18742 Federal Register / Vol. 60, No. 71 / Thursday, April 13, 1995 / Rules and Regulations

Approved: March 28, 1995.

Leslie Samuels,

Assistant Secretary of the Treasury.

Margaret Milner Richardson,

Commissioner of Internal Revenue.

[FR Doc. 95–9049 Filed 4–12–95; 8:45 am]

BILLING CODE 4830–01–U

26 CFR Parts 1 and 602

[TD 8593]

RIN 1545–AT16

Effective Dates of the Economic

Performance Requirement

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Final regulations.

SUMMARY: This document contains final

regulations relating to the effective dates

of the economic performance

requirement. Changes to the applicable

laws were made by the Tax Reform Act

of 1984. The regulations affect all

taxpayers that use an accrual method of

accounting.

DATES: These regulations are effective

April 7, 1995.

For applicability of these regulations,

see EFFECTIVE DATES under the

SUPPLEMENTARY INFORMATION portion of

the preamble.

FOR FURTHER INFORMATION CONTACT:

James L. Atkinson, (202) 622–4950 (not

a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information

contained in these final regulations has

been reviewed and approved by the

Office of Management and Budget in

accordance with the Paperwork

Reduction Act (44 U.S.C. 3504(h)) under

control number 1545–0917. The

estimated annual reporting burden per

respondent varies from 1 hour to 5

hours, depending on individual

circumstances, with an estimated

average of 3 hours. The annual

recordkeeping burden per respondent

varies from .01 hours to .1 hours, with

an estimated average of .02 hours.

Comments concerning the accuracy of

this burden estimate and suggestions for

reducing this burden should be sent to

the Internal Revenue Service, Attn: IRS

Reports Clearance Officer, PC:FP,

Washington, DC 20224, and 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.

Background

On May 20, 1985, § 1.461–3T (TD

8024), relating to the effective dates of

the economic performance requirement

in section 461(h) of the Internal

Revenue Code (Code) was published in

the Federal Register (50 FR 20748). On

June 7, 1990, a notice of proposed

rulemaking (IA–258–84) concerning the

economic performance requirement was

published in the Federal Register (55

FR 23235). In addition to proposing

general economic performance rules, the

notice proposed redesignating the

temporary regulations as § 1.461–7T. A

public hearing on the regulations was

held on October 22, 1990. On April 10,

1992, final and temporary regulations

(TD 8408) regarding the economic

performance requirement were

published in the Federal Register (57

FR 12411). TD 8408 also redesignated

§ 1.461–3T as § 1.461–7T (without

further change).

Written comments responding to the

temporary regulations were received. In

lieu of finalizing the temporary

regulations issued as TD 8024 and

redesignated by TD 8408, this Treasury

decision removes § 1.461–7T and

incorporates relevant provisions of

those regulations into §§ 1.461–4 and

1.461–5, as appropriate.

Explanation of Provisions

Section 91(a) of the Tax Reform Act

of 1984 (Pub. L. 98–369, 98 Stat. 598)

added section 461(h) to the Internal

Revenue Code. This section generally

provides that the amount of an item is

not incurred under an accrual method of

accounting until economic performance

occurs.

Section 91(g)(1) of the Tax Reform Act

of 1984 provides that except as

otherwise provided, section 461(h) of

the Code applies to amounts that would

be allowable as a deduction after July

18, 1984, under the law in effect before

the enactment of section 461(h) (cut-off

method). Alternatively, a taxpayer may

elect to treat the application of section

461(h) as a change in accounting

method to which section 481(a) applies.

A taxpayer that makes this election may

elect to apply the new method of

accounting as of either July 19, 1984

(part-year change in method), or the first

day of the taxable year that includes

July 19, 1984 (full-year change in

method).

On May 20, 1985, the IRS issued

temporary regulations (TD 8024)

relating to the general section 461(h)

effective date, the date of electing

alternative effective dates, the manner of

making the elections, the scope of the

elections, and the section 481(a)

adjustment required by the elections. A

detailed description of the regulations is

set forth in the preamble to TD 8024.

After having considered the public

comments received in connection with

the temporary regulations, the Service is

removing § 1.461–7T and incorporating

the relevant provisions of the temporary

regulations into §§ 1.461–4 and 1.461–5.

Specifically, §§ 1.461–4 and 1.461–5

have been revised to clarify that all

references to § 1.461–7T refer to

§ 1.461–7T as it appears in 26 CFR part

1 as revised April 1, 1995. Although this

clarification refers to taxable years

ending before April 7, 1995, however, it

is not intended to extend the

applicability of provisions previously

set forth in § 1.461–7T beyond the dates

originally provided in those temporary

regulations. The reference to April 7,

1995, is necessary only to satisfy

requirements of the Office of the Federal

Register. In addition, § 1.461–4(k)(1) is

revised to include special effective date

rules for interest. These rules previously

appeared in Q&A–12 of § 1.461–7T.

