Part IV — Internal Revenue Bulletin 2026-3

Notice of Proposed Rulemaking

Income of Foreign Governments and of International Organizations

REG-101952-24

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains proposed regulations relating to the taxation of the income of foreign governments from investments in the United States. In particular, these proposed regulations provide guidance for determining when an acquisition of debt by a foreign government is considered to be commercial activity, and when a foreign government has effective control of an entity engaged in commercial activities. These proposed regulations will affect foreign governments that derive income from sources within the United States.

DATES: Written or electronic comments and requests for a public hearing must be received by February 13, 2026.

ADDRESSES: Commenters are strongly encouraged to submit public comments electronically via the Federal eRulemaking Portal at https:// www. regulations.gov (indicate IRS and REG-101952-24) by following the online instructions for submitting comments. Requests for a public hearing must be submitted as prescribed in the “Comments and Requests for a Public Hearing” section. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The Department of the Treasury (Treasury Department) and the IRS will publish for public availability any comments submitted to the IRS’s public docket. Send paper submissions to: CC:PA:01:PR (REG101952-24), Room 5503, Internal Reve

nue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

FOR FURTHER INFORMATION CONTACT : Concerning the proposed regulations, Jack Zhou at (202) 317-6938; concerning submissions of comments, requests for a public hearing, and access to a public hearing, Publication and Regulations Section at (202) 317-6901 (not toll-free numbers) or by email to publi- chearings@irs.gov (preferred).

SUPPLEMENTARY INFORMATION:

Authority

This document contains proposed amendments to the Income Tax Regulations (26 CFR part 1) under section 892 of the Internal Revenue Code (Code). These regulations are issued under the express delegations of authority under sections 892(c) and 7805(a) of the Code.

Background

I. Overview

This document contains proposed amendments to the Income Tax Regulations (26 CFR part 1) under section 892 of the Code relating to income of foreign governments (proposed regulations). Any terms used but not defined in this preamble have the meanings given to them in the proposed regulations.

Section 892(a)(1) provides that income of foreign governments received from investments in the United States in stocks, bonds, or other domestic securities owned by the foreign governments, or financial instruments held in the execution of governmental financial or monetary policy, or interest on deposits in banks in the United States of moneys belonging to the foreign governments, is not included in gross income and is exempt from taxation under subtitle A of the Code. Section 892(a)(2) (A) provides that section 892(a)(1) does not apply to any income that is (1) derived from the conduct of any commercial activity (whether within or outside the United States), (2) received by a controlled com

mercial entity (CCE) or received (directly or indirectly) from a CCE, or (3) derived from the disposition of any interest in a CCE.

Section 892(a)(2)(B) provides that, for purposes of section 892(a)(2)(A), a CCE means any entity engaged in commercial activities (whether within or outside the United States) if the foreign government holds (directly or indirectly) any interest in the entity which (by value or voting interest) is 50 percent or more of the total of the interests in the entity, or holds (directly or indirectly) any other interest in the entity which provides the foreign government with effective control of the entity. Section 892(c) authorizes the Secretary to prescribe such regulations as may be necessary or appropriate to carry out the purposes of section 892.

II. Regulations Addressing the Application of Section 892

On June 27, 1988, the Treasury Department and the IRS published in the Federal Register a notice of proposed rulemaking (53 FR 24100) (1988 proposed regulations) with a cross-reference to temporary regulations under section 892 (TD 8211, 53 FR 24060) (1988 temporary regulations) to provide guidance under section 892. On August 1, 2002, the Treasury Department and the IRS published § 1.892-5(a)(3) in the Federal Register (TD 9012, 67 FR 49864) to provide that the term “entity” for purposes of section 892(a)(2)(B) (defining “controlled commercial entity”) includes partnerships (2002 final regulations).

On November 3, 2011, the Treasury Department and the IRS published in the Federal Register a notice of proposed rulemaking (76 FR 68119) that would provide additional guidance for determining when a foreign government is engaged in commercial activities (2011 proposed regulations). On December 29, 2022, the Treasury Department and the IRS published in the Federal Register a notice of proposed rulemaking (87 FR 80097) that would make changes to § 1.892-5T(b)(1) to provide exceptions to the general rule

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that a United States real property holding corporation (USRPHC), as defined in section 897(c)(2), which may include a foreign corporation, is treated as engaged in commercial activity and, therefore, is a CCE if the requirements of § 1.892-5T(a) (1) or (2) are satisfied (2022 proposed regulations).

The rules in the 2011 proposed regulations and the 2022 proposed regulations are finalized, with modifications, in the Final Rules section of this issue of the Federal Register (2025 final regulations). The 2025 final regulations also finalized proposed § 1.892-3(a)(4) (definition of financial instrument) of the 1988 proposed regulations.

Explanation of Provisions

I. Definition of Controlled Entity

Section 892 does not define the term “foreign government.” The 1988 temporary regulations define a foreign government to consist only of integral parts and controlled entities of a foreign sovereign. Section 1.892-2T(a)(3) defines “controlled entity” to mean an entity that is separate in form from a foreign sovereign or otherwise constitutes a separate juridical entity if it satisfies certain requirements, including that it is wholly owned and controlled by a single foreign sovereign directly or indirectly through one or more controlled entities. The flush language of § 1.8922T(a)(3) states “[a] controlled entity does not include partnerships or any other entity owned and controlled by more than one foreign sovereign.”

The Treasury Department and the IRS are aware that the flush language of § 1.892-2T(a)(3) may be interpreted by taxpayers as referring only to partnerships owned by more than one foreign sovereign. The Treasury Department and the IRS are of the view, however, the better reading of this flush language is that partnerships, including ones wholly owned and controlled by a single foreign sovereign (including indirectly through con

trolled entities), are not included in the term “controlled entity” for purposes of § 1.892-2T(a)(3). The concept of a controlled entity was developed to address the question of whether an entity separate from a foreign sovereign and otherwise subject to Federal income tax could be exempt from such tax under section 892. ¹ Since an entity treated as a partnership for Federal tax purposes generally is not subject to such tax, without regard to the exemption under section 892, the question addressed by the concept of a controlled entity does not arise in the case of a partnership. ² Therefore, the proposed regulations would clarify that a partnership for Federal tax purposes is not a controlled entity within the meaning of § 1.8922T(a)(3). The proposed regulations would remove the flush language following § 1.892-2T(a)(3) and replace it with proposed § 1.892-2(a)(4), which would provide that a controlled entity, within the meaning of § 1.892-2T(a)(3), does not include any partnership for Federal tax purposes. The proposed regulations also would revise the concluding sentence of the flush language following § 1.8922T(a)(3) to clarify that the rule is not confined to “foreign financial organizations” and to make other drafting changes.

II. Acquisition of Debt

A. In general

Proposed § 1.892-4(e)(1)(i) of the 2011 proposed regulations would provide in part, under the heading titled “investments,” that subject to the provisions of proposed § 1.892-4(e)(1)(ii) and (iii) (rules on trading activities and investments made by a banking, financing, or similar business), loans and investments in stocks, bonds, and other securities are not commercial activities. Proposed § 1.892-4(e)(1)(iii) would provide that investments (including loans) made by a banking, financing, or similar business constitute commercial activities, even if the income derived from those invest

ments is not considered to be income effectively connected to the active conduct of a banking, financing, or similar business in the United States by reason of the application of § 1.864-4(c)(5). A comment to the 2011 proposed regulations stated that there is uncertainty as to the circumstances in which loan origination is commercial activity. The Treasury Department and the IRS acknowledged the comment when finalizing proposed § 1.892-4(e)(1) (i) and (ii) in the 2025 final regulations and stated that the issue will be addressed by these proposed regulations.

The Treasury Department and the IRS are of the view that whether the activity of lending or otherwise acquiring debt, including at original issuance, qualifies as investment rather than commercial activity under section 892 is highly fact-dependent, so that a consideration of all facts and circumstances is needed to determine the appropriate characterization. Accordingly, the Treasury Department and the IRS are proposing these regulations to provide a framework for determining when acquiring any debt, including at original issuance, qualifies as investment for purposes of section 892.

The proposed regulations would provide as a general rule that all acquisition of debt is treated as commercial activity unless the acquisition is characterized as investment for purposes of section 892 under either of two safe harbors or under a facts-and-circumstances test. See proposed § 1.892-4(c)(1)(ii)(A). The term “debt” means an obligation treated as debt for Federal tax purposes, regardless of its legal form. Accordingly, proposed § 1.892-4(c)(1)(ii) would also apply to a financial instrument, within the meaning of § 1.892-3(a)(4), that is treated as debt. An acquisition of debt undertaken as a dealer, as defined in § 1.864-2(c)(2)(iv) (a), would be treated in any event as commercial activity.

The proposed regulations’ framework would constitute the exclusive set of rules for determining whether acquiring debt, including at original issuance, is treated

1 See Rev. Rul. 75-298, 1975-2 C.B. 290 (providing criteria to determine whether an organization will be considered part of a foreign government for purposes of qualifying for exemption from Federal income tax pursuant to section 892), obsoleted by Rev. Rul. 2003-99, 2003-2 C.B. 388, and revoking Rev. Rul. 66-73, 1966-1 C.B. 174 (examining whether an organization constitutes a corporation for purposes of section 892).

2 See section 701, which was enacted in 1954 and states that “[a] partnership as such shall not be subject to the income tax imposed by this chapter.” Section 701 refers to “this chapter” (chapter 1) while section 892(a)(1) states that certain income of foreign governments is exempt “under this subtitle.” However, the taxes for which section 892 provides an exemption (section 892(a)(1)) are described in chapter 1 of the subtitle.

