Federal Register / Vol. 60, No. 245 / Thursday, December 21, 1995 / Proposed Rules 66243

level: the taxable income limitation of

section 613(a); the depletable quantity

limitations of section 613A(c); or the

limitations of sections 613A(d)(2), (3),

and (4) (exclusion of retailers and

refiners).

(6) Examples. The following examples

illustrate the provisions of this

paragraph (g):

Example 1. Transfer of natural resource

recapture property to an S corporation in a

section 351 transaction. As of January 1,

1996, A owns all the stock (20 shares) in X,

an S corporation. X holds property that is not

natural resource recapture property that has

a fair market value of $2,000 and an adjusted

basis of $2,000. On January 1, 1996, B

transfers natural resource recapture property,

Property P, to X in exchange for 80 shares of

X stock in a transaction that qualifies under

section 351. Property P has a fair market

value of $8,000 and an adjusted basis of

$5,000. Pursuant to section 351, B does not

recognize gain on the transaction.

Immediately prior to the transaction, B’s

section 1254 costs with respect to Property P

equaled $6,000. Under § 1.1254–2(c)(1), B

does not recognize any gain under section

1254 on the section 351 transaction and,

under § 1.1254–3(b)(1), X’s section 1254 costs

with respect to Property P immediately after

the contribution equal $6,000. Under

paragraph (g)(2) of this section, each

shareholder is allocated a pro rata share of

X’s section 1254 costs. The pro rata share of

X’s section 1254 costs that is allocated to A

equals $1,200 (20 percent interest in X

multiplied by X’s $6,000 of section 1254

costs). The pro rata share of X’s section 1254

costs that is allocated to B equals $4,800 (80

percent interest in X multiplied by X’s $6,000

of section 1254 costs).

Example 2. Contribution of money in

exchange for stock of an S corporation

holding natural resource recapture property.

As of January 1, 1996, A and B each own 50

percent of the stock (50 shares each) in X, an

S corporation. X holds natural resource

recapture property, Property P, which has a

fair market value of $20,000 and an adjusted

basis of $14,000. A’s and B’s section 1254

costs with respect to Property P are $4,000

and $1,500, respectively. On January 1, 1996,

C contributes $20,000 to X in exchange for

100 shares of X’s stock. Under paragraph

(g)(1)(i) of this section, X must allocate to C

a pro rata share of its shareholders’ section

1254 costs. Using the assumptions set forth

in paragraph (g)(5)(i)(B) of this section, X

determines that A’s section 1254 costs with

respect to natural resource recapture property

held by X equal $4,500. Using written data

provided by B, X determines that B’s section

1254 costs with respect to Property P equal

$1,500. Thus, the aggregate of X’s

shareholders’ section 1254 costs equals

$6,000. C’s pro rata share of the $6,000 of

section 1254 costs equals $3,000 (C’s 50

percent interest in X multiplied by $6,000).

Under paragraph (g)(1)(ii) of this section, A’s

section 1254 costs are reduced by $2,000 (A’s

actual section 1254 costs ($4,000) multiplied

by 50 percent). B’s section 1254 costs are

reduced by $750 (B’s actual section 1254

costs ($1,500) multiplied by 50 percent).

Example 3. Merger involving an S

corporation that holds natural resource

recapture property. X, an S corporation with

one shareholder, A, holds as its sole asset

natural resource recapture property that has

a fair market value of $120,000 and an

adjusted basis of $40,000. A has section 1254

costs with respect to the property of $60,000.

For valid business reasons, X merges into Y,

an S corporation with one shareholder, B, in

a reorganization described in section

368(a)(1)(A). Y holds property that is not

natural resource recapture property that has

a fair market value of $120,000 and basis of

$120,000. Under paragraph (c) of this section,

A does not recognize ordinary income under

section 1254 upon the exchange of stock in

the merger because A did not otherwise

recognize gain on the merger. Under

paragraph (g)(2) of this section, Y must

allocate to A and B a pro rata share of its

$60,000 of section 1254 costs. Thus, A and

B are each allocated $30,000 of section 1254

costs (50 percent interest in X, each,

multiplied by $60,000).

(h) Effective date. This section applies

to dispositions of natural resource

recapture property by an S corporation

(and a former S corporation) and

dispositions of S corporation stock

occurring after publication of these

regulations as final regulations in the

Federal Register.

Margaret Milner Richardson,

Commissioner of Internal Revenue.

