Federal Register/Vol. 67, No. 139/Friday, July 19, 2002/Rules

47454 Federal Register / Vol. 67, No. 139 / Friday, July 19, 2002 / Rules and Regulations

with holding the residual interest does previously transferred residual interests. U’s Robert E. Wenzel, not exceed the sum of— financial circumstances, including the Deputy Commissioner of Internal Revenue. (i) The present value of any aggregate tax liabilities it has assumed with Approved: July 10, 2002 consideration given to the transferee to respect to REMIC residual interests, would Pamela F. Olson, cause a reasonable person to conclude that U acquire the interest; Acting Assistant Secretary of the Treasury. (ii) The present value of the expected will be unable to meet its tax liabilities when [FR Doc. 02–18021 Filed 7–18–02; 8:45 am] future distributions on the interest; and due. The transfers in the last month of the (iii) The present value of the year fail to satisfy the investigation BILLING CODE 4830–01–P anticipated tax savings associated with requirement in paragraph (c)(4)(i) of this section and the asset test requirement of holding the interest as the REMIC DEPARTMENT OF THE TREASURY generates losses. paragraph (c)(5)(iii) of this section because (8) Conditions and limitations on Bank has reason to know that U will not be Internal Revenue Service formula test. The following rules apply able to pay the tax due on those interests. for purposes of the formula test in Example 3. Transfer to a foreign 26 CFR Parts 1 and 601 paragraph (c)(7) of this section. permanent establishment of an eligible (i) The transferee is assumed to pay corporation. R transfers a noneconomic [TD 9006] tax at a rate equal to the highest rate of residual interest in a REMIC to the foreign RIN 1545–AY68 tax specified in section 11(b)(1). If the permanent establishment of Corporation T. transferee has been subject to the Solely because of paragraph (c)(8)(ii) of this Notice to Interested Parties alternative minimum tax under section section, the transfer does not satisfy the AGENCY: Internal Revenue Service (IRS), 55 in the preceding two years and will formula test of paragraph (c)(7) of this Treasury. compute its taxable income in the section. In addition, even if T is an eligible current taxable year using the corporation, the transfer does not satisfy the ACTION: Final regulations. asset test because the transfer fails the alternative minimum tax rate, then the SUMMARY: This document contains final tax rate specified in section 55(b)(1)(B) requirements of paragraph (c)(5)(ii) of this section. regulations relating to the notice to may be used in lieu of the highest rate interested parties requirement. Before specified in section 11(b)(1). (10) Effective dates. Paragraphs (c)(4) the IRS can issue an advance (ii) The direct or indirect transfer of through (c)(9) of this section are determination regarding the the residual interest to a foreign applicable to transfers occurring on or qualification of a retirement plan, a plan permanent establishment or fixed base after February 4, 2000, except for sponsor must provide evidence that it (within the meaning of an applicable paragraphs (c)(4)(iii) and (c)(8)(iii) of has notified all persons who qualify as income tax treaty) of a domestic this section, which are applicable for interested parties that an application for transferee is not eligible for the formula an advance determination will be filed test. transfers occurring on or after August 19, 2002. For the dates of applicability with the IRS. These regulations set forth (iii) Present values are computed standards by which a plan sponsor may using a discount rate equal to the of paragraphs (a) through (c)(3) and (d) of this section, see § 1.860A–1. satisfy the notice to interested parties Federal short-term rate prescribed by requirement. The final regulations affect section 1274(d) for the month of the * * * * * retirement plan sponsors, plan transfer and the compounding period participants and other interested parties PART 602—OMB CONTROL NUMBERS used by the taxpayer. with respect to a determination letter UNDER THE PAPERWORK (9) Examples. The following examples application, and certain representatives illustrate the rules of this section: REDUCTION ACT of interested parties. Example 1. Transfer to partnership. X DATES: Effective Date: These regulations transfers a noneconomic residual interest in Par. 4. The authority citation for part are effective on July 19, 2002. a REMIC to Partnership P in a transaction 602 continues to read as follows: Applicability Date: These regulations that does not satisfy the formula test of apply to applications made on or after paragraph (c)(7) of this section. Y and Z are Authority: 26 U.S.C. 7805. the partners of P. Even if Y and Z are eligible January 1, 2003. corporations that satisfy the requirements of Par. 5. In § 602.101, paragraph (b) is FOR FURTHER INFORMATION CONTACT: paragraph (c)(5)(i) of this section, the transfer amended by adding an entry in Pamela R. Kinard, (202) 622–6060 (not fails to satisfy the asset test requirements numerical order to the table to read as a toll-free number). found in paragraph (c)(5)(ii) of this section follows: SUPPLEMENTARY INFORMATION: because P is a partnership rather than an eligible corporation within the meaning of § 602.101 OMB Control numbers. Background (c)(6)(i) of this section. * * * * * This document