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as investment and thus not as commercial activity for purposes of section 892. Whether debt acquisition is investment for purposes of section 892 would be, unless otherwise provided, determined without regard to whether the debt acquisition is treated as a trade or business for Federal tax purposes. Thus, no inference is intended from the proposed regulations as to the circumstances in which acquiring debt, including at original issuance, would or would not be a trade or business for other purposes of the Code, including section 864, section 162, or section 166 of the Code.

B. Debt acquisition safe harbors

Proposed § 1.892-4(c)(1)(ii)(B) would provide two safe harbors that treat debt acquired in a registered offering or in a qualified secondary market acquisition as investment for purposes of § 1.892-4(c) (1)(i) and, thus, not subject to the general rule of proposed § 1.892-4(c)(1)(ii)(A).

The first safe harbor would treat acquisitions of bonds or other debt securities acquired in an offering registered under the Securities Act of 1933, as amended (Securities Act), as investment provided that the underwriters of the offering are not related to the acquirer within the meaning of sections 267(b) and 707(b). Although the first safe harbor would except only offerings of debt securities registered under the Securities Act, the Treasury Department and the IRS recognize that the securities laws of some foreign countries may provide a regulatory framework for debt offerings sufficiently similar to the Securities Act such that this exception may appropriately apply in those circumstances. Comments are requested regarding the circumstances, if any, in which the safe harbor should be extended to offerings registered under foreign securities laws in addition to the Securities Act.

The second safe harbor would treat a qualified secondary market acquisition of debt as investment for purposes of § 1.8924(c)(1)(i). This generally would include acquisitions of debt traded on an established securities market provided that the acquirer is not purchasing from the issuer or participating in negotiation of the terms or issuance of the debt. A qualified secondary market acquisition must not be from a

person that is under common management or control with the acquirer, unless that person acquired the debt as investment within the meaning of § 1.892-4(c)(1)(i). Comments are requested on this safe harbor, including the circumstances, if any, in which it should apply to an acquisition of debt that is not traded on an established securities market.

C. Qualification as investment based on all facts and circumstances

Proposed § 1.892-4(c)(1)(ii)(C) would provide that debt acquisitions that do not satisfy the safe harbors of proposed § 1.892-4(c)(1)(ii)(B) may be an investment based on consideration of all relevant facts and circumstances. In general, facts and circumstances would be relevant to the extent they indicate that the entity’s expected return from acquiring the debt is exclusively a return on its capital rather than including a return on activities it conducts. The proposed regulations provide a non-exclusive list of relevant factors, in proposed § 1.892-4(c)(1)(ii)(C) (1) through (8), that would apply in determining whether a debt acquisition is investment for purposes of § 1.892-4(c)(1)(i). Under this proposed analysis, all factors would be taken into account and, depending on the particular case, the weight given to each relevant factor (including factors not listed in the proposed regulations) may vary.

Comments are requested on whether proposed § 1.892-4(c)(1)(ii)(C) should include additional factors or examples of transactions undertaken by foreign government investors. In particular, comments are requested on the circumstances, if any, in which acquisitions of distressed debt, broadly syndicated loans, revolving credit facilities, and delayed-draw debt obligations should be treated as investment rather than commercial activities for purposes of section 892.

D. Other changes

The proposed regulations would retain the exception for investments in “other securities” (which follows the reference to stocks and bonds) and retain the definition of “other securities” as “any note or other evidence of indebtedness” which includes

loans. See proposed §§ 1.892-4(c)(1)(i) and 1.892-3T(a)(3). Accordingly, the proposed regulations would remove “loans” from the list of investments in § 1.8924(c)(1)(i) of the 2025 final regulations that are not treated as commercial activities.

Additionally, the proposed regulations would withdraw the rule on banking, financing, or similar businesses in § 1.892-4T(c)(1)(iii). This is a conforming change given that the proposed regulations’ framework would constitute the exclusive set of rules for determining whether acquiring debt, including at original issuance, is treated as investment and thus not as commercial activity for purposes of section 892.

The proposed regulations also would remove the phrase “or from an investment in net leases on real property” from the parentheses that follow “the holding of real property which is not producing income” in § 1.892-4(c)(1)(i). The clause that would be removed is duplicative of “the holding of net leases on real property,” which is another activity identified in § 1.892-4(c)(1)(i) that is not a commercial activity. Thus, no substantive change to § 1.892-4(c)(1)(i) is intended by this removal. An additional non-substantive change is made in proposed § 1.892-4(c) (1)(i) that would add “the transfer of securities under a loan agreement which meets the requirements of section 1058” to the list of activities that are not commercial activities, rather than setting off that activity in its own sentence.

III. Defining Effective Control

Section 892(a)(2)(B) defines a CCE as any entity engaged in commercial activities (whether within or outside the United States) if the government (i) holds (directly or indirectly) any interest in such entity which (by value or voting interest) is 50 percent or more of the total of such interests in such entity, or (ii) holds (directly or indirectly) any other interest in the entity which provides the foreign government with effective control of the entity.

The 1988 temporary regulations provide that an entity that is engaged in commercial activities is a CCE if the foreign government has “effective practical control” of the entity. See § 1.892-5T(a)(2).

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The 1988 temporary regulations explain that effective practical control may be achieved through a minority interest which is sufficiently large to achieve effective control, or through creditor, contractual, or regulatory relationships which, together with ownership interests held by the foreign government, achieve effective control. For example, an entity engaged in commercial activities may be treated as a CCE if a foreign government, in addition to holding a minority interest (by value or voting power), is also a substantial creditor of the entity or controls a strategic natural resource which the entity uses in the conduct of its trade or business, providing the foreign government effective practical control over the entity. See § 1.892-5T(c) (2). Thus, under the 1988 temporary regulations, the term “other interest” in section 892(a)(2)(B)(ii) includes business relationships, and an interest in the entity for purposes of an analysis of effective control may exist when the foreign government has the ability to exert influence over the entity. A comment to the 2011 proposed regulations suggested that the regulations should be expanded to provide a more thorough definition of effective practical control with more specific examples. The Treasury Department and the IRS acknowledged the comment in the 2025 final regulations and stated that the issue will be addressed by these proposed regulations.

The proposed regulations would revise § 1.892-5T(c)(2) to provide further guidance on what constitutes effective control under section 892(a)(2)(B)(ii). The Treasury Department and the IRS are of the view that it is necessary and appropriate to define the terms “other interest” and “effective control” broadly to include circumstances in which a foreign government would have control over either the operational, managerial, board-level, or investor-level decisions of an entity. The proposed regulations would provide that, generally, effective control is achieved by any interest in the entity that, either separately or in combination, results in control over the operational, managerial, boardlevel, or investor-level decisions of the entity. All of the facts and circumstances related to the interests would be considered in determining effective control. Interests may include equity interests, voting power in the entity, debt interests,

contractual rights in or arrangements with the entity or with holders of equity or other interests in the entity, certain business relationships with the entity or with other interest holders in the entity, regulatory authority over the entity, or any other arrangement or relationship that provides influence over the entity’s operational, managerial, board-level, or investor-level decisions. (Although the 1988 temporary regulations provide guidance under section 892(a)(2)(B) using the term “effective practical control,” the proposed regulations use the term “effective control” to be consistent with section 892(a)(2)(B)(ii) and the 2025 final regulations.)

For example, a foreign government would have effective control of an entity in a case in which it owns a minority equity interest in the entity that entitles that foreign government to appoint only one out of several directors of the entity, if that one director has the sole power to unilaterally appoint or dismiss the entity’s manager. See proposed § 1.892-5(c)(2)(iii)(E) ( Example 4 ). In contrast, a foreign government that holds only a minority interest by value and voting power in an entity, and no other interest, would not have effective control of the entity if the foreign government lacks the power (directly or indirectly through other arrangements) to unilaterally elect the entity’s board, choose its management, or otherwise direct the entity’s operational, managerial, board-level, or investor-level decisions. See proposed § 1.892-5(c)(2)(iii)(B) ( Example 1 ).

A foreign government would be deemed to have effective control of an entity if the foreign government is, or under § 1.892-5(a)(1) controls an entity that is, a managing partner or managing member of such entity, or holds or controls an entity that holds an equivalent role with respect to such entity under local law applicable to the entity. The Treasury Department and the IRS are of the view that these roles inherently carry control over an entity so that the facts-and-circumstances test is unnecessary to determine whether a foreign government has effective control of the entity. On the other hand, the mere right to be consulted with respect to operational, managerial, boardlevel, or investor-level decisions of an entity will not alone give rise to effective control.

Additionally, a foreign government would not need to hold any particular amount of (or any) equity in an entity to have effective control of the entity. For example, if a foreign government is a creditor of an entity with sufficient creditor rights to give it effective control, then that entity would be a CCE of the foreign government, and any interest payments (or other payments) made by the debtor entity to the foreign government would not qualify for the exemption under section 892. See proposed § 1.892-5(c)(2)(iii) (I) ( Example 8 ) (finding effective control when creditor’s rights generally included veto rights over the debtor’s capital transactions and operating budget).

