81 FR 70938 - Election To Take Disaster Loss Deduction for Preceding Year
DEPARTMENT OF THE TREASURY
Internal Revenue Service Federal Register Volume 81, Issue 199 (October 14, 2016)
Internal Revenue Service
Federal Register Volume 81, Issue 199 (October 14, 2016)
| Page Range | 70938-70940 | |
| FR Document | 2016-24664 |
[Federal Register Volume 81, Number 199 (Friday, October 14, 2016)] [Rules and Regulations] [Pages 70938-70940] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-24664] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [TD 9789] RIN 1545-BM03 Election To Take Disaster Loss Deduction for Preceding Year AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final and temporary regulations. ----------------------------------------------------------------------- SUMMARY: This document contains final and temporary regulations relating to the election to accelerate the timing of a loss sustained by a taxpayer attributable to a federally declared disaster. The text of the temporary [[Page 70939]] regulations also serves as the text of the proposed regulations (REG- 150992-13) set forth in the notice of proposed rulemaking on this subject in the Proposed Rules section in this issue of the Federal Register. DATES: Effective Date: These regulations are effective October 13, 2016. Applicability Dates: For dates of applicability, see Sec. 1.165- 11T(i). FOR FURTHER INFORMATION CONTACT: Daniel Cassano (202) 317-7011 (not a toll free number). SUPPLEMENTARY INFORMATION: Background This document contains amendments to the Income Tax Regulations (26 CFR part 1) under section 165(i) of the Internal Revenue Code (Code) regarding the election to deduct a loss attributable to a federally declared disaster for the taxable year prior to the year in which the disaster occurred. Under section 165, a loss from a federally declared disaster is a form of casualty loss. A casualty loss is generally allowed as a deduction only for the taxable year in which the loss is sustained (disaster year). Section 165(i) provides an exception to the general timing rule by allowing a taxpayer to elect to treat an allowable loss occurring in a disaster area and attributable to a federally declared disaster as sustained in the taxable year immediately prior to the taxable year in which the disaster occurred (preceding year). Taxpayers make the election under section 165(i) by clearly indicating on an original return, an amended return, or a refund claim, that the election has been made. The existing regulations under section 165(i) provide that the original return, amended return, or refund claim must be filed on or before the later of: (1) The due date of the taxpayer's income tax return (determined without regard to any extension of time for filing the return) for the disaster year; or (2) the due date of the taxpayer's income tax return (determined with regard to any extension of time for filing the return) for the preceding year. Thus, taxpayers typically have until the unextended due date of the return for the disaster year to make the section 165(i) election. Concerns have been raised that the due date for making the section 165(i) election may not always provide sufficient time for taxpayers affected by disasters to consider whether to make the election. These concerns led the Department of the Treasury (Treasury Department) and the IRS to issue notices postponing the due date in the wake of a number of federally declared disasters in the last ten years. Notice 2006-17, 2006-1 C.B. 559, postponed the due date for victims of Hurricanes Katrina, Rita, and Wilma to make a section 165(i) election for their disaster losses to October 16, 2006. Notice 2013-21, 2013-15 I.R.B. 903, postponed the due date for victims of Hurricane Sandy to make a section 165(i) election for their disaster losses to October 15, 2013. Notice 2014-20, 2014-16 I.R.B. 937, postponed the due date for victims of a major Colorado flooding event to make a section 165(i) election for their disaster losses to October 15, 2014. Explanation of Provisions 1. Definitions These temporary regulations add a paragraph that defines the following terms for purposes of the temporary regulations: Federally declared disaster; federally declared disaster area; disaster loss; disaster year; and preceding year. A federally declared disaster means any disaster subsequently determined by the President of the United States to warrant assistance by the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act or a successor enactment. A federally declared disaster area is the area determined to be eligible for assistance pursuant to the Presidential declaration in paragraph (b)(1) of the section. A disaster loss is a loss occurring in a federally declared disaster area that is attributable to a federally declared