Part IV. Items — Internal Revenue Bulletin 2016-20

Limited Penalty Relief for Filers of Form 1098–T, Tuition Statement

Announcement 2016–17

This announcement provides notice that the IRS will not impose penalties under section 6721 or 6722 on eligible educational institutions with respect to Forms 1098–T, Tuition Statement, required to be filed and furnished for the 2016 calendar year under section 6050S if the institution reports the aggregate amount billed for qualified tuition and related expenses on Form 1098–T instead of the aggregate amount of payments received as required by section 212 of the Protecting Americans from Tax Hikes Act of 2015 (Public Law 114–113 (129 Stat. 2242 (2015))(PATH). The penalty relief in this announcement is limited to 2016 Forms 1098–T required to be filed by eligible educational institutions by February 28, 2017 (or March 31, 2017, if filed electronically), and furnished to recipients by January 31, 2017. This announcement does not provide penalty relief for any other failure that would cause a filer to be subject to penalties under section 6721 or 6722, or any other penalty under any provision of the Code.

Sections 6050S(a)(1) and 6050S(d) generally require eligible educational institutions to file information returns with the IRS and to furnish written statements to individuals relating to qualified tuition and related expenses paid by, or on behalf of, students. Section 6050S(b)(2) specifies the contents of the information return and, effective for expenses paid after December 31, 2015, requires eligible educational institutions to report the aggregate amount of payments received for qualified tuition and related expenses during the calendar year from, or on behalf of, a student. Previously, section 6050S(b)(2) allowed eligible educational institutions to report either the aggregate amount of payments received for qualified tuition and related expenses or the aggregate amount billed for such tuition and expenses. Section 1.6050S–1(b)(5) provides that information returns required under section 6050S

must be filed by February 28 (or March 31 if filed electronically) of the year following the calendar year to which such returns relate. Section 6050S(d) provides that written statements required under that section must be furnished to recipients by January 31 of the year following the calendar year for which such statements are furnished.

Section 212 of PATH amended section 6050S(b)(2) and eliminated the option for eligible educational institutions to report aggregate qualified tuition and related expenses billed for the calendar year. This amendment is effective for qualified tuition and related expenses paid after December 31, 2015, for education furnished in academic periods beginning after such date.

Section 6721 imposes a penalty for failure to file correct or timely information returns with the IRS. Section 6722 imposes a penalty for failure to furnish a correct or timely written statement to the recipient. These penalties do not apply if it is shown under section 6724 that the failure is due to reasonable cause and not due to willful neglect.

Form 1098–T is the information return for purposes of satisfying the reporting obligations described in sections 6050S(a)(1) and 6050S(d). Prior to enactment of section 212 of PATH, eligible educational institutions reported qualified tuition and related expenses on Form 1098–T either as payments received for the calendar year in Box 1 of the form or as amounts billed during a calendar year in Box 2 of the form.

Following the enactment of PATH, numerous eligible educational institutions informed the IRS that implementation of the law change will require computer software reprogramming and other changes that cannot be implemented in time to meet the applicable filing and furnishing due dates for Form 1098–T for calendar year 2016.

In light of this, the IRS will not impose penalties under section 6721 or 6722 with respect to 2016 Forms 1098–T solely because the eligible educational institution reports the aggregate amount billed for qualified tuition and related expenses for the 2016 calendar year. Thus, eligible educational institutions will continue to have the option of reporting either the amount of payments of qualified tuition and related expenses received or the amount of quali

fied tuition and related expenses billed for the 2016 calendar year without being subject to penalties. Institutions should refer to the instructions for the 2016 Form 1098–T for further guidance for reporting of these amounts. This penalty relief does not apply to any other failure subject to a penalty under section 6721 or 6722.

The principal author of this announcement is Gerald Semasek of the Office of Associate Chief Counsel (Procedure & Administration). For further information regarding this announcement, contact Gerald Semasek at (202) 317-6845 (not a toll-free number).

Partial Withdrawal of Notice of Proposed Rulemaking

Partial Withdrawal of Proposed Application of Section 367 to a Section 351 Exchange Resulting From a Transaction Described in Section 304(a)(1); Partial Withdrawal of Proposed Guidance for Determining Stock Ownership

REG–135734–14

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Partial withdrawal of notice of proposed rulemaking.

