Guidance Regarding Claims for Income Tax Convention Benefits

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-104893-97]

RIN 1545-AV10

Guidance Regarding Claims for Income Tax Convention Benefits

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 regarding

rules for determining whether U.S. source payments made to entities,

including entities that are fiscally transparent in the United States

and/or the applicable treaty jurisdiction, are eligible for treaty-

reduced tax rates. 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: Comments and outlines of topics to be discussed at the public

hearing scheduled for September 24, 1997, at 10 a.m. must be received

by September 3, 1997.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-104893-97), room

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

Washington, DC 20044. Submissions may also be hand delivered between

the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG-104893-97),

Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW.,

Washington, DC. Alternatively, taxpayers may submit comments

electronically via the internet by selecting the ``Tax Regs'' option on

the IRS Home Page, or by submitting comments directly to the IRS

internet site at http://www.irs.ustreas.gov/prod/tax__regs/

comments.html. The public hearing will be held in the Commissioner's

Conference Room, room 3313, Internal Revenue Building, 1111

Constitution Avenue, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Elizabeth

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

Evangelista Lee, (202) 622-7190 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

Temporary regulations in the Rules and Regulations portion of this

issue of the Federal Register amend the Income Tax Regulations (26 CFR

part 1) relating to section 894. The temporary regulations contain

rules relating to eligibility for benefits under income tax conventions

for payments to flow-through entities or arrangements.

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.

Special Analyses

It has been determined that this notice of proposed rulemaking is

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

these regulations do not impose on small entities a collection of

information requirement, the Regulatory Flexibility Act (5 U.S.C.

chapter 6) does not apply. 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 its impact on small business.

Comments and Public Hearing

Before these proposed regulations are adopted as final regulations,

consideration will be given to any comments that are submitted timely

to the IRS. All comments will be available for public inspection and

copying.

A public hearing has been scheduled for September 24, 1997, at 10

a.m. in the Commissioner's Conference Room, room 3313, Internal Revenue

Building, 1111 Constitution Avenue NW., Washington DC. Because of

access restrictions, visitors will not be admitted beyond the Internal

Revenue Building lobby more

[[Page 35756]]

than 15 minutes before the hearing starts.

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

Persons who wish to present oral comments at the hearing must

submit comments and an outline of the topics to be discussed and the

time to be devoted to each topic by September 3, 1997.

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.

Proposed Effective Date

This amendment applies to payments received by an entity on or

after January 1, 1998.

List of Subjects in 26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

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

PART 1--INCOME TAXES

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

follows:

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

Par. 2. In Sec. 1.894-1, paragraph (d) is added to read as follows:

Sec. 1.894-1 Income affected by treaty.

* * * * *

[The text of proposed paragraph (d) is the same as the text of

Sec. 1.894-1T(d) published elsewhere in this issue of the Federal

Register].

Michael P. Dolan,

Acting Commissioner of Internal Revenue.

[FR Doc. 97-17468 Filed 6-30-97; 12:19 pm]

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