Automatic Extension of Time for Filing Individual Income Tax Returns; Automatic Extension of Time To File Partnership Return of Income, Trust Income Tax Return, and U.S. Real Estate Mortgage Investment Conduit Income Tax Return

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 301, and 602

[TD 8703]

RIN 1545-AS04; RIN 1545-AU47

Automatic Extension of Time for Filing Individual Income Tax

Returns; Automatic Extension of Time To File Partnership Return of

Income, Trust Income Tax Return, and U.S. Real Estate Mortgage

Investment Conduit Income Tax Return

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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[[Page 69028]]

SUMMARY: This document contains final regulations that reflect new and

simpler procedures for an individual to obtain an automatic extension

of time to file an individual income tax return. This document also

contains final regulations that provide new and simpler procedures for

a partnership, trust, and Real Estate Mortgage Investment Conduit

(REMIC) to obtain an automatic extension of time to file partnership,

trust, and REMIC returns.

EFFECTIVE DATE: The regulations are effective December 31, 1996.

FOR FURTHER INFORMATION CONTACT: Margaret A. Owens, (202) 622-6232 (not

a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information contained in these final regulations

has been reviewed and approved by the Office of Management and Budget

in accordance with the Paperwork Reduction Act (44 U.S.C. 3504(h))

under control numbers 1545-1479 and 1545-0148. Responses to this

collection of information are required to obtain a benefit (an

automatic 4-month extension of time to file an individual income tax

return or an automatic 3-month extension of time to file a partnership

return of income, a trust income tax return, or a REMIC income tax

return).

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.

Estimates of the reporting burden in these final regulations are

reflected in the burden estimates of either Form 4868, Application for

Automatic Extension of Time to File U.S. Individual Income Tax Return,

or Form 8736, Application for Automatic Extension of Time To File U.S.

Return for a Partnership, REMIC or for Certain Trusts.

Comments concerning the accuracy of this burden estimate and

suggestions for reducing this burden should be sent to the Internal

Revenue Service, Attn: IRS Reports Clearance Officer, T:FP, Washington,

DC 20224, and to the Office of Management and Budget, Attn: Desk

Officer for the Department of the Treasury, Office of Information and

Regulatory Affairs, Washington, DC 20503.

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.

Background

Extensions for Individual Income Tax Returns

On January 4, 1996, temporary regulations (TD 8651) providing new

and simpler procedures for individuals to obtain an automatic extension

of time to file an individual income tax return were published in the

Federal Register (61 FR 260). A notice of proposed rulemaking (IA-41-

93) cross-referencing the temporary regulations was published in the

Federal Register for the same day (61 FR 338).

Written comments responding to the notice of proposed rulemaking

were received. No public hearing was requested or held. After

consideration of all the comments, the temporary regulations under

sections 6081 and 6651 relating to the automatic extension of time to

file individual income tax returns are adopted as revised by this

Treasury Decision, and the corresponding temporary regulations are

removed. The comments and revisions are discussed below in the section

on Explanation of Provisions and Summary of Comments.

Extensions for Partnership Returns of Income and Trust Income Tax

Returns

On April 5, 1988, temporary regulations (TD 8190) relating to the

automatic extension of time to file partnership returns of income and

trust income tax returns were published in the Federal Register (53 FR

11066). A notice of proposed rulemaking (LR-29-88) cross-referencing

the temporary regulations was published in the Federal Register for the

same day (53 FR 11103).

In accordance with section 860F(e), REMICs have been generally

treated as partnerships with regard to extensions of time to file. A

REMIC has been allowed an automatic 3-month extension of time to file

if (1) an application was prepared on Form 8736, (2) the application

was signed by the person duly authorized, (3) the application was filed

on or before the date Form 1066, U.S. Real Estate Mortgage Investment

Conduit Income Tax Return, was due, (4) the application showed the full

amount properly estimated as tax, and (5) the application was

accompanied by full remittance of the amount properly estimated as tax

that was unpaid as of the date prescribed for filing Form 1066.