contains amendments Example 2. Transfer to a corporation without capacity to carry additional residual (b) * * * to 26 CFR parts 1 and 601 under section interests. During the first ten months of a 7476 of the Internal Revenue Code of year, Bank transfers five residual interests to CFR part or section where Current OMB 1986 (Code). On May 21, 1976, final Corporation U under circumstances meeting identified and described control No. regulations (TD 7421) under section the requirements of the asset test in 7476 were published in the Federal paragraph (c)(5) of this section. Bank is the Register (41 FR 20874). These final major creditor of U and consequently has *****regulations provide guidance on the access to U’s financial records and has ** nature and method of giving notice to knowledge of U’s financial circumstances. 1.860E–1 ...... 1545–1675 interested parties. On January 17, 2001, During the last month of the year, Bank transfers three additional residual interests to a notice of proposed rulemaking (REG– *****129608–00) was published in the U in a transaction that does not meet the ** formula test of paragraph (c)(7) of this Federal Register (66 FR 3954), setting section. At the time of this transfer, U’s forth the proposed new standards for financial records indicate it has retained the delivery of the notice to interested

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parties. No public hearing was for advance determination with the IRS than 10 days nor more than 24 days requested or held. Written comments that are subject to the requirements prior to the date that the application for responding to the notice of proposed under section 410. Section 1.7476– a determination is made. One rulemaking were received. After 1(c)(5) provides that in the case of an commentator requested clarification on consideration of all the comments, the organization described in section whether the time period for providing proposed regulations are adopted as 410(c)(1), which includes governmental notice by electronic mail is the same amended by this Treasury decision. The plans within the meaning of section time period for when notice is given by revisions are discussed below. 414(d), section 410 will be considered to a means other than postal mailing. In apply to a plan year of such the interest of simplification, the final Explanation of Provisions and organization for any plan year in which regulations provide a single time period Summary of Comments section 410(c)(2) applies to the plan. for providing the notice. Under these A. Overview Section 410(c)(1)(A) provides that the final regulations, the notice must be provisions of section 410 (other than given not less than 10 days nor more Section 7476(b)(2) provides that, with section 410(c)(2)) do not apply to than 24 days prior to the date that the respect to a pleading filed by a governmental plans within the meaning application for a determination is made. petitioner for a request for a of section 414(d). Section 410(c)(2) This time period applies to all methods determination on the qualified status of provides that a governmental plan will of delivering the notice to interested a retirement plan under section 7476(a), be treated as meeting the requirements parties. Taxpayers may continue to rely the United States Tax Court may find under section 410 for purposes of on the prior time periods until the the pleading to be premature unless the section 401(a). Prior to 1997, section applicability date of this Treasury petitioner establishes to the satisfaction 410(c)(2) provided that, in order to be decision. of the Court that he has complied with treated as satisfying the requirements of Section 601.201(o)(3)(xvii) describes the requirements prescribed by the section 410, a governmental plan must the procedures for providing additional regulations of the Secretary regarding meet the requirements under section informational material required by the notice to interested parties of the 401(a)(3) as in effect on September 1, § 601.201(o)(3)(xviii), (xix), and (xx), to filing of the request for a determination. 1974, relating to minimum participation the extent that such information is not Section 3001(a) of the Employee standards. Section 1505(a)(1) of the provided in the notice to interested Retirement Income Security Act of 1974 Taxpayer Relief Act of 1997 (TRA ‘‘97) parties. Such materials may include an (ERISA) provides that before issuing an (Public Law 105–34, 111 Stat. 788) updated copy of the plan and related advance determination regarding the added section 401(a)(5)(G), which trust agreement or the determination qualification of a retirement plan, the provides that the nondiscrimination and letter application. One commentator Secretary of Treasury shall require that minimum participation requirements suggested that § 601.201(o)(3)(xvii) be an applicant provide evidence under section 401(a)(3) and (4) do not revised to provide that any reasonable satisfactory to the Secretary that the apply to a governmental plan (within delivery method should be available for applicant has notified each employee the meaning of section 414(d)) providing additional information to who qualifies as an interested party of maintained by a State or local interested parties. The final regulations the application for a determination. The government or political subdivision amend § 