INTL-3-95.Supporting_Statement-REV

SUPPORTING STATEMENT

INTL-3-95 (TD 8687)

1. CIRCUMSTANCES NECESSITATING COLLECTION OF INFORMATION

Section 863(a) authorizes the Secretary to promulgate regulations allocating and apportioning to U.S. or foreign sources all items of income not described in sections 861 and 862. The regulations provide rules for determining the amount of U.S. or foreign source income from cross‑border sales. The regulations provide amendments to the existing regulations. The regulations require information to be disclosed in §1.863‑l(b)(6), and in §1.863‑3(e)(2), to enable the IRS to determine if the taxpayer has properly determined the source of its income.

2. USE OF DATA

The information is used by the IRS in the administration of the Internal Revenue laws to determine on audit whether the taxpayer has properly determined the source of its income from export sales.

3. USE OF IMPROVED INFORMATION TECHNOLOGY TO REDUCE BURDEN

We have no plans to offer electronic filing. 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

In response to the Federal Register Notice dated August 9, 2010 (75 FR 47896), we received no comments during the comment period regarding INTL-3-95.

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

(1) Section 1.863‑l(b) provides rules governing how a taxpayer is to determine the source of its income from the ownership or operation of natural resources located within or outside the United States. Section 1.863‑l(b)(6) requires a taxpayer determining the source of its income under section 1.863‑l(b) to fully explain the methodology used in a statement attached to the tax return. Certain taxpayers who engage in substantial additional production in addition to the activities of owning and operating natural resources can determine the source of their income under §1.863‑1(b)(1)'s export terminal rule or under §1.863‑1(b)(2)'s additional production rule. Taxpayers who determine the source of their income under either of these rules must disclose under §1.863‑l(b)(6) how they determine the fair market value of the natural resources at either the export terminal or the point of additional production, depending upon which rule applies. Taxpayers performing additional production prior to the export terminal or in a country other than the place of export or the place of sale must in addition comply with the disclosure requirements in §l.863‑3(e)(2). We estimate that approximately 25 taxpayers will be affected by this requirement and that it will take approximately 5 hours to prepare this information. The burden for this requirement is 125 hours.

(2) Section 1.863‑3(e)(2) requires taxpayers to fully explain the methodology used to determine the source of their income, the extent sales are aggregated, and the amount of their U.S. or foreign source income on a statement attached to their tax return. We estimate that approximately 425 taxpayers will be affected by this requirement and that it will take approximately 2.65 hours to prepare this information. The total burden for this requirement is 1,125 hours.

CFR Section	No. Respondents	No. Responses Per Respondent	Total Annual Responses	Hours Per Response	Total Burden
1.863-1(b)(6) Allocation of gross income under section 863(a); tax disclosure	25	1	25	5	125
1.863-3(e)(2)Allocation and apportionment of income from certain sales of inventory; Disclosure on tax return	425	1	425	2.65	1,125
Totals	450	1	450	2.78	1,250

Estimates of the annualized cost to respondents for the hour burdens shown above are not available at this time.

13. ESTIMATED TOTAL ANNUAL COST BURDEN TO RESPONDENTS

As suggested by OMB, our Federal Register notice dated August 9, 2010 (75 FR 47896), 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

Not applicable.

15. REASONS FOR CHANGE IN BURDEN

The adjustment in estimate is due to an error in reporting burden requirements under

§1.863-1(b)(6) . The increase captures the additional 125 burden, for a total of 1,250 hours requested.

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 regulation sunsets 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.

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