Federal Register / Vol. 63, No. 16 / Monday, January 26, 1998 / Proposed Rules 3677

Paragraph 6005 Class E airspace areas

extending upward from 700 feet or more

above the surface of the earth.

* * * * *

ANM CO E5 Blue Mesa, CO [Removed]

* * * * *

ANM CO E5 Gunnison, CO [New]

Gunnison County Airport, CO

(Lat. 38°32′02′′ N, long. 106°55′59′′ W)

That airspace extending upward from 700

feet above the surface within an area

bounded by a line beginning at lat. 38°11′25′′

N, long. 107°12′30′′ W; to lat. 38°21′25′′ N,

long. 107°25′00′′ W; to lat. 38°24′30′′ N, long.

107°21′00′′ W; to lat. 38°33′30′′ N, long.

107°20′00′′ W; to lat. 38°31′25′′ N, long.

107°12′30′′ W; to lat. 38°42′00′′ N, long.

106°59′00′′ W; to lat. 38°32′10′′ N, long,

106°46′00′′ W; thence to point of beginning;

that airspace extending upward from 1,200

feet above the surface within an area

bounded by a line beginning at lat. 37°59′30′′

N, long. 107°16′00′′ W; to lat. 38°17′45′′ N,

long. 107°39′00′′ W; to lat. 38°45′40′′ N, long.

106°54′00′′ W; to lat. 38°16′40′′ N, long.

106°08′00′′ W; to lat. 38°09′00′′ N, long.

106°16′00′′ W; to lat. 38°18′30′′ N, long.

106°47′00′′ W; thence to point of beginning.

* * * * *

Issued in Seattle, Washington, on

November 24, 1997.

Glenn A. Adams III,

Assistant Manager, Air Traffic Division,

Northwest Mountain Region.

[FR Doc. 98–1744 Filed 1–23–98; 8:45 am]

BILLING CODE 4910–13–M

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG–209322–82]

RIN 1545–AU99

Return of Partnership Income

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Withdrawal of notice of

proposed rulemaking; notice of

proposed rulemaking and notice of

public hearing.

SUMMARY: This document withdraws the

notice of proposed rulemaking relating

to partnership returns. The proposed

regulations were published in the

Federal Register on January 23, 1986.

These regulations revise the partnership

filing requirement to reflect changes to

the law made by the Taxpayer Relief Act

of 1997 (TRA). All partnerships required

to file partnership returns, including

certain foreign partnerships, are affected

by these regulations. This document

also contains a notice of a public

hearing on the proposed regulations.

DATES: Written comments must be

received by April 27, 1998. Requests to

speak and outlines of oral comments to

be discussed at the public hearing

scheduled for May 19, 1998, at 10 a.m.

must be received by April 28, 1998.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (REG–209322–82),

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–209322–82),

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 of the

IRS Home Page, or by submitting

comments directly to the IRS Internet

site at: http://www.irs.ustreas.gov/prod/

taxlregs/comments.html. The public

hearing will be held in the IRS

Auditorium, 7400 Corridor, Internal

Revenue Building, 1111 Constitution

Avenue NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT:

Concerning the regulations, Martin

Schaffer or Christopher Kelley, 202–

622–3080; concerning foreign

partnerships, Ronald Gootzeit, 202–

622–3860; concerning submissions and

the hearing, Michael Slaughter, 202–

622–7190 (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, T:FP,

Washington, DC 20224. Comments on

the collection of information must be

received by March 27, 1998. Comments

are specifically requested on:

Whether the proposed collection of

information is necessary for the proper

performance of the functions of the

Internal Revenue Service, 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 the 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 § 1.6031(a)–1.

This information is required to enable

the IRS to verify that a taxpayer is

reporting the correct amount of income

or gain or claiming the correct amount

of losses, deductions, or credits from

that taxpayer’s interest in the

partnership. The collection of

information is mandatory. The likely

respondents are businesses and other

for-profit institutions.

The burden is reflected in the burden

of Form 1065.

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

This document contains proposed

amendments to the Income Tax

Regulations (26 CFR Part 1) under

sections 6031 and 6063 of the Internal

Revenue Code of 1986 (Code). These

amendments are designed, in part, to

reflect changes made to section 6031 by

section 1141 of TRA, Public Law 105–

34, 111 Stat. 788 (1997). Section 6031

contains rules regarding the filing of

returns of partnership income

(partnership returns).

