# Bulletin No. 2021–32 > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/agency%3Airs%3Ab3da8beefb7add75 ## Record - **Collection:** Agency decision - **Document type:** Agency decision ## Text HIGHLIGHTS OF THIS ISSUE   Bulletin No. 2021–32 August 9, 2021 These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations. ADMINISTRATIVE REG-102951-16, page 272. The proposed regulations would amend the rules for filing certain returns and statements electronically to reflect changes made by the Taxpayer First Act of 2019 and to promote electronic filing. The NPRM also withdraws proposed regulations published in the Federal Register on May 31, 2018, amending the rules for determining whether information returns must be filed electronically. INCOME TAX Notice 2021-47, page 269. The notice announces the inflation adjustment factor and phase-out amount for the enhanced oil recovery credit for Finding Lists begin on page ii. taxable years beginning in the 2021 calendar year. The format of the notice is identical to the format of previously published notices on this issue. The notice concludes that because the reference price for the 2020 calendar year ($37.07) does not exceed $28 multiplied by the inflation adjustment factor for the 2020 calendar year ($28 multiplied by 1.7849 = $49.9772), the enhanced oil recovery credit for qualified costs paid or incurred in 2021 is determined without regard to the phase-out for crude oil price increases. The notice contains the previously published figures for taxable years beginning in the 1991 through 2020 calendar years. This year, calendar year 2021, is similar to 2016 and 2017 where the enhanced oil recovery credit is determined without regard to the phase-out for crude oil price increases. The IRS Mission Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all. Introduction The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published weekly. It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published. Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements. Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same. The Bulletin is divided into four parts as follows: Part I.—1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986. Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Legislation and Related Committee Reports. Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secretary (Enforcement). Part IV.—Items of General Interest. This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements. The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period. The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate. August 9, 2021  Bulletin No. 2021–32 Part III 2021 Section 43 Inflation Adjustment Notice 2021-47 Section 43(a) provides that for purposes of section 38, the enhanced oil recovery credit for any taxable year is an amount equal to 15 percent of the taxpayer’s qualified enhanced oil recovery costs for such taxable year. Section 43(b)(1) provides that the amount of the credit determined under subsection (a) for any taxable year shall be reduced by an amount which bears the same ratio to the amount of such credit (determined without regard to this para- Bulletin No. 2021–32 graph) as — (A) the amount by which the reference price for the calendar year preceding the calendar year in which the taxable year begins exceeds $28, bears to (B) $6. Section 43(b)(3)(B) of the Internal Revenue Code requires the Secretary to publish an inflation adjustment factor. The enhanced oil recovery credit under § 43 for any taxable year is reduced if the “reference price,” determined under § 45K(d) (2)(C), for the calendar year preceding the calendar year in which the taxable year begins is greater than $28 multiplied by the inflation adjustment factor for that year. The term “inflation adjustment factor” means, with respect to any calendar year, a fraction the numerator of which is the 269 GNP implicit price deflator for the preceding calendar year and the denominator of which is the GNP implicit price deflator for 1990. Because the reference price for the 2020 calendar year ($37.07) does not exceed $28 multiplied by the inflation adjustment factor for the 2020 calendar year ($28 multiplied by 1.7849 = $49.9772), the enhanced oil recovery credit for qualified costs paid or incurred in 2021 is determined without regard to the phase-out for crude oil price increases. Table 1 contains the GNP implicit price deflator used for the 2021 calendar year, as well as the previously published GNP implicit price deflators used for the 1991 through 2020 calendar years. August 9, 2021 Notice 2021-47 TABLE 1 GNP IMPLICIT PRICE DEFLATORS Calendar Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 GNP Implicit Price Deflator 112.9 (used for 1991) 117.0 (used for 1992) 120.9 (used for 1993) 124.1 (used for 1994) 126.0 (used for 1995)* 107.5 (used for 1996) 109.7 (used for 1997)** 112.35 (used for 1998) 112.64 (used for 1999)*** 104.59 (used for 2000) 106.89 (used for 2001) 109.31 (used for 2002) 110.63 (used for 2003) 105.67 (used for 2004)**** 108.23 (used for 2005) 112.129 (used for 2006) 116.036 (used for 2007) 119.656 (used for 2008) 122.407 (used for 2009) 109.764 (used for 2010)***** 110.654 (used for 2011) 113.347 (used for 2012)****** 115.387 (used for 2013) 106.710 (used for 2014)******* 108.407 (used for 2015)******** 109.868 (used for 2016) 111.528 (used for 2017) 113.500 (used for 2018) 110.308 (used for 2019)********* 112.257 (used for 2020) 113.586 (used for 2021) * Beginning in 1995, the GNP implicit price deflator was rebased relative to 1992. The 1990 GNP implicit price deflator used to compute the 1996 § 43 inflation adjustment factor is 93.6. ** Beginning in 1997, two digits follow the decimal point in the GNP implicit price deflator. The 1990 GNP price deflator used to compute the 1998 § 43 inflation adjustment factor is 93.63. *** Beginning in 1999, the GNP implicit price deflator was rebased relative to 1996. The 1990 GNP implicit price deflator used to compute the 2000 § 43 inflation adjustment factor is 86.53. **** Beginning in 2003, the GNP implicit price deflator was rebased, and the 1990 GNP implicit price deflator used to compute the 2004 § 43 inflation adjustment factor is 81.589. ***** Beginning in 2009, the GNP implicit price deflator was rebased, and the 1990 GNP implicit price deflator used to compute the 2010 § 43 inflation adjustment factor is 72.199. ****** Beginning in 2011, the 1990 GNP implicit price deflator used to compute the 2012 § 43 inflation adjustment factor is 72.260. ******* Beginning in 2013, the GNP implicit price deflator was rebased, and the 1990 GNP implicit price deflator used to compute the 2014 § 43 inflation adjustment factor is 66.803. ******** Beginning in 2014, the 1990 GNP implicit price deflator used to compute the 2015 § 43 inflation adjustment factor is 66.732. ********* Beginning in 2018, the 1990 GNP implicit price deflator used to compute the 2019 § 43 inflation adjustment factor is 63.637. August 9, 2021 270 Bulletin No. 2021–32 Table 2 contains the inflation adjustment factor and the phase-out amount for taxable years beginning in the 2021 calendar year as well as the previously published inflation adjustment factors and phase-out amounts for taxable years Calendar Year 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Notice 2021-47 TABLE 2 INFLATION ADJUSTMENT FACTORS AND PHASE-OUT AMOUNTS Inflation Adjustment Factor 1.0000 1.0363 1.0708 1.0992 1.1160 1.1485 1.1720 1.1999 1.2030 1.2087 1.2353 1.2633 1.2785 1.2952 1.3266 1.3743 1.4222 1.4666 1.5003 1.5203 1.5326 1.5686 1.5968 1.5974 1.6245 1.6464 1.6713 1.7008 1.7334 1.7640 1.7849 DRAFTING INFORMATION The principal author of this notice is Bulletin No. 2021–32 Martha M. Garcia of the Office of Associate Chief Counsel (Passthroughs and Special Industries). For further information 271 beginning in the 1991 through 2020 calendar years. Phase-out Amount 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 100 percent 100 percent 100 percent 100 percent 100 percent 100 percent 100 percent 100 percent 100 percent 100 percent 0 0 1.069 percent 100 percent 100 percent 0 regarding this notice, contact Ms. Garcia at (202) 317-6853 (not a toll-free number). August 9, 2021 Part IV Notice of Proposed Rulemaking Electronic-Filing Requirements for Specified Returns and Other Documents REG-102951-16 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Withdrawal of notice of proposed rulemaking; notice of proposed rulemaking. SUMMARY: This document contains proposed regulations amending the rules for filing electronically and affects persons required to file partnership returns, corporate income tax returns, unrelated business income tax returns, withholding tax returns, and certain information returns, registration statements, disclosure statements, notifications, actuarial reports, and certain excise tax returns. The proposed amendments reflect changes made by the Taxpayer First Act of 2019 (TFA) and are consistent with the TFA’s emphasis on increasing electronic filing. This document also withdraws proposed regulations published in the Federal Register on May 31, 2018, amending the rules for determining whether information returns must be filed electronically. DATES: Written or electronic comments must be received by September 21, 2021. The public hearing is being held by teleconference on September 22, 2021 at 10 a.m. EST. Requests to speak and outlines of topics to be discussed at the public hearing must be received by September 21, 2021. If no outlines are received by September 21, 2021, the public hearing will be cancelled. Requests to attend the public hearing must be received by 5:00 p.m. EST on September 20, 2021. The telephonic hearing will be made accessible to people with disabilities. Requests for special assistance during the telephon- August 9, 2021 ic hearing must be received by September 17, 2021. ADDRESSES: Commenters are strongly encouraged to submit public comments electronically. Submit electronic submissions via the Federal eRulemaking Portal at www.regulations.gov (indicate IRS and REG–102951–16) by following the online instructions for submitting comments. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The Department of the Treasury (Treasury Department) and the IRS will publish for public availability any comments submitted to its public docket. Send paper submissions to: CC:PA:LPD:PR (REG–102951–16), room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, call Casey R. Conrad of the Office of the Associate Chief Counsel (Procedure and Administration), (202) 317-6844; concerning submission of comments or requests for a public hearing, call Regina Johnson, (202) 317-5177 (not toll-free numbers). SUPPLEMENTARY INFORMATION: Background This document contains proposed amendments to the Regulations on Income Taxes (26 CFR part 1) under sections 1461 and 1474 of the Internal Revenue Code (Code), which provide that persons required to deduct and withhold tax are liable for such tax, and section 6050I of the Code, which requires persons to report information about financial transactions to the IRS; to the Regulations on Pension Excise Taxes (26 CFR part 54) under section 6011 of the Code, which requires persons to report information for certain excise taxes related to employee benefit plans; to the Regulations on Procedure and Administration (26 CFR part 301) under sections 1474, 6011, 6012, 6033, 6057, 6058, and 6059 of the Code for determining whether 272 returns must be filed using magnetic media; and to the Regulations on Foundation and Similar Excise Taxes (26 CFR part 53) under section 6011 of the Code to remove the option—available to a person required to report certain excise taxes on Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code—to designate a Form 4720 filed by a private foundation or trust as that person’s return if the foundation is reporting the same transaction. This document also withdraws proposed regulations under section 6011 that were published in the Federal Register on May 31, 2018 (May 2018 proposed regulations), amending the rules for determining whether information returns must be filed using magnetic media. Section 6011(e) was added to the Code by section 319 of the Tax Equity and Fiscal Responsibility Act of 1982, Public Law 97-248, 96 Stat. 610, and required the Secretary of the Treasury or her delegate (Secretary) to prescribe regulations providing standards for determining which returns were required to be filed on magnetic media (hereinafter references to filing “in electronic form” will be used in place of filing “on magnetic media”). A year later, the statute was amended by section 109 of the Interest and Dividend Tax Compliance Act of 1983, Public Law 98-67, 97 Stat. 383, to require information returns under sections 6042(a) (dividends and corporate earnings and profits), 6044(a) (patronage dividends), and 6049(a) (interest), with respect to more than 50 payees for any calendar year, to be filed electronically. The amendment also added a waiver provision from electronically filing to any person who established undue hardship. On March 25, 1986, the Secretary first published guidance under section 6011(e) with respect to the electronic filing requirement as §301.6011-2 (TD 8081), which specified Forms 1042-S, 1098, 1099 series, 5498, 6248, 8027, W-2G, W-2, W-2P as the information returns covered by the regulation that had to be filed electronically unless the person was granted a waiver or was a low-volume filer. The term “low-volume filers” was Bulletin No. 2021–32 defined as persons not required to file, for any calendar year beginning on or after January 1, 1987, 250 or more of the specified returns (other than Forms 1099DIV, Dividends and Distributions; 1099PATR, Taxable Distributions Received from Cooperatives; 1099-INT, Interest Income; or 1099-OID, Original Issue Discount). For those four Forms 1099, the regulation provided a special rule that reduced the 250-return threshold to 50 and required that the four forms be aggregated for purposes of determining whether a person met the 50-return threshold. The regulation also provided that the Commissioner of Internal Revenue or his delegate (Commissioner) could prescribe by revenue procedure additional forms to be covered by the regulation. Section 6011(e) was again amended in 1989 by section 7713, Title VII, of the Revenue Reconciliation