37728 Federal Register / Vol. 65, No. 117 / Friday, June 16, 2000 / Proposed Rules

Comments that provide the factual basis

supporting the views and suggestions

presented are particularly helpful in

developing reasoned regulatory

decisions on the proposal. Comments

are specifically invited on the overall

regulatory, aeronautical, economic,

environmental, and energy-related

aspects of the proposal.

Communications should identify the

airspace docket number and be

submitted in triplicate to the address

listed above. Commenters wishing the

FAA to acknowledge receipt of their

comments on this action must submit

with those comments a self-addressed,

stamped postcard on which the

following statement is made:

‘‘Comments to Airspace Docket No. 00–

AGL–18.’’ The postcard will be date/

time stamped and returned to the

commenter. All communications

received on or before the specified

closing date for comments will be

considered before taking action on the

proposed rule. The proposal contained

in this action may be changed in light

of comments received. All comments

submitted will be available for

examination in the Rules Docket, FAA,

Great Lakes Region, Office of the

Regional Counsel, 2300 East Devon

Avenue, Des Plaines, Illinois, both

before and after the closing date for

comments. A report summarizing each

substantive public contact with FAA

personnel concerned with this

rulemaking will be filed in the docket.

Availability of NPRM’s

Any person may obtain a copy of this

Notice of Proposed Rulemaking (NPRM)

by submitting a request to the Federal

Aviation Administration, Office of

Public Affiars, Attention: Public Inquiry

Center, APA–230, 800 Independence

Avenue, SW., Washington, DC 20591, or

by calling (202) 267–3484.

Communications must identify the

docket number of this NPRM. Persons

interested in being placed on a mailing

list for future NPRM’s should also

request a copy of Advisory Circular No.

11–2A, which describes the application

procedure.

The Proposal

The FAA is considering an

amendment to 14 CFR part 71 to modify

Class E airspace at Frankfort, MI, for

Frankfort Dow Memorial Airport.

Controlled airspace extending upward

from 700 feet or more above the surface

of the earth is needed to contain aircraft

executing instrument approach

procedures. The area would be depicted

on appropriate aeronautical charts.

Class E airspace areas extending upward

from 700 feet or more above the surface

of the earth are published in paragraph

6005 of FAA Order 7400.9G dated

September 1, 1999, and effective

September 16, 1999, which is

incorporated by reference in 14 CFR

71.1. The Class E designations listed in

this document would be published

subsequently in the Order.

The FAA has determined that this

proposed regulation only involves an

establishment body of technical

regulations for which frequent and

routine amendments are necessary to

keep them operationally current.

Therefore this, proposed regulation—(1)

is not a ‘‘significant regulatory action’’

under Executive Order 12866; (2) is not

a ‘‘significant rule’’ under DOT

Regulatory Policies and Procedures (44

FR 11034; February 26, 1979); and (3)

does not warrant preparation of a

Regulatory Evaluation as the anticipated

impact is so minimal. Since this is a

routine matter that will only affect air

traffic procedures and air navigation, it

is certified that this proposed rule will

not have a significant economic impact

on a substantial number of small entities

under the criteria of the Regulatory

Flexibility Act.

List of Subjects in 14 CFR Part 71

Airspace, Incorporation by reference,

Navigation (air).

The Proposed Amendment

Accordingly, pursuant to the

authority delegated to me, the Federal

Aviation Administration proposes to

amend 14 CFR part 71 as follows:

PART 71—DESIGNATION OF CLASS A,

CLASS B, CLASS C, CLASS D, AND

CLASS E AIRSPACE AREAS;

AIRWAYS, ROUTES; AND REPORTING

POINTS

1. The authority citation for part 71

continues to read as follows:

Authority: 49 U.S.C. 106(g), 40103, 40113,

40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–

1963 Comp., p. 389.

§ 71.1 [Amended]

2. The incorporation by reference in

14 CFR 71.1 of the Federal Aviation

Administration Order 7400.9G, Airspace

Designations and Reporting Points,

dated September 1, 1999, and effective

September 16, 1999, is amended as

follows:

* * * * *

Paragraph 6005 Class E airspace areas

extending upward from 700 feet or more

above the surface of the earth.

* * * * *

AGL MI E5 Frankfort, MI [Revised]

Frankford Dow Memorial Airport, MI

(Lat. 44° 37 ′ 30′′N., long. 86° 12′ 02′′W.)

That airspace extending upward from 700

feet above the surface within a 6.4-mile

radius of the Frankfort Dow Memorial

Airport.

Dated: Issued in Des Plaines, Illinois on

May 23, 2000.

Christopher R. Blum,

Manager, Air Traffic Division.

[FR Doc. 00–15210 Filed 6–15–00; 8:45 am]

BILLING CODE 4910–13–M

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 301

[REG–105316–98]

RIN 1545–AW67

Information Reporting for Payments of

Qualified Tuition and Payments of

Interest on Qualified Education Loans;

Magnetic Media Filing Requirements

for Information Returns

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of proposed rulemaking

and requests to videoconference the

public hearing.

SUMMARY: This document contains

proposed regulations relating to the

information reporting requirements

under section 6050S of the Internal

Revenue Code for payments of qualified

tuition and related expenses and

interest on qualified education loans,

including the filing of information

returns on magnetic media. The

regulations reflect changes to the law

made by the Taxpayer Relief Act of

1997. The regulations provide guidance

to eligible educational institutions and

insurers receiving payments of, or

making reimbursements or refunds of,

qualified tuition and related expenses.

The regulations also provide guidance

to payees receiving interest payments on

qualified education loans. This

document also announces that a public

hearing will be held on the proposed

regulations upon request and that

persons outside the Washington, DC,

area who wish to testify at the hearing

may request that the IRS

videoconference the hearing to their

sites.

DATES: Written or electronically

generated comments must be received

by September 14, 2000. Requests to

videoconference the hearing to other

sites must be received by August 15,

2000.

Federal Register / Vol. 65, No. 117 / Friday, June 16, 2000 / Proposed Rules 37729

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (REG–105316–98),

room 5226, Internal Revenue Service,

POB 7604, Ben Franklin Station,

Washington, DC 20044. Submissions

may be hand delivered Monday through

Friday between the hours of 8 a.m. and

5 p.m. to: CC:DOM:CORP:R (REG–

105316–98), Courier’s Desk, Internal

Revenue Service, 1111 Constitution

Avenue, NW., Washington, DC.

Taxpayers may also 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/regslist.html. The IRS will

publish the time and date of the public

hearing and the locations of any

videoconferencing sites in the Federal

Register.

FOR FURTHER INFORMATION CONTACT:

Concerning the regulations, Donna

Welch, (202) 622–4910; concerning

submissions of comments, the hearing,

and/or to be placed on the building

access list to attend the hearing, Guy

Traynor, (202) 622–7180; concerning the

magnetic media filing specifications,

waivers for filing on magnetic media,

and extensions of time, contact the

Internal Revenue Service, Martinsburg

Computing Center, (304) 263–8700 (not

toll–free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information

contained in this notice of proposed

rulemaking has been submitted to the

Office of Management and Budget for

review in accordance with the

Paperwork Reduction Act of 1995 (44

U.S.C. 3507(d)). Comments on the

collection of information should be sent

to the Office of Management and

Budget, Attn: Desk Officer for the

Department of the Treasury, Office of

Information and Regulatory Affairs,

Washington, DC 20503, with copies to

the Internal Revenue Service, Attn: IRS

Reports Clearance Officer, OP:FS:FP,

Washington, DC 20224. Comments on

the collection of information should be

received by August 15, 2000. Comments

are specifically requested concerning:

Whether the proposed collection of

information is necessary for the proper

performance of the functions of the IRS,

including whether the information will

have practical utility;

The accuracy of the estimated burden

associated with the proposed collection

of information (see below);

How the quality, utility, and clarity of

the information to be collected may be

enhanced;

How the burden of complying with

the proposed collection of information

may be minimized, including through

the application of automated collection

techniques or other forms of information

technology; and

Estimates of capital or start-up costs

and costs of operation, maintenance,

and purchase of services to provide

information.