On January 23, 1986, the IRS

published in the Federal Register (51

FR 3075) proposed regulations under

section 6031 of the Internal Revenue

Code (existing proposed regulations).

Section 1.6031–1 of the existing

proposed regulations provides rules

that, if finalized, would implement the

partnership filing requirements of

section 404 of the Tax Equity and Fiscal

Responsibility Act of 1982 (TEFRA),

Public Law 97–248, 96 Stat. 669 (1982).

Because section 1141 of TRA supersedes

the partnership filing requirements of
3678 Federal Register / Vol. 63, No. 16 / Monday, January 26, 1998 / Proposed Rules

section 404 of TEFRA, the IRS and

Treasury consider it appropriate to

reissue proposed regulations reflecting

recent changes to the law, while giving

taxpayers another opportunity to

comment. Accordingly, this document

withdraws § 1.6031–1 of the existing

proposed regulations published in the

Federal Register on January 23, 1986

(51 FR 3075). A partnership that has

followed the rules contained in

§ 1.6031–1 of the existing final

regulations for all taxable years prior to

the taxable year for which these new

regulations will become effective will be

treated as fully complying with the

partnership filing requirements with

respect to such taxable years.

Section 6063 provides that a

partnership return shall be signed by

any one of the partners. The proposed

regulations clarify who must sign a

partnership return filed solely for the

purpose of making certain partnershiplevel elections.

Explanation of Provisions

Filing Requirement

Section 6031(a) requires every

partnership to file a partnership return.

New section 6031(e), as added by

section 1141 of TRA, exempts certain

foreign partnerships from the filing

requirement of section 6031(a). Section

6031(e) provides that a foreign

partnership is not required to file a

return for a tax year unless during that

year it derives gross income from

sources within the United States or has

gross income that is effectively

connected with the conduct of a trade

or business within the United States.

Further exceptions to the filing

requirement for foreign partnerships

may be provided by regulation.

The proposed regulations separately

describe the filing requirements for

domestic and foreign partnerships. In

accordance with section 6031(a), the

proposed regulations provide that,

except in certain limited circumstances,

every domestic partnership must file a

partnership return.

Under section 6031 and the proposed

regulations, a foreign partnership

generally must file a partnership return

only if it has either United States source

income or income effectively connected

(or treated as effectively connected)

with the conduct of a trade or business

within the United States. However,

under the proposed regulations, a

foreign partnership that has no gross

income that is effectively connected

with the conduct of a trade or business

within the United States, and that

would be required to file a partnership

return only because it has gross income

derived from sources within the United

States, will be exempt from the

requirement to file a partnership return

if (i) no United States person has a

direct or indirect interest in the

partnership; (ii) the gross income

derived from sources within the United

States is either fixed or determinable

annual or periodical income described

in § 1.1441–2(b) or other amounts

subject to withholding described in

§ 1.1441–2(c); (iii) Forms 1042 and

1042–S are filed with respect to all such

gross income in accordance with

§ 1.1461–1 (b) and (c); and (iv) the tax

liability of the partners with respect to

such gross income has been fully

satisfied by the withholding of tax at the

source, if applicable, under chapter 3.

The foreign partnership’s obligation to

file Forms 1042 and 1042–S is generally

eliminated by the regulations under

section 1461 published in the Federal

Register on October 14, 1997 (62 FR

53387) if those returns are filed by the

withholding agent (or agents) making

the payments of United States source

income to the partnership and the

partners’ tax liability with respect to

United States source income has been

fully satisfied by withholding. See

§ 1.1461–1 (b)(2) and (c)(4). The IRS and

Treasury invite comments addressing

other ways to reduce duplicative

information filing.

Any domestic or foreign partnership

that elects to be excluded from

subchapter K of Chapter 1 of the Code

under section 761(a) will not be

required to file a partnership return,

except that where a partnership makes

an election under § 1.761–2(b)(2)(i), the

partnership must timely file a

partnership return that contains the

information required by § 1.761–

2(b)(2)(i) for the taxable year for which

the election is made.

Failure to Meet Filing Requirement

If a partnership that is not a small

partnership under section 6231(a)(1)(B)

is required to file a partnership return

under section 6031 but fails to do so, the

period of limitations on assessment of

tax attributable to items of that

partnership remains open indefinitely

under section 6229(a). The failure of a

partnership to file a return required by

section 6031 might also result in

disallowance under section 6231(f) of

the deductions, losses, and credits

flowing through to the partners and

could subject the partnership to

penalties under section 6698 and/or

section 7203.

