Part IV. Items of General Interest

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

Modifications of Certain Derivative Contracts

REG–109006–11

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 temporary regulations (T.D. 9538) relating to whether an exchange for purposes of §1.1001–1(a) occurs for the nonassigning counterparty when there is an assignment of certain derivative contracts. The text of those regulations also serves as the text of these proposed regulations. This document also provides notice of a public hearing on these proposed regulations.

DATES: Written or electronic comments must be received by October 20, 2011. Outlines of topics to be discussed at the public hearing scheduled for October 27, 2011, must be received by October 20, 2011.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–109006–11), 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–109006–11), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, DC, or sent electronically, via the Federal eRulemaking Portal at www.regulations.gov (IRS REG–109006–11). The public hearing will be held in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, N.W., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Andrea M. Hoffenson, (202) 622–3920; concerning submissions of comments, the hearing, and/or to be placed on the building access list to attend the hearing, Oluwafunmilayo (Funmi) Taylor, (202) 622–7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

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 1001. The temporary regulations provide that the transfer or assignment of a derivative contract in certain situations is not an exchange to the nonassigning counterparty for purposes of §1.1001–1(a). The text of the temporary regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the amendments.

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 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, and because the regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Internal Revenue Code, this notice of proposed rulemaking has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small businesses.

Comments and 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 the Treasury Department specifically request com

ments 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 has been scheduled for October 27, 2011, beginning at 10 a.m. in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, N.W., Washington, DC. Due to building security procedures, visitors must enter through 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 area 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 written or electronic comments 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 Thursday, October 20, 2011. 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 regulations is Andrea M. Hoffenson, Office of Associate Chief Counsel (Financial Institutions and Products). 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:

September 12, 2011 334 2011–37 I.R.B.

The written Notice of Approval to serve as a nonbank trustee or custodian is not an endorsement of any investment made with respect to any retirement plan or arrangement handled by the approved nonbank trustee or custodian. The Internal Revenue Service does not review or approve investments.

If the trustee or custodian of an account described above is not a bank (and in the case of Archer MSAs and health savings accounts, a bank or an insurance company) or an approved nonbank trustee or custodian, the amounts held in such account (including earned interest) will be deemed distributed and includible in gross income in the year(s) the account’s trustee or custodian was not a bank or, if applicable, an insurance company, or an approved nonbank trustee or custodian. Contributions made to such account are not deductible from gross income and will be disallowed if claimed on an income tax return.

This list of approved nonbank trustees and custodians includes names, addresses and the date each application was approved.

If an approved nonbank trustee or custodian believes that the information on the list below is incorrect or incomplete or it has been improperly omitted from this list, it may notify the Service in writing of any changes it proposes to the list. This notification should include a copy of the original Notice of Approval.

The notification should be addressed to:

Internal Revenue Service SE:T:EP:RA:T1 1111 Constitution Ave. NW – PE Washington, DC 20224

Drafting Information

The principal author of this announcement is Eric Slack of the Employee Plans, Tax Exempt and Government Entities Division. Please contact Mr. Slack at 202–283–9576 (not a toll-free number), if there are any questions regarding the publication of this list. Written inquiries concerning this announcement should be addressed to the Internal Revenue Service at the above address.

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. Section 1.1001–4 is revised to read as follows:

§1.1001–4 Modifications of certain derivative contracts .

[The text of the proposed amendments to §1.1001–4 is the same as the text for §1.1001–4T(a) through (d) published elsewhere in this issue of the Bulletin].

Steven T. Miller, Deputy Commissioner for Services and Enforcement.

(Filed by the Office of the Federal Register on July 21, 2011, 8:45 a.m., and published in the issue of the Federal Register for July 22, 2011, 76 F.R. 43957)

List of Nonbank Trustees and Custodians

Announcement 2011–59

The following is a list of entities that have been approved by the Commissioner of Internal Revenue, pursuant to § 1.408–2(e) of the Income Tax Regulations, to serve as a nonbank trustee or custodian. This list updates and supersedes the list published with Announcement 2007–47, 2007–1 C.B. 1260. Archer medical savings accounts (Archer MSAs) established under § 220 of the Internal Revenue Code, health savings accounts described in § 223, custodial accounts of retirement plans qualified under § 401, custodial accounts described in § 403(b)(7), trust or custodial accounts of individual retirement accounts (IRAs) established under §§ 408 and 408A (Roth IRAs), Coverdell education savings accounts described in § 530, and custodial accounts of eligible deferred compensation plans described in § 457(b) will not be tax-exempt if the trustee or custodian of such accounts is not a bank (as defined in § 408(n), and in the case of Archer MSAs and health savings accounts, a bank within the meaning of § 408(n) or an insurance company within the meaning of § 816) or an approved nonbank trustee or custodian.

An entity that is not a bank (as defined in § 408(n), and in the case of Archer MSAs and health savings accounts, a bank within the meaning of § 408(n) or an insurance company within the meaning of § 816) must receive approval from the Service to serve as a nonbank trustee or custodian. A prospective nonbank trustee or custodian must file a written application with the Commissioner of Internal Revenue demonstrating that the requirements of § 1.408–2(e)(2) through §1.408–2(e)(7) of the regulations will be met. If the application is approved, a written Notice of Approval will be issued to the applicant. The Notice of Approval will state the day on which it becomes effective, and (except as otherwise provided therein) will remain effective until revoked by the Service or withdrawn by the applicant. Entities that have received such approval from the Service may also sponsor certain retirement plans, custodial accounts under § 403(b)(7) and individual retirement arrangements established under §§ 408 and 408A (See Rev. Proc. 2005–16, 2005–1 C.B. 674, and Rev. Proc. 87–50, 1987–2 C.B. 647, as modified.)

A prospective nonbank trustee or custodian may not accept any fiduciary account before such Notice of Approval becomes effective. In addition, a nonbank trustee or custodian may not accept a fiduciary account until after the plan administrator or the person for whose benefit the account is to be established is furnished with a copy of the written Notice of Approval issued to the applicant.

The continued reliance on a Notice of Approval is dependent upon the continued satisfaction of the nonbank trustee requirements set forth in the regulations. The Notice of Approval issued to an applicant will be revoked if the Commissioner determines that the applicant is unwilling or unable to administer fiduciary accounts in a manner consistent with the requirements of the regulations. Generally, the notice will not be revoked unless the Commissioner determines that the applicant has knowingly, willfully or repeatedly failed to administer fiduciary accounts in a manner consistent with the requirements of the regulations, or has administered a fiduciary account in a grossly negligent manner.

2011–37 I.R.B. 335 September 12, 2011

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2011–37 I.R.B. 337 September 12, 2011

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2011–37 I.R.B. 339 September 12, 2011

September 12, 2011 340 2011–37 I.R.B.