Federal Register / Vol. 89, No. 224 / Wednesday, November 20, 2024 / Proposed Rules 91617 

Safety Commission and at the National 

Archives and Records Administration 

(NARA). Contact the U.S. Consumer 

Product Safety Commission at: Office of 

the Secretary, U.S. Consumer Product 

Safety Commission, 4330 East-West 

Highway, Bethesda, MD 20814; 

telephone (301) 504–7479, email cpscos@cpsc.gov. For information on the 

availability of this material at NARA, 

visit www.archives.gov/federal-register/ 

cfr/ibr-locations or email fr.inspection@

nara.gov. The material may be obtained 

from the following sources: 

(1) Pool and Hot Tub Alliance 

(PHTA), 1650 King Street, Suite 602, 

Alexandria, VA 22314; phone: (703) 

838–0083; website: www.phta.org. 

(i) ANSI APSP ICC–16, American 

National Standard for Suction Outlet 

Fitting Assemblies (SOFA) for Use in 

Pools, Spas, and Hot Tubs, (approved 

August 18, 2017). 

(ii) [Reserved] 

(2) Underwriters Laboratories (UL), 

1250 Connecticut Avenue NW, Suite 

520, Washington, DC 20036; phone: 

(202) 296–7840; website: www.ul.com. 

(i) ANSI/CAN/UL 12402–9, Standard 

for Personal Flotation Devices—Part 9: 

Test Methods, (published February 11, 

2021). 

(ii) [Reserved] 

(3) National Electrical Manufacturers 

Association (NEMA), 1300 17th St. N, 

Arlington, VA 22209; phone: (703) 841– 

3200; website: www.nema.org. 

(i) ANSI/NEMA Z535.4–23, American 

National Standard for Product Safety 

Signs and Labels (approved December 

14, 2023). 

(ii) [Reserved] 

(4) ASTM International (ASTM), 100 

Barr Harbor Drive, PO Box C700, West 

Conshohocken, PA 19428–2959; phone: 

(610) 832–9585; website: www.astm.org. 

(i) ASTM F833–21, Standard 

Consumer Safety Performance 

Specification for Carriages and Strollers, 

(approved June 15, 2021). 

(ii) ASTM F1967–19, Standard 

Consumer Safety Specification for 

Infant Bath Seats, (approved May 1, 

2019). 

Alberta E. Mills, 

Secretary, Consumer Product Safety 

Commission. 

[FR Doc. 2024–25446 Filed 11–19–24; 8:45 am] 

BILLING CODE 6355–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–116017–24] 

RIN 1545–BR36 

Administrative Requirements for an 

Election To Exclude Applicable 

Unincorporated Organizations From 

the Application of Subchapter K 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking; 

notice of public hearing. 

SUMMARY: This document contains 

proposed regulations that would 

provide certain administrative 

requirements for unincorporated 

organizations taking advantage of 

modifications to the rules governing 

elections to be excluded from the 

application of partnership tax rules. 

These proposed regulations would affect 

unincorporated organizations and their 

members, including tax-exempt 

organizations, the District of Columbia, 

State and local governments, Indian 

Tribal governments, Alaska Native 

Corporations, the Tennessee Valley 

Authority, rural electric cooperatives, 

and certain agencies and 

instrumentalities. The proposed 

regulations would also update the 

procedure for obtaining permission to 

revoke a section 761(a) election. 

DATES: Written or electronic comments 

must be received by January 21, 2025. 

A public hearing on these proposed 

regulations has been scheduled for 

February 7, 2025, at 10 a.m. Eastern 

Standard Time (EST). Requests to speak 

and outlines of topics to be discussed at 

the public hearing must be received by 

January 21, 2025. If no outlines are 

received by January 21, 2025, the public 

hearing will be cancelled. Requests to 

attend the public hearing must be 

received by 5 p.m. on February 5, 2025. 

ADDRESSES: Commenters are strongly 

encouraged to submit public comments 

electronically via the Federal 

eRulemaking Portal at https://

www.regulations.gov (indicate IRS and 

REG–116017–24) by following the 

online instructions for submitting 

comments. Requests for a public hearing 

must be submitted as prescribed in the 

‘‘Comments and Public Hearing’’ 

section. Once submitted to the Federal 

eRulemaking Portal, comments cannot 

be edited or withdrawn. The 

Department of the Treasury (Treasury 

Department) and the IRS will publish 

for public availability any comments 

submitted to the IRS’s public docket. 

Send paper submissions to: 

CC:PA:01:PR (REG–116017–24), Room 

5203, Internal Revenue Service, P.O. 

Box 7604, Ben Franklin Station, 

Washington, DC 20044. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

contact Cameron Williamson at (202) 

317–6684; and concerning submissions 

of comments and requests for a public 

hearing, contact the Publications and 

Regulations Section at (202) 317–6901 

(not toll-free numbers) or by email to 

publichearings@irs.gov (preferred). 

SUPPLEMENTARY INFORMATION: 

Authority 

This document contains proposed 

amendments to the Income Tax 

Regulations (26 CFR part 1) under 

section 761(a) of the Internal Revenue 

Code (Code) issued by the Secretary of 

the Treasury or her delegate (Secretary) 

under the express authority granted 

under sections 761(a), 6031(a), 6417(d) 

and (h), and 7805(a) of the Code 

(proposed regulations). 

Section 761(a) provides, in part, an 

express grant of regulatory authority for 

section 761(a) stating, ‘‘[u]nder 

regulations the Secretary may, at the 

election of all the members of an 

unincorporated organization, exclude 

such organization from the application 

of all or a part of this subchapter.’’ 

Section 6031(a) provides an express 

grant of a regulatory authority for the 

Secretary to prescribe in forms or 

regulations partnership reporting 

information required ‘‘for the purpose of 

carrying out the provisions of subtitle 

A.’’ 

Section 6417(d) provides several 

express delegations of authority to the 

Secretary to enforce requirements for 

elective payments of applicable credits 

under section 6417 and recapture 

excessive payments. Section 6417(h) 

requires the Secretary to issue 

regulations or other guidance as may be 

necessary to carry out the purposes of 

section 6417, including guidance to 

ensure that the amount of the payment 

or deemed payment made under this 

section is commensurate with the 

amount of the credit that would be 

otherwise allowable (determined 

without regard to section 38(c)). 

Finally, section 7805(a) authorizes the 

Secretary to ‘‘prescribe all needful rules 

and regulations for the enforcement of 

[the Code], including all rules and 

regulations as may be necessary by 

reason of any alteration of law in 

relation to internal revenue.’’ 


