Federal Register/Vol. 85, No. 202/Monday, October 19, 2020/Rules and Regulations
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Federal Register / Vol. 85, No. 202 / Monday, October 19, 2020 / Rules and Regulations 66219 even if it is excluded from certain label SUMMARY: This document contains final hearing in response to that notice. On declarations. Finally, we reorganized regulations clarifying that the following August 5, 2020, the Treasury the section detailing our consideration deductions allowed to an estate or non- Department and the IRS published in of allulose as a sugar. grantor trust are not miscellaneous the Federal Register (85 FR 47323) a The guidance announced in this itemized deductions: Costs paid or cancellation of the notice of public notice finalizes the draft guidance with incurred in connection with the hearing. respect to: (1) Our views on the administration of an estate or non- The Treasury Department and the IRS declaration of allulose on Nutrition grantor trust that would not have been received written and electronic Facts and Supplement Facts labels and incurred if the property were not held comments in response to the proposed on the caloric content of allulose; and in the estate or trust, the personal regulations. All comments were (2) our intent to exercise enforcement exemption of an estate or non-grantor considered and are available at discretion for the exclusion of allulose trust, the distribution deduction for www.regulations.gov or upon request. from the amount of Total Sugars and trusts distributing current income, and After full consideration of the comments Added Sugars declared on the label and the distribution deduction for estates received, this Treasury decision adopts use of a general factor of 0.4 kcal/g for and trusts accumulating income. the proposed regulations with allulose when calculating declarations Therefore, these deductions are not modifications described in the on Nutrition and Supplement Facts affected by the suspension of the Summary of Comments and Explanation labels pending review of the issues in a deductibility of miscellaneous itemized of Revisions. rulemaking. deductions for taxable years beginning Summary of Comments and after December 31, 2017, and before II. Paperwork Reduction Act of 1995 Explanation of Revisions January 1, 2026. The final regulations Most of the comments addressing the This guidance contains no collection also provide guidance on determining proposed regulations are summarized in of information. Therefore, clearance by the character, amount, and allocation of this Summary of Comments and the Office of Management and Budget deductions in excess of gross income Explanation of Revisions. Comments (OMB) under the Paperwork Reduction succeeded to by a beneficiary on the merely summarizing or interpreting the Act of 1995 (PRA) (44 U.S.C. 3501– termination of an estate or non-grantor proposed regulations or recommending 3521) is not required. trust. The final regulations affect estates, statutory revisions are not discussed in However, this guidance refers to non-grantor trusts (including the S this preamble. The Treasury Department previously approved FDA collections of portion of an electing small business and the IRS continue to study comments information. These collections of trust), and their beneficiaries. information are subject to review by on issues related to sections 67 and DATES: 642(h) that are beyond the scope of OMB under the PRA. The collections of Effective date: These regulations are these regulations, which may be information in 21 CFR part 101 have effective on October 19, 2020. discussed in future guidance if guidance been approved under OMB control Applicability dates: For dates of on those issues is published. The scope number 0910–0381. applicability, see §§ 1.67–4(d), of the proposed regulations and these II. Electronic Access 1.642(h)–2(f) and 1.642(h)–5(c). regulations is limited to the effect of FOR FURTHER INFORMATION CONTACT: Persons with access to the internet section 67(g) on the deductibility of Margaret Burow at (202) 317–5279 (not certain expenses described in section may obtain the guidance at either a toll-free number). https://www.fda.gov/FoodGuidances or 67(b) and (e) that are incurred by estates SUPPLEMENTARY INFORMATION: https://www.regulations.gov. Use the and non-grantor trusts and the treatment of excess deductions on termination of FDA website listed in the previous Background an estate or trust under section 642(h). sentence to find the most current This document contains amendments version of the guidance. This Summary of Comments and to Income Tax Regulations (26 CFR part Explanation of Revisions also describes Dated: October 9, 2020. 