601.201(o)(3)(xvii) to clarify final regulations amend §§ 1.7476–2 and thereof (or agency or instrumentality that the procedure for making materials 601.201 regarding the nature and thereof). Thus, section 410 no longer related to an application for method of giving notices to interested applies to such governmental plans. determination available to interested parties. The final regulations generally One commentator requested parties may include any delivery adopt the standards in the proposed clarification that the notice to interested method or a combination thereof that regulations. These final regulations parties requirement under section 7476 reasonably ensures accessibility to all provide that the notice may be provided no longer applies to governmental plans interested parties. by any method reasonably calculated to after TRA ‘‘97. Section 1.7476–1(b)(7) of Section 601.201(o)(3)(xxi) provides ensure that each interested party is the regulations limits the applicability that the notice to interested parties will notified of the application for of the notice to interested parties be deemed given when it is given in determination. Whether a particular requirement to retirement plans that are person, posted as prescribed in the method of delivery satisfies this subject to section 410 of the Code. regulations under section 7476, or standard is determined on the basis of Because a governmental plan received through the mail. One all the facts and circumstances. The established and maintained by a State or commentator suggested that final regulations retain the safe harbor local government or political § 601.201(o)(3)(xxi) be revised to reflect provided in the proposed regulations for subdivision thereof (or agency or the new standards by which a plan plans using an electronic medium to instrumentality thereof) is not subject to sponsor may satisfy the notice to deliver the notice to interested parties. section 410 of the Code, it is also not interested parties requirement. The final Under that safe harbor, a plan sponsor subject to the notice to interested parties regulations amend § 601.201(o)(3)(xxi) will be treated as satisfying the requirement. to clarify that the notice to interested requirements under § 1.7476–2(c)(1) if parties required by § 601.201(o)(3)(xiv) C. Miscellaneous Comments the plan sponsor delivers the notice shall be deemed given when the notice using an electronic medium under a Proposed regulations under is posted or sent to the person in the system that satisfies the requirements of § 601.201(o)(3)(xv) provide that when manner prescribed in the regulations § 1.402(f)-1 Q&A–5. the notice is given other than by under section 7476. mailing, it should be given not less than B. Application of the Notification 7 days nor more than 21 days prior to Effective Date Requirement to Governmental Plans the date that the application for a These regulations apply to Section 1.7476–1(b)(7) provides that determination is made. When the notice applications made on or after January 1, § 1.7476–1(b), relating to the definition is provided by mailing, prior final 2003. For applications made prior to of interested parties, applies only to regulations under § 601.201(o)(3)(xv) that date, taxpayers may continue to retirement plans filing an application provide that the notice be given not less rely on the standards set forth in the

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prior final regulations or the proposed 2. Paragraph (e) is added. notice required under this section to regulations published in the Federal The revisions and addition read as interested parties. Register on January 17, 2001 (66 FR follows: (ii) Employer B has multiple worksites. 3954). Employer B’s employees located at worksites § 1.7476–2 Notice to interested parties. 1 through 4 have reasonable access to Special Analyses * * * * * computers at their workplace. However, (b) Nature of notice. The notice Employer B’s employees located at worksite It has been determined that this 5 do not have access to computers. Treasury decision is not a significant required by this section shall— (iii) For present employees with reasonable regulatory action as defined in (1) Contain the information and be access to computers (worksites 1 through 4), Executive Order 12866. Therefore, a given within the time period prescribed Employer B provides the notice by posting regulatory assessment is not required. It in § 601.201(o)(3) of this chapter; and the notice on Employer B’s web site (Internet also has been determined that section (2) Be given in a manner prescribed in or intranet). Employees at worksites 1 553(b) of the Administrative Procedure paragraph (c) of this section. through 4 customarily receive employer Act (5 U.S.C. chapter 5) does not apply (c) Method of giving notice. (1) In the notification with regard to employment and to these regulations, and because these case of a present employee, former employee benefit matters from the Employer employee, or beneficiary who is an B’s web site. For present employees without regulations do not impose a collection access to computers (worksite 5), Employer B of information on small entities, the interested party, the notice may be provides the notice by posting the notice at Regulatory Flexibility Act (5 U.S.C. provided by any method reasonably worksite 5 in a location that is customarily chapter 6) does