80_FR_61505 80 FR 61308 - Notional Principal Contracts; Swaps With Nonperiodic Payments

80 FR 61308 - Notional Principal Contracts; Swaps With Nonperiodic Payments

DEPARTMENT OF THE TREASURY
Internal Revenue Service

Federal Register Volume 80, Issue 197 (October 13, 2015)

Page Range61308-61308
FR Document2015-25921

This document contains amendments to temporary regulations relating to guidance for the treatment of nonperiodic payments made or received pursuant to certain notional principal contracts. These amendments change the applicability date of the embedded loan rule for the treatment of nonperiodic payments from November 4, 2015, to the later of January 1, 2017, or six months after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register. The amendments to the temporary regulations provide guidance to taxpayers who are parties making and receiving nonperiodic payments under notional principal contracts.

Federal Register, Volume 80 Issue 197 (Tuesday, October 13, 2015)
[Federal Register Volume 80, Number 197 (Tuesday, October 13, 2015)]
[Rules and Regulations]
[Page 61308]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-25921]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9719]
RIN 1545-BM62


Notional Principal Contracts; Swaps With Nonperiodic Payments

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations; correcting amendments.

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

SUMMARY: This document contains amendments to temporary regulations 
relating to guidance for the treatment of nonperiodic payments made or 
received pursuant to certain notional principal contracts. These 
amendments change the applicability date of the embedded loan rule for 
the treatment of nonperiodic payments from November 4, 2015, to the 
later of January 1, 2017, or six months after the date of publication 
of the Treasury decision adopting these rules as final regulations in 
the Federal Register. The amendments to the temporary regulations 
provide guidance to taxpayers who are parties making and receiving 
nonperiodic payments under notional principal contracts.

DATES: Effective Date: These amendments are effective on October 13, 
2015.
    Applicability Date: For the date of applicability, see Sec.  1.446-
3T(j)(2), as corrected.

FOR FURTHER INFORMATION CONTACT: Alexa Dubert at (202) 317-6945 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    The temporary regulations that are the subject of these amendments 
are under section 446(b) of the Internal Revenue Code (Code). The 
temporary regulations (TD 9719) were published in the Federal Register 
on Friday, May 8, 2015 (80 FR 26437).

Need for Amendments

    Section 1.446-3T(g)(4)(i) of the temporary regulations provides 
that, subject to certain exceptions set forth in Sec.  1.446-
3T(g)(4)(ii), a notional principal contract with one or more 
nonperiodic payments is treated as two separate transactions consisting 
of an on-market, level payment swap and one or more loans (the embedded 
loan rule). Section 1.446-3T(g)(4)(i) eliminated the exception to the 
embedded loan rule for non-significant, nonperiodic payments set forth 
in the final regulations (TD 8491) published in the Federal Register on 
October 14, 1993 (58 FR 53125) (the 1993 Regulations). See Sec.  1.446-
3. Section 1.446-3T(g)(4)(i) applies to notional principal contracts 
entered into on or after November 4, 2015. After publication of the 
temporary regulations, the Treasury Department and the IRS received 
comments requesting the delay of the applicability date of the embedded 
loan rule set forth in the temporary regulations. In response to those 
comments, this document amends the applicability date to make Sec.  
1.446-3T(g)(4)(i) and Sec.  1.446-3T(g)(6) Example 2 apply to notional 
principal contracts entered into on or after the later of January 1, 
2017, or 180 days after the date of publication of the Treasury 
decision adopting these rules as final regulations in the Federal 
Register. Prior to the date of applicability of Sec.  1.446-
3T(g)(4)(i), as corrected, taxpayers may continue to apply the 1993 
Regulations that (except for purposes of section 956) limit the 
application of the embedded loan rule to nonperiodic payments that are 
significant.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Amendments to the Regulations

    Accordingly, 26 CFR part 1 is corrected by making the following 
correcting amendments:

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 1.446-3T is amended by revising paragraph (j)(2) to 
read as follows:


Sec.  1.446-3T  Notional principal contracts (temporary).