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91618 Federal Register / Vol. 89, No. 224 / Wednesday, November 20, 2024 / Proposed Rules 

Background 

I. Elective Payment of Applicable 

Credits 

Section 6417 was added to the Code 

by section 13801(a) of Public Law 117– 

169, 136 Stat. 1818, 2003 (August 16, 

2022), commonly referred to as the 

Inflation Reduction Act of 2022 (IRA). 

Section 6417 allows an ‘‘applicable 

entity’’ (including tax-exempt 

organizations, the District of Columbia, 

State and local governments, Indian 

Tribal governments, Alaska Native 

Corporations, the Tennessee Valley 

Authority, rural electric cooperatives, 

and certain agencies and 

instrumentalities) to make an election to 

treat an ‘‘applicable credit’’ (as defined 

in section 6417(b)) determined with 

respect to such entity as making a 

payment by such entity against the tax 

imposed by subtitle A of the Code, for 

the taxable year with respect to which 

such credit is determined, equal to the 

amount of such credit. Section 6417 also 

provides special rules relating to 

partnerships and directs the Secretary to 

provide rules for making elections 

under section 6417. Section 13801(g) of 

the IRA provides that section 6417 

applies to taxable years beginning after 

December 31, 2022. 

On March 11, 2024, the Treasury 

Department and the IRS published in 

the Federal Register (88 FR 40528) final 

regulations (TD 9988) providing 

guidance on the section 6417 elective 

payment election (section 6417 

regulations). Section 1.6417–2(a)(1)(iv) 

provides that partnerships are not 

applicable entities described in section 

6417(d)(1)(A) or § 1.6417–1(c), 

regardless of how many of their partners 

are themselves applicable entities. 

Accordingly, any partnership making an 

elective payment election must be an 

electing taxpayer (as defined in 

§ 1.6417–1(g)), and, as such, the only 

applicable credits with respect to which 

the partnership could make an elective 

payment election would be credits 

determined under sections 45Q, 45V, 

and 45X for the time periods allowed in 

section 6417(d). However, § 1.6417– 

2(a)(1)(iii) provides that if an applicable 

entity is a co-owner in an applicable 

credit property (as defined in § 1.6417– 

1(e)), through an organization that has 

made a valid election under section 

761(a) (section 761(a) election) to be 

excluded from the application of the 

partnership tax rules of subchapter K of 

chapter 1 of the Code (subchapter K), 

then the applicable entity’s undivided 

ownership share of the applicable credit 

property is treated as a separate 

applicable credit property owned by 

such applicable entity. As a result, the 

applicable entity may make an elective 

payment election for the applicable 

credit(s) determined with respect to 

such applicable credit property. 

Also on March 11, 2024, the Treasury 

Department and the IRS published in 

the Federal Register (89 FR 17613) 

proposed amendments (REG–101552– 

24) to the regulations under section 

761(a) to carry out the purposes of 

section 6417 (March 2024 proposed 

regulations). Generally, the March 2024 

proposed regulations would have 

amended certain provisions of § 1.761– 

2 to provide that unincorporated 

organizations meeting certain 

requirements (applicable 

unincorporated organizations) are 

eligible for certain modifications to the 

existing requirements for making a 

section 761(a) election. 

Concurrently with the publication of 

these proposed regulations, the Treasury 

Department and the IRS are publishing 

in the Rules and Regulations section of 

this edition of the Federal Register a 

Treasury decision (TD 10012, RIN 1545– 

BR09) adopting certain provisions of 

§ 1.761–2 of the March 2024 proposed 

regulations as final regulations under 

section 761(a) (final regulations). The 

provisions of § 1.761–2 of the final 

regulations are explained in greater 

detail in the preamble to the final 

regulations. The provisions of § 1.761–2 

in effect as of January 19, 2025, are 

referred to in this preamble as ‘‘revised 

§ 1.761–2.’’ 

II. Overview of Section 761(a) and 

Revised § 1.761–2 

Section 761(a) provides, in part, that 

under regulations the Secretary may, at 

the election of all of the members of an 

unincorporated organization, exclude 

such organization from the application 

of all or part of subchapter K if the 

organization is availed of: (1) for 

investment purposes only and not for 

the active conduct of a business, (2) for 

the joint production, extraction, or use 

of property, but not for the purpose of 

selling services or property produced or 

extracted, or (3) by dealers in securities 

for a short period for the purpose of 

underwriting, selling, or distributing a 

particular issue of securities, provided 

that the income of the members of the 

organization may be adequately 

determined without the computation of 

partnership taxable income. 

Unincorporated organizations seeking 

to make an election to be excluded from 

the application of subchapter K so that 

one or more of their members can make 

an election under section 6417 are likely 

to be availed of for the purposes listed 

in section 761(a)(2), that is, for the joint 

production, extraction, or use of 

property, but not for the purpose of 

selling services or property produced or 

extracted. Pursuant to the authority in 

section 761(a), revised § 1.761–2(a)(3) 

provides additional requirements for an 

unincorporated organization to elect to 

be excluded from the application of 

subchapter K under section 761(a)(2). 

Specifically, revised § 1.761–2(a)(3) 

requires that the participants in the joint 

production, extraction, or use of 

property: (i) own the property as coowners, either in fee or under lease or 

other form of contract granting exclusive 

operating rights (co-ownership 

requirement), (ii) reserve the right 

separately to take in kind or dispose of 

their shares of any property produced, 

extracted, or used, and (iii) do not 

jointly sell services or the property 

produced or extracted (joint marketing 

requirement), although each separate 

participant may delegate authority to 

sell the participant’s share of the 

property produced or extracted for the 

time being for the participant’s account, 

but not for a period of time in excess of 

the minimum needs of the industry, and 

in no event for more than one year. 

The final regulations modify the coownership and joint marketing 

requirements for ‘‘applicable 

unincorporated organizations.’’ Under 

revised § 1.761–2(a)(4)(ii), an applicable 

unincorporated organization is defined 

as an unincorporated organization (1) 

that is owned, in whole or in part, by 

one or more applicable entities, as 

defined in section 6417(d)(1)(A) and 

§ 1.6417–1(c), (2) the members of which 

enter into a joint operating agreement in 

which the members reserve the right 

separately to take in kind or dispose of 

their pro rata shares of any property 

produced, extracted, or used, and any 

associated renewable energy credits or 

similar credits, (3) that, pursuant to the 

joint operating agreement, is organized 

exclusively to own and operate 

applicable credit property (as defined in 

§ 1.6417–1(e)), (4) for which one or more 

of the applicable entities will make an 

elective payment election under section 

6417(a) for the applicable credits 

determined with respect to its share of 

the applicable credit property, (5) the 

members of which are able to compute 

their income without the necessity of 

computing partnership taxable income, 

and (6) which is not a syndicate, group, 

pool, or joint venture which is 

classifiable as an association, or any 

group operating under an agreement 

which creates an organization 

classifiable as an association. 

