[Federal Register: July 28, 2004 (Volume 69, Number 144)]
[Proposed Rules]
[Page 44988-44990]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28jy04-23]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-208246-90]
RIN 1545-BD47
Allocation and Apportionment of Deductions for Charitable
Contributions
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Withdrawal of notice of proposed rulemaking, notice of proposed
rulemaking, notice of proposed rulemaking by cross-reference to
temporary regulations, and notice of public hearing.
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SUMMARY: This document withdraws the notice of proposed rulemaking
published on March 12, 1991 (the 1991 proposed regulations), relating
to the allocation and apportionment of charitable deductions. In
addition, in the Rules and Regulations section of this issue of the
Federal Register, the Treasury Department and the IRS are issuing
temporary regulations providing that the deduction for a charitable
contribution (as defined in section 170(c)) is to be allocated to all
of the taxpayer's gross income and apportioned on the basis of income
from sources within the United States. The text of the temporary
regulations also serves as the text of these proposed regulations.
Further, regulations are proposed in this document, without cross-
reference to temporary regulations, with respect to deductions for
charitable contributions that are provided by an income tax treaty
rather than by sections 170, 873(b)(2), and 882(c)(1)(B). This document
also provides a notice of public hearing on these proposed regulations.
DATES: Written or electronic comments must be received by October 26,
2004. Outlines of topics to be discussed at the public hearing
scheduled for December 2, 2004, at 10 a.m. must be received by November
12, 2004.
[[Page 44989]]
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-208246-90), Room
5203, Internal Revenue Service, POB 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand-delivered between the
hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-208246-90), Courier's
Desk, Internal Revenue Service, 1111 Constitution Ave., NW.,
Washington, DC or sent electronically, via the IRS Internet site at
http://www.irs.gov/regs or Federal eRulemaking Portal at http://www.regulations.gov
(IRS and REG-208246-90). The public hearing will be
held in the Auditorium, Internal Revenue Building, 1111 Constitution
Ave., NW., Washington, DC.
FOR FURTHER INFORMATION CONTACT: Concerning the withdrawal of the 1991
proposed regulations and the proposed regulations, Teresa Burridge
Hughes, (202) 622-3850 (not a toll-free number); concerning the
submission of comments, the hearing, and/or placement on the building
access list to attend the hearing, Treena Garrett, (202) 622-7180 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background and Explanation of Provisions
Section 1.861-8(e)(9) provides that the deduction for charitable
contributions allowed by sections 170, 873(b)(2), and 882(c)(1)(B) is
generally considered as not definitely related to any gross income and
therefore is ratably apportioned to all of a taxpayer's gross income.
On March 12, 1991, Treasury and the IRS published in the Federal
Register (56 FR 10395) a notice of proposed rulemaking (INTL-116-90,
REG-208246-90) that would have modified the allocation and
apportionment of the deduction for charitable contributions. The 1991
proposed regulations generally would have provided for the allocation
and apportionment of a deduction for a charitable contribution to
sources within or without the United States based on where the
contribution was used. Where the deduction for a charitable
contribution would not have been allocable to United States or foreign
source gross income based on the new test, it would have been ratably
apportioned to all gross income. Written comments were received and a
public hearing on the 1991 proposed regulations was held on August 1,
1991. In response to comments received, and after further consideration
of the issue, the 1991 proposed regulations are withdrawn.
Contemporaneously with the withdrawal of the 1991 proposed
regulations, the Treasury Department and the IRS are issuing a Treasury
decision containing temporary regulations that are published in the
Rules and Regulations section in this issue of the Federal Register.
The temporary regulations provide for the allocation and apportionment
of the deduction for charitable contributions to U.S. source income.
The text of the temporary regulations also serves as the text of these
proposed regulations. The preamble to the temporary regulations
discusses the comments received on the 1991 proposed regulations, the
reasons for the withdrawal of the 1991 proposed regulations, and the
approach of the temporary regulations.
This document also proposes a rule for the allocation and
apportionment of deductions for charitable contributions that are
allowed under a U.S. income tax treaty (rather than under sections 170,
873(b)(2), and 882(c)(1)(B)) that limits the amount of the deduction
based on a percentage of income that arises from sources within the
treaty partner. In such case, these proposed regulations would provide
that the deduction is definitely related and allocable to all of the
taxpayer's gross income. The deduction would be apportioned between the
statutory grouping (or among the statutory groupings) of gross income
and the residual grouping on the basis of the relative amounts of gross
income from sources within the treaty partner within each grouping This
rule is proposed to be effective for taxable years beginning on or
after the date final regulations are published in the Federal Register.
