81 FR 8149 - Reporting of Original Issue Discount on Tax-Exempt Obligations; Basis and Transfer Reporting by Securities Brokers for Debt Instruments and Options

DEPARTMENT OF THE TREASURY
Internal Revenue Service

Federal Register Volume 81, Issue 32 (February 18, 2016)

Page Range		8149-8154
FR Document		2016-03429

This document contains final regulations relating to information reporting by brokers for transactions involving debt instruments and options, including the reporting of original issue discount (OID) on tax-exempt obligations, the treatment of certain holder elections for reporting a taxpayer's adjusted basis in a debt instrument, and transfer reporting for section 1256 options and debt instruments. The regulations in this document provide guidance to brokers and payors and to their customers.

Federal Register, Volume 81 Issue 32 (Thursday, February 18, 2016)

[Federal Register Volume 81, Number 32 (Thursday, February 18, 2016)]
[Rules and Regulations]
[Pages 8149-8154]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-03429]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9750]
RIN 1545-BM59


Reporting of Original Issue Discount on Tax-Exempt Obligations; 
Basis and Transfer Reporting by Securities Brokers for Debt Instruments 
and Options

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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

SUMMARY: This document contains final regulations relating to 
information reporting by brokers for transactions involving debt 
instruments and options, including the reporting of original issue 
discount (OID) on tax-exempt obligations, the treatment of certain 
holder elections for reporting a taxpayer's adjusted basis in a debt 
instrument, and transfer reporting for section 1256 options and debt 
instruments. The regulations in this document provide guidance to 
brokers and payors and to their customers.

DATES: 
    Effective date: These regulations are effective on February 18, 
2016.

[[Page 8150]]

    Applicability dates: For the dates of applicability, see Sec. Sec.  
1.6045-1(n)(11)(i)(A), 1.6045-1(n)(11)(i)(B), 1.6045-1(n)(12)(ii), 
1.6045A-1(b)(3)(x), 1.6045A-1(b)(4)(iv), and 1.6049-10(c).

FOR FURTHER INFORMATION CONTACT: Pamela Lew of the Office of the 
Associate Chief Counsel (Financial Institutions and Products) at (202) 
317-7053 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in Sec. Sec.  1.6045-1(n) 
and 1.6045A-1(b) of these final regulations has been reviewed and 
approved by the Office of Management and Budget in accordance with the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control 
number 1545-2186. The collection of information is required to comply 
with the provisions of section 403 of the Energy Improvement and 
Extension Act of 2008, Division B of Public Law 110-343 (122 Stat. 
3765, 3854 (2008)) (the Act). The information required under Sec.  
1.6045-1(n) minimizes the need for reconciliation between information 
reported by a broker to both a customer and the IRS and the amounts 
reported on the customer's tax return. The information required under 
Sec.  1.6045A-1 is necessary to allow brokers that effect sales of 
transferred section 1256 options and debt instruments that are covered 
securities to determine and report the adjusted basis of these 
securities in compliance with section 6045(g) of the Internal Revenue 
Code (Code). The burden for the collection of information contained in 
Sec.  1.6049-10 of these final regulations will be reflected in the 
burden for Form 1099-OID, Original Issue Discount (OMB control number 
1545-0117), when it is revised to request the additional information in 
the regulations. This information is required to enable the IRS to 
verify that a taxpayer is reporting the correct amount of tax-exempt 
interest each year for alternative minimum tax and other purposes. In 
addition, because this information is used to determine a taxpayer's 
adjusted basis in a debt instrument for purposes of section 6045(g), 
this information is required to enable the IRS to verify that a 
taxpayer is reporting the correct amount of gain or loss upon the sale 
of a tax-exempt obligation.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    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 section 6103.

Background

    Section 6045 generally requires a broker to report gross proceeds 
upon the sale of a security. Section 6045 was amended by section 403 of 
the Act to require the reporting of adjusted basis for a covered 
security and whether any gain or loss upon the sale of the security is 
long-term or short-term. In addition, the Act added section 6045A of 
the Code, which requires certain information to be reported in 
connection with a transfer of a covered security to another broker, and 
section 6045B of the Code, which requires an issuer of a specified 
security to file a return relating to certain actions that affect the 
basis of the security. Section 6049 requires the reporting of interest 
payments (including accruals of OID treated as payments).
    On November 25, 2011, the Treasury Department and the IRS published 
in the Federal Register proposed regulations relating to information 
reporting by brokers, transferors, and issuers of securities under 
sections 6045, 6045A, and 6045B for debt instruments, options, and 
securities futures contracts (REG-102988-11 at 76 FR 72652) (the 2011 
proposed basis reporting regulations). On April 18, 2013, the Treasury 
Department and the IRS published in the Federal Register final 
regulations under sections 6045, 6045A, and 6045B (the 2013 final basis 
reporting regulations) and temporary regulations relating to 
information reporting for bond premium and acquisition premium under 
section 6049 (TD 9616 at 78 FR 23116) (the 2013 temporary interest 
reporting regulations). A notice of proposed rulemaking cross-
referencing the 2013 temporary interest reporting regulations also was 
published in the Federal Register on April 18, 2013 (REG-154563-12 at 
78 FR 23183) (the 2013 proposed interest reporting regulations).
    On March 13, 2015, the Treasury Department and the IRS published in 
the Federal Register final regulations under sections 6045, 6045A, and 
6049 (TD 9713 at 80 FR 13233) (the 2015 final basis reporting 
regulations, and, together with the 2013 final basis reporting 
regulations, the final basis reporting regulations). A number of 
commenters on the 2013 final basis reporting regulations requested 
changes to the basis reporting rules relating to certain debt 
elections. In addition, for purposes of section 6045A, several 
commenters requested that a transferring broker provide additional 
information on the transfer statement for a debt instrument and that a 
transferring broker provide a transfer statement for a section 1256 
option contract. Several commenters also suggested that the rules for 
reporting OID associated with a tax-exempt obligation be conformed to 
the rules regarding basis reporting for those debt instruments. 
Accordingly, TD 9713 also included temporary regulations relating to 
information reporting for debt instruments under sections 6045, 6045A, 
and 6049 (the 2015 temporary reporting regulations). A notice of 
proposed rulemaking cross-referencing the 2015 temporary reporting 
regulations was published in the Federal Register on March 13, 2015 
(REG-143040-14 at 80 FR 13292) (the 2015 proposed reporting 
regulations). A correction to Sec.  1.6045A-1T(f) was published on June 
5, 2015 (TD 9713 at 80 FR 31995), delaying the effective date of Sec.  
1.6045A-1T(f) from June 30, 2015, to January 1, 2016.
    Written comments were received on the 2015 proposed reporting 
regulations and are summarized below. No public hearing was requested 
or held. In general, these final regulations adopt the provisions of 
the 2015 proposed reporting regulations. These final regulations also 
remove the corresponding 2015 temporary reporting regulations.
    After the publication of the 2015 final basis reporting 
regulations, the Treasury Department and the IRS received written 
comments on certain provisions of the final basis reporting 
regulations. In response to these comments, this document contains 
final regulations under section 6045 relating to the treatment of 
certain debt instruments as non-covered securities.
    The written comments on the 2015 proposed reporting regulations and 
the 2015 final basis reporting regulations are available for public 
inspection at http://www.regulations.gov or upon request.