disaster and that is otherwise allowable as a deduction for the disaster year under section 165(a) and Sec. Sec. 1.165-1 through 1.165-10 of the Income Tax Regulations. The disaster year is defined as the taxable year in which a taxpayer sustains a loss attributable to a federally declared disaster. The preceding year is the taxable year immediately prior to the disaster year. 2. Time and Manner of Making the Section 165(i) Election These temporary regulations generally provide that the due date for making the section 165(i) election is six months after the due date for filing the taxpayer's federal income tax return for the disaster year (determined without regard to any extension of time to file). This amount of time is comparable to the length of the postponements of the due dates for making the election granted in the notices identified in the Background section of this preamble. These temporary regulations also authorize the Treasury Department and the IRS to issue additional guidance regarding the time and manner for making the section 165(i) election. The authorization in these temporary regulations will permit the Treasury Department and the IRS to act quickly to adapt to both taxpayer needs and the needs of tax administration as future disasters occur. Contemporaneously with these temporary regulations, the Treasury Department and the IRS are issuing Rev. Proc. 2016-53, I.R.B 2016-44, which specifies how a taxpayer makes a section 165(i) election and incorporates the due date for making the election provided in these temporary regulations. 3. Revocations of a Section 165(i) Election These temporary regulations extend the period of time for revoking a section 165(i) election to ninety (90) days after the due date for making the election. This change conforms to the rule established by the United States Tax Court in Matheson v. Commissioner, 74 T.C. 836 (1980), acq., AOD-1980-177. These temporary regulations also authorize the Treasury Department and the IRS to issue additional guidance regarding the time and manner of revoking the election. Rev. Proc. 2016-53 specifies how a taxpayer revokes a section 165(i) election and incorporates the due date for revoking the election provided in these temporary regulations. 4. Consistent Return Positions These temporary regulations reflect rules established elsewhere in federal tax law that a taxpayer cannot deduct the same loss in more than one taxable year. Taxpayers must amend the return for the disaster year in order to make the section 165(i) election for a disaster loss if the taxpayer has deducted such loss for the disaster year. Similarly, taxpayers must amend the preceding year return to revoke a section 165(i) election before filing a return or amended return to deduct the loss in the disaster year. Rev. Proc. 2016-53 contains further guidance for taxpayers in amending returns and taking consistent return positions to minimize the administrative burden on the IRS in ensuring the prompt processing of refunds. 5. Immediate Effect These temporary regulations are effective immediately because they provide relief to taxpayers who suffer casualty losses attributable to federally declared disasters and the Treasury Department and the IRS anticipate a significant number of casualty losses arising from recent instances of flooding [[Page 70940]] in areas located throughout the United States, including Texas and Louisiana. Special Analyses Certain IRS regulations, including these, are exempt from the requirements of Executive Order 12866, as supplemented and reaffirmed by Executive Order 13563. Therefore, a regulatory impact 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. For applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6), please refer to the cross-referencing notice of proposed rulemaking published in the Proposed Rules section in this issue of the Federal Register. Pursuant to section 7805(f) of the Code, these temporary regulations will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business. Drafting Information The principal authors of these regulations are Daniel Cassano and Christopher Wrobel of the Office of the Associate Chief Counsel (Income Tax & Accounting). 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. Amendments to the Regulations Accordingly, 26 CFR part 1 is 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 1.165-11 is revised to read as follows: Sec. 1.165-11 Election in respect of losses attributable to a disaster. (a) through (j) [Reserved]. For further guidance, see Sec. 1.165- 11T(a) through (j). 