[Federal Register Volume 86, Number 173 (Friday, September 10, 2021)]
[Proposed Rules]
[Pages 50687-50689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-19523]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 31

[REG-109077-21]
RIN 1545-BQ08


Recapture of Excess Employment Tax Credits Under the American 
Relief Plan Act of 2021

AGENCY: Internal Revenue Service (IRS), Treasury.

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

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SUMMARY: In the Rules and Regulations section of this issue of the 
Federal Register, the IRS is issuing temporary regulations pursuant to 
the regulatory authority granted under sections 3131, 3132, and 3134 of 
the Internal Revenue Code, added by sections 9641 and 9651 of the 
American Rescue Plan Act of 2021, to prescribe regulations as may be 
necessary for recapturing the benefit of the employment tax credits 
provided under these sections when necessary and to prevent the 
avoidance of the purposes of the limitations under these sections. 
These proposed regulations affect businesses and tax-exempt 
organizations, as well as certain governmental entities, that claim the 
paid sick leave credit and the paid family leave credit under sections 
3131 and 3132, respectively, and that claim the employee retention 
credit under section 3134. The text of those temporary regulations 
serves as the text of these proposed regulations.

DATES: Written or electronic comments and requests for a public hearing 
must be received by November 9, 2021.

ADDRESSES: Commenters are strongly encouraged to submit public comments 
electronically. Submit electronic submissions via the Federal 
eRulemaking Portal at www.regulations.gov (indicate IRS and REG-109077-
21) by following the online instructions for submitting comments. Once 
submitted to the Federal eRulemaking Portal, comments cannot be edited 
or withdrawn. The IRS expects to have limited personnel available to 
process public comments that are submitted on paper through the mail. 
Until further notice, any comments submitted on paper will be 
considered to the extent practicable. The Department of the Treasury 
(Treasury Department) and the IRS will publish for public availability 
any comment submitted electronically, and to the extent practicable on 
paper, to its

[[Page 50688]]

public docket. Send paper submissions to: CC:PA:LPD:PR (REG-109077-21), 
room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, 
Washington, DC 20044.
    Requests for a public hearing must be submitted as prescribed in 
the Comments and Requests for a Public Hearing section.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
NaLee Park at (202) 317-6879; concerning submissions of comments and/or 
requests for a public hearing, Regina Johnson at (202) 317-5177 (not 
toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

    Temporary regulations in the Rules and Regulations section of this 
issue of the Federal Register amend the Employment Taxes and Collection 
of Income at the Source Regulations (26 CFR part 31) under sections 
3131, 3132, and 3134 of the Internal Revenue Code (Code) pursuant to 
the regulatory authority granted under these sections to prescribe 
regulations as may be necessary for recapturing the benefit of the 
employment tax credits provided under these sections when necessary and 
to prevent the avoidance of the purposes of the limitations under these 
sections. Consistent with this authority, these proposed regulations 
authorize the assessment of erroneous refunds of the credits paid under 
sections 3131, 3132 (including any increases in those credits under 
section 3133), and 3134. The text of those temporary regulations also 
serves as the text of these proposed regulations. The preamble to the 
temporary regulations explains the amendments.

Special Analyses

    The Office of Management and Budget's Office of Information and 
Regulatory Analysis has determined that these regulations are not 
significant and not subject to review under section 6(b) of Executive 
Order 12866.
    Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), 
the Secretary certifies that these proposed regulations will not have a 
significant economic impact on a substantial number of small entities 
because these proposed regulations impose no compliance burden on any 
business entities, including small entities. Although these proposed 
regulations will apply to all employers eligible for the credits under 
sections 3131, 3132, and 3134, including small businesses and tax-
exempt organizations with fewer than 500 employees as well as certain 
governmental employers, and therefore are likely to affect a 
substantial number of small entities, the economic impact will not be 
significant. These proposed regulations do not affect the employer's 
employment tax reporting or the necessary information to substantiate 
entitlement to the credits. Rather, these proposed regulations merely 
implement the statutory authority granted under sections 3131(g), 3132 
(g), 3134(j), and 3134(m) that authorize the Service to assess, 
reconcile, and recapture any portion of the credits erroneously paid or 
refunded in excess of the actual amount allowed as if those amounts 
were taxes imposed under section 3111(b) (the Hospital Insurance tax 
(Medicare tax)), and so much of the taxes imposed under section 3221(a) 
(the Railroad Retirement Tax Act Tier 1 tax) as are attributable to the 
rate in effect under section 3111(b), as applicable, subject to 
assessment and administrative collection procedures. Notwithstanding 
this certification, the Treasury Department and the IRS invite comments 
on any impact these regulations would have on small entities.
    Pursuant to section 7805(f), this notice of proposed rulemaking has 
been submitted to the Chief Counsel of the Office of Advocacy of the 
Small Business Administration for comment on its impact on small 
business.

Comments and Requests for Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any comments that are timely submitted 
to the IRS as prescribed in the preamble under the ADDRESSES section. 
The Treasury Department and the IRS request comments on all aspects of 
these proposed regulations. Any electronic comments submitted, and to 
the extent practicable any paper comments submitted, will be made 
available at www.regulations.gov or upon request.
    A public hearing will be scheduled if requested in writing by any 
person who timely submits electronic or written comments. Requests for 
a hearing are strongly encouraged to be submitted electronically. If a 
public hearing is scheduled, notice of the date and time for the public 
hearing will be published in the Federal Register. Announcement 2020-4, 
2020-17 IRB 1, provides that until further notice, public hearings 
conducted by the IRS will be held telephonically. Any telephonic 
hearing will be made accessible to people with disabilities.

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 http://www.irs.gov.

Drafting Information

    The principal author of these regulations is NaLee Park, Office of 
the Associate Chief Counsel (Employee Benefits, Exempt Organizations, 
and Employment Taxes). However, other personnel from the Treasury 
Department and the IRS participated in the development of these 
regulations.

List of Subjects in 26 CFR Part 31

    Employment taxes, Income taxes, Penalties, Pensions, Railroad 
retirement, Reporting and recordkeeping requirements, Social security, 
Unemployment compensation.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 31 is proposed to be amended as follows:

PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE

0
Paragraph 1. The authority citation for part 31 is amended by adding 
entries for Sec. Sec.  31.3131-1, 31.3132-1, and 31.3134-1 in numerical 
order to read in part as follows:

    Authority:  26 U.S.C. 7805.
* * * * *
    Section 31.3131-1 also issued under 26 U.S.C. 3131(g).
    Section 31.3132-1 also issued under 26 U.S.C. 3132(g).
    Section 31.3134-1 also issued under 26 U.S.C. 3134(m)(3).
* * * * *
0
Par. 2. Section 31.3131-1 is added to read as follows:


Sec.  31.3131-1  Recapture of credits.

    [The text of proposed Sec.  31.3131-1 is the same as the text of 
Sec.  31.3131-1T published elsewhere in this issue of the Federal 
Register].
0
Par. 3. Section 31.3132-1 is added to read as follows:


Sec.  31.3132-1   Recapture of credits.

    [The text of proposed Sec.  31.3132-1 is the same as the text of 
Sec.  31.3132-1T published elsewhere in this issue of the Federal 
Register].
0
Par. 4. Section 31.3134-1 is added to read as follows:

[[Page 50689]]

Sec.  31.3134-1  Recapture of credits.

    [The text of proposed Sec.  31.3134-1 is the same as the text of 
Sec.  31.3134-1T published elsewhere in this issue of the Federal 
Register].

Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2021-19523 Filed 9-8-21; 4:15 pm]
BILLING CODE 4830-01-P