Information To Be Furnished to Partners

Under section 6031(b), every

partnership that is required by section

6031(a) to file a partnership return must

furnish information to its partners as

required by regulations. The rules

governing partnership statements to

partners and nominees are in

§ 1.6031(b)–1T.

Partnership Elections

A foreign partnership otherwise

exempt from the filing requirement that

wants to make a partnership-level

election under section 703(b) must file

a partnership return for the year of the

election. The proposed regulations

provide rules similar to those contained

in § 1.7701–3(c)(2) of the entity

classification regulations with respect to

who has the authority to file such

returns. Generally, the return must be

signed by all partners or by an

authorized partner.

Proposed Effective Dates

These regulations are proposed to be

applicable to partnership tax years

ending on or after the 90th day after

final regulations on this subject are

published in the Federal Register.

However, the exceptions for certain

foreign partnerships contained in

§ 1.6031(a)–1(b)(2) will not be

applicable to any partnership taxable

years beginning before January 1, 1999.

Special Analyses

It has been determined that this notice

of proposed rulemaking is not a

significant regulatory action as defined

in EO 12866. Therefore, a regulatory

assessment is not required. It also has

been determined that section 553(b) of

the Administrative Procedure Act (5

U.S.C. chapter 5) does not apply to these

proposed regulations. It is hereby

certified that the collection of

information contained in these

proposed regulations will not have a

significant economic impact on a

substantial number of small entities.

This certification is based on the fact

that the regulations would reduce

(rather than increase) the number of

small entities that are required to file a

partnership return. Specifically, the

proposed regulations would eliminate

the filing requirements for certain

foreign partnerships that are fully

subject to withholding in order to

prevent duplicative filing requirements.

In addition to eliminating the filing

requirements in these circumstances, for

ease of reference the proposed

regulations update and restate the

general requirements to file a

partnership return as set forth in

existing regulations. Because the

proposed regulations would not impose

any new reporting requirements that are

not imposed by the existing regulations,
Federal Register / Vol. 63, No. 16 / Monday, January 26, 1998 / Proposed Rules 3679

and the only significant modification of

the existing regulations is to eliminate

the filing requirement for certain foreign

partnerships, the regulations will not

have a significant economic impact on

a substantial number of small entities.

Accordingly, a Regulatory Flexibility

Analysis under the Regulatory

Flexibility Act (5 U.S.C. chapter 6) is

not required. Pursuant to section 7805(f)

of the Code, these proposed regulations

will be submitted to the Chief Counsel

for Advocacy of the Small Business

Administration for comment on their

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 (preferably a signed

original and eight (8) copies) that are

submitted timely to the IRS. All

comments will be available for public

inspection and copying.

A public hearing has been scheduled

for Tuesday, May 19, 998, at 10 a.m., in

the IRS Auditorium, 7400 Corridor,

Internal Revenue Building, 1111

Constitution Avenue NW., Washington,

DC. Because of access restrictions,

visitors will not be admitted beyond the

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 by April 27, 1998 and

submit an outline of the topics to be

discussed and the time to be devoted to

each topic (signed original and eight (8)

copies) by April 28, 1998.

A period of 10 minutes will be

allotted to 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 authors of these

regulations are Martin Scha ̈ffer and

Christopher Kelley, Office of Assistant

Chief Counsel (Passthroughs and

Special Industries), and Ronald

Gootzeit, Office of the Associate Chief

Counsel (International). However, other

personnel from the IRS and Treasury

Department participated in their

development.

List of Subjects in 26 CFR Part 1

Income taxes, Reporting and

recordkeeping requirements.

Withdrawal of Proposed Amendments

to the Regulations

Accordingly, under the authority of

26 U.S.C. 7805, the notice of proposed

rulemaking that was published in the

Federal Register on January 23, 1986

(51 FR 3075) is withdrawn.

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 is amended by adding an entry

in numerical order to read as follows:

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

Section 1.6031(a)–1 also issued under

26 U.S.C. 6031. * * *

§ 1.6031–1 [Removed]

Par. 1a. Section 1.6031–1 is removed.

Par. 2. Section 1.6031(a)–1 is added to

read as follows:

§ 1.6031(a)–1 Return of partnership

income.