[FR Doc. 95–30832 Filed 12–20–95; 8:45 am]

BILLING CODE 4830–01–U

26 CFR Part 31

[IA–33–95]

RIN 1545–AT77

Effective Date of Temporary Backup

Withholding Regulations

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of proposed rulemaking

by cross-reference to temporary

regulations.

SUMMARY: In the Rules and Regulations

section of this issue of the Federal

Register, the IRS is issuing temporary

regulations relating to the effective date

of the Temporary Employment Tax

Regulations under the Interest and

Dividend Tax Compliance Act of 1983,

relating to backup withholding,

statement mailing requirements, and

due diligence. The text of those

temporary regulations also serves as the

text of these proposed regulations.

DATES: Written comments and requests

for a public hearing must be received by

March 20, 1996.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (IA–33–95), room

5228, Internal Revenue Service, POB

7604, Ben Franklin Station, Washington,

DC 20044. In the alternative,

submissions may be hand delivered

between the hours of 8 a.m. and 5 p.m.

to: CC:DOM:CORP:R (IA–33–95),

Courier’s Desk, Internal Revenue

Service, 1111 Constitution Avenue, NW,

Washington, DC.

FOR FURTHER INFORMATION CONTACT:

Concerning the regulations, Renay

France, (202) 622–4910; concerning

submissions, Michael Slaughter, (202)

622–7190 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

Temporary regulations in the Rules

and Regulations section of this issue of

the Federal Register amend the

Temporary Employment Tax

Regulations under the Interest and

Dividend Tax Compliance Act of 1983

(26 CFR part 35a). The temporary

regulations contain rules relating to the

effective date of §§ 35a.9999–1,

35a.9999–2, 35a.9999–3, 35a.9999–3A,

35a.9999–4T, and 35a.9999–5.

The text of those temporary

regulations also serves as the text of

these proposed regulations. The

preamble to the temporary regulations

explains the temporary regulations.

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 has also

been determined that section 553(b) of

the Administrative Procedure Act (5

U.S.C. chapter 5) and the Regulatory

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

not apply to these regulations, and

therefore, a Regulatory Flexibility

Analysis is not required. Pursuant to

section 7805(f) of the Internal Revenue

Code, this notice of proposed

rulemaking will be submitted to the

Chief Counsel for Advocacy of the Small

Business Administration for comment

on its impact on small business.

Comments and Requests for a Public

Hearing

Before these proposed regulations are

adopted as final regulations,

consideration will be given to any

written comments (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 may be

scheduled if requested in writing by any

person that timely submits written

comments. If a public hearing is

scheduled, notice of the date, time, and
66244 Federal Register / Vol. 60, No. 245 / Thursday, December 21, 1995 / Proposed Rules

place for the hearing will be published

in the Federal Register.

Drafting Information

The principal author of the

regulations is Renay France, Office of

Assistant Chief Counsel (Income Tax

and Accounting), IRS. However, other

personnel from IRS and Treasury

Department participated in their

development.

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

Paragraph 1. The authority citation

for part 31 continues to read in part as

follows:

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

Par. 2. Section 31.9999–0 is added to

read as follows:

§ 31.9999–0 Effective date.

[The text of this proposed section is

the same as the text of § 35a.9999–0T

published elsewhere is this issue of the

Federal Register].

Margaret Milner Richardson,

Commissioner of Internal Revenue.

[FR Doc. 95–30734 Filed 12–20–95; 8:45 am]

BILLING CODE 4830–01–U

DEPARTMENT OF THE INTERIOR

Office of Surface Mining Reclamation

and Enforcement

30 CFR Part 936

[SPATS No. OK–015–FOR]

Oklahoma Abandoned Mine Land

Reclamation Plan

AGENCY: Office of Surface Mining

Reclamation and Enforcement (OSM),

Interior.

ACTION: Proposed rule; public comment

period and opportunity for public

hearing.

SUMMARY: OSM is announcing receipt of

a proposed amendment to the Oklahoma

abandoned mine land reclamation plan

(hereinafter referred to as the

‘‘Oklahoma plan’’) under the Surface

Mining Control and Reclamation Act of

1977 (SMCRA). The proposed

amendment pertains to abandoned mine

land reclamation (AMLR) goals and

objectives, project ranking and

selection, coordination between

reclamation agencies, reclamation on

private land, eligible lands and waters,

public participation, agency

administrative and management

structure, reclamation set-aside trust

funds, contractor eligibility

requirements, and acid mine drainage

projects. The amendment is intended to

bring the Oklahoma AMLR Program into

compliance with Federal AMLR

regulations. It will allow the Oklahoma

Conservation Commission to participate

in AMLR activities authorized by the

Omnibus Budget Reconciliation Act of

1990 and the Energy Policy Act of 1992.