Written comments responding to the notice of proposed rulemaking

and the request for comments were received. No public hearing was

requested or held. After consideration of all the comments, the

temporary regulations under section 6081 relating to the automatic

extension of time to file partnership returns of income, trust income

tax returns, and REMIC income tax returns are adopted as revised by

this Treasury decision, and the corresponding temporary regulations are

removed. The comments and revisions are discussed below.

Explanation of Provisions and Summary of Comments

These final regulations provide that individuals may obtain an

automatic 4-month extension of time to file an individual income tax

return without remitting the unpaid amount of any tax properly

estimated to be due with the application for extension of time to file.

Under these final regulations, an individual's inability to pay is not

a condition for obtaining an automatic 4-month extension. However,

taxpayers are encouraged to make payments in order to minimize interest

and penalties imposed on unpaid amounts.

The final regulations remove the regulatory requirement that Forms

4868 be signed.

Most commentators responded favorably to the proposed and temporary

regulations. Some commentators suggested that the IRS should develop a

bulk method for submitting applications for automatic extensions so

that return preparers could submit a list of the required information

for all their clients on one Form 4868. The final regulations provide

that the IRS may prescribe other methods for submitting an application

in lieu of a paper application on Form 4868. In April 1996, the IRS

provided a method of filing Forms 4868 electronically through the

Electronic Transmitted Documents System. See Publication 1346. The IRS

continues to offer this method of filing Forms 4868. If there is still

a need for other methods, suggestions should be sent to: CC:DOM:CORP:R

(REG-209643-93), Room 5226, Internal Revenue Service, POB 7604, Ben

Franklin Station, Washington, DC 20044.

One commentator recommended that the requirement to ``properly

estimate'' the tax be dropped, since payment of the unpaid amount of

tax due is not a condition of obtaining an automatic 4-month extension

of time to file an individual income tax return. The requirement has

been retained to assist taxpayers in determining the amount of interest

and penalties for which they will be liable if timely tax payments are

not made, and to thereby encourage

[[Page 69029]]

payments, as large as possible, with the application for extension of

time to file.

The final regulations provide the requirements for partnerships,

trusts, and REMICs to obtain an automatic 3-month extension of time to

file partnership, trust, and REMIC returns. The final regulations

remove the regulatory requirement that Forms 8736 be signed.

Notwithstanding the current instructions to Form 8736, an unsigned Form

8736 will be processed. In addition, these final regulations provide

that trusts and REMICs may obtain an automatic 3-month extension of

time to file a trust income tax return or a REMIC income tax return

without remitting the unpaid amount of any tax properly estimated to be

due with the application for extension of time to file.

The final regulations provide that the IRS may prescribe additional

methods of obtaining an extension of time to file in lieu of a paper

application on Form 8736.

Some commentators suggested that allowing automatic extensions for

partnership returns of income and trust income tax returns will give

rise to filing difficulties for partners and trust beneficiaries. The

Treasury and the IRS took this concern into account when limiting

partnership and trust extensions to 3 months rather than the 4 months

permitted individuals.

Special Analyses

It has been determined that these final regulations are not a

significant regulatory action as defined in EO 12866. Therefore, a

regulatory assessment is not required. It also has been determined that

section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)

does not apply to these regulations, and because the notices of

proposed rulemaking preceding the regulations were issued prior to

March 29, 1996, a Regulatory Flexibility Analysis is not required.

Pursuant to section 7805(f) of the Internal Revenue Code, a copy of the

notice of proposed rulemaking providing an automatic extension of time

to file an individual income tax return that precedes these regulations

was submitted to the Chief Counsel for Advocacy of the Small Business

Administration for comment on their impact on small business.

Drafting Information

The principal authors of these regulations are Margaret A. Owens,

and Philip E. Bennet, Office of the Assistant Chief Counsel (Income Tax

& Accounting), IRS. However, other personnel from the IRS and the

Treasury Department participated in their development.

List of Subjects

26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 301

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income

taxes, Penalties, Reporting and recordkeeping requirements.

26 CFR Part 602

Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

Accordingly, 26 CFR parts 1, 301, and 602 are amended as follows:

PART 1--INCOME TAXES

Paragraph 1. The authority citation for part 1 is amended by adding

new entries in numerical order to read as follows:

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

Section 1.6081-2 also issued under 26 U.S.C. 6081(a).