With respect to related foreign government entities, the proposed regulations would provide that the principles of § 1.892-5T(c)(1)(i) (attributing an interest owned directly or indirectly by an integral part or controlled entity to the foreign sovereign) apply for purposes of an effective control analysis. For example, if two controlled entities (within the meaning of § 1.892-2T(a)(3)) of the same foreign sovereign have direct or indirect equity or non-equity interests in a corporation, all of those interests would be considered together for purposes of the effective control analysis with respect to either controlled entity. Comments are requested as to the circumstances, if any, in which a determination could be made that controlled entities (within the meaning of § 1.892-2T(a)(3)) are functionally independent of one another and therefore may be appropriately considered separately for purposes of an effective control analysis.

Comments are also requested as to the circumstances, if any, in which the holder of a minority equity interest in an entity should not be treated as having effective control (or as having at least 50 percent of voting power) of the entity if managerial or board-level decisions of the entity are subject to veto or “blocking” rights of the holder and other holders (for example, through consent rights, supermajority requirements, or otherwise).

Applicability Dates

These regulations are proposed to apply to taxable years beginning on or after the date of publication of the Trea

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sury decision adopting these rules as final regulations in the Federal Register (the finalization date). A foreign government within the meaning of §§ 1.892-2 and 1.892-2T may choose to apply § 1.8922(a)(4), once finalized, to a taxable year of its directly or indirectly wholly-owned entities beginning before the finalization date if the period of limitations on assessment of the taxable year is open under section 6501, and provided that the foreign government consistently applies the rule in its entirety to the taxable year and all succeeding taxable years of its directly or indirectly wholly-owned entities beginning before the finalization date.

Special Analyses

I. Regulatory Planning and Review – Economic Analysis

These proposed regulations are not subject to review under section 6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement (July 4, 2025) between the Treasury Department and the Office of Management and Budget (OMB) regarding review of tax regulations.

II. Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520) generally requires that a Federal agency obtain the approval of the OMB before collecting information from the public, whether such collection of information is mandatory, voluntary, or required to obtain or retain a benefit. There are no additional information collection requirements associated with these proposed regulations.

III. Regulatory Flexibility Act

Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that this rulemaking will not have a significant economic impact on a substantial number of small entities within the meaning of section 601(6) of the Regulatory Flexibility Act. This certification is based on the fact that the proposed regulations affect foreign governments, including their controlled entities, with income from sources within the United States.

Accordingly, the entities affected by the proposed regulations are not considered small entities, and a regulatory flexibility analysis under the Regulatory Flexibility Act is not required.

IV. Section 7805(f)

Pursuant to section 7805(f) of the Code, these proposed regulations will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.

V. Unfunded Mandates Reform Act

Section 202 of the Unfunded Mandates Reform Act of 1995 requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a State, local, or Tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. The proposed regulations do not include any Federal mandate that may result in expenditures by State, local, or Tribal governments, or by the private sector in excess of that threshold.

VI. Executive Order 13132: Federalism

Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on State and local governments, and is not required by statute, or preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive order. The proposed regulations do not have federalism implications and do not impose substantial direct compliance costs on State and local governments or preempt State law within the meaning of the Executive order.

Comments and Requests for Public Hearing

Before the proposed regulations are adopted as final regulations, consideration will be given to any comments that are

submitted timely to the IRS as prescribed in this preamble under the ADDRESSES heading. The Treasury Department and the IRS request comments on all aspects of the proposed regulations. Any comments submitted will be made available at https://www.regulations.gov or upon request.

A public hearing will be scheduled if requested in writing by any person who timely submits electronic or written comments. Requests for a public hearing are also encouraged to be made electronically. If a public hearing is scheduled, notice of the date and time for the public hearing will be published in the Federal Register .

Drafting Information

The principal authors of the proposed regulations are Jack Zhou of the Office of Associate Chief Counsel (International), and Joel Deuth, formerly of the Office of Associate Chief Counsel (International). However, other personnel from the Treasury Department and the IRS participated in their development.

Statement of Availability of IRS Documents

IRS guidance cited in this preamble is published in the Internal Revenue Bulletin and is available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS website at https://www. irs.gov .

List of Subjects in 26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

Accordingly, the Treasury Department and the IRS propose to amend 26 CFR part 1 as follows:

PART 1—INCOME TAXES

Paragraph 1 . The authority citation for part 1 is amended by adding an entry for § 1.892-2 in numerical order to read in part as follows:

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Authority: 26 U.S.C. 7805 * * *

Section 1.892-2 also issued under 26 U.S.C. 892(c).

Par. 2 . Section 1.892-2 is added to read as follows:

§ 1.892-2 Foreign government defined.

(a) Foreign government —(1) Defini- tion . For further guidance, see § 1.8922T(a)(1). (2) Integral part . For further guidance, see § 1.892-2T(a)(2).

(3) Controlled entity. For further guidance, see § 1.892-2T(a)(3).

(4) Exceptions. A controlled entity, within the meaning of paragraph (a)(3) of this section, does not include any partnership for Federal tax purposes. A controlled entity also does not include any entity owned and controlled by more than one foreign sovereign. Thus, a foreign entity organized and wholly owned and controlled by multiple foreign sovereigns to invest jointly, or to foster economic, financial, and/or technical cooperation, is not a controlled entity for purposes of paragraph (a)(3) of this section.

(b) Inurement to the benefit of pri- vate persons . For further guidance, see § 1.892-2T(b).

(1) through (2) [Reserved] (c) Pension trusts —(1) In general . For further guidance, see § 1.892-2T(c)(1) introductory text through (c)(1)(iv).

(i) through (v) [Reserved] (2) Illustrations . For further guidance, see § 1.892-2T(c)(2).

(d) Political subdivision and transna- tional entity . For further guidance, see § 1.892-2T(d).

(e) A pplicability date . Paragraph (a) (4) of this section applies to taxable years beginning on or after [DATE OF PUBLICATION OF FINAL RULE]. However, a foreign government within the meaning of §§ 1.892-2 and 1.892-2T may choose to apply paragraph (a)(4) of this section to a taxable year of its directly or indirectly wholly-owned entities beginning before [DATE OF PUBLICATION OF FINAL RULE] if the period of limitations on assessment of the taxable year is open under section 6501, and provided that the foreign government consistently applies

the rule in its entirety to the taxable year and all succeeding taxable years of its directly or indirectly wholly-owned entities beginning before [DATE OF PUBLICATION OF FINAL RULE].

Par. 3. Section 1.892-2T is amended by:

a. Removing the undesignated text under paragraph (a)(3)(iv); and

b. Adding paragraph (a)(4). The addition reads as follows:

§ 1.892-2T Foreign government defined (temporary regulations).

(a) * * * (4) Exceptions . For further guidance, see § 1.892-2(a)(4).

Par. 4. Section 1.892-4, as amended in a final rule published elsewhere in this issue of the Federal Register, effective December 15, 2025, is amended by:

a. Revising paragraphs (c)(1)(i) through (iii); and

b. Adding a sentence after the first sentence of paragraph (d).

The revisions and addition read as follows:

§ 1.892-4 Commercial activities.

(c) * * * (1) * * * (i) In general . Subject to the provisions of this paragraph (c)(1)(i) and paragraphs (c)(1)(ii) through (c)(7) of this section, the following are not commercial activities: investments in stocks, bonds, and other securities (as defined in § 1.892-3T(a)(3)); investments in financial instruments (as defined in § 1.8923(a)(4)); the holding of partnership equity interests; the holding of net leases on real property; the holding of real property which is not producing income (other than on its sale); the holding of deposits in any currency in banks; and the transfer of securities under a loan agreement which meets the requirements of section 1058. An activity will not cease to be an investment solely because of the volume of transactions of that activity or because of other unrelated activities.

(ii) Acquisition of debt —(A) In gen- eral . An acquisition of debt is considered a

commercial activity for purposes of paragraph (b) of this section notwithstanding any other provision of this section, unless the acquisition qualifies as investment under the rules of paragraph (c)(1)(ii)(B) or (C) of this section. For purposes of this paragraph (c)(1)(ii), the term debt means an obligation treated as debt for Federal tax purposes. For purposes of applying paragraphs (c)(1)(ii)(B) and (C) of this section, actions by an agent or a person otherwise acting on behalf of the acquirer are treated as the actions of the acquirer. An acquisition of debt undertaken as a dealer, as defined in § 1.864-2(c)(2)(iv) (a), constitutes commercial activity without regard to paragraphs (c)(1)(ii)(B) and (C) of this section.

(B) Safe harbors . An acquisition of debt that satisfies paragraph (c)(1)(ii) (B)( 1 ) or ( 2 ) of this section is treated as investment and not commercial activity for purposes of paragraph (c)(1)(i) of this section.

( 1 ) Registered offerings . An acquisition of bonds or other debt securities in an offering registered under the Securities Act of 1933, as amended (15 U.S.C. 77a, et seq .), ( the Securities Act), provided that the underwriters of the offering are not related to the acquirer within the meaning of sections 267(b) and 707(b).

( 2 ) Qualified secondary market acqui- sitions . An acquisition of debt traded on an established securities market, within the meaning of § 1.7704-1(b), provided that—

( i ) The acquirer does not acquire the debt from the debt issuer or participate in the negotiation of the terms or issuance of the debt; and

( ii ) The acquisition is not from a person that is under common management or control with the acquirer, unless that person acquired the debt as investment within the meaning of paragraph (c)(1)(i) of this section.

