Final Regulation_TD 8507

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~ & dRcgirttr / Vol. 58. No. 240 / Wednesday, December

29, 1993 - 1

Rules a d Reg~tions68751:

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ernDATE These regulations m
e W v e h a e m b e r 29,1993.
-MY

LIFOR~U~H:
.

Papan*ork Reduction Act
Tho colledw af information
mntained in thw h d regulations has
boen reviewed and approved by the
m c e of Man ement und Budget in
accordance wi the Papwork
Reduction Act (44 U.S.C. 3 5 W b J )under
mum1number 1515-1339. Tbe
collection of information mquiremmt in
tbbss regulations is satisfied by
induding the additional infomatian on
a Form logs filed with the Servics and
on 4 statement furnished to the p or of
m r d [a rubrtituia Form 1098).
-timated burdm for filing Form 1098
and the statemant to the payur of record
[substitute Fonn 1098)i s reflected in the
burden estimates for Form 1098.
Comments concerning the accuracy of
this burden estimate and suggestions lor
nrduung this burden should be directed
to h e Internal Revenua Sarvice, Atla:
IRS
flearanca Ofi-I PC:FP,
Wasbingto~,DC 20224, and to the
Office of Management and Budget, A M :
O5cer for tbn Departmmt of the
Treasury, Ofice of Information and
Regulatory Affairs, Washington, DC

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20503.

Background
This dmument rovides final
r~lalions
amen ing the lncorne Tax
Regulations 0 6 CFR part 1) under
d o n 6050H of the ht9mal Revenue
-9
of 1ga6 (Code)-On Wobr
1992,the IRS publishd in the F e d 4
Register a Notica olProposad
~ulernaf;ing(57 FR 4 74281 re tdting to
tha infomation m p d g rsquirements
for roimbments of interest paid on
~ 4 6 . m
d a a a 8 a -B e f ~ m
the
h a 1 rsguhtioru, the IRS solicited
Commmb and held&pubhc hearing on
&r propored r@ation~ The IRS

cr

26 CFR Parts 1 ltnd 8W

infuruiation ralating to &e
mimbursement of mortgags interest.
However. mortgage interest
reimbmmants were to be reported on
statements r e q u i d to be furnished to
pyors of mord dter h m b e r 31,
1992 be., for statements relating to 1992
mimbursemantjl.
Commentators w a d that
corn lianoe with this effective date
wou d be unduly burdensome and. in
earn* t~*65,
impassible. The
commentators noted that the data
pmpsiag q-starns at &a interest
recipients had not been progmmmed to
Ldtmtify reimbursements of interest
nude in 1992 and. thus. compliance
with the &ations would ~ q u i r aa
costly maaud searcb af records
preparation of dalemants.
Commentators mqutsted that the
effective date for statements ftuni shed
to payors of record k aher h m b e r
31,1993,consistent with the efIective
date for Foms 1098 filed with the IRS.
T h e h a 1 replatiom, themfore,
provide that mimburrernmts of i n t m
on a q u a l l h d mo*age mads In I 993
and subsequent mlendar years must be
reported on h t h Forms 3098 6lsd with
the S and statements fumirhed t o
payors of record. l k i s change was first
~
o
~ inm
Notice
d 9240,1992-2
CB. 387. In addition, for
reimburstments made in 1993, no
penalties will k imposed under
wctions 6721 through 6724 for failure to
comply with the reporting requirements
of these
repletions. Reimbursements
made prior to 1993 are not required to

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B. Information
to P a ~ o r sof
Record .
~ b ,propomd regulations rovided
l n l o m t l m R e p w l i n ~fw
that. on the statement h d e d to
Flalmbummmntr of Intamst on
payoq of =cord under 5 16OSOH-Ztb),
Owlifled Mortgrgs8
the year or yew in which heinterest
overpayments wars made and h e
In'Rev.nw
Wl*
+ ~ . n wrinsn mm-ts.
0 pfion of
raim-msnt
Treasury.
dditfos.thrrv
wd - - a - b k t o d p m u s t b e
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d fOOZ Tbrmrm-tt
c o n kbd H
to
tha *btiona -tain*
in this
regulations under d o n 6050H of tbs
lnternd Revsnue W e d a t i n g to ths
dmumaot
rdO~csd
information m p h g mquiremmts fae
consideration
writtan
m d $0 t m o n Y at tha
b0reimbmmeots d intumst paid in
connection witb 8 qualified mortgage.
ml.tiau
This information i
required by the
Internal Revanue Servica to ancoursg*
A- Ef&ve me
compliance with tbe tax lews relating to
Under seaion 6050H,interest
the deductibility of payments of
redpisntr must (1)file an infamation
mortgage interest The information will return {Form 1098) with the IRS. and (2)
b used to determine whether mo%age furnish a statement to the payor of
interest reimbursements havn been
r m r d on the mortgage. Undnr tbe
corredy reported on the return of the
proposed regulations,Forms 1098 filed
SUYY*RY: Tbir d&cmt