Explanation of Provisions

A. Constant Yield Election for Accruals of Market Discount

    Under section 1276(b)(2), a customer may elect to accrue market 
discount on a constant yield method rather than a ratable method. The 
election may be made on a debt instrument by debt instrument basis and 
must be made for the earliest taxable year for which the customer is 
required to determine

[[Page 8151]]

accrued market discount. The election may not be revoked once it has 
been made. In most cases, the use of a constant yield method backloads 
market discount and is therefore more taxpayer favorable than the use 
of a ratable method.
    In response to comments on the 2013 final basis reporting 
regulations (which required the broker to assume that the customer had 
not made a constant yield election), Sec.  1.6045-1T(n)(11)(i)(B) of 
the 2015 temporary reporting regulations provided that for a debt 
instrument acquired on or after January 1, 2015, brokers are required 
to assume that a customer has elected to determine accrued market 
discount using a constant yield method unless the customer notifies the 
broker otherwise. A customer that does not want to use a constant yield 
method to determine accrued market discount must, by the end of the 
calendar year in which the customer acquired the debt instrument in an 
account with the broker, notify the broker in writing that the customer 
wants the broker to use the ratable method to determine accrued market 
discount.
    No comments were received on the substantive rules in Sec.  1.6045-
1T(n)(11)(i)(B). Accordingly, the rules in the final regulations in 
this document are the same as the rules in Sec.  1.6045-
1T(n)(11)(i)(B). Several commenters requested permission to apply the 
default constant yield method to debt instruments acquired on or after 
January 1, 2014, which was the first date for which a broker was 
required to report accrued market discount under section 6045, provided 
that the broker had not reported accrued market discount to a customer 
for the 2014 calendar year using the ratable method. According to the 
commenters, the use of a single method to compute market discount 
accruals for all covered securities with market discount would simplify 
the calculation of accrued market discount and the reporting of this 
information to their customers.
    The final regulations in this document permit, but do not require, 
a broker to apply the default constant yield method to a debt 
instrument acquired on or after January 1, 2014, and before January 1, 
2015, provided the broker was not informed that the customer had made a 
section 1278(b) election (the election to include market discount in 
income as it accrues rather than upon a disposition or receipt of a 
partial principal payment), there were no principal payments on the 
debt instrument during the 2014 calendar year, and the broker therefore 
had not reported accrued market discount to the customer for the 2014 
calendar year using the ratable method.

B. Transfer Statements

    Under Sec.  1.6045A-1T(e) of the 2015 temporary reporting 
regulations, a transferring broker is required to provide a transfer 
statement upon the transfer of a section 1256 option to ensure that the 
receiving broker has all of the information required for purposes of 
section 6045. The temporary regulations provide that a transfer 
statement is required for the transfer of a section 1256 option that 
occurs on or after January 1, 2016. The temporary regulations also list 
the data specific to section 1256 options that must be provided.
    One commenter asserted that including the fair market value 
information on a transfer statement for a section 1256 option is 
unnecessary because the receiving broker can look up the information if 
it is needed and suggested saving space on the transfer statement by 
eliminating this data item. After considering the suggestion, the 
Treasury Department and IRS decline to adopt this suggestion. Providing 
fair market value information on a transfer statement will help ensure 
that the receiving broker is reporting an amount of realized but 
unrecognized gain or loss from the prior year that is consistent with 
the amount reported in the prior year by the transferring broker, which 
will minimize the possibility of double counting or omission of gain or 
loss.
    No other comments were received on Sec.  1.6045A-1T of the 2015 
temporary reporting regulations. The rules in the final regulations in 
this document are substantively the same as the rules in the 2015 
temporary regulations. However, the rules in Sec.  1.6045A-1T(e) are in 
Sec.  1.6045A-1(b)(4)(iv) of the final regulations in this document and 
the rules in Sec.  1.6045A-1T(f) are in Sec.  1.6045A-1(b)(3)(x) of the 
final regulations in this document.

C. Reporting of OID on a Tax-Exempt Obligation

    To coordinate the reporting of OID under section 6049 with the 
reporting of basis for tax-exempt obligations under section 6045, Sec.  
1.6049-10T of the 2015 temporary reporting regulations provides that a 
payor must report under section 6049 the daily portions of OID on a 
tax-exempt obligation. The daily portions of OID are determined as if 
section 1272 and Sec.  1.1272-1 applied to a tax-exempt obligation. A 
payor must determine whether a tax-exempt obligation was issued with 
OID and the amount that accrues for each relevant period. In addition, 
OID on a tax-exempt obligation is determined without regard to the de 
minimis rule in section 1273(a)(3) and Sec.  1.1273-1(d). Because the 
temporary regulations require the reporting of OID, payors also must 
report amortized acquisition premium (which offsets OID) on a tax-
exempt obligation. A broker may report either a gross amount for both 
OID and amortized acquisition premium, or a net amount of OID that 
reflects the offset of the OID by the amount of amortized acquisition 
premium allocable to the OID. Section 1.6049-10T of the 2015 temporary 
reporting regulations applies to a tax-exempt obligation acquired on or 
after January 1, 2017.
    No comments were received on the substantive rules in Sec.  1.6049-
10T. Accordingly, the rules in the final regulations in this document 
are the same as the rules in Sec.  1.6049-10T. However, several 
commenters requested that, for taxable years beginning after December 
31, 2016, a broker be permitted to report on Form 1099-OID the OID and 
acquisition premium on a tax-exempt obligation that is a covered 
security acquired before January 1, 2017. According to the commenters, 
customers might be confused because of the difference between the date 
that a tax-exempt obligation generally became a covered security (that 
is, an obligation acquired on or after January 1, 2014), and the date 
after which a tax-exempt obligation that is a covered security becomes 
subject to mandatory reporting of OID and acquisition premium (that is, 
an obligation acquired on or after January 1, 2017). Because a broker 
is required to track basis for a tax-exempt obligation that is a 
covered security for purposes of section 6045, the broker is 
responsible for calculating OID on a tax-exempt obligation acquired on 
or after January 1, 2014, even if the broker has no obligation to 
report the obligation's OID to the customer for purposes of section 
6049. To simplify the reporting of OID and acquisition premium and to 
minimize any customer confusion, the commenters requested that the 
final regulations permit a broker to report OID and acquisition 
discount on all tax-exempt bonds that are covered securities.
    After considering the requests, for taxable years beginning after 
December 31, 2016, the final regulations in this document permit, but 
do not require, a broker to report OID and acquisition discount for a 
tax-exempt obligation that is a covered security acquired before 
January 1, 2017.