0 Par. 3. Section 1.165-11T is added to read as follows: Sec. 1.165-11T Election to take disaster loss deduction for preceding year (temporary). (a) In general. Section 165(i) allows a taxpayer who has sustained a loss attributable to a federally declared disaster in a taxable year to elect to deduct that disaster loss in the preceding year. This section provides rules and procedures for making and revoking an election to claim a disaster loss in the preceding year. (b) Definitions. The following definitions apply for purposes of this section: (1) A federally declared disaster means any disaster subsequently determined by the President of the United States to warrant assistance by the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act or a successor enactment. (2) A federally declared disaster area is the area determined to be eligible for assistance pursuant to the Presidential declaration in paragraph (b)(1) of this section. (3) A disaster loss is a loss occurring in a federally declared disaster area that is attributable to a federally declared disaster and that is otherwise allowable as a deduction for the disaster year under section 165(a) and Sec. Sec. 1.165-1 through 1.165-10. (4) The disaster year is the taxable year in which a taxpayer sustains a loss attributable to a federally declared disaster. (5) The preceding year is the taxable year immediately prior to the disaster year. (c) Scope and effect of election. An election made pursuant to section 165(i) for a disaster loss attributable to a particular disaster applies to the entire loss sustained by the taxpayer from that disaster during the disaster year. If the taxpayer makes a section 165(i) election with respect to a particular disaster occurring during the disaster year, the disaster to which the election relates is deemed to have occurred, and the disaster loss to which the election applies is deemed to have been sustained, in the preceding year. (d) Requirement to file consistent returns. A taxpayer may not make a section 165(i) election for a disaster loss if the taxpayer claims a deduction (as a loss, as cost of goods sold, or otherwise) for the same loss for the disaster year. If a taxpayer has claimed a deduction for a disaster loss for the disaster year and the taxpayer wishes to make a section 165(i) election with respect to such loss, the taxpayer must file an amended return to remove the previously deducted loss on or before the date that the taxpayer makes the section 165(i) election for such loss. Similarly, if a taxpayer has claimed a deduction for a disaster loss for the preceding year based on a section 165(i) election and the taxpayer wishes to revoke that election, the taxpayer must file an amended return to remove the loss for the preceding year on or before the date the taxpayer files the return or amended return for the disaster year that includes the loss. (e) Manner of making election. An election under section 165(i) to deduct a disaster loss for the preceding year is made on an original federal tax return for the preceding year or an amended federal tax return for the preceding year in the manner specified by guidance issued pursuant to these regulations. See paragraph (h) of this section. (f) Due date for making election. The due date for making the section 165(i) election is six months after the due date for filing the taxpayer's federal income tax return for the disaster year (determined without regard to any extension of time to file). (g) Revocation. Subject to the requirements in paragraph (d) of this section, a section 165(i) election may be revoked on or before the date that is ninety (90) days after the due date for making the election. (h) Additional guidance. The time and manner for making and revoking a section 165(i) election under paragraphs (d), (e), (f), and (g) of this section may be modified through guidance published in the Federal Register or in the Internal Revenue Bulletin (see Sec. 601.601(d) of this chapter). (i) Effective/applicability date. This section is effective October 13, 2016 and applies to elections, revocations, and any other related actions that can be made or taken on or after October 13, 2016. (j) Expiration date. The section expires October 13, 2019. John Dalrymple, Deputy Commissioner for Services and Enforcement. Approved: September 19, 2016. Mark J. Mazur, Assistant Secretary of the Treasury (Tax Policy). [FR Doc. 2016-24664 Filed 10-13-16; 8:45 am] BILLING CODE 4830-01-P
![70938 Federal Register / Vol. 81, No. 199 / Friday, October 14, 2016 / Rules and Regulations
Small busi- Counsel for Advocacy of the Small For the reasons set forth above, the
NAICS industry title ness size Business Administration. Consequently, Federal Trade Commission amends 16
standard no significant issues have arisen from CFR part 304 as follows:
comments, and no changes have been
Toy and Hobby Goods and 100 employ- PART 304—RULES AND
made to the proposed rule in the final
Supplies Merchant Whole- ees REGULATIONS UNDER THE HOBBY
salers. rule as a result of comments.