The collection of information in this

proposed regulation is in §§ 1.6050S–1

and 1.6050S–2. In general, eligible

educational institutions and insurers

must file a Form 1098–T, ‘‘Tuition

Payments Statement,’’ with the IRS for

each individual with respect to whom

payments of qualified tuition and

related expenses were received, or

reimbursements or refunds of such

expenses were made, and furnish an

information statement to such

individual. This collection of

information is required in order to assist

the IRS and taxpayers in calculating the

amount of any education tax credit

allowable under section 25A. In

addition, payees who receive from any

payor interest payments aggregating

$600 or more on one or more qualified

education loans must file a Form 1098–

E, ‘‘Student Loan Interest Statement,’’

with the IRS and furnish an information

statement to the payor. This collection

of information is required in order to

assist the IRS and taxpayers in

calculating the amount of any student

loan interest deduction allowable under

section 221. The likely respondents are

businesses or other for-profit

institutions and nonprofit institutions.

Estimated total annual reporting

burden for 1998 for Form 1098–T:

2,419,438 hours.

Estimated average annual burden

hours per response for Form 1098–T: 7

minutes.

Estimated number of responses for

1998 for Form 1098–T: 20,738,039.

Estimated annual frequency of

responses: Once.

Estimated total annual reporting

burden for 1998 for Form 1098–E:

437,691 hours.

Estimated average annual burden

hours per response for Form 1098–E: 3

minutes.

Estimated number of responses for

1998 for Form 1098–E: 8,753,819.

Estimated annual frequency of

responses: Once.

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 control

number assigned by the Office of

Management and Budget.

Books or records relating to a

collection of information must be

retained as long as their contents may

become material in the administration

of any internal revenue law. Generally,

tax returns and tax return information

are confidential, as required by 26

U.S.C. 6103.

Background

1. Information Reporting Requirements

This document contains proposed

amendments to the Income Tax

Regulations (26 CFR part 1) relating to

information reporting requirements

under section 6050S. The Taxpayer

Relief Act of 1997 (Public Law 105–34

(111 Stat. 788) (TRA ’97)) added section

25A of the Internal Revenue Code to

provide the Hope Scholarship Credit

and the Lifetime Learning Credit

(education tax credits). In general, the

Hope Scholarship Credit and the

Lifetime Learning Credit allow certain

taxpayers who pay qualified tuition and

related expenses to an eligible

educational institution to claim a

nonrefundable credit against their

Federal income tax liability. On January

6, 1999, the IRS issued proposed

regulations under section 25A. See 64

FR 794 (1999).

TRA ’97 also added section 221 of the

Internal Revenue Code to allow certain

taxpayers who pay interest on qualified

education loans to claim a Federal

income tax deduction for their interest

payments. In general, a deduction is

allowed for interest payments made

during the first 60 months in which

interest payments are required on a

qualified education loan. However, no

interest deduction is allowed for any

interest paid before January 1, 1998. On

January 21, 1999, the IRS issued

proposed regulations under section 221.

See 64 FR 3257 (1999).

In addition, TRA ’97 added section

6050S of the Internal Revenue Code,

which requires eligible educational

institutions to file information returns

and to furnish written information

statements to assist taxpayers and the

IRS in determining any education tax

credit allowable under section 25A.

Similarly, section 6050S requires any

person engaged in a trade or business of

making payments to any individual

under an insurance agreement as

reimbursements or refunds of qualified

tuition and related expenses to file

information returns and to furnish

written information statements. Lastly,

section 6050S requires certain payees

who receive payments of interest on one

or more qualified education loans to file

information returns and to furnish

written information statements to assist

taxpayers and the IRS in determining

37730 Federal Register / Vol. 65, No. 117 / Friday, June 16, 2000 / Proposed Rules

any interest deduction allowable under

section 221.

The IRS has published several notices

prescribing limited information

reporting for eligible educational

institutions for the years 1998, 1999,

and 2000. On December 22, 1997, the

IRS published Notice 97–73 (1997–2

C.B. 335), which describes the

information that an eligible educational

institution must report for 1998. On

September 8, 1998, the IRS published

Notice 98–46 (1998–36 I.R.B. 21), which

extends the application of Notice 97–73

to information returns required under

section 6050S for 1999. On December 7,

1998, the IRS published Notice 98–59

(1998–49 I.R.B. 16), which modifies the

prior Notices by providing that an

institution is not required to file

information returns for students who

are: (1) Enrolled during the year only in

courses for which the student receives

no academic credit; or (2) nonresident

alien students, unless the student

requests the institution to report. On

July 26, 1999, the IRS published Notice

99–37 (1999–30 I.R.B. 124), which

extends the application of Notice 97–73

(as modified) to information returns

required under section 6050S for 2000.

In addition, the IRS has published

several notices describing the

information reporting for certain payees

who receive interest on qualified

education loans during the years 1998,

1999, and 2000. On January 20, 1998,

the IRS published Notice 98–7 (1998–3

I.R.B. 54), which describes the

information reporting required under

section 6050S for 1998. On November

16, 1998, the IRS published Notice 98–

54 (1998–46 I.R.B. 25), which modifies

Notice 98–7 to reflect a technical change

to section 221 made by the Internal

Revenue Service Restructuring and

Reform Act of 1998 (Public Law 105–

206 (112 Stat. 685)), and extends the

application of Notice 98–7 (as modified)

to information reporting required under

section 6050S for 1999. On July 26,

1999, the IRS published Notice 99–37,

which extends the application of Notice

98–7 (as modified) to information

returns required under section 6050S for

2000.

2. Magnetic Media Requirements

This document also contains

proposed amendments to the

Regulations on Procedure and

Administration (26 part 301) relating to

the filing of information returns on

magnetic media under section 6011(e).

Section 6011(e) authorizes the Secretary

to prescribe regulations providing the

standards for determining which returns

must be filed on magnetic media.

Section 6011(e)(2)(A) provides that the

Secretary shall not require any person to

file returns on magnetic media unless

the person is required to file at least 250

returns during the calendar year.

Section 6011(e)(2)(B) provides that, in

prescribing regulations, the Secretary

shall consider the ability of the taxpayer

to comply at reasonable cost with the

requirements of the regulations.

Explanation of Provisions

1. Information Reporting for Payments

and Reimbursements or Refunds of

Qualified Tuition and Related Expenses

The proposed regulations require an

eligible educational institution (as

defined in section 25A(f)(2) and the

regulations thereunder) (an institution)

that receives payments of qualified

tuition and related expenses (as defined

in section 25A(f)(1) and the regulations

thereunder) with respect to any

individual, or makes reimbursements or

refunds of such amounts, to file a Form

1098–T with the IRS. In addition, the

proposed regulations require any person

engaged in a trade or business of making

payments under an insurance

arrangement as reimbursements or

refunds (or other similar amounts) of

qualified tuition and related expenses

(an insurer) to file a Form 1098–T with

the IRS.

Under the proposed regulations, the

following information must be reported

on Form 1098–T: (a) The name, address,

and taxpayer identification number

(TIN) (as defined in section 7701(a)(41))

of the institution or the insurer; (b) the

name, address, and TIN of the

individual with respect to whom

payments of qualified tuition and

related expenses were received, or

reimbursements or refunds were made;

(c) the aggregate amount of payments of

qualified tuition and related expenses

from any source that the institution

received with respect to the individual

during the calendar year; (d) the

aggregate amount of reimbursements or

refunds of qualified tuition and related

expenses that the institution or insurer

made with respect to the individual

during the calendar year; (e) the

aggregate amount of any scholarships or

grants that the institution processed

during the calendar year for the

payment of the individual’s costs of

attendance; (f) an indication by the

institution whether the individual was

enrolled for at least half of the normal

full-time work load for the course of

study the individual is pursuing for at

least one academic period that begins

during the calendar year; (g) an

indication by the institution whether

the individual was enrolled in a

program leading to a graduate-level

degree, graduate-level certificate, or

other recognized graduate-level

educational credential; and (h) any

other information required by Form

1098–T and its instructions.

The proposed regulations reserve the

requirement in section 6050S(b)(2)(B)

that an institution or insurer obtain and

report the name, address, and TIN of

any taxpayer who will claim the

individual with respect to whom

payments are received, or

reimbursements or refunds are made, as

a dependent for purposes of the

deduction allowable under section 151

for the taxable year. Thus, under the

proposed regulations, there is no

requirement to obtain and report the

name, address, and TIN of any taxpayer

who will claim the individual as a

dependent on the taxpayer’s Federal

income tax return.