[[Page 8152]]

D. Treatment of Certain Debt Instruments Subject to January 1, 2016, 
Reporting

    Under Sec.  1.6045-1(n)(3) of the 2013 final basis reporting 
regulations, certain debt instruments are subject to basis reporting 
only if the debt instrument is acquired by a customer on or after 
January 1, 2016. For example, Sec.  1.6045-1(n)(3) applies to a 
contingent payment debt instrument, a debt instrument that is not 
issued by a U.S. issuer, and a debt instrument the terms of which are 
not reasonably available to a broker within 90 days of acquisition of 
the debt instrument by the customer.
    Several commenters on the 2013 final basis reporting regulations 
requested guidance for a debt instrument the terms of which are not 
reasonably available to the broker. The commenters stated that they 
would not have the information necessary to comply with the information 
reporting rules for these instruments. Several commenters stated that 
information for a debt instrument issued by a non-U.S. issuer and for a 
tax-exempt obligation is particularly difficult to obtain. One 
commenter noted that under SEC Release 34-67908, issued on September 
21, 2012 (77 FR 59427), issuers of municipal securities are required to 
provide certain data to the Electronic Municipal Market Access system 
set up by the Municipal Securities Rulemaking Board for new issuances, 
but there is no requirement to file similar information for issuances 
already outstanding as of the November 1, 2012, effective date of the 
release.
    The Treasury Department and the IRS agree that a broker may not 
always be able to obtain information for a debt instrument issued by a 
non-U.S. issuer or for a tax-exempt obligation issued before January 1, 
2014. The final regulations in this document therefore provide that a 
debt instrument issued by a non-U.S. issuer or a tax-exempt obligation 
issued before January 1, 2014, is treated as a noncovered security 
(and, therefore, is not subject to basis reporting under section 6045) 
if the terms of the debt instrument are not reasonably available to the 
broker within 90 days of the date the debt instrument was acquired by 
the customer. The Treasury Department and the IRS believe that the 
information necessary for section 6045 compliance should be available 
for other debt instruments.

Applicability Dates

    The final regulations under section 6045 in this document (other 
than Sec.  1.6045-1(n)(12)) apply to a debt instrument acquired on or 
after January 1, 2015. Section 1.6045-1(n)(12) applies to a debt 
instrument acquired on or after February 18, 2016. The final 
regulations under section 6049 in this document apply to a tax-exempt 
obligation that is a covered security acquired on or after January 1, 
2017. The final regulations under section 6045A in this document apply 
to a transfer of a section 1256 option that occurs on or after January 
1, 2016, and to a transfer of a debt instrument that occurs on or after 
January 1, 2016.

Special Analyses

    Certain IRS regulations, including this one, are exempt from the 
requirements of Executive Order 12866, as supplemented and reaffirmed 
by Executive Order 13563. 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.
    It is hereby certified that the final regulations in this document 
will not have a significant economic impact on a substantial number of 
small entities. Therefore, a Regulatory Flexibility Analysis under the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. It is 
anticipated that the requirements in the final regulations in this 
document, except in the case of the notification by a customer 
discussed in the next paragraph, will fall only on financial services 
firms with annual receipts greater than the $38.5 million threshold 
and, therefore, on no small entities.
    Section 403(a) of the Act requires a broker to report the adjusted 
basis of a debt instrument that is a covered security. Although a 
holder of a debt instrument (customer) is permitted to make a number of 
elections that affect how basis is computed, a broker only is required 
to take into account specified elections in reporting the adjusted 
basis of a debt instrument, including the election under section 
1276(b)(2) to determine accruals of market discount on a constant yield 
method. Under the 2013 final basis reporting regulations, a customer 
was required to notify the broker that the customer had made the 
section 1276(b)(2) election. However, Sec.  1.6045-1(n)(11)(i)(B) 
requires a broker to take into account the election under section 
1276(b)(2) in reporting a debt instrument's adjusted basis unless the 
customer timely notifies the broker that the customer has not made the 
election. The notification must be in writing, which includes a writing 
in electronic format. In most cases, this election results in a more 
taxpayer-favorable result than the default ratable method. It is 
anticipated that this collection of information in the regulations will 
not fall on a substantial number of small entities, especially because 
fewer customers will need to notify brokers about the election. 
Further, the regulations implement the statutory requirements for 
reporting adjusted basis under section 403 of the Act. Moreover, any 
economic impact is expected to be minimal because it should take a 
customer no more than seven minutes to satisfy the information-sharing 
requirement in these regulations.
    Section 403(c) of the Act added section 6045A, which requires 
applicable persons to provide a transfer statement in connection with 
the transfer of custody of a covered security. Section 1.6045A-1 
effectuates the Act by giving the broker who receives the transfer 
statement the information necessary to determine and report adjusted 
basis and whether any gain or loss with respect to a debt instrument or 
section 1256 option is long-term or short-term as required by section 
6045 when the security is subsequently sold. Consequently, Sec.  
1.6045A-1 does not add to the impact on small entities imposed by the 
statutory provisions. Instead, the regulations limit the information to 
be reported to only those items necessary to effectuate the statutory 
scheme.
    The information required under Sec.  1.6049-10 will enable the IRS 
to verify that a taxpayer is reporting the correct amount of tax-exempt 
interest each year for alternative minimum tax and other purposes. In 
addition, because this information is used to determine a taxpayer's 
adjusted basis in a debt instrument for purposes of section 6045(g), 
this information is required to enable the IRS to verify that a 
taxpayer is reporting the correct amount of gain or loss upon the sale 
of a tax-exempt obligation. Any economic impact on small entities is 
expected to be minimal because a broker already is required to 
determine the accruals of OID and acquisition premium for purposes of 
determining and reporting a customer's adjusted basis on Form 1099-B 
under section 6045. Moreover, any effect on small entities of the rules 
in the final regulations flows from section 6049 and section 403 of the 
Act.
    Therefore, because the final regulations in this document will not 
have a significant economic impact on a substantial number of small 
entities, a regulatory flexibility analysis is not required.
    Pursuant to section 7805(f) of the Internal Revenue Code, the 
proposed regulations preceding the final regulations in this document 
were

[[Page 8153]]

submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on their impact on small businesses. No 
comments were received.