(a) Domestic partnerships—(1) Return

required. Except as provided in

paragraphs (a)(3) and (c) of this section,

every domestic organization that is a

partnership must file a return of

partnership income under section 6031

(partnership return) for each taxable

year on the form prescribed for the

partnership return. The partnership

return must be filed for the taxable year

of the partnership regardless of the

taxable years of the partners. For taxable

years of a partnership and of a partner,

see section 706 and § 1.706–1. For the

rules governing partnership statements

to partners and nominees, see

§ 1.6031(b)–1T.

(2) Content of return. The partnership

return must contain the information

required by the prescribed form and the

accompanying instructions.

(3) Special rule. A partnership that

has no income, deductions, or credits

for federal income tax purposes for a

taxable year is not required to file a

partnership return for that year.

(4) Failure to file. For the

consequences of a failure to comply

with the requirements of section 6031(a)

and this paragraph (a), see sections

6229(a), 6231(f), 6698, and 7203.

(b) Foreign partnerships—(1) Return

required. A foreign partnership must file

a partnership return for a partnership

taxable year only if it has gross income

derived from sources within the United

States or it has gross income that is (or

is treated as) effectively connected with

the conduct of a trade or business

within the United States for the taxable

year. Certain exceptions to this

requirement are provided in paragraphs

(b)(2) and (c) of this section. A foreign

partnership that is required to file a

partnership return must file the

partnership return in accordance with

the rules provided for domestic

partnerships in paragraph (a) of this

section.

(2) Exception to partnership return

requirement for certain foreign

partnerships investing in the United

States. A foreign partnership that has no

gross income that is effectively

connected with the conduct of a trade

or business within the United States,

and that would be required to file a

partnership return only because it has

gross income derived from sources

within the United States, is not required

to file a partnership return under

section 6031 if—

(i) No United States person has a

direct or indirect interest in the

partnership;

(ii) The gross income derived from

sources within the United States is

either fixed or determinable annual or

periodical income described in

§ 1.1441–2(b) or other amounts subject

to withholding described in § 1.1441–

2(c);

(iii) Forms 1042 and 1042–S are filed

with respect to all such gross income in

accordance with § 1.1461–1 (b) and (c).

In order to satisfy this requirement,

Forms 1042 and 1042–S must be filed

by the partnership unless the

partnership is not required to file such

returns under § 1.1461–1 (b)(2) and

(c)(4), in which case, Forms 1042 and

1042–S must be filed by another

withholding agent (or agents); and

(iv) The tax liability of the partners

with respect to such gross income has

been fully satisfied by the withholding

of tax at the source, if applicable, under

chapter 3 of the Internal Revenue Code.

(3) Partnership information or returns

required of partners who are United

States persons—(i) In general. If a

United States person is a partner in a

partnership that is not required to file a

partnership return, the district director

or director of the service center may

require that person to render the

statements or provide the information

necessary to verify the accuracy of the

reporting by that person of any items of

partnership income, gain, loss,

deduction, or credit.

(ii) Certain partnership elections. For

a partnership that is not otherwise

required to file a partnership return, if

an election that can only be made by the

partnership under section 703 (affecting

the computation of taxable income

derived from a partnership) is to be

made by or for the partnership, a return
3680 Federal Register / Vol. 63, No. 16 / Monday, January 26, 1998 / Proposed Rules

on the form prescribed for the

partnership return must be filed for the

partnership. The return must be signed

by—

(A) Each partner that is a partner in

the partnership at the time the election

is made; or

(B) Any partner of the partnership

who is authorized (under local law or

the partnership’s organizational

documents) to make the election and

who represents to having such

authorization under penalties of perjury.

(iii) Controlled foreign partnerships.

Certain United States persons who are

partners in a foreign partnership

controlled (within the meaning of

section 6038(e)(1)) by United States

persons may be required to provide

information with respect to the

partnership under section 6038.

(4) Exclusion for certain

organizations. The return requirement

of section 6031 and this section does not

apply to the International

Telecommunications Satellite

Organization, the International Maritime

Satellite Organization, or any

organization that is a successor of either.

(c) Partnerships excluded from the

application of subchapter K—(1) Wholly

excluded—(i) Year of election. An

eligible partnership as described in

§ 1.761–2(a) that elects to be excluded

from all the provisions of subchapter K

of chapter 1 of the Internal Revenue

Code in the manner specified by

§ 1.761–2(b)(2)(i) must timely file the

form prescribed for the partnership

return for the taxable year for which the

election is made. In lieu of the

information otherwise required, the

return must contain or be accompanied

by the information required by § 1.761–

2(b)(2)(i).