Consistent with the exceptions to

required reporting in Notice 98–59, the

proposed regulations provide that an

institution or insurer is not required to

file a Form 1098–T for an individual

who is a nonresident alien, unless the

individual requests that the institution

or insurer report. In addition, an

institution is not required to file a Form

1098–T for an individual who is

enrolled during the calendar year only

in courses for which the individual

receives no academic credit. Under the

proposed regulations, the term

academic credit means credit awarded

by an institution for the completion of

coursework leading toward a postsecondary degree, certificate, or other

recognized post-secondary educational

credential.

The proposed regulations provide

that, in determining the payments for

qualified tuition and related expenses

that an institution must report,

payments received with respect to an

individual from any source (except for

any scholarship or grant that, by its

terms, must be applied to expenses

other than qualified tuition and related

expenses, such as room and board) are

treated as payments of qualified tuition

and related expenses up to the total

amount billed for such expenses.

The proposed regulations provide that

an institution or insurer must furnish an

information statement to each

individual for whom it is required to file

a Form 1098–T. The proposed

regulations provide that the statement

must include the information included

on the Form 1098–T filed with the IRS

and a legend that identifies the

statement as important tax information

being furnished to the IRS. The

statement must include instructions that

state that the taxpayer may not be able

to claim an education tax credit under

Federal Register / Vol. 65, No. 117 / Friday, June 16, 2000 / Proposed Rules 37731

section 25A and the regulations

thereunder with respect to the total

payments of qualified tuition and

related expenses reported for the

calendar year. The instructions must

state that the amount of the

scholarships, grants, reimbursements, or

refunds reported for the calendar year

and other similar amounts not reported

(because they are not processed by the

institution) may reduce the amount of

any allowable education tax credit for

the taxable year or a prior taxable year.

The instructions must state that the

taxpayer should refer to relevant IRS

forms and publications (such as Form

8863, ‘‘Education Credits,’’ and

Publication 970, ‘‘Tax Benefits for

Higher Education’’) for explanations

relating to the eligibility requirements

for, and the calculation of, any

allowable education tax credit.

The proposed regulations reserve the

requirement in section 6050S(d) that an

institution or insurer furnish a

statement to any taxpayer who will

claim the individual with respect to

whom payments are received, or

reimbursements or refunds are made, as

a dependent for purposes of the

deduction allowable under section 151

for the taxable year. Thus, under the

proposed regulations, there is no

requirement to furnish a statement to

any taxpayer who will claim the

individual as a dependent on the

taxpayer’s Federal income tax return.

The proposed regulations describe the

rules for the time and manner of filing

information returns with the IRS and

furnishing information statements.

Forms 1098–T must generally be filed

with the IRS on or before February 28

(March 31 if filed electronically) of the

year following the calendar year in

which the payments were received, or

reimbursements or refunds were made.

In general, an institution or insurer must

furnish an information statement to

each individual with respect to whom

payments of qualified tuition and

related expenses were received, or

reimbursements or refunds were made,

on or before January 31 of the year

following the calendar year in which

payments were received, or

reimbursements or refunds were made.

Although the regulations do not

specifically address the issue of

electronic transmission of information

statements, the IRS is currently studying

the issue. Accordingly, the IRS may

address that issue in future guidance.

Under the proposed regulations, an

institution or insurer may be subject to

a penalty under section 6721 for failure

to file correct Forms 1098–T and a

penalty under section 6722 for failure to

furnish correct information statements.

The proposed regulations generally

follow the rules under section 6724 for

waivers of penalties for certain failures

due to reasonable cause. The regulations

also provide special rules for soliciting

an individual’s TIN. An institution or

insurer that complies with those rules

will not be penalized for any failure to

obtain or include a correct TIN on a

Form 1098–T or the related information

statement.

2. Information Reporting for Payments

of Interest on Qualified Education Loans

The proposed regulations require any

person engaged in a trade or business

that receives from any payor interest of

$600 or more for any calendar year on

one or more qualified education loans

(as defined in section 221(e)(1) and the

regulations thereunder) (a payee) to file

a Form 1098–E with the IRS. Under the

proposed regulations, a payee must

report the name, address, and taxpayer

identification number (TIN) of the

payee; the name, address, and TIN of

the payor; and the aggregate amount of

interest received during the calendar

year from the payor. The payee may be

the lender, the holder of the loan, or the

loan servicer. The regulations define the

payor as the individual carried on the

books and records of the payee as the

borrower on a qualified education loan.

If there are multiple borrowers, the

principal borrower indicated on the

payee’s books and records is treated as

the payor for purposes of section 6050S.

Under the proposed regulations, a

payee is required to report only interest

payments received on a qualified

education loan during the first 60

months in which interest payments are

required on the loan. The proposed

regulations, in general, incorporate the

rules of section 221 and the regulations

thereunder to determine the 60-month

period for which interest payments

must be reported. Under the proposed

regulations, the 60-month period

generally begins on the date the

qualified education loan first enters

repayment status. However, for

qualified education loans made before

January 1, 1998, if the payee does not

know, and does not have reason to

know, the date on which the loan

entered repayment status, then, for

information reporting purposes, the 60-

month period begins on January 1, 1998.

For defaulted loans made before January

1, 1998, if the payee does not know, and

does not have reason to know, the date

on which the loan entered repayment

status, then, for information reporting

purposes, the 60-month period begins

on the earlier of the date the loan went

into default or January 1, 1998. If the

payee does not know, and does not have

reason to know, either the date the loan

entered repayment status or the default

date, then, for information reporting

purposes, the 60-month period begins

on January 1, 1998.

The proposed regulations provide

that, in determining the aggregate

amount of interest payments to be

reported by a payee, the term interest

includes stated interest, loan origination

fees (other than any fees for services),

and capitalized interest as described in

proposed regulations § 1.221–1(h)(2).

However, in order to provide payees

sufficient time to develop systems to

report amounts other than stated

interest, the proposed regulations do not

require payees to report loan origination

fees and capitalized interest for loans

made before January 1, 2002.

The proposed regulations provide

rules to determine which loans are

qualified education loans subject to

information reporting under section

6050S. The regulations provide that,

unless the loan is subsidized,

guaranteed, financed, or otherwise

treated as a student loan under a

program of the Federal, state, or local

government or an eligible educational

institution, the payee must request and

obtain a certification from the payor that

the loan will be used solely to pay

qualified higher education expenses.

The regulations provide that the payee

may use Form W–9S, ‘‘Request for

Student’s Social Security Number and

Borrower Certification,’’ to request and

obtain the certification. If a payee fails

to obtain a required certification, the

loan is not treated as a qualified

education loan for purposes of section

6050S.

The proposed regulations provide that

a payee must furnish an information

statement to each payor for whom it is

required to file a Form 1098–E. The

proposed regulations provide that the

statement must include the information

included on the Form 1098–E filed with

the IRS and a legend that identifies the

statement as important tax information

being furnished to the IRS. The

statement must include instructions that

state that, under section 221 and the

regulations thereunder, the payor may

not be able to deduct the full amount of

interest reported on the statement. The

instructions must state that interest

payments are deductible only during the

first 60-months that interest payments

are required. If the payee reports only

stated interest, the instructions must

state that the payor may be able to

deduct additional amounts (e.g., certain

loan origination fees and capitalized

interest) not reported on the statement.

The instructions must also state that the

payor should refer to relevant IRS forms

37732 Federal Register / Vol. 65, No. 117 / Friday, June 16, 2000 / Proposed Rules

and publications (such as Publication

970) for explanations relating to the

eligibility requirements for, and the

calculation of, any allowable interest

deduction on qualified education loans.

The proposed regulations describe the

rules for the time and manner of filing

information returns with the IRS and

furnishing information statements to

payors. Forms 1098–E must generally be

filed with the IRS on or before February

28 (March 31 if filed electronically) of

the year following the calendar year in

which the interest payments were

received. In general, a payee must

furnish an information statement to the

payor on or before January 31 of the year

following the calendar year in which

interest payments were received.

Although the regulations do not

specifically address the issue of

electronic transmission of information

statements, the IRS is currently studying

the issue. Accordingly, the IRS may

address that issue in future guidance.

Under the proposed regulations, a

payee may be subject to a penalty under

section 6721 for failure to file correct

Forms 1098–E and a penalty under

section 6722 for a failure to furnish

correct information statements. The

proposed regulations generally follow

the rules under section 6724 for waivers

of penalties for certain failures due to

reasonable cause. The regulations also

provide special rules for soliciting the

payor’s TIN. A payee that complies with

those rules will not be penalized for any

failure to obtain or include a correct TIN

on a Form 1098–E or the related

information statement.