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taxpayer who rewives the
~ e i m b u r s e m e n t ..

withtheIRSaftarI3ecamber31,19g3.
were mquired to-indude-the--

: that thi8 requiremminot b hcl uded in
the final regulations.The commentators

argued that compliance would impose
data processing difficulties. Further. the
commentators noted that rirporting the
year or yuars of overpayment is
-importantto only a small minority of
payors of mrd-those that deducted
all of their mortgage interest in some
years but not in other years. Because the
information i s relevant to only a small
numhr of p a y ~ r sof record, tbe
commentators argued that it should not
be required to be reported. Rather, if a
payorofrecordneedstoknowthe
yeer{s) of overpayment, t h e payor of -

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68754 r e d d . w
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No.

58,

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248 / Wednesday, December 29, 1993 1 Rdes

and Regulations

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n c o r d can c o n W the intarart rsdpisnt - i h a . h drsguhtians
the . _. T h s find iagulationr airs pmvids
.
W
y to?blainfhe iaformation: .
position prescribed in the proposed:
that, for p e ~ a n snot subject to section - Therefom, the requirament -hthe.: . . ,.- , mgulations that reimbursements nf. . .
6049 reporting for the payment of
pmposudregulations that infer& .. .,- . internst on a qudiErd mortgage must be- interest on a reimbursement of mortgage
mdpim.is Aport to the payor of A r d : -'reported on Form 1098.--TheIntarnal ,- interest, rulw relatug to the reporting of
.
h e y k ui ye& in which the interest-'-:Revende explored the possibility of.
:' such interest payments ars provided in
overpaymmtf were rnadu.mdthe-:,':-; ;: . requiring tbe repprting-ofmortgage- '-. i section 6041 and &a regulaGqns ;
i;eiihb~&@t+??;'~-:- L-.-7.
in&
reirnbuneiients on F+m 1098- themunder.
. . . pprti,a of
sectfoa 6041. +,1:. ,*+
. bttributablo tn each year h g bey
l.,:I; . . provides r 5600 hshoi,d.~amomtl:. .
. - . m iiidg'&dion
C
6041. .?t
. _:excluded h r n tha.fin,d.~@atf~?<:~<;-d&ded; however, that seciian'6OSUH I.!
I r personsnotsubject to s&on 6049. ::, .
- - ~ n d sCi h i i 6 n a l . ~ l a t i 0 1 + - - ~resped
?5
* was the mom appmpriale reporting 7
:.:I reporting for thd psyment of int~mton
,
- to mortgsgw intmst reimb~:ents,r-.: "-&on
h a w e h a reporting of. - . a reimbursement ofmortgage interest
the m i m b ~ e m e n amount
f
pportad on*-,:
r e i m b m m e n t s of mortgage , i n t e ~ 6 t . :' wodd b r e q M to raport only tbose
FOF 1O98t0 the2h~md-r(8Penue:is:-:
&eJ
- . - - . -.:paymeats of
agpgating ~ 6 0 or
0
- ' the only-inouht
~ q u i r s dtb bq~~o~ed"60~0~fi)(2)~),.whi&
allows h a - ' ;
morn-toa p a p of mcgrd. -.i..:. - .:
.. . . . on stetemnits furnished to;payors of 7-'. '
to 19bformation .to :.,
mcod:Thit &cagew++rrst ,adn'ounbd-.b,reported =der %tioa 6 0 5 0 in
~ - - - .' . ,E *-Comments
t.:'- :-- 2:
. .:
~inN0d~92-60.'.-~~'.'i'~r;..,;;~:,:,:,?.~~~+~.'~dditi~~to&e~~e~d~d&~~~f&~&
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,. . - .-#.'
- ~ , _ ~ ~ ~ ~ c e i ~ e d 'a ~ ~ ~ ~
...--.
C.Inf&,otioRR~+Rg
= h d o j d r2 -.: ., taxpayer and the .amokt of-morlgsgs ;;comments in-additiont~tho t a - . ,.
,,;,-,:i n t e r e s t , l ~ e e iduring
~
the den,+ .-. , summarizad above. +me of the . .
pmposod~ ' a t i o n 6 ' ~ u.: i ---m .d d:d.rYeai.
- A mimbursameht of mortgage : . . ruggertimis contained in tho comments
. any reimbursement of prior
,l' intekst rehk lo m amount that in-d'' ,: have baan adopted in h e final : . - ' v e ~ a ~ a n l r t?Eprtedlrialihwd was @reviotiklydeduhd by regulations. Olhar suggested changer
m, - - - if the rsimbursemenl're'atd
tbe borfower. The inclusion of the . . ;-.
, - were not adopted primarily because
amount of interest mquimd to be : - :.. ,
, . ..
reimbursed
amount
in' gmss income' - : Chose suggestions were inconsistent
'Og8
suchprior
mported On
effectively reverser p a of the mongags . with the purpose of the ~ g ~ l a t i o n r .
year. Commentators shted that t h ~
interest previously deduded. Thus. ths Spkial
halp. ,, .
...
lations
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I
d
pmvid*
a de
requirement
to
r
e
p
h
~
e
inkre&
. -. - ,
- , ~ ~ l a t i n g t a t h s m o u o ( d , ,i, .,. , rrimbvrremant under J B ~ 6050H
O ~
is- . - It ha. bsen d a t m i n s d &at hi.: .-. . -