Finally, § 1.461–5(d) has been revised to

include an explanation of the term type

of item for purposes of the recurring

item exception. This explanation

previously appeared in Q&A–3(d) of

§ 1.461–7T.

Rev. Proc. 94–32, 1994–1 C.B. 627,

provides guidance regarding requests to

make or revoke an election to ratably

accrue real property taxes under section

461(c) for the taxpayer’s first taxable

year beginning after December 31, 1992.

This Treasury decision does not affect

the application of Rev. Proc. 94–32.

Effective Dates

These regulations are applicable for

amounts that would be allowable as a

deduction after April 7, 1995.

Special Analyses

It has been determined that this

Treasury decision 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) 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 Code, the notice

of proposed rulemaking preceding these

regulations was submitted to the Small

Business Administration for comment

on their impact on small business.

Drafting Information: The principal author

of these regulations is James L. Atkinson,

Office of Assistant Chief Counsel (Income

Tax andAccounting), IRS. However, other
Federal Register / Vol. 60, No. 71 / Thursday, April 13, 1995 / Rules and Regulations 18743

personnel from the IRS andTreasury

Department participated in their

development.

List of Subjects

26 CFR Part 1

Income taxes, Reporting and

recordkeeping requirements.

26 CFR Part 602

Reporting and recordkeeping

requirements.

Adoption of Amendments to the

Regulations

Accordingly, 26 CFR parts 1 and 602

are amended as follows:

PART 1—INCOME TAXES

PARAGRAPH 1. The authority citation

for part 1 is amended by removing the

entry for § 1.461–7T to read in part as

follows:

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

§ 1.461–0 [Amended]

PAR. 2. Section 1.461–0 is amended by

removing the entry for § 1.461–7T.

PAR. 3. Section 1.461–4 is amended as

follows:

1. Paragraph (k)(1) is revised;

2. Paragraphs (m)(1)(i), (ii), and (iii)

are revised;

3. Paragraph (m)(2)(ii) is revised.

The revisions read as follows:

§ 1.461–4 Economic performance.

* * * * *

(k) Special effective dates—(1) In

general. Except as otherwise provided

in this paragraph (k), section 461(h) and

this section apply to liabilities that

would, under the law in effect before

the enactment of section 461(h), be

allowable as a deduction or otherwise

incurred after July 18, 1984. For

example, the economic performance

requirement applies to all liabilities

arising under a workers compensation

act or out of any tort that would, under

the law in effect before the enactment of

section 461(h), be incurred after July 18,

1984. For taxable years ending before

April 7, 1995, see Q&A–2 of § 1.461–7T

(as it appears in 26 CFR part 1 revised

April 1, 1995), which provides an

election to make this change in method

of accounting applicable to either the

portion of the first taxable year that

occurs after July 18, 1984 (part-year

change method), or the entire first

taxable year ending after July 18, 1984

(full-year change method). With respect

to the effective date rules for interest,

section 461(h) applies to interest

accruing under any obligation (whether

or not evidenced by a debt instrument)

if the obligation is incurred in any

transaction occurring after June 8, 1984,

and is not incurred under a written

contract which was binding on March 1,

1984, and at all times thereafter until

the obligation is incurred. Interest

accruing under an obligation described

in the preceding sentence is subject to

section 461(h) even if the interest

accrues before July 19, 1984. Similarly,

interest accruing under any obligation

incurred in a transaction occurring

before June 9, 1984, (or under a written

contract which was binding on March 1,

1984, and at all times thereafter until

the obligation is incurred) is not subject

to section 461(h) even to the extent the

interest accrues after July 18, 1984.

* * * * *

(m) Change in method of accounting

required by this section—(1) In general.

