Federal Register / Vol. 75, No. 242 / Friday, December 17, 2010 / Rules and Regulations 78897 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 301 

[TD 9511] 

RIN 1545–BI44 

Definition of Omission From Gross 

Income 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations. 

SUMMARY: This document contains final 

regulations defining an omission from 

gross income for purposes of the sixyear minimum period for assessment of 

tax attributable to partnership items and 

the six-year period for assessing tax. The 

regulations resolve a continuing issue as 

to whether an overstatement of basis in 

a sold asset results in an omission from 

gross income. The regulations will affect 

any taxpayer who overstates basis in a 

sold asset creating an omission from 

gross income exceeding twenty-five 

percent of the income stated in the 

return. Additionally, provisions related 

to estate, gift and excise tax are 

reinstated from the prior final 

regulation. 

DATES: Effective Date: These regulations 

are effective on December 14, 2010. 

Applicability Date: The regulations 

relating to income taxes apply to taxable 

years with respect to which the period 

for assessing tax was open on or after 

September 24, 2009, which is the date 

that the proposed and temporary 

regulations to which these regulations 

relate were filed with the Federal 

Register. For dates of applicability 

regarding the regulations relating to 

estate, gift and excise taxes, see 

§ 301.6501(e)–1(e)(2). 

FOR FURTHER INFORMATION CONTACT: 

William A. Heard, III at (202) 622–4570 

(not a toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

This document contains amendments 

to the Procedure and Administration 

Regulations (26 CFR part 301) under 

section 6229(c)(2) and section 6501(e) of 

the Internal Revenue Code. On 

September 28, 2009, temporary 

regulations (TD 9466) regarding the 

definition of an omission from gross 

income for purposes of the six-year 

period for assessment were published in 

the Federal Register (74 FR 49321). A 

notice of proposed rulemaking (REG– 

108045–08) cross-referencing the 

temporary regulations was published in 

the Federal Register for the same day 

(74 FR 49354). One written comment 

was received from the public in 

response to the notice of proposed 

rulemaking. No public hearing was 

requested or held. After consideration of 

the comment, the proposed regulations 

are adopted as amended by this 

Treasury decision, and the 

corresponding temporary regulations are 

removed. 

Summary of Comments and 

Explanation of Revisions 

These final regulations amend the 

Procedure and Administration 

Regulations (26 CFR part 301) relating to 

sections 6229(c)(2) and 6501(e). In 

addition to the revisions set forth in the 

proposed regulations cross-referencing 

the temporary regulations, the final 

regulations reflect structural 

amendments to sections 6229(c)(2) and 

6501(e) in the Hiring Incentives To 

Restore Employment Act (Pub. L. 111– 

147, 124 Stat. 112) to accommodate an 

additional threshold triggering the sixyear period of limitations for omissions 

from gross income attributable to assets 

subject to certain reporting 

requirements, which is not otherwise 

addressed in these final regulations. The 

final regulations also clarify the 

effective/applicability date provisions in 

the section 6229(c)(2) and section 

6501(e) regulations to eliminate a 

perceived ambiguity in the temporary 

regulations, that was brought to light by 

the Tax Court in Intermountain 

Insurance Service of Vail v. 

Commissioner, 134 T.C. No. 11 (2010), 

appeal docketed, No. 10–1204 (DC Cir.). 

As explained in the preamble to the 

temporary regulations, the United States 

Courts of Appeals for the Ninth Circuit 

and the Federal Circuit construed 

section 6501(e)(1) in cases outside the 

trade-or-business context contrary to the 

interpretation provided in these final 

regulations, holding that an 

overstatement of basis does not 

constitute an ‘‘omission.’’ Bakersfield 

Energy Partners v. Commissioner, 568 

F.3d 767 (9th Cir. 2009); Salman Ranch 

Ltd v. United States, 573 F.3d 1362 

(Fed. Cir. 2009). Those courts relied on 

the Supreme Court’s opinion in Colony 

v. Commissioner, 357 U.S. 28 (1958), 

which dealt with an omission from 

gross income in the context of a trade 

or business under the predecessor of 

section 6501(e). The Treasury 

Department and the Internal Revenue 

Service disagree with those courts that 

the Supreme Court’s reading of the 

predecessor to section 6501(e) in Colony 

applies to sections 6501(e)(1) and 

6229(c)(2), for the reasons set forth in 

the preamble to the temporary 

regulations. 