3. Requirement to File Information

Returns on Magnetic Media

The proposed regulations amend the

regulations under section 6011(e) to

require eligible educational institutions,

insurers, and payees who are required to

file 250 or more Forms 1098–T or 1098–

E to file on magnetic media. Under

§ 301.6011–2(a)(1), the term magnetic

media means any media permitted

under applicable regulations, revenue

procedures, or publications, including

magnetic tape, tape cartridge, and

diskette, as well as other media (such as

electronic filing).

Proposed Effective Date

These regulations are proposed to

apply to information returns required to

be filed, and information statements

required to be furnished, after December

31, 2001. Taxpayers may rely on these

proposed regulations for guidance

pending the issuance of final

regulations. If, and to the extent, future

guidance is more restrictive than the

guidance in the proposed regulations,

the future guidance will be applied

without retroactive effect.

Special Analyses

It has been determined that these

proposed regulations are not a

significant regulatory action as defined

in Executive Order 12866. Therefore, a

regulatory assessment is not required. It

has also been determined that section

553(b) of the Administrative Procedure

Act (5 U.S.C. chapter 5) does not apply

to these regulations. An initial

regulatory flexibility analysis has been

prepared for this notice of proposed

rulemaking under 5 U.S.C. 603 and is

set forth under the heading ‘‘Initial

Regulatory Flexibility Analysis’’ in this

preamble. Pursuant to section 7805(f),

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.

Initial Regulatory Flexibility Analysis

The collection of information

contained in §§ 1.6050S–1(a) and (b)

and 1.6050S–2(a) and (c) is needed to

assist the IRS and taxpayers in

determining the amount of any

education credit allowable under

section 25A and the amount of any

interest deduction allowable under

section 221. The objectives of the

proposed regulations are to provide

uniform, practicable, and administrable

rules under section 6050S. The types of

small entities to which the proposed

regulations may apply are small eligible

educational institutions (such as

colleges and universities), certain

insurers who reimburse educational

expenses, and certain payees who

receive payments of interest on

qualified education loans. As of the end

of December 1999, a total of 20,738,039

Forms 1098–T were filed with the IRS

for 1998 and a total of 8,753,819 Forms

1098–E were filed with the IRS for 1998.

The current estimated reporting burden

is 7 minutes per Form 1098–T and 3

minutes per Form 1098–E. No special

professional skills are necessary for

preparation of the reports or records.

There are no known Federal rules that

duplicate, overlap, or conflict with these

proposed regulations. The regulations

proposed are considered to have the

least economic impact on small entities

of all alternatives considered.

Moreover, the proposed regulations

requiring filing Forms 1098–T and

1098–E on magnetic media impose no

additional reporting or recordkeeping

and only prescribe the method of filing

information returns that are already

required to be filed. Further, these

regulations are consistent with the

statutory requirement that an eligible

educational institution, insurer, or

payee is not required to file Forms

1098–T or 1098–E on magnetic media

unless required to file at least 250 or

more returns during the year. Finally,

the economic impact caused by

requiring Forms 1098–T and 1098–E on

magnetic media should be minimal

because most institution’s, insurer’s,

and payee’s operations are

computerized. Even if their operations

are not computerized, the incremental

cost of magnetic media reporting should

be minimal in most cases because of the

availability of computer service bureaus.

In addition, the existing regulations

under section 6011(e) provide that the

IRS may waive the magnetic media

filing requirements on a showing of

hardship. The waiver authority will be

exercised so as not to unduly burden

institutions, insurers, and payees

lacking both the necessary data

processing facilities and access at a

reasonable cost to computer service

bureaus.

Comments and Public Hearing

Before these proposed regulations are

adopted as final regulations,

consideration will be given to any

written and electronic comments that

are submitted timely to the IRS. The IRS

and Treasury specifically request

comments on the clarity of the proposed

regulations and how they can be made

easier to understand. All comments will

be available for public inspection and

copying.

A public hearing will be scheduled in

the Internal Revenue Building, 1111

Constitution Avenue, NW., Washington,

DC. The IRS recognizes that persons

outside the Washington, DC, area may

also wish to testify at the public hearing

through videoconferencing. Requests to

include videoconferencing sites must be

received by August 15, 2000. If the IRS

receives sufficient indications of interest

to warrant videoconferencing to a

particular city, and if the IRS has

videoconferencing facilities available in

that city on the date the public hearing

is to be scheduled, the IRS will try to

accommodate the requests.

The IRS will publish the time and

date of the public hearing and the

locations of any videoconferencing sites

in a document in the Federal Register.

Drafting Information

The principal author of the

regulations is Donna Welch, Office of

Assistant Chief Counsel (Income Tax

and Accounting). However, other

personnel from the IRS and the Treasury

Department participated in the

development of the regulations.

Federal Register / Vol. 65, No. 117 / Friday, June 16, 2000 / Proposed Rules 37733

List of Subjects

26 CFR Part 1

Income taxes, Reporting and

recordkeeping requirements.

26 CFR Part 301

Employment taxes, Estate taxes,

Excise taxes, Gift taxes, Income taxes,

Penalties, Reporting and recordkeeping

requirements.

Proposed Amendments to the

Regulations

Accordingly, 26 CFR parts 1 and 301

are proposed to be amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation

for part 1 is amended by adding entries

in numerical order to read in part as

follows:

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

Section 1.6050S–1 also issued under

section 26 U.S.C. 6050S(g).

Section 1.6050S–2 also issued under

section 26 U.S.C. 6050S(g). * * *

Par. 2. Sections 1.6050S–0 through

1.6050S–2 are added to read as follows:

§ 1.6050S–0 Table of contents.

This section lists captions contained

in §§ 1.6050S–1 and 1.6050S–2.

§ 1.6050S–1 Information reporting for

payments and reimbursements or

refunds of qualified tuition and related

expenses.

(a) Information reporting requirement.

(1) In general.

(2) Exceptions.

(i) No reporting for nonresident alien

individuals.

(ii) No reporting for individuals enrolled in

noncredit courses.

(A) In general.

(B) Academic credit defined.

(C) Example.

(b) Requirement to file return.

(1) Form of return.

(2) Information included on return.

(i) In general.

(ii) Requirement to include name, address,

and TIN of any taxpayer who will claim the

individual as a dependent on the taxpayer’s

Federal income tax return. [Reserved]

(3) Time and place for filing return.

(i) In general.

(ii) Return for nonresident alien individual.

(iii) Extensions of time.

(4) Use of magnetic media.

(c) Requirement to furnish statement.

(1) In general.

(2) Statement furnished to any taxpayer

who will claim the individual as a dependent

on the taxpayer’s Federal income tax return.

[Reserved]

(3) Time and manner for furnishing

statement.

(i) In general.

(ii) Statement to nonresident alien

individual.

(iii) Extensions of time.

(4) Time and manner for furnishing

statement to any taxpayer who will claim the

individual as a dependent on the taxpayer’s

Federal income tax return. [Reserved]

(5) Copy of Form 1098–T.

(d) Special rules.

(1) Payments received for qualified tuition

and related expenses determined.

(i) In general.

(ii) Example.

(2) Payments of qualified tuition and

related expenses received or collected on

behalf of an institution.

(i) In general.

(ii) Exception.

(3) Governmental units.

(e) Penalty provisions.

(1) Failure to file correct returns.

(2) Failure to furnish correct information

statements.

(3) Waiver of penalties for failures to

include a correct TIN.

(i) In general.

(ii) Acting in a responsible manner.

(iii) Manner of soliciting TIN.

(4) Requirement to request and obtain TIN

of any taxpayer who will claim the

individual as a dependent on the taxpayer’s

Federal income tax return. [Reserved]

(5) Failure to furnish TIN.

(f) Effective date.

§ 1.6050S–2 Information reporting for

payments of interest on qualified

education loans.

(a) Information reporting requirement.

(1) In general.

(2) Reporting period.

(i) In general.

(ii) Calculation of 60-month period.

(iii) Transitional rules for reporting on

loans made before January 1, 1998.

(b) Definitions.

(c) Requirement to file return.

(1) Form of return.

(2) Information included on return.

(3) Time and place for filing return.

(i) In general.

(ii) Extensions of time.

(4) Use of magnetic media.

(d) Requirement to furnish statement.

(1) In general.

(2) Time and manner for furnishing

statement.

(i) In general.

(ii) Extensions of time.

(3) Copy of Form 1098–E.

(e) Special rules.

