Termination of Puerto Rico and Possession Tax Credit; New Lines of Business Prohibited

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-115446-97]

RIN 1545-AV68

Termination of Puerto Rico and Possession Tax Credit; New Lines

of Business Prohibited

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 TD 8778, published elsewhere in this issue of the Federal

Register, the IRS is issuing temporary regulations that provide

guidance regarding the addition of a substantial new line of business

by a possessions corporation that is an existing credit claimant. These

regulations reflect changes made by the Small Business Job Protection

Act of 1996. 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 November 17, 1998. Requests

to speak and outlines of topics to be discussed at the public hearing

scheduled for Tuesday, December 1, 1998, at 10 a.m. must be received by

Tuesday, November 10, 1998.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-115446-97), room

5226, Internal Revenue Service, POB 7604, Ben Franklin Station,

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

hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG-115446-97), 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 room 2615, Internal

Revenue Building, 1111 Constitution Avenue, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Patricia

A. Bray or Elizabeth Beck, (202) 622-3880 or Jacob Feldman, (202) 622-

3830; concerning submissions and the hearing, Michael Slaughter, (202)

622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

Temporary Regulations in the Rules and Regulations portion of this

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

1) relating to section 936. Section 1.936-11T, published in TD 8778,

provides guidance to possessions corporations that could lose their

status as an existing credit claimant, and, as a result, their right to

claim the possession tax credit, due to the addition of a substantial

new line of business.

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 Analysis

It has been determined that this notice of proposed rulemaking is

not a significant regulatory action as defined in Executive Order

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

been determined that section 553(b) of the Administrative Procedure Act

(5 U.S.C. chapter 5) does not apply to these regulations, and because

the regulations do not impose a collection of information on small

entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not

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

notice of proposed rulemaking will be submitted to the Chief Counsel

for Advocacy of the Small Business Administration for comment on its

impact on small business.

Comments and 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 IRS. All

comments will be made available for public inspection and copying.

A public hearing has been scheduled for December 1, 1998, at 10

a.m., in room 2615, Internal Revenue Building, 1111 Constitution Ave.,

NW., Washington, DC. Because of access restrictions, visitors will not

be admitted beyond the Internal Revenue Building lobby more than 15

minutes before the hearing starts.

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

Persons who wish to present oral comments at the hearing must

submit written comments and an outline of the topic (preferably a

signed original and eight (8) copies) to be discussed by November 10,

1998.

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 regulations is

Patricia A. Bray of the Office of the Associate Chief Counsel

(International). Other personnel from the IRS and the Department of the

Treasury participated in the development of these regulations.

List of Subjects in 26 CFR Part 1

Income taxes, 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 is amended by adding

an entry in numerical order to read as follows:

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

Section 1.936-11 also issued under 26 U.S.C. 936. * * *

Par. 2. Section 1.936-11 is added to read as follows:

Sec. 1.936-11 New lines of business prohibited.

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

Sec. 1.936-11T published elsewhere in this issue of the Federal

Register.]

Michael P. Dolan,

Deputy Commissioner of Internal Revenue.

[FR Doc. 98-21827 Filed 8-18-98; 8:45 am]

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