1) under sections 67 and 642 of the each of the final rules contained in this Lauren K. Roth, Internal Revenue Code (Code). On May document. Acting Principal Associate Commissioner for 11, 2020, the Department of Treasury Policy. (Treasury Department) and the IRS A. Section 67 [FR Doc. 2020–22901 Filed 10–16–20; 8:45 am] published a notice of proposed Section 67(g) was added to the Code BILLING CODE 4164–01–P rulemaking (REG–113295–18) in the on December 22, 2017, by section Federal Register (85 FR 27693) 11045(a) of Public Law 115–97, 131 containing proposed regulations under Stat. 2054, 2088 (2017), commonly sections 67 and 642(h) (proposed referred to as the Tax Cuts and Jobs Act DEPARTMENT OF THE TREASURY regulations). The Summary of (TCJA). Section 67(g) prohibits Internal Revenue Service Comments and Explanation of Revisions individual taxpayers from claiming section of this preamble summarizes the miscellaneous itemized deductions for 26 CFR Part 1 provisions of sections 67 and 642(h) and any taxable year beginning after the provisions of the proposed December 31, 2017, and before January [TD 9918] regulations, which are explained in 1, 2026. Prior to the TCJA, greater detail in the preamble to the miscellaneous itemized deductions RIN 1545–BO87 proposed regulations. were allowable for any taxable year only On July 17, 2020, the Treasury to the extent that the sum of such Effect of Section 67(g) on Trusts and Department and the IRS published in deductions exceeded two percent of Estates the Federal Register (85 FR 43512) a adjusted gross income. See section AGENCY: Internal Revenue Service (IRS), notice of public hearing on the proposed 67(a). Section 67(b) defines Treasury. regulations scheduled for August 12, miscellaneous itemized deductions as 2020. The Treasury Department and the itemized deductions other than those ACTION: Final regulations. IRS received no requests to speak at a listed in section 67(b)(1) through (12). VerDate Sep<11>2014 16:28 Oct 16, 2020 Jkt 253001 PO 00000 Frm 00019 Fmt 4700 Sfmt 4700 E:\FR\FM\19OCR1.SGM 19OCR1 jbell on DSKJLSW7X2PROD with RULES 66220 Federal Register / Vol. 85, No. 202 / Monday, October 19, 2020 / Rules and Regulations Section 67(e) provides that, for therefore, these regulations do not likelihood of the QFT beneficiaries purposes of section 67, an estate or trust address the AMT. Further, no being subject to the net investment computes its adjusted gross income in conclusions should be drawn from the income tax. The Treasury Department the same manner as that of an absence of a discussion of the AMT in and the IRS continue to consider these individual, except that the following these regulations regarding the comments but providing an exemption additional deductions are treated as treatment of deductions described in for cemetery and funeral trusts under allowable in arriving at adjusted gross section 67(e) for purposes of section 67(g) is outside the scope of income: (1) The deductions for costs determining the AMT. these regulations. which are paid or incurred in One commenter suggested that the connection with the administration of Treasury Department and the IRS B. Section 642(h) the estate or trust and which would not exercise their regulatory authority under 1. In General have been incurred if the property were section 67(e) to exempt cemetery trusts Section 642(h) provides that if, on the not held in such estate or trust, and (2) under section 642(i) and qualified termination of an estate or trust, the deductions allowable under section funeral trusts (QFTs) under section 685 estate or trust has: (1) A net operating 642(b) (concerning the personal from the application of section 67(g). loss carryover under section 172 or a exemption of an estate or non-grantor The commenter stated that the primary capital loss carryover under section trust), section 651 (concerning the type of expense incurred by these trusts 1212, or (2) for the last taxable year of deduction for trusts distributing current is investment advisory expenses, the tax the estate or trust, deductions (other income), and section 661 (concerning treatment of which differs under the the deduction for estates and trusts Code from management expense. That than the deductions allowed under accumulating income). Accordingly, is, trust management expenses generally section 642(b) (relating to the personal section 67(e) removes the deductions are allowable in computing adjusted exemption) or section 642(c) (relating to described in section 67(e)(1) and (2) gross income under section 67(e)(1), charitable contributions)) in excess of from the definition of itemized while trust investment advisory gross income for such year, then such deductions under section 63(d), and expenses are miscellaneous itemized carryover or excess will be allowed as thus from the definition of deductions. See § 1.67–4(b)(4). The a deduction, in accordance with the miscellaneous itemized deductions commenter asserted that it was not the regulations prescribed by the Secretary under section 67(b), and treats them as intent of Congress to disallow of the Treasury or his delegate deductions allowable in arriving at investment advisory expenses incurred (Secretary), to the beneficiaries adjusted gross income under section by cemetery and funeral trusts when succeeding to the property of the estate 62(a).