Revised § 1.761–2(b) provides rules 

for making a section 761(a) election. 

Revised § 1.761–2(b)(2)(i) generally 

provides that a section 761(a) election 


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Federal Register / Vol. 89, No. 224 / Wednesday, November 20, 2024 / Proposed Rules 91619 

must be made in a statement attached 

to, or incorporated in, a properly 

executed partnership return, Form 1065, 

U.S. Return of Partnership Income, 

which must contain, in lieu of the 

information required by Form 1065 and 

the instructions relating thereto, the 

following information: the name or 

other identification and the address of 

the organization together with 

information on the return, or in the 

statement attached to the return, 

showing the names, addresses, and 

identification numbers of all the 

members of the organization; a 

statement that the organization qualifies 

under § 1.761–2(a)(1) and either 

§ 1.761–2(a)(2) or (3) (taking into 

account revised § 1.761–2(a)(4), as 

applicable); a statement that all of the 

members of the organization elect to be 

excluded from all of subchapter K; and 

a statement indicating where a copy of 

the agreement under which the 

organization operates is available (or if 

the agreement is oral, from whom the 

provisions of the agreement may be 

obtained). 

If an unincorporated organization 

does not make the section 761(a) 

election provided in this manner, 

revised § 1.761–2(b)(2)(ii) provides (as it 

provided before the final regulations) 

that the organization will nevertheless 

be deemed to have made the election if 

it can be shown from all the 

surrounding facts and circumstances 

that it was the intention of the members 

of such organization at the time of its 

formation to secure exclusion from all of 

subchapter K beginning with the first 

taxable year of the organization (deemed 

election rule). Although the following 

facts are not exclusive, the requisite 

intent may be indicated if (1) at the time 

of the formation of the organization 

there is an agreement among the 

members that the organization be 

excluded from the application of 

subchapter K beginning with the first 

taxable year of the organization, or (2) 

the members of the organization owning 

substantially all of the capital interests 

report their respective shares of the 

items of income, deductions, and credits 

of the organization on their respective 

returns (making such elections as to 

individual items as may be appropriate) 

in a manner consistent with the 

exclusion of the organization from 

subchapter K beginning with the first 

taxable year of the organization. 

III. Reason for Proposed Regulations 

Section 6417(d)(5) provides that as a 

condition of, and prior to, any amount 

being treated as a payment that is made 

by an applicable entity, the Secretary 

may require such information or 

registration as the Secretary deems 

necessary for purposes of preventing 

duplication, fraud, improper payments, 

or excessive payments. Section 6417(h) 

requires the Secretary to issue 

regulations or other guidance to ensure 

that the amount of a payment or deemed 

payment made under section 6417 is 

commensurate with the amount of the 

credit that would be otherwise 

allowable. 

The Treasury Department and the IRS 

have determined that additional 

guidance outlining certain 

administrative requirements is needed 

to comply with these statutory 

directives. After an unincorporated 

organization makes a section 761(a) 

election, each member may increase or 

reduce (even to zero) its interest in the 

unincorporated organization without 

affecting the validity of the section 

761(a) election. As a result, the 

information submitted to the IRS in 

connection with an organization’s 

section 761(a) election, as required 

under revised § 1.761–2(b), can become 

inaccurate at any time without notice to 

the IRS. This lack of reliable and 

accurate information about the 

applicable entity owners (if any) of an 

applicable unincorporated organization 

constrains the IRS’s ability to ensure 

that the amount of payments or deemed 

payments made under section 6417 are 

commensurate with the amount of 

applicable credits that would otherwise 

be allowable, as directed under section 

6417(h). 

This problem is compounded by the 

deemed election rule in revised § 1.761– 

2(b)(2)(ii). A deemed election obscures 

any record of an organization’s members 

(including any applicable entities) that 

are subject to a section 761(a) election 

and can be discovered by the IRS only 

upon examination. In contrast, a written 

election is a relatively simple and 

effective means of identifying any 

applicable entity owners of applicable 

credit property held through an 

applicable unincorporated organization 

with a valid section 761(a) election. 

Moreover, members of an organization 

who form an entity or enter into longterm contracts together are especially 

likely to know that their activities could 

create a partnership subject to 

subchapter K. The Treasury Department 

and the IRS have concerns that deemed 

elections are not appropriate in such 

situations, especially when (as is 

anticipated to be typical) applicable 

entities intend to make section 6417 

elections with respect to applicable 

credit property owned by an 

unincorporated organization, as such 

elections are generally permitted only 

when the organization has a valid 

section 761(a) election. 

Explanation of Provisions 

The proposed regulations would 

impose new requirements on applicable 

unincorporated organizations whose 

section 761(a) elections would not be 

valid without the application of revised 

§ 1.761–2(a)(4)(iii) (specified 

modifications for applicable 

unincorporated organizations). 

Proposed § 1.761–2(a)(4)(iv)(A) would 

provide that a specified applicable 

unincorporated organization’s section 

761(a) election will terminate as a result 

of a ‘‘terminating transaction.’’ A 

terminating transaction is the 

acquisition or disposition of an interest 

in a specified applicable unincorporated 

organization, other than as the result of 

a transfer between a disregarded entity 

(as defined in § 1.6417–1(f)) and its 

owner since such transfer does not 

change the identity of the applicable 

entity for purposes of section 6417. See 

§ 1.6417–2(a)(1)(ii); see also proposed 

§ 1.6417–1(f) contained in the notice of 

proposed rulemaking Entities Wholly 

Owned by Indian Tribal Governments 

(REG–113628–21) published in the 

Federal Register (89 FR 81871) on 

October 9, 2024, which alters the 

definition of disregarded entities for 

purposes of section 6417. 