Drafting Information

    The principal author of these regulations is Pamela Lew, 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.

Adoption of 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 is amended by removing 
the entries for Sec. Sec.  1.6045A-1T and 1.6049-10T and adding an 
entry for Sec.  1.6049-10 to read in part as follows:

    Authority:  26 U.S.C. 7805 * * *
    Section 1.6049-10 also issued under 26 U.S.C. 6049(a). * * *


0
Par. 2. Section 1.6045-1 is amended by:
0
1. Adding a sentence at the end of paragraph (n)(4) introductory text.
0
2. Revising the last sentence in paragraph (n)(4)(iv).
0
3. Revising the last sentence in paragraph (n)(5)(i).
0
4. Revising the second sentence in paragraph (n)(6)(i).
0
5. Adding a sentence at the end of paragraph (n)(6)(ii).
0
6. Revising the last sentence in paragraph (n)(7)(iii).
0
7. Revising ``Sec.  1.6049-9T'' to read ``Sec.  1.6049-9'' in two 
places in paragraph (n)(9).
0
8. Revising paragraph (n)(11).
0
9. Adding paragraph (n)(12).
    The revisions and additions read as follows:


Sec.  1.6045-1  Returns of information of brokers and barter exchanges.

* * * * *
    (n) * * *
    (4) * * * However, see paragraph (n)(11) of this section for the 
treatment of an election described in paragraph (n)(4)(iii) of this 
section (election to accrue market discount based on a constant yield) 
and an election described in paragraph (n)(4)(iv) of this section 
(election to treat all interest as OID).
    (iv) * * * However, see paragraph (n)(11)(i)(A) of this section for 
a debt instrument acquired on or after January 1, 2014.
* * * * *
    (5) * * *
    (i) * * * However, see paragraph (n)(11) of this section for the 
treatment of an election described in paragraph (n)(4)(iii) of this 
section (election to accrue market discount based on a constant yield) 
and an election described in paragraph (n)(4)(iv) of this section 
(election to treat all interest as OID).
* * * * *
    (6) * * *
    (i) * * * See paragraphs (n)(5) and (n)(11)(i)(B) of this section 
to determine whether the amount reported should take into account a 
customer election under section 1276(b)(2). * * *
    (ii) * * * See paragraphs (n)(5) and (n)(11)(i)(B) of this section 
to determine whether the amount reported should take into account a 
customer election under section 1276(b)(2).
    (7) * * *
    (iii) * * * However, if a broker took into account a customer 
election under Sec.  1.1272-3 in 2014, the broker must decrease the 
customer's basis in the debt instrument by the amount of acquisition 
premium that is taken into account each year to reduce the amount of 
the original issue discount that is otherwise includible in the 
customer's income for that year in accordance with Sec. Sec.  1.1272-
2(b)(5) and 1.1272-3.
* * * * *
    (11) Additional rules for certain holder elections--(i) In general. 
For purposes of this section, the rules in this paragraph (n)(11) apply 
notwithstanding any other rule in paragraph (n) of this section.
    (A) Election to treat all interest as OID. A broker must report the 
information required under paragraph (d) of this section without taking 
into account any election described in paragraph (n)(4)(iv) of this 
section (the election to treat all interest as OID in Sec.  1.1272-3). 
As a result, for example, a broker must determine the amount of any 
acquisition premium taken into account each year for purposes of this 
section in accordance with Sec.  1.1272-2(b)(4). This paragraph 
(n)(11)(i)(A) applies to a debt instrument acquired on or after January 
1, 2015. A broker, however, may rely on this paragraph (n)(11)(i)(A) 
for a debt instrument acquired on or after January 1, 2014, and before 
January 1, 2015.
    (B) Election to accrue market discount based on a constant yield. A 
broker must report the information required under paragraph (d) of this 
section by assuming that a customer has made the election described in 
paragraph (n)(4)(iii) of this section (the election to accrue market 
discount based on a constant yield). However, if a customer notifies a 
broker in writing that the customer does not want the broker to take 
into account this election, the broker must report the information 
required under paragraph (d) of this section without taking into 
account this election. The customer must provide this notification to 
the broker by the end of the calendar year in which the customer 
acquired the debt instrument in an account with the broker. This 
paragraph (n)(11)(i)(B) applies to a debt instrument acquired on or 
after January 1, 2015. A broker, however, may rely on this paragraph 
(n)(11)(i)(B) to report accrued market discount for a debt instrument 
that is a covered security acquired on or after January 1, 2014, and 
before January 1, 2015, if the customer had not informed the broker 
that the customer had made a section 1278(b) election and there were no 
principal payments on the debt instrument during this period.
    (ii) [Reserved].
    (12) Certain debt instruments treated as noncovered securities--(i) 
In general. Notwithstanding paragraph (a)(15) of this section, a debt 
instrument is treated as a noncovered security for purposes of this 
section if the terms of the debt instrument are not reasonably 
available to the broker within 90 days of the date the debt instrument 
was acquired by the customer and the debt instrument is either--
    (A) A debt instrument issued by a non-U.S. issuer; or
    (B) A tax-exempt obligation issued before January 1, 2014.
    (ii) Effective/applicability date. Paragraph (n)(12)(i) of this 
section applies to a debt instrument described in paragraph 
(n)(12)(i)(A) or (B) of this section that is acquired on or after 
February 18, 2016. However, a broker may rely on paragraph (n)(12)(i) 
of this section for a debt instrument described in paragraph 
(n)(12)(i)(A) or (B) of this section acquired before February 18, 2016.
* * * * *

0
Par. 3. Section 1.6045-1T is amended by revising paragraphs (h) through 
(p) to read as follows:


Sec.  1.6045-1T  Returns of information of brokers and barter exchanges 
(temporary).

* * * * *
    (h) through (p) [Reserved]. For further guidance, see Sec.  1.6045-
1(h) through (p).
* * * * *

[[Page 8154]]


0
Par. 4. Section 1.6045A-1 is amended by:
0
1. Removing ``and'' at the end of paragraph (b)(3)(viii), removing the 
period at the end of paragraph (b)(3)(ix) and adding ``and;'' in its 
place, and adding paragraph (b)(3)(x).
0
2. Removing ``and'' at the end of paragraph (b)(4)(ii), removing the 
period at the end of paragraph (b)(4)(iii) and adding ``and;'' in its 
place, and adding paragraph (b)(4)(iv).
0
3. Removing paragraphs (e) and (f).
    The additions read as follows:


Sec.  1.6045A-1  Statements of information required in connection with 
transfers of securities.

