[Federal Register Volume 63, Number 127 (Thursday, July 2, 1998)]
[Rules and Regulations]
[Pages 36180-36181]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17697]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
[TD 8775]
RIN 1545-AV79
Election Not to Apply Look-Back Method in De Minimis Cases
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final and temporary regulations.
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SUMMARY: This document contains regulations explaining how a taxpayer
elects under section 460(b)(6) not to apply the look-back method to
long-term contracts in de minimis cases. The regulations reflect
changes to the law made by the Taxpayer Relief Act of 1997 and affect
manufacturers and construction contractors whose long-term contracts
otherwise are subject to the look-back method.
DATES: Effective date: These regulations are effective July 2, 1998.
Applicability date: These regulations apply to long-term contracts
completed in taxable years ending after August 5, 1997.
FOR FURTHER INFORMATION CONTACT: Leo F. Nolan II or John M. Aramburu at
(202) 622-4960 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in these final regulations
has been reviewed and approved by the Office of Management and Budget
in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under
control number 1545-1572. Responses to this collection of information
are required for a taxpayer to elect not to apply the look-back method
to long-term contracts in de minimis cases. An agency may not conduct
or sponsor, and a person is not required to respond to, a collection of
information unless the collection of information displays a valid OMB
control number. The estimated average burden per respondent is 0.2
hours.
Comments concerning the accuracy of this burden estimate should be
sent to the Internal Revenue Service, Attn: IRS Reports Clearance
Officer, OP:FS:FP, Washington, DC 20224, and to the Office of
Management and Budget, Attn: Desk Officer for the Department of the
Treasury, Office of Information and Regulatory Affairs, Washington, DC
20503.
Books or records relating to a collection of information must be
retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns and
tax return information are confidential, as required by 26 U.S.C. 6103.
Background
This document contains amendments to the Income Tax Regulations (26
CFR part 1). Section 460(b)(6) of the Internal Revenue Code was added
by section 1211 of the Taxpayer Relief Act of 1997, Public Law 105-34,
111 Stat. 788, 998, to provide an election not to apply the look-back
method of section 460(b)(2) to long-term contracts in de minimis cases.
These regulations provide guidance concerning this new election.
A notice of proposed rulemaking was published in the Federal
Register for January 13, 1998 (63 FR 1932). No written comments were
received, and no public hearing was requested or held. The proposed
regulations under section 460 are adopted by this Treasury decision
with one revision. The final regulations provide that for long-term
contracts completed in taxable years ending after August 5, 1997, an
election not to apply the look-back method under section 460(b)(6)
automatically revokes an election under Sec. 1.460-6(e) to use the
delayed reapplication method.
Special Analyses
It has been determined that this final regulation is not a
significant regulatory action as defined in EO 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. Moreover, it is hereby certified
that the collection of information in these regulations will not have a
significant economic impact on a substantial number of small entities.
This certification is based on the fact that the time required to
prepare and file an election statement is minimal and will not have a
significant impact on those small entities that choose to make the
election. In addition, the election need only be made once by a
taxpayer. Therefore, a Regulatory Flexibility Analysis under the
Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required.
Pursuant to section 7805(f) of the Internal Revenue Code, the
notice of proposed rulemaking preceding these regulations was submitted
to the Chief Counsel for Advocacy of the Small Business Administration
for comment on the impact of the proposed regulations on small
business.
Drafting Information
The principal author of these regulations is Leo F. Nolan II,
Office of Assistant Chief Counsel (Income Tax and Accounting). However,
other personnel from the IRS and Treasury Department participated in
their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 602 are amended as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 is amended by
removing the entry for ``Sec. 1.460-6T'' to read in part as follows:
[[Page 36181]]
Authority: 26 U.S.C. 7805 * * *
Par. 2. In Sec. 1.460-0, the entry for Sec. 1.460-6 is amended by
adding entries for paragraphs (i) and (j) and the entry for Sec. 1.460-
6T is removed to read as follows:
Sec. 1.460-0 Outline of regulations under section 460.
* * * * *
Sec. 1.460-6 Look-back method.
* * * * *
(i) [Reserved].
(j) Election not to apply look-back method in de minimis cases.
* * * * *
Par. 3. In Sec. 1.460-6, paragraph (i) is added and reserved and
paragraph (j) is added to read as follows:
Sec. 1.460-6 Look-back method.
* * * * *
(i) [Reserved].
(j) Election not to apply look-back method in de minimis cases.
Section 460(b)(6) provides taxpayers with an election not to apply the
look-back method to long-term contracts in de minimis cases, effective
for contracts completed in taxable years ending after August 5, 1997.
To make an election, a taxpayer must attach a statement to its timely
filed original federal income tax return (including extensions) for the
taxable year the election is to become effective or to an amended
return for that year, provided the amended return is filed on or before
March 31, 998. This statement must have the legend ``NOTIFICATION OF
ELECTION UNDER SECTION 460(b)(6)''; provide the taxpayer's name and
identifying number and the effective date of the election; and identify
the trades or businesses that involve long-term contracts. An election
applies to all long-term contracts completed during and after the
taxable year for which the election is effective. An election may not
be revoked without the Commissioner's consent. For taxpayers who
elected to use the delayed reapplication method under paragraph (e) of
this section, an election under this paragraph (j) automatically
revokes the election to use the delayed reapplication method for
contracts subject to section 460(b)(6). A consolidated group of
corporations, as defined in Sec. 1.1502-1(h), is subject to consistency
rules analogous to those in paragraph (e)(2) of this section and in
paragraph (d)(4)(ii)(C) of this section (concerning election to use
simplified marginal impact method).
Sec. 1.460-6T [Removed]
Par. 4. Section 1.460-6T is removed.
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
Par. 5. The authority citation for part 602 continues to read as
follows:
Authority: 26 U.S.C. 7805.
Par. 6. In Sec. 602.101, paragraph (c) is amended by:
1. Removing the following entry from the table:
Sec. 602.101 OMB Control numbers.
* * * * *
(c) * * *
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Current OMB
CFR part or section where identified and described control No.
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* * * * *
1.460-6T................................................... 1545-1572
* * * * *
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2. Revising the entry for Sec. 1.460-6 to read as follows:
Sec. 602.101 OMB Control numbers.
* * * * *
(c) * * *
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Current OMB
CFR part or section where identified and described control No.
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* * * * *
1.460-6.................................................... 1545-1031
1545-1572
* * * * *
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Michael P. Dolan,
Deputy Commissioner of Internal Revenue.
Approved: June 12, 1998.
Donald C. Lubick,
Assistant Secretary of the Treasury.
[FR Doc. 98-17697 Filed 7-1-98; 8:45 am]
BILLING CODE 4830-01-U