Terminating transactions will not 

terminate an applicable unincorporated 

organization’s section 761(a) election if 

the organization meets the requirements 

to make a new section 761(a) election 

and makes such an election not later 

than the time prescribed by § 1.6031(a)– 

1(e) (including extensions thereof) for 

filing a partnership return with respect 

to the period of time that would have 

been the organization’s taxable year if, 

after the taxable year with respect to 

which the organization first made the 

section 761(a) election, the organization 

continued to have taxable years and 

such taxable years were determined by 

reference to the taxable year in which 

the organization made the section 761(a) 

election (hypothetical partnership 

taxable year). Such election will protect 

the organization’s section 761(a) 

election against all terminating 

transactions in a hypothetical year only 

if it contains, in addition to the 

information required by § 1.761–2(b), 

information about every terminating 

transaction that occurred in the 

hypothetical partnership taxable year, 

including the parties thereto and the 

interest(s) transferred. If a new election 

is not timely made, the section 761(a) 

election would terminate on the first 

day of the taxable year beginning after 

the hypothetical partnership taxable 


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91620 Federal Register / Vol. 89, No. 224 / Wednesday, November 20, 2024 / Proposed Rules 

year in which one or more terminating 

transactions occurred. Proposed 

§ 1.761–2(a)(5)(iv) would add Example 4 

to illustrate this new rule. These 

provisions are inapplicable to an 

organization that is no longer eligible to 

elect to be excluded from the 

application of subchapter K. When an 

organization becomes ineligible to make 

a section 761(a) election, the 

organization’s section 761(a) election 

automatically terminates, and the 

organization must begin complying with 

the requirements of subchapter K. 

The proposed regulations would also 

clarify that the deemed election rule in 

§ 1.761–2(b)(2)(ii) does not apply to 

specified applicable unincorporated 

organizations. This change is necessary 

to ensure that an unincorporated 

organization cannot benefit from the 

modifications in revised § 1.761– 

2(a)(4)(iii) without providing written 

information to the IRS about its 

members. The change also ensures that 

a specified applicable unincorporated 

organization that terminates as the 

result of a terminating transaction 

cannot have its election restored 

without making a new election in 

writing. However, if such an 

organization can make a valid section 

761(a) election without the application 

of either of the specified modifications 

in revised § 1.761–2(a)(4)(iii), the 

organization may be deemed to make 

such an election under the deemed 

election rule. 

In addition, the proposed regulations 

would clarify that an applicable 

unincorporated organization making a 

section 761(a) election must submit all 

information required by the instructions 

to Form 1065, U.S. Return of 

Partnership Income, for making a 

section 761(a) election. This 

requirement is intended to ensure that 

the organization making a section 761(a) 

election provides all of the information 

necessary for the IRS to properly 

administer section 6417 with respect to 

applicable unincorporated organizations 

making a section 761(a) election. 

The proposed regulations would also 

update the procedure for obtaining 

permission to revoke a section 761(a) 

election. Prior to revision in the final 

regulations, § 1.761–2(b)(3) provided 

that taxpayers could revoke a section 

761(a) election by submitting an 

application for permission to revoke a 

section 761(a) election to the 

Commissioner of Internal Revenue, 

Attention: T:I, Washington, DC 20224, 

no later than 30 days after the beginning 

of the first taxable year to which the 

revocation is to apply. Though this 

language did not define what the 

application would include, it 

historically has been interpreted to 

mean a private letter ruling request. 

However, the language in § 1.761– 

2(b)(3) was imprecise, lists an incorrect 

address, and was removed by the final 

regulations. The proposed regulations 

would clarify that such an application 

must be made by submitting a letter 

ruling request that complies with the 

requirements of Rev. Proc. 2024–1 or 

successor guidance. This language 

would ensure that the process for 

making this application is up-to-date 

and clear. Taxpayers may continue to 

submit applications for permission to 

revoke an election by requesting a 

private letter ruling and can rely on the 

process in Revenue Procedure 2024–1 or 

successor guidance prior to the date 

regulations finalizing these proposed 

regulations are published in the Federal 

Register. 

Proposed Applicability Dates 

These proposed regulations are 

proposed to apply to taxable years 

ending on or after November 20, 2024. 

Special Analyses 

I. Regulatory Planning and Review 

Pursuant to the Memorandum of 

Agreement, Review of Treasury 

Regulations under Executive Order 

12866 (June 9, 2023), tax regulatory 

actions issued by the IRS are not subject 

to the requirements of section 6 of 

Executive Order 12866, as amended. 

Therefore, a regulatory impact 

assessment is not required. 

II. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3520) (PRA) generally 

requires that a Federal agency obtain the 

approval of the Office of Management 

and Budget (OMB) before collecting 

information from the public, whether 

such collection of information is 

mandatory, voluntary, or required to 

obtain or retain a benefit. An agency 

may not conduct or sponsor, and a 

person is not required to respond to, a 

collection of information unless the 

collection of information displays a 

valid control number. 

These proposed regulations mention 

reporting and recordkeeping 

requirements that must be satisfied for 

unincorporated organizations to make 

and maintain an election out of 

subchapter K. These collections of 

information are generally used by the 

IRS for tax compliance purposes and by 

taxpayers to facilitate proper reporting 

and recordkeeping. The likely 

respondents to these collections are 

businesses and tax-exempt 

organizations. 

These proposed regulations would 

also require unincorporated 

organizations to provide all information 

required by the instructions to Form 

1065 for making a section 761(a) 

election. This reporting requirement 

will be approved by OMB under 1545– 

0123 for business filers and 1545–0047 

for tax-exempt organizations in 

accordance with the PRA procedures in 

5 CFR 1320.10. 

These proposed regulations would 

include recordkeeping requirements for 

certain unincorporated organizations to 

track changes in ownership of interests 

in each such organization. The 

organizations can maintain these 

records in any manner they deem 

appropriate. The recordkeeping is 

needed to determine whether a new 

written section 761(a) election must be 

filed with the IRS. IRS will seek OMB 

approval under a new OMB Control 

Number (1545–NEW) for the burden on 

business filers and tax-exempt 

organizations. The associated burden for 

the recordkeeping is estimated as 

follows: 

Estimated number of respondents: 

1,000. 

Estimated average annual burden per 

response: 1 hour. 

Estimated total annual reporting 

burden: 1,000 hours. 

The recordkeeping in this proposed 

rulemaking has been submitted to OMB 

for review in accordance with the PRA 

under OMB Control Number 1545– 

NEW. Commenters are strongly 

encouraged to submit public comments 

electronically. Written comments and 

recommendations for the proposed 

information collection should be sent to 

www.reginfo.gov/public/do/PRAMain, 

with copies to the IRS. Find this 

particular information collection by 

selecting ‘‘Currently under Review— 

Open for Public Comments’’ then by 

using the search function. Submit 

electronic submissions for the proposed 

information collection to the IRS via 

email at pra.comments@irs.gov (indicate 

REG–116017–24 on the Subject line). 

