Federal Register / Vol. 85, No. 250 / Wednesday, December 30, 2020 / Rules and Regulations 86511 

and that is not materially modified after 

that date. For purposes of this paragraph 

(h)(3), written binding contract and 

material modification have the same 

meanings as provided in paragraphs 

(g)(1) and (2) of this section. 

(D) Corporations that become publicly 

held. The rule in paragraph (d) of this 

section (providing that the deduction 

limitation of paragraph (b) of this 

section applies to a deduction for any 

compensation that is otherwise 

deductible for the taxable year ending 

on or after the date that a privately held 

corporation becomes a publicly held 

corporation) applies to corporations that 

become publicly held after December 

20, 2019. A privately held corporation 

that becomes a publicly held 

corporation on or before December 20, 

2019, may rely on the transition rules 

provided in § 1.162–27(f)(1) until the 

earliest of the events provided in 

§ 1.162–27(f)(2). A subsidiary that is a 

member of an affiliated group (as 

defined in § 1.162–27(c)(1)(ii)) may rely 

on transition relief provided in § 1.162– 

27(f)(4) if it becomes a separate publicly 

held corporation (whether in a spin-off 

transaction or otherwise) on or before 

December 20, 2019. 

(E) Transition rules. Except for the 

transition rules in paragraphs (g)(1)(v) 

through (vii) of this section, the 

transition rules in paragraphs (g)(1) and 

(2) of this section (providing that this 

section does not apply to compensation 

payable under a written binding 

contract which was in effect on 

November 2, 2017, and which is not 

modified in any material respect on or 

after such date) apply to taxable years 

ending on or after September 10, 2018. 

■ Par. 4. Section 1.338–1 is amended by 

revising paragraph (b)(2)(i) to read as 

follows: 

§ 1.338–1 General principles; status of old 

target and new target. 

* * * * * 

(b) * * * 

(2) * * * 

(i) The rules applicable to employee 

benefit plans (including those plans 

described in sections 79, 104, 105, 106, 

125, 127, 129, 132, 137, and 220), 

qualified pension, profit-sharing, stock 

bonus and annuity plans (sections 

401(a) and 403(a)), simplified employee 

pensions (section 408(k)), tax qualified 

stock option plans (sections 422 and 

423), welfare benefit funds (sections 

419, 419A, 512(a)(3), and 4976), 

voluntary employee benefit associations 

(section 501(c)(9) and the regulations 

thereunder (§§ 1.501(c)(9)–1 through 

1.501(c)(9)–8)) and certain excessive 

employee remuneration (section 162(m) 

and the regulations thereunder 

(§§ 1.162–27, 1.162–31, and 1.162–33)); 

* * * * * 

Sunita Lough, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: December 11, 2020. 

David J. Kautter, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 2020–28484 Filed 12–28–20; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF TREASURY 

31 CFR Part 1 

RIN 1505–AC66 

Privacy Act of 1974; Exemption 

AGENCY: Departmental Offices, 

Department of the Treasury. 

ACTION: Final rule. 

SUMMARY: In accordance with the 

requirements of the Privacy Act of 1974, 

the Department of the Treasury, 

Departmental Offices (DO) gives notice 

of a final rule exemption for a new 

system of records entitled ‘‘Department 

of the Treasury, Departmental Offices 

.227—Committee on Foreign Investment 

in the United States (CFIUS) Case 

Management System,’’ maintained by 

the Committee on Foreign Investment in 

the United States from certain 

provisions of the Privacy Act. The 

exemption is intended to comply with 

the legal prohibitions against the 

disclosure of certain kinds of 

information and to protect certain 

information maintained in this system 

of records. 

DATES: Effective December 30, 2020. 

FOR FURTHER INFORMATION CONTACT: 

Ryan Law, Deputy Assistant Secretary 

for Management, Office of Privacy, 

Transparency, and Records, 1750 

Pennsylvania Avenue NW, 8th Floor, 

Washington, DC 20220. Mr. Law may be 

reached via telephone at (202) 622- 5710 

(not a toll free number). 

SUPPLEMENTARY INFORMATION: 

Background 

The Department of the Treasury 

(Treasury) published a notice of 

proposed rulemaking in the Federal 

Register, 85 FR 58308, September 18, 

2020, proposing to exempt portions of 

the system of records from one or more 

provisions of the Privacy Act. As 

background, in 2018, the Foreign 

Investment Risk Review Modernization 

Act of 2018 (FIRRMA), Subtitle A of 

Title XVII of Public Law 115–232, 132 

Stat. 2173, was enacted. FIRRMA 

amends section 721 of the Defense 

Production Act of 1950, as amended 

(Section 721), which delineates the 

authorities and jurisdiction of the 

Committee on Foreign Investment in the 

United States (CFIUS). FIRRMA 

maintains CFIUS’s jurisdiction over any 

transaction that could result in foreign 

control of any U.S. business, and 

broadens the authorities of the President 

and CFIUS under Section 721 to review 

and take action to address any national 

security concerns arising from certain 

non-controlling investments and certain 

real estate transactions involving foreign 

persons. 

