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###### Department of the Treasury

###### Internal Revenue Service

          - 26 CFR Part 1
          - [REG-132736-11]
          - RIN 1545-BK49

# AGENCY:

Internal Revenue Service (IRS), Treasury.

# ACTION:

Notice of proposed rulemaking by cross-reference to temporary regulations.

# SUMMARY:

                        In the Rules and Regulations section in this issue of the                         **Federal Register,**                         the IRS is issuing temporary regulations that provide guidance relating to a new provision of the Internal Revenue Code (Code) that addresses situations in which foreign income taxes have been separated from the related income. Those regulations are necessary to provide guidance on applying the new statutory provision, which was enacted as part of legislation commonly referred to as the Education Jobs and Medicaid Assistance Act (EJMAA) on August 10, 2010. The text of those temporary regulations published in this issue of the                         **Federal Register**                         also serves as the text of these proposed regulations.                    

# DATES:

Comments and requests for a public hearing must be received by May 14, 2012.

# ADDRESSES:

                        Send submissions to CC:PA:LPD:PR (REG-132736-11), room 5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-132736-11), Courier's desk, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, DC 20044, or sent electronically, via the Federal eRulemaking Portal at                         *www.regulations.gov*                         (IRS REG-132736-11).                    

# FOR FURTHER INFORMATION CONTACT:

Concerning the regulations, Suzanne M. Walsh, (202) 622-3850; concerning submissions of comments, Oluwafunmilayo Taylor, (202) 622-7180 (not toll-free numbers).

# SUPPLEMENTARY INFORMATION:

## Background and Explanation of Provisions

                    Temporary regulations in the Rules and Regulations section of this issue of the                     **Federal Register**                     contain amendments to the Income Tax Regulations (26 CFR part 1) which                           ( print page 8185)                        provide rules relating to a new provision of the Code that was enacted as part of EJMAA (Pub. L. 111-226, 124 Stat. 2389 (2010)) which addresses situations in which foreign income taxes have been separated from the related income. The text of those regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the temporary regulations and these proposed regulations. The regulations affect taxpayers claiming foreign tax credits.                

## Special Analyses

It has been determined that this notice of proposed rulemaking is 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, and because the 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), these regulations have been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

## Comments and Requests for Public Hearing

                    Before these proposed regulations are adopted as final regulations, consideration will be given to any comments that are submitted timely to the IRS as prescribed in this preamble under                     **ADDRESSES.**                     The Treasury Department and the IRS request comments on all aspects of the proposed rules. All comments will be available at                     *www.regulations.gov*                     or upon request. A public hearing will be scheduled if requested in writing by any person that timely submits comments. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the                     **Federal Register**                    .                

## Drafting Information

The principal author of these regulations is Suzanne M. Walsh of the Office of Associate Chief Counsel (International). However, other personnel from the IRS and the Treasury Department participated in their development.

# List of Subjects in 26 CFR Part 1

      - Income taxes
      - Reporting and recordkeeping requirements

## Proposed Amendments to the Regulations

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

# PART 1—INCOME TAXES

**Paragraph 1.**                         The authority citation for part 1 continues to read in part as follows:                    

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

**Par. 2.**                         Section 1.704-1 is amended as follows:                    

                        1. Paragraph (b)(1)(ii)(                        *b*)(                        *3*) is added.                    

                        2. Paragraph (b)(4)(viii)(                        *d*)(                        *3*) and paragraph (b)(5)                         *Example 24*                         are revised.                    

The addition and revisions read as follows:

§ 1.704-1 

* * * * *

(b) * * *

(1) * * *

(ii) * * *

                            (                            *b*) * * *                        

                            (                            *3*) [The text of the proposed amendments to § 1.704-1(b)(1)(ii)(                            *b*)(                            *3*) is the same as the text of § 1.704-1T(b)(1)(ii)(                            *b*)(                            *3*) published elsewhere in this issue of the                             **Federal Register**                            .]                        

* * * * *

(4) * * *

(viii) * * *

                            (                            *d*) * * *                        

                            (                            *3*) [The text of the proposed amendments to § 1.704-1(b)(4)(viii)(                            *d*)(                            *3*) is the same as the text of § 1.704-1T(b)(4)(viii)(                            *d*)(                            *3*) published elsewhere in this issue of the                             **Federal Register**                            .]                        

* * * * *

(5) * * *

*Example 24.*                             [The text of the proposed amendments to § 1.704-1(b)(5)                             *Example 24*                             is the same as the text of §§ 1.704-1T(b)(5)                             *Example 24*                             published elsewhere in this issue of the                             **Federal Register.**                            ]                        

* * * * *

**Par. 3.**                             Section 1.909-0 is added to read as follows:                        

§ 1.909-0 

                            [The text of proposed § 1.909-0 is the same as the text of § 1.909-0T published elsewhere in this issue of the                             **Federal Register.**                            ]                        

**Par. 4.**                             Sections 1.909-1 through 1.909-6 are added to read as follows:                        

§ 1.909-1 

                            [The text of proposed § 1.909-1 is the same as the text of § 1.909-1T(a) through (e) published elsewhere in this issue of the                             **Federal Register.**                            ]                        

§ 1.909-2 

                            [The text of proposed § 1.909-2 is the same as the text of § 1.909-2T(a) through (c) published elsewhere in this issue of the                             **Federal Register.**                            ]                        

§ 1.909-3 

                            [The text of proposed § 1.909-3 is the same as the text of § 1.909-3T(a) through (c) published elsewhere in this issue of the                             **Federal Register.**                            ]                        

§ 1.909-4 

                            [The text of proposed § 1.909-4 is the same as the text of § 1.909-4T(a) through (b) published elsewhere in this issue of the                             **Federal Register.**                            ]                        

§ 1.909-5 

                            [The text of proposed § 1.909-5 is the same as the text of § 1.909-5T(a) through (c) published elsewhere in this issue of the                             **Federal Register**                            .]                        

§ 1.909-6 

                            [The text of proposed § 1.909-6 is the same as the text of § 1.909-6T(a) through (h) published elsewhere in this issue of the                             **Federal Register**                            .]                        

Steven T. Miller,

Deputy Commissioner for Services and Enforcement. 

[FR Doc. 2012-3350 Filed 2-9-12; 4:15 pm]

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