80 FR 26500 - Notional Principal Contracts; Swaps With Nonperiodic Payments

DEPARTMENT OF THE TREASURY
Internal Revenue Service

Federal Register Volume 80, Issue 89 (May 8, 2015)

Page Range		26500-26501
FR Document		2015-11093

In the Rules and Regulations section of this issue of the Federal Register, the IRS is issuing final and temporary regulations that amend the treatment of nonperiodic payments made or received pursuant to certain notional principal contracts. These regulations provide that, subject to certain exceptions, a notional principal contract with a nonperiodic payment, regardless of whether it is significant, must be treated as two separate transactions consisting of one or more loans and an on-market, level payment swap. The regulations provide an exception from the definition of United States property. These regulations affect parties making and receiving payments under notional principal contracts, including United States shareholders of controlled foreign corporations and tax-exempt organizations. The text of the temporary regulations also serves as the text of these proposed regulations. This document withdraws the notice of proposed rulemaking (REG-107548-11; RIN 1545-BK10) published in the Federal Register on May 11, 2012 (77 FR 27669).

Federal Register, Volume 80 Issue 89 (Friday, May 8, 2015)

[Federal Register Volume 80, Number 89 (Friday, May 8, 2015)]
[Proposed Rules]
[Pages 26500-26501]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-11093]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-102656-15; REG-107548-11]
RIN 1545-BM61; 1545-BK10


Notional Principal Contracts; Swaps With Nonperiodic Payments

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Withdrawal of notice of proposed rulemaking; notice of proposed 
rulemaking by cross-reference to temporary regulations.

-----------------------------------------------------------------------

SUMMARY: In the Rules and Regulations section of this issue of the 
Federal Register, the IRS is issuing final and temporary regulations 
that amend the treatment of nonperiodic payments made or received 
pursuant to certain notional principal contracts. These regulations 
provide that, subject to certain exceptions, a notional principal 
contract with a nonperiodic payment, regardless of whether it is 
significant, must be treated as two separate transactions consisting of 
one or more loans and an on-market, level payment swap. The regulations 
provide an exception from the definition of United States property. 
These regulations affect parties making and receiving payments under 
notional principal contracts, including United States shareholders of 
controlled foreign corporations and tax-exempt organizations. The text 
of the temporary regulations also serves as the text of these proposed 
regulations. This document withdraws the notice of proposed rulemaking 
(REG-107548-11; RIN 1545-BK10) published in the Federal Register on May 
11, 2012 (77 FR 27669).

DATES: Comments and requests for a public hearing must be received by 
August 6, 2015.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG-102656-15), Room 5203, 
Internal Revenue Service, P.O. 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-
102656-15), 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-102656-15).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations 
under section 446, Alexa T. Dubert or Anna H. Kim at (202) 317-6895; 
concerning the proposed regulations under section 956, Kristine A. 
Crabtree at (202) 317-6934; concerning submissions of comments or to 
request a public hearing, Oluwafunmilayo Taylor, (202) 317-6901 (not 
toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

    On May 11, 2012, the Treasury Department and the IRS published 
temporary regulations under section 956 (TD 9589) in the Federal 
Register (77 FR 27612). On the same date, a notice of proposed 
rulemaking (REG-107548-11) by cross-reference to the temporary 
regulations was published in the Federal Register (77 FR 27669). This 
document withdraws those proposed regulations (REG-107548-11; RIN 1545-
BK10) and provides new proposed regulations (REG-102656-15).
    Final and temporary regulations in the Rules and Regulations 
section of this issue of the Federal Register amend the Income Tax 
Regulations (26 CFR part 1). The final and temporary regulations amend 
the regulations under section 446 of the Internal Revenue Code (Code) 
relating to the treatment of nonperiodic payments made or received 
pursuant to certain notional principal contracts for U.S. federal 
income tax purposes. The final and temporary regulations also amend the 
regulations under section 956 of the Code regarding an exception from 
the definition of United States property. The text of the final and 
temporary regulations also serves as the text of these proposed 
regulations. The preamble to the final and temporary regulations 
explains those regulations and these proposed regulations.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866, as supplemented by Executive Order 13653. Therefore, a 
regulatory assessment is not required. It also has

[[Page 26501]]

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 
these 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 Code, this notice of proposed 
rulemaking has been submitted to the Chief Counsel for Advocacy of the 
Small Business Administration for comment on its impact on small 
entities.