* * *

(i) For taxable years ending before

April 7, 1995, the part-year change in

method election described in Q&A–2

through Q&A–6 and Q&A–8 through

Q&A–10 of § 1.461–7T (as it appears in

26 CFR part 1 revised April 1, 1995);

(ii) For taxable years ending before

April 7, 1995, the full-year change in

method election described in Q&A–2

through Q&A–6 and Q&A–8 through

Q&A–10 of § 1.461–7T (as it appears in

26 CFR part 1 revised April 1, 1995); or

(iii) For taxable years ending before

April 7, 1995, if no election is made, the

cut-off method described in Q&A–1 and

Q&A–11 of § 1.461–7T (as it appears in

26 CFR part 1 revised April 1, 1995).

(2) * * *

(ii) Retroactive change in method of

accounting for long-term contracts and

payment liabilities. For the first taxable

year beginning after December 31, 1989,

or the first taxable year beginning after

December 31, 1990, a taxpayer is

granted the consent of the

Commissioner to change its method of

accounting for long-term contract

liabilities described in paragraph

(d)(2)(ii) of this section and payment

liabilities described in paragraph (g) of

this section (other than liabilities arising

under a workers compensation act or

out of any tort described in paragraph

(g)(2) of this section) to comply with the

provisions of this section. The change

must be made in accordance with

paragraph (m)(1)(ii) or (m)(1)(iii) of this

section, except the effective date is the

first day of the first taxable year

beginning after December 31, 1989, or

the first day of the first taxable year

beginning after December 31, 1990. For

taxable years ending before April 7,

1995, the taxpayer may make the change

in method of accounting, including a

full-year change in method election

under paragraph (m)(1)(ii) of this

section and Q&A–5 of § 1.461–7T (as it

appears in 26 CFR part 1 revised April

1, 1995), by filing an amended return for

such year, provided the amended return

is filed on or before October 7, 1992.

Par. 4. Section 1.461–5 is amended as

follows:

1. Paragraph (d)(1) is revised.

2. Paragraphs (d)(2) (i) and (ii) are

revised.

The revised provisions read as

follows:

§ 1.461–5 Recurring item exception.

* * * * *

(d) Time and manner of adopting the

recurring item exception—(1) In general.

The recurring item exception is a

method of accounting that must be

consistently applied with respect to a

type of item, or for all items, from one

taxable year to the next in order to

clearly reflect income. A taxpayer is

permitted to adopt the recurring item

exception as part of its method of

accounting for any type of item for the

first taxable year in which that type of

item is incurred. Except as otherwise

provided, the rules of section 446(e) and

§ 1.446–1(e) apply to changes to or from

the recurring item exception as a

method of accounting. For taxable years

ending before April 7, 1995, see Q&A–

7 of § 1.461–7T (as it appears in 26 CFR

part 1 revised April 1, 1995) for rules

concerning the time and manner of

adopting the recurring item exception

for taxable years that include July

19,1984. For purposes of this section,

items are to be classified by type in a

manner that results in classifications

that are no less inclusive than the

classifications of production costs

provided in the full-absorption

regulations of § 1.471–11(b) and(c),

whether or not the taxpayer is required

to maintain inventories.

(2) Change to the recurring item

exception method for the first taxable

year beginning after December 31,

1991—(i) In general. For the first taxable

year beginning after December 31,1991,

a taxpayer is granted the consent of the

Commissioner to change to the recurring

item exception method of accounting. A

taxpayer is also granted the consent of

the Commissioner to expand or modify

its use of the recurring item exception

method for the first taxable year

beginning after December 31, 1991.For

each trade or business for which a

taxpayer elects to use the recurring item

exception method, the taxpayer must

use the same method of change (cut-off

or full-year change) it is using for that

trade or business under § 1.461–4(m).

For taxable year sending before April 7,

1995, see Q&A–11 of § 1.461–7T (as it

appears in 26 CFR part 1 revised April
18744 Federal Register / Vol. 60, No. 71 / Thursday, April 13, 1995 / Rules and Regulations

1, 1995) for an explanation of how

amounts are taken into account under

the cut-off method (except that, for

purposes of this paragraph (d)(2), the

change applies to all amounts otherwise

incurred on or after the first day of the

first taxable year beginning after

December 31, 1991). For taxable years

ending before April 7, 1995, see Q&A–

6 of § 1.461–7T (as it appears in 26 CFR

part 1 revised April 1, 1995) for an

explanation of how amounts are taken

into account under the full-year change

method (except that the change in

method occurs on the first day of the

first taxable year beginning after

December 31, 1991). For taxable years

ending before April 7, 1995, the fullyear change in method may result in a

section 481(a) adjustment that must be

taken into account in the manner

described in Q&A–8 and Q&A–9 of

§ 1.461–7T (as it appears in 26 CFR part

1 revised April 1, 1995) (except that the

taxable year of change is the first taxable

year beginning after December 31,

1991).

(ii) Manner of changing to the

recurring item exception method. For

the first taxable year beginning after

December 31, 1991, a taxpayer may

change to the recurring item exception

method by accounting for the item on its

timely filed original return for such

taxable year (including extensions). For

taxable years ending before April 7,

1995, the automatic consent of the

Commissioner is limited to those items

accounted for under the recurring item

exception method on the timely filed

return, unless the taxpayer indicates a

wider scope of change by filing the

statement provided in Q&A–7(b)(2) of

§ 1.461–7T (as it appears in 26 CFR part

1 revised April 1, 1995).