Act of 1989 (1989 Act), Public Law 101-239, 103 Stat. 2394, to prohibit the Secretary from requiring any person to file returns electronically unless that person was required to file at least 250 returns during the calendar year. The 1989 Act also required the Secretary to consider the taxpayer’s ability to comply at reasonable costs with the regulation’s requirements. On June 30, 1998, the Secretary promulgated amending regulations under section 6011(e), §301.6011-2 (TD 8772), that removed the special rules related to the four Forms 1099 and clarified that the 250-return threshold applied separately to each information return covered by §301.6011-2. The regulation also added Forms 499R-2/W-2PR, W-2VI, W-2GU, and W-2AS as information returns covered by the regulation and removed Form 6248. On August 5, 1997, the President signed into law the Taxpayer Relief Act of 1997, Public Law 105–34. Section 1224 of that Act amended 6011(e)(2) by adding a sentence that required the Secretary to promulgate regulations to require partnerships with over 100 partners to file returns electronically. On November 12, 1999, the Secretary promulgated regulations under section 6011(e) relating to this special rule for partnerships with more than 100 partners, §301.6011-3 (TD 8843), requiring partnerships with more than 100 partners to file partnership returns and all informa- Bulletin No. 2021–32 tion required by the applicable forms and schedules electronically. On April 29, 2002, the Secretary promulgated regulations under section 6011(e) (TD 8992) to add Form 1098-E as an information return covered by the regulation; on February 7, 2003, the Secretary promulgated regulations under section 6011(e) (TD 9029) to add Form 1098-T as an information return covered by the regulation. On November 13, 2007, the Secretary promulgated regulations relating to the requirements for filing corporate income tax returns and returns of organizations required to file returns under section 6033 electronically under section 6011(e), §301.6011-5, §301.6033-4, and §301.6037-2 (TD 9363). The regulations specify that all returns required to be filed during the calendar year, including income tax returns, employment tax returns, excise tax returns, and information returns, are counted in determining whether a corporation or organization meets the 250-return threshold. Sections 301.60115 and 301.6037-2 apply to large corporations and S corporations, respectively, if the corporation is required to file at least 250 returns during the calendar year and the corporation reports total assets at the end of the corporation’s taxable year that equal or exceed $10 million on Schedule L of their Form 1120 ($10 million rule). Section 301.6033-4 applies to organizations required to file Form 990, Return of Organization Exempt From Income Tax, that have total assets of $10 million or more as of the end of the taxable year, and that are required to file at least 250 returns during the calendar year; it also applies to any organization (regardless of total assets) required to file Form 990-PF, Return of Private Foundation or Section 4947(a) (1) Trust Treated as Private Foundation, if the organization is required to file at least 250 returns during the calendar year. Section 6011(e)(4) was added to the Code in 2010 by section 522, Title V, of the Hiring Incentives to Restore Employment (HIRE) Act, Public Law 111-147, 124 Stat. 71, to authorize the Secretary to require financial institutions that file returns with respect to withholding on foreign transfers to file those returns electronically regardless of the number. On January 28, 2013, the Secretary promul- 273 gated regulations under section 1474(f), §301.1474-1 (TD 9610), to require financial institutions defined in section 1471(d) (5) to electronically file Form 1042-S, Foreign Persons’ U.S. Source Income Subject to Withholding, regardless of the number of returns filed for the calendar year, but did not include in those regulations a requirement to electronically file Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons. On March 10, 2014, the Secretary promulgated regulations under section 6011(e), §301.6011-2 (TD 9660), to add the Forms 1094 series and 1095 series as information returns covered by the regulation. And on December 19, 2016, the Secretary promulgated regulations under section 6011(e), §301.6011-2 (TD 9804), to remove the Form 1095 series and add Form 1095-B and Form 1095-C as information returns covered by the regulation. On March 23, 2018, the President signed into law the Tax Technical Corrections Act of 2018 (TTCA), Public Law 115-141. Section 301, div. U, title III, of the TTCA added a new paragraph (5), Special rule for partnerships, to section 6011(e). Section 6011(e)(5)(A), Partnerships permitted to be required to file on magnetic media, authorized the Secretary to lower the electronic-filing threshold to 200 returns and statements for all partnerships filing returns and statements relating to calendar year 2018, reducing that number by 50 each year until 2023, when partnerships filing more than 20 returns and statements relating to 2022 or any subsequent calendar year could be required to file electronically. The TTCA also moved the rule authorizing the Secretary to require partnerships with more than 100 partners to file their returns electronically from section 6011(e)(2) to new section 6011(e)(5)(B), Partnerships required to file on magnetic media. The Secretary did not promulgate regulations under section 6011(e) relating to the lower electronic-filing thresholds for partnerships. On May 31, 2018, the Secretary proposed regulations under section 6011(e) (83 FR 24948) amending §301.6011-2. The proposed regulations would have required that all information returns covered under that regulation, regardless of type, be included in determining whether the August 9, 2021 returns a person must file meet the 250-return threshold and the person must file the information returns electronically. The May 2018 proposed regulations also provided that corrected information returns would be required to be filed electronically if the corresponding original return was required to be filed electronically. On July 1, 2019, the President signed into law the Taxpayer First Act of 2019 (TFA), Public Law 116-25. Section 2301 of the TFA amended section 6011(e) by adding new paragraph 5 that authorizes the Secretary to prescribe regulations that decrease, in accordance with the TFA, the number of returns a taxpayer may file without being required to file electronically. These amendments included changes to the special rule for partnerships. Section 2301 of the TFA moved the rule requiring partnerships with more than 100 partners to file returns electronically from section 6011(e)(5), titled “Partnerships required to file on magnetic media”, to new section 6011(e)(6). Section 3101 of the TFA amended section 6011 to require any charitable or other organization required to file an annual return that relates to any tax imposed by section 511 on unrelated business taxable income to file those returns in electronic form. Section 3101 of the TFA also amended section 6033 to require any organization required to file a return under section 6033 to file those returns in electronic form. On November 19, 2020, the Secretary promulgated regulations under section 529A of the Code, which amended a regulation under section 6011(e) of the Code, §301.6011-2 (TD 9923), to add the Forms 5498-ESA, Coverdell ESA Contribution Information, 5498-QA, ABLE Account Contribution Information, and 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, as information returns covered by the regulation. On December 20, 2019, the President signed into law the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), enacted as part of the Further Consolidated Appropriations Act, 2020, Public Law 116-94, div. O. Section 202 of the SECURE Act allows a group of plans to file a single aggregated annual return or report for plan years beginning after December 31, 2021. Section 202(d) of the SECURE Act clari- August 9, 2021 fies the electronic-filing requirements for these deferred compensation plans. Section 202 of the SECURE Act also added to section 6011 a second paragraph (e) (6), although the headings of the two paragraphs (e)(6) differ. The one moved to paragraph (e)(6) by the TFA is titled “Partnerships required to file on magnetic media.” The one added by the SECURE Act is titled “Application of numerical limitation to returns related to deferred compensation plans” and treats information regarding each plan for which information is provided on a return required to be filed under section 6058 of the Code as a separate return for purposes of determining the number of returns a taxpayer may file without being required to file electronically. These proposed regulations do not address amendments made by section 202(d) of the SECURE Act. Explanation of Provisions 1. Scope of the Proposed Regulations for Filing Returns Electronically These proposed regulations would impose electronic-filing requirements on persons required to file certain returns as authorized by the TFA by amending the following regulations: (1) §301.6011-2, Required use of electronic form, which prescribes standards for determining whether certain information returns must be filed electronically; (2) §1.6045-2, Furnishing statement required with respect to certain substitute payments, which requires persons to report certain substitute payments; (3) §1.6045-4, Information reporting on real estate transactions with dates of closing on or after January 1, 1991, which requires persons to report on real estate transactions; (4) §1.6050I-0, Table of contents, which lists the major captions that appear in §§1.6050I-1 and 1.6050I2; (5) §1.6050I-1, Returns relating to cash in excess of $10,000 received in a trade or business, which requires persons to report information about these financial transactions to the IRS; 274 (6) (7) (8) (9) (10) (11) (12) (13) (14) §1.6050I-2, Returns relating to cash in excess of $10,000 received as bail by court clerks, which requires persons to report information about these financial transactions to the IRS; §1.6050M-1, Information returns relating to persons receiving contracts from certain Federal executive agencies, which requires certain Federal executive agencies to report information with respect to each contract entered into by that agency; §301.6721-1, Failure to file correct information returns, which provides the penalty for failure to file correct information returns; §301.6011-3, Required use of electronic form for partnership returns, which prescribes standards for determining whether a partnership must file its partnership return electronically; §301.6011-5, Required use of electronic form for corporate income tax returns, which prescribes standards for determining whether a corporation must file its corporate income tax returns electronically; §1.6037-2, Required use of electronic form for income tax returns of electing small business corporations, which prescribes standards for determining whether an electing small-business corporation (S corporation) must file its S corporation return electronically; §301.6037-2, Required use of electronic form for returns of electing small business corporations, which prescribes standards for determining whether an electing small-business corporation (S corporation) must file its S corporation return electronically; §1.6033‑4, Required filing in electronic form for returns by organizations required to file returns under section 6033, which prescribes standards for filing returns required to be filed electronically under §301.6033-4; §301.6033-4, Required filing in electronic form for returns by organizations required to file returns under section 6033, which prescribes standards for determining whether Bulletin No. 2021–32 returns by organizations required to file a return under section 6033 must be filed electronically; (15) §53.6011-1, General requirement of return, statement or list, which requires persons subject to certain enumerated excise taxes under Chapter 42 of the Code to file a Form 4720 to accompany payment of those excise taxes; (16) §301.6057-3, Required use of electronic form for filing requirements relating to deferred vested retirement benefit, which prescribes standards for determining whether a registration statement required to be filed under section 6057(a) or a notification required to be filed under section 6057(b) must be filed electronically; (17) §301.6058-2, Required use of electronic form for filing requirements relating to information required in connection with certain plans of deferred compensation, which prescribes standards for determining whether a return required to be filed under section 6058 with respect to an employee benefit plan must be filed electronically; and (18) §301.6059-2, Required use of electronic form for filing requirements relating to periodic report of actuary, which prescribes standards for determining whether an actuarial report required to be filed under section 6059 with respect to an employee benefit plan must be filed electronically. The proposed regulations would also create the following new regulations that impose an electronic-filing requirement: (1) §301.6011-10, Certain organizations, including trusts, required to file unrelated business income tax returns in electronic form, which requires certain organizations, including trusts, to file their unrelated business income tax returns electronically; (2) §301.6011-11, Required use of electronic form for certain returns for tax-advantaged bonds, which prescribes standards for determining whether a return for credit payments to issuers of qualified bonds must be filed electronically; Bulletin No. 2021–32 (3) §301.6011-12, Required use of electronic form for returns of certain excise taxes under chapters 41 and 42 of the Internal Revenue Code, which prescribes standards for determining whether an excise tax return on Form 4720 must be filed electronically; (4) §301.6011-13, Required use of electronic form for split-interest trust returns, which prescribes standards for determining whether an information return on Form 5227 must be filed electronically; (5) §301.6011-14, Required use of electronic form or other machine-readable form for material advisor disclosure statements, which