(1) Transitional rule for reporting of loan

origination fees and capitalized interest.

(2) Qualified education loan certification.

(3) Payments of interest received or

collected by one or more persons.

(i) In general.

(ii) Exception.

(4) Reporting by foreign persons.

(5) Governmental units.

(f) Penalty provisions.

(1) Failure to file correct returns.

(2) Failure to furnish correct information

statements.

(3) Waiver of penalties for failures to

include a correct TIN.

(i) In general.

(ii) Acting in a responsible manner.

(iii) Manner of soliciting TIN.

(4) Failure to furnish TIN.

(g) Effective date.

§ 1.6050S–1 Information reporting for

payments and reimbursements or refunds

of qualified tuition and related expenses.

(a) Information reporting

requirement—(1) In general. Except as

provided in paragraph (a)(2) of this

section, any eligible educational

institution (as defined in section

25A(f)(2) and § 1.25A–2(b)) (an

institution) that receives payments of

qualified tuition and related expenses

(as defined in section 25A(f)(1) and

§ 1.25A–2(d)) from any source for any

calendar year, or that makes

reimbursements or refunds (or similar

payments) of such amounts, and any

person engaged in a trade or business of

making payments under an insurance

arrangement as reimbursements or

refunds (or other similar amounts) of

qualified tuition and related expenses

(an insurer) must—

(i) File an information return, as

described in paragraph (b) of this

section, with the Internal Revenue

Service (IRS) with respect to each

individual for whom such payments are

received, or reimbursements or refunds

are made; and

(ii) Furnish a statement, as described

in paragraph (c) of this section, to each

individual described in paragraph (c) of

this section.

(2) Exceptions—(i) No reporting for

nonresident alien individuals. The

information reporting requirements of

this section do not apply with respect to

any individual who is a nonresident

alien (as defined in section 7701(b) and

§ 301.7701(b)–3 of this chapter) during

the calendar year, unless the individual

requests the institution or insurer to

report. If a nonresident alien individual

requests an institution or insurer to

report, the institution or insurer must

comply with the requirements of this

section for the year with respect to

which the request is made and all years

after such request in which it receives

payments of qualified tuition and

related expenses or makes

reimbursements or refunds of such

amounts with respect to such

individual.

(ii) No reporting for individuals

enrolled in noncredit courses—(A) In

general. The information reporting

requirements of this section do not

apply with respect to any individual

who is enrolled during the calendar year

only in courses for which the individual

receives no academic credit.

(B) Academic credit defined.

Academic credit means credit awarded

by an institution for the completion of

coursework leading toward a postVerDate 11<MAY>2000 15:33 Jun 15, 2000 Jkt 190000 PO 00000 Frm 00022 Fmt 4702 Sfmt 4702 E:\FR\FM\16JNP1.SGM pfrm02 PsN: 16JNP1
37734 Federal Register / Vol. 65, No. 117 / Friday, June 16, 2000 / Proposed Rules

secondary degree, certificate, or other

recognized post-secondary educational

credential.

(C) Example. The following example

illustrates the rules of this paragraph

(a)(2)(ii):

Example. Student A, a medical doctor,

takes a course at University X’s medical

school. Student A takes the course to fulfill

State Y’s licensing requirement that medical

doctors attend continuing medical education

courses each year. Student A is not enrolled

in a degree program at University X and takes

the medical course through University X’s

continuing professional education division.

University X does not award Student A credit

toward a post-secondary degree on an

academic transcript for the completion of the

course but gives Student A a certificate of

attendance upon completion. Under this

paragraph (a)(2)(ii), University X is not

subject to the information reporting

requirements of section 6050S and this

section for the medical education course

taken by Student A.

(b) Requirement to file return—(1)

Form of return. Except as otherwise

provided in this section, an institution

or insurer must file an information

return for each individual with respect

to whom payments of qualified tuition

and related expenses are received, or

reimbursements or refunds of such

amounts are made, during the calendar

year on Form 1098–T, ‘‘Tuition

Payments Statement.’’ An institution or

insurer may use a substitute for Form

1098–T if the substitute form complies

with applicable revenue procedures

relating to substitute forms.

(2) Information included on return—

(i) In general. An institution or insurer

must include on Form 1098–T—

(A) The name, address, and taxpayer

identification number (TIN) (as defined

in section 7701(a)(41)) of the institution

or the insurer;

(B) The name, address, and TIN of the

individual with respect to whom

payments of qualified tuition and

related expenses were received, or

reimbursements or refunds of such

amounts were made;

(C) The aggregate amount of payments

of qualified tuition and related expenses

from any source that the institution

received with respect to the individual

during the calendar year;

(D) The aggregate amount of

reimbursements or refunds of qualified

tuition and related expenses that the

institution or insurer made with respect

to the individual during the calendar

year;

(E) The aggregate amount of any

scholarships or grants that the

institution processed during the

calendar year for the payment of the

individual’s costs of attendance;

(F) An indication by the institution

whether the individual was enrolled for

at least half of the normal full-time work

load for the course of study the

individual is pursuing for at least one

academic period that begins during the

calendar year (see § 1.25A–3(d)(1)(ii));

(G) An indication by the institution

whether the individual was enrolled in

a program leading to a graduate-level

degree, graduate-level certificate, or

other recognized graduate-level

educational credential; and

(H) Any other information required by

Form 1098–T and its instructions.

(ii) Requirement to include name,

address, and TIN of any taxpayer who

will claim the individual as a dependent

on the taxpayer’s Federal income tax

return. [Reserved]

(3) Time and place for filing return—

(i) In general. Except as provided in

paragraphs (b)(3)(ii) and (iii) of this

section, Form 1098–T must be filed on

or before February 28 (March 31 if filed

electronically) of the year following the

calendar year in which payments of

qualified tuition or related expenses

were received, or reimbursements or

refunds of such amounts were made. An

institution or insurer must file Form

1098–T with the IRS according to the

instructions to Form 1098–T.

(ii) Return for nonresident alien

individual. In general, an institution or

insurer is not required to file a return on

behalf of a nonresident alien individual.

However, if a nonresident alien

individual requests an institution or

insurer to report, the institution or

insurer must file a return described in

paragraph (b)(2) of this section with the

IRS on or before the date prescribed in

paragraph (b)(3)(i) of this section, or on

or before the thirtieth day after the

request, whichever is later.

(iii) Extensions of time. The IRS may

grant an institution or insurer an

extension of time to file returns required

in this section upon a showing of good

cause. See the instructions to Form

1098–T and applicable revenue

procedures for rules relating to

extensions of time to file.

(4) Use of magnetic media. See

section 6011(e) and § 301.6011–2 of this

chapter for rules relating to the

requirement to file Forms 1098–T on

magnetic media.

(c) Requirement to furnish

statement—(1) In general. An institution

or insurer must furnish a statement to

each individual for whom it is required

to file a Form 1098–T. The statement

must include—

(i) The information required under

paragraph (b)(2) of this section;

(ii) A legend that identifies the

statement as important tax information

that is being furnished to the IRS;

(iii) Instructions that—

(A) State that the taxpayer may not be

able to claim an education tax credit

under section 25A and the regulations

thereunder with respect to the total

payments of qualified tuition and

related expenses reported for the

calendar year;

(B) State that the amount of any

scholarships, grants, refunds, or

reimbursements reported for the

calendar year and other similar amounts

not reported (because they are not

processed by the institution) may

reduce the amount of any allowable

education tax credit for the taxable year

or a prior taxable year;

(C) State that the taxpayer should

refer to relevant IRS forms and

publications for explanations relating to

the eligibility requirements for, and

calculation of, any allowable education

tax credit; and

(D) Include the name, address, and

phone number of the individual who is

the information contact for the

institution or insurer that filed the Form

1098–T.

(2) Statement furnished to any

taxpayer who will claim the individual

as a dependent on the taxpayer’s

Federal income tax return. [Reserved]

(3) Time and manner for furnishing

statement—(i) In general. Except as

provided in paragraphs (c)(3)(ii) and (iii)

of this section, an institution or insurer

must furnish the statement described in

paragraph (c)(1) of this section to each

individual with respect to whom

payments of qualified tuition and

related expenses were received, or

reimbursements or refunds were made,

on or before January 31 of the year

following the calendar year in which

payments were received or

reimbursements or refunds were made.

If mailed, the statement must be sent to

the individual’s permanent address, or

the individual’s temporary address if

the institution or insurer does not know

the individual’s permanent address.