not apply. Pursuant to calculated to ensure that each interested used for employer notices to employees with section 7805(f) of the Code, the notice party is notified of the application for a regard to employment and employee benefit of proposed rulemaking preceding these determination. If an interested party matters. regulations was submitted to the Chief who is a present employee is in a unit (iv) Employer B also sends the notice by e- Counsel for Advocacy of the Small of employees covered by a collective- mail to each collective-bargaining Business Administration for comment bargaining agreement between employee representative of interested parties who are representatives and one or more present employees of Employer B covered by on its impact on small business. a collective-bargaining agreement between employers, notice shall also be given to Drafting Information employee representatives and Employer B, the collective-bargaining representative using the e-mail address previously provided The principal author of these of such interested party by any method to Employer B by such collective-bargaining regulations is Pamela R. Kinard, Office that satisfies this paragraph. Whether representative. of Division Counsel/Associate Chief the notice is provided in a manner that (v) In this Example 2, Employer B satisfies Counsel (Tax Exempt and Government satisfies the requirements of this the notice to interested parties requirement Entities). However, other personnel paragraph is determined on the basis of described in this section. from the IRS and Treasury Department all the relevant facts and circumstances. Example 3. (i) Employer C is terminating participated in their development. Because the facts and circumstances Plan E and applying for a determination letter as to whether the plan termination List of Subjects differ depending on the interested party, affects the continuing qualification of Plan E. it may be necessary to use more than As part of the determination letter 26 CFR Part 1 one method of delivery in order to application process, Employer C provides the Income taxes, Reporting and ensure timely and adequate notice to all notice required under this section to recordkeeping requirements. interested parties. interested parties. (2) If the notice to interested parties (ii) All of Employer C’s employees have 26 CFR Part 601 is delivered using an electronic medium reasonable access to computers. Each Reporting and recordkeeping under a system that satisfies the employee has an e-mail address where he or requirements. requirements of § 1.402(f)-1 Q&A–5, the she can receive messages from Employer C. notice is deemed to be provided in a Employees of Employer C customarily Adoption of Amendments to the receive employer notices regarding Regulations manner that satisfies the requirements employment and employee benefit matters by of paragraph (c)(1). e-mail. Accordingly, 26 CFR parts 1 and 601 (d) Examples. The principles of this (iii) For present employees, Employer C are amended as follows: section are illustrated by the following provides the notice by sending the notice by examples: e-mail. PART 1—INCOME TAXES Example 1. (i) Employer A is amending (iv) Employer C also sends the notice by e- Plan C and applying for a determination mail to each collective-bargaining Paragraph 1. The authority citation letter. Plan C is not maintained pursuant to representative of interested parties who are for part 1 continues to read in part as one or more collective bargaining agreements present employees of Employer C covered by follows: and is not being terminated. As part of the a collective-bargaining agreement between Authority: 26 U.S.C. 7805 * * * determination letter application process, employee representatives and Employer C, Employer A provides the notice required using the e-mail address previously provided Par. 2. Section 1.7476–1 is amended under this section to interested parties. For to Employer C by such collective-bargaining by adding paragraph (e) to read as present employees, Employer A provides the representative. follows: notice by posting the notice at those locations (v) In addition, Employer C sends the within the principal places of employment of notice by e-mail to each interested party who § 1.7476–1 Interested parties. the interested parties which are customarily is a former employee or beneficiary, using the * * * * * used for employer notices to employees with e-mail address previously provided to (e) Effective date. The provisions of regard to employment and employee benefit Employer C by such interested party. For any this section apply to applications matters. former employee or beneficiary who did not referred to in paragraph (a) of this (ii) In this Example 1, Employer A satisfies provide an e-mail address, Employer C sends section made on or after June 21, 1976. the notice to interested parties requirement the notice by regular mail to the last known described in this section. address of such former employee or Par. 3. Section 1.7476–2 is amended Example 2. (i) Employer B is amending beneficiary. as follows: Plan D and applying for a determination (vi) In this Example 3, Employer C satisfies 1. Paragraphs (b), (c), and (d) are letter. As part of the determination letter the notice to interested parties requirement revised. application process, Employer B provides the described in this section.