prescribes standards for determining whether a material advisor disclosure statement on Form 8918 must be filed electronically or in other machine-readable form; (6) §301.6012-2, Required use of electronic form for income tax returns of certain political organizations, which prescribes standards for determining whether an income tax return on Form 1120-POL must be filed electronically; (7) §54.6011-3, Required use of electronic form for the filing requirements for the return for certain excise taxes related to employee benefit plans, which prescribes standards for determining whether an income tax return on Form 5330, Return of Excise Taxes Related to Employee Benefit Plans, must be filed electronically; and (8) §301.6011-15, Required use of electronic form for withholding tax returns, which prescribes standards for determining whether an income tax return filed by a withholding agent on Form 1042 must be filed electronically. In addition, the proposed regulations would amend the following regulations regarding the filing requirements of withholding agents: (1) §1.1461-1, Payment and returns of tax withheld, which prescribes requirements for withholding agents to file returns with respect to U.S. source income of foreign persons; (2) §1.1471-0, Outline of regulation provisions for sections 1471 through 1474, which lists the major captions 275 that appear in §§1.1471-1 through 1.1474-7 and §301.1474-1; (3) §1.1474-1, Liability for withheld tax and withholding agent reporting, which provides rules for withholding agents making payments under chapters 3 or 4 of the Code; and (4) §301.1474-1, Required use of electronic form for financial institutions filing Form 1042-S or Form 8966, which provides rules for withholding agents making payments under chapter 4 of the Code. The regulations proposed in this document include reordering and renumbering of paragraphs when necessary for clarification and logic. In addition, cross references have been updated, and typographical, grammatical, and punctuation corrections have been made. As many of these regulations imposing electronic-filing requirements also provide a waiver from electronically filing to any person who establishes undue hardship, the Treasury Department and the IRS request comments on how the hardship waiver procedures should be administered, including suggestions for revising the procedures for requesting, and criteria for granting, a hardship waiver. 2. Proposed §301.6011-2, Rules for Filing Certain Information Returns Electronically These proposed regulations would amend §301.6011-2 as discussed in detail in the following sections 2.A though 2.G. A. Additional information returns required to be filed electronically i. Forms 1098-C and 1098-Q Section 301.6011-2(b)(1) provides a list of information returns required to be filed electronically in accordance with §301.6011-2. Among those returns are three in the Form 1098 series: Form 1098, Mortgage Interest Statement; Form 1098E, Student Loan Interest Statement; and Form 1098-T, Tuition Statement, added to §301.6011‑2(b)(1) by, respectively, TD 8081 (March 25, 1986), TD 8992 (April 29, 2002), and TD 9029 (February 7, 2003). After those three forms were added to §301.6011-2(b)(1), the IRS cre- August 9, 2021 ated additional returns in the Form 1098 series: Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes; and Form 1098-Q, Qualifying Longevity Annuity Contract Information. These two additional 1098 series forms, as well as the three currently listed in §301.60112(b), are all filed and furnished by larger organizations and institutions that generally electronically file returns even when not required to do so by §301.6011-2. Based on the size and sophistication of the entities that file these forms and the accessibility and availability of electronic filing, the Treasury Department and the IRS have determined that filers of Forms 1098-C and 1098-Q are unlikely to incur unreasonable costs to electronically file these returns. Thus, the proposed regulations would amend §301.6011-2(b) (1) to add Forms 1098-C and 1098-Q to the list of information returns covered by §301.6011-2(b). ii. Forms 3921 and 3922 The proposed regulations would also amend §301.6011-2(b)(1) to add the Form 3921, Exercise of an Incentive Stock Option Under Section 422(b), and Form 3922, Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c). These forms are filed and furnished by sophisticated taxpayers that generally electronically file returns even when not required to do so by §301.6011 2. Based on the sophistication of these filers and the accessibility and availability of electronic filing, the Treasury Department and the IRS have determined that filers of Forms 3921 and 3922 are unlikely to incur unreasonable costs to electronically file these returns. iii. Form 1097-BTC The proposed regulations would also amend §301.6011-2(b)(1) to add the Form 1097-BTC, Bond Tax Credit. This form is filed and furnished by bond issuers with respect to certain tax credit bonds. For the reasons discussed in this preamble, the Treasury Department and the IRS have determined that filers of Form 1097BTC should not incur any unreasonable costs to electronically file this return. See section 2.D., Aggregation of returns to August 9, 2021 determine whether the electronic-filing threshold is met. Proposed §301.6011-2 would allow for a waiver of the electronic filing requirements for Form 1097-BTC if hardship is shown in a request for waiver made in accordance with the regulation. B. Form 8300 required to be filed electronically Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, is a dual-purpose form, designed to meet both the section 6050I reporting requirement and, since January 1, 2002, a similar Bank Secrecy Act (BSA) reporting requirement found in 31 U.S.C. 5331 and 31 CFR 1010.330. Generally, any person in a trade or business who receives more than $10,000 in cash in a single transaction or related transactions must file Form 8300. The IRS uses the information on the Form 8300 for civil and criminal tax administration and compliance. The Financial Crimes Enforcement Network (FinCEN) relies on up-to-date Form 8300 filings for law enforcement, reporting, and statistical purposes. The instructions on Form 8300 state that filers can file the form either on paper with the IRS or electronically through FinCEN’s BSA E-Filing System. Approximately 250,000 of the 300,000 Forms 8300 filed during each calendar year from 2015 to 2018 were filed on paper with the IRS. IRS employees manually input data from the paper-filed Forms 8300 into FinCEN’s BSA E-Filing System. This procedure requires significant resources to be spent on processing and data entry. Manual data entry can cause delays in the input and retrieval of data, affecting the timeliness of information available for law enforcement and other users to detect potential money laundering, terrorist financing, and other tax and financial fraud. These proposed regulations would require filers who are required to file at least the applicable number of returns identified in paragraphs (b)(1) and (b)(2) of proposed §301.6011-2 during the calendar year to also file their Forms 8300 electronically, as directed by the form’s instructions. This requirement would increase the timeliness and accuracy of data entry, reduce postage costs, promote IT 276 modernization efforts, reallocate IRS staff for priority assignments, and provide IRS criminal and civil investigators and other agencies with access to the data with upto-date and accurate information. Electronic filing would also protect against possible future disruption and delays in processing paper-filed Forms 8300. It is anticipated that the form will direct filers to use FinCEN’s BSA E-Filing system (https://bsaefiling.fincen.treas.gov/main. html), which is an internet-based secure system with no cost to the user. The only technical requirement of the BSA E-Filing System is to have an internet connection for access to the system. Nonetheless, the proposed regulations would continue to allow the Commissioner to waive the requirement to file information returns electronically if the request for waiver demonstrates hardship. The principal factor in determining hardship will be the extent, if any, to which the cost of electronically filing Form 8300 exceeds the cost of filing Form 8300 on paper. The proposed regulations would also edit the example in §1.6050I-1(d)(2)(iv) to provide additional clarity for the rule illustrated in that example. C. Amending the electronic-filing threshold Under section 6011(e)(1), the Secretary must prescribe regulations providing standards for determining which returns must be filed electronically. Section 6011(e)(2) (A), however, until it was amended by the TFA, prevented the Secretary from requiring any person to file returns electronically unless the person was required to file at least 250 returns during the calendar year. Section 2301 of the TFA amended section 6011(e), changing the statutory 250-return threshold to a decreasing number over several years, as set forth in new section 6011(e)(5). In accordance with section 2301 of the TFA, these proposed regulations would amend §301.60112(c)(1)(i), which currently provides that no person is required to electronically file an information return covered under §301.6011-2(b) unless the person is required to file 250 or more returns during the calendar year. The proposed amendments would remove references to the 250-return threshold in §301.6011-2(c) Bulletin No. 2021–32 (1)(i) and add a new paragraph (c)(3)(i) to §301.6011-2 that, in accordance with the TFA, reduces the electronic-filing threshold for information returns covered under §301.6011-2(b) from 250 to 100, for returns required to be filed during calendar year 2022, and from 100 to 10, for returns required to be filed during calendar years after 2022. Information returns are generally required to be filed between January and March of the year following the calendar year to which such returns relate. See sections 6071(b) and (c). If a taxpayer has, for example, 13 employees in calendar year 2022 and is required to file Forms W-2 for those employees during calendar year 2023, that taxpayer would, under these proposed regulations, be required to file those 13 Forms W-2 electronically. The proposed incremental step-down from 250 to 100 for information returns required to be filed during calendar year 2022, and then from 100 to 10 for information returns required to be filed after 2022, will allow the IRS time to ensure it has sufficient resources and updated programming to seamlessly handle and process the increased volume of electronically-filed information returns and the applications required to file those information returns electronically. The Treasury Department and the IRS expect that by calendar year 2023 the IRS will be prepared to handle and process the anticipated increased volume of returns and applications, and that no further incremental step-down would be necessary if these proposed regulations are finalized and applicable to returns required to be filed during calendar year 2023. Consequently, persons required to file at least 10 information returns during the calendar year 2023 would be required to file those returns electronically. The Treasury Department and the IRS request comments on why persons required to file at least 10 information returns during the calendar year 2023 would not be able to file those returns electronically during that calendar year and whether the Treasury Department and the IRS should provide an incremental step-down to 100 for information returns required to be filed during calendar year 2023, and then from 100 to 10 for information returns required to be filed during calendar years after 2023. Bulletin No. 2021–32 D. Aggregation of returns to determine whether the electronic-filing threshold is met Section 301.6011-2(c)(1)(iii) provides that each type of information return covered under §301.6011-2(b) is considered separately for purposes of determining whether a person meets the 250-return electronic-filing threshold. Therefore, different types of information returns are not counted in the aggregate for purposes of determining whether a person is required to file a number of returns that equals or exceeds the 250-return electronic-filing threshold during the calendar year (non-aggregation rule). These proposed regulations would remove the non-aggregation rule from §301.6011-2(c)(1)(iii). Section 6011(e) does not prohibit the aggregation of information returns of different types in determining whether a person meets the electronic-filing threshold during a calendar year. When the regulations specifically providing for non-aggregation were published in 1998, electronic filing was still in the early stages of development and not as commonly used as it is today. Both the 250-return limitation that Congress had included in the 1989 amendment to section 6011(e) and the non-aggregation rule that the Secretary prescribed helped ensure that electronic-filing burdens and costs were appropriate, given the existing limits and accessibility to electronic-filing technology at that time. Since that time, electronic filing has become more common, accessible, and economical, as evidenced by the prevalence of tax-return preparers and third-party service providers who offer return-preparation and electronic-filing services, by the availability of tax-return-preparation software, and by the numbers of returns already being filed electronically on a voluntary basis. In 2018, for example, approximately 98.5 percent of information returns were filed electronically. Moreover, electronic filing increases the IRS’s timeliness and accuracy in processing return information, which, in turn, provides faster and better customer service to taxpayers with respect to those returns. In light of the prevalence of electronic filing and Congress’s enactment of the TFA, which significantly expanded the 277 Secretary’s authority to prescribe regulations requiring persons to file returns electronically, the Treasury Department and the IRS have determined that the non-aggregation rule is no longer necessary and propose to remove it from §301.60112(c). The proposed regulations would add a new paragraph (c)(4)(i) to §301.6011-2 to provide that a person required to file original information returns of