Hobby, Toy and Game $27.5 million (3) A description of and an estimate PROTECTION ACT
Stores. of the number of small entities to which
the Rules will apply. ■ 1. The authority citation for this part
Souvenir Stores ..................... $7.5 million
Political Organizations ........... $7.5 million As noted earlier, staff estimates that continues to read as follows:
Electronic Shopping .............. $32.5 million approximately 5,000 retailers, Authority: 15 U.S.C. 2101 et seq.
Electronic Auctions ................ $38.5 million manufacturers, and importers of ■ 2. Revise § 304.3 to read as follows:
Mail-Order Houses ................ $38.5 million imitation numismatic items are subject
to the Rules, and from 500 to 2,500 § 304.3 Applicability.
From the record of this proceeding, manufacturers and importers of Any person engaged in the
the Commission is unable to conclude imitation political items are subject to manufacturing, or importation into the
how many of the above-listed entities the Rules. United States for introduction into or
qualify as small businesses. The record (4) A description of the projected distribution in commerce, of imitation
does not contain information regarding reporting, recordkeeping and other political or imitation numismatic items
the size of the entities subject to the compliance requirements. shall be subject to the requirements of
Rules. Moreover, the relevant NAICS The Rules impose a disclosure the Act and the regulations promulgated
categories include many entities that do (marking) burden, currently estimated at thereunder. Any person engaged in the
not engage in activities covered by the 5 hours annually. The amendment is not sale in commerce of imitation
Rules. Therefore, estimates of the expected to increase this burden on any numismatic items shall be subject to the
percentage of small businesses in those person or entity subject to and in requirements of the Act and the
categories would not necessarily reflect compliance with the Rules. The regulations promulgated thereunder. It
the percentage of small businesses additional burden imposed by the shall be a violation of the Act and the
subject to the Rules in those categories. amendment will result solely from the regulations promulgated thereunder for
Even absent this data, however, the expanded scope of the Rules to cover a person to provide substantial
Commission does not expect that the certain additional persons and entities, assistance or support to any
amendments will have a significant consistent with the Hobby Act, as manufacturer, importer, or seller of
economic impact on small entities. As amended. As noted earlier, the imitation numismatic items, or to any
discussed above in Section V, the disclosure burden imposed by the Rules manufacturer or importer of imitation
amendments do not impose any new is normally addressed in the political items, if that person knows or
costs upon persons or entities engaged manufacturing process, which requires should have known that the
in commerce concerning items that graphic or other design skills for the die, manufacturer, importer, or seller is
comply with the marking requirements cast, mold or other process used to engaged in any practice that violates the
of the Hobby Act and Rules. This manufacture the item. Act and the regulations promulgated
document serves as notice to the Small (5) Steps taken by the agency to thereunder.
Business Administration of the agency’s minimize the significant economic
By direction of the Commission.
certification of no effect. The impact, if any, on small entities,
Commission has nonetheless Donald S. Clark,
consistent with the stated objectives of
determined that it is appropriate to applicable statutes. Secretary.
publish the following final regulatory Commission staff have not identified [FR Doc. 2016–24880 Filed 10–13–16; 8:45 am]
flexibility analysis to ensure that the any significant alternatives that would BILLING CODE P
economic impact of the amendments on accomplish the statute’s objectives
small entities is fully addressed. while minimizing any significant
(1) Need for, and objectives of, the economic impact on small entities. The DEPARTMENT OF THE TREASURY
amendments to the Rules. amendment, as explained earlier, is
As explained above, the amendments intended to bring the scope of the Rules Internal Revenue Service
are intended to harmonize the Rules in line with the scope of the Hobby Act,
with the Hobby Act, as amended by the as amended by the CCPA. Neither the 26 CFR Part 1
CCPA. Amending 16 CFR 304.3 extends Act nor the Rules exempt small entities, [TD 9789]
the Rules’ coverage to persons engaged or impose lesser or different
in the sale in commerce of imitation requirements on such entities. Such RIN 1545–BM03
numismatic items, and persons or exemptions or alternative requirements
entities that provide substantial Election To Take Disaster Loss
would undermine the purpose and
assistance or support to any Deduction for Preceding Year
effect of the Act and the Rules, to the
manufacturer, importer, or seller of extent that Congress has determined by AGENCY: Internal Revenue Service (IRS),
covered items under certain law that covered items, regardless of the Treasury.