Section 1.6081-4 also issued under 26 U.S.C. 6081(a).

Section 1.6081-6 also issued under 26 U.S.C. 6081(a).

Section 1.6081-7 also issued under 26 U.S.C. 6081(a). * * *

Par. 2. Section 1.6081-2 is added to read as follows:

Sec. 1.6081-2 Automatic extension of time to file partnership return

of income.

(a) In general. A partnership required to file a return of income

on Form 1065, U.S. Partnership Return of Income, for any taxable year

will be allowed an automatic 3-month extension of time to file the

return after the date prescribed for filing the return if an

application under this section is filed in accordance with paragraph

(b) of this section. In the case of a partnership described in

Sec. 1.6081-5(a)(1), the automatic extension allowed under this section

runs concurrently with an extension of time to file granted pursuant to

Sec. 1.6081-5(a).

(b) Requirements. In order to satisfy this paragraph (b), an

application for an automatic extension under this section must be--

(1) Submitted on Form 8736, Application for Automatic Extension of

Time To File U.S. Return for a Partnership, REMIC or for Certain

Trusts, or in any other manner as may be prescribed by the

Commissioner;

(2) Filed on or before the later of--

(i) The date prescribed for filing the partnership return (without

regard to any extensions of the time for filing such return); or

(ii) The expiration of any extension of time to file granted such

partnership pursuant to Sec. 1.6081-5(a); and

(3) Filed with the Internal Revenue Service office designated in

the application's instructions.

(c) Payment of section 7519 amount. An automatic extension of time

for filing a partnership return under this section does not extend the

time for payment of any amount due under section 7519, relating to

required payments for entities electing not to have a required taxable

year.

(d) Section 444 election. An automatic extension of time for filing

a partnership return will run concurrently with any extension of time

for filing a return allowed because of section 444, relating to the

election of a taxable year other than a required taxable year.

(e) Effect of extension on partner. An automatic extension of time

for filing a partnership return under this section does not operate to

extend the time for filing a partner's income tax return or the time

for the payment of any tax due on the partner's income tax return.

(f) Termination of automatic extension. The district director,

including the Assistant Commissioner (International), or the director

of a service center may terminate at any time an automatic extension by

mailing to the partnership a notice of termination. The notice must be

mailed at least 10 days prior to the termination date designated in

such notice. The notice of termination must be mailed to the address

shown on Form 8736 or to the partnerships's last known address.

(g) Penalties. See section 6698 for failure to file a partnership

return.

(h) Coordination with Sec. 1.6081-1. Except in undue hardship

cases, no extension of time for filing a partnership return of income

will be granted under Sec. 1.6081-1 until an automatic extension has

been allowed pursuant to the provisions of this section.

(i) Effective date. This section is effective for applications for

an automatic extension of time to file a partnership return of income

filed on or after December 31, 1996.

Sec. 1.6081-2T [Removed]

Par. 3. Section 1.6081-2T is removed.

Sec. 1.6081-3T [Removed]

Par. 4. Section 1.6081-3T is removed.

Par. 5. Section 1.6081-4 is amended as follows:

1. Paragraphs (a) and (c) are revised.

2. Paragraphs (d) and (e) are added.

The revised and added provisions read as follows:

[[Page 69030]]

Sec. 1.6081-4 Automatic extension of time for filing individual income

tax returns.

(a) In general--(1) Period of extension. An individual who is

required to file an individual income tax return will be allowed an

automatic 4-month extension of time to file the return after the date

prescribed for filing the return provided the requirements contained in

paragraphs (a)(2), (3), and (4) of this section are met. In the case of

an individual described in Sec. 1.6081-5(a)(5) or (6), the automatic 4-

month extension will run concurrently with the extension of time to

file granted pursuant to Sec. 1.6081-5.

(2) Manner for submitting an application. An application must be

submitted--

(i) On Form 4868, Application for Automatic Extension of Time to

File U.S. Individual Income Tax Return; or

(ii) In any other manner as may be prescribed by the Commissioner.