After publication of the temporary 

regulations, the Tax Court declared the 

temporary regulations invalid, adhering 

to its prior opinion in Bakersfield 

Energy Partners v. Commissioner, 128 

T.C. 207 (2007). Intermountain 

Insurance Service of Vail v. 

Commissioner, 134 T.C. No. 11 (2010), 

appeal docketed, No. 10–1204 (DC Cir.). 

In part, the Tax Court in Intermountain 

concluded that the Supreme Court’s 

opinion in Colony was the only 

permissible interpretation of the 

statutory language in question (‘‘omits 

from gross income’’). The Treasury 

Department and the Internal Revenue 

Service disagree with Intermountain. 

The Supreme Court stated in Colony 

that the statutory phrase ‘‘omits from 

gross income’’ is ambiguous, meaning 

that it is susceptible to more than one 

reasonable interpretation. The 

interpretation adopted by the Supreme 

Court in Colony represented that court’s 

interpretation of the phrase but not the 

only permissible interpretation of it. 

Under the authority of Nat’l Cable & 

Telecomms. Ass’n v. Brand X Internet 

Servs., 545 U.S. 967, 982–83 (2005), the 

Treasury Department and the Internal 

Revenue Service are permitted to adopt 

another reasonable interpretation of 

‘‘omits from gross income,’’ particularly 

as it is used in a new statutory setting. 

See Hernandez-Carrera v. Carlson, 547 

F.3d 1237 (10th Cir. 2008) (agencies are 

free to promulgate a reasonable 

construction of an ambiguous statute 

that contradicts any court’s 

interpretation, even the Supreme 

Court’s). The interpretation of the 

phrase ‘‘omits from gross income’’ as 

used in section 6501(e)(1) is currently 

pending before several United States 

Courts of Appeals. 

Because these regulations are a 

clarification of the period of limitations 

provided in sections 6501(e)(1) and 

6229(c)(2) and are consistent with the 

Secretary’s application of those 

provisions both with respect to a trade 

or business (that is, gross income means 

gross receipts), as well as outside of the 

trade-or-business context (that is, the 

section 61 definition of gross income 

applies), they are applicable to all cases 

with respect to which the period for 

assessing tax was open on or after 

September 24, 2009, the date the 

temporary regulations were filed with 

the Federal Register. 

1. Retroactivity 

The sole written comment received in 

response to the notice of proposed 

rulemaking by cross-reference to the 

temporary regulations questioned the 

application of the regulations, 

characterizing them as retroactive, and 


srobinson on DSKHWCL6B1PROD with RULES
78898 Federal Register / Vol. 75, No. 242 / Friday, December 17, 2010 / Rules and Regulations 

recommended that they be applied only 

prospectively. The commentator stated 

that the temporary regulations apply 

with retroactive effect ‘‘in that taxable 

years which had closed are now 

reopened.’’ The Treasury Department 

and the Internal Revenue Service 

disagree with the characterization of the 

regulations as retroactive. The final 

regulations have been clarified to 

emphasize that they only apply to open 

tax years, and do not reopen closed tax 

years as suggested by the commentator. 

The commentator also relied on the 

1996 amendments to section 7805(b) to 

argue that retroactively effective 

Treasury regulations are impermissible, 

with limited exceptions. The 1996 

amendments to section 7805(b), 

however, do not apply to the regulations 

under sections 6229(c)(2) and 

6501(e)(1). That is because those 

amendments are only effective for 

regulations that relate to statutory 

provisions enacted on or after July 30, 

1996. Taxpayer Bill of Rights 2 (Pub. L. 

104–168, section 1101(a), 110 Stat. 