DATES: Written comments must be

received by 4:00 p.m., c.s.t., January 22,

1996. If requested, a public hearing on

the proposed amendment will be held

on January 16, 1996. Requests to speak

at the hearing must be received by 4:00

p.m., c.s.t., on January 5, 1996.

ADDRESSES: Written comments and

requests to speak at the hearing should

be mailed or hand delivered to Jack R.

Carson, Acting Director, Tulsa Field

Office at the address listed below.

Copies of the Oklahoma plan, the

proposed amendment, a listing of any

scheduled public hearings, and all

written comments received in response

to this document will be available for

public review at the addresses listed

below during normal business hours,

Monday through Friday, excluding

holidays. Each requester may receive

one free copy of the proposed

amendment by contacting OSM’s Tulsa

Field Office.

Jack R. Carson, Acting Director, Tulsa

Field Office, Office of Surface Mining

Reclamation and Enforcement, 5100

East Skelly Drive, Suite 470, Tulsa,

Oklahoma 74135–6547, Telephone:

(918) 581–6430.

Oklahoma Conservation Commission,

2800 N. Lincoln Blvd., Suite 160,

Oklahoma City, Oklahoma 73105–

4210, Telephone: (405) 521–2384.

FOR FURTHER INFORMATION CONTACT: Jack

R. Carson, Acting Director, Tulsa Field

Office, Telephone: (918) 581–6430.

SUPPLEMENTARY INFORMATION:

I. Background on the Oklahoma Plan

On January 21, 1982, the Secretary of

the Interior approved the Oklahoma

plan. Background information on the

Oklahoma plan, including the

Secretary’s findings, the disposition of

comments, and the approval of the plan

can be found in the January 21, 1982,

Federal Register (47 FR 2989).

II. Description of the Proposed

Amendment

By letter dated November 13, 1995

(Administrative Record No. OAML–63),

Oklahoma submitted a proposed

amendment to its AMLR plan pursuant

to SMCRA. Oklahoma submitted the

proposed amendment in response to a

September 26, 1994, letter from OSM

(Administrative Record No. OAML–65),

in accordance with 30 CFR 884.15(d),

concerning revisions to the AML

regulations at 30 CFR Chapter VII,

Subchapter R (59 FR 28136, May 31,

1994).

Oklahoma proposes to amend its

administrative rules at OAC 155:15,

Oklahoma Abandoned Mine Land

Program. Oklahoma proposes to amend

its Reclamation Plan at sections

884.13(c)1, Goals and Objectives;

884.13(c)2, Project Ranking and

Selection; 884.13(c)3, Interagency

Coordination; 884.13(c)5, Eligible Lands

and Waters; 884.13(c)7, Public

Participation; and 884.13(d)1,

Administrative and Management

Structure.

(1) OAC 155:15, Oklahoma Abandoned

Mine Land Reclamation Program Rules

Subsection 1–2, is revised to clarify

definitions used later in the rules.

Subsection 1–3, subpart (4) is added to

require that contracts for AML projects

only be awarded to successful bidders

who are determined eligible to receive

funds by using OSM’s Applicant

Violator System. Subsection 1–3 is

revised to ensure that certain coal mine

sites damaged and abandoned after

August 3, 1977, are eligible for

reclamation funding if the mining (1)

took place during the interim program

or (2) ended on or before November 5,

1990, and the surety for the mining

company became insolvent during that

period. Changes to Subsection 1–6

revise the objectives of reclamation

project funding and the priority of those

objectives. Objectives (4), Research and

Demonstration, and (7), Construction of

Public Facilities, are eliminated. The

priority of order of the other objectives

remains unchanged. Subsection 1–14 is

added to allow for the construction,

repair or enhancement of facilities

related to water supplies where such

supplies have been adversely affected

by coal mining practices. Subsection 1–

15 adds requirements for the

establishment of special trust accounts

that will provide for coal reclamation

after September 30, 1995. Once

established, Oklahoma may then set

aside 10% of its annual grant funding