(ii) Statement to nonresident alien

individual. If an information return is

filed for a nonresident alien individual,

the institution or insurer must furnish a

statement described in paragraph (c)(1)

of this section to the individual in the

manner and on or before the date

prescribed in paragraph (c)(3)(i) of this

section, or on or before the thirtieth day

after the nonresident alien’s request to

report, whichever is later.

(iii) Extensions of time. The IRS may

grant an institution or insurer an

extension of time to furnish the

statements required in this section upon

Federal Register / Vol. 65, No. 117 / Friday, June 16, 2000 / Proposed Rules 37735

a showing of good cause. See the

instructions to Form 1098–T and

applicable revenue procedures for rules

relating to extensions of time to furnish

statements.

(4) Time and manner for furnishing

statement to any taxpayer who will

claim the individual as a dependent on

the taxpayer’s Federal income tax

return. [Reserved]

(5) Copy of Form 1098–T. An

institution or insurer may satisfy the

requirement of this paragraph (c) by

furnishing either a copy of Form 1098–

T and its instructions or another

document that contains all of the

information filed with the IRS and the

information required by paragraph (c)(1)

of this section if the document complies

with applicable revenue procedures

relating to substitute statements.

(d) Special rules—(1) Payments

received for qualified tuition and related

expenses determined—(i) In general. In

determining the aggregate amount of

payments of qualified tuition and

related expenses that an institution

must report, payments received with

respect to an individual during the

calendar year from any source (except

for any scholarship or grant that, by its

terms, must be applied to expenses

other than qualified tuition and related

expenses, such as room and board) will

be treated as payments of qualified

tuition and related expenses up to the

total amount billed by the institution for

such expenses.

(ii) Example. The following example

illustrates the rules of this paragraph

(d)(1):

Example. (i) During the 2002 Spring

semester, Student C attends College X and

enrolls in a program leading toward an

associate’s degree. Student C lives oncampus. In December 2001, College X

charges Student C $2,000 for room and board

for the 2002 Spring semester. In addition, in

December 2001, College X charges Student C

$4,000 for qualified tuition and related

expenses for the 2002 Spring semester. In

December 2001, Student C pays College X

$1,500. In early January 2002, College X

receives and processes a $4,500 scholarship

that may be applied to any of Student C’s

costs of attendance. Assume that there are no

other payments during the calendar years

2001 and 2002.

(ii) Under this paragraph (d)(1), for the

calendar year 2001, College X must report

$1,500 for payments of qualified tuition and

related expenses received during the

calendar year 2001. In addition, for the

calendar year 2002, College X must report:

(A) $2,500 for payments of qualified tuition

and related expenses received during the

calendar year 2002 ($4,000 total charges for

qualified tuition and related expenses less

the $1,500 payments received during 2001);

and

(B) $4,500 of scholarships processed

during the calendar year 2002.

(2) Payments of qualified tuition and

related expenses received or collected

on behalf of an institution—(i) In

general. If an institution contracts with

another person to receive or collect

payments of qualified tuition and

related expenses on its behalf, the other

person must satisfy the information

reporting requirements of this section.

(ii) Exception. If the institution does

not provide the other person with the

information necessary to comply with

the reporting requirements of this

section, the other person must request

the information necessary to comply

with the information reporting

requirements from the institution. If the

institution does not provide the other

person with the necessary information

upon request, the institution must

satisfy the information reporting

requirements of this section.

(3) Governmental units. An institution

or insurer that is a governmental unit,

or an agency or instrumentality of a

governmental unit, is subject to the

information reporting requirements of

this section and an appropriately

designated officer or employee of the

governmental entity must satisfy the

information reporting requirements of

this section.

(e) Penalty provisions—(1) Failure to

file correct returns. The section 6721

penalty may apply to an institution or

insurer that fails to file information

returns required by section 6050S and

this section on or before the required

filing date; that fails to include all of the

required information on the return; or

that includes incorrect information on

the return. See section 6721, and the

regulations thereunder, for rules relating

to penalties for failure to file correct

returns. See section 6724, and the

regulations thereunder, for rules relating

to waivers of penalties for certain

failures due to reasonable cause.

(2) Failure to furnish correct

information statements. The section

6722 penalty may apply to an

institution or insurer that fails to furnish

statements required by section 6050S

and this section on or before the

prescribed date; that fails to include all

the required information on the

statement; or that includes incorrect

information on the statement. See

section 6722, and the regulations

thereunder, for rules relating to

penalties for failure to furnish correct

statements. See section 6724, and the

regulations thereunder, for rules relating

to waivers of penalties for certain

failures due to reasonable cause.

(3) Waiver of penalties for failures to

include a correct TIN—(i) In general. In

the case of a failure to include a correct

TIN on Form 1098–T or a related

information statement, penalties may be

waived if the failure is due to reasonable

cause. Reasonable cause may be

established if the failure arose from

events beyond the institution’s or

insurer’s control, such as a failure of the

individual to furnish a correct TIN.

However, the institution or insurer must

establish that it acted in a responsible

manner both before and after the failure.

(ii) Acting in a responsible manner.

An institution or insurer must request

the TIN of each individual with respect

to whom payments of qualified tuition

were received, or reimbursements or

refunds were made, if it does not

already have a record of the individual’s

correct TIN. If the institution or insurer

does not have a record of the

individual’s correct TIN, then it must

solicit the TIN in the manner described

in paragraph (e)(3)(iii) of this section on

or before December 31 of each year

during which it receives payments of, or

makes reimbursements of, qualified

tuition and related expenses with

respect to the individual. If an

individual refuses to provide his or her

TIN upon request, the institution or

insurer must file the return and furnish

the statement required by this section

without the individual’s TIN, but with

all other required information. The

specific solicitation requirements of

paragraph (e)(3)(iii) of this section apply

in lieu of the solicitation requirements

of § 301.6724–1(e) and (f) of this chapter

for the purpose of determining whether

an institution or insurer acted in a

responsible manner in attempting to

obtain a correct TIN. An institution or

insurer that complies with the

requirements of this paragraph (e)(3)

will be considered to have acted in a

responsible manner within the meaning

of § 301.6724–1(d) of this chapter with

respect to any failure to include the

correct TIN of an individual on a return

or statement required by section 6050S

and this section.

(iii) Manner of soliciting TIN. An

institution or insurer must request the

individual’s TIN in writing and must

clearly notify the individual that the law

requires the individual to furnish a TIN

so that it may be included on an

information return filed by the

institution or insurer. An institution or

insurer must notify the individual that

the individual’s failure to furnish his or

her TIN to the institution or insurer may

result in a $50 penalty being imposed

against the individual as authorized by

law. A request for a TIN made on Form

W–9S, ‘‘Request for Student’s or

Borrower’s Social Security Number and

Certification,’’ satisfies the requirements

of this paragraph (e)(3)(iii). An

institution or insurer may establish a

37736 Federal Register / Vol. 65, No. 117 / Friday, June 16, 2000 / Proposed Rules

system for individuals to submit Forms

W–9S electronically as described in

applicable forms and instructions. An

institution or insurer may also develop

a separate form to request the

individual’s TIN or incorporate the

request into other forms customarily

used by the institution or insurer, such

as financial aid applications.

(4) Requirement to request and obtain

TIN of any taxpayer who will claim the

individual as a dependent on the

taxpayer’s Federal income tax return.

[Reserved]

(5) Failure to furnish TIN. The section

6723 penalty may apply to any

individual who is required (but fails) to

furnish his or her TIN to an institution

or insurer. See section 6723, and the

regulations thereunder, for rules relating

to the penalty for failure to furnish a

TIN.

(f) Effective date. The rules in this

section apply to information returns

required to be filed, and information

statements required to be furnished,

after December 31, 2001.

§ 1.6050S–2 Information reporting for

payments of interest on qualified education

loans.

(a) Information reporting

requirement—(1) In general. Except as

otherwise provided in this section, any

person engaged in a trade or business

that, in the course of that trade or

business, receives from any payor (as

defined in paragraph (b)(2) of this

section) interest payments that aggregate

$600 or more for any calendar year on

one or more qualified education loans

(as defined in section 221(e)(1) and

§ 1.221–1(f)(3))(a payee) must—

(i) File an information return, as

described in paragraph (c) of this

section, with the IRS with respect to the

payor; and

(ii) Furnish a statement, as described

in paragraph (d) of this section, to the

payor.

(2) Reporting period—(i) In general.

