parties’ opposing views, a written response from the taxpayer must be included with the FTS Application.

If the case is not accepted for inclusion in TE/GE FTS, the TE/GE or Appeals representative will discuss other dispute resolution opportunities with the taxpayer, including 30-day letter procedures contained in IRS Publications 1, Your Rights As A Taxpayer, or 5, Your Appeal Rights and How To Prepare a Protest If You Don’t Agree . The decision not to accept a case into the TE/GE FTS program is not subject to administrative appeal or judicial review.

SETTLEMENT PROCESS

TE/GE FTS employs various alternative dispute resolution techniques to promote agreement. An FTS Appeals Official will serve as a neutral party. The FTS Appeals Official will not perform in a traditional Appeals role, but will use dispute resolution techniques to facilitate settlement between the parties. A TE/GE Appeals Officer trained in mediation or, in

December 1, 2008 1220 2008–48 I.R.B.

on the proposed settlement from the Joint Committee on Taxation. If the taxpayer declines to agree with any changes by the IRS upon reconsideration, TE/GE will close the case unagreed, and the taxpayer will retain all the usual rights to request Appeals consideration of any unagreed issues.

UNRESOLVED CASES

With respect to TE/GE FTS cases that are returned for traditional Appeals consideration for any reason, ex parte restrictions will not be imposed on intra-Appeals communications. Appeals management will take appropriate measures to ensure these cases are handled impartially.

PRECEDENTIAL VALUE OF SETTLEMENT AGREEMENTS

A resolution reached by the parties through the TE/GE FTS process will not bind the parties for taxable periods or issues not covered by the TE/GE FTS agreement, unless such taxable periods or issues are addressed expressly in a closing agreement reached as part of the TE/GE FTS process.

DELEGATION OF AUTHORITY

This announcement constitutes a delegation by the Commissioner of Internal Revenue of settlement authority to Grade 14, 13 and 12 Appeals Officers who are assigned to be Appeals FTS Officials for TE/GE FTS cases described in this announcement. This delegation of settlement authority includes the responsibility for arriving at the final disposition from the Government’s perspective, approving the final settlement in accordance with the delegated authority, and executing the appropriate closing documents. This authority may not be redelegated.

EFFECTIVE DATE

TE/GE FTS is effective upon publication of this announcement in the Internal Revenue Bulletin.

COMMENTS

The IRS invites interested persons to comment on this program. Send submissions to:

that the taxpayer had not previously presented during the audit, the FTS Appeals Official will adjust the targeted completion date to give the appropriate IRS officials time to evaluate the information.

During the session, the FTS Appeals Official may propose settlement terms for any or all issues. If the taxpayer accepts the FTS Appeals Official’s settlement proposal, but the TE/GE Group Manager rejects it, the TE/GE Area Manager or equivalent TE/GE management official with jurisdiction for the case must review the rejection of the settlement proposal and either concur in writing with the rejection or accept the settlement proposal on behalf of TE/GE. If the TE/GE Area Manager or equivalent TE/GE management official concurs with the Group Manager’s rejection of the settlement proposal, and an acceptable alternative settlement cannot be reached, the issue will be closed out of the FTS program as unagreed.

If the parties resolve any of the disputed issues at the conclusion of the session, the parties and the FTS Appeals Official shall sign the FTS Session Report acknowledging acceptance of the terms of settlement for purposes of preparing computations. The signature of the parties on the FTS Session Report does not constitute a final settlement, nor does it waive restrictions on assessment, terminate consents to extend periods of limitation, start the running of any periods of limitation, or constitute agreement to close the case. Post-settlement procedures are described below.

The TE/GE FTS process is confidential. IRS employees involved in any way with the TE/GE FTS process are subject to the confidentiality and disclosure provisions of the Internal Revenue Code. By signing the FTS Agreement, attached as Exhibit 1, the taxpayer consents, pursuant to section 6103(c), to the disclosure of the taxpayer’s returns and return information pertaining to the issues being considered in the TE/GE FTS process to those persons named on the Agreement as participants in the process. IRS employees, the taxpayer and persons invited to participate by the IRS or the taxpayer shall not voluntarily disclose information regarding any communication made during the TE/GE FTS session, except as provided by statute.

The prohibition against ex parte communications between Appeals Officers and other IRS employees provided by § 1001(a) of the Internal Revenue Service Restructuring and Reform Act of 1998 does not apply to the communications arising in the TE/GE FTS process because the Appeals personnel are facilitating an agreement between the taxpayer and TE/GE and are not acting in their traditional Appeals settlement role.

