E8-16331. Determining the Amount of Taxes Paid for Purposes of Section 901

AGENCY:

Internal Revenue Service (IRS), Treasury.

ACTION:

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

SUMMARY:

In the Rules and Regulations section in this issue of the Federal Register, the IRS is issuing temporary regulations that provide guidance relating to the determination of the amount of taxes paid for purposes of the foreign tax credit. The regulations affect taxpayers that claim direct and indirect foreign tax credits. The text of those temporary regulations also serves as the text of these proposed regulations. This document also provides notice of a public hearing on these proposed regulations.

DATES:

Written or electronic comments must be received by October 14, 2008. Outlines of topics to be discussed at the public hearing scheduled for December 11, 2008, at 10 a.m. must be received by November 20, 2008.

ADDRESSES:

Send submissions to CC:PA:LPD:PR (REG-156779-06), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-156779-06), Courier's desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC 20224, or sent electronically via the Federal eRulemaking Portal at www.regulations.gov (IRS REG-156779-06). The public hearing will be held in the Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT:

Concerning the regulations, Michael I. Gilman, [phone]; concerning submissions of comments, the hearing, and/or to be placed on the building access list to attend the hearing, Regina Johnson, [phone] (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

Temporary regulations in the Rules and Regulations section of this issue of the Federal Register contain amendments to the Income Tax Regulations (26 CFR Part 1) which provide rules relating to the determination of the amount of taxes paid for purposes of the foreign tax credit. The text of those regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the temporary regulations and these proposed regulations. The regulations affect individuals and corporations claiming foreign tax credits.

Special Analyses

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because the regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6), does not apply. Pursuant to section 7805(f) of the Internal Revenue Code, this regulation has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small businesses.

Comments and Public Hearing

Before these proposed regulations are adopted as final regulations, consideration will be given to any written (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. In particular, the IRS and Treasury Department continue to study arrangements in which the foreign payments attributable to income of a special purpose vehicle (SPV) do not substantially exceed the foreign taxes that would have been paid by a controlled foreign corporation that owns the SPV in the absence of the arrangement. The IRS and Treasury Department seek additional comments on how to overcome the administrative challenges of determining the amount of foreign taxes that would have been paid but for such arrangement. The IRS and Treasury Department also request comments on whether the regulations should contain additional guidance on the extent to which activities are conducted by an entity's employees or on the treatment of employees of affiliates that are seconded to, or supervised by employees of, the tested entity. Finally, the IRS and Treasury Department request comments on the clarity of the proposed regulations and how they can be made easier to understand. All comments will be available for public inspection and copying.

A public hearing has been scheduled for December 11, 2008, at 10 a.m. in the Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section of this preamble.

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments must submit electronic or written comments by October 14, 2008, and an outline of the topics to be discussed and time to be devoted to each topic (a signed original and eight (8) copies) by November 20, 2008. A period of 10 minutes will be allotted to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing.

Drafting Information

The principal author of these regulations is Michael I. Gilman, Office of Associate Chief Counsel (International). However, other personnel from the IRS and the Treasury Department participated in their development.

List of Subjects in 26 CFR Part 1

• Income taxes
• Reporting and recordkeeping requirements

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1—INCOME TAXES

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

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

Par. 2. Section 1.901-1 is amended by revising paragraphs (a) and (b) to read as follows:

§ 1.901-1

Allowance of credit for taxes.

(a) and (b) [The text of proposed § 1.901-2(a) and (b) is the same as the text of § 1.901-1T(a) and (b) published elsewhere in this issue of the Federal Register.]

* * * * *

Par 3. Section 1.901-2 is amended by revising paragraphs (e)(5)(iii), (e)(5)(iv), and (h)(2) to read as follows:

§ 1.901-2

Income, war profits, or excess profits tax paid or accrued.

* * * * *

(e) * * *

(5) * * *

(iii) and (iv) [The text of proposed § 1.901-2(e)(5)(iii) and (iv) is the same as the text of § 1.901-2T(e)(5)(iii) and (iv) published elsewhere in this issue of the Federal Register.]

* * * * *

(h) * * *

(2) [The text of proposed § 1.901-2(h)(2) is the same as the text of § 1.901-2T(h)(2) published elsewhere in this issue of the Federal Register.]

Linda E. Stiff,

Deputy Commissioner for Services and Enforcement.