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mimbvrrswnt hi

b.
-mended

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in keeping with the statutory intent 01
Treasury decision is not a significht -.
. . w l a t o r y .stion as defined in:,
that
r
e
d
o
%
WE&
i
s
to
encomge
.
wrnpiianm
with
the tax laws relathg to-:- Executive Order.12866.It h u slso been
reimblipiamenu'-irtsnt
with ths - -- the dsduciion for rnorigags interest. %a - -dateminsd.htsection 553(b) ofthe .
h s h o l d f o r n ~ r t i n g m o r t ~ ~ ~ i n t e r e rH
t R Rep. No. 432.98th Cong.. Zd Sezr: . - A d m i n i s t m t i d A d [ 5 U.S.C
received. - . : chapter 51 and the Regulatory Flexibility
1353 (1984). Finally, the Internal
In responss
,--moleikwishes to 'laribthat - '
. Act (5 U.S.C.chapter 6) do not apply to
final regulations provide that, with . . ..
.
lespect to mimbwements
ofiatsre,, on reimbursements of mortgage internst are these regulations, and,therefore, a
. - Regulatory FlegbiIity Analysis is not year,
.
not
subjecf
to
Form
1099
reporting
.
a qudified
in a
6041..
. - - - required. Pursuant to section 7805(r)of . ( a ] reimbursements aggregating 5600 or under ~ection

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somsmmmanratoa
a
$600 h s h o l d for the reporting of - . .

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more must be reported. and &)

E. ~ e ~ b r t i of~ntekst
ng
on ,
- - - hrulemaking
e Code, the ,notice ofpruposed
for the regulations was
- . - . , .- . , . , subdttsd
reimbursements 'giegating lerrlhan
Reimburremen*,,
. . :
heChisfCounrelfor, '
5600 must be mported anly in Instances .
. . .- ...- .
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A
d
v
m
c
y
of
the
Small Business .co;6rkentators questad mom . .
-where 5600 or more of interest on the
qudfied
is received inha
guidanm on the reporting of intemst
- Administration for comment on its
.
impadon small business.
.
paid with respect to ceimbursed
calendar year of he reimbursement
born the payor of mrd. Thus. under
BmOunh (i.8-*the amount paid
,
Drafting Information
r :
, borrower, in addition to the refund of sn
the regulations,.reirnbimements .
authnr of these
The
aggregating 5600 or mom in a -lendar _- OVVaYment, that -siitutes interest
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year must be reportti. However, - ' . .
reimbursemmts aggregsting lea ban

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for the use of the bormwer'r funds). The, ~
l a t i o n iss Stephen b T W ~ of~ the
Offica
0fAssiSWt Chid Counsel . Y

m p d mguhiians provide only that .
-: pForm
1098 and the statement Wished- :.

