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29450 Federal Register / Vol. 70, No.

98 / Monday, May 23, 2005 / Rules and Regulations

section and, in the case of an issue 95 for pool mortgage insurance on a pool yield by more than 1.125 percentage
percent or more of the net proceeds of of mortgages, are not taken into account points.
which are to be used to provide so long as such amounts do not exceed (c) Arbitrage and investment gains to
residences for veterans, such issue also the amounts charged in the area with be used to reduce costs of owner-
meets the requirements of paragraph (c) respect to a similar mortgage, or pool of financing. As provided in section
of this section. The requirements of mortgages, that is not financed with 143(g)(3), certain earnings on
section 143(g) and this section are mortgage revenue bonds. For this nonpurpose investments must either be
applicable in addition to the purpose, amounts paid for pool paid or credited to mortgagors, or paid
requirements of section 148 and mortgage insurance include amounts to the United States, in certain
§§ 1.148–0 through 1.148–11. paid to an entity (for example, the circumstances. To the extent not
(b) Effective rate of mortgage interest Government National Mortgage inconsistent with the 1986 Act or
not to exceed bond yield by more than Association, the Federal National subsequent law, § 6a.103A–2(i)(4) of this
1.125 percentage points—(1) Maximum Mortgage Association (FNMA), the chapter applies to provide guidance
yield. An issue shall be treated as Federal Home Loan Mortgage relating to compliance with this
meeting the requirements of this Corporation, or other mortgage insurer) requirement.
paragraph (b) only if the excess of the to directly guarantee the pool of (d) Effective dates—(1) In general.
effective rate of interest on the mortgages financed with the bonds, or Except as otherwise provided in this
mortgages financed by the issue, over to guarantee a pass-through security section, § 1.143(g)–1 applies to bonds
the yield on the issue, is not greater over backed by the pool of mortgages sold on or after May 23, 2005, that are
the term of the issue than 1.125 financed with the bonds. subject to section 143.
percentage points. (C) The following example illustrates (2) Permissive retroactive application
(2) Effective rate of interest. (i) In the provisions of this paragraph in whole. Except as provided in
determining the effective rate of interest (b)(2)(iii): paragraph (d)(4) of this section, issuers
on any mortgage for purposes of this may apply § 1.143(g)–1, in whole, but
paragraph (b), there shall be taken into Example. Housing Authority X issues
not in part, to bonds sold before May 23,
account all fees, charges, and other bonds intended to be qualified mortgage
bonds under section 143(a). At the time the 2005, that are subject to section 143.
amounts borne by the mortgagor that are bonds are issued, X enters into an agreement (3) Bonds subject to the Internal
attributable to the mortgage or to the with a group of mortgage lending institutions Revenue Code of 1954. Except as
bond issue. Such amounts include (lenders) under which the lenders agree to provided in paragraph (d)(4) of this
points, commitment fees, origination originate and service mortgages that meet section and subject to the applicable
fees, servicing fees, and prepayment certain specified requirements. After effective dates for the corresponding
penalties paid by the mortgagor. originating a specified amount of mortgages, statutory provisions, an issuer may
(ii) Items that shall be treated as borne each lender issues a ‘‘pass-though security’’ apply § 1.143(g)–1, in whole, but not in