Special Analyses
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 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, 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 Internal Revenue Code, this
notice of proposed rulemaking will be submitted to the Chief Counsel
for Advocacy of the Small Business Administration for comment on their
impact on small businesses.
Comments and Public Hearing
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 the Treasury Department request comments on the
clarity of the proposed rules and how they can be made easier to
understand. All comments will be available for public inspection and
copying.
A public hearing has been scheduled for December 2, 2004, beginning
at 10 a.m. in the IRS Auditorium of the Internal Revenue Building, 1111
Constitution Avenue, NW., Washington, DC. Due to building security
procedures, visitors must enter at the Constitution Avenue entrance. In
addition, all visitors must present photo identification to enter the
building. Because of access restrictions, visitors will not be admitted
beyond the immediate entrance area more than 30 minutes before the
hearing starts. For more information about having your name placed on
the building access list to attend the hearing, see the FOR FURTHER
INFORMATION CONTACT section of this preamble.
The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who
wish to present oral comments at the hearing must submit electronic or
written comments by October 26, 2004, and an outline of the topics to
be discussed the time to be devoted to each topic (signed original and
eight (8) copies) by November 12, 2004. A period of 10 minutes will be
allotted to each person for making comments. An agenda showing the
scheduling of the speakers will be prepared after the deadline for
receiving outlines has passed. Copies of the agenda will be available
free of charge at the hearing.
Drafting Information
The principal author of this document is Teresa Burridge Hughes,
Office of Associate Chief Counsel (International). However, other
personnel from the Treasury Department and the IRS participated in its
development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Withdrawal of a Notice of Proposed Rulemaking
Under the authority of 26 U.S.C. 7805, Sec. 1.861-8(e) and (g) of
the notice of proposed rulemaking (INTL-116-90) published in the
Federal Register on March 12, 1991, (56 FR 10395) is withdrawn.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 1 is proposed to be amended as follows:
[[Page 44990]]
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 is amended by adding
an entry in numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.861-8(e)(12) is added to read as follows:
Sec. 1.861-8 Computation of taxable income from sources within the
United States and from other sources and activities.
* * * * *
(e) * * *
(e)(12)(i) and (ii) [The text of the proposed addition of Sec.
1.861-8(e)(12)(i) and (ii) is the same as Sec. 1.861-8T(e)(12)(i) and
(ii) published elsewhere in this issue of the Federal Register.]
(e)(12)(iii) Treaty provisions. (A) In general. If a deduction for
charitable contributions not otherwise permitted by sections 170,
873(b)(2) and 882(c)(1)(B) is allowed under a U.S. income tax treaty,
and such treaty limits the amount of the deduction based on a
percentage of income arising from sources within the treaty partner,
the deduction is definitely related and allocable to all of the
taxpayer's gross income. The deduction allocated under this paragraph
(e)(12)(iii) shall be apportioned between the statutory grouping (or
among the statutory groupings) of gross income and the residual
grouping on the basis of the relative amounts of gross income from
sources within the treaty partner within each grouping.
(B) The rules of this paragraph (e)(12)(iii) are applicable for
charitable contributions made on or after the date of publication of
this document as a final regulation in the Federal Register.
(e)(12)(iv)(A) [The text of the proposed addition of Sec. 1.861-
8(e)(12)(iv)(A) is the same as Sec. 1.861-8T(e)(12)(iv)(A) published
elsewhere in this issue of the Federal Register.]
(e)(12)(iv)(B) [Reserved]
Par. 4. Section 1.861-14(e)(6) is revised to read as follows:
Sec. 1.861-14 Special rules for allocating and apportioning certain
expenses (other than interest expense) of an affiliated group of
corporations.
* * * * *
(e) * * *
(e)(6) [The text of the proposed revision of Sec. 1.861-14(e)(6)
is the same as Sec. 1.861-14T(e)(6) through (e)(6)(ii)(A) published
elsewhere in this issue of the Federal Register.]
* * * * *
Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 04-17080 Filed 7-27-04; 8:45 am]
BILLING CODE 4830-01-P