(C) Investments in debt . An acquisition of debt that does not satisfy either paragraph (c)(1)(ii)(B)( 1 ) or ( 2 ) of this section may be an investment for purposes of paragraph (c)(1)(i) of this section based on all relevant facts and circumstances, including the following:

( 1 ) Whether the acquirer solicited prospective borrowers, or otherwise held itself out as willing to make loans or oth

January 12, 2026 350 Bulletin No. 2026–3

erwise acquire debt at or in connection with its original issuance;

( 2 ) Whether the acquirer materially participated in negotiating or structuring the terms of the debt;

( 3 ) Whether the acquirer is entitled to compensation (whether or not labelled as a fee) that is not treated as interest (including original issue discount) for Federal tax purposes;

( 4 ) The form of the debt and the issuance process, including, for example, whether the debt is a bank loan or instead a privately placed debt security pursuant to Regulation S or Rule 144A under the Securities Act;

( 5 ) The percentage of the debt issuance acquired by the acquirer relative to the percentages acquired by other purchasers;

( 6 ) The percentage of equity in the debt issuer held or to be held by the acquirer;

( 7 ) The value of that equity relative to the amount of the debt acquired; and

( 8 ) If debt is deemed to be acquired in a debt-for-debt exchange as a result of a significant modification under § 1.1001-3, whether there was, at the time of acquisition of the original unmodified debt, a reasonable expectation, based on objective evidence, such as a decline in the financial condition or credit rating of the debt issuer between original issuance and the time of the acquisition of the original unmodified debt, that the original unmodified debt would default.

(D) Examples— ( 1 ) Assumed facts. The rules of this paragraph (c)(1)(ii) are illustrated by the examples in this paragraph (c)(1)(ii)(D). Except as otherwise stated, the following facts are assumed for purposes of paragraphs (c)(1)(ii)(D)( 2 ) through ( 6 ) of this section ( Examples 1 through 5 ):

( i ) FC is a foreign entity organized under the laws of country X and is treated as a corporation for Federal tax purposes; FC is a controlled entity of the government of country X under § 1.892-2T(a)(3);

( ii ) FC has neither engaged in, nor has been attributed, any conduct of commercial activities for purposes of section 892;

( iii ) FC has not previously acquired any debt; and

( iv ) FC is not a dealer as defined in § 1.864-2(c)(2)(iv) (a) .

( 2 ) Example 1 : Isolated debt financing as com- mercial activity —( i ) Facts . In year 1, representatives of FC offered, on behalf of FC, to provide debt financing to a foreign corporation. FC’s representatives structured and negotiated the terms of that debt financing, and FC made a loan to the foreign corpo

ration pursuant to those terms in year 1. FC does not own any equity in that corporation. The debt was not issued in a registered offering. All of the activities occurred outside the United States in year 1.

( ii ) Analysis . FC’s debt acquisition activity is commercial activity under this paragraph (c)(1)(ii), unless the acquisition qualifies as investment under paragraph (c)(1)(ii)(B) or (C) of this section. The debt acquisition does not qualify as investment under either of the safe harbors in paragraph (c)(1)(ii)(B) of this section because the debt was not issued in an offering registered under the Securities Act, and because FC materially participated in negotiating the terms of the debt through its representatives and acquired the debt at original issuance from the issuer. This debt acquisition also does not qualify as investment under paragraph (c)(1)(ii)(C) of this section because, through its representatives, FC held itself out as a lender and solicited, structured, negotiated, and funded the debt at original issuance, and because FC acquired the debt in the form of a loan and did not own any equity in the debt issuer. Although FC made only one loan in year 1, the number of loans does not change the determination that the acquisition is commercial activity under this paragraph (c)(1)(ii), regardless of whether FC is treated as engaged in a trade or business for purposes of section 162, section 166, or section 864(b). ( 3 ) Example 2: Debt financing as investment when combined with certain equity investments— ( i ) Facts. In year 1, FC owned 80 percent of a foreign corporation’s equity interests, which had a total value of $100 million. During year 1, FC lent $50 million to the foreign corporation to finance the foreign corporation’s activities. FC’s management structured the terms of the debt in the form of a loan between FC and the foreign corporation. FC acquired the debt at original issuance without a registered offering. All of the activities occurred outside the United States in year 1.

( ii ) Analysis . FC’s debt acquisition activity is a commercial activity under this paragraph (c)(1) (ii), unless the acquisition qualifies as investment under paragraph (c)(1)(ii)(B) or (C) of this section. The debt acquisition does not qualify as investment under either of the safe harbors in paragraph (c)(1) (ii)(B) of this section because the debt was not issued in an offering registered under the Securities Act and because FC acquired the debt at original issuance from the issuer. Nonetheless, taking into account all relevant facts and circumstances, including those under paragraph (c)(1)(ii)(C) of this section, FC’s acquisition of the foreign corporation’s debt is investment for purposes of paragraph (c)(1)(i) of this section. FC did not hold itself out as a lender or solicit borrowers. Even though FC structured the terms of the debt and acquired the debt in the form of a loan, FC owned a substantial percentage of the equity interests in the debt issuer and acquired an amount of debt that is not significant relative to the value of FC’s equity investment in the debt issuer. Accordingly, taking into account all relevant facts and circumstances, FC’s debt acquisition qualifies as investment for purposes of paragraph (c)(1)(i) of this section, and therefore is not commercial activity under this paragraph (c)(1)(ii).

( 4 ) Example 3: Private placement of debt secu- rities and U.S. Treasury securities as investment—

( i ) Facts. In year 1, representatives of FC met with financial institutions unrelated to FC that were serving as placement agents for the debt of a number of domestic corporations. At those meetings, FC’s representatives communicated FC’s interest in purchasing privately placed debt of U.S. corporate issuers and communicated the terms on which FC would be willing to purchase that debt. Based on those discussions, in the same year, FC purchased, at original issuance, ten privately placed debt securities of several domestic corporations. Each of the debt securities was offered by the placement agents under Regulation S through a private placement memorandum. FC purchased less than one-third by principal amount of each debt offering and at least one other unrelated purchaser purchased a larger percentage of each debt offering than FC. In addition, in the same year, FC purchased U.S. Treasury debt securities at original issuance in a public auction.

( ii ) Analysis . FC’s debt acquisition activities are commercial activities under this paragraph (c)(1) (ii), unless the acquisitions qualify as investments under paragraph (c)(1)(ii)(B) or (C) of this section. Because FC acquired the debt at original issuance from the issuers and not in offerings registered under the Securities Act, the acquisitions do not qualify for either of the safe harbors under paragraph (c)(1)(ii) (B) of this section. Nonetheless, taking into account all relevant facts and circumstances, including those under paragraph (c)(1)(ii)(C) of this section, FC’s acquisitions of privately placed debt securities and of U.S. Treasury debt securities are investments for purposes of paragraph (c)(1)(i) of this section. The corporate debt was structured on behalf of the issuers by financial institutions unrelated to FC that were serving as placement agents. The U.S. Treasury debt securities were offered with terms and conditions set by the Treasury Department. FC did not hold itself out as a lender, solicit borrowers, or materially participate in structuring or negotiating the terms of the debt. Although FC did communicate to the placement agents for the corporate debt before issuance the terms on which FC would be willing to acquire the debt and bid in the auction of U.S. Treasury debt securities, these activities do not indicate material participation in the structuring or negotiation of the terms of the debt. Moreover, the corporate debt was offered to FC in the form of a privately placed security, and FC was not the largest purchaser of any debt offering based on principal amount. Accordingly, taking into account all relevant facts and circumstances, FC’s debt acquisitions qualify as investments for purposes of paragraph (c)(1) (i) of this section, and therefore are not commercial activities under this paragraph (c)(1)(ii).

( 5 ) Example 4: Debt modification as invest- ment— ( i ) Facts. In year 1, FC purchased debt of a foreign issuer, X, in secondary market acquisitions that qualify as investments under paragraph (c)(1)(ii) (B)( 2 ) of this section (the X Debt ). At the time of FC’s acquisitions, the X Debt was not in default, and there were no objective indications at the time of the purchase of the X Debt, such as a declining trend in X’s financial condition or credit rating, that X would default on the X Debt. In year 4, due to unexpected changes in market conditions, X defaulted on the X Debt. A committee of creditors of X, acting on behalf of all holders of the X Debt, negotiated with X to

Bulletin No. 2026–3 351 January 12, 2026

(F) Regulatory authority over the entity; or

(G) Any other interest in or other relationship with the entity that may provide influence over decisions relating to the entity’s operations, management, boardlevel, or investor-level matters.

(ii) Special rule . A foreign government is deemed to have effective control of an entity if the foreign government is, or under paragraph (a)(1) of this section controls an entity that is, a managing partner or managing member of such entity, or holds or controls an entity that holds an equivalent role with respect to such entity under local law applicable to the entity.

(iii) Examples —(A) Assumed facts. The application of this paragraph (c) (2) is illustrated by the examples in this paragraph (c)(2)(iii). Except as otherwise stated, the following facts are assumed for purposes of paragraphs (c)(2)(iii)(B) through (I) of this section ( Examples 1 through 8 ):

( 1 ) FX is a foreign entity organized under the laws of country C and is treated as a corporation for Federal tax purposes; FX is a controlled entity of the government of country C under § 1.892-2T(a)(3);

( 2 ) Corp 1 is a corporation for Federal tax purposes that is engaged in commercial activities;

( 3 ) Corp 1 has a single class of equity interest and, unless otherwise stated, Corp 1’s governing documents or local law require that more than 50 percent of its equity holders approve the election of its directors, the selection of its officers, and certain major corporate decisions;

( 4 ) FX owns less than 50 percent of the value or voting power in Corp 1 under paragraph (a)(1)(i) of this section and whether Corp 1 is a controlled commercial entity with respect to FX is determined under paragraphs (a)(1)(ii) and (c)(2)(i) of this section based on all of the facts and circumstances; and

( 5 ) The remaining equity interests of Corp 1 are owned by several other investors unrelated to FX, none of which has control of Corp 1 within the meaning of paragraph (a)(1)(i) of this section.