any type covered by §301.6011-2(b)(1) and (b) (2) must count all those returns together to determine whether the person meets or exceeds the electronic-filing threshold for the relevant calendar year. The proposed regulations do not include Forms 8300 in the aggregation rule, and no Form 8300 would be included in determining whether a person is required to file the applicable number of information returns. A Form 8300 generally must be filed within 15 days after a reportable payment of more than $10,000 is received. A filer may not know the number of Forms 8300 it will file in a calendar year until after the year is over, because the filer will not know how many cash transactions over $10,000 will occur during the year. On the other hand, other information returns described in §301.6011-2(b)(1) and (2) do not need to be filed until after the calendar year of the event being reported. A filer of those other information returns will therefore know at the beginning of the calendar year whether the filer is required to file at least the applicable number of those other information returns because those returns relate to the preceding calendar year. Thus, the Treasury Department and the IRS propose to require electronic filing of Forms 8300 only if the filer is required to file other information returns electronically. Under these proposed regulations, filers would generally understand early in the calendar year their electronic-filing obligations for Forms 8300 without an unduly complex aggregation rule. In addition, these proposed regulations are consistent with the TFA’s emphasis on development, improvement, and expansion of modern technology (see, for example, “An Act To amend the Internal Revenue Code of 1986 to modernize and improve the Internal Revenue Service, and for other purposes” and “Subtitle B—Development of Information Technology” under “Title II—21st August 9, 2021 Century IRS”), and are within the Secretary’s expanded authority under the TFA to prescribe regulations requiring persons to file returns electronically. E. Corrected returns must be filed in the same manner as the original return Section 301.6011-2 provides that the non-aggregation rule applies separately to each type of corrected information return covered by §301.6011-2(b) such that, for purposes of determining whether a person meets the 250-return electronic-filing threshold, corrected information returns are counted separately from original information returns, and each type of corrected information return is counted separately. The Treasury Department and the IRS have determined that, to increase the IRS’s timeliness and accuracy in processing information returns, if persons are required to file original information returns electronically, they must file any corresponding corrected information returns electronically. Likewise, if persons permitted to file information returns on paper file those information returns on paper, they must also file any corresponding corrected information returns on paper. As discussed in the next three paragraphs, this will increase the IRS’s efficiency in processing returns and should not cause taxpayers to incur unreasonable costs. Paper information returns are generally filed at one of three different IRS Submission Processing Centers, depending on the filer’s legal residence (for individuals) or principal place of business (for entities). When the IRS receives paper returns, it must convert the return to an electronic-data record before it can use the information effectively. Electronic information returns, on the other hand, do not go through Submission Processing Centers; they are generally filed through the IRS’s Filing Information Returns Electronically (FIRE) system or Affordable Care Act Information Returns (AIR) system, depending on the type of return. Because the procedures for processing electronic returns and paper returns are different, when an original return is filed on paper and a corrected return is filed electronically shortly thereafter, the IRS may not have finished processing the original paper return before the electronic August 9, 2021 return is received. The IRS is thus not able to reconcile differences as quickly as when the original and corrected returns are filed in the same manner. Similar processing issues arise when an original return is filed electronically and the corrected return is filed on paper. This proposed requirement will not result in any additional costs or burdens on taxpayers with respect to electronic filing because a filer who filed the original return electronically has the software necessary to file a corrected return electronically. Thus, the proposed regulations would add new paragraphs (c)(4)(ii)(A) and (c)(4)(ii) (B) to §301.6011-2 to provide that corrected information returns must be filed electronically if the corresponding original return was required to be filed electronically, and that corrected returns must be filed on paper if the corresponding original return was permitted to be, and was, filed on paper. In addition, the proposed regulations would amend §301.6721-1(a) (2)(ii), as discussed under section 5, Proposed §301.6721-1, Rules Relating to Penalties for Failure to File Correct Information Returns, to provide that a failure to file a corrected information return in the same manner as the corresponding original will be deemed a failure to correct the corresponding original information return. F. Special electronic-filing threshold for partnerships of any size Section 2301 of the TFA amended the special rule for partnerships in section 6011(e)(5) to authorize the Secretary to reduce the electronic-filing threshold for partnerships required to file returns. The amended special rule for partnerships authorized the Secretary to reduce the electronic-filing threshold at an accelerated rate when compared to the general electronic-filing threshold, phasing out this special rule for partnerships for returns required to be filed during calendar years after 2021. These proposed regulations do not include a special electronic-filing threshold for partnerships because the final regulations are not expected to be applicable before the 2022 filing season, at which point the special rule for partnerships will be phased out. For all the reasons discussed in this preamble, the proposed regulations would reduce, 278 for all persons, including partnerships, the electronic-filing threshold for information returns covered under §301.6011-2(b) from 250 to 100, for returns required to be filed during calendar year 2022, and from 100 to 10, for returns required to be filed during calendar years after 2022. See section 2.C., Amending the electronic-filing threshold. G. Special electronic-filing rule for partnerships having more than 100 partners Paragraph (6) of section 6011(e), as that section was amended by the TFA, provides, “Notwithstanding paragraph (2) (A), the Secretary shall require partnerships having more than 100 partners to file returns on magnetic media” (100-partner rule). The statute uses the general term “returns” without specifying the type of returns that must be filed electronically. But the legislative history of the Taxpayer Relief Act of 1997, which added the 100-partner rule to section 6011(e), mentions the rule’s application only with respect to partnership returns. H.R. Rep. No. 105-220, at 675 (1997) (Conf. Rep.) (“The House bill provides generally that any partnership is required to provide the tax return of the partnership (Form 1065), as well as copies of the schedule[s] sent to each partner (Form K–1), to the Internal Revenue Service on magnetic media. An exception is provided for partnerships with 100 or fewer partners.”). In accordance with this legislative history, the Secretary promulgated regulations in 1999, §301.6011-3 (TD 8843), requiring partnerships with more than 100 partners to file partnership returns and all other information required by the applicable forms and schedules electronically. In 2018, however, Congress enacted the TTCA and moved this 100-partner rule from section 6011(e)(2), where it appeared as flush language under the 250-threshold limitation, to a new subparagraph (B) under section 6011(e)(5), “Special rules for partnerships.” There is no legislative history to the 2018 TTCA that explains why Congress moved the 100-partner rule. But after the TTCA was enacted, the Joint Committee on Taxation describes the rule with respect to “returns,” rather than “tax Bulletin No. 2021–32 return of the partnership (Form 1065),” which is how the legislative history of the Taxpayer Relief Act of 1997 described it. Staff of the J. Comm. On Taxation, Technical Explanation of the Revenue Provisions of the House Amendment to the Senate Amendment to H.R. 1625, at 52 (JCX-618) (“Present law requires that …. partnerships having more than 100 partners are required to file returns electronically.”). In 2019, a year after TTCA moved the 100-partner rule, Congress, in Title II of the TFA, under Subtitle D, “Expanded Use of Electronic Systems,” again moved the 100-partner rule to a new paragraph (6) under section 6011(e), “Partnerships required to file on magnetic media.” In light of the Joint Committee on Taxation’s referring to “returns” in general in describing this provision of the TTCA, the TFA’s emphasis on development, improvement, and expansion of modern technology, as discussed in this preamble, the TFA’s emphasis on electronic filing (see “Subtitle D—“Expanded Use of Electronic Systems” under Title II), and the accessibility and prevalence of electronic filing, the Treasury Department and the IRS propose to add a new paragraph (c)(3)(ii)(B) to §301.6011-2 to require partnerships with more than 100 partners to file their information returns covered by §301.6011-2(b) electronically, regardless of the number of information returns being filed. 3. Proposed §1.6050I-0, Table of contents, and §1.6050I-1, Returns Relating to Cash in Excess of $10,000 Received in a Trade or Business Section 1.6050I-1(e)(1) provides that Form 8300 must be filed with the IRS by the 15th day after the date cash in excess of $10,000 is received in a trade or business. Section 1.6050I-1(e)(3) provides that Form 8300 must be filed by mailing it to the address shown in the instructions on the form. For all the reasons discussed in this preamble, the proposed regulations would remove references to mailing Form 8300 to the IRS and require that the form be filed as directed by the form’s instructions. See section 2.B., Form 8300 required to be filed electronically; section 2.C., Amending the electronic-filing threshold; and section 2.D., Aggregation Bulletin No. 2021–32 of returns to determine whether the electronic-filing threshold is met. The instructions to Form 8300 will explain how to file the form electronically. The proposed regulations would also update outdated citations in §1.6050I-0 and §1.6050I-1 that cross-reference to the regulations under Title 31 of the CFR and clarify the example in §1.6050I-1(d)(2)(iv). 4. Proposed §1.6050I-2, Returns Relating to Cash in Excess of $10,000 Received as Bail by Court Clerks Section 1.6050I-2(c)(1)(i) provides that Form 8300 must be filed with the IRS by the 15th day after the date cash bail in excess of $10,000 is received. Section 1.6050I-2(c)(3)(i) provides that Form 8300 must be filed with the IRS office designated in the instructions on the form. For all the reasons discussed in this preamble, the proposed regulations would remove references to filing Form 8300 with a specific IRS office and require that the form be filed as directed by the form’s instructions. See section 2.B., Form 8300 required to be filed electronically; section 2.C., Amending the electronic-filing threshold; and section 2.D., Aggregation of returns to determine whether the electronic-filing threshold is met. The instructions to Form 8300 will explain how to file the form electronically. 5. Proposed §301.6721-1, Rules Relating to Penalties for Failure to File Correct Information Returns Paragraph (a)(2)(ii) of §301.6721-1, Failure to file correct information returns, states that no penalty will be imposed solely by reason of failing to file electronically, except to the extent that a failure occurs with respect to more than 250 returns. In accordance with changes made to the 250-return threshold by section 2301 of the TFA, the proposed amendments to §301.6721-1 would remove references to a 250-return threshold with respect to penalties for failure to file correct information returns. Section 301.6721-1(a)(2)(ii) also states that the threshold requirements apply separately to original and corrected returns, such that a filer that files 300 returns on Form 1099-DIV and later files 70 cor- 279 rected returns on Form 1099-DIV could file the corrected returns either on the prescribed paper form (because they fall below the 250-threshold requirement) or electronically. For the reasons discussed in this preamble, the Treasury Department and the IRS propose to remove this rule because they have determined that corrected returns should be filed electronically if the corresponding original returns were so filed. See section 2.E., Corrected returns must be filed in the same manner as the original return. These proposed regulations would thus amend §301.67211(a)(2)(ii) to provide that a failure to file a corrected information return in the same manner as the corresponding original will be deemed a failure to correct the corresponding original information return such that the filer will not receive the benefit of a reduced penalty under §301.6721-1(b) for that corrected information return. 