Comments and Requests for Public Hearing

    Before these 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 rules. All comments will be available at 
www.regulations.gov or upon request. A public hearing will be scheduled 
if requested in writing by any person that timely submits written 
comments. If a public hearing is scheduled, notice of the date, time, 
and place for the hearing will be published in the Federal Register.

Drafting Information

    The principal authors of these regulations are Alexa T. Dubert and 
Anna H. Kim of the Office of Associate Chief Counsel (Financial 
Institutions and Products). However, other personnel from the Treasury 
Department and the IRS participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Withdrawal of Notice of Proposed Rulemaking

    Accordingly, under the authority of 26 U.S.C. 7805, the notice of 
proposed rulemaking (REG-107548-11 and RIN 1545-BK10) that was 
published in the Federal Register on May 11, 2012 (77 FR 27669) is 
withdrawn.

Proposed Amendments to the Regulations

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

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

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

0
Par. 2. Section 1.446-3 is amended by:
0
1. Revising paragraph (g)(4).
0
2. Revising paragraph (g)(6), Examples 2, 3 and 4.
0
3. Revising paragraph (j)(2).
    The revisions read as follows:


Sec.  1.446-3  Notional principal contracts.

* * * * *
    (g) * * *
    (4) [The text of the proposed amendment to Sec.  1.446-3(g)(4) is 
the same as the text of Sec.  1.446-3T(g)(4) published elsewhere in 
this issue of the Federal Register].
* * * * *
    (6) * * *

    Example 2. [The text of proposed amendment to Sec.  1.446-
3(g)(6) Example 2 is the same as the text of Sec.  1.446-3T(g)(6) 
Example 2 published elsewhere in this issue of the Federal 
Register].
    Example 3. [The text of proposed amendment to Sec.  1.446-
3(g)(6) Example 3 is the same as the text of Sec.  1.446-3T(g)(6) 
Example 3 published elsewhere in this issue of the Federal 
Register].
    Example 4. [The text of proposed amendment to Sec.  1.446-
3(g)(6) Example 4 is the same as the text of Sec.  1.446-3T(g)(6) 
Example 4 published elsewhere in this issue of the Federal 
Register].
* * * * *
    (j) * * *
    (2) [The text of the proposed amendment to Sec.  1.446-3(j)(2) is 
the same as the text of Sec.  1.446-3T(j)(2) published elsewhere in 
this issue of the Federal Register].
0
Par. 3. Section 1.956-2 is amended by revising paragraphs (b)(1)(xi) 
and (f) to read as follows:


Sec.  1.956-2  Definition of United States property.

* * * * *
    (b)(1)(xi) [The text of this proposed amendment is the same as the 
text of Sec.  1.956-2T(b)(1)(xi) published elsewhere in this issue of 
the Federal Register].
* * * * *
    (f) [The text of this proposed amendment is the same as the text of 
Sec.  1.956-2T(f) published elsewhere in this issue of the Federal 
Register].

 John M. Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2015-11093 Filed 5-7-15; 8:45 am]
 BILLING CODE 4830-01-P