(B) Example 1 —( 1 ) Facts . FX owns 40 percent of the equity in Corp 1. Two other investors each own 30 percent of the equity in Corp 1. FX is not a party to any arrangement with other equity holders or holders of other interests in Corp 1 that would give

modify the terms of the X Debt, including extensions of maturity, deferral of interest payments, and changes in interest rates. FC did not participate in the creditors’ committee, thus was not involved in any negotiations between the committee and X, and did not directly negotiate with X on any aspect of the X Debt. The modifications to the X Debt were significant modifications within the meaning of § 1.1001-3, and FC was deemed to acquire a new debt from X (the Modified X Debt ) in exchange for the unmodified X Debt.

( 6 ) Example 5: Debt restructuring as commer- cial activity —( i ) Facts . The facts are the same as in paragraph (c)(1)(ii)(D)( 5 ) of this section ( Example 4 ), except that FC was a member of the creditors’ committee of X, which materially participated in negotiating and structuring the terms of the Modified X Debt.

(ii) Analysis. In contrast to the acquisition in paragraph (c)(1)(ii)(D)( 5 ) of this section ( Example 4 ), FC’s acquisition of the Modified X Debt is commercial activity under this paragraph (c)(1)(ii). Taking into account all relevant facts and circumstances, the acquisition does not qualify as investment under paragraph (c)(1)(i) of this section because FC was a member of the creditors’ committee and, as a result, presumed to have materially participated in negotiating and structuring the terms of the Modified X Debt.

(iii) [Reserved]

(d) Applicability date. - * * Paragraph (c)(1) of this section applies to taxable years beginning on or after [DATE OF PUBLICATION OF FINAL RULE]. * * *

Par. 5 . Section 1.892-4T is amended by revising paragraph (c)(1)(iii) to read as follows:

§ 1.892-4T Commercial activities (temporary regulations).

Par. 6 . Section 1.892-5, as amended in a final rule published elsewhere in this issue of the Federal Register, effective December 15, 2025, is amended by:

a. Revising paragraph (c)(2); and b. Adding a sentence after the second sentence of paragraph (e).

The revision and addition read as follows:

§ 1.892-5 Controlled commercial entity.

(c) * * * (2) Effective control —(i) Rule . An entity engaged in commercial activity is a controlled commercial entity under paragraph (a)(1)(ii) of this section if a foreign government (within the meaning of § 1.892-2T(a)) has effective control of the entity. Except as provided in paragraph (c) (2)(ii) of this section, effective control is achieved by any interest in the entity that, directly or indirectly, either separately or in combination with other interests, results in control of the operational, managerial, board-level, or investor-level decisions of the entity. However, mere consultation rights with respect to operational, managerial, board-level, or investor-level decisions of an entity (such as extending the term of the entity’s investment period, change in control of the entity, or liquidation of the entity) do not alone give rise to effective control. The determination of effective control is made considering all of the facts and circumstances related to the interests in an entity. Interests in an entity may include, for example:

(A) Equity interests; (B) Debt interests; (C) Voting rights in the entity, including the power to appoint directors or managers, and to veto decisions;

(D) Contractual rights in or arrangements with the entity, or with other interest holders in the entity;

(E) Business relationships with the entity, or with other interest holders in the entity, including as a major customer or a supplier having control over a strategic natural resource used in the entity’s business;

January 12, 2026 352 Bulletin No. 2026–3

FX the right to elect a majority of Corp 1’s directors or to appoint or replace officers of Corp 1. Under Corp 1’s governing documents and local law, FX does not have the power to unilaterally authorize or veto a corporate action or appoint a majority of Corp 1’s directors or officers, and FX does not hold any other interest in Corp 1, including by reason of any business relationship that provides it with influence over Corp 1.

( 2 ) Analysis . Because FX holds only a minority equity interest in Corp 1, is not a party to any arrangement with other equity or other interest holders of Corp 1, does not have sufficient voting power to unilaterally authorize or veto Corp 1’s actions or to appoint a majority of Corp 1’s directors or officers, and does not otherwise hold any other interest in Corp 1, FX is not treated as having effective control of Corp 1. Accordingly, Corp 1 is not a controlled commercial entity with respect to FX.

(C) Example 2 —( 1 ) Facts . The facts are the same as in paragraph (c)(2)(iii)(B) of this section ( Exam- ple 1 ), except that FX and Corp 1 have an investment agreement in place when FX invests in Corp 1. The investment agreement provides criteria for what types of investments can be made by Corp 1, and provides no voting, operational, managerial, or other rights to FX with respect to Corp 1.

( 2 ) Analysis . The investment agreement between FX and Corp 1 does not itself, or in combination with the other facts provided in paragraph (c)(2)(iii)(B) of this section ( Example 1 ), give FX control of operational, managerial, board-level, or investor-level decisions of Corp 1. Thus, for the reasons stated in paragraph (c)(2)(iii)(B) of this section ( Example 1 ), FX is not treated as having effective control of Corp

Accordingly, Corp 1 is not a controlled commercial entity with respect to FX.

(D) Example 3 —( 1 ) Facts . The facts are the same as in paragraph (c)(2)(iii)(B) of this section ( Example 1 ), except that under Corp 1’s governing documents, FX is entitled to participate in an investment committee and has the right only to discuss acquisitions and sales of property by Corp 1, but FX has no right to decide or execute such acquisitions or sales and no other rights with respect to Corp 1.

( 2 ) Analysis . FX’s rights arising from the investment committee for Corp 1 are mere consultation rights with respect to managerial decisions of Corp

Such rights do not themselves, or in combination with the other facts provided in paragraph (c)(2) (iii)(B) of this section ( Example 1 ), give FX control of operational, managerial, board-level, or investor-level decisions of Corp 1. Thus, for the reasons stated in paragraph (c)(2)(iii)(B) of this section ( Example 1 ), FX is not treated as having effective control of Corp 1. Accordingly, Corp 1 is not a controlled commercial entity with respect to FX.

(E) Example 4 —( 1 ) Facts . Under Corp 1’s governing documents, FX is entitled to appoint one out of three directors of Corp 1. That director alone is authorized under Corp 1’s governing documents to unilaterally appoint or dismiss the manager, an officer of Corp 1 whose responsibilities are to manage Corp 1’s operations. FX does not otherwise have sufficient voting power directly or through any arrangements with holders of equity or holders of other interests in Corp 1 to unilaterally authorize or veto any other Corp 1 action.

( 2 ) Analysis . FX has, by reason of its equity interest, power that allows it to appoint a director who alone has the power to unilaterally appoint or dismiss Corp 1’s manager, which provides FX with control over decisions as to the operations and management of Corp 1. Therefore, FX has effective control of Corp 1. Accordingly, Corp 1 is a controlled commercial entity with respect to FX.

(F) Example 5 —( 1 ) Facts . The facts are the same as in paragraph (c)(2)(iii)(E) of this section ( Exam- ple 4 ), except instead of having the right to unilaterally appoint or dismiss the manager of Corp 1, FX’s appointed director alone has rights to unilaterally veto dividend distributions, material capital expenditures, sales of new equity interests in Corp 1, and the operating budget of Corp 1.

( 2 ) Analysis . The veto rights of FX’s appointed director give FX control over decisions as to the operation of Corp 1. Therefore, FX has effective control of Corp 1. Accordingly, Corp 1 is a controlled commercial entity with respect to FX.

(G) Example 6 —( 1 ) Facts. Under Corp 1’s governing documents, FX is entitled to appoint one out of three directors of Corp 1 and the remaining two directors are appointed by the other unrelated investors. However, one unrelated investor derives significant revenues from FX through other business dealings, and, as a matter of course, causes its appointed director to always vote in the same manner as FX’s appointed director on all board decisions. That unrelated investor’s and FX’s appointed director’s votes, when combined, constitute the majority of the Corp 1 board votes. FX does not otherwise have sufficient voting power to unilaterally authorize or veto any other Corp 1 action. FX does not hold any other interest in Corp 1.

( 2 ) Analysis . FX’s significant business relationship with the unrelated investor constitutes an interest in Corp 1 under paragraph (c)(2)(i)(E) of this section. That interest indirectly provides FX, when combined with its equity interest, with the power to control Corp 1’s board. Therefore, FX has effective control of Corp 1. Accordingly, Corp 1 is a controlled commercial entity with respect to FX.

(H) Example 7 —( 1 ) Facts . Corp 1’s business consists primarily of extracting and marketing a mineral located in country C. FC, the government of country C, owns all rights to that mineral and regulates all businesses engaged in its extraction.

( 2 ) Analysis . FX, by reason of FC’s ownership of the mineral rights and the regulatory authority over the mineral’s extraction, has the ability to substantially affect Corp 1’s business. For purposes of paragraph (c)(2)(i) of this section, FC’s ownership of the mineral rights and its regulatory relationship with Corp 1’s business constitute FX’s interests in Corp 1 under paragraphs (c)(2)(i)(E) and (F) of this section. Those interests indirectly provide FX with the power to control decisions as to the operation and management of Corp 1. Therefore, FX has effective control of Corp 1. Accordingly, Corp 1 is a controlled commercial entity with respect to FX.

