In this issue of the Bulletin, the IRS is issuing temporary regulations (T.D. 9554) to extend the exceptions from taxes under the Federal Insurance Contributions Act (“FICA”) and the Federal Unemployment Tax Act (“FUTA”) under sections 3121(b)(3), 3127, and 3306(c)(5) to entities that are disregarded as separate from their owners for federal tax purposes. The temporary regulations also clarify the existing rule that the owners of disregarded entities, except for qualified subchapter S subsidiaries, are responsible for backup withholding and related information reporting requirements under section 3406. The text of those regulations also serves as the text of these proposed regulations.
Written or electronic comments and requests for a public hearing must be received by January 30, 2012.
Send submissions to CC:PA:LPD:PR (REG-136565-09), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. to 4 p.m. to CC:PA:LPD:PR (REG-136565-09), Courier’s Desk, Internal Revenue Service, 1111 Constitution Ave. N.W., Washington, DC. Alternatively, taxpayers may submit electronic comments via the Federal eRulemaking Portal at www.regulations.gov (indicate IRS and REG-136565-09).
Concerning the proposed regulations, Joseph Perera, at (202) 622-6040; concerning submissions of comments or requests for a hearing, Oluwafunmilayo (Funmi) Taylor at (202) 622-7180 (not toll-free numbers).
Temporary regulations in this issue of the Bulletin contain amendments to Employment Tax Regulations (26 CFR Part 31) and the Procedure and Administration Regulations (26 CFR Part 301). The text of those regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the temporary regulations and these proposed regulations. Generally, the regulations allow certain disregarded entities under §301.7701-2 that are treated as corporations for employment tax purposes, to qualify for the FICA and FUTA exceptions of sections 3121(b)(3), 3127, and 3306(c)(5) by treating the owner of the disregarded entity as the employer for purposes of applying those sections. Additionally, the regulations clarify the existing rule that the owners of disregarded entities, other than qualified subchapter S subsidiaries are responsible for backup withholding and related information reporting requirements on reportable payments.
The regulations, as proposed, apply to wages paid on or after November 1, 2011.
However, the rules in these proposed regulations may be relied on by taxpayers for wages paid after December 31, 2008.
It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because the regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.
Before these proposed regulations are adopted as final regulations, consideration will be given to any written (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. The IRS and Treasury Department request comments on the clarity of the proposed rules and how they can be made easier to understand. All comments will be made available for public inspection and copying.
Accordingly, 26 CFR parts 31 and 301 are amended as follows:
Paragraph 1. The authority citation for part 31 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 31.3121(b)(3)-1 is amended by:
1. Revising paragraph (c).
2. Adding paragraphs (d) and (e).
The revision and addition read as follows:
* * * * *
(c) [The text of the proposed amendment to §31.3121(b)(3)-1(c) is the same as the text of §31.3121(b)(3)-1T(c) published elsewhere in this issue of the Bulletin].
(d) [The text of the proposed amendment to §31.3121(b)(3)-1(d) is the same as the text of §31.3121(b)(3)-1T(d) published elsewhere in this issue of the Bulletin].
(e) [The text of the proposed amendment to §31.3121(b)(3)-1(e) is the same as the text of §31.3121(b)(3)-1T(e) published elsewhere in this issue of the Bulletin].
Par. 3. Section 31.3127-1 is added to read as follows:
[The text of the proposed §31.3127-1 is the same as the text of §31.3127-1T published elsewhere in this issue of the Bulletin].
Par. 4. Section 31.3306(c)(5)-1 is amended by:
1. Revising paragraph (c).
2. Adding paragraphs (d) and (e).
The revision and addition read as follows:
* * * * *
(c) [The text of the proposed amendment to §31.3306(c)(5)-1(c) is the same as the text of §31.3306(c)(5)-1T(c) published elsewhere in this issue of the Bulletin].
(d) [The text of the proposed amendment to §31.3306(c)(5)-1(d) is the same as the text of §31.3306(c)(5)-1T(d) published elsewhere in this issue of the Bulletin].
(e) [The text of the proposed amendment to §31.3306(c)(5)-1(e) is the same as the text of §31.3306(c)(5)-1T(e) published elsewhere in this issue of the Bulletin].
Par. 5. The authority citation for part 301 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 6. Section 301.7701-2 is amended by:
1. Revising paragraph (c)(2)(iv)(A).
2. Redesignating paragraph (c)(2)(iv)(C) as paragraph (c)(2)(iv)(D) and adding new paragraph (c)(2)(iv)(C).
3. Adding a sentence at the end of paragraph (e)(5).
The additions and revisions read as follows:
* * * * *
(c) * * *
(2) * * *
(iv) * * *
(A) [The text of the proposed amendment to §301.7701-2(c)(2)(iv)(A) is the same as the text of §301.7701-2T(c)(2)(iv)(A) published elsewhere in this issue of the Bulletin].
(B) * * *
(C) [The text of the proposed amendment to §301.7701-2(c)(2)(iv)(C) is the same as the text of §301.7701-2T(c)(2)(iv)(C) published elsewhere in this issue of the Bulletin].
* * * * *
(e) * * *
(5) * * * [The text of the proposed amendment to §301.7701-2(e)(5) is the same as the text of §301.7701-2T(e)(5) published elsewhere in this issue of the Bulletin].
* * * * *
Steven T. Miller,The Internal Revenue Bulletin is produced and published by the Internal Revenue Service and contains IRS pronouncements affecting tax analysis under the Code and the Regulations, including but not limited to Revenue Procedures, Revenue Rulings, Notices and Announcements. Access the IRS site at https://www.irs.gov/help/irsgov-accessibility for information concerning accessibility of IRS materials. While every effort has been made to ensure that the IRB database files available through the TouchTax application are accurate, those using TouchTax for legal research should verify their results against the printed versions of the IRBs available from the IRS.