* * * * *
    (b) * * *
    (3) * * *
    (x) For a transfer that occurs on or after January 1, 2016, the 
last date on or before the transfer date that the transferor made an 
adjustment for a particular item (for example, the last date on or 
before the transfer date that bond premium was amortized). A broker, 
however, may rely on this paragraph (b)(3)(x) for a transfer of a 
covered security that occurs on or after June 30, 2015, and before 
January 1, 2016.
    (4) * * *
    (iv) For a transfer of an option described in Sec.  1.6045-1(m)(3) 
(section 1256 option) that occurs on or after January 1, 2016, the 
original basis of the option and the fair market value of the option as 
of the end of the prior calendar year.
* * * * *


Sec.  1.6045A-1T  [Removed]

0
Par. 5. Section 1.6045A-1T is removed.

0
Par. 6. Section 1.6049-10 is added to read as follows:


Sec.  1.6049-10  Reporting of original issue discount on a tax-exempt 
obligation.

    (a) In general. For purposes of section 6049, a payor (as defined 
in Sec.  1.6049-4(a)(2)) of original issue discount (OID) on a tax-
exempt obligation (as defined in section 1288(b)(2)) is required to 
report the daily portions of OID on the obligation as if the daily 
portions of OID that accrued during a calendar year were paid to the 
holder (or holders) of the obligation in the calendar year. The amount 
of the daily portions of OID that accrues during a calendar year is 
determined as if section 1272 and Sec.  1.1272-1 applied to a tax-
exempt obligation. Notwithstanding any other rule in section 6049 and 
the regulations thereunder, a payor must determine whether a tax-exempt 
obligation was issued with OID and the amount of OID that accrues for 
each relevant period. As prescribed by section 1288(b)(1), OID on a 
tax-exempt obligation is determined without regard to the de minimis 
rules in section 1273(a)(3) and Sec.  1.1273-1(d).
    (b) Acquisition premium. A payor is required to report acquisition 
premium amortization on a tax-exempt obligation in accordance with the 
rules in Sec.  1.6049-9(c) as if section 1272 applied to a tax-exempt 
obligation. See paragraph (a) of this section to determine the amount 
of OID allocable to an accrual period.
    (c) Effective/applicability date. This section applies to a tax-
exempt obligation that is a covered security (within the meaning of 
Sec.  1.6045-1(a)(15) and (n)(12)) acquired on or after January 1, 
2017. For a taxable year beginning after December 31, 2016, a broker, 
however, may rely on this section to report OID and acquisition premium 
for a tax-exempt obligation that is a covered security acquired before 
January 1, 2017.


Sec.  1.6049-10T  [Removed]

0
Par. 7. Section 1.6049-10T is removed.

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
    Approved: January 13, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2016-03429 Filed 2[dash]17-16; 8:45 am]
BILLING CODE 4830-01-P

Federal Register / Vol. 81, No. 32 / Thursday, February 18, 2016 / Rules and Regulations 8149

the collections of information in 21 CFR ProductsandMedicalProcedures/ § 888.3330 Hip joint metal/metal semi-
part 814, subpart B, have been approved ImplantsandProsthetics/MetalonMetal constrained, with an uncemented
under OMB control number 0910–0231; HipImplants/ucm241667.htm. acetabular component, prosthesis.
and the collections of information under 4. FDA, Orthopaedic and Rehabilitation * * * * *
21 CFR part 801 have been approved Devices Panel, FDA Executive Summary, (c) Date PMA or notice of completion
under OMB control number 0910–0485. June 27–28, 2012. Available at http:// of PDP is required. A PMA or a notice
www.fda.gov/downloads/ of completion of a PDP is required to be
VI. Codification of Orders AdvisoryCommittees/Committees filed with the Food and Drug
Prior to the amendments by FDASIA, MeetingMaterials/MedicalDevices/ Administration on or before May 18,
section 515(b) of the FD&C Act provided MedicalDevicesAdvisoryCommittee/ 2016, for any hip joint metal/metal
for FDA to issue regulations to require OrthopaedicandRehabilitationDevices semi-constrained prosthesis with an
approval of an application for premarket Panel/UCM309302.pdf.
uncemented acetabular component that
5. FDA, Orthopaedic and Rehabilitation
approval for preamendments devices or was in commercial distribution before
Devices Panel transcript, June 28, 2012.
devices found substantially equivalent May 28, 1976, or that has, on or before
Available at http://www.fda.gov/
to preamendments devices. Section May 18, 2016, been found to be
downloads/AdvisoryCommittees/
515(b) of the FD&C Act, as amended by CommitteesMeetingMaterials/ substantially equivalent to a hip joint
FDASIA, provides for FDA to require MedicalDevices/ metal/metal semi-constrained prosthesis
approval of an application for premarket MedicalDevicesAdvisoryCommittee/ with an uncemented acetabular
approval for such devices by issuing a OrthopaedicandRehabilitationDevices component that was in commercial
final order following the issuance of a Panel/UCM313605.pdf. distribution before May 28, 1976. Any
proposed order in the Federal Register. other hip joint metal/metal semi-
FDA will continue to codify the List of Subjects in 21 CFR Part 888 constrained prosthesis with an
requirement for an application for uncemented acetabular component shall
premarket approval in the Code of Medical devices.
have an approved PMA or a declared
Federal Regulations (CFR). Therefore, Therefore, under the Federal Food, completed PDP in effect before being
under section 515(b)(1) of the FD&C Act, Drug, and Cosmetic Act and under placed in commercial distribution.
as amended by FDASIA, in this final authority delegated to the Commissioner Dated: February 11, 2016.
order, FDA is requiring approval of an of Food and Drugs, 21 CFR part 888 is
Leslie Kux,
application for premarket approval for amended as follows:
total MoM semi-constrained hip joint Associate Commissioner for Policy.
systems, which include the following PART 888—ORTHOPEDIC DEVICES [FR Doc. 2016–03331 Filed 2–17–16; 8:45 am]
two specific preamendments class III BILLING CODE 4164–01–P
devices: Hip joint metal/metal semi- ■ 1. The authority citation for 21 CFR
constrained, with a cemented acetabular part 888 continues to read as follows:
component, prosthesis; and hip joint DEPARTMENT OF THE TREASURY
Authority: 21 U.S.C. 351, 360, 360c, 360e,
metal/metal semi-constrained, with an 360j, 371.
uncemented acetabular component, Internal Revenue Service
prosthesis; and the Agency is making ■ 2. Section 888.3320 is amended by
the language in 21 CFR 888.3320 and revising paragraph (c) to read as follows: 26 CFR Part 1
888.3330 consistent with this final [TD 9750]
order. § 888.3320 Hip joint metal/metal semi-
constrained, with a cemented acetabular RIN 1545–BM59
VII. References component, prosthesis.
Reporting of Original Issue Discount
The following references are on * * * * *
on Tax-Exempt Obligations; Basis and
display in the Division of Dockets (c) Date PMA or notice of completion Transfer Reporting by Securities
Management (HFA–305), Food and Drug of PDP is required. A PMA or a notice Brokers for Debt Instruments and
Administration, 5630 Fishers Lane, Rm. of completion of a PDP is required to be Options
1061, Rockville, MD 20852, and are filed with the Food and Drug
available for viewing by interested Administration on or before May 18, AGENCY: Internal Revenue Service (IRS),
persons between 9 a.m. and 4 p.m., 2016, for any hip joint metal/metal Treasury.
Monday through Friday; they are also semi-constrained prosthesis with a ACTION: Final regulations.
available electronically at http:// cemented acetabular component that
www.regulations.gov. FDA has verified SUMMARY: This document contains final
was in commercial distribution before
the Web site addresses, as of the date regulations relating to information
May 28, 1976, or that has, on or before
this document publishes in the Federal reporting by brokers for transactions
May 18, 2016, been found to be
Register, but Web sites are subject to involving debt instruments and options,
substantially equivalent to a hip joint
change over time. including the reporting of original issue
metal/metal semi-constrained prosthesis
discount (OID) on tax-exempt
1. FDA, Orthopaedic and Rehabilitation with a cemented acetabular component
Devices Panel transcript, August 8, 2001. obligations, the treatment of certain
that was in commercial distribution
Available at http://www.fda.gov/ohrms/ holder elections for reporting a
before May 28, 1976. Any other hip joint
dockets/ac/01/transcripts/3780t1.rtf. taxpayer’s adjusted basis in a debt
metal/metal semi-constrained prosthesis
2. Kwon et al. ‘‘Risk Stratification Algorithm instrument, and transfer reporting for
for Management of Patients with Metal- with a cemented acetabular component
section 1256 options and debt
wgreen on DSK2VPTVN1PROD with RULES