26500 Federal Register / Vol. 80, No. 89 / Friday, May 8, 2015 / Proposed Rules

with respect to systems of records (J) Litigation, Claims, and may be hand-delivered Monday through
maintained by the Department, Administrative Proceeding Records— Friday between the hours of 8 a.m. and
including the parts of each system to be COMMERCE/DEPT–14; and 4 p.m. to CC:PA:LPD:PR (REG–102656–
exempted, the provisions of the Act (K) Access Control and Identity 15), Courier’s Desk, Internal Revenue
from which they are exempted, and the Management System—COMMERCE/ Service, 1111 Constitution Avenue NW.,
justification for the exemption, are as DEPT–25, but only on condition that the Washington, DC 20224, or sent
follows: general exemption claimed in electronically via the Federal
(1) Exempt under 5 U.S.C. 552a(k)(1). § 4.33(b)(4) is held to be invalid. eRulemaking Portal at
The systems of records exempt * * * * * www.regulations.gov (IRS REG–102656–
hereunder appear in paragraph (a) of [FR Doc. 2015–10451 Filed 5–7–15; 8:45 am] 15).
this section. The claims for exemption BILLING CODE 3510–BX–P FOR FURTHER INFORMATION CONTACT:
of COMMERCE/DEPT–12, COMMERCE/ Concerning the proposed regulations
ITA–1, COMMERCE/NOAA–5, and under section 446, Alexa T. Dubert or
COMMERCE/DEPT–25 under this DEPARTMENT OF THE TREASURY Anna H. Kim at (202) 317–6895;
paragraph are subject to the condition concerning the proposed regulations
that the general exemption claimed in Internal Revenue Service under section 956, Kristine A. Crabtree
§ 4.33(b) is held to be invalid. at (202) 317–6934; concerning
* * * * * 26 CFR Part 1 submissions of comments or to request
(2)(i) Exempt under 5 U.S.C. [REG–102656–15; REG–107548–11] a public hearing, Oluwafunmilayo
552a(k)(2). The systems of records Taylor, (202) 317–6901 (not toll-free
exempt (some only conditionally), the RIN 1545–BM61; 1545–BK10 numbers).
sections of the Act from which SUPPLEMENTARY INFORMATION:
exempted, and the reasons therefor are Notional Principal Contracts; Swaps
as follows: With Nonperiodic Payments Background and Explanation of
* * * * * AGENCY: Internal Revenue Service (IRS), Provisions
(C) Fisheries Law Enforcement Case Treasury. On May 11, 2012, the Treasury
Files—COMMERCE/NOAA–5, but only ACTION: Withdrawal of notice of Department and the IRS published
on condition that the general exemption proposed rulemaking; notice of temporary regulations under section 956
claimed in § 4.33(b)(2) is held to be proposed rulemaking by cross-reference (TD 9589) in the Federal Register (77 FR
invalid; to temporary regulations. 27612). On the same date, a notice of
* * * * * proposed rulemaking (REG–107548–11)
(F) Access Control and Identity SUMMARY: In the Rules and Regulations by cross-reference to the temporary
Management System—COMMERCE/ section of this issue of the Federal regulations was published in the
DEPT–25, but only on condition that the Register, the IRS is issuing final and Federal Register (77 FR 27669). This
general exemption claimed in temporary regulations that amend the document withdraws those proposed
§ 4.33(b)(4) is held to be invalid; treatment of nonperiodic payments regulations (REG–107548–11; RIN 1545–
made or received pursuant to certain BK10) and provides new proposed
* * * * * notional principal contracts. These
(4)(i) Exempt under 5 U.S.C. regulations (REG–102656–15).
regulations provide that, subject to Final and temporary regulations in
552a(k)(5). The systems of records certain exceptions, a notional principal
exempt (some only conditionally), the the Rules and Regulations section of this
contract with a nonperiodic payment, issue of the Federal Register amend the
sections of the Act from which regardless of whether it is significant,
exempted, and the reasons therefor are Income Tax Regulations (26 CFR part 1).
must be treated as two separate The final and temporary regulations
as follows: transactions consisting of one or more
(A) Applications to U.S. Merchant amend the regulations under section
loans and an on-market, level payment 446 of the Internal Revenue Code (Code)
Marine Academy (USMMA)— swap. The regulations provide an
COMMERCE/MA–1; relating to the treatment of nonperiodic
exception from the definition of United payments made or received pursuant to
(B) USMMA Midshipman Medical
States property. These regulations affect certain notional principal contracts for
Files—COMMERCE/MA–17;
parties making and receiving payments U.S. federal income tax purposes. The
(C) USMMA Midshipman Personnel
under notional principal contracts, final and temporary regulations also
Files—COMMERCE/MA–18;
(D) USMMA Non-Appropriated Fund including United States shareholders of amend the regulations under section
Employees—COMMERCE/MA–19; controlled foreign corporations and tax- 956 of the Code regarding an exception
(E) Applicants for the NOAA Corps— exempt organizations. The text of the from the definition of United States
COMMERCE/NOAA–1; temporary regulations also serves as the property. The text of the final and
(F) Commissioned Officer Official text of these proposed regulations. This temporary regulations also serves as the
Personnel Folders—COMMERCE/ document withdraws the notice of text of these proposed regulations. The
NOAA–3; proposed rulemaking (REG–107548–11; preamble to the final and temporary
(G) Conflict of Interest Records, RIN 1545–BK10) published in the regulations explains those regulations
Appointed Officials—COMMERCE/ Federal Register on May 11, 2012 (77 and these proposed regulations.
asabaliauskas on DSK5VPTVN1PROD with PROPOSALS