6. Proposed §301.6011-3, Rules for Filing Partnership Returns Electronically Section 301.6011-3 prescribes standards for determining whether a partnership must file its partnership return electronically. In 2018, the TTCA amended section 6011(e) to authorize the Secretary to incrementally reduce, by regulation, the electronic-filing threshold for partnerships. When section 2301 of the TFA amended that particular statute again in 2019, to further reduce the electronic-filing threshold for partnerships, the Secretary had not yet promulgated regulations to implement that reduced-threshold rule for partnerships. As discussed in this preamble, these proposed regulations do not include a special electronic-filing threshold for partnerships because the final regulations are not expected to be applicable before the 2022 filing season, at which point the special rule for partnerships will be phased out. See section 2.F., Special electronic-filing threshold for partnerships of any size. For returns required to be filed during calendar years after 2021, section 2301 of the TFA authorizes the Secretary to reduce the electronic-filing threshold to 10 for all persons, including partnerships. These proposed regulations would amend §301.6011-3(a) to reduce the electronic-filing threshold to 10 returns for any partnership, in accordance with sec- August 9, 2021 tion 6011(e), as amended by the TFA. In addition, for all the reasons discussed in this preamble, the proposed regulations would add a new paragraph (a)(5) to §301.6011-3 that provides that all returns of any type, including partnership returns, excise-tax returns, employment-tax returns, and information returns (but not including schedules required to be attached to or included with a partnership return), are counted in the aggregate for purposes of determining whether a partnership of any size meets the electronic-filing threshold of 10 returns in a calendar year, and thus must file its partnership return electronically. See sections 2.D., Aggregation of returns to determine whether the electronic-filing threshold is met; and 2.G., Special electronic-filing rule for partnerships having more than 100 partners. These rules relating to the requirements for determining when a partnership is required to file its partnership return electronically do not limit the application of any other statute affecting partnership returns that must be filed electronically, such as section 6033(n), which requires a partnership return filed by a section 501(d) apostolic organization to be filed electronically. 7. Proposed §301.6011-5, Rules for Filing Corporate Income Tax Returns Electronically Section 301.6011-5 prescribes standards for determining whether a corporation must file its income tax returns electronically and requires large corporations to file the corporate income tax return electronically if the corporation is required to file during the calendar year at least 250 returns of any type. The regulation, however, applies only to those corporations that report total assets at the end of the corporate taxable year of $10 million or more on Schedule L of their Form 1120. Section 2301 of the TFA amended section 6011(e) to authorize the Secretary to prescribe regulations to reduce the number of returns that a person may be required to file during a calendar year before the Secretary may impose an electronic-filing requirement. These proposed regulations would remove references to the 250-return threshold and reduce the electronic-filing threshold for corporate income August 9, 2021 tax returns to 10, for returns required to be filed during calendar years after 2021, in accordance with section 6011(e), as amended by the TFA. In addition, the Treasury Department and the IRS propose to remove the $10 million rule, making the regulation applicable to all corporations regardless of reportable assets. The $10 million rule was never required by the Code; rather, the Treasury Department and the IRS prescribed the rule in 2007 to help ensure that electronic-filing burdens and costs were appropriate, given the existing limits and accessibility to electronic-filing technology at that time. With the current prevalence and accessibility of electronic filing even for small businesses, as well as the benefits of quicker return processing, the $10-million rule is no longer needed. Accordingly, the proposed regulations would require that any corporation required to file a corporate income tax return under §1.6012-2, regardless of the corporation’s reported total assets at the end of its taxable year, file that return electronically if the corporation is required to file at least 10 returns of any type during calendar years after 2021. The proposed regulations would also update the example to reflect these changes. The proposed regulations do not change the existing rule in §301.6011-5 that all returns of any type are counted in determining whether a corporation is required to file its income tax return electronically. 8. Proposed §301.6037-2, Required Use of Electronic Form for Returns of Electing-Small Business Corporation Section 301.6037-2 prescribes standards for determining whether an S corporation must file its S corporation return electronically. Section 301.6037-2 requires S corporations to file their corporate income tax return electronically if the corporation is required to file during the calendar year at least 250 returns of any type, but the regulation applies only to those S corporations that report total assets at the end of the corporation’s taxable year that equal or exceed $10 million on Schedule L of Form 1120-S. Section 2301 of the TFA amended section 6011(e), authorizing the IRS to change the 250-return threshold to 10, for returns required to be filed during calen- 280 dar years after 2021. These proposed regulations would remove references to the 250-return threshold and reduce the electronic-filing threshold for S corporations to 10 in accordance with section 6011(e), as amended by the TFA. In addition, the Treasury Department and the IRS propose to remove the $10 million rule for the same reasons that it is eliminating the rule for corporations. See section 7, Proposed §301.6011-5, Rules for Filing Corporate Income Tax Returns Electronically. With the current prevalence and accessibility of e-filing, as well as the benefits of quicker processing of returns, the $10 million rule is no longer needed. Accordingly, the proposed regulations would require that any S corporation required to file an S-corporation return under §1.6037-1, regardless of the corporation’s reported total assets at the end of its taxable year, file its income tax return electronically if the corporation is required to file at least 10 returns of any type during the calendar year. The proposed regulations would also update the example illustrating this rule to reflect these changes. 9. Proposed §§1.6033-4 and 301.6033-4, Required Filing in Electronic Form for Returns by Organizations Required to File Returns Under Section 6033 Section 1.6033-4 provides that the return of an organization that is required to be filed electronically under §301.6033-4 must be filed in accordance with IRS revenue procedures, publications, forms, or instructions, including those posted electronically. Section 301.6033-4 provides that an organization required to file a return under section 6033 on Form 990 must file its Form 990 electronically if the organization is required to file during the calendar year at least 250 returns of any type and if the organization has total assets as of the end of the taxable year of $10 million or more. It also provides that any organization (regardless of total assets) required to file Form 990-PF must file its Form 990PF electronically if it is required to file at least 250 returns of any type during the calendar year. In accordance with section 3101 of the TFA, these proposed regulations would amend §§1.6033-4 and 301.6033-4 to re- Bulletin No. 2021–32 place the term “magnetic media” with “in electronic form.” These proposed regulations would also amend §301.6033-4 to remove any references to thresholds that establish a requirement to file electronically because the TFA now requires that any organization required to file a return under section 6033 must file such return in electronic form. Likewise, the proposed regulations would amend §301.6033-4 by removing the following paragraphs: paragraph (d)(1), which defines the term “magnetic media”; paragraph (d)(3), which defines the term “determination of 250 returns”; and paragraph (e), which illustrates by example how the 250 number is determined. In addition, the proposed regulations would remove §301.60334(b), which provides that the Commissioner may grant waivers of the electronic-filing requirement. Section 3101 of the TFA does not provide for any waiver of or alternate method to the electronic-filing requirements for returns required to be filed under section 6033. Accordingly, these proposed regulations would amend §301.6033-4 by removing paragraph (b) that provides for a waiver of the requirements. Finally, these proposed regulations would amend §301.6033-4(d)(2) to include Form 990-EZ, “Short Form Return of Organization Exempt From Income Tax,” as a return required to be filed under section 6033, clarifying that section 3101 of the TFA mandates that all returns required to be filed under section 6033 must be filed in electronic form. 10. Proposed §53.6011-1(c) Deletion, Joint Filing of a Form 4720 Return Section 3101(a) of the TFA amended section 6033(n) to provide that any exempt organization required to file a return under section 6033 must file such return in electronic form. Section 1.6033-2(a) (2) provides, under the broad authority of section 6033(a)(1) (requiring every organization exempt from taxation under section 501(a) to file an annual return, stating specifically the items of gross income, receipts, and disbursements, and such other information for the purpose of carrying out the internal revenue laws as the Secretary may by forms or regulations prescribe), that every private foundation must Bulletin No. 2021–32 file Form 990-PF, Return of Private Foundation, as its annual information return. In the case of a private foundation liable for tax under chapter 42, such information as is required by Form 4720 is to be furnished by the private foundation as part of its annual information return. See §1.6033-2(a) (2)(ii)(J). The preamble to the final regulations adding §1.6033-2(a)(2)(ii)(J) specifically noted that Form 4720, when filed by a private foundation, is part of the annual information return required to be filed under section 6033 as well as a tax return required to be filed under section 6011. Accordingly, Form 4720 filed by a private foundation as part of the Form 990-PF is a return required to be filed under section 6033 and is thus required to be filed in electronic form as a return required under section 6033(n). For the electronic-filing requirement for persons not described under section 509(a) as a private foundation, see section 16 of this preamble, Proposed §301.6011-12, Required Use of Electronic Form for Returns of Certain Excise Taxes Under Chapters 41 And 42 of the Internal Revenue Code. If Form 4720 is filed by a private foundation (or by a trust described in section 4947(a)(2)) with respect to a transaction to which other persons are required to file under §53.6011-1(b) (persons liable for excise tax imposed by Chapters 41 and 42 of the Code), and if the other persons’ tax years are the same as the foundation’s or trust’s, §53.6011-1(c) allows the private foundation and such other persons to file a joint Form 4720, and, to the extent applicable, that form will be considered as the other persons’ return for purposes of complying with the filing requirement under §53.6011-1(b). This current regulatory permission to jointly file Form 4720, however, is incompatible with the requirement under section 6033(n) to file the return electronically. Accordingly, because the Form 4720 cannot be filed jointly in electronic form, the proposed regulations would delete §53.6011-1(c). Disqualified persons thus will no longer be able to meet their tax filing obligation under §53.60111(b) by the joint-filing process. Notice 2021-01, 2021-2 I.R.B. 315 (January 11, 2021), announced the IRS’s intent to remove §53.6011-1(c) because the amendments the TFA made to sections 6104 (that any annual return re- 281 quired to be filed electronically under section 6033(n) must be made available by the Secretary to the public as soon as practicable in a machine-readable format) and 6033 rendered unfeasible the ability for a private foundation and other persons to jointly file the same Form 4720 electronically. Notice 2021-01 was first released to the public on December 16, 2020, and substantially described the expected contents of the proposed amendments to §53.6011-1, in accordance with section 7805(b)(1)(C). Thus, the proposed changes to §53.6011-1 described in this section are proposed to apply retroactively as of January 1, 2021, as allowed by section 7805(b)(1)(C). 11. Proposed §301.6057-3, Required Use of Electronic Form for Filing Requirements Relating to Deferred Vested Retirement Benefit Section 6057(a) requires the plan administrator (within the meaning of section 414(g)) of each plan, to which the vesting standards of section 203 of the Employee Retirement Income Security Act of 1974 (ERISA) apply for a plan year, to file, within the time prescribed by regulations, a registration statement with the Secretary. The registration statement must set forth the following information relating to the plan: (1) the name of the plan; (2) the name and address of the plan administrator; (3) the name and identifying information of plan participants who separated from service covered by the plan and are entitled to deferred vested retirement benefits; and (4) the nature, amount, and form of deferred vested retirement benefits to which the plan participants are entitled. The form used to satisfy the reporting requirements under section 6057 is Form 8955-SSA, Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits. Section 6057(b) provides that any plan administrator required to register under section 6057(a) must, within the time prescribed by regulations, also notify the Secretary of any change in the name of the plan or the name and address of the plan administrator, the termination of the plan, or the merger or consolidation of the plan with any other plan or its division into two or more plans. August 9, 2021 Section 301.6057-3 provides that a registration statement required to be filed under section 6057(a) or a notification required to be filed under section 6057(b) must be filed electronically if the filer is required by the Code or regulations to file at least 250 returns during the calendar year that includes the first day of the plan year. For the reasons discussed in this preamble, and consistent with section 6011(e), as amended by the TFA, these proposed regulations would remove references to the 250-return threshold and would reduce the electronic-filing threshold to 10 for registration statements required to be filed under section 6057(a) and notifications required under section 6057(b) with respect to an employee benefit plan for any plan year that begins after December 31, 2021 (but only for filings with a filing deadline, not taking into account extensions, after July 31, 2022). See section 2.C., Amending the electronic-filing threshold. 