The information reporting requirements

of this section apply only to interest

payments received on a qualified

education loan during the first 60

months in which interest payments are

required on the loan.

(ii) Calculation of 60-month period. In

general, the 60-month period described

in paragraph (a)(2)(i) of this section

begins on the date the qualified

education loan first enters repayment

status and ends 60 months later.

However, if the payee knows, or has

reason to know, of any periods of

deferment or forbearance during which

the 60-month period is suspended

under the rules described in § 1.221–

1(e)(3), the 60-month period described

in paragraph (a)(2)(i) of this section is

extended by the period of such

deferment or forbearance. The date on

which the qualified education loan first

enters repayment status is determined

under the terms of the loan agreement

or, in the case of a loan issued or

guaranteed under a federal postsecondary education loan program,

under applicable federal regulations.

For purposes of reporting under section

6050S and this section for refinanced

loans and consolidated and collapsed

loans, the rules of § 1.221–1(h)(1),

relating to the date on which the 60-

month period begins, apply.

(iii) Transitional rules for reporting on

loans made before January 1, 1998. For

qualified education loans made before

January 1, 1998, the 60-month period

described in paragraph (a)(2)(i) of this

section is determined in accordance

with the rules of paragraph (a)(2)(ii) of

this section, except that if the payee

does not know, and does not have

reason to know, the date on which the

loan entered repayment status, then, for

reporting purposes only, the 60-month

period begins on January 1, 1998. For

defaulted loans made before January 1,

1998, if the payee does not know, and

does not have reason to know, the date

on which the loan entered repayment

status, then, for reporting purposes only,

the 60-month period begins on the

earlier of the date the loan went into

default or January 1, 1998. If the payee

does not know, and does not have

reason to know, either the date the loan

entered repayment status or the default

date, then, for reporting purposes only,

the 60-month period begins on January

1, 1998. For purposes of this paragraph

(a)(2)(iii), a defaulted loan is a loan with

respect to which required payments of

interest and principal have not been

made when due over a period of time

such that the holder has declared the

loan in default based on its terms and

conditions, and, if applicable, has

sought recourse against the ultimate

guarantor of the loan.

(b) Definitions. The following

definitions apply for purposes of this

section:

(1) Interest includes stated interest,

loan origination fees (other than fees for

services), and capitalized interest as

described in § 1.221–1(h)(2). See

paragraph (e)(1) of this section for a

special transitional rule relating to

reporting of loan origination fees and

capitalized interest.

(2) Payor means the individual who is

carried on the books and records of the

payee as the borrower on a qualified

education loan. If there are multiple

borrowers, the principal borrower on

the payee’s books and records is treated

as the payor for purposes of section

6050S and this section.

(c) Requirement to file return—(1)

Form of return. A payee must file an

information return for the payor on

Form 1098–E, ‘‘Student Loan Interest

Statement.’’ A payee may use a

substitute for Form 1098–E if the

substitute form complies with the

applicable revenue procedures relating

to substitute forms.

(2) Information included on return. A

payee must include on Form 1098–E—

(i) The name, address, and taxpayer

identification number (TIN)(as defined

in section 7701(a)(41)) of the payee;

(ii) The name, address, and TIN of the

payor;

(iii) The aggregate amount of interest

payments received during the calendar

year from the payor; and

(iv) Any other information required

by Form 1098–E and its instructions.

(3) Time and place for filing return—

(i) In general. Except as provided in

paragraph (c)(3)(ii) of this section, the

Form 1098–E must be filed on or before

February 28 (March 31 if filed

electronically) of the year following the

calendar year in which interest

payments were received. A payee must

file Form 1098–E with the IRS according

to the instructions to Form 1098–E.

(ii) Extensions of time. The IRS may

grant a payee an extension of time to file

returns required in this section upon a

showing of good cause. See the

instructions to Form 1098–E and

applicable revenue procedures for rules

relating to extensions of time to file.

(4) Use of magnetic media. See

section 6011(e) and § 301.6011–2 of this

chapter for rules relating to the

requirement to file Forms 1098–E on

magnetic media.

(d) Requirement to furnish

statement—(1) In general. A payee must

furnish a statement to each payor for

whom it is required to file a Form 1098–

E. The statement must include—

(i) The information required under

paragraph (c)(2) of this section;

(ii) A legend that identifies the

statement as important tax information

that is being furnished to the IRS;

(iii) Instructions that—

(A) State that, under section 221 and

the regulations thereunder, the payor

may not be able to deduct the full

amount of interest reported on the

statement;

(B) State that interest payments are

deductible only during the first 60

months that interest payments are

required;

(C) In the case of qualified education

loans made before January 1, 2002, for

which the payee does not report

payments of interest other than stated

Federal Register / Vol. 65, No. 117 / Friday, June 16, 2000 / Proposed Rules 37737

interest, state that the payor may be able

to deduct additional amounts (such as

certain loan origination fees and

capitalized interest) not reported on the

statement;

(D) State that the payor should refer

to relevant IRS forms and publications

for explanations relating to the

eligibility requirements for, and

calculation of, any allowable deduction

for interest paid on a qualified

education loan; and

(E) Include the name, address, and

phone number of the individual who is

the information contact for the payee

that filed the Form 1098–E.

(2) Time and manner for furnishing

statement—(i) In general. Except as

provided in paragraph (d)(2)(ii) of this

section, a payee must furnish the

statement described in paragraph (d)(1)

of this section to the payor on or before

January 31 of the year following the

calendar year in which payments of

interest on a qualified education loan

were received. If mailed, the statement

must be sent to the payor’s last known

address.

(ii) Extensions of time. The IRS may

grant a payee an extension of time to

furnish statements required in this

section upon a showing of good cause.

See the instructions to Form 1098–E and

applicable revenue procedures for rules

relating to extensions of time to furnish

statements.

(3) Copy of Form 1098–E. A payee

may satisfy the requirement of this

paragraph (d) by furnishing either a

copy of Form 1098–E and its

instructions or another document that

contains all the information filed with

the IRS and the information required by

paragraph (d)(1) of this section if the

document complies with applicable

revenue procedures relating to

substitute statements.

(e) Special rules—(1) Transitional rule

for reporting of loan origination fees and

capitalized interest. For qualified

education loans made before January 1,

2002, a payee is not required to report

payments of loan origination fees and

capitalized interest as interest under

section 6050S and this section.

(2) Qualified education loan

certification. If a loan is not subsidized,

guaranteed, financed, or is not

otherwise treated as a student loan

under a program of the Federal, state, or

local government or an eligible

educational institution, a payee must

request a certification from the payor

that the loan will be used solely to pay

for qualified higher education expenses.

A payee may use Form W–9S, ‘‘Request

for Student’s or Borrower’s Social

Security Number and Certification,’’ to

obtain the certification. A payee may

establish an electronic system for payors

to submit Forms W–9S electronically as

described in applicable forms and

instructions. A payee may also develop

a separate form to obtain the payor

certification or may incorporate

certification into other forms

customarily used by the payee, such as

loan applications, provided the

certification is clearly set forth. If the

certification is not received, the loan is

not a qualified education loan for

purposes of section 6050S and this

section.

(3) Payments of interest received or

collected by one or more persons—(i) In

general. If a payee contracts with

another person to receive or collect

payments on a qualified education loan

on its behalf, the other person must

satisfy the information reporting

requirements of this section.

(ii) Exception. If the payee does not

provide the other person with

information necessary to comply with

the information reporting requirements

of this section, the other person must

request the information necessary to

comply with the information reporting

requirements from the payee. If the

payee does not provide the other person

with the necessary information upon

request, the payee must satisfy the

information reporting requirements of

this section.

(4) Reporting by foreign persons. A

payee that is not a United States person

(as defined in section 7701(a)(30)) must

report payments of interest it receives

on a qualified education loan only if it

receives the payment—

(i) At a location in the United States;

or

(ii) At a location outside the United

States if the payee is—

(A) A controlled foreign corporation

(within the meaning of section 957(a));

or

(B) A person 50 percent or more of the

gross income of which, from all sources

for the three-year period ending with

the close of the taxable year preceding

the taxable year in which interest

payments were received (or for such

part of the period as the person was in

existence), was effectively connected

with the conduct of a trade or business

within the United States.

(5) Governmental units. A

governmental unit, or an agency or

instrumentality of a governmental unit,

that receives from any payor interest

payments that aggregate $600 or more

for any calendar year on one or more

qualified education loans is a payee,

without regard to the requirement of

paragraph (a)(1) of this section that the

interest be received in the course of a

trade or business.