(I) Example 8 —( 1 ) Facts . FX is a creditor of Corp 1. Under the credit agreement between FX and Corp 1, Corp 1 is subject to restrictions on the type of investments that Corp 1 can make, asset dispositions, levels of future borrowing, and dividend distributions by Corp 1. The credit agreement also provides

FX with veto rights over dividend and stock repurchases, additional borrowing, capital expenditures, Corp 1’s annual operating budget, and redemption of subordinated debt.

( 2 ) Analysis . FX’s creditor interest, based on the totality of the rights provided to FX by the terms of the credit agreement, provides FX with control over both investor-level and operational decisions of Corp 1. Therefore, FX has effective control of Corp

Accordingly, Corp 1 is a controlled commercial entity with respect to FX.

(e) Applicability date . * * * Paragraph (c)(2) of this section applies to taxable years beginning on or after [DATE OF PUBLICATION OF FINAL RULE]. * * *

Frank J. Bisignano, Chief Executive Officer .

(Filed by the Office of the Federal Register December 12, 2025, 8:45 a.m., and published in the issue of the Federal Register for December 15, 2025, 90 FR 57928)

Notice of Proposed Rulemaking

Updating Regulation References to Reflect Reorganizations at the Department of Justice and the Internal Revenue Service

REG-110519-25

AGENCY: Internal Revenue Service (IRS), Alcohol and Tobacco Tax and Trade Bureau (TTB), Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains proposed regulations that would update points of contact within the Department of Justice and the IRS. The proposed regulations are necessary to reflect a reorganization within the Department of Justice to identify new points of contact for matters involving the internal revenue laws. The proposed regulations would also update points of contact at the IRS for adminis

Bulletin No. 2026–3 353 January 12, 2026

trative claim submissions from taxpayers seeking civil damages for certain unauthorized collection actions or awards of administrative costs with respect to certain administrative proceedings.

DATES: Written or electronic comments and requests for a public hearing must be received by January 14, 2026.

ADDRESSES: Commenters are strongly encouraged to submit public comments electronically via the Federal eRulemaking Portal at https://www.regulations.gov (indicate IRS and REG-110519-25) by following the online instructions for submitting comments. Requests for a public hearing must be submitted as prescribed in the “Comments and Requests for a Public Hearing” section. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The Department of the Treasury (Treasury Department) and the IRS will publish for public availability any comments submitted to the IRS’s public docket. Send paper submissions to : CC:PA:01:PR (REG110519-25), room 5503, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Shikha K. Patel at (202) 3176306; concerning submissions of comments or a public hearing, the Publications and Regulations Section at (202) 3176091 (not toll-free numbers) or by email at publichearings @ irs . gov (preferred).

SUPPLEMENTARY INFORMATION:

Authority

This document contains proposed amendments to the Procedure and Administration Regulations (26 CFR part 301) under sections 6103, 6402, 7430, and 7433 of the Internal Revenue Code (Code) previously issued under sections 6103(q) and 7805(a) of the Code. This document also contains a proposed amendment to the Procedure and Administration Regulations (27 CFR Part 70), which governs taxpayer claims for credit or refund to the Alcohol and Tobacco and Trade Bureau (TTB) for certain excise taxes assessed

under the Code. Section 6103(q) authorizes the Secretary of the Treasury or the Secretary’s delegate (Secretary) “to prescribe such other regulations as necessary to carry out the provisions of [section 6103].” Section 7805(a) of the Code authorizes the Secretary to “prescribe all needful rules and regulations for the enforcement of [the Code], including all rules and regulations as may be necessary by reason of any alteration of law to internal revenue.”

Background

I. Changes in references to Department of Justice organization

Civil and criminal litigation relating to the Internal Revenue laws has historically been handled or authorized by the Tax Division of the Department of Justice. The Treasury Department, IRS, and the TTB have been made aware that the Department of Justice has modified its organizational structure to divide the responsibilities of the Tax Division between the Civil Division and Criminal Division of the Department of Justice. References to the Tax Division appear in 26 CFR 301.6103(h)(2)-1 and 301.6402-2, and 27 CFR 70.123.

Section 301.6103(h)(2)-1 of Title 26 of the Code of Federal Regulations (Title 26) regulates the requirements and grounds for disclosures of returns and return information to and by officers and employees of the Department of Justice in Federal grand jury proceedings involving tax administration, including preparation for and investigation of those proceedings. These regulations provide that, pursuant to section 6103(h)(2), such disclosures must be duly authorized by or on behalf of the Assistant Attorney General for the Tax Division of the Department of Justice.

Section 301.6402-2 of Title 26 regulates the requirements, grounds, and form for a taxpayer to file a claim for credit or refund as well as methods of refund. In the event that the refund is based on a claim that has been reduced to judgement, or settled in or as a result of litigation, 26 CFR 301.6402-2 provides that the check is to be mailed to the Department of Justice, Tax Division, which will then deliver

the check to the taxpayer or the counsel of record.

Section 70.123 of Title 27 sets forth the requirements, grounds, and form for filing claims for credits or refunds, as well as methods of refunds. It provides that checks in payment of claims which have been reduced to judgment or settled in the course or as a result of litigation, will be drawn in the name of the person or persons entitled to the money and will be sent to the Assistant Attorney General, Tax Division, Department of Justice, for delivery to the taxpayer or the counsel of record in the court proceeding.

II. Changes in the processing of certain claims at the IRS

Section 7433 provides for civil damages for certain unauthorized collection actions and was enacted as part of the Technical and Miscellaneous Revenue Act of 1988, Public Law 100-647, 102 Stat. 3746 (November 10, 1988). The Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98), Public Law 105-206, 112 Stat. 685 (July 22, 1998), mandated fundamental reorganization of the IRS. Additionally, the RRA 98 amended section 7433(e) to require an exhaustion of administrative remedies. On March 25, 2003, the Treasury Department and the IRS published final regulations (TD 9050) in the Federal Register (68 FR 14316) under section 7433 that require, for collection actions that do not relate to section 362 or section 524 of title 11, United States Code (Bankruptcy Code), an administrative claim to first be sent in writing to the “Area Director, Attn: Compliance Technical Support Manager” of the area in which the taxpayer currently resides in order to exhaust administrative remedies. In contrast, for collection actions related to violations of section 362 or section 524 of the Bankruptcy Code, an administrative claim must first be sent to the “Chief, Local Insolvency Unit,” for the judicial district in which the bankruptcy petition that is the basis for the asserted automatic stay or discharge violation was filed.

As part of that reorganization mandated by the RRA 98, the IRS shifted from a geographically focused organizational system to one that focuses on specific cat

January 12, 2026 354 Bulletin No. 2026–3

egories of taxpayers with similar needs. Since the regulations were published in 2003, there have been numerous changes to which IRS offices are responsible for the processing of these claims. The Internal Revenue Manual (IRM) 1.4.51.2 (June 25, 2025) sets forth the role of processing such claims to the Field Insolvency Manager and the Centralized Insolvency Operation Manager. The Insolvency function is now comprised of two operations, Field Insolvency (FI) and the Centralized Insolvency Operation (CIO). These two operations work together to provide customer service while addressing employee satisfaction in delivering improved business results. Pursuant to IRM 1.4.51.2.5 (2) and (3) (February 12, 2020), the CIO provides initial clerical processing and sends complex issues to FI to work. Addressing administrative claims for damages to the CIO ensures the efficient routing of these claims to the FI office best suited to address those claims. References to Compliance Technical Support appear in 26 CFR 301.7433-1. References to Local Insolvency Units appear in 26 CFR 301.7430-1, 301.7430‑2, and 301.7433-2. Section 301.7430-1(e) of Title 26 defines the manner in which a party seeking damages for actions involving willful violations of the automatic stay under section 362 of the Bankruptcy Code or the discharge provisions under section 524 of the Bankruptcy Code can meet the exhaustion of administrative remedies requirement of section 7433(d)(1). It provides that a party must file an administrative claim for damages or for relief from a violation of section 362 or section 524 of the Bankruptcy Code with the Chief, Local Insolvency Unit, for the judicial district in which the bankruptcy petition that is the basis for the asserted automatic stay or discharge violation was filed. It also refers to actions for damages for willful violation of the automatic stay as section 362(h) claims. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Public Law 109-8, 119 Stat. 23 (April 20, 2005) recodified section 362(h) of the Bankruptcy Code in its entirety at section 362(k)(1) of the Bankruptcy Code. Section 301.7430-2(c) of Title 26 describes the procedures that a party must follow to recover reasonable administrative costs regarding administrative pro

ceedings within the IRS. It provides that administrative claims with respect to requests for administrative costs incurred in damage actions for violations of section 362 or section 524 of the Bankruptcy Code should be made to the Chief, Local Insolvency Unit.

Section 301.7433-1(e) of Title 26 describes the procedures that a party must follow to file an administrative claim for damages for unauthorized collection actions to fulfill the exhaustion of administrative remedies requirement of section 7433(d)(1). Specifically, an administrative claim for damages shall be sent to the Area Director, Attn: Compliance Technical Support Manager, of the area in which the taxpayer currently resides.