on-Metal Hip Arthroplasty.’’ Journal of shall have an approved PMA or a
instruments. The regulations in this
Bone and Joint Surgery, American declared completed PDP in effect before
document provide guidance to brokers
Volume, 96:e4, 2014. being placed in commercial
3. FDA, Metal-on-Metal Hip Implants Web
and payors and to their customers.
distribution.
site, Information for Orthopaedic DATES:
Surgeons. Available at http:// ■ 3. Section 888.3330 is amended by Effective date: These regulations are
www.fda.gov/MedicalDevices/ revising paragraph (c) to read as follows: effective on February 18, 2016.

VerDate Sep<11>2014 14:29 Feb 17, 2016 Jkt 238001 PO 00000 Frm 00017 Fmt 4700 Sfmt 4700 E:\FR\FM\18FER1.SGM 18FER1

8150 Federal Register / Vol. 81, No. 32 / Thursday, February 18, 2016 / Rules and Regulations

Applicability dates: For the dates of Books or records relating to a to the basis reporting rules relating to
applicability, see §§ 1.6045– collection of information must be certain debt elections. In addition, for
1(n)(11)(i)(A), 1.6045–1(n)(11)(i)(B), retained as long as their contents may purposes of section 6045A, several
1.6045–1(n)(12)(ii), 1.6045A–1(b)(3)(x), become material in the administration commenters requested that a
1.6045A–1(b)(4)(iv), and 1.6049–10(c). of any internal revenue law. Generally, transferring broker provide additional
FOR FURTHER INFORMATION CONTACT: tax returns and tax return information information on the transfer statement for
Pamela Lew of the Office of the are confidential, as required by section a debt instrument and that a transferring
Associate Chief Counsel (Financial 6103. broker provide a transfer statement for
Institutions and Products) at (202) 317– Background a section 1256 option contract. Several
7053 (not a toll-free number). commenters also suggested that the
Section 6045 generally requires a rules for reporting OID associated with
SUPPLEMENTARY INFORMATION:
broker to report gross proceeds upon the a tax-exempt obligation be conformed to
Paperwork Reduction Act sale of a security. Section 6045 was the rules regarding basis reporting for
amended by section 403 of the Act to those debt instruments. Accordingly, TD
The collection of information
require the reporting of adjusted basis 9713 also included temporary
contained in §§ 1.6045–1(n) and
for a covered security and whether any regulations relating to information
1.6045A–1(b) of these final regulations gain or loss upon the sale of the security
has been reviewed and approved by the reporting for debt instruments under
is long-term or short-term. In addition, sections 6045, 6045A, and 6049 (the
Office of Management and Budget in the Act added section 6045A of the
accordance with the Paperwork 2015 temporary reporting regulations).
Code, which requires certain A notice of proposed rulemaking cross-
Reduction Act of 1995 (44 U.S.C. information to be reported in
3507(d)) under control number 1545– referencing the 2015 temporary
connection with a transfer of a covered reporting regulations was published in
2186. The collection of information is security to another broker, and section
required to comply with the provisions the Federal Register on March 13, 2015
6045B of the Code, which requires an (REG–143040–14 at 80 FR 13292) (the
of section 403 of the Energy issuer of a specified security to file a
Improvement and Extension Act of 2015 proposed reporting regulations). A
return relating to certain actions that correction to § 1.6045A–1T(f) was
2008, Division B of Public Law 110–343 affect the basis of the security. Section
(122 Stat. 3765, 3854 (2008)) (the Act). published on June 5, 2015 (TD 9713 at
6049 requires the reporting of interest 80 FR 31995), delaying the effective date
The information required under payments (including accruals of OID
§ 1.6045–1(n) minimizes the need for of § 1.6045A–1T(f) from June 30, 2015,
treated as payments).
reconciliation between information to January 1, 2016.
On November 25, 2011, the Treasury
reported by a broker to both a customer Written comments were received on
Department and the IRS published in
and the IRS and the amounts reported the 2015 proposed reporting regulations
the Federal Register proposed
on the customer’s tax return. The and are summarized below. No public
regulations relating to information
information required under § 1.6045A–1 hearing was requested or held. In
reporting by brokers, transferors, and
is necessary to allow brokers that effect general, these final regulations adopt the
issuers of securities under sections
sales of transferred section 1256 options provisions of the 2015 proposed
6045, 6045A, and 6045B for debt
and debt instruments that are covered instruments, options, and securities reporting regulations. These final
securities to determine and report the futures contracts (REG–102988–11 at 76 regulations also remove the
adjusted basis of these securities in FR 72652) (the 2011 proposed basis corresponding 2015 temporary reporting
compliance with section 6045(g) of the reporting regulations). On April 18, regulations.
Internal Revenue Code (Code). The After the publication of the 2015 final
2013, the Treasury Department and the
burden for the collection of information IRS published in the Federal Register basis reporting regulations, the Treasury
contained in § 1.6049–10 of these final final regulations under sections 6045, Department and the IRS received
regulations will be reflected in the 6045A, and 6045B (the 2013 final basis written comments on certain provisions
burden for Form 1099–OID, Original reporting regulations) and temporary of the final basis reporting regulations.
Issue Discount (OMB control number regulations relating to information In response to these comments, this
1545–0117), when it is revised to reporting for bond premium and document contains final regulations
request the additional information in acquisition premium under section 6049 under section 6045 relating to the
the regulations. This information is (TD 9616 at 78 FR 23116) (the 2013 treatment of certain debt instruments as
required to enable the IRS to verify that temporary interest reporting non-covered securities.
a taxpayer is reporting the correct regulations). A notice of proposed The written comments on the 2015
amount of tax-exempt interest each year rulemaking cross-referencing the 2013 proposed reporting regulations and the
for alternative minimum tax and other temporary interest reporting regulations 2015 final basis reporting regulations
purposes. In addition, because this also was published in the Federal are available for public inspection at
information is used to determine a Register on April 18, 2013 (REG– http://www.regulations.gov or upon
taxpayer’s adjusted basis in a debt 154563–12 at 78 FR 23183) (the 2013 request.
instrument for purposes of section proposed interest reporting regulations). Explanation of Provisions
6045(g), this information is required to On March 13, 2015, the Treasury
enable the IRS to verify that a taxpayer Department and the IRS published in A. Constant Yield Election for Accruals
is reporting the correct amount of gain the Federal Register final regulations of Market Discount
or loss upon the sale of a tax-exempt under sections 6045, 6045A, and 6049 Under section 1276(b)(2), a customer
obligation. (TD 9713 at 80 FR 13233) (the 2015 final may elect to accrue market discount on
wgreen on DSK2VPTVN1PROD with RULES