Executive Order 13456, 73 FR 4677 

(January 23, 2008), directs the Secretary 

of the Treasury to issue regulations 

implementing Section 721. On January 

17, 2020, Treasury published two rules 

broadly implementing FIRRMA, and 

those rules took effect on February 13, 

2020. 85 FR 3112 and 85 FR 3158. 

Subsequent amendments were made to 

the regulations in 2020. 85 FR 8747, 85 

FR 45311, and 85 FR 57124. 

In addition to the exemptions below, 

pursuant to section 721(c) of the 

Defense Production Act of 1950, as 

amended, 50 U.S.C. 4565(c) and subject 

to certain exceptions provided therein, 

any information or documentary 

material filed with the President or 

CFIUS under Section 721 is exempt 

from disclosure under the Freedom of 

Information Act, as amended (FOIA), 5 

U.S.C. 552, and no such information or 

documentary material may be made 

public. 

Treasury published separately the 

notice of the new system of records 

maintained by CFIUS. 85 FR 55534, as 

amended. 

Under 5 U.S.C. 552a(k)(1), the head of 

a Federal agency may promulgate rules 

to exempt a system of records from 

certain provisions of 5 U.S.C. 552a if the 

system of records is subject to the 

exemption contained in section 

552(b)(1) of title 5. (FOIA exemption 

(b)(1) protects from disclosure 

information that is ‘‘specifically 

authorized under criteria established by 

an Executive order to be kept secret in 

the interest of national defense or 

foreign policy’’ and is ‘‘in fact properly 

classified pursuant to such Executive 

order.’’) 

Under 5 U.S.C. 552a(k)(2), the head of 

a Federal agency may promulgate rules 

to exempt a system of records from 

certain provisions of 5 U.S.C. 552a if the 

system of records contains investigatory 

materials compiled for law enforcement 

purposes that are not within the scope 

of subsection (j)(2) of the Privacy Act 

(which applies to agencies and 

86512 Federal Register / Vol. 85, No. 250 / Wednesday, December 30, 2020 / Rules and Regulations 

components thereof that perform as 

their principal function any activity 

pertaining to the enforcement of 

criminal laws). 

To the extent that this system of 

records contains classified information 

protected by 5 U.S.C.552a(k)(1) or 

investigatory materials compiled for law 

enforcement purposes protected by 5 

U.S.C. 552a(k)(2), Treasury exempts the 

following system of records from 

various provisions of the Privacy Act: 

DO .227 CFIUS Case Management 

System. 

Under 5 U.S.C. 552a(k)(1) and (k)(2), 

Treasury exempts certain records in the 

above-referenced system of records from 

5 U.S.C. 552a(c)(3), (d)(1), (2), (3), and 

(4), (e)(1), (e)(4)(G), (H), and (I), and (f) 

of the Privacy Act. See 31 CFR 1.36. 

The following are the reasons why the 

classified records and investigatory 

materials contained in the abovereferenced systems of records 

maintained by CFIUS may be exempted 

from various provisions of the Privacy 

Act pursuant to 5 U.S.C. 552a(k)(1) and 

(k)(2). 

(1) From 5 U.S.C. 552a(c)(3) 

(Accounting for Disclosures) because 

release of the accounting of disclosures 

of the records in this system could alert 

individuals that they have been 

identified as a national security threat or 

the subject of an analysis related to the 

national security interests of the United 

States, to the existence of the analysis, 

and reveal the interest on the part of 

Treasury or CFIUS as well as the 

recipient agency. Disclosure of the 

accounting would present a serious 

impediment to efforts to protect national 

security interests by giving individuals 

an opportunity to learn whether they 

have been identified as subjects of a 

national security-related analysis. As 

further described in the following 

paragraph, access to such knowledge 

would impair Treasury’s ability to carry 

out its mission, since individuals could: 

(i) Take steps to avoid analysis; 

(ii) inform associates that a national 

security analysis is in progress; 

(iii) learn the nature of the national 

security analysis; 

(iv) learn the scope of the national 

security analysis; 

(v) begin, continue, or resume 

conduct that may pose a threat to 

national security upon inferring they 

may not be part of a national security 

analysis because their records were not 

disclosed; or 

(vi) destroy information relevant to 

the national security analysis. 

(2) From subsection 5 U.S.C. 

552a(d)(1), (d)(2), (d)(3), and (d)(4) 

(Access to Records), because access to a 

portion of the records contained in this 

system of records could inform 

individuals whether they have been 

identified as a national security threat or 

the subject of an analysis related to the 

national security interests of the United 

States, to the existence of the analysis 

and reveal the interest on the part of 

Treasury, CFIUS or another agency. 

Access to the records would present a 

serious impediment to efforts to protect 

national security interests by permitting 

the individual who is the subject of a 

record to learn whether they have been 

identified as subjects of a national 

security-related analysis. Access to such 

knowledge would impair Treasury’s 

ability to carry out its mission, since 

individuals could take steps to impede 

the analysis and avoid detection, 

including the steps described in 

paragraph (1)(i)–(vi) of this section. 