* * * * *
    (j) * * *
    (2) Application of Sec.  1.446-3T(g)(4). Paragraph (g)(4)(i) of 
this section and paragraph (g)(6) Example 2 of this section apply to 
notional principal contracts entered into on or after the later of 
January 1, 2017, or 180 days after the date of publication of the 
Treasury decision adopting these rules as final regulations in the 
Federal Register. Paragraph (g)(4)(ii) of this section applies to 
notional principal contracts entered into on or after May 8, 2015. 
However, before the later of January 1, 2017, or 180 days after the 
date of publication of the Treasury decision adopting paragraph 
(g)(4)(i) of this section as final regulations in the Federal Register, 
taxpayers may rely on the provision in Sec.  1.446-3(g)(4), as 
contained in 26 CFR part 1, revised April 1, 2015, which (except for 
purposes of section 956) limits the application of the embedded loan 
rule to nonperiodic payments that are significant, even if the 
requirements for the exceptions in paragraph (g)(4)(ii) of this section 
are not met. Taxpayers may apply paragraph (g)(4)(i) of this section, 
paragraph (g)(4)(ii) of this section, or both to notional principal 
contracts entered into before the dates set forth in this paragraph 
(j)(2).
* * * * *

Martin Franks,
Branch Chief, Publications & Regulations Branch, Legal Processing 
Division, Associate Chief Counsel (Procedure & Administration).
[FR Doc. 2015-25921 Filed 10-9-15; 8:45 am]
 BILLING CODE 4830-01-P



                                                  61308            Federal Register / Vol. 80, No. 197 / Tuesday, October 13, 2015 / Rules and Regulations

                                                    (B) [Reserved].                                       in the Federal Register. The                          to nonperiodic payments that are
                                                    (vi) AASHTO LRFD Movable                              amendments to the temporary                           significant.
                                                  Highway Bridge Design Specifications,                   regulations provide guidance to
                                                  2nd Edition, 2007, with:                                taxpayers who are parties making and                  List of Subjects in 26 CFR Part 1
                                                    (A) Interim Revisions, 2008,                          receiving nonperiodic payments under                    Income taxes, Reporting and
                                                    (B) Interim Revisions, 2010,                          notional principal contracts.                         recordkeeping requirements.
                                                    (C) Interim Revisions, 2011,                          DATES: Effective Date: These
                                                    (D) Interim Revisions, 2012,                          amendments are effective on October                   Amendments to the Regulations
                                                    (E) Interim Revisions, 2014, and                      13, 2015.
                                                    (F) Interim Revisions, 2015                                                                                   Accordingly, 26 CFR part 1 is
                                                                                                            Applicability Date: For the date of                 corrected by making the following
                                                    (vii) AASHTO/AWS D1.5M/D1.5:
                                                                                                          applicability, see § 1.446–3T(j)(2), as               correcting amendments:
                                                  2010 Bridge Welding Code, 6th Edition,
                                                                                                          corrected.
                                                  2010, with:
                                                    (A) Interim Revisions, 2011, and                                                                            PART 1—INCOME TAXES
                                                                                                          FOR FURTHER INFORMATION CONTACT:
                                                    (B) Interim Revisions, 2012                           Alexa Dubert at (202) 317–6945 (not a
                                                    (viii) Standard Specifications for                    toll-free number).                                    ■ Paragraph 1. The authority citation
                                                  Structural Supports for Highway Signs,                                                                        for part 1 continues to read in part as
                                                                                                          SUPPLEMENTARY INFORMATION:                            follows:
                                                  Luminaires and Traffic Signals, 6th
                                                  Edition, AASHTO 2013.                                   Background                                                Authority: 26 U.S.C. 7805 * * *
                                                    (2) American Welding Society (AWS),                     The temporary regulations that are the
                                                  8869 NW 36 Street, #130 Miami, FL                                                                             ■ Par. 2. Section 1.446–3T is amended
                                                                                                          subject of these amendments are under
                                                  33166–6672; www.aws.org; or (800)                                                                             by revising paragraph (j)(2) to read as
                                                                                                          section 446(b) of the Internal Revenue
                                                  443–9353 or (305) 443–9353.                                                                                   follows:
                                                                                                          Code (Code). The temporary regulations
                                                    (i) D1.4/D1.4M: 2011 Structural                       (TD 9719) were published in the                       § 1.446–3T Notional principal contracts
                                                  Welding Code—Reinforcing Steel, 2011.                   Federal Register on Friday, May 8, 2015               (temporary).
                                                    (ii) [Reserved].                                      (80 FR 26437).
                                                    (e) The FHWA supports using, as                                                                             *       *    *    *     *
                                                  design resources to achieve context                     Need for Amendments                                      (j) * * *
                                                  sensitive designs, guides that national                    Section 1.446–3T(g)(4)(i) of the                      (2) Application of § 1.446–3T(g)(4).
                                                  organizations develop from peer-                        temporary regulations provides that,                  Paragraph (g)(4)(i) of this section and
                                                  reviewed research, or equivalent guides                 subject to certain exceptions set forth in            paragraph (g)(6) Example 2 of this
                                                  that are developed in cooperation with                  § 1.446–3T(g)(4)(ii), a notional principal            section apply to notional principal
                                                  State or local officials, when such                     contract with one or more nonperiodic                 contracts entered into on or after the
                                                  guides are not in conflict with Federal                 payments is treated as two separate                   later of January 1, 2017, or 180 days
                                                  laws and regulations.                                   transactions consisting of an on-market,              after the date of publication of the
                                                  [FR Doc. 2015–25931 Filed 10–9–15; 8:45 am]             level payment swap and one or more                    Treasury decision adopting these rules
                                                  BILLING CODE 4910–22–P                                  loans (the embedded loan rule). Section               as final regulations in the Federal
                                                                                                          1.446–3T(g)(4)(i) eliminated the                      Register. Paragraph (g)(4)(ii) of this
                                                                                                          exception to the embedded loan rule for               section applies to notional principal
                                                  DEPARTMENT OF THE TREASURY                              non-significant, nonperiodic payments                 contracts entered into on or after May 8,
                                                                                                          set forth in the final regulations (TD                2015. However, before the later of
                                                  Internal Revenue Service                                8491) published in the Federal Register               January 1, 2017, or 180 days after the
                                                                                                          on October 14, 1993 (58 FR 53125) (the                date of publication of the Treasury
                                                  26 CFR Part 1                                           1993 Regulations). See § 1.446–3.                     decision adopting paragraph (g)(4)(i) of
                                                  [TD 9719]                                               Section 1.446–3T(g)(4)(i) applies to                  this section as final regulations in the
                                                                                                          notional principal contracts entered into             Federal Register, taxpayers may rely on
                                                  RIN 1545–BM62                                           on or after November 4, 2015. After                   the provision in § 1.446–3(g)(4), as
                                                                                                          publication of the temporary                          contained in 26 CFR part 1, revised
                                                  Notional Principal Contracts; Swaps                                                                           April 1, 2015, which (except for
                                                                                                          regulations, the Treasury Department
                                                  With Nonperiodic Payments                                                                                     purposes of section 956) limits the
                                                                                                          and the IRS received comments
                                                  AGENCY:  Internal Revenue Service (IRS),                requesting the delay of the applicability             application of the embedded loan rule
                                                  Treasury.                                               date of the embedded loan rule set forth              to nonperiodic payments that are
                                                  ACTION: Temporary regulations;                          in the temporary regulations. In                      significant, even if the requirements for
                                                  correcting amendments.                                  response to those comments, this                      the exceptions in paragraph (g)(4)(ii) of
                                                                                                          document amends the applicability date                this section are not met. Taxpayers may
                                                  SUMMARY:   This document contains                       to make § 1.446–3T(g)(4)(i) and § 1.446–              apply paragraph (g)(4)(i) of this section,
                                                  amendments to temporary regulations                     3T(g)(6) Example 2 apply to notional                  paragraph (g)(4)(ii) of this section, or
                                                  relating to guidance for the treatment of               principal contracts entered into on or                both to notional principal contracts
                                                  nonperiodic payments made or received                   after the later of January 1, 2017, or 180            entered into before the dates set forth in
                                                  pursuant to certain notional principal                  days after the date of publication of the             this paragraph (j)(2).
asabaliauskas on DSK5VPTVN1PROD with RULES