12. Proposed §301.6058-2, Required Use of Electronic Form for Filing Requirements Relating to Information Required in Connection with Certain Plans of Deferred Compensation Section 6058(a) generally requires that every employer maintaining a pension, annuity, stock bonus, profit-sharing, or other funded plan of deferred compensation, or the plan administrator (within the meaning of section 414(g)) of the plan, file an annual return stating such information as the Secretary may by regulations prescribe with respect to the qualification, financial condition, and operations of the plan. The reporting requirement under section 6058(a) is satisfied by filing a return in the Form 5500 series. The Form 5500, Annual Return/Report of Employee Benefit Plan, the Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan, and Form 5500EZ, Annual Return of A One-Participant (Owners/Partners and Their Spouses) Retirement Plan or A Foreign Plan, make up the Form 5500 series. Section 301.6058-2(a) provides that a return required to be filed under section 6058 with respect to an employee benefit plan must be filed electronically if the filer is required by the Code or regulations to file at least 250 returns during August 9, 2021 the calendar year that includes the first day of the plan year. For the reasons discussed in this preamble, and in accordance with section 6011(e), as amended by the TFA, these proposed regulations would remove references to the 250-return threshold and reduce the electronic-filing threshold to 10 for returns required to be filed under section 6058 with respect to an employee benefit plan for any plan year that begins after December 31, 2021 (but only for filings with a filing deadline, not taking into account extensions, after July 31, 2022). See section 2.C., Amending the electronic-filing threshold. In addition, these proposed regulations would provide a cross reference, under §301.6058-2(d)(3), Calculating the number of returns, to new section 6011(e)(6) to alert taxpayers that information regarding each plan for which information is provided on a combined annual return to satisfy the requirements under section 6058 is treated as a separate return for purposes of determining the electronic-filing threshold. Under section 104 of ERISA, the plan administrator of a plan described in section 6058(a) of the Code that is also an employee pension benefit plan within the meaning of section 3(2) of ERISA must file an annual report on Form 5500, Annual Return/Report of Employee Benefit Plan, or Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan (and all attachments to those forms, including Schedules SB and MB) electronically using the Department of Labor’s EFAST2 system, without regard to the number of returns the filer is required to file under the Code. The Department of Labor has advised the Treasury Department and the IRS that this proposed regulation does not affect the obligations of any person required to file an annual report electronically under 29 CFR 2520.104a-2 and section 104 of ERISA. An electronic filing on Form 5500 or Form 5500-SF also satisfies any obligation to file such forms using electronic form under section 6011 of the Code. An employer that maintains a one-participant or foreign plan (which is not subject to section 104 of ERISA) or the plan administrator of the plan may satisfy the annual return filing requirements under section 6058(a) of the Code by filing a Form 5500-EZ, Annual Return of A One-Participant (Owners/Partners 282 and Their Spouses) Retirement Plan or A Foreign Plan, which is required to be filed electronically using the Department of Labor’s EFAST2 system only if the employer or plan administrator is otherwise required to file using electronic form under section 6011. 13. Proposed §301.6059-2, Required Use of Electronic Form for Filing Requirements Relating to Periodic Report of Actuary Section 6059(a) generally requires that a plan administrator (as defined in section 414(g)) of each defined benefit plan to which section 412 applies file the actuarial report described in section 6059(b) for the first plan year for which section 412 applies to the plan and for each third plan year thereafter (or more frequently if the Secretary determines that more frequent reports are necessary). The reporting requirements under section 6059(a) and (b) are satisfied by filing Schedule SB (Form 5500), Single Employer Defined Benefit Plan Actuarial Information and Schedule MB (Form 5500), Multiemployer Defined Benefit Plan and Certain Money Purchase Plan Actuarial Information. Section 301.6059-2 provides that an actuarial report required to be filed under section 6059 with respect to an employee benefit plan must be filed electronically if the filer is required by the Code or regulations to file at least 250 returns during the calendar year that includes the first day of the plan year. For the reasons discussed in this preamble, and in accordance with section 6011(e), as amended by the TFA, these proposed regulations would remove references to the 250-return threshold and would reduce the electronic-filing threshold to 10, for actuarial reports required to be filed under section 6059 with respect to an employee benefit plan for any plan year that begins after December 31, 2021 (but only for filings with a filing deadline, not taking into account extensions, after July 31, 2022). See section 2.C., Amending the electronic-filing threshold. The Department of Labor has advised the Treasury Department and the IRS that the electronic-filing threshold under section 6011(e) does not affect the obligation of a plan administrator or plan sponsor to file electronically with the Department of Labor Bulletin No. 2021–32 a Schedule SB or Schedule MB as an attachment to the Form 5500, as required by 29 CFR 2520.104a-2 and section 104 of ERISA. 14. Proposed §301.6011-10, Certain Organizations, Including Trusts, Required To File Unrelated Business Income Tax Returns in Electronic Form Section 3101(b)(2) of the TFA amended section 6011 to redesignate paragraph (h) as paragraph (i) and add new paragraph (h) that requires any organization required to file an annual return under section 6011 that relates to any tax imposed by section 511 to file such return in electronic form, effective for taxable years beginning after July 1, 2019. Section 3101 of the TFA does not provide for any waiver of or alternative method to the electronic-filing requirement for returns required to be filed under section 6011(h). The proposed regulations would add a new regulation under section 6011(h), §301.6011-10, in accordance with the TFA, to require any organization described in section 511(a) (2) subject to the tax under section 511(a) (1) or any trust described in section 511(b) (2) subject to the tax under section 511(b) (1) on their respective unrelated business taxable income to file their unrelated business income tax returns electronically. 15. Proposed §301.6011-11, Required Use of Electronic Form for Returns for Certain Tax-Advantaged Bonds Under former sections 54AA and 6431(f) of the Code, issuers of qualified taxable bonds that provide a refundable federal tax credit payable directly to the issuer of the bond, such as build-America bonds, recovery zone economic development bonds, new clean renewable energy bonds, qualified energy conservation bonds, qualified zone academy bonds, and qualified school construction bonds, can elect to receive a direct payment from the federal government based upon a percentage of the interest payments on these bonds. Section 3.1 of Notice 2009-26, 2009-16 I.R.B. 833, 836 (April 20, 2009), and section 3 of Notice 2010-35, 2010-19 I.R.B. 660, 662 (May 10, 2010), provide that issuers of qualified bonds must submit a Form 8038-CP, Return for Credit Bulletin No. 2021–32 Payments to Issuers of Qualified Bonds, to request payment of the amount of the credit within a prescribed time before or after each applicable interest payment date, depending on whether the bonds are fixed rate or variable rate. During 2013 to 2018, the IRS processed an average of $5 billion in direct payment requests; amounts paid on each return varied from less than $1,000 to more than $65 million. During 2019, state and local governments filed approximately 10,000 Forms 8038CP in paper form. The IRS expects that it will continue to receive Forms 8038-CP from these issuers during the entire term of the bonds, which may be more than 20 years. The proposed regulations would require filers who are required to file at least 10 returns of any type during the calendar year to file their Forms 8038-CP electronically, as directed by the form’s instructions. This requirement would increase the timeliness and accuracy of processing these forms and promote IT modernization efforts. Proposed §301.6011-11 would also provide that the Commissioner may grant individual waivers of the e-filing requirement of this section in cases of undue hardship. The Treasury Department and the IRS anticipate issuing guidance that will set forth procedures whereby a taxpayer may request a hardship waiver for filing Form 8038-CP electronically. 16. Proposed §301.6011-12, Required Use of Electronic Form for Returns of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code Section 2301 of the TFA amended section 6011(e), changing the 250-return threshold to a 10-return threshold for returns required to be filed in calendar years after 2021. The proposed regulations would add a new regulation under section 6011(e), §301.6011-12, that would require the electronic filing of Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code. The proposed regulations would require a person to file the Form 4720 electronically if that person is required to file at least 10 returns of any type during the calendar year. Proposed §301.6011-12 would also provide that the Commissioner may grant individual waivers of the requirements of 283 this section in cases of undue hardship. The Treasury Department and the IRS anticipate issuing guidance that will set forth procedures whereby a taxpayer may request a hardship waiver for filing Form 4720 electronically. The proposed regulations relating to the requirements for determining whether a person must file its Form 4720 electronically would not limit the application of any other statute affecting Form 4720, such as section 6033(n), which requires a Form 4720 filed by organizations recognized as tax exempt under section 501(c)(3) and classified as private foundations under section 509(a) to be filed electronically, as discussed under section 10, Proposed §53.6011-1(c) Deletion, Joint Filing of a Form 4720 Return. 17. Proposed §301.6011-13, Required Use of Electronic Form for Split-Interest Trust Returns Section 2301 of the TFA amended section 6011(e), changing the 250-return threshold to a 10-return threshold for returns required to be filed in calendar years after 2021. The proposed regulations would add a new regulation under section 6011(e), §301.6011-13, that would require the filing of Form 5227, Split-Interest Trust Information Return, electronically. Forms 5227 are filed by split-interest trusts to report the trust’s financial activities, including distributions to the beneficiaries. The proposed regulations would require a trust to file the Form 5227 electronically if the trust is required to file at least 10 returns of any type during the calendar year. Proposed §301.6011-13 would also provide that the Commissioner may grant individual waivers of the requirements of this section in cases of undue hardship. The Treasury Department and the IRS anticipate issuing guidance that will set forth procedures whereby a taxpayer may request a hardship waiver for filing Form 5227 electronically. 18. Proposed §301.6011-14, Required Use of Electronic Form or Other Machine-Readable Form for Material Advisor Disclosure Statements The proposed regulations would add a new regulation under section 6011(e), August 9, 2021 §301.6011-14, that would require the filing of Form 8918, Material Advisor Disclosure Statement, electronically or in other machine-readable form, in accordance with revenue procedures, publications, forms, instructions, or other guidance, including postings on the IRS.gov website. Section 6111 requires each material advisor with respect to any reportable transaction to make a return setting forth certain information with respect to the reportable transaction. Section 301.6111-3(d) clarifies that the return required to be filed under section 6111(a) is the Form 8918. Form 8918 is currently filed on paper and must be mailed to the Office of Tax Shelter Analysis in Ogden, Utah. The proposed regulations would require a material advisor to file the Form 8918 electronically or in other machine-readable form if the material advisor is required to file at least 10 returns of any type during the calendar year, in accordance with section 6011(e), as amended by section 2301 of the TFA. This requirement would increase the timeliness and accuracy of processing the data on Form 8918, reduce postage costs, and promote IT modernization efforts. Proposed §301.6011-14 would also provide that the Commissioner may grant individual waivers of the requirements of this section in cases of undue hardship. The Treasury Department and the IRS anticipate issuing guidance that will set forth procedures whereby a taxpayer may request a hardship waiver from filing Form 8918 electronically. 