(3) Time and place for filing application. Except in the case of an

individual described in Sec. 1.6081-5(a)(5) or (6), the application

must be filed on or before the date prescribed for filing the

individual income tax return. In the case of an individual described in

Sec. 1.6081-5(a)(5) or (6), the application must be filed on or before

the expiration of the extension of time to file granted pursuant to

Sec. 1.6081-5. The application must be filed with the Internal Revenue

Service office designated in the application's instructions.

(4) Proper estimate of tax. An application for extension must show

the full amount properly estimated as tax for the taxable year.

(5) Coordination with Sec. 1.6081-1. Except in undue hardship

cases, no extension of time for filing an individual income tax return

will be granted under Sec. 1.6081-1 until an automatic extension has

been allowed pursuant to the provisions of this paragraph (a).

* * * * *

(c) Termination of automatic extension. The district director,

including the Assistant Commissioner (International), or the director

of a service center may terminate at any time an automatic extension by

mailing to the taxpayer a notice of termination. The notice must be

mailed at least 10 days prior to the termination date designated in

such notice. The notice of termination must be mailed to the taxpayer

at the address shown on Form 4868 or to the taxpayer's last known

address.

(d) Penalties. See section 6651 for failure to file an individual

income tax return or failure to pay the amount shown as tax on the

return. In particular, see Sec. 301.6651-1(c)(3) of this chapter

(relating to a presumption of reasonable cause in certain circumstances

involving an automatic extension of time for filing an individual

income tax return).

(e) Effective date. This section is effective for applications for

an automatic extension of time to file an individual income tax return

filed on or after December 31, 1996.

Sec. 1.6081-4T [Removed]

Par. 6. Section 1.6081-4T is removed.

Par. 7. Section 1.6081-6 is added under the undesignated

centerheading ``Extension of Time for Filing Returns'' to read as

follows:

Sec. 1.6081-6 Automatic extension of time to file trust income tax

return.

(a) In general. A trust required to file an income tax return on

Form 1041, U.S. Income Tax Return for Estates and Trusts, for any

taxable year will be allowed an automatic 3-month extension of time to

file the return after the date prescribed for filing the return if an

application under this section is filed in accordance with paragraph

(b) of this section.

(b) Requirements. To satisfy this paragraph (b), an application for

an automatic extension under this section must--

(1) Be submitted on Form 8736, Application for Automatic Extension

of Time To File U.S. Return for a Partnership, REMIC or for Certain

Trusts, or in any other manner as may be prescribed by the

Commissioner;

(2) Be filed on or before the date prescribed for filing the trust

income tax return with the Internal Revenue Service office designated

in the application's instructions; and

(3) Show the full amount properly estimated as tax for the trust

for the taxable year.

(c) Effect of extension on beneficiary. An automatic extension of

time to file a trust income tax return under this section will not

operate to extend the time for filing the income tax return of a

beneficiary of the trust or the time for the payment of any tax due on

the beneficiary's income tax return.

(d) Termination of automatic extension. The district director,

including the Assistant Commissioner (International), or the director

of a service center may terminate at any time an automatic extension by

mailing to the trust a notice of termination. The notice must be mailed

at least 10 days prior to the termination date designated in such

notice. The notice of termination must be mailed to the address shown

on Form 8736 or to the trust's last known address.

(e) Penalties. See section 6651 for failure to file a trust income

tax return or failure to pay the amount shown as tax on the return.

(f) Coordination with Sec. 1.6081-1. Except in undue hardship

cases, no extension of time for filing a trust income tax return will

be granted under Sec. 1.6081-1 until an automatic extension has been

allowed pursuant to the provisions of this section.

(g) Effective date. This section is effective for applications for

an automatic extension of time to file a trust income tax return filed

on or after December 31, 1996.

Par. 8. Section 1.6081-7 is added under the undesignated

centerheading ``Extension of Time for Filing Returns'' to read as

follows:

Sec. 1.6081-7 Automatic extension of time to file Real Estate Mortgage

Investment Conduit (REMIC) income tax return.

(a) In general. A Real Estate Mortgage Investment Conduit (REMIC)

required to file an income tax return on Form 1066, U.S. Real Estate

Mortgage Investment Conduit Income Tax Return, for any taxable year

will be allowed an automatic 3-month extension of time to file the

return after the date prescribed for filing the return if an

application under this section is filed in accordance with paragraph

(b) of this section.