circumstances. The legal basis for this size of the entity that manufactures, ACTION: Final and temporary
amendment is the CCPA, which imports or sells them, require markings regulations.
expanded the scope of the Hobby Act. (i.e., disclosures) under certain
ehiers on DSK5VPTVN1PROD with RULES
(2) Significant issues raised by circumstances for the protection of SUMMARY: This document contains final
comments in response to the proposed consumers who may purchase such and temporary regulations relating to
amendments to the Rules. items. the election to accelerate the timing of
The Commission received no a loss sustained by a taxpayer
substantive comments from the public List of Subjects in 16 CFR Part 304 attributable to a federally declared
and no comments from the Chief Hobbies, Labeling, Trade practices. disaster. The text of the temporary
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![70940 Federal Register / Vol. 81, No. 199 / Friday, October 14, 2016 / Rules and Regulations
in areas located throughout the United revoking an election to claim a disaster amended return for the disaster year
States, including Texas and Louisiana. loss in the preceding year. that includes the loss.
(b) Definitions. The following (e) Manner of making election. An
Special Analyses definitions apply for purposes of this election under section 165(i) to deduct
Certain IRS regulations, including section: a disaster loss for the preceding year is
these, are exempt from the requirements (1) A federally declared disaster made on an original federal tax return
of Executive Order 12866, as means any disaster subsequently for the preceding year or an amended
supplemented and reaffirmed by determined by the President of the federal tax return for the preceding year
Executive Order 13563. Therefore, a United States to warrant assistance by in the manner specified by guidance
regulatory impact assessment is not the Federal Government under the issued pursuant to these regulations.
required. It also has been determined Robert T. Stafford Disaster Relief and See paragraph (h) of this section.
that section 553(b) of the Administrative Emergency Assistance Act or a (f) Due date for making election. The
Procedure Act (5 U.S.C. chapter 5) does successor enactment. due date for making the section 165(i)
not apply to these regulations. For (2) A federally declared disaster area election is six months after the due date
applicability of the Regulatory is the area determined to be eligible for for filing the taxpayer’s federal income
Flexibility Act (5 U.S.C. chapter 6), assistance pursuant to the Presidential tax return for the disaster year
please refer to the cross-referencing declaration in paragraph (b)(1) of this (determined without regard to any
notice of proposed rulemaking section. extension of time to file).
published in the Proposed Rules section (3) A disaster loss is a loss occurring
(g) Revocation. Subject to the
in this issue of the Federal Register. in a federally declared disaster area that
requirements in paragraph (d) of this
Pursuant to section 7805(f) of the Code, is attributable to a federally declared
section, a section 165(i) election may be
these temporary regulations will be disaster and that is otherwise allowable
revoked on or before the date that is
submitted to the Chief Counsel for as a deduction for the disaster year
ninety (90) days after the due date for
Advocacy of the Small Business under section 165(a) and §§ 1.165–1
making the election.
Administration for comment on their through 1.165–10.
(4) The disaster year is the taxable (h) Additional guidance. The time and
impact on small business. manner for making and revoking a
year in which a taxpayer sustains a loss
Drafting Information attributable to a federally declared section 165(i) election under paragraphs
disaster. (d), (e), (f), and (g) of this section may
The principal authors of these be modified through guidance
regulations are Daniel Cassano and (5) The preceding year is the taxable
year immediately prior to the disaster published in the Federal Register or in
Christopher Wrobel of the Office of the the Internal Revenue Bulletin (see
Associate Chief Counsel (Income Tax & year.
