6090 Federal Register / Vol. 65, No. 26 / Tuesday, February 8, 2000 / Proposed Rules

taxable year to which the determination

is relevant.

(5) Availability and retention of

documents for inspection. The

documentation described in paragraphs

(d)(3) and (4) of this section must be

retained by the corporation seeking

qualified foreign corporation status (the

foreign corporation) until the expiration

of the statute of limitations for the

taxable year of the foreign corporation to

which the documentation relates. Such

documentation must be made available

for inspection by the Commissioner at

such time and place as the

Commissioner may request in writing.

(e) Reporting requirements. A foreign

corporation relying on the qualified

shareholder test of this section to

demonstrate that it is a qualified foreign

corporation for purposes of § 1.883–

1(c)(2) must provide the following

information in addition to the

information required in § 1.883–1(c)(3)

to be included in its Form 1120F for

each taxable year. The information

should be current as of the end of the

corporation’s taxable year. The

information must include the

following—

(1) A representation that more than 50

percent of the value of the outstanding

shares of the corporation is owned (or

treated as owned by reason of paragraph

(c) of this section) by qualified

shareholders for the category of income

for which the exemption is claimed;

(2) With respect to each individual

qualified shareholder owning 5 percent

or more of the foreign corporation,

applying the attribution rules of

paragraph (c) of this section, and relied

upon to meet the 50 percent ownership

test of paragraph (a) of this section, the

name and address, as represented on

each such individual’s ownership

statement;

(3) With respect to all qualified

shareholders relied upon to satisfy the

50 percent ownership test of paragraph

(a) of this section, the total percentage

of the value of the outstanding shares

owned, applying the attribution rules of

paragraph (c) of this section, by all

qualified shareholders resident in a

qualified foreign country, by country;

and

(4) Any other required

documentation.

§ 1.883–5 Effective date.

(a) General rule. Sections 1.883–1

through 1.883–4 apply to taxable years

of the foreign corporation ending 30

days or more after the date these

regulations are published as final

regulations in the Federal Register.

(b) Election for retroactive

application. When §§ 1.883–1 through

1.883–4 become generally applicable,

taxpayers may rely on all the provisions

of §§ 1.883–1 through 1.883–4 for

guidance and may elect to apply all

such substantive provisions for any

open taxable year of the foreign

corporation beginning after December

31, 1986, and ending less than 30 days

after the date these regulations are

published as final regulations in the

Federal Register. However, such

election is not required to be applied

with respect to § 1.883–1(c)(3) (relating

to the substantiation and reporting

required to be treated as a qualified

foreign corporation) or §§ 1.883–2(f),

1.883–3(d) and 1.883–4(e) (relating to

additional information to be included in

the return to demonstrate whether the

foreign corporation satisfies one of three

stock ownership tests). Such election

will be applicable for the year of the

election and for all subsequent taxable

years.

(c) Transition rule. For taxable years

of the foreign corporation ending 30

days or more after the date these

regulations are published as final

regulations in the Federal Register, and

until such time as the Form 1120F and

its instructions are revised to conform to

§§ 1.883–1 through 1.883–4, the

information required in § 1.883–1(c)(3)

and § 1.883–2(f), 1.883–3(d) or 1.883–

4(e), as applicable, must be included on

a written statement signed under

penalties of perjury by a person

authorized to sign the return, attached

to the Form 1120F, and filed with the

return.

Robert E. Wenzel,

Deputy Commissioner of Internal Revenue.

[FR Doc. 00–1899 Filed 2–7–00; 8:45 am]

BILLING CODE 4831–01–U

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG–103882–99]

RIN 1545–AX06

Depletion; Treatment of Delay Rental

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of proposed rulemaking

and notice of public hearing.

SUMMARY: This document contains

proposed amendments conforming

regulations relating to delay rental to the

requirements of section 263A relating to

capitalization and inclusion in

inventory of costs of certain expenses.

Changes to the applicable law were

made by the Tax Reform Act of 1986

and the Technical and Miscellaneous

Revenue Act of 1988. The proposed

regulations provide the public with

guidance concerning the application of

section 263A to delay rental.

DATES: Written comments must be

received by May 8, 2000. Outlines of

topics to be discussed at the public

hearing scheduled for May 26, 2000, at

10 a.m. must be received by May 5,

2000.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (REG–103882–99),

room 5226, Internal Revenue Service,

POB 7604, Ben Franklin Station,

Washington, DC 20044. Submissions

may be hand delivered between the

hours of 8 a.m. and 5 p.m. to:

CC:DOM:CORP:R (REG–103882–99),

Courier’s Desk, Internal Revenue

Service, 1111 Constitution Avenue,

NW., Washington, DC. Alternatively,

taxpayers may 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/

taxlregs/regslist.html. The public

hearing will be held in room 2615,

Internal Revenue Building, 1111

Constitution Avenue, NW., Washington,

DC.

FOR FURTHER INFORMATION CONTACT:

Concerning the regulation, Brenda M.

Stewart, (202) 622–3120; concerning

submissions and the hearing, LaNita

Van Dyke, (202) 622–7180 (not toll-free

numbers).

SUPPLEMENTARY INFORMATION:

Background

This document contains proposed

amendments to the Income Tax

Regulations (26 CFR part 1) under

section 612 to conform them to the

requirements of section 263A. Section

263A was enacted by the Tax Reform

Act of 1986, Public Law 99–514 (100

Stat. 2085), and amended by the

Technical and Miscellaneous Revenue

Act of 1988, Public Law 100–647 (102

Stat. 3342).