by the mortgagor and shall be taken into (each, a PTS) backed by the mortgages and part, to bonds that are subject to section
account in calculating the effective rate sells the PTS to X. Under the terms of the
PTS, the lender pays X an amount equal to
103A(i) of the Internal Revenue Code of
of interest also include— 1954.
the regular monthly payments on the
(A) All points, commitment fees, (4) Special rule for pre-July 1, 1993
mortgages (less certain fees), whether or not
origination fees, or similar charges received by the lender (plus any prepayments bonds. To the extent that an issuer
borne by the seller of the property; and and liquidation proceeds in the event of a applies this section to bonds issued
(B) The excess of any amounts foreclosure or other disposition of any before July 1, 1993, § 6a.103A–2(i)(3) of
received from any person other than the mortgages). FNMA guarantees the timely this chapter also applies to the bonds.
mortgagor by any person in connection payment of principal and interest on each
with the acquisition of the mortgagor’s PTS. From the payments received from each Mark E. Matthews,
interest in the property over the usual mortgagor, the lender pays a fee to FNMA for Deputy Commissioner for Services and
and reasonable acquisition costs of a its guarantee of the PTS. The amounts paid Enforcement.
person acquiring like property when to FNMA do not exceed the amounts charged Approved: May 12, 2005.
in the area with respect to a similar pool of
owner-financing is not provided Eric Solomon,
mortgages that is not financed with mortgage
through the use of mortgage revenue revenue bonds. Under this paragraph Acting Deputy Assistant Secretary of the
bonds. (b)(2)(iii), the fees for the guarantee provided Treasury.
(iii) The following items shall not be by FNMA are an insurance charge because [FR Doc. 05–10163 Filed 5–20–05; 8:45 am]
treated as borne by the mortgagor and the guarantee is pool mortgage insurance. BILLING CODE 4830–01–P
shall not be taken into account in Because the amounts charged for the
calculating the effective rate of guarantee do not exceed the amounts charged
interest— in the area with respect to a similar pool of DEPARTMENT OF THE TREASURY
(A) Any expected rebate of arbitrage mortgages that is not financed with mortgage
profit under paragraph (c) of this revenue bonds, the amounts charged for the Internal Revenue Service
section; and guarantee are not taken into account in
(B) Any application fee, survey fee, computing the effective rate of interest on the
mortgages financed with X’s bonds.
26 CFR Parts 1 and 602
credit report fee, insurance charge or
[TD 9206]
similar settlement or financing cost to (3) Additional rules. To the extent not
the extent such amount does not exceed inconsistent with the Tax Reform Act of RIN 1545–BE12
amounts charged in the area in cases 1986, Public Law 99–514 (the 1986 Act),
when owner-financing is not provided or subsequent law, § 6a.103A–2(i)(2) Information Returns by Donees
through the use of mortgage revenue (other than paragraphs (i)(2)(i) and Relating to Qualified Intellectual
bonds. For example, amounts paid for (i)(2)(ii)(A) through (C)) of this chapter Property Contributions
Federal Housing Administration, applies to provide additional rules AGENCY: Internal Revenue Service (IRS),
Veterans’ Administration, or similar relating to compliance with the Treasury.
private mortgage insurance on an requirement that the effective rate of
ACTION: Temporary regulations.
individual’s mortgage, or amounts paid mortgage interest not exceed the bond