Comments on the collection of 

information should be received by 

January 21, 2025. 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; 

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, 


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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. 

III. Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA) imposes 

certain requirements with respect to 

Federal rules that are subject to the 

notice and comment requirements of 

section 553(b) of the Administrative 

Procedure Act (5 U.S.C. 551 et seq.) and 

that are likely to have a significant 

economic impact on a substantial 

number of small entities. Unless an 

agency determines that a proposal is not 

likely to have a significant economic 

impact on a substantial number of small 

entities, section 603 of the RFA requires 

the agency to present an initial 

regulatory flexibility analysis (IRFA) of 

the proposed rule. The Treasury 

Department and the IRS have not 

determined whether the proposed rule, 

when finalized, will likely have a 

significant economic impact on a 

substantial number of small entities. 

This determination requires further 

study. However, because there is a 

possibility of significant economic 

impact on a substantial number of small 

entities, an IRFA is provided in these 

proposed regulations. The Treasury 

Department and the IRS invite 

comments on both the number of 

entities affected and the economic 

impact on small entities. 

Pursuant to section 7805(f), this 

notice of proposed rulemaking has been 

submitted to the Chief Counsel of for the 

Office of Advocacy of the Small 

Business Administration for comment 

on its impact on small business. 

1. Need for and Objectives of the 

Proposed Rule 

As discussed in this preamble, the 

proposed regulations are intended to 

ensure that each section 761(a) election 

by a specified applicable 

unincorporated organization provides 

all of the information necessary for the 

IRS to comply with the directives of 

section 6417(d) and (h). 

2. Affected Small Entities 

The RFA directs agencies to provide 

a description of, and where feasible, an 

estimate of, the number of small entities 

that may be affected by the proposed 

rules, if adopted. The Small Business 

Administration’s Office of Advocacy 

estimates in its 2024 Frequently Asked 

Questions that 99.9 percent of American 

businesses meet its definition of a small 

business. The applicability of these 

proposed regulations does not depend 

on the size of the business, as defined 

by the Small Business Administration. 

As described more fully in the preamble 

to these proposed regulations and in 

this IRFA, section 761(a) and these 

proposed regulations may affect a 

variety of different entities across 

several different industries as there are 

12 different applicable credits for which 

an elective payment election under 

section 6417(a) may be made. There is 

uncertainty as to the exact number of 

small businesses within this group. The 

current estimated number of 

respondents to the section 6417 

regulations is 20,000 taxpayers, and it is 

likely that a fraction of that number 

would be respondents to these proposed 

regulations. 

The Treasury Department and the IRS 

expect to receive more information on 

the impact on small businesses through 

comments on this proposed rule and 

again when taxpayers start to make the 

section 761(a) election using the 

guidance and procedures provided in 

the final regulations and these proposed 

regulations. 

3. Impact of the Proposed Rules 

The proposed regulations would 

require certain applicable 

unincorporated organizations to submit 

section 761(a) elections in writing more 

frequently than they otherwise would 

have (though no more than once per 

year). In addition, a specified applicable 

unincorporated organization will be 

responsible for identifying any 

transactions involving ownership 

interests therein. Applicable 

unincorporated organizations that make 

a section 761(a) election will have 

administrative costs related to reading 

and understanding the rules as well as 

recordkeeping and reporting 

requirements. The costs will vary across 

different-sized entities and across the 

type of project(s) in which such entities 

are engaged. 

Although the Treasury Department 

and the IRS do not have sufficient data 

to determine precisely the likely extent 

of the increased costs of compliance, the 

estimated burdens of complying with 

the recordkeeping and reporting 

requirements are described in the 

Paperwork Reduction Act section of the 

preamble. 

4. Alternatives Considered 

The Treasury Department and the IRS 

considered alternatives to the proposed 

regulations. For example, in adopting 

the terminating transaction rules, the 

Treasury Department and the IRS 

considered requiring only the parties to 

a transaction involving an interest in a 

specified applicable unincorporated 

organization to report such transaction. 

However, the Treasury Department and 

the IRS decided that such an option 

would increase the opportunity for 

duplication, fraud, improper payments, 

or excessive payments under section 

6417. Section 6417(d)(5) specifically 

authorizes the IRS to require such 

information or registration as the 

Secretary deems necessary for purposes 

of preventing duplication, fraud, 

improper payments, or excessive 

payments under section 6417 as a 

condition of, and prior to, any amount 

being treated as a payment which is 

made by an applicable entity under 

section 6417. As described in the 

preamble to these proposed regulations, 

these proposed rules carry out that 

congressional intent by ensuring that 

every member of a specified applicable 

unincorporated organization is informed 

about all transactions involving interests 

in the specified applicable 

unincorporated organization that could 

affect the amount or owner of any 

payments under section 6417. 

Comments are requested on the 

requirements in the proposed 

regulations, including specifically 

whether there are less burdensome 

alternatives that do not increase the risk 

of duplication, fraud, improper 

payments, or excessive payments under 

section 6417. 

IV. Unfunded Mandates Reform Act 

Section 202 of the Unfunded Mandate 

Reform Act of 1995 requires that 

agencies assess anticipated costs and 

benefits and take certain other actions 

before issuing a final rule that includes 

any Federal mandate that may result in 

expenditures in any one year by a State, 

local, or Tribal government, in the 

aggregate, or by the private sector, of 

$100 million (updated annually for 

inflation). These proposed regulations 

do not include any Federal mandate that 

may result in expenditures by State, 

local, or Tribal governments or by the 

private sector in excess of that 

threshold. 

V. Executive Order 13132: Federalism 

Executive Order 13132 (Federalism) 

prohibits an agency from publishing any 

rule that has federalism implications if 

the rule either imposes substantial, 

direct compliance costs on State and 

local governments, and is not required 

by statute, or preempts State law, unless 

the agency meets the consultation and 

funding requirements of section 6 of the 

Executive order. These proposed 

regulations do not have federalism 

implications and do not impose 


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91622 Federal Register / Vol. 89, No. 224 / Wednesday, November 20, 2024 / Proposed Rules 

substantial, direct compliance costs on 

State and local governments or preempt 

State law within the meaning of the 

Executive order. 