                                                  contracts. These amendments change                      Treasury decision adopting these rules                *       *    *    *     *
                                                  the applicability date of the embedded                  as final regulations in the Federal
                                                  loan rule for the treatment of                          Register. Prior to the date of                        Martin Franks,
                                                  nonperiodic payments from November                      applicability of § 1.446–3T(g)(4)(i), as              Branch Chief, Publications & Regulations
                                                  4, 2015, to the later of January 1, 2017,               corrected, taxpayers may continue to                  Branch, Legal Processing Division, Associate
                                                  or six months after the date of                         apply the 1993 Regulations that (except               Chief Counsel (Procedure & Administration).
                                                  publication of the Treasury decision                    for purposes of section 956) limit the                [FR Doc. 2015–25921 Filed 10–9–15; 8:45 am]
                                                  adopting these rules as final regulations               application of the embedded loan rule                 BILLING CODE 4830–01–P




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Document Created: 2018-02-27 08:47:43
Document Modified: 2018-02-27 08:47:43
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionRules and Regulations
ActionTemporary regulations; correcting amendments.
DatesEffective Date: These amendments are effective on October 13, 2015.
ContactAlexa Dubert at (202) 317-6945 (not a toll-free number).
FR Citation80 FR 61308 
RIN Number1545-BM62
CFR AssociatedIncome Taxes and Reporting and Recordkeeping Requirements

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