DEPT–3: FR 27669).
(H) Investigative and Inspection DATES: Comments and requests for a Special Analyses
Records—COMMERCE/DEPT–12, but public hearing must be received by It has been determined that this notice
only on condition that the general August 6, 2015. of proposed rulemaking is not a
exemption claimed in § 4.33(b)(3) is ADDRESSES: Send submissions to significant regulatory action as defined
held to be invalid; CC:PA:LPD:PR (REG–102656–15), Room in Executive Order 12866, as
(I) Investigative Records— Persons 5203, Internal Revenue Service, P.O. supplemented by Executive Order
within the Investigative Jurisdiction of Box 7604, Ben Franklin Station, 13653. Therefore, a regulatory
the Department COMMERCE/DEPT–13; Washington, DC 20044. Submissions assessment is not required. It also has

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Federal Register / Vol. 80, No. 89 / Friday, May 8, 2015 / Proposed Rules 26501

been determined that section 553(b) of ■ Par. 2. Section 1.446–3 is amended NATIONAL ARCHIVES AND RECORDS
the Administrative Procedure Act (5 by: ADMINISTRATION
U.S.C. chapter 5) does not apply to these ■ 1. Revising paragraph (g)(4).
regulations, and because these Information Security Oversight Office
regulations do not impose a collection ■ 2. Revising paragraph (g)(6), Examples
of information on small entities, the 2, 3 and 4. 32 CFR Part 2002
Regulatory Flexibility Act (5 U.S.C. ■ 3. Revising paragraph (j)(2). [FDMS No. NARA–15–0001; NARA–2015–
chapter 6) does not apply. Pursuant to The revisions read as follows: 037]
section 7805(f) of the Code, this notice
of proposed rulemaking has been § 1.446–3 Notional principal contracts. RIN 3095–AB80
submitted to the Chief Counsel for * * * * * Controlled Unclassified Information
Advocacy of the Small Business
Administration for comment on its (g) * * * AGENCY: Information Security Oversight
impact on small entities. (4) [The text of the proposed Office, NARA.
amendment to § 1.446–3(g)(4) is the ACTION: Proposed rule.
Comments and Requests for Public
same as the text of § 1.446–3T(g)(4)
Hearing SUMMARY: As the Federal Government’s
published elsewhere in this issue of the
Before these proposed regulations are Federal Register]. Executive Agent for Controlled
adopted as final regulations, Unclassified Information (CUI), the
* * * * *
consideration will be given to any Information Security Oversight Office
comments that are submitted timely to (6) * * * (ISOO) of the National Archives and
the IRS as prescribed in this preamble Example 2. [The text of proposed Records Administration (NARA)
under the ADDRESSES heading. The amendment to § 1.446–3(g)(6) Example 2 is implements the Federal Government-
Treasury Department and the IRS the same as the text of § 1.446–3T(g)(6) wide CUI Program. As part of that
request comments on all aspects of the Example 2 published elsewhere in this issue responsibility, ISOO proposes this rule
proposed rules. All comments will be of the Federal Register]. to establish policy for agencies on
available at www.regulations.gov or Example 3. [The text of proposed designating, safeguarding,
upon request. A public hearing will be amendment to § 1.446–3(g)(6) Example 3 is disseminating, marking, decontrolling,
scheduled if requested in writing by any the same as the text of § 1.446–3T(g)(6) and disposing of CUI, self-inspection
person that timely submits written Example 3 published elsewhere in this issue and oversight requirements, and other
comments. If a public hearing is of the Federal Register]. facets of the Program.
scheduled, notice of the date, time, and Example 4. [The text of proposed DATES: Submit comments on or before
place for the hearing will be published amendment to § 1.446–3(g)(6) Example 4 is July 7, 2015.
in the Federal Register. the same as the text of § 1.446–3T(g)(6) ADDRESSES: You may submit comments,
Example 4 published elsewhere in this issue identified by RIN 3095–AB80, by any of
Drafting Information of the Federal Register].
the following methods:
The principal authors of these * * * * * • Federal eRulemaking Portal: http://
regulations are Alexa T. Dubert and
(j) * * * www.regulations.gov. Follow the
Anna H. Kim of the Office of Associate
instructions for submitting comments.
Chief Counsel (Financial Institutions (2) [The text of the proposed • Email: Regulation_comments@
and Products). However, other amendment to § 1.446–3(j)(2) is the nara.gov. Include RIN 3095–AB80 in the
personnel from the Treasury same as the text of § 1.446–3T(j)(2) subject line of the message.
Department and the IRS participated in published elsewhere in this issue of the • Fax: 301–837–0319. Include RIN
their development. Federal Register]. 3095–AB80 in the subject line of the fax
List of Subjects in 26 CFR Part 1 ■ Par. 3. Section 1.956–2 is amended by cover sheet.
revising paragraphs (b)(1)(xi) and (f) to • Mail (for paper, disk, or CD–ROM
Income taxes, Reporting and
read as follows: submissions. Include RIN 3095–AB80
recordkeeping requirements.
on the submission): Regulations
Withdrawal of Notice of Proposed § 1.956–2 Definition of United States Comment Desk, Strategy Division (SP);
Rulemaking property. Suite 4100; National and Archives
Accordingly, under the authority of * * * * * Records Administration; 8601 Adelphi
26 U.S.C. 7805, the notice of proposed (b)(1)(xi) [The text of this proposed Road; College Park, MD 20740–6001.
rulemaking (REG–107548–11 and RIN amendment is the same as the text of • Hand delivery or courier: Deliver
1545–BK10) that was published in the § 1.956–2T(b)(1)(xi) published comments to front desk at the address
Federal Register on May 11, 2012 (77 elsewhere in this issue of the Federal above.
FR 27669) is withdrawn. Instructions: All submissions must
Register].
include NARA’s name and the
Proposed Amendments to the * * * * * regulatory information number for this
Regulations (f) [The text of this proposed rulemaking (RIN 3095–AB80). We may
asabaliauskas on DSK5VPTVN1PROD with PROPOSALS