.
b m m e Tm and Accountin@;Mema1
Revenue.
Howev%r+
other
~
n
o
n
n
e
l
is
t -titUte
i n t e d on .. - h m thtr',IRSand Treasury Department :.
t h m payorofmord.ht midthe :. ...' :my u n o ~that
of, the reimbumment paid to .the +yat of ,=-:karud~atad
htheit deveio~med:..--. . .
mimb-snt
becaw at
- . .. - - . . . . .-, , -.. .
- .
-.:=,. -.
. . - Lift ofS,&j& - ;--I
.; . l :-:f.
r n o r t g w interest is - i d
-intne , . .. .mid'-,'
. . .
par
ks
: Tb.
MI m a ~ a n ~&bie*
r
k'lp''':
. , -:*'
. . ... . .' -. . .
.
:. - :-26 (SR P& 1':
f B pMn sarying
D.R e ~ ~ f i i n~g e j .. ~* On
b
u bankin
~
~obusin
~err (or
~ a iniddlsmap;
~
~
&
- : hmma:t-,
~ a ~ r t l n g n n- h.
". . . . 1098.. . . ,
. . ... d e b in 5 1.6MW(Of41, OF a person - mrdkeaping,requhments
.:. .
:: Soma commentafoa contended that - . csrrying on-tbebanking business), d a a . 2 6 m p & 6 0 r
-- :-:.-:--'
..' - - . . .'+ : , reimbursements of,htereston a . :- -laling to the -m'podngof interest w a
- ..
qualifid mortgap am reportahle un+r
.reimb-ment pf mortgqe intersst ara . Reparting and rka&eeping d i o n 6041 of &heCode and thus
mquiremsnts.
:. provided i
n d o n 6049 and the
rboul# be reported on Form 10%
.
rquhtions therzmder. Persons rubjsd
Adoplon ifhadmenti
Lo
,
MISC. T h e proposed mgulatiqcs make
to section 6049 must repod paymen9 of
- .
Regulations
dear that the reimbursemen&mn -.
i~ ,rt.sL aggregating $10 ar more to a . reportable under sseti~n6OSOH on Form payor of record during the calendar . . ~ c c o r d i n ~ l26
y ,CFR
1 md 602 .
1098.
y Mr.
, . -.areamendedasiollows;,
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only Form

must be

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requw-b for

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t O ' h pmyor of record must : ; ~ include
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Federal ~egisterI Vol. 58, Na. 248 /.Wednesday, December 29. 1993 / Rules and ReguIations 68753
as defined in f 1.604%4[f)(4], of a
- - parson
carrying on the bankir.9

of t h e year following the mlecdur ).ear
lor which it receives the rnortF;qa
I *The
titation
business), pmvided in secli on 6049 and interest. If no rnortgqs interest is
Ior Pon cnncinues t? mad in pM as regulations bemunder, and, for
required to b reported for h e ca!endar
foIlow s:
other persons, provided in section 6041 year, but a reimbursement of interest on
Authority: 26 U.SC 7 W - a ' '. S n d o a
and the regulekions thereunder. , .
a qurlifid mortgage is q u i r e d to be
1.6uSOH-2 is also issued under.26 U3.C
repofled
for &a calendar year, then the
Rcimbmements
of
interest
on
a
. .
bO5DH. '
'
. , .. - qualified mortgage [as described in this statement rquixed by para5;eph ('b){~)
.of this section must IH furnished on 0,. . Par. 2. Se&n i . 6 0 ~- .0 ~ -i~2amended-- section) made in 1993 and subsequent.
belgre Janyry 31 of the year following
as fol~ows: . .
calendar y e m must be reported on
. Form 1098 and mtements furnished to
the calendar par in which the
1. The word "and"at the end of
paragraph [a)D)(iii] is remzvsb- .
payars of record. Reimbursements made reimbursement wa5 made. The interest
*
recipient will be considered to have
2. Paragraph ta)(Z)Iiv] i s redesigiated prior to 1993 are not required to be . furnished the statement to the payor of
as paragraph (a#Z)IvI. '
reponed.
, .
3 . A n e w p a r a ra h[~](tl(ir.;isadded~ ( 4 ) T i m e u n d p l o ~ f o r f i l i n g r ~ t u r n . reccrd if it n a i l s ths statarnenl ra the
4.Pwmpnphrfa]&landb)(4)am h i n t e ~ . m d p i o l l r n u r t f i ~ ~ n ~ upayor
m ofrecord3 last known address.
redesignatedBS paragraphs taIt4) md
required by parag-ph (a] of this section
[a)(5~.respe~tively,and,anewparagr~ph
on~rbefonrFebruary28ofIheyesr . PART 6024:AB CONTROL HUMaERS
lollowing the'calendar year for whicb it UNDER THE PAPERWORK (aI(3) is added.
5 . Newly designated pmgmph (aIi4)
receives the rnortgagt interest If no . REDUCTION ACTis w i s e d .
interest i s required t o be reported for tbe
Par4. The authority ci:ation for part
6.Paragraph (bl(2l(ii) IS revised.
calendar year, but a reimbursement of
602 continues to read u; fol~ows:
7. At the end of paragraph IbI[ZHiiil,
btcmst on B qualified mortgage is
Aulhorlq: 26 U.S.C. 7805.
"." is removed and "; and" is added in
to be p2ported for hemlendm
its place.
year, &en a retrn reqiiired by
1692101 [Amandodl
a. Paragrg (b](~;(ivlis added.
paragraph [a) ofthis section must be
Par 5. In 5 602.101(c).the table is
g. Patagre& r0][6) is revised.
filed on or before- Febmary 2 8 of the
.
ammded by revising the entry for
10. The aided and =vised provisions year following &e calendar
in
,
mad as foIlows:
which the reimbursement was made. h 5 1.6050H-2 to read: "1.6050H-2 ' ' *
154540Gl.1545-1339".
interest recipieat must CiIe the return
61.6050)(-2 -,
fwm,
mtrnw d
Margurt YLkr R i c h d o n ,
required
by-paragzph
(4
of
this
section
. rtpo&g in-t r d v c d on ~LUIHW
mortgega
with the ZRS ofice desipatkd in Lha
instructions for Form 1098.
(a]
PART 1-ANCOME TAXES