1469). Since section 6229(c)(2) was 

enacted in 1982 and section 

6501(e)(1)(A) was enacted in 1954 (and 

redesignated as subparagraph (B) as part 

of the HIRE Act in 2010), the 1996 

amendments to section 7805(b) are 

inapplicable to the regulations. Prior to 

the 1996 amendments, section 7805(b) 

provided, ‘‘The Secretary may prescribe 

the extent, if any, to which any ruling 

or regulation, relating to the internal 

revenue laws, shall be applied without 

retroactive effect.’’ Although these 

regulations are not retroactive, a 

retroactive regulation interpreting 

sections 6229(c)(2) and 6501(e)(1) is 

expressly permitted by the applicable 

version of section 7805(b), which 

presumes regulations to apply 

retroactively unless otherwise provided. 

2. Intermountain 

The Tax Court’s majority in 

Intermountain erroneously interpreted 

the applicability provisions of the 

temporary and proposed regulations, 

which provided that the regulations 

applied to taxable years with respect to 

which ‘‘the applicable period for 

assessing tax did not expire before 

September 24, 2009.’’ The Internal 

Revenue Service will continue to adhere 

to the position that ‘‘the applicable 

period’’ of limitations is not the 

‘‘general’’ three-year limitations period. 

The three-year limitations period is one 

of several limitations periods in the 

Internal Revenue Code, including the 

six-year limitations period under 

sections 6229(c)(2) and 6501(e)(1). The 

expiration of the three-year period does 

not ‘‘close’’ a taxable year if a longer 

period applies. Consistent with that 

position, the final regulations apply to 

taxable years with respect to which the 

six-year period for assessing tax under 

section 6229(c)(2) or 6501(e)(1) was 

open on or after September 24, 2009. 

This includes, but is not limited to, all 

taxable years (1) for which six years had 

not elapsed from the later of the date 

that a tax return was due or actually 

filed, (2) that are the subject of any case 

pending before any court of competent 

jurisdiction (including the United States 

Tax Court and Court of Federal Claims) 

in which a decision had not become 

final (within the meaning of section 

7481) or (3) with respect to which the 

liability at issue had not become fixed 

pursuant to a closing agreement entered 

into under section 7121. The Internal 

Revenue Service’s position is consistent 

with the effective/applicability date 

provisions of these final regulations. 

3. Other Revisions 

The final regulations are amended to 

reinstate estate, gift and excise tax 

provisions that were inadvertently 

removed by the temporary regulations. 

Special Analyses 

It has been determined that these 

regulations are 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 these 

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, the NPRM cross-referencing the 

temporary regulations preceding these 

regulations was submitted to the Chief 

Counsel for Advocacy of the Small 

Business Administration for comment 

on their impact on small business. 

Drafting Information 

The principal author of these 

regulations is William A. Heard III of 

the Office of the Associate Chief 

Counsel (Procedure and 

Administration). 

List of Subjects in 26 CFR Part 301 

Employment taxes, Estate taxes, 

Excise taxes, Gift taxes, Income taxes, 

Penalties, Reporting and recordkeeping 

requirements. 

Adoption of Amendments to the 

Regulations 

■ Accordingly, 26 CFR part 301 is 

amended as follows: 

PART 301—PROCEDURE AND 

ADMINISTRATION 

■ Paragraph 1. The authority citation 

for part 301 is amended by adding an 

entry in numerical order to read in part 

as follows: 

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

Section 301.6229(c)(2)–1 is also issued 

under 26 U.S.C. 6230(k). * * * 

■ Par. 2. Section 301.6229(c)(2)–1 is 

added to read as follows: 

§ 301.6229(c)(2)–1 Substantial omission of 

income. 