Section 301.7433-2(a) of Title 26 describes the civil cause of action for violation of section 362 or section 524 of the Bankruptcy Code. Section 301.7433-2(a) (2) of Title 26 clarifies that while section 7433 constitutes the exclusive remedy under the Code for violations of section 362 or section 524 of the Bankruptcy Code, such exclusivity does not preclude a cause of action under the Bankruptcy Code relating to willful violations of the stay formerly codified at section 362(h). The BAPCPA recodified this cause of action under section 362(k) of the Bankruptcy Code. Section 301.7433-2(e) of Title 26 describes the procedures that a party must follow to file an administrative claim for damages for violations of section 362 or section 524 of the Bankruptcy Code to fulfill the exhaustion of administrative remedies requirement of section 7433(d)(1). It provides that an administrative claim for damages shall be sent to the Chief, Local Insolvency Unit, for the judicial district in which the taxpayer filed the underlying bankruptcy case giving rise to the alleged violation.

Explanation of Provisions

These proposed regulations would amend 26 CFR 301.6402-2, 301.6103(h) (2)‑1, and 27 CFR 70.123 by updating references to the “Assistant Attorney General for the Tax Division of the Department of Justice” to reflect the Assistant Attorneys General who will supervise civil and criminal tax functions after the reorganization of the Department of Justice. Specifically, references in 26 CFR 301.6402-2 and 27

CFR 70.123, which relate to civil matters, would be amended to read “Assistant Attorney General for the Civil Division of the Department of Justice.” References in 26 CFR 301.6103(h)(2)-1, which relate to criminal matters, would be amended to read “Assistant Attorney General for the Criminal Division of the Department of Justice.” Amending these regulations to reflect the correct point of contact at the Department of Justice will ensure that communications are sent to the appropriate Assistant Attorney General with supervisory authority over the appropriate civil or criminal tax function.

Additionally, these proposed regulations would amend 26 CFR 301.7433-1(e) (1) by updating references to “Area Director, Attn: Compliance Technical Support Manager” to reflect that those matters are currently handled by Collection Advisory Groups. These proposed regulations would amend 26 CFR 301.7430-1(e), 301.7430-2(c)(2), and 301.7433-2(e)(1) by updating references to “Chief, Local Insolvency Unit” to reflect the shift to the Centralized Insolvency Operation. Specifically, the reference in 26 CFR 301.74331(e)(1) to “Area Director, Attn: Compliance Technical Support Manager” would be amended to read “Collection Advisory Group of the area in which the taxpayer currently resides.” The references in 26 CFR 301.7430-1(e)(1), 301.7430-1(e)(2), 301.7430-2(c)(2), and 301.7433-2(e)(1) to “Chief, Local Insolvency Unit” would be amended to read “Centralized Insolvency Operation.” Amending these regulations to reflect the current points of contact within the IRS Collection function will ensure that claim submissions are sent to the appropriate Collection contact.

Finally, these proposed regulations would update references to actions under Bankruptcy Code section 362(h) in 26 CFR 301.7430-1(e)(2) and 301.7433-2(a) (2) to reflect the revision to the Bankruptcy Code under the BAPCPA. Amending these regulations to reflect the current version of the Bankruptcy Code would decrease confusion around application of that title.

Proposed Effective Date

The changes to the organizational structure of the Department of Justice

Bulletin No. 2026–3 355 January 12, 2026

and the IRS are already in effect. It would be unnecessary and contrary to the public interest for the regulations to continue to reference Department of Justice divisions and IRS business units that have been reorganized as points of contact. To ensure that communications are sent to the appropriate Assistant Attorney General with supervisory authority over the appropriate civil or criminal tax function at the Department of Justice for matters involving the internal revenue laws and that administrative claims submitted from taxpayers seeking civil damages for certain unauthorized collection actions or awards of administrative costs with respect to certain administrative proceedings are sent to the appropriate IRS collection contact, the Treasury Department, the IRS, and TTB find that there is good cause to dispense with a delayed effective date pursuant to 5 U.S.C. 553(d)(3). The regulations under 26 CFR part 301, as proposed, and 27 CFR part 70, as proposed, would be effective as of the date of publication of a Treasury decision adopting these proposed rules with any necessary modifications as final in the Federal Register .

Proposed Applicability Date

For proposed applicability dates see 26 CFR 301.6402-2(h), 301.6103(h)(2)-1(c), 301.7430-1(h), 301.7430-2(f), 301.74331(i); and 301.7433-2(i).

Special Analyses

I. Regulatory Planning and Review

II. Regulatory Flexibility Act

The Secretary of the Treasury hereby certifies that these proposed regulations would not have a significant economic impact on a substantial number of small entities pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6). The proposed regulations would provide updated

points of contact within the Department of Justice and the IRS, and would not impose any new requirements or obligations upon small entities. Accordingly, a regulatory flexibility analysis under the Regulatory Flexibility Act is not required.

III. Unfunded Mandates Reform Act

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a State, local, or Tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. These proposed regulations do not include any Federal mandate that may result in expenditures by State, local, or Tribal governments, or by the private sector in excess of that threshold.

IV. Executive Order 13132: Federalism

Executive Order 13132 (Federalism) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on State and local governments, and is not required by statute, or preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive order. These proposed regulations do not have federalism implications and do not impose substantial direct compliance costs on State and local governments or preempt State law within the meaning of the Executive order.

V. Small Business Administration

Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on its impact on small business.

Comments and Request for a Public Hearing

Before these proposed regulations are adopted as final regulations, consideration

will be given to any comments that are timely submitted to the IRS as prescribed in this preamble under the ADDRESSES heading. The Treasury Department, the IRS, and TTB request comments on all aspects of the proposed regulations. Any comments submitted will be available at https://www.regulations.gov or upon request. A public hearing will be scheduled if requested in writing by any person who timely submits electronic or written comments. Requests for a public hearing are also encouraged to be made electronically. If a public hearing is scheduled, notice of the date and time for the public hearing will be published in the Federal Register .

Drafting Information

The principal author of these regulations is Shikha K. Patel of the Office of Associate Chief Counsel (Procedure and Administration). However, other personnel from the Treasury Department participated in the development of the regulations.

Lists of Subjects

26 CFR Part 301

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements.

27 CFR Part 70

Administrative practice and procedure, Claims, Excise taxes, Freedom of information, Penalties, Reporting and recordkeeping requirements, Surety bonds.

Proposed Amendments to the Regulations

Accordingly, the IRS proposes to amend 26 CFR part 301 and the Treasury Department proposes to amend 27 CFR part 70 as follows:

PART 301 – PROCEDURE AND ADMINISTRATION

Paragraph 1. The authority citation for 26 CFR part 301 continues to read, in part, as follows:

January 12, 2026 356 Bulletin No. 2026–3

Authority: 26 U.S.C. 7805. Par. 2. Section 301.6402-2 is amended by revising paragraphs (f)(2) and (h) to read as follows:

§ 301.6402-2 Claims for credit or refund.

(f) * * * (2) Checks in payment of claims which have either been reduced to judgment or settled in the course or as a result of litigation will be drawn in the name of the person or persons entitled to the money and will be sent to the Assistant Attorney General for the Civil Division of the Department of Justice, or such person’s designee, for delivery to the taxpayer or the counsel of record in the court proceeding.

(h) Applicability dates. This section applies on or after December 15, 2025. For periods before December 15, 2025, see this section as in effect and contained in 26 CFR part 301, revised as of April 1, 2025. Par. 3. Section 301.6103(h)(2)-1 is amended by revising paragraph (a)(2)(ii) and adding paragraph (c) to read as follows:

§ 301.6103(h)(2)-1 Disclosure of returns and return information (including taxpayer return information) to and by officers and employees of the Department of Justice for use in Federal grand jury proceeding, or in preparation for proceeding or investigation, involving tax administration.

(a) * * * (2) * * * (ii) In connection with any Federal grand jury proceeding, or preparation for any proceeding (or with an investigation which may result in such a proceeding), described in paragraph (a)(1) of this section which also involves enforcement of a specific Federal criminal statute other than one described in paragraph (a)(1) of this section to which the United States is or may be a party, provided such matter involves or arises out of the particular facts and circumstances giving rise to the proceeding (or investigation) described in

paragraph (a)(1) of this section and further provided the tax portion of such proceeding (or investigation) has been duly authorized by or on behalf of the Assistant Attorney General for the Criminal Division of the Department of Justice, pursuant to the request of the Secretary, as a proceeding (or investigation) described in paragraph (a)(1) of this section. If, in the course of a Federal grand jury proceeding, or preparation for a proceeding (or the conduct of an investigation which may result in such a proceeding), described in this paragraph (a)(2)(ii), the tax administration portion thereof is terminated for any reason, any further use or disclosure of such returns or taxpayer return information in such Federal grand jury proceeding, or preparation or investigation, with respect to the remaining portion may be made only pursuant to, and upon the grant of, a court order as provided by section 6103(i)(1) (A), provided, however, that the returns and taxpayer return information may in any event be used for purposes of obtaining the necessary court order.

(c) Applicability date . This section applies on or after December 15, 2025. For periods before December 15, 2025, see this section as in effect and contained in 26 CFR part 301, revised as of April 1, 2025. Par. 4. Section 301.7430-1 is amended by revising paragraphs (e) and (h) to read as follows:

§ 301.7430-1 Exhaustion of administrative remedies.

(e) * * * (1) Section 7433 claims . A party has not exhausted administrative remedies within the Internal Revenue Service with respect to asserted violations of the automatic stay under section 362 of title 11, United States Code (Bankruptcy Code) or the provisions under section 524 of the Bankruptcy Code unless it files an administrative claim for damages or for relief from a violation of section 362 or section 524 of the Bankruptcy Code with the Centralized Insolvency Operation or successor function and satisfies the other conditions set forth in § 301.7433-2(d) prior to filing a petition under section 7433.