VI. Executive Order 13175: Consultation 

and Coordination With Indian Tribal 

Governments 

Executive Order 13175 (Consultation 

and Coordination With Indian Tribal 

Governments) prohibits an agency from 

publishing any rule that has Tribal 

implications if the rule either imposes 

substantial, direct compliance costs on 

Indian Tribal governments, and is not 

required by statute, or preempts Tribal 

law, unless the agency meets the 

consultation and funding requirements 

of section 5 of the Executive order. This 

proposed rule does not have substantial 

direct effects on one or more federally 

recognized Indian tribes and does not 

impose substantial direct compliance 

costs on Indian Tribal governments 

within the meaning of the Executive 

order. 

Nevertheless, on April 5, 2024, the 

Treasury Department and the IRS held 

a consultation with Tribal leaders 

requesting assistance in addressing 

questions related to the section 761(a) 

proposed rules published on March 11, 

2024, which helped inform the 

development of these proposed 

regulations. 

VII. Executive Order 14112: Reforming 

Federal Funding and Support for Tribal 

Nations To Better Embrace Our Trust 

Responsibilities and Promote the Next 

Era of Tribal Self-Determination 

Executive Order 14112 (Reforming 

Federal Funding and Support for Tribal 

Nations to Better Embrace Our Trust 

Responsibilities and Promote the Next 

Era of Tribal Self-Determination) 

reaffirms the executive branch’s support 

for Tribal self-determination as the most 

effective policy for the economic growth 

of Tribal Nations and the economic 

well-being of Tribal citizens. Executive 

Order 14112 requires agency heads to 

take certain actions, consistent with 

applicable law and to the extent 

practicable, to increase access to 

‘‘Federal funding and support programs 

for Tribal Nations’’; provide Tribal 

Nations with the flexibility to improve 

economic growth and address the 

specific needs of their communities; and 

reduce administrative burdens. Section 

2(b) of the Executive order defines 

‘‘Federal funding and support programs 

for Tribal Nations’’ as including 

‘‘funding, programs, technical 

assistance, loans, grants, or other 

financial support or direct services that 

the Federal Government provides to 

Tribal Nations or Indians because of 

their status as Indians.’’ As section 1 of 

the Executive order explains, ‘‘As we 

continue to support Tribal Nations, we 

must respect their sovereignty by better 

ensuring that they are able to make their 

own decisions about where and how to 

meet the needs of their communities. No 

less than for any other sovereign, Tribal 

self-governance is about the 

fundamental right of a people to 

determine their own destiny and to 

prosper and flourish on their own 

terms.’’ These commitments build on a 

recognition of principles of sovereignty, 

sovereign immunity, and selfgovernance that have been repeatedly 

reaffirmed by the Supreme Court. See, 

e.g., Three Affiliated Tribes of the Fort 

Berthold Reservation v. Wold 

Engineering, P.C., et al., 476 U.S. 877, 

890–91 (1986); Oklahoma Tax Comm’n 

v. Citizen Band Potawatomi Indian 

Tribe of Oklahoma, 498 U.S. 505, 510 

(1991). The Treasury Tribal Advisory 

Committee has advised that Tribes 

consider ‘‘financial support’’ in 

Executive Order 14112 to include tax 

matters that range from tax credits to 

Federal tax rules that regulate Tribal 

revenue. 

Consistent with Executive Order 

14112, the Treasury Department and the 

IRS recognize the importance of 

protecting and supporting Tribal 

sovereignty and self-determination. 

These proposed regulations are 

necessary for compliance with sections 

6417(d)(5) and (h) and do not impose 

undue burdens on Tribal sovereignty. 

Comments and Public Hearing 

Before these proposed regulations are 

adopted as final regulations, 

consideration will be given to comments 

regarding the notice of proposed 

rulemaking that are submitted timely to 

the IRS as prescribed in the preamble 

under the ADDRESSES section. The 

Treasury Department and the IRS 

request comments on all aspects of the 

proposed regulations. All comments 

will be made available at https://

www.regulations.gov. Once submitted to 

the Federal eRulemaking Portal, 

comments cannot be edited or 

withdrawn. 

A public hearing has been scheduled 

for February 7, 2025, beginning at 10 

a.m. EST, in the Auditorium at the 

Internal Revenue Building, 1111 

Constitution Avenue NW, Washington, 

DC. Due to building security 

procedures, visitors must enter at the 

Constitution Avenue entrance. In 

addition, all visitors must present photo 

identification to enter the building. 

Because of access restrictions, visitors 

will not be admitted beyond the 

immediate entrance area more than 30 

minutes before the hearing starts. 

Participants may alternatively attend the 

public hearing by telephone. 

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

apply to the hearing. Persons who wish 

to present oral comments at the hearing 

must submit an outline of the topics to 

be discussed and the time to be devoted 

to each topic by January 21, 2025. A 

period of ten minutes will be allocated 

to each person for making comments. 

After the deadline for receiving outlines 

has passed, the IRS will prepare an 

agenda containing the schedule of 

speakers. Copies of the agenda will be 

available free of charge at the hearing. 

If no outline of the topics to be 

discussed at the hearing is received by 

January 21, 2025, the public hearing 

will be cancelled. If the public hearing 

is cancelled, a notice of cancellation of 

the public hearing will be published in 

the Federal Register. 

Individuals who want to testify in 

person at the public hearing must send 

an email to publichearings@irs.gov to 

have your name added to the building 

access list. The subject line of the email 

must contain the regulation number 

REG–116017–24 and the language 

‘‘TESTIFY In Person.’’ For example, the 

subject line may say: Request to 

TESTIFY In Person at Hearing for REG– 

116017–24. 

Individuals who want to testify by 

telephone at the public hearing must 

send an email to publichearings@irs.gov 

to receive the telephone number and 

access code for the hearing. The subject 

line of the email must contain the 

regulation number REG–116017–24 and 

the language ‘‘TESTIFY 

Telephonically.’’ For example, the 

subject line may say: Request to 

TESTIFY Telephonically at Hearing for 

REG–116017–24. 

Individuals who want to attend the 

public hearing in person without 

testifying must also send an email to 

publichearings@irs.gov to have your 

name added to the building access list. 

The subject line of the email must 

contain the regulation number REG– 

116017–24 and the language ‘‘ATTEND 

In Person.’’ For example, the subject 

line may say: Request to ATTEND 

Hearing In Person for REG–116017–24. 

Requests to attend the public hearing 

must be received by 5 p.m. EST on 

February 5, 2025. 

Individuals who want to attend the 

public hearing by telephone without 

testifying must also send an email to 

publichearings@irs.gov to receive the 

telephone number and access code for 

the hearing. The subject line of the 

email must contain the regulation 

number REG–116017–24 and the 

language ‘‘ATTEND Hearing 


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Federal Register / Vol. 89, No. 224 / Wednesday, November 20, 2024 / Proposed Rules 91623 

Telephonically.’’ For example, the 

subject line may say: Request to 

ATTEND Hearing Telephonically for 

REG–116017–24. Requests to attend the 

public hearing must be received by 5 

p.m. EST on February 5, 2025. 

