This document withdraws a portion of a notice of proposed rulemaking (REG-110385-99, 1999-2 C.B. 670) published on November 29, 1999, addressing certain transactions that occur within a specified period before or after a foreign entity changed its classification to disregarded-entity status.
On December 18, 1996, Treasury and IRS published in the Federal Register final regulations (T.D. 8697, 1997-1 C.B. 215 [61 FR 66584]) relating to the classification of business entities under section 7701 (check-the-box regulations). On November 29, 1999, Treasury and the IRS published in the Federal Register a notice of proposed rulemaking (REG-110385-99, 1999-2 C.B. 670 [64 FR 66591]) proposing to amend §§301.7701-2 and 301.7701-3 of the current check-the-box regulations (proposed regulations). A public hearing on the proposed regulations was held on January 31, 2000. In addition, written comments were received. Most of the written and oral comments related to proposed §301.7701-3(h), which provided a rule that would have operated to change the classification of a foreign disregarded entity if a so-called “extraordinary transaction” occurred one day before or within one year after the election to treat the entity as disregarded. In general, commentators criticized the approach adopted in this rule as overly broad and expressed concern that it would mitigate the increased certainty promoted by the check-the-box regulations in 1996.
After considering the comments received, Treasury and the IRS issued Notice 2003-46, 2003-28 IRB 53, on June 26, 2003, announcing the intention to withdraw the extraordinary transaction rule in proposed §301.7701-3(h) and to finalize the remaining provisions of the proposed regulations addressing grandfathered entities and the relevancy of classification status.
With the publication of this document, proposed §301.7701-3(h) is withdrawn. Final regulations (T.D. 9093) adopting without substantive change the portions of the proposed regulations relating to grandfathered entities and the relevancy of classification status are being published on page 1156 of this issue of the Bulletin. These final regulations do not adopt the extraordinary transaction rule in proposed §301.7701-3(h).
The principal author of this withdrawal notice is Ronald M. Gootzeit, Office of Associate Chief Counsel (International). However, other personnel from Treasury and the IRS participated in its development.
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Accordingly, under the authority of 26 U.S.C. 7805, §301.7701-3(h) of the notice of proposed rulemaking published in the Federal Register on November 29, 1999, (64 FR 66591) is withdrawn.
Robert E. Wenzel,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.