SUPPORTING STATEMENT
(Notice 2005-64)
1. CIRCUMSTANCES NECESSITATING COLLECTION OF INFORMATION
This document provides guidance under new section 965 enacted by the American Jobs Creation Act of 2004 (P.L. 108-357). In general, section 965(a) provides that a corporation that is a U.S. shareholder of a controlled foreign corporation (CFC) may elect, for one taxable year, an 85 percent dividends received deduction (DRD) with respect to certain cash dividends it receives from its CFCs. Section 965(f) provides that taxpayers may elect the application of section 965 for either the taxpayer’s last taxable year which begins before October 22, 2004, or the taxpayer’s first taxable year which begins during the one-year period beginning on October 22, 2004. In general, a taxpayer will elect to apply section 965 to a taxable year by filing Form 8895 with its timely-filed tax return (including extensions) for such taxable year. Form 8895 also will include certain calculations relevant to determining the maximum amount of a U.S. shareholder’s section 965 DRD. If, however, a taxpayer filed its tax return for the taxable year to which the taxpayer intends to elect section 965 to apply prior to the issuance of Form 8895, its election is made on a statement that is attached to its timely-filed tax return (including extensions) for such taxable year.
This notice provides guidance on technical issues relating to the computation of the foreign tax credit and related issues involving expense allocation and apportionment, foreign currency translation, the disallowance of certain expenses directly allocable to the deductible portion of qualifying dividends under section 965, and the computation of the alternative minimum tax and credit for prior year minimum tax for taxpayers electing to apply section 965. This notice describes how taxpayers may identify specific cash dividends qualifying for the dividends received deduction on Form 8895 and describes circumstances under which a taxpayer may amend its section 965 domestic reinvestment plan or file an amended federal income tax return to comply with this notice (section 11). This notice also clarifies several issues raised in the two prior notices that address section 965, Notice 2005-10, 2005-6 I.R.B. 1, and Notice 2005-38, 2005-22 I.R.B. 1100.
2. USE OF DATA
The collection of information is required to elect to apply section 965 and for audit and examination purposes. In particular, this information is required to provide the IRS sufficient information to determine whether a taxpayer has properly determined the amount of cash dividends described in section 965(a) and has properly identified specific dividends qualifying for the DRD. The collections of information are required to obtain the benefit of section 965 for a taxable year. The likely respondents will be U.S. corporations that directly, indirectly, or constructively own 10 percent or greater interests in the voting stock of foreign corporations.
USE OF IMPROVED INFORMATION TECHNOLOGY TO REDUCE BURDEN
IRS Publications, Regulations, Notices and Letters are to be electronically enabled on an as practicable basis in accordance with the IRS Reform and Restructuring Act of 1998.
4. EFFORTS TO IDENTIFY DUPLICATION
We have attempted to eliminate duplication within the agency wherever possible.
5. METHODS TO MINIMIZE BURDEN ON SMALL BUSINESSES OR OTHER SMALL ENTITIES
Not applicable.
6. CONSEQUENCES OF LESS FREQUENT COLLECTION ON FEDERAL PROGRAMS OR POLICY ACTIVITIES
Not applicable.
7. SPECIAL CIRCUMSTANCES REQUIRING DATA COLLECTION TO BE
INCONSISTENT WITH GUIDELINES IN 5 CFR 1320.5(d)(2)
Not applicable.
8. CONSULTATION WITH INDIVIDUALS OUTSIDE OF THE AGENCY ON
AVAILABILITY OF DATA, FREQUENCY OF COLLECTION, CLARITY
OF INSTRUCTIONS AND FORMS, AND DATA ELEMENTS
This Notice 2005-64 was published in the Internal Revenue Bulletin (2005-36 I. R. B. 471), on September 6, 2005.
In response to the Federal Register Notice dated December 22, 2008 (73 FR 78425), we received no comments during the comment period regarding Notice 2005-64.
9. EXPLANATION OF DECISION TO PROVIDE ANY PAYMENT OR GIFT TO
RESPONDENTS
Not applicable.
10. ASSURANCE OF CONFIDENTIALITY OF RESPONSES
Generally, tax returns and tax return information are confidential as required by 26 USC 6103.
11. JUSTIFICATION OF SENSITIVE QUESTIONS
Not applicable.
12. ESTIMATED BURDEN OF INFORMATION COLLECTION
The collection of information in this notice is based upon section 965(b) and 965(f) of the Internal Revenue Code. The collection of information relates to the requirement that qualifying taxpayers may elect to deduct 85 percent of certain dividends received from their CFCs. This collection of information is necessary for the proper performance of the function of the IRS because it notifies the IRS whether taxpayers have claimed and are entitled to the deduction. The likely respondents will be U.S. corporations that directly, indirectly, or constructively own 10 percent or greater interests in the voting stock of foreign corporations.
A taxpayer elects to apply section 965 to a taxable year by filing Form 8895 with its timely-filed tax return (including extensions) for such taxable year. If, however, a taxpayer files its tax return for the taxable year to which the taxpayer intends to elect section 965 to apply prior to the issuance of Form 8895, the election must be made on a statement that is attached to its timely-filed tax return (including extensions) for such taxable year. In Notice 2005-10, 2005-6 I.R.B. 1, we estimated that approximately 25,000 taxpayers will elect to deduct their dividends under section 965 and that it will take each taxpayer approximately 150 hours to prepare the documentation. The total reporting burden was estimated to be 3,750,000 hours. We believe that the additional reporting burden necessitated by this notice is approximately 250,000 hours (10 hours per taxpayer, 25,000 taxpayers).
Estimates of the annualized cost to respondents for the hour burdens shown are not available at this time.
13. ESTIMATED TOTAL ANNUAL COST BURDEN TO RESPONDENTS
As suggested by OMB, our Federal Register Notice dated December 22, 2008 (73 FR 78425), requested public comments on estimates of cost burden that are not captured in the estimates of burden hours, i.e., estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information. However, we did not receive any response from taxpayers on this subject. As a result, estimates of the cost burdens are not available at this time.
14. ESTIMATED ANNUALIZED COST TO THE FEDERAL GOVERNMENT
After consultation with various functions within the Service, we determined in connection with Notice 2005-10 that the cost of developing, printing, processing, distribution and overhead for Form 8895 is $1,500.
15. REASONS FOR CHANGE IN BURDEN
There is no change in the paperwork burden previously approved by OMB. This form is being submitted for renewal purposes only.
16. PLANS FOR TABULATION, STATISTICAL ANALYSIS AND PUBLICATION
Not applicable.
17. REASONS WHY DISPLAYING THE OMB EXPIRATION DATE IS
INAPPROPRIATE
We believe that displaying the OMB expiration date is inappropriate because it could cause confusion by leading taxpayers to believe that the regulations sunset as of the expiration date. Taxpayers are not likely to be aware that the Service intends to request renewal of the OMB approval and obtain a new expiration date before the old one expires.
18. EXCEPTIONS TO THE CERTIFICATION STATEMENT ON OMB FORM 83-I
Not applicable.
Note: The following paragraph applies to all of the collections of information in this submission:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. 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.
| File Type | application/msword |
| Author | Carol |
| Last Modified By | 5pqgb |
| File Modified | 2009-02-23 |
| File Created | 2009-02-23 |