Hearings will be made accessible to 

people with disabilities. To request 

special assistance during a hearing 

please contact the Publications and 

Regulations Section of the Office of 

Associate Chief Counsel (Procedure and 

Administration) by sending an email to 

publichearings@irs.gov (preferred) or by 

telephone at (202) 317–6901 (not a tollfree number) by 5 p.m. EST on February 

4, 2025. 

Statement of Availability of IRS 

Documents 

IRS notices and other guidance cited 

in this preamble are published in the 

Internal Revenue Bulletin (or 

Cumulative Bulletin) and are available 

from the Superintendent of Documents, 

U.S. Government Publishing Office, 

Washington, DC 20402, or by visiting 

the IRS website at https://www.irs.gov. 

Drafting Information 

The principal author of these 

proposed regulations is Cameron 

Williamson of the Office of Associate 

Chief Counsel (Passthroughs and 

Special Industries). However, other 

personnel from the Treasury 

Department and the IRS participated in 

their development. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

Proposed Amendments to the 

Regulations 

Accordingly, the Treasury Department 

and the IRS propose to amend 26 CFR 

part 1 as follows: 

PART 1—INCOME TAXES 

■ Paragraph 1. The authority citation 

for part 1, as amended in a final rule 

published elsewhere in this issue of the 

Federal Register, effective January 19, 

2025, continues to read in part as 

follows: 

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

* * * * * 

Section 1.761–2 also issued under 26 

U.S.C. 446(b), 761(a), 6031(a), 6417(d), and 

6417(h). 

* * * * * 

■ Par. 2. Section 1.761–2, as amended 

in a final rule published elsewhere in 

this issue of the Federal Register, 

effective January 19, 2025, is further 

amended by: 

■ a. Adding paragraphs (a)(4)(iv) and 

(a)(5)(iv). 

■ b. Revising the last sentence of 

paragraph (b)(2)(i). 

■ c. Revising the first sentence of 

paragraph (b)(2)(ii). 

■ d. Adding a sentence to the end of 

paragraph (b)(3)(i). 

■ e. Revising paragraph (f). 

The additions and revisions read as 

follows: 

§ 1.761–2 Exclusion of certain 

unincorporated organizations from the 

application of all or part of subchapter K of 

chapter 1 of the Internal Revenue Code. 

(a) * * * 

(4) * * * 

(iv) Termination upon change in 

interest—(A) In general. Except as 

provided in paragraph (a)(4)(iv)(E) of 

this section, an election under this 

paragraph (a) by a specified applicable 

unincorporated organization (as defined 

in paragraph (a)(4)(iv)(C) of this section) 

will terminate as the result of a 

terminating transaction (as defined in 

paragraph (a)(4)(iv)(D) of this section) 

involving an interest in that 

organization. Such termination will be 

effective beginning on the first day of 

the taxable year beginning after the 

hypothetical partnership taxable year 

(as defined in paragraph (a)(4)(iv)(B) of 

this section) in which the terminating 

transaction occurred. 

(B) Hypothetical partnership taxable 

year. The term hypothetical partnership 

taxable year means, with respect to a 

specified applicable unincorporated 

organization, the period of time that 

would have been the organization’s 

taxable year if, after the taxable year 

with respect to which the organization 

first made the election under this 

paragraph (a), the organization 

continued to have taxable years and 

such taxable years were determined by 

reference to the taxable year required to 

be used by the organization to make the 

election. 

(C) Specified applicable 

unincorporated organization. The term 

specified applicable unincorporated 

organization means an applicable 

unincorporated organization that has 

made an election under this paragraph 

(a) and such election would not be valid 

without the application of either 

paragraph (a)(4)(iii)(A) or (B) of this 

section. 

(D) Terminating transaction. The term 

terminating transaction means an 

acquisition or disposition of an interest 

in a specified applicable unincorporated 

organization (including transfers among 

members of the organization), other than 

as the result of a transfer between a 

disregarded entity (as defined in 

§ 1.6417–1(f)) and its owner. 

(E) Exception. If a specified applicable 

unincorporated organization meets the 

requirements to make a new election 

under this paragraph (a) and makes such 

an election no later than the time that 

would have been prescribed by 

§ 1.6031(a)–1(e) (including extensions 

thereof) for filing a partnership return 

with respect to the hypothetical 

partnership taxable year in which one or 

more terminating transactions occurred, 

the organization’s election will not 

terminate under paragraph (a)(4)(iv)(A) 

of this section as a result of any 

terminating transaction occurring 

during that hypothetical partnership 

taxable year. Such election must 

contain, in addition to the information 

required by paragraph (b) of this section, 

information about every terminating 

transaction that occurred in the 

hypothetical partnership taxable year, 

including the parties thereto and the 

interest(s) transferred. 

(5) * * * 

(iv) Example 4—(A) Facts. The facts 

are the same as in paragraph (a)(5)(ii)(A) 

of this section (Example 2), except that 

T owns a 60% interest in TLLC and Y 

owns a 40% interest in TLLC. TLLC’s 

first taxable year ends on September 

30th of year 1. On or before the 15th day 

of the third month following that date, 

TLLC makes a valid election under 

section 761(a) with respect to year 1. On 

August 31 of year 3, T sells all of T’s 

interest in TLLC to Q. 

(B) Analysis. TLLC is a specified 

applicable unincorporated organization. 

Accordingly, the sale of T’s interest is a 

terminating transaction and will 

terminate TLLC’s section 761(a) election 

unless TLLC makes a new section 761(a) 

election on or before the 15th day of the 

third month following September 30th 

of year 3. This analysis would not be 

different if, sometime between the end 

of TLLC’s first taxable year and the 

hypothetical partnership taxable year 

ending on September 30th of year 3, 

TLLC’s taxable year would have 

changed under the rules of subchapter 

K (for example, as a result of a change 

in T’s taxable year). 

(b) * * * 

(2) * * * 

(i) * * * Such partnership return 

must contain the following information: 

the name or other identification and the 

address of the organization together 

with information on the return, or in the 

statement attached to the return, 

showing the names, addresses, and 

taxpayer identification numbers of all 

the members of the organization; a 

statement that the organization qualifies 

under paragraph (a)(1) of this section 

and either paragraph (a)(2) or (3) of this 

section (taking into account paragraph 


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(a)(4) of this section, as applicable); a 

statement that all of the members of the 

organization elect that it be excluded 

from all of subchapter K; a statement 

indicating where a copy of the 

agreement under which the organization 

operates is available (or if the agreement 

is oral, from whom the provisions of the 

agreement may be obtained); and all 

information required by the form and 

instructions to the Form 1065 for an 

election under paragraph (a) of this 

section. 