* * * * *

§ 1.461–7T [Removed]

Par. 5. Section 1.461–7T is removed.

PART 602—OMB CONTROL NUMBERS

UNDER THE PAPERWORK

REDUCTION ACT

Par. 6. The authority citation for part

602 continues to read as follows:

Authority: 26 U.S.C. 7805.

Par. 7. In § 602.101, paragraph (c) is

amended by removing the entry for

1.461–3T from the table and adding the

following entries in numerical order to

read as follows:

§ 602.101 OMB Control numbers.

* * * * *

(c) * * *

CFR part or section where

identified and described

Current

OMB control

No.

* * * * *

1.461–4 ..................................... 1545–0917

1.461–5 ..................................... 1545–0917

* * * * *

Margaret Milner Richardson,

Commissioner of Internal Revenue.

Approved: April 5, 1995.

Leslie Samuels,

Assistant Secretary of the Treasury.

[FR Doc. 95–9034 Filed 4–7–95; 4:56 pm]

BILLING CODE 4830–01–U

DEPARTMENT OF THE INTERIOR

Office of Surface Mining Reclamation

and Enforcement

30 CFR Part 934

North Dakota Regulatory Program

AGENCY: Office of Surface Mining

Reclamation and Enforcement (OSM),

Interior.

ACTION: Final rule; approval of

amendment.

SUMMARY: OSM is approving, with

certain exceptions, a proposed

amendment to the North Dakota

regulatory program (hereinafter referred

to as the ‘‘North Dakota program’’)

under the Surface Mining Control and

Reclamation Act of 1977 (SMCRA).

North Dakota proposed revisions to and

additions of rules pertaining to: areas

unsuitable for mining; permit

applications (environmental monitoring

plans); permit application approval

procedures; permit revisions, renewals,

and transfer or sale; performance bond;

resoiling performance standards;

sediment pond performance standards;

contemporaneous reclamation

performance standards; and

enforcement actions. The amendment is

intended to revise the North Dakota

program to be consistent with the

corresponding Federal regulations,

address required program amendments,

clarify ambiguities, correct crossreferences, and improve program

efficiency.

EFFECTIVE DATE: April 13, 1995.

FOR FURTHER INFORMATION CONTACT: Guy

Padgett, Telephone: (307) 261–5776.

SUPPLEMENTARY INFORMATION:

I. Background on the North Dakota

Program

On December 15, 1980, the Secretary

of the Interior conditionally approved

the North Dakota program. General

background information on the North

Dakota program, including the

Secretary’s findings, the disposition of

comments, and the conditions of

approval of the North Dakota program

can be found in the December 15, 1980,

Federal Register (45 FR 82214).

Subsequent actions concerning North

Dakota’s program and program

amendments can be found at 30 CFR

934.12, 934.13, 934.15, 934.16, and

934.30.

II. Proposed Amendment

By letter dated November 10, 1994,

North Dakota submitted a proposed

amendment to its program pursuant to

SMCRA (Amendment number XXI,

Administrative Record No. ND–V–01,

State Program Amendment Tracking

System No. ND–031–FOR). North

Dakota submitted the proposed

amendment in response to the required

program amendments at 30 CFR

934.16(u) and at its own initiative. The

provisions of the North Dakota

Administrative Code (NDAC) that North

Dakota proposes to revise or add are:

NDAC 69–05.2–04–07(3)(a), lands

unsuitable for mining; NDAC 69–05.2–

05–09, permit applications

(environmental monitoring plans);

NDAC 69–05.2–06–01(2), permit

applications (identification of interests);

NDAC 69–05.2–06–02(6), permit

applications (compliance information);

NDAC 69–05.2–10–03(5), criteria for

permit approval; NDAC 69–05.2–11–

02(1)(d), permit revisions; NDAC 69–

05.2–11–03(5)(c), permit renewals;

NDAC 69–05.2–11–06(1)(c), transfer,

sale, or assignment of permit rights;

NDAC 69–05.2–12–09(2), performance

bond (period of liability); NDAC 69–

05.2–15–02(2)(a), performance

standards (suitable plant growth

materials); NDAC 69–05.2–16–09 (7)

and (20), performance standards

(sediment ponds); NDAC 69–05.2–21–

01(2), performance standards

(backfilling and grading, timing

requirements); and NDAC 69–05.2–28–

03(b), inspection and enforcement

(cessation orders).

OSM announced receipt of the

proposed amendment in the December

9, 1994, Federal Register (59 FR 63738),

provided an opportunity for a public

hearing or meeting on its substantive

adequacy, and invited public comment

on its adequacy (Administrative Record

No. ND–V–06). Because no one