(2) Section 362(k) claims . A party has not exhausted administrative remedies within the Internal Revenue Service with respect to asserted violations of the automatic stay under section 362 of the Bankruptcy Code unless it files an administrative claim for relief from a violation of section 362 of the Bankruptcy Code with the Centralized Insolvency Operation pursuant to § 301.7433-2(e) and satisfies the other conditions set forth in § 301.74332(d) prior to filing a petition under section 362(k) (formerly 362(h)) of the Bankruptcy Code.

(h) Applicability date. This section applies to court proceedings described in section 7430 filed in a court of the United States (including the Tax Court and the Court of Federal Claims) after December 15, 2025. For such court proceedings on or before December 15, 2025, see this section as in effect and contained in 26 CFR part 301, revised as of April 1, 2025.

Par. 5. Section 301.7430-2 is amended by revising paragraph (c)(2) and adding paragraph (f) to read as follows:

§301.7430-2 Requirements and procedures for recovery of reasonable administrative costs.

(c) * * * (2) Where request must be filed . A request required by paragraph (c)(1) of this section must be filed with the Internal Revenue Service personnel who have jurisdiction over the tax matter underlying the claim for costs, except that requests with respect to administrative proceedings defined by § 301.7430-8(c) should be made to the Centralized Insolvency Operation. However, if those persons are unknown to the taxpayer making the request, the taxpayer may send the request to the Internal Revenue Service office that considered the underlying matter.

(f) Applicability date . This section applies on or after December 15, 2025. For periods before December 165, 2025, see this section as in effect and contained in 26 CFR part 301, revised as of April 1, 2025.

Par. 6. Section 301.7433-1 is amended by revising paragraphs (e)(1) and (i) to read as follows.

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§301.7433-1 Civil cause of action for certain unauthorized collection actions.

(e) * * * (1) Manner . An administrative claim for the lesser of $1,000,000 ($100,000 in the case of negligence) or actual, direct economic damages as defined in paragraph (b) of this section shall be sent in writing to the Collection Advisory Group of the area in which the taxpayer currently resides.

(i) Applicability dates . This section applies on or after December 15, 2025. For periods before December 15, 2025, see this section as in effect and contained in 26 CFR part 301, revised as of April 1, 2025. Par. 7. Section 301.7433-2 is amended by revising paragraphs (a)(2), (e)(1), and (i) to read as follows.

§ 301.7433-2 Civil cause of action for violation of section 362 or 524 of the Bankruptcy Code.

(a) * * * (2) An action under this section constitutes the exclusive remedy under the Internal Revenue Code for violations of sections 362 and 524 of title 11, United States Code (Bankruptcy Code). In addition, taxpayers injured by violations of section 362 of the Bankruptcy Code may maintain actions under section 362(k) (formerly section 362(h)) of the Bankruptcy Code (relating to an individual injured by a willful violation of the stay). However, any administrative or litigation costs in connection with an action under section 362(k) (formerly section 362(h)) may be awarded, if at all, only under section 7430 of the Internal Revenue Code.

(e) * * * (1) Manner . An administrative claim for the lesser of $1,000,000 or actual, direct economic damages as defined in paragraph (b) of this section shall be sent in writing to the Centralized Insolvency Operation.

(i) Applicability date . This section is applicable to actions taken by Internal Revenue Service officials after

December 15, 2025. For actions taken by Internal Revenue Service officials on or before December 15, 2025, see this section as in effect and contained in 26 CFR part 301, revised as of April 1, 2025.

PART 70 – PROCEDURE AND ADMINISTRATION

Par. 8. The authority citation for 27 CFR part 70 continues to read in part as follows:

Authority: 5 U.S.C. 301 and 552; 26 U.S.C. 4181, 4182, 5123, 5203, 5207, 5275, 5367, 5415, 5504, 5555, 5684(a), 5741, 5761(b), 5802, 6020, 6021, 6064, 6102, 6109, 6155, 6159, 6201, 6203, 6204, 6301, 6303, 6311, 6313, 6314, 6321, 6323, 6325, 6326, 6331-6343, 6401-6404, 6407, 6416, 6423, 6501-6503, 6511, 6513, 6514, 6532, 6601, 6602, 6611, 6621, 6622, 6651, 6653, 6656-6658, 6665, 6671, 6672, 6701, 6723, 6801, 6862, 6863, 6901, 7011, 7101, 7102, 7121, 7122, 7207, 7209, 7214, 7304, 7401, 7403, 7406, 7423, 7424, 7425, 7426, 7429, 7430, 7432, 7502, 7503, 7505, 7506, 7513, 7601-7606, 7608-7610, 7622, 7623, 7653, 7805. Par. 9. Section 70.123 is amended by revising paragraph (e)(2) to read as follows:

§ 70.123 Claims for credit or refund.

(e) * * * (2) Checks in payment of claims which have either been reduced to judgment or settled in the course or as a result of litigation will be drawn in the name of the person or persons entitled to the money and will be sent to the Assistant Attorney General for the Civil Division of the Department of Justice, or such person’s designee, for delivery to the taxpayer or the counsel of record in the court proceeding.

Frank J. Bisignano, Chief Executive Officer.

Approved: October 14, 2025

Kenneth J. Kies, Assistant Secretary of the Treasury

(Tax Policy).

(Filed by the Office of the Federal Register December 12, 2025, 8:45 a.m., and published in the issue of the Federal Register for December 15, 2025, 90 FR 57937)

Notice of Proposed Rulemaking

Relief From Joint and Several Liability

REG-132251-11; REG-134219-08

AGENCY: Internal Revenue Service (IRS), Treasury

ACTION: Withdrawal of notices of proposed rulemaking.

SUMMARY: This document withdraws two notices of proposed rulemaking regarding relief from joint and several tax liability and relief from Federal income tax liability resulting from the operation of State community property laws. The proposed regulations would have affected married individuals who filed joint returns and later seek relief from joint and several liability.

DATES : As of December 15, 2025, the notices of proposed rulemaking that were published in the Federal Register on August 13, 2013 (78 FR 49242) and November 20, 2015 (80 FR 72649), are withdrawn.

FOR FURTHER INFORMATION CONTACT: Mark Shurtliff at (202) 317– 6845 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

On August 13, 2013, the Department of the Treasury (Treasury Department) and the IRS published a notice of proposed rulemaking (REG-132251-11) in the Federal Register (78 FR 49242) that proposed guidance for taxpayers on when and how to request relief from joint

January 12, 2026 358 Bulletin No. 2026–3

and several liability under section 6015 of the Internal Revenue Code (Code) and relief from the operation of State community property law under section 66 of the Code (2013 proposed regulations). In addition, on November 20, 2015, the Treasury Department and the IRS published a notice of proposed rulemaking (REG-134219-08) in the Federal Regis- ter (80 FR 72649) that reflected changes to section 6015 made by the Tax Relief and Health Care Act of 2006, Public Law 109-432, 120 Stat. 2922, 3061 (December 20, 2006), as well as changes in the law arising from litigation (2015 proposed regulations).

The Treasury Department and the IRS have determined it appropriate to withdraw the 2013 proposed regulations and the 2015 proposed regulations at this time to focus time and resources on other matters. Additionally, in light of the volume and breadth of scope of the comments received in response to the 2013 proposed regulations and the 2015 proposed regulations, the Treasury Department and the IRS have determined that further consideration of the proposed rules contained in the notices of proposed rulemaking is warranted. Moreover, due to the amount of time that has passed since the notices of proposed rulemaking were published, the Treasury Department and the IRS do not intend to publish final rules with

out again providing additional notice of the proposed rules and requesting public comments. For these reasons, the Treasury Department and the IRS are withdrawing the 2013 proposed regulations and the 2015 proposed regulations. The withdrawal of the 2013 proposed regulations and the 2015 proposed regulations does not limit the ability of the Treasury Department and the IRS to publish new regulatory proposals regarding the areas addressed by the withdrawn notices of proposed rulemaking, including new proposals that may be substantially identical or similar to those described therein, and the Treasury Department and the IRS may propose new rules in this regard in a future rulemaking, as appropriate. In addition, the withdrawal of these notices of proposed rulemaking does not affect the ongoing application of existing statutory and regulatory requirements or the responsibility to faithfully administer the statutory requirements the proposed rules would have implemented if finalized. Finally, should the Treasury Department and the IRS decide in the future to move forward with rulemaking in this area, such rulemaking would take into account statutory changes that have been made, as well as changes in the law arising from litigation, since the 2013 proposed regulations and the 2015 proposed regulations were published.

Drafting Information

The principal author of this notice is Mark Shurtliff of the Office of Associate Chief Counsel (Procedure and Administration). However, other personnel from the Treasury Department and the IRS participated in its development.

List of Subjects in 26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

Withdrawal of Proposed Amendments to the Regulations

Under the authority of 26 U.S.C. 7805, the notice of proposed rulemaking (REG-132251-11) that was published in the Federal Register on August 13, 2013 (78 FR 49242), and the notice of proposed rulemaking (REG-134219-08) that was published in the Federal Register on November 20, 2015 (80 FR 72649), are withdrawn.

Frank J. Bisignano, Chief Executive Officer.

(Filed by the Office of the Federal Register December 12, 2025, 8:45 a.m., and published in the issue of the Federal Register for December 15, 2025, 90 FR 57937)

Bulletin No. 2026–3 359 January 12, 2026