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(e) Effective date. (1) The provisions to supply them with such additional city of Biloxi/Gulfport including of this section shall apply to informational material in time for them Harrison County, should be decreased to applications referred to in § 1.7476–1(a) to pursue their rights within the time provide for the reimbursement of made on or after January 1, 2003. period prescribed, and must be available Federal employees’ lodging expenses (2) For applications made on or after until the earlier of the filing of a covered by the per diem. This final rule June 21, 1976 and before January 1, pleading commencing a declaratory increases or decreases the maximum 2003, § 1.7476–2 (as it appeared in the judgment action under section 7476 lodging amounts in the prescribed areas. April 1, 2002 edition of 26 CFR part 1) with respect to the qualification of the EFFECTIVE DATE: applies. plan or the ninety-second day after the July 15, 2002. day the notice of final determination is FOR FURTHER INFORMATION CONTACT: PART 601—STATEMENT OF mailed to the applicant. Joddy P. Garner, Office of PROCEDURAL RULES * * * * * Governmentwide Policy, Travel Par. 4. The authority citation for part (xxi) * * * The notice to interested Management Policy, at 202–501–4857. parties required by paragraph (o)(3)(xiv) 601 continues to read as follows: SUPPLEMENTARY INFORMATION: of this section shall be deemed given Authority: 26 U.S.C. 7805. when the notice is posted or sent to the A. Background Par. 5. Section 601.201 is amended as person in the manner prescribed in In the past, properties in high cost follows: § 1.7476–2 of this chapter. * * * travel areas have been under no 1. In paragraph (o)(3)(xv), the first two * * * * * sentences are removed and a new obligation to provide lodging to Federal David A. Mader, sentence is added in their place. travelers at the prescribed per diem rate. 2. In paragraph (o)(3)(xvi), the Acting Deputy Commissioner of Internal Thus, GSA established the FPLP to Revenue. introductory text is revised. contract directly with properties in high 3. Paragraph (o)(3)(xvii) is revised. Approved: July 10, 2002. cost travel markets to make available a 4. In paragraph (o)(3)(xxi), the second Pamela F. Olson, set number of rooms to Federal travelers sentence is revised. Acting Assistant Secretary of the Treasury at contract rates. FPLP contract results The revisions and addition read as (Tax Policy). along with the lodging survey data are follows: [FR Doc. 02–18020 Filed 7–18–02; 8:45 am] integrated together to determine BILLING CODE 4830–01–P reasonable per diem rates that more § 601.201 Rulings and determination accurately reflect lodging costs in these letters. areas. In addition, the FPLP will * * * * * GENERAL SERVICES enhance the Government’s ability to (o) * * * ADMINISTRATION better meet its overall room night (3) * * * demand, and allow travelers to find (xv) When the notice referred to in 41 CFR Chapter 301 lodging close to where they need to paragraph (o)(3)(xiv) of this section is [FTR Amendment 106] conduct business. After an analysis of given in the manner set forth in this additional data, the maximum § 1.7476–2(c) of this chapter, such RIN 3090–AH64 lodging amounts are being changed in notice must be given not less than 10 Huntsville, Alabama; Savannah, days nor more than 24 days prior to the Federal Travel Regulation; Maximum Georgia; Charleston/Berkeley County, date the application for a determination Per Diem Rates South Carolina; Jacksonville/Mayport, is made. * * * AGENCY: Office of Governmentwide Florida; and Biloxi/Gulfport, (xvi) The notice referred to in Policy, GSA. Mississippi. paragraph (o)(3)(xiv) of this section shall ACTION: Final rule. be given in the manner prescribed in B. Executive Order 12866 § 1.7476–2 of this chapter and shall SUMMARY: To improve the ability of the GSA has determined that this final contain the following information: per diem rates to meet the lodging rule is not a significant regulatory action * * * * * demands of Federal travelers to high for the purposes of Executive Order (xvii) The procedure referred to in cost travel locations, the General 12866 of September 30, 1993. paragraph (o)(3)(xvi)(i) of this section Services Administration (GSA) has whereby the additional informational integrated the contracting mechanism of C. Regulatory Flexibility Act material required by paragraphs the new Federal Premier Lodging (o)(3)(xviii), (xix), and (xx) of this Program (FPLP) into the per diem rate- This final rule is not required to be section will (to the extent not included setting process. An analysis of FPLP published in the Federal Register for in this notice) be made available to contracting actions and the lodging rate notice and comment; therefore, the interested parties, may consist of survey data reveal that the maximum Regulatory Flexibility Act, 5 U.S.C. 601 making such material available for per diem rate for the State of Florida, et seq., does not apply. inspection and copying by interested city of Jacksonville/Mayport including D. Paperwork Reduction Act parties at a place or places reasonably Duval County and Mayport Naval accessible to such parties, or supplying Station, the State of Georgia, city of The Paperwork Reduction Act does such material by using a method of Savannah including Chatham County, not apply because the proposed delivery or a combination thereof that is and the State of South Carolina, city of revisions do not impose record keeping reasonably calculated to ensure that all Charleston/Berkeley County including or information collection requirements, interested parties will have access to the Charleston and Berkeley Counties, or the collection of information from materials. The procedure referred to in should be increased; and the maximum offerors, contractors, or members of the paragraph (o)(3)(xvi)(i) of this section per diem rate for the State of Alabama, public which require the approval of the must be immediately available to all city of Huntsville including Madison Office of Management and Budget under interested parties and must be designed County, and the State of Mississippi, 44 U.S.C. 501 et seq.

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