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Federal Register / Vol. 70, No. 98 / Monday, May 23, 2005 / Rules and Regulations 29451

SUMMARY: This document contains information returns by donees relating beginning on the date of the
temporary regulations that provide to qualified intellectual property contribution or after the expiration of
guidance for the filing of information contributions made after June 3, 2004. the legal life of the qualified intellectual
returns by donees relating to qualified The Act provides rules that under property. Thus, the donee is not
intellectual property contributions. specified conditions enable taxpayers required to make a return with regard to
These temporary regulations affect who donate qualified intellectual a qualified intellectual property
donees receiving net income from property to receive additional charitable contribution for taxable years beginning
qualified intellectual property contribution deductions if and when after the expiration of the legal life of
contributions made after June 3, 2004. their donated property produces net such qualified intellectual property.
The text of these temporary regulations income for the donee (qualified donee Additionally, section 6050L(b) requires
also serves as the text of the proposed income). Section 170(m)(2), (8), (9). a return only for specified taxable years
regulations set forth in the notice of Under the Act, a taxpayer who of the donee, which years are defined in
proposed rulemaking on this subject in contributes a ‘‘patent, copyright (other section 6050L(b)(2)(B) as any taxable
the Proposed Rules section in this issue than a copyright described in section year any portion of which is part of the
of the Federal Register. 1221(a)(3) or 1231(b)(1)(C)), trademark, 10-year period beginning on the date of
DATES: Effective date: These regulations
trade name, trade secret, know-how, contribution of the qualified intellectual
are effective May 23, 2005. software (other than software described property. Therefore, the donee is not
in section 197(e)(3)(A)(i)), or similar required to make a return for taxable
FOR FURTHER INFORMATION CONTACT:
property, or applications or registrations years beginning more than 10 years after
Donnell M. Rini-Swyers, (202) 622–4910 of such property,’’ to a donee described
(not a toll-free number). the date of the qualified intellectual
in section 170(c) (other than to a private
SUPPLEMENTARY INFORMATION: property contribution.
foundation referred to in section
170(e)(1)(B)(ii)) may be allowed an Under these regulations, the donee
Paperwork Reduction Act
initial charitable contribution deduction generally is required to file an
These temporary regulations are being limited to the lesser of the taxpayer’s information return (with a copy of such
issued without prior notice and public basis or the fair market value of the return to the donor) on or before the last
procedure pursuant to the qualified intellectual property. In day of the first full month following the
Administrative Procedure Act (5 U.S.C. addition, the taxpayer may be permitted close of the donee’s taxable year. See
553). For this reason, the collection of to deduct certain additional amounts in section 7701(a)(23) for the definition of
information contained in these the year of contribution or in taxable year. Transition rules are
regulations has been reviewed and, subsequent taxable years based on a provided to take into account these
pending receipt and evaluation of specified percentage of the qualified filing requirements before a form is
public comments, approved by the donee income received by the donee prescribed by the Internal Revenue
Office of Management and Budget under with respect to the qualified intellectual Service and for donees’ taxable years
control number 1545–1932. Responses property. ending prior to or on the date of
to this collection of information are Section 882(c)(1) of the Act amended issuance of these regulations.
required to obtain a tax benefit. section 6050L to require donees to make
An agency may not conduct or an annual information return that Special Analyses
sponsor, and a person is not required to reports the qualified donee income for
respond to, a collection of information It has been determined that these
the taxable year and other specified
unless the collection of information temporary regulations are not a
information relating to qualified
displays a valid OMB control number. significant regulatory action as defined
intellectual property contributions. The
For further information concerning this in Executive Order 12866. Therefore, a
Service expects to issue a new Form
collection of information, and where to 8899 on which donees will report regulatory assessment is not required.
submit comments on the collection of qualified donee income. For the applicability of the Regulatory
information and the accuracy of the Under section 170(m)(8)(B), a donor Flexibility Act (5 U.S.C. chapter 6) refer
estimated burden, and suggestions for must notify the donee of the donor’s to the Special Analyses section of the
reducing this burden, please refer to the intent to treat a charitable contribution preamble of the cross-reference notice of
preamble to the cross referencing notice as a qualified intellectual property proposed rulemaking published in the
of proposed rulemaking published in contribution under sections 170(m) and Proposed Rules section in this issue of
the Proposed Rules section of this issue 6050L. For rules relating to donor the Federal Register. Pursuant to
of the Federal Register. notification see section 170(m)(8)(B) and section 7805(f) of the Internal Revenue
Books or records relating to a Notice 2005–XX issued thereunder. Code, these regulations will be
collection of information must be Unless timely notice is provided, the submitted to the Chief Counsel for
retained as long as their contents may donor has not made a qualified Advocacy of the Small Business
become material in the administration intellectual property contribution, and Administration for comment on their
of any internal revenue law. Generally, the donee has no reporting obligation impact on small business.
tax returns and return information are under section 6050L or these Drafting Information
confidential, as required by 26 U.S.C. regulations.
6103. The donee is not required to make an The principal author of these
information return if the qualified regulations is Donnell M. Rini-Swyers,
Explanation of Provisions intellectual property produced no net Office of Associate Chief Counsel
This document contains temporary income for the donee’s taxable year. (Procedure and Administration).
Income Tax Regulations under the Under section 170(m)(5) and (m)(6),
American Jobs Creation Act of 2004 income received or accrued during the List of Subjects
(Pub. L. 108–357, 118 Stat. 1418) (the donee’s taxable year is not treated as 26 CFR Part 1
Act). They are necessary to implement allocated to qualified intellectual
section 882 of the Act, which directs property if such income is received or Income taxes, Reporting and
that regulations be issued regarding accrued after the 10-year period recordkeeping requirements.

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29452 Federal Register / Vol. 70, No. 98 / Monday, May 23, 2005 / Rules and Regulations