(ii) Subsequent years. Except as

otherwise provided in paragraph

(c)(1)(i) of this section, an eligible

partnership that elects to be wholly

excluded from the application of

subchapter K is not required to file a

partnership return.

(2) Deemed excluded. An eligible

partnership that is deemed to have

elected exclusion from the application

of subchapter K beginning with its first

taxable year, as specified in § 1.761–

2(b)(2)(ii), is not required to file a

partnership return.

(d) Definitions—(1) Partnership. For

the meaning of the term partnership, see

§ 1.761–1(a).

(2) United States person. In applying

this section, United States person means

a person described in section

7701(a)(30); the government of the

United States, a State, or the District of

Columbia (including an agency or

instrumentality thereof); or a

corporation created or organized in

Guam, the Commonwealth of the

Northern Mariana Islands, the U.S.

Virgin Islands, and American Samoa, if

the requirements of sections 881(b)(1)

(A), (B), and (C) are met for such

corporation. The term does not include

an alien individual who is a resident of

Puerto Rico, Guam, the Commonwealth

of the Northern Mariana Islands, the

U.S. Virgin Islands, or American Samoa,

as determined under § 301.7701(b)–1(d)

of this chapter.

(e) Procedural requirements—(1)

Place for filing—(i) Domestic

partnerships. The return of a domestic

partnership that is required to file under

paragraph (a) of this section must be

filed with the service center for the

internal revenue district in which the

partnership has its principal office or

principal place of business in the

United States.

(ii) Foreign partnerships with United

States business or income. The return of

a foreign partnership that is required to

file under paragraph (b)(1) of this

section must be filed—

(A) With the service center for the

internal revenue district in which the

partnership has its principal office or

principal place of business in the

United States; or

(B) With the Internal Revenue Service

Center, Philadelphia, PA 19255–0011 if

the partnership has no office or place of

business in the United States.

(iii) Foreign partnerships without

United States business or income. The

return of a foreign partnership filed

under paragraph (b)(3)(ii) of this section

(regarding partnerships for which an

election under section 703 is made)

must be filed with the Internal Revenue

Service Center, Philadelphia, PA 19255–

0011. A statement must be attached to

the partnership return indicating that

the return is being filed pursuant to

paragraph (b)(3)(ii) of this section solely

to make one or more elections under

section 703.

(2) Time for filing. The return of a

partnership must be filed on or before

the fifteenth day of the fourth month

following the close of the taxable year

of the partnership.

(3) Magnetic media filing. For

magnetic media filing requirements

with respect to partnerships, see section

6011(e)(2) and the regulations

thereunder.

(f) Effective date. This section applies

to taxable years of a partnership ending

on or after the 90th day after the date

final regulations on this subject are

published in the Federal Register.

However, in no event will paragraph

(b)(2) of this section apply to taxable

years of a partnership that begin before

January 1, 1999.

Par. 3. Section 1.6063–1 is amended

by adding paragraph (c) to read as

follows:

§ 1.6063–1 Signing of returns, statements,

and other documents made by

partnerships.

* * * * *

(c) Certain partnership elections—(1)

In general. For rules regarding the

authority of a partner to sign a

partnership return filed solely for the

purpose of making certain partnershiplevel elections, see § 1.6031(a)–

1(b)(3)(ii).

(2) Effective date. The provisions of

paragraph (c) of this section apply to

taxable years of a partnership ending on

or after the 90th day after the date final

regulations on this subject are published

in the Federal Register.

Michael P. Dolan,

Deputy Commissioner of Internal Revenue.

[FR Doc. 98–1529 Filed 1–23–98; 8:45 am]

BILLING CODE 4830–01–U

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 31

[REG–104691–97]

RIN 1545–AV28

Electronic Tip Reports

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document proposes to

amend the regulations dealing with the

requirement that tipped employees

report their tips to their employer. The

proposed regulations permit employers

to establish electronic systems for use

by their tipped employees in reporting

tips to the employer. The proposed

regulations also address substantiation

requirements for employees using the

electronic system.

DATES: Written comments and requests

for a public hearing must be received by

April 27, 1998.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (REG–104691–97),

room 5228, 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–104691–97),

Courier’s Desk, Internal Revenue

Service, 1111 Constitution Avenue,

NW., Washington, DC. Alternatively,