Explanation of Provisions

Under the terms of a lease of mineral

property, the lessee acquires, for a stated

term, the right and obligation to obtain

production of minerals from the

property. A lease may provide that for

each year that the lessee fails to make

efforts to obtain production, the lessee

must pay a ‘‘delay rental’’ to the lessor.

Section 1.612–3(c)(1) of the final

regulations defines a delay rental as an

amount paid for the privilege of

deferring development of the property

Federal Register / Vol. 65, No. 26 / Tuesday, February 8, 2000 / Proposed Rules 6091

and which could have been avoided by

abandonment of the lease, or by

commencement of development

operations, or by obtaining production.

Section 1.612–3(c)(2) of the final

regulations provides that since a delay

rental is in the nature of rent, it is

ordinary income to the payee and not

subject to depletion. The payor may at

his election deduct the delay rental as

an expense, or charge it to depletable

capital account under section 266.

Section 263A was enacted subsequent

to the issuance of § 1.612–3(c) of the

final regulations. The uniform

capitalization rules of section 263A

generally require the capitalization of all

direct costs and certain indirect costs

properly allocable to property produced

by the taxpayer. Capitalization may be

required even though production

(development) has not yet begun.

§ 1.263A–2(a)(3)(ii). In some situations,

a delay rental may be required to be

capitalized under section 263A.

Accordingly, the proposed regulation

clarifies that subsequent to the

enactment of section 263A, the payor of

a delay rental may elect to expense

currently the delay rental or charge it to

depletable capital account under section

266 to the extent that the delay rental is

not required to be capitalized under

section 263A and the regulations

thereunder.

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, a

Regulatory Flexibility Analysis is not

required. Pursuant to section 7805(f) of

the Internal Revenue Code, 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.

Comments and Public Hearing

Before these proposed regulations are

adopted as final regulations,

consideration will be given to any

written comments that are submitted

timely (a signed original and eight

copies) to the IRS. The IRS and Treasury

request comments on the clarity of the

proposed regulations and they may be

made easier to understand. All

comments will be made available for

public inspection and copying.

A public hearing has been scheduled

for May 26, 2000, at 10 a.m. in room

2615, Internal Revenue Building, 1111

Constitution Avenue NW., Washington,

DC. Because of access restrictions,

visitors will not be admitted beyond the

Internal Revenue Building lobby more

than 15 minutes before the hearing

starts.

The rules of 26 CFR 601.601(a)(3)

apply to the hearing.

Persons that wish to present oral

comments at the hearing must submit

written comments (a signed original and

eight (8) copies) by May 8, 2000. The

outline of topics to be discussed at the

hearing must be received by May 5,

2000.

A period of 10 minutes will be

allotted for each person for making

comments.

An agenda showing the scheduling of

the speakers will be prepared after the

deadline for receiving outlines has

passed. Copies of the agenda will be

available free of charge at the hearing.

Drafting Information

The principal author of this proposed

regulation is Brenda M. Stewart of the

Office of Assistant Chief Counsel

(Passthroughs and Special Industries),

Internal Revenue Service. However,

other personnel from the IRS and

Treasury Department participated in its

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 TAX

Paragraph 1. The authority citation

for part 1 continues to read in part as

follows:

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

Par. 2. In § 1.612–3, the second

sentence of paragraph (c)(2) is removed

and two sentences are added in its place

to read as follows:

§ 1.612–3 Depletion; treatment of bonus

and advanced royalty.

* * * * *

(c) * * *

(2) * * * To the extent the delay

rental is not required to be capitalized

under section 263A and the regulations

thereunder, the payor may at his

election deduct such amount or under

section 266 and the regulations

thereunder, charge it to depletable

capital account. The second sentence of

this paragraph (c)(2) applies to delay

rentals paid with respect to leasing

transactions entered into on or after the

date these regulations are published as

final regulations in the Federal Register.

* * * * *

Robert E. Wenzel,

Deputy Commissioner of Internal Revenue.

[FR Doc. 00–2730 Filed 2–7–00; 8:45 am]

BILLING CODE 4830–01–P

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 52

[CA–237–0221; FRL–6534–5]

Approval and Promulgation of State

Implementation Plans; California—

South Coast

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Proposed rule.

SUMMARY: EPA is proposing to approve

a state implementation plan (SIP)

revision by the State of California to

provide for attainment of the ozone

national ambient air quality standard

(NAAQS) in the Los Angeles-South

Coast Air Basin Area (South Coast). EPA

is proposing to approve the SIP revision

under provisions of the Clean Air Act

(CAA) regarding EPA action on SIP

submittals, SIPs for national primary

and secondary ambient air quality

standards, and plan requirements for

nonattainment areas.

DATES: Comments must be received on

or before March 9, 2000.

ADDRESSES: Written comments should

be addressed to: Dave Jesson (AIR–2),

EPA Region IX, 75 Hawthorne Street,

San Francisco, CA 94105–3901, or

jesson.david@epa.gov. The rulemaking

docket for this notice is available for

public inspection during normal

business hours at EPA’s Region IX

office. A reasonable fee may be charged

for copying parts of the docket.

Copies of the SIP materials are also

available for inspection at the following

locations:

California Air Resources Board, 2020 L

Street, Sacramento, California

South Coast Air Quality Management

District, 21865 E. Copley Drive,

Diamond Bar, California

The SIP materials are also

electronically available at: http://

www.aqmd.gov/aqmp/

FOR FURTHER INFORMATION CONTACT:

Dave Jesson at (415) 744–1288.