26 CFR Part 602 Every donee making an information (e) Penalties. For penalties for failure
Reporting and recordkeeping return under section 6050L and this to comply with the requirements of this
requirements. section with respect to a qualified section, see sections 6721 through 6724.
intellectual property contribution shall (f) Effective date. The rules of this
Amendments to the Regulations furnish a copy of the information return section apply to qualified intellectual
■ Accordingly, 26 CFR parts 1 and 602 to the donor of the property. The property contributions made after June
are amended as follows: information return required by section 3, 2004.
6050L and this section shall be
PART 1—INCOME TAXES furnished to the donor on or before the PART 602—OMB CONTROL NUMBERS
date the donee is required to file the UNDER THE PAPERWORK
■ Paragraph 1. The authority citation for return with the Internal Revenue REDUCTION ACT
part 1 continues to read, in part, as Service.
follows: ■ Par. 8. The authority citation for part
(2) Before a form is prescribed by the 602 continues to read as follows:
Authority: 26 U.S.C. 7805 * * * Internal Revenue Service. Before a form
is prescribed by the Internal Revenue Authority: 26 U.S.C. 7805 * * *
■ Par. 2. Section 1.6050L–2T is added to
read as follows: Service, every donee required to make ■ Par. 9. In § 602.101, paragraph (b) is
an information return under section amended by adding an entry to the table
§ 1.6050L–2T Information returns by 6050L and this section with respect to
donees relating to qualified intellectual in numerical order to read as follows:
qualified intellectual property
property contributions (temporary). § 602.101 OMB Control numbers.
contributions shall furnish, in lieu of
(a) In general. Each donee the prescribed form, a statement to the * * * * *
organization described in section 170(c), donor that includes all information (b) * * *
except a private foundation (as defined required by paragraphs (b)(1) through
in section 509(a)), other than a private (b)(5) of this section. This statement CFR part or section where Current OMB
foundation described in section shall be furnished to the donor on or identified and described control No.
170(b)(1)(E), that receives or accrues net before the date the donee would have
income during a taxable year from any been required to file the return with the
qualified intellectual property * * * * *
Internal Revenue Service under 1.6050L–2T ........................... 1545–1932
contribution (as defined in section paragraph (d)(2)(i) of this section had a
170(m)(8)) must make an annual form been prescribed. * * * * *
information return on the form
prescribed by the Internal Revenue (3) Donee taxable years ending prior
Service. The information return is to or on the date of issuance of Mark E. Matthews,
required for any taxable year of the regulations. If the donee’s taxable year Deputy Commissioner for Services and
donee that includes any portion of the to which net income from the qualified Enforcement.
10-year period beginning on the date of intellectual property is properly Approved: May 16, 2005.
the contribution, but not for taxable allocable ends prior to or on May 23, Eric Solomon,
years beginning after the expiration of 2005, the donee shall furnish the Acting Deputy Assistant Secretary of the
the legal life of the qualified intellectual information required under section Treasury.
property. 6050L and this section to the donor on [FR Doc. 05–10229 Filed 5–20–05; 8:45 am]
(b) Information required to be or before the 90th day following May 23,
BILLING CODE 4830–01–P
provided on return. The information 2005.
return required by section 6050L and (d) Place and time for filing
paragraph (a) of this section shall information return—(1) Place for filing. DEPARTMENT OF THE TREASURY
include the following— The information return required by
(1) The name, address, taxable year, section 6050L and this section shall be Internal Revenue Service
and employer identification number of filed with the Internal Revenue Service
the donee making the information location listed on the prescribed form or 26 CFR Part 301
return; in its instructions.
(2) The name, address, and taxpayer [TD 9203]
(2) Time for filing—(i) In general. A
identification number of the donor; donee is required to file the return RIN 1545–BC32
(3) A description of the qualified required by section 6050L and this
intellectual property in sufficient detail section on or before the last day of the Deemed Election To Be an Association
to identify the qualified intellectual first full month following the close of Taxable as a Corporation for a
property received by such donee; the donee’s taxable year to which net Qualified Electing S Corporation
(4) The date of the contribution to the
income from the qualified intellectual AGENCY: Internal Revenue Service (IRS),
donee;
(5) The amount of net income of the property is properly allocable. Treasury.
donee for the taxable year that is (ii) Before a form is prescribed by the ACTION: Final regulations and removal of
properly allocable to the qualified Internal Revenue Service. If the temporary regulations.
intellectual property (determined information return required by section
without regard to paragraph (10)(B) of 6050L and this section is required to be SUMMARY: This document contains final
section 170(m) and with the filed before a form is prescribed by the regulations that deem certain eligible
modifications described in paragraphs Internal Revenue Service, then an entities that file timely S corporation
(5) and (6) of such section); and information return for such taxable year elections to have elected to be classified
(6) Such other information as may be shall be filed on or before the last day as associations taxable as corporations.
specified by the form or its instructions. of the second full month following the These regulations affect certain eligible
(c) Special rule—statement to be release of such prescribed form by the entities filing timely elections to be S
furnished to donors—(1) In general. Internal Revenue Service. corporations on or after July 20, 2004.

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