An agency may not conduct or basis reporting regulations, and, a constant yield method rather than a
sponsor, and a person is not required to together with the 2013 final basis ratable method. The election may be
respond to, a collection of information reporting regulations, the final basis made on a debt instrument by debt
unless it displays a valid control reporting regulations). A number of instrument basis and must be made for
number assigned by the Office of commenters on the 2013 final basis the earliest taxable year for which the
Management and Budget. reporting regulations requested changes customer is required to determine

VerDate Sep<11>2014 14:29 Feb 17, 2016 Jkt 238001 PO 00000 Frm 00018 Fmt 4700 Sfmt 4700 E:\FR\FM\18FER1.SGM 18FER1

8152 Federal Register / Vol. 81, No. 32 / Thursday, February 18, 2016 / Rules and Regulations

D. Treatment of Certain Debt 1, 2015. Section 1.6045–1(n)(12) applies It is anticipated that this collection of
Instruments Subject to January 1, 2016, to a debt instrument acquired on or after information in the regulations will not
Reporting February 18, 2016. The final regulations fall on a substantial number of small
Under § 1.6045–1(n)(3) of the 2013 under section 6049 in this document entities, especially because fewer
final basis reporting regulations, certain apply to a tax-exempt obligation that is customers will need to notify brokers
debt instruments are subject to basis a covered security acquired on or after about the election. Further, the
reporting only if the debt instrument is January 1, 2017. The final regulations regulations implement the statutory
acquired by a customer on or after under section 6045A in this document requirements for reporting adjusted
apply to a transfer of a section 1256 basis under section 403 of the Act.
January 1, 2016. For example, § 1.6045–
option that occurs on or after January 1, Moreover, any economic impact is
1(n)(3) applies to a contingent payment
2016, and to a transfer of a debt expected to be minimal because it
debt instrument, a debt instrument that
instrument that occurs on or after should take a customer no more than
is not issued by a U.S. issuer, and a debt
January 1, 2016. seven minutes to satisfy the
instrument the terms of which are not
information-sharing requirement in
reasonably available to a broker within Special Analyses
these regulations.
90 days of acquisition of the debt Certain IRS regulations, including this Section 403(c) of the Act added
instrument by the customer. one, are exempt from the requirements section 6045A, which requires
Several commenters on the 2013 final of Executive Order 12866, as applicable persons to provide a transfer
basis reporting regulations requested supplemented and reaffirmed by statement in connection with the
guidance for a debt instrument the terms Executive Order 13563. Therefore, a transfer of custody of a covered security.
of which are not reasonably available to regulatory assessment is not required. It Section 1.6045A–1 effectuates the Act
the broker. The commenters stated that also has been determined that section by giving the broker who receives the
they would not have the information 553(b) of the Administrative Procedure transfer statement the information
necessary to comply with the Act (5 U.S.C. chapter 5) does not apply necessary to determine and report
information reporting rules for these to these regulations. adjusted basis and whether any gain or
instruments. Several commenters stated It is hereby certified that the final loss with respect to a debt instrument or
that information for a debt instrument regulations in this document will not section 1256 option is long-term or
issued by a non-U.S. issuer and for a have a significant economic impact on short-term as required by section 6045
tax-exempt obligation is particularly a substantial number of small entities. when the security is subsequently sold.
difficult to obtain. One commenter Therefore, a Regulatory Flexibility Consequently, § 1.6045A–1 does not add
noted that under SEC Release 34–67908, Analysis under the Regulatory to the impact on small entities imposed
issued on September 21, 2012 (77 FR Flexibility Act (5 U.S.C. chapter 6) is by the statutory provisions. Instead, the
59427), issuers of municipal securities not required. It is anticipated that the regulations limit the information to be
are required to provide certain data to requirements in the final regulations in reported to only those items necessary
the Electronic Municipal Market Access this document, except in the case of the to effectuate the statutory scheme.
system set up by the Municipal notification by a customer discussed in The information required under
Securities Rulemaking Board for new the next paragraph, will fall only on § 1.6049–10 will enable the IRS to verify
issuances, but there is no requirement to financial services firms with annual that a taxpayer is reporting the correct
file similar information for issuances receipts greater than the $38.5 million amount of tax-exempt interest each year
already outstanding as of the November threshold and, therefore, on no small for alternative minimum tax and other
1, 2012, effective date of the release. entities. purposes. In addition, because this
The Treasury Department and the IRS Section 403(a) of the Act requires a information is used to determine a
agree that a broker may not always be broker to report the adjusted basis of a taxpayer’s adjusted basis in a debt
able to obtain information for a debt debt instrument that is a covered instrument for purposes of section
instrument issued by a non-U.S. issuer security. Although a holder of a debt 6045(g), this information is required to
or for a tax-exempt obligation issued instrument (customer) is permitted to enable the IRS to verify that a taxpayer
before January 1, 2014. The final make a number of elections that affect is reporting the correct amount of gain
regulations in this document therefore how basis is computed, a broker only is or loss upon the sale of a tax-exempt
provide that a debt instrument issued by required to take into account specified obligation. Any economic impact on
a non-U.S. issuer or a tax-exempt elections in reporting the adjusted basis small entities is expected to be minimal
obligation issued before January 1, 2014, of a debt instrument, including the because a broker already is required to
is treated as a noncovered security (and, election under section 1276(b)(2) to determine the accruals of OID and
therefore, is not subject to basis determine accruals of market discount acquisition premium for purposes of
reporting under section 6045) if the on a constant yield method. Under the determining and reporting a customer’s
terms of the debt instrument are not 2013 final basis reporting regulations, a adjusted basis on Form 1099–B under
reasonably available to the broker customer was required to notify the section 6045. Moreover, any effect on
within 90 days of the date the debt broker that the customer had made the small entities of the rules in the final
instrument was acquired by the section 1276(b)(2) election. However, regulations flows from section 6049 and
customer. The Treasury Department and § 1.6045–1(n)(11)(i)(B) requires a broker section 403 of the Act.
the IRS believe that the information to take into account the election under Therefore, because the final
necessary for section 6045 compliance section 1276(b)(2) in reporting a debt regulations in this document will not
should be available for other debt instrument’s adjusted basis unless the have a significant economic impact on
instruments. customer timely notifies the broker that a substantial number of small entities, a
wgreen on DSK2VPTVN1PROD with RULES