(a) Partnership return—(1) General 

rule. (i) If any partnership omits from 

the gross income stated in its return an 

amount properly includible therein and 

that amount is described in clause (i) of 

section 6501(e)(1)(A), subsection (a) of 

section 6229 shall be applied by 

substituting ‘‘6 years’’ for ‘‘3 years.’’ 

(ii) For purposes of paragraph (a)(1)(i) 

of this section, the term gross income, as 

it relates to a trade or business, means 

the total of the amounts received or 

accrued from the sale of goods or 

services, to the extent required to be 

shown on the return, without reduction 

for the cost of those goods or services. 

(iii) For purposes of paragraph (a)(1)(i) 

of this section, the term gross income, as 

it relates to any income other than from 

the sale of goods or services in a trade 

or business, has the same meaning as 

provided under section 61(a), and 

includes the total of the amounts 

received or accrued, to the extent 

required to be shown on the return. In 

the case of amounts received or accrued 

that relate to the disposition of property, 

and except as provided in paragraph 

(a)(1)(ii) of this section, gross income 

means the excess of the amount realized 

from the disposition of the property 

over the unrecovered cost or other basis 

of the property. Consequently, except as 

provided in paragraph (a)(1)(ii) of this 

section, an understated amount of gross 

income resulting from an overstatement 

of unrecovered cost or other basis 

constitutes an omission from gross 

income for purposes of section 

6229(c)(2). 

(iv) An amount shall not be 

considered as omitted from gross 

income if information sufficient to 

apprise the Commissioner of the nature 

and amount of the item is disclosed in 

the return, including any schedule or 

statement attached to the return. 

(b) Effective/applicability date. This 

section applies to taxable years with 

respect to which the period for assessing 

tax was open on or after September 24, 

2009. 


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Federal Register / Vol. 75, No. 242 / Friday, December 17, 2010 / Rules and Regulations 78899 

§ 301.6229(c)(2)–1T [Removed] 

■ Par. 3. Section 6229(c)(2)–1T is 

removed. 

■ Par. 4. Section 301.6501(e)–1 is added 

to read as follows: 

§ 301.6501(e)–1 Omission from return. 

(a) Income taxes—(1) General rule. (i) 

If a taxpayer omits from the gross 

income stated in the return of a tax 

imposed by subtitle A of the Internal 

Revenue Code an amount properly 

includible therein that is in excess of 25 

percent of the gross income so stated, 

the tax may be assessed, or a proceeding 

in court for the collection of that tax 

may be begun without assessment, at 

any time within 6 years after the return 

was filed. 

(ii) For purposes of paragraph (a)(1)(i) 

of this section, the term gross income, as 

it relates to a trade or business, means 

the total of the amounts received or 

accrued from the sale of goods or 

services, to the extent required to be 

shown on the return, without reduction 

for the cost of those goods or services. 

(iii) For purposes of paragraph (a)(1)(i) 

of this section, the term gross income, as 

it relates to any income other than from 

the sale of goods or services in a trade 

or business, has the same meaning as 

provided under section 61(a), and 

includes the total of the amounts 

received or accrued, to the extent 

required to be shown on the return. In 

the case of amounts received or accrued 

that relate to the disposition of property, 

and except as provided in paragraph 

(a)(1)(ii) of this section, gross income 

means the excess of the amount realized 

from the disposition of the property 

over the unrecovered cost or other basis 

of the property. Consequently, except as 

provided in paragraph (a)(1)(ii) of this 

section, an understated amount of gross 

income resulting from an overstatement 

of unrecovered cost or other basis 

constitutes an omission from gross 

income for purposes of section 

6501(e)(1)(A)(i). 

(iv) An amount shall not be 

considered as omitted from gross 

income if information sufficient to 

apprise the Commissioner of the nature 

and amount of the item is disclosed in 

the return, including any schedule or 

statement attached to the return. 