Amendment of the records would 

interfere with ongoing analysis and 

impose an impossible administrative 

burden given CFIUS’s statutory 

deadlines. The information contained in 

the system may also include classified 

information, the release of which would 

pose a threat to the national security of 

the United States. In addition, 

permitting access and amendment to 

such information could disclose 

sensitive security information that could 

be detrimental to Treasury. 

(3) From subsection 5 U.S.C. 

552a(e)(1) (Relevance and Necessity of 

Information), because in the course of 

its operations, CFIUS must be able to 

review information from a variety of 

sources. What information is relevant 

and necessary may not always be 

apparent until after the evaluation is 

completed. In the interests of national 

security, it is appropriate to include a 

broad range of information that may aid 

in identifying and assessing the nature 

and scope of foreign threats to the 

United States. Additionally, the 

accuracy of information obtained or 

introduced occasionally may be unclear, 

or the information may not be strictly 

relevant or necessary to a specific 

analysis. In the interests of national 

security, it is appropriate to retain all 

information that may aid in establishing 

patterns of suspicious foreign 

investment activity. 

(4) From subsection 5 U.S.C. 

552a(e)(4)(G), (H), and (I) (Agency 

Requirements), and 5 U.S.C. 552a(f), 

because portions of this system are 

exempt from the access and amendment 

provisions of subsection (d). The reason 

for invoking the exemption is to protect 

material authorized to be kept secret in 

the interest of national security 

pursuant to Executive Orders 12968, 

13526, successor or prior Executive 

Orders, and other legal authorities 

relevant to the intelligence 

responsibilities of Treasury. 

Any information from a system of 

records for which an exemption is 

claimed under 5 U.S.C. 552a(k)(1) or 5 

U.S.C. 552a(k)(2) which is also included 

in another system of records retains the 

same exempt status such information 

has in the system of records for which 

such exemption is claimed. 

This final rule is not a ‘‘significant 

regulatory action’’’ under Executive 

Order 12866. 

Pursuant to the requirements of the 

Regulatory Flexibility Act (RFA), 5 

U.S.C. 601–612, it is hereby certified 

that this rule will not have significant 

economic impact on a substantial 

number of small entities. The term 

‘‘small entity’’ is defined to have the 

same meaning as the terms ‘‘small 

business,’’ ‘‘small organization’’ and 

‘‘small governmental jurisdiction’’ as 

defined in the RFA. 

The regulation, issued under sections 

(k)(1) and (k)(2) of the Privacy Act, 

exempts certain information maintained 

by Treasury in the above-referenced 

systems of records from certain Privacy 

Act rights of individuals who are United 

States citizens or aliens lawfully 

admitted for permanent residence. In as 

much as the Privacy Act rights are 

personal and apply only to U.S. citizens 

or an alien lawfully admitted for 

permanent residence, small entities, as 

defined in the RFA, are not provided 

rights under the Privacy Act and are 

outside the scope of this regulation. 

Public Comments 

Treasury received one comment on 

the notice of proposed rulemaking, but 

it was outside the scope of the 

rulemaking. No comments were 

received on the system of records 

notice. Treasury will implement the 

rulemaking as proposed. 

List of Subjects in 31 CFR Part 1 

Courts, Freedom of information, 

Government employees, Privacy. 

For the reasons stated in the 

preamble, part 1 of Title 31 of the Code 

of Federal Regulations is amended as 

follows: 

PART 1—[AMENDED] 

■ 1. The authority citation for part 1 

continues to read as follows: 

Authority: 5 U.S.C. 301 and 31 U.S.C. 321. 

Subpart A also issued under 5 U.S.C. 552, as 

amended. Subpart C also issued under 5 

U.S.C. 552a, as amended. 

■ 2. In § 1.36, amend the tables in 

paragraphs (c)(1)(ii) and (g)(1)(ii) by 

adding in alphanumeric order an entry 

Federal Register / Vol. 85, No. 250 / Wednesday, December 30, 2020 / Rules and Regulations 86513 

for ‘‘DO .227 CFIUS Case Management 

System’’ to read as follows: 

§ 1.36 Systems exempt in whole or in part 

from provisions of 5 U.S.C. 552a and this 

part. 

* * * * * 

(c) * * * 

(1) * * * 

(ii) * * * 

No. System name 

* * * * * 

DO .227 .................................................... CFIUS Case Management System. 

* * * * * 

* * * * * 

(g) * * * 

(1) * * * 

(ii) * * * 

No. System name 

* * * * * 

DO .227 .................................................... CFIUS Case Management System. 

* * * * * 

* * * * * 

Ryan Law, 

Deputy Assistant Secretary Privacy, 

Transparency, and Records, U.S. Department 

of the Treasury. 

[FR Doc. 2020–26612 Filed 12–29–20; 8:45 am] 

BILLING CODE P