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(21
[iv) W i t h respect to reimbursements nf
bl * ' '
[2]
g
interest on a qualified mortgage (as
[ii) A legend thatdiscussed in paragraph (e)(3) of this
(A1 Identifies
sta:ement as
section) made to the payor of rec~rdin
important tax information that is being
. the calendzr year,.
(A) Reimbursements aggmgahg S ~ O O h i s h e d to tha IRS;and

wt

or more; and
[Bl Notifies
payor of r m r d
if
(BI ;iejmbmernmts aggregating 1. the payor of record is required 10 file a
return. a negligence p ~ ~ a l or
t yother
than 5600. but only if S ~ O o;S mom of
sanction may be imposed on h e P@Yor
interest on the qualified mortgage is
of record if Lhe IRS determink t h t ad
received in h e cdmdar yew
h e
underpaymwt ~f tax results b m u s s the
pa)-or of record and
payor o f mcmd overstated a deduction..
.
*
+
.
(3) Reimb-erncnk o f i n t m on o . for t h i s mortgage intarefit (if any) or
undeisbted income born this mod
qualfied nmrtgoge. For purposer of
interest raid-mint
(if my) 0.
Fmpnpb [a)[21[iig d esrpdon,
a
rBtm:
-.
reimbursement d interest on r gualifisd payorof -$'$
b
.
.
L
.
mortgage is a reimbursement of an
[ill With resped to m y informauon
amount received irl s rior year that war
y m d to k report4 m d u e p h
required to k reporti for that prior
( ~ ) ( Z l l i ~of
) this d o n , an i n a d i o n .
YE 7 under p m p p ) ! (a)(Z)[iiI) of this
s. -ion by any Cvterest rscipient Only - providing hat the amount ofthe
interest m:
that maks
reimbursement IS Dot to ba d e d u d d
. &mbummea ,requid to report he. and that the amount must be included
reimbursemenr dndw this st,ttim. Form In the gross income ofthe payor of
1098 and thm statement fumirhed to the record if the reimb. . & s dinterest was
payor of rscord under puraeraph Ib)of
deduaed by
Payor of m r d fn A
prior year so as to xaduce income ~BX.
this section must not include any.
Brnounithat mnstitutes interest on the
[6)Time ond plum fur furnishing
reimbumiment paid to the peyor of .
record. Rules relating l o h e mquirsmenl stofemen:. An interest redpient must
furnish a statement required by
I D report interest on a reimbursement
are. in the case of s person carrying on
ps-agraph @ ) ( I )o f h i s d a n t o s
the banking business [or a middleman.
payor o i record on or before January 31

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Acling Asi--tent Ssmtary of the Trccrury.
(FR D x 9341307 Filed 12-28-93: 8:4: am1
8ltLD.t eOOE W

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