(f) Penalty provisions—(1) Failure to

file correct returns. The section 6721

penalty may apply to a payee that fails

to file information returns required by

section 6050S and this section on or

before the required filing date; that fails

to include all of the required

information on the return; or that

includes incorrect information on the

return. See section 6721, and the

regulations thereunder, for rules relating

to penalties for failure to file correct

returns. See section 6724, and the

regulations thereunder, for rules relating

to waivers of penalties for certain

failures due to reasonable cause.

(2) Failure to furnish correct

information statements. The section

6722 penalty may apply to a payee that

fails to furnish statements required by

section 6050S and this section on or

before the prescribed date; that fails to

include all the required information on

the statement; or that includes incorrect

information on the statement. See

section 6722, and the regulations

thereunder, for rules relating to

penalties for failure to furnish correct

statements. See section 6724, and the

regulations thereunder, for rules relating

to waivers of penalties for certain

failures due to reasonable cause.

(3) Waiver of penalties for failures to

include a correct TIN—(i) In general. In

the case of a failure to include a correct

TIN on Form 1098–E or a related

information statement, penalties may be

waived if the failure is due to reasonable

cause. Reasonable cause may be

established if the failure arose from

events beyond the payee’s control, such

as a failure of the payor to furnish a

correct TIN. However, the payee must

establish that it acted in a responsible

manner both before and after the failure.

(ii) Acting in a responsible manner. A

payee must request the TIN of each

payor if it does not already have a

record of the payor’s correct TIN. If the

payee does not have a record of the

payor’s correct TIN, then it must solicit

the TIN in the manner described in

paragraph (f)(3)(iii) of this section on or

before December 31 of each year during

which it receives payments of interest.

If a payor refuses to provide his or her

TIN upon request, the payee must file

the return and furnish the statement

required by this section without the

payor’s TIN, but with all other required

information. The specific solicitation

requirements of paragraph (f)(3)(iii) of

this section apply in lieu of the

solicitation requirements of § 301.6724–

1(e) and (f) of this chapter for the

purpose of determining whether a payee

acted in a responsible manner in

attempting to obtain a correct TIN. A

payee that complies with the

37738 Federal Register / Vol. 65, No. 117 / Friday, June 16, 2000 / Proposed Rules

requirements of this paragraph (f)(3)

will be considered to have acted in a

responsible manner within the meaning

of § 301.6724–1(d) of this chapter with

respect to any failure to include the

correct TIN of a payor on a return or

statement required by section 6050S and

this section.

(iii) Manner of soliciting TIN. A payee

must request the payor’s TIN in writing

and must clearly notify the payor that

the law requires the payor to furnish a

TIN so that it may be included on an

information return filed by the payee. A

payee must notify the payor that the

payor’s failure to furnish his or her TIN

to the payee may result in a $50 penalty

being imposed against the individual as

authorized by law. A request for a TIN

made on Form W–9S, ‘‘Request for

Student’s or Borrower’s Social Security

Number and Certification,’’ satisfies the

requirements of this paragraph (f)(3)(iii).

A payee may establish a system for

payors to submit Forms W–9S

electronically as described in applicable

forms and instructions. A payee may

also develop a separate form to request

the payor’s TIN or incorporate the

request into other forms customarily

used by the payee, such as loan

applications.

(4) Failure to furnish TIN. The section

6723 penalty may apply to any payor

who is required (but fails) to furnish his

or her TIN to a payee. See section 6723,

and the regulations thereunder, for rules

relating to the penalty for failure to

furnish a TIN.

(g) Effective date. The rules in this

section apply to information returns

required to be filed, and information

statements required to be furnished,

after December 31, 2001.

PART 301—PROCEDURE AND

ADMINISTRATION

Par. 3. The authority citation for part

301 continues to read in part as follows:

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

Par. 4. Section 301.6011–2 is

amended by:

1. Revising the first sentence of

paragraph (b)(1).

2. Revising paragraph (g)(1).

3. Adding paragraph (g)(3).

The revisions and additions read as

follows:

§ 301.6011–2 Required use of magnetic

media.

* * * * *

(b) Returns required on magnetic

media. (1) If the use of Form 1042–S,

1098 series, 1099 series, 5498, 8027, W–

2G, or other form treated as a form

specified in this paragraph (b)(1) is

required by the applicable regulations or

revenue procedures for the purpose of

making an information return, the

information required by the form must

be submitted on magnetic media, except

as otherwise provided in paragraph (c)

of this section. * * *

* * * * *

(g) Effective dates. (1) Except as

otherwise provided in paragraph (g)(2)

or (g)(3) of this section, this section

applies to returns required to be filed

after December 31, 1986.

* * * * *

(3) This section applies to returns on

Forms 1098–T and 1098–E required to

be filed after December 31, 2001.

Robert E. Wenzel,

Deputy Commissioner of Internal Revenue.

[FR Doc. 00–13774 Filed 6–15–00; 8:45 am]

BILLING CODE 4830–01–U

DEPARTMENT OF DEFENSE

Department of the Army, Corps of

Engineers

33 CFR Part 323

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 232

[FRL–6717–2]

Proposed Revisions to the Clean Water

Act Regulatory Definitions of ‘‘Fill

Material’’ and ‘‘Discharge of Fill

Material’’

AGENCIES: U.S. Army Corps of

Engineers, Department of the Army,

DOD; and Environmental Protection

Agency.

ACTION: Proposed rule; extension of

comment period.

SUMMARY: On April 20, 2000, the

Department of the Army (Army) and the

Environmental Protection Agency (EPA)

jointly proposed to revise their Clean

Water Act (CWA) regulations defining

the term ‘‘fill material’’ (65 FR 21292).

Currently, the Army and EPA

definitions of fill material differ from

each other. The existing Army

definition defines ‘‘fill material’’ as any

material used for the primary purpose of

replacing an aquatic area with dry land

or of changing the bottom elevation of

a water body, and specifically excludes

from that definition any material

discharged into the water primarily to

dispose of waste, as that activity is

regulated under section 402 of the CWA.

The existing EPA definition defines ‘‘fill

material’’ as any pollutant which

replaces a portion of the waters of the

U.S. with dry land or which changes the

bottom elevation of such waters,

regardless of the purpose of the

discharge. The proposed rule would

amend both the Army and EPA

definitions of ‘‘fill material’’ to provide

a single definition of that term, and thus

ensure proper, consistent, and more

effective regulation under the CWA of

materials that have the effect of

replacing any portion of a water of the

U.S. with dry land or of changing the

bottom elevation of any portion of a

water of the U.S.

The Army and EPA sought comment

on the proposed rule by June 19, 2000.

In response to comments from the

public requesting additional time to

fully analyze the issues and prepare

comments, we are extending the

comment period on the proposed rule to

July 19, 2000.

DATES: Comments on the proposed rule

must be submitted on or before July 19,

2000.

ADDRESSES: Send written comments on

the proposed rule to the Office of the

Chief of Engineers, ATTN CECW–OR,

20 Massachusetts Avenue, Washington,

DC 20314–1000.

We request that commenters submit

any references cited in their comments.

We also request that commenters submit

an original and 2 copies of their written

comments and enclosures. Commenters

that want receipt of their comments

acknowledged should include a selfaddressed, stamped envelope. All

written comments must be postmarked

or delivered by hand. No facsimiles

(faxes) will be accepted.

A copy of the supporting documents

for this proposed rule is available for

review in Room 6225 at the U.S. Army

Corps of Engineers’ Pulaski Building,

located at 20 Massachusetts Avenue,

Washington, DC 20314–1000. For access

to docket materials, call (202) 761–0199

between 9 a.m. and 3:30 p.m. for an

appointment.

FOR FURTHER INFORMATION CONTACT: For

information on the proposed rule,

contact either Mr. Thaddeus Rugiel,

U.S. Army Corps of Engineers, ATTN

CECW–OR, 20 Massachusetts Avenue,

Washington, DC 20314–1000, phone:

(202) 761–0199, email:Thaddeus.J.Rugiel@

HQ02.USACE.ARMY.MIL, or Mr. John

Lishman, U.S. Environmental Protection

Agency, Office of Wetlands, Oceans and

Watersheds (4502F), 1200 Pennsylvania

Avenue NW, Washington, DC 20460,

phone: (202) 260–9180, e-mail:

lishman.john@epa.gov.