(b) Requirements. To satisfy this paragraph (b), an application for

an automatic extension under this section must--

(1) Be submitted on Form 8736, Application for Automatic Extension

of Time To File U.S. Return for a Partnership, REMIC or for Certain

Trusts, or in any other manner as may be prescribed by the

Commissioner;

(2) Be filed on or before the date prescribed for filing the REMIC

income tax return with the Internal Revenue Service office designated

in the application's instructions; and

(3) Show the full amount properly estimated as tax for the REMIC

for the taxable year.

(c) Effect of extension on residual or regular interest holders. An

automatic extension of time to file a REMIC income tax return under

this section will not operate to extend the time for filing the income

tax return of a residual or regular interest holder of the REMIC or the

time for the payment of any tax due on the residual or regular interest

holder's income tax return.

(d) Termination of automatic extension. The district director,

including the Assistant Commissioner (International), or the director

of a

[[Page 69031]]

service center may terminate at any time an automatic extension by

mailing to the REMIC a notice of termination. The notice must be mailed

at least 10 days prior to the termination date designated in such

notice. The notice of termination must be mailed to the address shown

on Form 8736 or to the REMIC's last known address.

(e) Penalties. See sections 6698 and 6651 for failure to file a

REMIC income tax return or failure to pay the amount shown as tax on

the return.

(f) Coordination with Sec. 1.6081-1. Except in undue hardship

cases, no extension of time for filing a REMIC income tax return will

be granted under Sec. 1.6081-1 until an automatic extension has been

allowed pursuant to the provisions of this section.

(g) Effective date. This section is effective for applications for

an automatic extension of time to file a REMIC income tax return filed

on or after December 31, 1996.

PART 301--PROCEDURE AND ADMINISTRATION

Par. 9. The authority citation for part 301 continues to read in

part as follows:

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

Par. 10. Section 301.6651-1 is amended by revising paragraph (c)(3)

to read as follows:

Sec. 301.6651-1 Failure to file tax return or to pay tax.

* * * * *

(c) * * *

(3) If, for a taxable year ending on or after December 31, 1995, an

individual taxpayer satisfies the requirement of Sec. 1.6081-4(a) of

this chapter (relating to automatic extension of time for filing an

individual income tax return), reasonable cause will be presumed, for

the period of the extension of time to file, with respect to any

underpayment of tax if--

(i) The excess of the amount of tax shown on the individual income

tax return over the amount of tax paid on or before the regular due

date of the return (by virtue of tax withheld by the employer,

estimated tax payments, and any payment with an application for

extension of time to file pursuant to Sec. 1.6081-4 of this chapter) is

no greater than 10 percent of the amount of tax shown on the individual

income tax return; and

(ii) Any balance due shown on the individual income tax return is

remitted with the return.

* * * * *

Sec. 301.6651-1T [Removed]

Par. 11. Section 301.6651-1T is removed.

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

Par. 12. The authority citation for part 602 continues to read as

follow:

Authority: 26 U.S.C. 7805.

Par. 13. In Sec. 602.101, paragraph (c) is amended by removing the

entries for Secs. 1.6081-2T, 1.6081-3T, and 1.6081-4T from the table,

revising the entry for Sec. 1.6081-4, and adding the following entries

in numerical order to the table to read as follows:

Sec. 602.101 OMB Control numbers.

* * * * *

(c) * * *

------------------------------------------------------------------------

Current OMB

CFR part or section where identified and described control No.

------------------------------------------------------------------------

* * * * *

1.6081-2................................................ 1545-0148

1545-1054

1545-1036

* * * * *

1.6081-4................................................ 1545-0188

1545-1479

1.6081-6................................................ 1545-0148

1545-1054

1.6081-7................................................ 1545-0148

1545-1054

* * * * *

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Margaret Milner Richardson,

Commissioner of Internal Revenue.

Approved: December 11, 1996.

Donald C. Lubick,

Acting Assistant Secretary of the Treasury.

[FR Doc. 96-32379 Filed 12-30-96; 8:45 am]

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