the customer has not made the election. regulatory flexibility analysis is not
Applicability Dates The notification must be in writing, required.
The final regulations under section which includes a writing in electronic Pursuant to section 7805(f) of the
6045 in this document (other than format. In most cases, this election Internal Revenue Code, the proposed
§ 1.6045–1(n)(12)) apply to a debt results in a more taxpayer-favorable regulations preceding the final
instrument acquired on or after January result than the default ratable method. regulations in this document were

VerDate Sep<11>2014 14:29 Feb 17, 2016 Jkt 238001 PO 00000 Frm 00020 Fmt 4700 Sfmt 4700 E:\FR\FM\18FER1.SGM 18FER1

$8154 Federal Register / Vol. 81, No. 32 / Thursday, February 18, 2016 / Rules and Regulations ■ Par. 4. Section 1.6045A–1 is amended option and the fair market value of the (b) Acquisition premium. A payor is by: option as of the end of the prior required to report acquisition premium ■ 1. Removing ‘‘and’’ at the end of calendar year. amortization on a tax-exempt obligation paragraph (b)(3)(viii), removing the * * * * * in accordance with the rules in period at the end of paragraph (b)(3)(ix) § 1.6049–9(c) as if section 1272 applied and adding ‘‘and;’’ in its place, and § 1.6045A–1T [Removed] to a tax-exempt obligation. See adding paragraph (b)(3)(x). ■ Par. 5. Section 1.6045A–1T is paragraph (a) of this section to ■ 2. Removing ‘‘and’’ at the end of removed. determine the amount of OID allocable paragraph (b)(4)(ii), removing the period ■ Par. 6. Section 1.6049–10 is added to to an accrual period. at the end of paragraph (b)(4)(iii) and read as follows: adding ‘‘and;’’ in its place, and adding (c) Effective/applicability date. This paragraph (b)(4)(iv). § 1.6049–10 Reporting of original issue section applies to a tax-exempt ■ 3. Removing paragraphs (e) and (f). discount on a tax-exempt obligation. obligation that is a covered security The additions read as follows: (a) In general. For purposes of section (within the meaning of § 1.6045–1(a)(15) 6049, a payor (as defined in § 1.6049– and (n)(12)) acquired on or after January § 1.6045A–1 Statements of information required in connection with transfers of 4(a)(2)) of original issue discount (OID) 1, 2017. For a taxable year beginning securities. on a tax-exempt obligation (as defined after December 31, 2016, a broker, * * * * * in section 1288(b)(2)) is required to however, may rely on this section to (b) * * * report the daily portions of OID on the report OID and acquisition premium for (3) * * * obligation as if the daily portions of OID a tax-exempt obligation that is a covered (x) For a transfer that occurs on or that accrued during a calendar year security acquired before January 1, after January 1, 2016, the last date on or were paid to the holder (or holders) of 2017. before the transfer date that the the obligation in the calendar year. The transferor made an adjustment for a amount of the daily portions of OID that § 1.6049–10T [Removed] particular item (for example, the last accrues during a calendar year is determined as if section 1272 and ■ Par. 7. Section 1.6049–10T is date on or before the transfer date that removed. bond premium was amortized). A § 1.1272–1 applied to a tax-exempt broker, however, may rely on this obligation. Notwithstanding any other John Dalrymple, paragraph (b)(3)(x) for a transfer of a rule in section 6049 and the regulations Deputy Commissioner for Services and covered security that occurs on or after thereunder, a payor must determine Enforcement. June 30, 2015, and before January 1, whether a tax-exempt obligation was Approved: January 13, 2016. 2016. issued with OID and the amount of OID that accrues for each relevant period. As Mark J. Mazur, (4) * * * (iv) For a transfer of an option prescribed by section 1288(b)(1), OID on Assistant Secretary of the Treasury (Tax described in § 1.6045–1(m)(3) (section a tax-exempt obligation is determined Policy). 1256 option) that occurs on or after without regard to the de minimis rules [FR Doc. 2016–03429 Filed 2-17–16; 8:45 am] January 1, 2016, the original basis of the in section 1273(a)(3) and § 1.1273–1(d). BILLING CODE 4830–01–P wgreen on DSK2VPTVN1PROD with RULES VerDate Sep<11>2014 14:29 Feb 17, 2016 Jkt 238001 PO 00000 Frm 00022 Fmt 4700 Sfmt 9990 E:\FR\FM\18FER1.SGM 18FER1$

Document Created: 2016-02-18 07:46:57
Document Modified: 2016-02-18 07:46:57

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 regulations.
Contact		Pamela Lew of the Office of the Associate Chief Counsel (Financial Institutions and Products) at (202) 317-7053 (not a toll-free number).
FR Citation		81 FR 8149
RIN Number		1545-BM59
CFR Associated		Income Taxes and Reporting and Recordkeeping Requirements

81 FR 8149 - Reporting of Original Issue Discount on Tax-Exempt Obligations; Basis and Transfer Reporting by Securities Brokers for Debt Instruments and Options

DEPARTMENT OF THE TREASURYInternal Revenue Service

Federal Register Volume 81, Issue 32 (February 18, 2016)

DEPARTMENT OF THE TREASURY
Internal Revenue Service