(c) Scope and effect of election. An § 601.601(d) of this chapter).
Accounting). However, other personnel (i) Effective/applicability date. This
election made pursuant to section 165(i)
from the Treasury Department and the section is effective October 13, 2016 and
for a disaster loss attributable to a
IRS participated in their development. applies to elections, revocations, and
particular disaster applies to the entire
List of Subjects in 26 CFR Part 1 loss sustained by the taxpayer from that any other related actions that can be
disaster during the disaster year. If the made or taken on or after October 13,
Income taxes, Reporting and 2016.
recordkeeping requirements. taxpayer makes a section 165(i) election
with respect to a particular disaster (j) Expiration date. The section
Amendments to the Regulations occurring during the disaster year, the expires October 13, 2019.
Accordingly, 26 CFR part 1 is disaster to which the election relates is John Dalrymple,
amended as follows: deemed to have occurred, and the Deputy Commissioner for Services and
disaster loss to which the election Enforcement.
PART 1— INCOME TAXES applies is deemed to have been Approved: September 19, 2016.
sustained, in the preceding year. Mark J. Mazur,
■ Paragraph 1. The authority citation (d) Requirement to file consistent
for part 1 continues to read in part as returns. A taxpayer may not make a Assistant Secretary of the Treasury (Tax
Policy).
follows: section 165(i) election for a disaster loss
[FR Doc. 2016–24664 Filed 10–13–16; 8:45 am]
Authority: 26 U.S.C. 7805 * * * if the taxpayer claims a deduction (as a
loss, as cost of goods sold, or otherwise) BILLING CODE 4830–01–P
■ Par. 2. Section 1.165–11 is revised to
read as follows: for the same loss for the disaster year.
If a taxpayer has claimed a deduction
§ 1.165–11 Election in respect of losses for a disaster loss for the disaster year PENSION BENEFIT GUARANTY
attributable to a disaster. and the taxpayer wishes to make a CORPORATION
(a) through (j) [Reserved]. For further section 165(i) election with respect to
such loss, the taxpayer must file an 29 CFR Part 4022
guidance, see § 1.165–11T(a) through (j).
■ Par. 3. Section 1.165–11T is added to amended return to remove the
Benefits Payable in Terminated Single-
read as follows: previously deducted loss on or before
Employer Plans; Interest Assumptions
the date that the taxpayer makes the
for Paying Benefits
§ 1.165–11T Election to take disaster loss section 165(i) election for such loss.
deduction for preceding year (temporary). Similarly, if a taxpayer has claimed a AGENCY: Pension Benefit Guaranty
(a) In general. Section 165(i) allows a deduction for a disaster loss for the Corporation.
ehiers on DSK5VPTVN1PROD with RULES
taxpayer who has sustained a loss preceding year based on a section 165(i) ACTION: Final rule.
attributable to a federally declared election and the taxpayer wishes to
disaster in a taxable year to elect to revoke that election, the taxpayer must SUMMARY: This final rule amends the
deduct that disaster loss in the file an amended return to remove the Pension Benefit Guaranty Corporation’s
preceding year. This section provides loss for the preceding year on or before regulation on Benefits Payable in
rules and procedures for making and the date the taxpayer files the return or Terminated Single-Employer Plans to
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Document Created: 2016-10-14 00:01:09
Document Modified: 2016-10-14 00:01:09
| 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 | Rules and Regulations | |
| Action | Final and temporary regulations. | |
| Contact | Daniel Cassano (202) 317-7011 (not a toll free number). | |
| FR Citation | 81 FR 70938 | |
| RIN Number | 1545-BM03 | |
| CFR Associated | Income Taxes and Reporting and Recordkeeping Requirements |
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