(2) [Reserved] 

(b) Estate and gift taxes—(1) If the 

taxpayer omits from the gross estate as 

stated in the estate tax return, or from 

the total amount of the gifts made 

during the period for which the gift tax 

return was filed (see § 25.6019–1 of this 

chapter) as stated in the gift tax return, 

an item or items properly includible 

therein the amount of which is in excess 

of 25 percent of the gross estate as stated 

in the estate tax return, or 25 percent of 

the total amount of the gifts as stated in 

the gift tax return, the tax may be 

assessed, or a proceeding in court for 

the collection thereof may be begun 

without assessment, at any time within 

6 years after the estate tax or gift tax 

return, as applicable, was filed. 

(2) For purposes of this paragraph (b), 

an item disclosed in the return or in any 

schedule or statement attached to the 

return in a manner sufficient to apprise 

the Commissioner of the nature and 

amount thereof shall not be taken into 

account in determining items omitted 

from the gross estate or total gifts, as the 

case may be. Further, there shall not be 

taken into account in computing the 25 

percent omission from the gross estate 

stated in the estate tax return or from 

the total gifts stated in the gift tax 

return, any increases in the valuation of 

assets disclosed on the return. 

(c) Excise taxes—(1) In general. If the 

taxpayer omits from a return of a tax 

imposed under a provision of subtitle D 

an amount properly includible thereon, 

which amount is in excess of 25 percent 

of the amount of tax reported thereon, 

the tax may be assessed or a proceeding 

in court for the collection thereof may 

be begun without assessment, at any 

time within 6 years after the return was 

filed. For special rules relating to 

chapter 41, 42, 43 and 44 taxes, see 

paragraphs (c)(2), (3), (4), and (5) of this 

section. 

(2) Chapter 41 excise taxes. If an 

organization discloses an expenditure in 

its return (or in a schedule or statement 

attached thereto) in a manner sufficient 

to apprise the Commissioner of the 

existence and nature of the expenditure, 

the three-year limitation on assessment 

and collection described in section 

6501(a) shall apply with respect to any 

tax under chapter 41 arising from the 

expenditure. If a taxpayer fails to so 

disclose an expenditure in its return (or 

in a schedule or statement attached 

thereto), the tax arising from the 

expenditure not so disclosed may be 

assessed, or a proceeding in court for 

the collection of the tax may be begun 

without assessment, at any time within 

6 years after the return was filed. 

(3) Chapter 42 excise taxes. (i) If a 

private foundation omits from its annual 

return with respect to the tax imposed 

by section 4940 an amount of tax 

properly includible therein that is in 

excess of 25 percent of the amount of 

tax imposed by section 4940 that is 

reported on the return, the tax may be 

assessed, or a proceeding in court for 

the collection of the tax may be begun 

without assessment, at any time within 

6 years after the return was filed. If a 

private foundation discloses in its 

return (or in a schedule or statement 

attached thereto) the nature, source, and 

amount of any income giving rise to any 

omitted tax, the tax arising from the 

income shall be counted as reported on 

the return in computing whether the 

foundation has omitted more than 25 

percent of the tax reported on its return. 

(ii) If a private foundation, trust, or 

other organization (as the case may be) 

discloses an item in its return (or in a 

schedule or statement attached thereto) 

in a manner sufficient to apprise the 

Commissioner of the existence and 

nature of the item, the three-year 

limitation on assessment and collection 

described in section 6501(a) shall apply 

with respect to any tax imposed under 

sections 4941(a), 4942(a), 4943(a), 

4944(a), 4945(a), 4951(a), 4952(a), 4953 

and 4958, arising from any transaction 

disclosed by the item. If a private 

foundation, trust, or other organization 

(as the case may be) fails to so disclose 

an item in its return (or in a schedule 

or statement attached thereto), the tax 

arising from any transaction not so 

disclosed may be assessed or a 

proceeding in court for the collection of 

the tax may be begun without 

assessment, at any time within 6 years 

after the return was filed. 