(ii) * * * If an unincorporated 

organization described in paragraph 

(a)(1) of this section and either 

paragraph (a)(2) or (3) of this section 

(but not a specified applicable 

unincorporated organization) does not 

make the election provided in section 

761(a) in the manner prescribed by 

paragraph (b)(2)(i) of this section, it will 

nevertheless be deemed to have made 

the election if it can be shown from all 

the surrounding facts and circumstances 

that it was the intention of the members 

of such organization at the time of its 

formation to secure exclusion from all of 

subchapter K beginning with the first 

taxable year of the organization. * * * 

(3) * * * 

(i) * * * Application for permission 

to revoke the election must be made by 

submitting a letter ruling request that 

complies with the requirements of Rev. 

Proc. 2024–1 or successor guidance. 

* * * * * 

(f) Applicability date—(1) In general. 

Except as provided in paragraphs (d) 

and (f)(2) of this section, this section 

applies to taxable years ending on or 

after March 11, 2024. 

(2) Exceptions. Paragraphs (a)(4)(iv) 

and (a)(5)(iv) of this section, the fifth 

sentence of paragraph (b)(2)(i) of this 

section, the first sentence of paragraph 

(b)(2)(ii) of this section, and the last 

sentence of paragraph (b)(3)(i) of this 

section, apply to taxable years ending 

on or after November 20, 2024. 

Heather C. Maloy, 

Acting Deputy Commissioner. 

[FR Doc. 2024–26962 Filed 11–19–24; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF VETERANS 

AFFAIRS 

38 CFR Part 36 

RIN 2900–AS16 

Loan Guaranty: Loan Reporting and 

Partial or Total Loss of Guaranty or 

Insurance 

AGENCY: Department of Veterans Affairs. 

ACTION: Proposed rule. 

SUMMARY: The Department of Veterans 

Affairs (VA) proposes to amend its 

regulations governing loan reporting 

requirements for lenders that participate 

in the VA-guaranteed home loan 

program and circumstances when VA 

would assert a defense for partial or 

total loss of guaranty or insurance for 

lenders and holders. These proposed 

amendments would support VA’s 

ongoing efforts to modernize and 

transform technology and processes 

within the guaranteed home loan 

program, capitalizing on industry 

standard datasets. In addition, the 

proposed regulatory changes would 

update and enhance the loan guaranty 

reporting requirements for lenders, 

providing veterans stronger protections 

against noncompliant loans through 

improved transparency and oversight of 

the program. 

DATES: Comments must be received on 

or before January 21, 2025. 

ADDRESSES: Comments must be 

submitted through www.regulations.gov. 

Except as provided below, comments 

received before the close of the 

comment period will be available at 

www.regulations.gov for public viewing, 

inspection, or copying, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post the comments 

received before the close of the 

comment period on 

www.regulations.gov as soon as possible 

after they have been received. VA will 

not post on www.regulations.gov public 

comments that make threats to 

individuals or institutions or suggest 

that the commenter will take actions to 

harm an individual. VA encourages 

individuals not to submit duplicative 

comments; however, we will post 

comments from multiple unique 

commenters even if the content is 

identical or nearly identical to other 

comments. Any public comment 

received after the comment period’s 

closing date is considered late and will 

not be considered in the final 

rulemaking. In accordance with the 

Providing Accountability Through 

Transparency Act of 2023, a 100 word 

Plain-Language Summary of this 

proposed rule is available at 

Regulations.gov, under RIN 2900– 

AS16(P). 

FOR FURTHER INFORMATION CONTACT: 

Stephanie Li, Assistant Director for 

Regulations, Legislation, Engagement, 

and Training; Terry Rouch, Assistant 

Director for Loan Policy and Valuation; 

and Colin Deaso, Assistant Director for 

Data and Technology Solutions, Loan 

Guaranty (26), Veterans Benefits 

Administration, Department of Veterans 

Affairs, 1800 G Street NW, Washington 

DC 20006, (202) 632–8862. (This is not 

a toll-free telephone number.) 

SUPPLEMENTARY INFORMATION: 

I. Purpose of This Rulemaking 

VA proposes to amend its reporting 

regulation at 38 CFR 36.4303 and its 

partial or total loss of guaranty or 

insurance regulation at 38 CFR 36.4328 

to support its ongoing efforts to 

modernize and transform technology 

and processes within its VA-guaranteed 

home loan program and to make the 

regulations more reader-friendly. VA is 

accomplishing the technological 

transformation by updating reporting 

requirements and connecting with 

lenders and holders through application 

programming interfaces (APIs). Utilizing 

APIs will more efficiently and 

effectively support veterans, lenders, 

servicers, and other stakeholders who 

participate in the VA-guaranteed home 

loan program. Specifically, VA would 

launch an API ecosystem in which VA 

and veterans would, through increased 

VA oversight capabilities, have stronger 

protections against noncompliant 

lenders and holders. Additionally, 

lenders and holders would have more 

assurance and confidence in using their 

authority to close VA-guaranteed loans 

on an automatic basis and in carrying 

out lending and servicing functions in 

VA’s home loan program. 

To help ensure success, updates to 38 

CFR 36.4303 and 36.4328 are necessary. 

Amendments to § 36.4303 would 

expand loan reporting requirements by 

allowing VA, lenders, and holders to 

take advantage of technological 

improvements that APIs provide, 

resulting in more efficient and more 

effective program administration. 

Section 36.4328 amendments would 

clarify provisions addressing partial or 

total loss of the guaranty or insurance 

when VA identifies fraud, material 

misrepresentations, or other 

noncompliance with VA requirements. 

II. Section-by-Section Analysis of the 

Proposed Regulatory Amendments 

A. 38 CFR 36.4303—Reporting 

Requirements 

1. Reporting Loans Closed on an 

Automatic Basis 

VA proposes to revise § 36.4303(a) to 

add the heading, ‘‘Automatically 

guaranteed loans’’, and provide that, for 

loans automatically guaranteed under 

38 U.S.C. 3703(a)(1), a lender of a class 

described under 38 U.S.C. 3702(d), 

would be required to report the loan, 

after loan closing, in an electronic 


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