Accordingly, 26 CFR part 1 is amendment is the same as the text of publish any comments we receive
proposed to be amended as follows: § 1.956–2T(f) published elsewhere in without changes, including any
this issue of the Federal Register]. personal information you include.
PART 1—INCOME TAXES FOR FURTHER INFORMATION CONTACT:
John M. Dalrymple, Kimberly Keravuori, by email at
■ Paragraph 1. The authority citation Deputy Commissioner for Services and regulations_comments@nara.gov, or by
for part 1 continues to read in part as Enforcement. telephone at 301–837–3151. You may
follows: [FR Doc. 2015–11093 Filed 5–7–15; 8:45 am] also find more information about the
Authority: 26 U.S.C. 7805 * * * BILLING CODE 4830–01–P CUI Program, and some FAQs, on

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Document Created: 2018-02-21 10:24:23
Document Modified: 2018-02-21 10:24:23

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Proposed Rules
Action		Withdrawal of notice of proposed rulemaking; notice of proposed rulemaking by cross-reference to temporary regulations.
Dates		Comments and requests for a public hearing must be received by August 6, 2015.
Contact		Concerning the proposed regulations under section 446, Alexa T. Dubert or Anna H. Kim at (202) 317-6895; concerning the proposed regulations under section 956, Kristine A. Crabtree at (202) 317-6934; concerning submissions of comments or to request a public hearing, Oluwafunmilayo Taylor, (202) 317-6901 (not toll-free numbers).
FR Citation		80 FR 26500
RIN Number		1545-BM61 and 1545-BK10
CFR Associated		Income Taxes and Reporting and Recordkeeping Requirements

80 FR 26500 - Notional Principal Contracts; Swaps With Nonperiodic Payments

DEPARTMENT OF THE TREASURYInternal Revenue Service

Federal Register Volume 80, Issue 89 (May 8, 2015)

DEPARTMENT OF THE TREASURY
Internal Revenue Service