Certain Transfers of Domestic Stock or Securities by U.S. Persons to Foreign Corporations

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[INTL-0009-95]

RIN 1545-AT42

Certain Transfers of Domestic Stock or Securities by U.S. Persons

to Foreign Corporations

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary

regulations and notice of public hearing.

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SUMMARY: In the Rules and Regulations section of this issue of the

Federal Register, the IRS is issuing temporary regulations revising the

rules under section 367(a) with respect to certain transfers of stock

or securities of domestic corporations by United States persons

pursuant to the corporate organization, reorganization or liquidation

provisions of the Internal Revenue Code. The text of those temporary

regulations also serves as the text of these proposed regulations. This

document also provides notice of a public hearing on these proposed

regulations.

DATES: Written comments must be received by March 25, 1996. Outlines of

topics to be discussed at the public hearing scheduled for April 11,

1996, at 10 a.m. must be received by March 21, 1996.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (INTL 0009-95), Room

5228, Internal Revenue Service, POB 7604, Ben Franklin Station,

Washington, DC 20044. In the alternative, submissions may be hand

delivered between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R

(INTL-0009-95), Courier's Desk, Internal Revenue Service, 1111

Constitution Ave. NW., Washington, DC. The public hearing will be held

in the IRS Auditorium, Internal Revenue Building, 1111 Constitution

Avenue NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Philip L.

Tretiak at (202) 622-3860; concerning submissions and the hearing,

Christina Vasquez at (202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information contained in this notice of proposed

rulemaking has been submitted to the Office of Management and Budget

for review in accordance with the Paperwork Reduction Act of 1995 (44

U.S.C. 3507).

Comments on the collection of information should be sent to the

Office of Management and Budget, Attn: Desk Officer for the Department

of Treasury, Office of Information and Regulatory Affairs, Washington,

DC 20503, with copies to the Internal Revenue Service, Attn: IRS

Reports Clearance Officer, T:FP, Washington, DC 20224. Comments on the

collection of information should be received by February 26, 1996.

An agency may not conduct or sponsor, and a person is not required

to respond to, a collection of information unless the collection of

information displays a valid control number.

The collection of information is in Sec. 1.367(a)-3T(c)(4). This

information is required by the IRS as a condition for a taxpayer to

qualify for an exception to the general rule of taxation under section

367(a)(1). This information will be used to determine whether a

taxpayer properly qualifies for a claimed exception. The respondents

generally will be U.S. corporations, probably U.S. multinationals, that

are acquired by foreign companies pursuant to nonrecognition exchanges

or that engage in joint ventures with foreign companies. Responses to

this collection of information by the relevant U.S. corporations are

required in order for the shareholders of such corporations to

[[Page 66772]]

qualify for an exception to the general rule under section 367(a)(1).

Books or records relating to a collection of information must be

retained as long as their contents may become material in the

administration of any internal revenue law. Generally, tax returns and

tax return information are confidential, as required by 26 U.S.C. 6103.

Estimated total annual reporting burden: 1,000 hours. The estimated

annual burden per respondent varies from 1 hour to 20 hours, depending

on individual circumstances, with an estimated average of 10 hours.

Estimated number of respondents: 100.

Estimated annual frequency of responses: Once.

Background

The temporary regulations published in the Rules and Regulations

section of this issue of the Federal Register amend the Income Tax

Regulations (26 CFR part 1) relating to section 367(a). The temporary

regulations contain rules relating to the transfer of stock or

securities by a United States person to a foreign corporation in an

exchange described in section 367(a).

The text of those temporary regulations also serves as the text of

these proposed regulations. The preamble to the temporary regulations

explains the temporary regulations. Final regulations under section

367(a) regarding transfers of stock or securities will integrate the

proposed regulations herein with the notice of proposed rulemaking

published on August 26, 1991, in the Federal Register (56 FR 41993).

Thus, the proposed regulations herein supplement and, where

inconsistent with, supersede, the 1991 proposed regulations.

Special Analyses

It has been determined that this notice of proposed rulemaking is

not a significant regulatory action as defined in Executive Order

12866. Therefore, a regulatory assessment is not required. It has also

been determined that this regulation does not have a significant impact

on a substantial number of small entities. Thus, the Regulatory

Flexibility Act (5 U.S.C. chapter 6) does not apply to these

regulations, and therefore, a Regulatory Flexibility Analysis is not

required. Pursuant to section 7805(f) of the Internal Revenue Code,

this notice of proposed rulemaking will be submitted to the Chief

Counsel for Advocacy of the Small Business Administration for comment

on their impact on small business.

Comments and Notice of Public Hearing

Before these proposed regulations are adopted as final regulations,

consideration will be given to any written comments (a signed original

and eight (8) copies) that are submitted timely to the Internal Revenue

Service. All comments will be available for public inspection and

copying.

A public hearing has been scheduled for April 11, 1996, at 10 a.m.

in the IRS Auditorium. Because of access restrictions, visitors will

not be admitted beyond the building lobby more than 15 minutes before

the hearing starts.

The rules of 26 CFR 601.601(a)(3) apply to the hearing.

Persons that wish to present oral comments at the hearing must

submit written comments by March 25, 1996 and submit an outline of the

topics to be discussed and the time to be devoted to each topic (signed

original and eight (8) copies) by March 21, 1996.

A period of 10 minutes will be allotted to each person for making

comments.

An agenda showing the scheduling of the speakers will be prepared

after the deadline for receiving outlines has passed. Copies of the

agenda will be available free of charge at the hearing.

Drafting Information

The principal author of these proposed regulations is Philip L.

Tretiak of the Office of Associate Chief Counsel (International),

Internal Revenue Service. However, other personnel from the IRS and

Treasury Department participated in their development.

List of Subjects in 26 CFR Part 1

Income tax, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

Paragraph 1. The authority citation for part 1 continues to read in

part as follows:

Authority: 26 U.S.C. 7805. * * *

Par. 2. New Sec. 1.367-9 is added to read as follows:

Sec. 1.367(a)-9 Transfers by U.S. persons of stock or securities of

domestic corporations to foreign corporations.

[The text of this proposed section is the same as the text of

paragraphs (a), (c), (d), (e), (f), (g)(1), and (h)(1) of Sec. 1.367-3T

published elsewhere in this issue of the Federal Register].

Margaret Milner Richardson,

Commissioner of Internal Revenue.

[FR Doc. 95-30828 Filed 12-22-95; 8:45 am]

BILLING CODE 4830-01-U