(4) Chapter 43 excise taxes. If a 

taxpayer discloses an item in its return 

(or in a schedule or statement attached 

thereto) in a manner sufficient to 

apprise the Commissioner of the 

existence and nature of the item, the 

three-year limitation on assessment and 

collection described in section 6501(a) 

shall apply with respect to any tax 

imposed under sections 4971(a), 4972, 

4973, 4974 and 4975(a), arising from 

any transaction disclosed by the item. If 

a taxpayer fails to so disclose an item in 

its return (or in a schedule or statement 

attached thereto), the tax arising from 

any transaction not so disclosed may be 

assessed, or a proceeding in court for 

the collection of the tax may be begun 

without assessment, at any time within 

6 years after the return was filed. The 

applicable return for the tax under 

sections 4971, 4972, 4973 and 4974, is 

the return designated by the 

Commissioner for reporting the 

respective tax. The applicable return for 

the tax under section 4975 is the return 

filed by the plan used to report the act 

giving rise to the tax. 

(5) Chapter 44 excise taxes. If a real 

estate investment trust omits from its 

annual return with respect to the tax 

imposed by section 4981 an amount of 

tax properly includible therein that is in 

excess of 25 percent of the amount of 

tax imposed by section 4981 that is 

reported on the return, the tax may be 

assessed, or a proceeding in court for 


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78900 Federal Register / Vol. 75, No. 242 / Friday, December 17, 2010 / Rules and Regulations 

the collection of the tax may be begun 

without assessment, at any time within 

6 years after the return was filed. If a 

real estate investment trust discloses in 

its return (or in a schedule or statement 

attached thereto) the nature, source, and 

amount of any income giving rise to any 

omitted tax, the tax arising from the 

income shall be counted as reported on 

the return in computing whether the 

trust has omitted more than 25 percent 

of the tax reported on its return. 

(d) Exception. The provisions of this 

section do not limit the application of 

section 6501(c). 

(e) Effective/applicability date—(1) 

Income taxes. Paragraph (a) of this 

section applies to taxable years with 

respect to which the period for assessing 

tax was open on or after September 24, 

2009. 

(2) Estate, gift and excise taxes. 

Paragraphs (b) through (d) of this 

section continue to apply as they did 

prior to being removed inadvertently on 

September 28, 2009. Specifically, 

paragraph (b) of this section applies to 

returns filed on or after May 2, 1956, 

except for the amendment to paragraph 

(b)(1) of this section that applies to 

returns filed on or after December 29, 

1972. Paragraph (c) of this section 

applies to returns filed on or after 

October 7, 1982, except for the 

amendment to paragraph (c)(3)(ii) of this 

section that applies to returns filed on 

or after January 10, 2001. Paragraph (d) 

of this section applies to returns filed on 

or after May 2, 1956. 

§ 301.6501(e)–1T [Removed] 

■ Par. 5. Section 301.6501(e)–1T is 

removed. 

Steven T. Miller, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: December 13, 2010. 

Michael Mundaca, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 2010–31747 Filed 12–14–10; 4:15 pm] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Fiscal Service 

31 CFR Parts 357 and 363 

Regulations Governing Book-Entry 

Treasury Bonds, Notes and Bills Held 

in Legacy Treasury Direct; Regulations 

Governing Securities Held in Treasury 

Direct 

AGENCY: Bureau of the Public Debt, 

Fiscal Service, Treasury. 

ACTION: Final rule. 

SUMMARY: Treasury’s retail electronic 

systems for holding Treasury marketable 

securities began with the goal of 

permitting investors to buy and hold 

marketable Treasury securities until 

maturity. As a cost-saving measure, 

Treasury is returning the Legacy 

Treasury Direct and TreasuryDirect 

systems to this initial vision by 

eliminating the SellDirect program that 

permits investors to sell their 

marketable securities on the open 

market through a Federal Reserve Bank. 

Investors will now need to transfer a 

marketable security to a broker or 

financial institution in order to effect a 

sale of the security prior to maturity. 

DATES: Effective Date: December 17, 

2010. 

