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)

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, 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.

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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