Any recommended settlement by the FTS Appeals Official of an issue in FTS shall be subject to the procedures including procedures in the Internal Revenue Manual and existing published guidance, which would be applicable if the issue was being considered by Appeals. FTS therefore creates no special authority for settlement by the FTS Appeals Official. For example, if the FTS issue is coordinated in either the Technical Advisor Program or the Appeals Technical Guidance program, the proposed settlement of that issue is subject to established procedures, including submission of the proposed settlement to the Appeals Coordinator for review and concurrence.

If the parties fail to resolve any issue in FTS, the taxpayer retains the option of requesting that the issue be heard through the traditional Appeals process.

Except as specifically provided above, both parties retain the right to withdraw throughout the entire TE/GE FTS process. A party wishing to withdraw should provide written notice to the FTS Appeals Official and the other party.

POST-SETTLEMENT PROCEDURE

If the parties reach an agreement on all or some issues through the TE/GE FTS process, the TE/GE or Appeals FTS Official, as appropriate, will use established issue or case closing procedures and applicable agreement forms, including preparation of a Form 906, Closing Agreement On Final Determination Covering Specific Matters, if appropriate.

If applicable, the IRS will report a proposed resolution reached as a result of TE/GE FTS to the Joint Committee on Taxation in accordance with section 6405. The IRS may reconsider a proposed settlement, as reflected in a signed FTS Session Report, upon receipt of comments

2008–48 I.R.B. 1221 December 1, 2008

number), Charles.F.Fisher@irs.gov or Leonard C. Horton, Appeals Program Analyst, Tax Policy & Procedure (Alternative Dispute Resolution) at (972) 308–7330 (not a toll-free number), Leonard.C.Horton@irs.gov .

Internal Revenue Service-Appeals Attn: Leonard C. Horton 4050 Alpha Road Farmers Branch, TX 75244–4201 Leonard.C.Horton@irs.gov

FURTHER INFORMATION

For further information regarding this announcement, contact either: Charles F. Fisher, TE/GE Team Leader, at (302) 286–1510 (not a toll-free

December 1, 2008 1222 2008–48 I.R.B.

2008–48 I.R.B. 1223 December 1, 2008

Extension of Fast Track Settlement For SB/SE Taxpayers Pilot Program

Announcement 2008–110

SUMMARY AND BACKGROUND

This announcement extends the test of the Fast Track Settlement for Small Business/Self-Employed division (SB/SE) Taxpayers Pilot Program set forth in Announcement 2006–61, 2006–2 C.B. 390, for an additional two-year period, beginning on December 1, 2008, the date this announcement is published in the Internal Revenue Bulletin.

SB/SE and the Office of Appeals (Appeals) concluded a two-year test of the Fast Track Settlement for SB/SE Taxpayers Pilot Program on September 4, 2008. During the additional two-year test period, SB/SE and Appeals will seek additional cases for fast track settlement in the same seven cities designated in Ann. 2006–61 and IR 2007–200, to further evaluate the program. The extended program will contain no changes from the provisions set forth in Ann. 2006–61.

This procedure allows taxpayers with eligible cases, as listed in Ann. 2006–61, under examination by SB/SE to request fast track settlement. Using the services of a trained mediator from Appeals, the taxpayer and SB/SE will attempt to resolve unagreed issues on an expedited basis. The fast track settlement program is consistent with the Internal Revenue Service’s efforts to improve tax administration, provide customer service, and reduce taxpayer burden.

EFFECTIVE DATE

This program is effective beginning December 1, 2008, the date it is published in the Internal Revenue Bulletin, and applications to the program will be accepted through November 30, 2010.

COMMENTS

The Service invites interested persons to comment on this pilot program. Written comments should be delivered or mailed by January 15, 2009, to:

Internal Revenue Service — Appeals Attn: Nancy J. Talajkowski 160 Spears Street, Suite 800 San Francisco, CA 94105

Alternatively, comments may be submitted by e-mail to the following address: notice.comments@irscounsel.treas.gov .

FURTHER INFORMATION

For further information regarding this announcement, contact either: Xavier Guerrero, SB/SE Program Analyst, at (415) 552–6195 (not a toll-free number); or Nancy J. Talajkowski, Appeals Program Analyst, Tax Policy & Procedure (Alternative Dispute Resolution) at (415) 227–5007 (not a toll-free number).

Test of Procedures for Mediation and Arbitration for Offer in Compromise and Trust Fund Recovery Penalty Cases in Appeals

Announcement 2008–111