ADDRESSES: You can download this 

Final Rule at the following Internet 

addresses: http:// 

www.publicdebt.treas.gov, http:// 

www.gpo.gov, or http:// 

www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: 

Elisha Whipkey, Director, Division of 

Program Administration, Office of Retail 

Securities, Bureau of the Public Debt, at 

(304) 480–6319 or 

elisha.whipkey@bpd.treas.gov. 

Susan Sharp, Attorney-Adviser; Ann 

Fowler, Attorney-Adviser; Dean Adams, 

Assistant Chief Counsel; Edward 

Gronseth, Deputy Chief Counsel, Office 

of the Chief Counsel, Bureau of the 

Public Debt, at (304) 480–8692 or 

susan.sharp@bpd.treas.gov. 

SUPPLEMENTARY INFORMATION: Treasury’s 

retail electronic systems for holding 

Treasury marketable securities began 

with the goal of permitting investors to 

buy and hold marketable Treasury 

securities until maturity. In 1997 

Treasury offered Legacy Treasury Direct 

investors the ability, for a fee, to sell 

their marketable securities on the 

secondary market, thus bypassing the 

need to transfer their securities to a 

broker or financial institution for sale. 

When Treasury began offering 

marketable securities in TreasuryDirect, 

its electronic, online system, the 

SellDirect service was offered to 

investors in that system as well. Because 

SellDirect was inconsistent with the 

initial vision of the marketable retail 

program, Treasury specifically reserved 

the right to end the program at any time. 

SellDirect volumes are low because 

most investors using the Legacy 

Treasury Direct and TreasuryDirect 

systems hold their securities to 

maturity. From Fiscal Year 2005 to 

Fiscal Year 2009, an annual average of 

13,000 securities worth approximately 

$800 million were sold through 

SellDirect, less than 1.5 percent of 

holdings. Alternative services by 

brokers or financial institutions are 

available to conduct sales. As a costsaving measure, Treasury is returning 

the Legacy Treasury Direct and 

TreasuryDirect systems to their initial 

vision of buy and hold to maturity by 

eliminating SellDirect. Investors will 

now need to transfer a marketable 

security to a broker or financial 

institution in order to effect a sale of the 

security before maturity. 

Procedural Requirements 

Executive Order 12866. This rule is 

not a significant regulatory action 

pursuant to Executive Order 12866. 

Administrative Procedure Act (APA). 

Because this rule relates to United 

States securities, which are contracts 

between Treasury and the owner of the 

security, this rule falls within the 

contract exception to the APA, 5 U.S.C. 

553(a)(2). As a result, the notice, public 

comment, and delayed effective date 

provisions of the APA are inapplicable 

to this rule. 

Regulatory Flexibility Act. The 

provisions of the Regulatory Flexibility 

Act, 5 U.S.C. 601 et seq., do not apply 

to this rule because, pursuant to 5 

U.S.C. 553(a)(2), it is not required to be 

issued with notice and opportunity for 

public comment. 

Paperwork Reduction Act (PRA). 

There is no new collection of 

information contained in this final rule 

that would be subject to the PRA, 44 

U.S.C. 3501 et seq. Under the PRA, an 

agency may not conduct or sponsor, and 

a person is not required to respond to, 

a collection of information unless it 

displays a valid OMB control number. 

The Office of Management and Budget 

already has approved all collections of 

information in 31 CFR Part 357 (OMB 

No. 1535–0068) and Part 363 (OMB No. 

1535–0138). 

Congressional Review Act (CRA). This 

rule is not a major rule pursuant to the 

CRA, 5 U.S.C. 801 et seq., because it is 

a minor amendment that is expected to 

decrease costs for taxpayers; therefore, 

this rule is not expected to lead to any 

of the results listed in 5 U.S.C. 804(2). 

This rule may take immediate effect 

after we submit a copy of it to Congress 

and the Comptroller General. 

List of Subjects 

31 CFR Part 357 

Banks, Banking, Bonds, Electronic 

funds transfers, Government securities, 

Reporting and recordkeeping 

requirements. 


srobinson on DSKHWCL6B1PROD with RULES