19. Proposed §301.6011-15, Required Use of Electronic Form for Withholding Tax Returns The proposed regulations would add a new regulation under section 6011(e), §301.6011-15, that would require the filing of Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, electronically in accordance with revenue procedures, publications, forms, instructions, or other guidance, including postings on the IRS.gov website. Sections 1441 and 1442 require withholding agents to withhold tax from payments made to foreign persons with respect to certain U.S. source income and to report August 9, 2021 those payments and the tax withheld for each recipient. Section 1.1461-1(c) specifies that the reporting be on Form 1042-S, Foreign Persons’ U.S. Source Income Subject to Withholding. In addition, §1.14611(b) requires withholding agents to make an annual income tax return on Form 1042 that reports the aggregate income paid and taxes withheld for the preceding calendar year. The IRS verifies the amount of withholding reported on Form 1042 and deposited with the IRS against amounts reported as withheld on Forms 1042-S. Form 1042-S is already required to be electronically filed to the extent provided under §301.6011-2 for a withholding agent that is not a financial institution. But the Form 1042 is not required to be electronically filed. To increase the timeliness and accuracy of processing refunds and credits claimed by foreign persons that have amounts withheld and reported on Form 1042-S, proposed §301.6011-15 would require Form 1042 filers—except for individuals, estates, or trusts—to file Form 1042 electronically if they are required to file 10 or more returns of any type during the calendar year, in accordance with section 6011(e), as amended by section 2301 of the TFA. Proposed §301.6011-15 would also require partnerships with more than 100 partners to file their Forms 1042 electronically, regardless of the number of returns the partnership is required to file during the calendar year. Proposed §301.6011-15 would also provide that the Commissioner may grant individual waivers of the requirements of this section in cases of undue hardship. 20. Proposed §301.6012-2, Required Use of Electronic Form for Income Tax Returns of Certain Political Organizations Section 2301 of the TFA amended section 6011(e), changing the 250-return threshold to a 10-return threshold for returns required to be filed in calendar years after 2021. The proposed regulations would add a new regulation under sections 6011(e) and 6012(a), §301.6012-2, to require the filing of Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations elec- 284 tronically. The Form 1120-POL is filed by political organizations, described in section 527 of the Code, to report income not specifically excluded from tax under section 527 and by exempt organizations subject to tax under section 527(f)(1) of the Code. The proposed regulations would require an organization to file the Form 1120-POL electronically if the organization is required to file at least 10 returns of any type during the calendar year. Proposed §301.6012-2 would also provide that the Commissioner may grant individual waivers of the requirements of this section in cases of undue hardship. The Treasury Department and the IRS anticipate issuing guidance that will set forth procedures whereby a taxpayer may request a hardship waiver for filing Form 1120-POL electronically. 21. Proposed §54.6011-3, Required Use of Electronic Form for the Filing Requirements for the Return for Certain Excise Taxes Related to Employee Benefit Plans The proposed regulations would add a new regulation under section 6011(e), §54.6011-3, to require the filing of Forms 5330, Return of Excise Taxes Related to Employee Benefit Plans, electronically. Section 2301 of the TFA amended section 6011(e), changing the 250-return threshold to a 10-return threshold for returns required to be filed during calendar years after 2021. The proposed regulations would require a filer to file the Form 5330 electronically if the filer is required to file at least 10 returns of any type during the calendar year. Proposed §54.6011-3 would also provide that the Commissioner may grant individual waivers of the requirements of this section in cases of undue hardship. The Treasury Department and the IRS anticipate issuing guidance that will set forth procedures whereby a taxpayer may request a hardship waiver for filing Form 5330 electronically. 22. Proposed §1.1461-1, Payment and Returns of Tax Withheld Section 1.1461-1 prescribes requirements for withholding agents to file information returns with respect to U.S. Bulletin No. 2021–32 source income of foreign persons. Section 1.1461-1(c)(5) provides that a withholding agent that makes 250 or more Form 1042–S information returns for a taxable year must file those forms electronically as required under §301.60112(b). The proposed regulations would amend §1.1461-1 to remove paragraph (c) (5) because the electronic-filing requirement for Form 1042-S is contained in §301.6011-2(b) and the 250-return threshold would no longer apply if the proposed amendments to §301.6011-2 are finalized in a Treasury decision. 25. Proposed §1.6050M-1, Information returns relating to persons receiving contracts from certain federal executive agencies Section 1.1474-1 provides rules for withholding agents making payments under chapter 4 of the Code. The first sentence in §1.1474-1(e) provides that withholding agents that are not financial institutions and that are required to file 250 or more Forms 1042–S for a taxable year must file those forms electronically, referencing §301.6011-2(b). The proposed regulations would amend §1.1474-1 to remove the first sentence in §1.1474-1(e) because the electronic-filing requirement for Form 1042-S is contained in §301.6011-2(b) and the 250-return threshold would no longer apply if the proposed amendments to §301.6011-2 are finalized in a Treasury decision. Section 1.6050M-1 requires federal executive agencies who enter into certain contracts, as defined under §1.6050M-1(b) (2), to file information returns with respect to those contracts. Under §1.6050M-1(d), the information returns must be filed on a quarterly basis; in addition, if the federal executive agency, on any October 1, expects to enter into 250 or more contracts during the one-year period beginning on October 1, it must file the information returns electronically. Section 2301 of the TFA amended section 6011(e), authorizing the IRS to change the 250-return threshold to 10, for returns required to be filed during calendar years after 2021. For the reasons discussed in this preamble, and consistent with section 6011(e), as amended by the TFA, these proposed regulations would remove references to the 250-return threshold under §1.6050M-1 and would reduce the electronic-filing threshold from 250 to 100, for information returns required to be filed during calendar year 2022, and from 100 to 10, for information returns required to be filed during calendar years after 2022. Proposed §1.6050M-1 would also provide that the Commissioner may grant individual waivers of the requirements of this section in cases of undue hardship. 24. Proposed §301.1474-1, Required Use of Electronic Form for Financial Institutions Filing Form 1042, Form 1042-S, or Form 8966 26. Proposed §1.6045-4, Information returns relating to persons receiving contracts from certain federal executive agencies. These proposed regulations would amend §301.1474-1 to add a requirement that a financial institution must file its Form 1042 electronically, without regard to the number of returns required to be filed during the calendar year, in accordance with section 6011(e)(4). The existing provision in §301.1474-1(b), which provides that the Commissioner may grant individual waivers of the requirements of §301.1474-1 in cases of undue hardship, would also apply to the proposed electronic-filing requirement relating to Form 1042. Section 1.6045-4 requires a real estate reporting person to file information returns with respect to real-estate transactions. Section 1.6045-4(k) provides rules for filing these returns electronically. The form used to report these transactions is a form covered under §301.6011-2(b)(1). Section 301.6011-2 provides the rules for electronically filing the forms listed in §301.6011-2(b)(1). These proposed regulations would thus remove paragraph (k) from §1.6045-4 because the electronic-filing requirement is contained in §301.6011-2. 23. Proposed §1.1474-1, Liability for Withheld Tax and Withholding Agent Reporting Bulletin No. 2021–32 285 27. Withdrawal of May 2018 proposed regulations In light of the TFA, the Treasury Department and the IRS withdraw the May 2018 proposed regulations under section 6011(e) because those proposed regulations interpret a provision of the Code that has been amended. The Treasury Department and the IRS have determined that the amendments made to section 6011(e) by the TFA require guidance to be issued by regulations. Withdrawing the proposed regulations and reissuing new proposed regulations ensure that all persons affected by the proposed regulations will have a meaningful opportunity to publicly comment. Special Analyses These regulations are not subject to review under section 6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement (April 11, 2018) between the Treasury Department and the Office of Management and Budget regarding review of tax regulations. Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that this proposed rule, if finalized, will not have a significant economic impact on a substantial number of small entities. Although these rules may affect a substantial number of small entities, for the reasons discussed in the following paragraphs, the economic impact is not significant. Under section 6011(e) of the Code and §§1.6050M-1, 301.6011-2, 301.60113, 301.6011-5, 301.6037-2, 301.6057-3, 301.6058-2, and 301.6059-2, filers are already required to file returns and statements electronically if, during a calendar year, they are required to file 250 or more returns. The eight proposed rules— §§1.6050M-1, 301.6011-2, 301.6011-3, 301.6011-5, 301.6037-2, 301.6057-3, 301.6058-2, and 301.6059-2—would lower the 250-return threshold as authorized by section 6011(e), as amended by section 2301 of the TFA. A filer may request that the IRS waive the electronic-filing requirement if the filer’s cost to comply with the rule would cause a financial hardship. The IRS routinely grants meri- August 9, 2021 torious hardship waiver requests. Accordingly, the economic burden on the limited number of small entities that are not currently filing electronically will be slight; and small entities that would experience a hardship because of these seven proposed rules may seek a waiver. Under section 6050I of the Code and §§1.6050I-1 and 1.6050I-2, filers are required to file Forms 8300 if, in the course of their trade or business, they receive more than $10,000 in cash in one transaction or in two or more related transactions. The proposed rule under §301.6011-2(b)(3) would require filers of Forms 8300 to file those forms electronically if such filers are also required to file returns electronically under paragraphs (b)(1) and (b)(2) of §301.60112. The Treasury Department and the IRS expect filers of Form 8300 to use FinCEN’s BSA E-Filing System, which is free, requiring only an internet connection. The economic impact on small entities should thus not be significant. Nonetheless, small entities that would experience a hardship because of this proposed rule may seek a hardship waiver. Under section 6011(e)(4) of the Code and §301.1474-1, financial institutions defined in section 1471(d)(5) of the Code already are required to electronically file Forms 1042-S. The proposed rule under §301.1474-1(a) would extend this filing requirement to Forms 1042 filed by the same financial institutions. The economic impact on small entities should thus not be significant. Nonetheless, small entities that would experience a hardship because of this proposed rule may seek a hardship waiver. Under section 6011(h) of the Code, as amended by section 3101 of the TFA, organizations required to file annual returns relating to any tax imposed by section 511 must file those returns in electronic form. The proposed regulation §301.6011-10 implements this statutory requirement. The economic impact of the proposed regulation should thus be insignificant. Under section 6033(n), as amended by section 3101 of the TFA, organizations required to file returns under section 6033 must file those returns in electronic form. The proposed regulations under §§1.6033-4, 53.6011-1, and 301.6033-4 implement this statutory August 9, 2021 requirement. The economic impact of these proposed regulations should thus be insignificant. The seven proposed regulations under §§54.6011-3, 301.6011-11, 301.6011-12, 301.6011-13, 301.6011-14, 301.6011-15, and 301.6012-2 would require electronic filing for certain returns not currently required to be filed electronically. Because electronic filing has become more common, accessible, and economical, the economic impact of these proposed rules on small entities should be insignificant. But if the cost to comply with these electronic-filing requirements would cause a financial hardship, an entity may request a waiver. The IRS routinely grants meritorious hardship waiver requests. Accordingly, the burden on small entities affected by these rules will be slight. Accordingly, it is hereby certified that these proposed regulations will not have a significant economic impact on a substantial number of small entities within the meaning of section 601(6) of the RFA. Section 202 of the Unfunded Mandates Reform Act of 1995 requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any federal mandate that may result in expenditures in any one year by a state, local, or tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. This regulation does not include any federal mandate that may result in expenditures by state, local, or tribal governments, or by the private sector in excess of that threshold. Executive Order 13132 (titled Federalism) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on state and local governments, and is not required by statute, or preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This rule does not have federalism implications and does not impose substantial direct compliance costs on state and local governments or preempt state law, within the meaning of the Executive Order. 