SUMMARY: This document withdraws portions of a notice of proposed rulemaking published in the Federal Register on February 11, 2009. The withdrawn portions relate to the application of section 367(b) to transactions described in section 304(a)(1). This document also withdraws portions of a notice of proposed rulemaking published in the Federal Register on January 17, 2014. The withdrawn portions relate to the identification of certain stock of a foreign corporation that is disregarded in calculating ownership of the

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foreign corporation for purposes of determining whether it is a surrogate foreign corporation for purposes of section 7874.

DATES: As of April 8, 2016, portions of proposed rules (REG–147636–08 and REG–121534–12) published in the Fed- eral Register on February 11, 2009 (74 FR 6840) and January 17, 2014 (79 FR 3145) are withdrawn.

FOR FURTHER INFORMATION CONTACT: Shane M. McCarrick or David A. Levine, (202) 317-6937.

SUPPLEMENTARY INFORMATION:

Background

On February 11, 2009, the Department of Treasury (Treasury Department) and the IRS published in the Federal Register proposed regulations (REG–147636–08, 74 FR 6840), including § 1.367(b)–4(e), (f), and (g), which provide guidance on the application of section 367(b) to transactions described in section 304(a)(1). The regulations were proposed by crossreference to temporary regulations in § 1.367(b)–4T in the same issue of the Bulletin (T.D. 9444, 74 FR 6824). This document withdraws these proposed regulations because the rules in the proposed regulations do not reflect current law. See Notice 2012–15, 2012–9 I.R.B. 424 (revising the approach under the proposed regulations regarding the interaction of sections 367 and 304 and providing that section 367(a) and (b) apply fully to cer

tain transctions described in section 304(a)(1)). In this issue of the Bulletin, the Treasury Department and the IRS are issuing additional temporary regulations in § 1.367(b)–4T(e), (f), and (g), as well as (h), that, in the case of certain exchanges, generally require an inclusion of amounts in income as a deemed dividend or recognition of realized gain that is not otherwise recognized, or both. Accordingly, the Treasury Department and the IRS issued a notice of proposed rulemaking in the 2016–18 issue of the Bulletin that proposes new rules in § 1.367(b)–4T by cross-reference to the temporary regulations.

On January 17, 2014, the Treasury Department and the IRS published in the Federal Register proposed regulations (REG–121534–12, 79 FR 3145), including in § 1.7874–4, that provide that certain stock of a foreign corporation is disregarded in calculating ownership of the foreign corporation for purposes of determining whether it is a surrogate foreign corporation for purposes of section 7874. The regulations were proposed by crossreference to temporary regulations in § 1.7874–4T in the same issue of the Bulletin (T.D. 9654, 79 FR 3094). In this issue of the Bulletin, the Treasury Department and the IRS are amending certain of the temporary regulations in § 1.7874– 4T. Accordingly, the Treasury Department and the IRS issued a notice of proposed rulemaking in the 2016–18 issue of the Bulletin that proposes rules in

§ 1.7874–4 by cross-reference to the amended temporary regulations. This document withdraws the previously proposed regulations that are replaced by the notice of proposed rulemaking in the 2016–18 issue of the Bulletin .

Partial Withdrawal of a Notice of Proposed Rulemaking

Accordingly, under the authority of 26 U.S.C. 7805, § 1.367(b)–4(e), (f), and (g) of the notice of proposed rulemaking (REG–147636–08) published in the Fed- eral Register on February 11, 2009 (74 FR 6840) are withdrawn. Also, under the authority of 26 U.S.C. 7805, § 1.7874– 4(c)(1)(i), (c)(1)(ii)(B), (c)(2), (d)(1)(i), (d)(1)(ii), (h), (i)(6), (i)(7)(iii)(C), (i)(7)(iv), (j)(7), (j)(8), and (k)(1), as well as paragraph (ii) of

Example 1, paragraph (ii) of Example 2, and Example 3 through Example 8 of § 1.7874–4(j), of the notice of proposed rulemaking (REG–121534–12) published in the Federal Register on January 17, 2014 (79 FR 3145) are withdrawn.

John Dalrymple, Deputy Commissioner for Services and Enforcement.

(Filed by the Office of the Federal Register on April 4, 2016, 5:00 p.m., and published in the issue of the Federal Register for April 8, 2016, 81 F.R. 20587)

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