286 Pursuant to section 7805(f) of the Code, this proposed regulation has been submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on its impact on small business. Comments and Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to comments that are submitted timely to the IRS as prescribed in this preamble under the ADDRESSES section. The Treasury Department and the IRS request comments on all aspects of the proposed regulations. Any comments submitted will be available at www.regulations.gov or upon request. The public hearing is being held by teleconference on September 22, 2021 at 10 a.m. EST. Requests to speak and outlines of topics to be discussed at the public hearing must be received by September 21, 2021. If no outlines are received by September 21, 2021, the public hearing will be cancelled. Requests to attend the public hearing must be received by 5:00 p.m. EST on September 20, 2021. The telephonic hearing will be made accessible to people with disabilities. Requests for special assistance during the telephonic hearing must be received by September 17, 2021. Drafting Information The principal author of these proposed regulations is Casey R. Conrad of the Office of the Associate Chief Counsel (Procedure and Administration). Other personnel from the Treasury Department and the IRS participated in the development of the regulations. Statement of Availability of IRS Documents IRS revenue procedures, notices, and other guidance cited in this document are published in the Internal Revenue Bulletin (or Cumulative Bulletin) and are available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS website at http://www.irs.gov. Bulletin No. 2021–32 Withdrawal of Proposed Regulations Under the authority of 26 U.S.C. 7805, §301.6011-2 and §301.6721-1 of the notice of proposed rulemaking (REG102951-16) that was published in the Federal Register on Thursday, May 31, 2018 (83 FR 24948) is withdrawn. List of Subjects 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. 26 CFR Part 53 Excise taxes, Foundations, Investments, Lobbying, Reporting and recordkeeping requirements. 26 CFR Part 54 Excise taxes, Pensions, Reporting and recordkeeping requirements. 26 CFR Part 301 Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements. Proposed Amendments to the Regulations Accordingly, 26 CFR parts 1, 53, 54 and 301 are proposed to be amended as follows: PART 1-INCOME TAXES Paragraph 1. The authority citation for part 1 is amended by adding the following entries in numerical order: Authority: 26. U.S.C. 7805 * * * Section 1.6033-4 also issued under 26 U.S.C. 6033. Section 1.6037-2 also issued under 26 U.S.C. 6037. ***** Par. 2. Section 1.1461-1 is amended by removing paragraph (c)(5) and revising paragraph (i) to read as follows: Bulletin No. 2021–32 §1.1461-1. Payment and returns of tax withheld. ***** (i) Applicability date. Except as provided in paragraph (c)(2)(iii) of this section, this section applies to returns required for payments made on or after [the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register]. (For payments made before [Date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register] and on or after January 1, 2022, see this section as in effect and contained in 26 CFR part 1, as revised April 1, 2021. For payments made before January 1, 2022, see this section as in effect and contained in 26 CFR part 1, as revised April 1, 2020.) Par. 3. Section 1.1471-0 is amended by revising the entries in the table of contents for §1.1474-1(e) and (j) and §301.14741(d)(1) and (e) to read as follows: §1.1471-0 Outline of regulation provisions for sections 1471 through 1474. ***** §1.1474-1 Liability for withheld tax and withholding agent reporting. ***** (e) Reporting in electronic form. ***** (j) Applicability date. ***** §301.1474-1 Required use of electronic form for financial institutions filing Form 1042, Form 1042-S, or Form 8966. ***** (d) * * * (1) Magnetic media or electronic form. ***** (e) Applicability date. Par. 4. Section 1.1474-1 is amended by revising paragraphs (e) and (j) to read as follows: §1.1474-1 Liability for withheld tax and withholding agent reporting. ***** (e) Reporting in electronic form. See §301.6011-2(b) of this chapter for the re- 287 quirements of a withholding agent that is not a financial institution with respect to the filing of Forms 1042-S in electronic form. See §301.1474-1(a) of this chapter for the requirements applicable to a withholding agent that is a financial institution with respect to the filing of Forms 1042-S in electronic form. ***** (j) Applicability date. This section applies to returns required for payments made on or after [Date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register]. (For the rules that apply before [the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register] and on or after January 6, 2017, see this section as in effect and contained in 26 CFR part 1, as revised April 1, 2021.) Par. 5. Section 1.6033-4 is revised to read as follows: §1.6033-4 Required filing in electronic form for returns by organizations required to file returns under section 6033. (a) In general. The return of an organization that is required to be filed in electronic form under §301.6033-4 of this chapter must be filed in accordance with revenue procedures, publications, forms, instructions, or other guidance. (b) Applicability date. The rules of this section apply for returns required to be filed for taxable years ending on or after [Date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register]. Par. 6. Section 1.6037-2 is revised to read as follows: §1.6037-2 Required use of electronic form for income tax returns of electing small business corporations. (a) In general. The return of an electing small business corporation that is required to be filed electronically under §301.6037-2 of this chapter must be filed in accordance with Internal Revenue Service revenue procedures, publications, forms, or instructions, including those posted electronically. August 9, 2021 (b) Applicability date. The rules of this section apply for returns required to be filed for taxable years ending on or after [Date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register]. Par. 7. Section 1.6045-2 is amended by revising paragraphs (g)(2) and (i) to read as follows: §1.6045-2 Furnishing statement required with respect to certain substitute payments. ***** (g) * * * (2) Reporting in electronic form. For information returns filed after December 31, 1996, see §301.6011-2 of this chapter for rules relating to filing information returns in electronic form and for rules relating to waivers granted for undue hardship. A broker or barter exchange that fails to file a Form 1099 electronically, when required, may be subject to a penalty under section 6721 for each such failure. See paragraph (g)(4) of this section. ***** (i) Applicability date. This section applies to substitute payments received by a broker after December 31, 1984. The amendments to paragraph (c) of this section apply to payee statements due after December 31, 2014. For payee statements due before January 1, 2015, §1.6045-2(c) (as contained in 26 CFR part 1, revised April 2013) shall apply. The amendments to paragraph (g)(2) of this section apply to information returns required to be filed during calendar years beginning after [Date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register]. Par. 8. Section 1.6045-4 is amended by removing and reserving paragraph (k) and revising paragraph (s) to read as follows: §1.6045-4 Information reporting on real estate transactions with dates of closing on or after January 1, 1991. ***** (s) Applicability date. This section applies for real estate transactions with dates of closing (as determined under paragraph (h)(2)(ii) of this section) that occur on or after January 1, 1991. The amendments August 9, 2021 to paragraphs (b)(2)(i)(E), (b)(2)(ii) and (c)(2)(i) of this section apply to sales or exchanges of standing timber for lumpsum payments completed after May 28, 2009. The amendments to paragraph (m) (1) of this section apply to payee statements due after December 31, 2014. For payee statements due before January 1, 2015, §1.6045-4(m)(1) (as contained in 26 CFR part 1, revised April 2013) shall apply. The removal of paragraph (k) of this section applies for information returns required to be filed during calendar years beginning after [Date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register]. Par. 9. Section 1.6050I-0 is amended by revising the entry in the table of contents for §1.6050I-1(d)(2)(ii) as follows: §1.6050I-0 Table of contents. ***** (d) * * * (2) * * * (ii) Casinos exempt under 31 CFR 1010.970(c). ***** Par. 10. Section 1.6050I-1 is amended by: 1. Revising paragraphs (a)(3)(ii), (c)(1) (iv), (d)(2)(i), (d)(2)(ii): 2. In paragraph (d)(2)(iv), designating the example as paragraph (d)(2)(iv) (A); 3. Revising newly designated paragraph (d)(2)(iv)(A) and adding paragraph (d)(2)(iv)(B); 4. Revising paragraphs (e)(1) and (e)(3) (i); and 5. Adding paragraph (h). The revisions and additions read as follows: §1.6050I-1 Returns relating to cash in excess of $10,000 received in a trade or business. (a) * * * (3) * * * (ii) Exception. An agent who receives cash from a principal and uses all of the cash within 15 days in a cash transaction (second cash transaction) which is reportable under section 6050I or 5312 of title 31 of the United States Code and the regulations thereunder (31 CFR Chapter X), 288 and who discloses the name, address, and taxpayer identification number of the principal to the recipient in the second cash transaction need not report the initial receipt of cash under this section. ***** (c) * * * (1) * * * (iv) Exception for certain loans. A cashier’s check, bank draft, traveler’s check, or money order received in a designated reporting transaction is not treated as cash pursuant to paragraph (c)(1)(ii)(B)(1) of this section if the instrument constitutes the proceeds of a loan from a bank (as that term is defined in 31 CFR Chapter X). ***** (d) * * * (2) * * * (i) In general. If a casino receives cash in excess of $10,000 and is required to report the receipt of such cash directly to the Treasury Department under 31 CFR 1021.310 or 1010.360 and is subject to the recordkeeping requirements of 31 CFR 1021.400, then the casino is not required to make a return with respect to the receipt of such cash under section 6050I and these regulations. (ii) Casinos exempt under 31 CFR 1010.970(c). Under the authority of section 6050I(c)(1)(A), the Secretary may exempt from the reporting requirements of section 6050I casinos with gross annual gaming revenue in excess of $1,000,000 that are exempt under 31 CFR 1010.970(c) from reporting certain cash transactions to the Treasury Department under 31 CFR 1021.310 or 1010.360. The determination whether a casino which is granted an exemption under 31 CFR 1010.970(c) will be required to report under section 6050I will be made on a case by case basis, concurrently with the granting of such an exemption. ***** (iv) * * * (A) Example. A and B are casinos having gross annual gaming revenue in excess of $1,000,000. C is a casino with gross annual gaming revenue of less than $1,000,000. Casino A receives $15,000 in cash from a customer with respect to a gaming transaction which the casino reports to the Treasury Department under 31 CFR 1021.310 and 1010.360. Casino B’s hotel division receives $15,000 in cash from a customer in payment for ac- Bulletin No. 2021–32 commodations provided to that customer at Casino B’s hotel. Casino C receives $15,000 in cash from a customer with respect to a gaming transaction. Casino A is not required to report the transaction under section 6050I or these regulations because the exception for certain casinos provided in paragraph (d)(2)(i) of this section (casino exception) applies. Casino B’s hotel division is required to report under section 6050I and these regulations because the casino exception does not apply to the receipt of cash by a nongaming business division. Casino C is required to report under section 6050I and these regulations because the casino exception does not apply to casinos having gross annual gaming revenue of $1,000,000 or less which do not have to report to the Treasury Department under 31 CFR 1021.310 and 1010.360. (B) [Reserved] ***** (e) * * * (1) Time of reporting. The reports required by this section must be filed in accordance with the Form 8300 instructions and related publications by the 15th day after the date the cash is received. However, in the case of multiple payments relating to a single transaction (or two or more related transactions), see paragraph (b) of this section. ***** (3) * * * (i) Where to file. A person making a return of information under this section must file Form 8300 in accordance with the form instructions and related publications. ***** (h) Applicability date. The rules of this section apply for returns required to be filed during calendar years beginning after [Date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register]. Par. 11. Section 1.6050I-2 is amended by revising paragraphs (c)(1)(i), (c)(3)(i), and (f) to read as follows: §1.6050I-2 Returns relating to cash in excess of $10,000 received as bail by court clerks. ***** (c) * * * (1) * * * (i) In general. The information return required by this section must Bulletin No. 2021–32 be filed in accordance with the Form 8300 instructions and related publications by the 15th day after the date the cash bail is received. ***** (3) * * * (i) Where to file. Returns required by this section must be filed in accordance with the Form 8300 instructions and related publications. A copy of the information return required to be filed under this section must be retained for five years from the date of filing. ***** (f) Applicability date. The rules of this section apply for returns required to be filed during calendar years beginning after [Date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register]. Par. 12. Section 1.6050M-1 is amended by revising paragraphs (d)(2), (d)(3), and (f) as follows: §1.6050M-1 Information returns relating to persons receiving contracts from certain federal executive agencies. ***** (d) * * * (2) Form of reporting—(i) General rule concerning electronic filing. The information returns required by this section with respect to contracts of a federal executive agency for each calendar quarter must be made in one submission (or in multiple submissions if permitted by paragraph (d) (4) of this section). Except as provided in paragraph (d)(2)(ii) of this section, the required returns must be made i [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3Ab3da8beefb7add75. Public record. Not legal advice.