Reg-135491-10

Part IV. Items of General Interest
Notice of Proposed
Rulemaking

SUPPLEMENTARY INFORMATION:

Updating of Employer
Identification Numbers

The collection of information contained in this notice of proposed rulemaking has been submitted to the Office of
Management and Budget in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)). Comments
on the collection of information should
be sent 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, with copies
to the Internal Revenue Service,
Attn: IRS Reports Clearance Officer,
SE:W:CAR:MP:T:M:S, Washington, DC
20224.
Comments on the collection
of information should be received by
May 14, 2012. Comments are specifically
requested concerning:
Whether the proposed collection of information is necessary for the proper performance of the functions of the IRS, including whether the information will have
practical utility;
The accuracy of the estimated burden
associated with the proposed collection of
information;
How the quality, utility, and clarity of
the information to be collected may be enhanced;
How the burden of complying with the
proposed collection of information may be
minimized, including through the application of automated collection techniques
or other forms of information technology;
and
Estimates of capital or start-up costs
and costs of operation, maintenance, and
purchase of services to provide information.
The collection of information in
this proposed regulation is in proposed
§301.6109–1(d)(2)(ii)(A). This information is necessary to allow the IRS to gather
correct ownership information with respect to persons that have an EIN. The
respondents are persons that have an EIN.
Estimated total annual reporting burden: 403,177 hours.
Estimated average annual burden per
respondent: varies from 10 to 20 minutes
with an estimated average of 15 minutes.

REG–135491–10
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains proposed regulations that provide rules requiring any person assigned an employer
identification number (EIN) to provide updated information to the IRS in the manner and frequency prescribed by forms, instructions, or other appropriate guidance.
These proposed regulations affect persons
with EINs and will enhance the IRS’s ability to maintain accurate information as to
persons assigned EINs.
DATES: Written or electronic comments
and request for a public hearing must be
received by June 12, 2012.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–135491–10), room
5205, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washington, DC 20044. Submissions may be
hand delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to: CC:PA:LPD:PR (REG–135491–10),
Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W.,
Washington, DC 20224 or sent electronically via the Federal eRulemaking
Portal at http://www.regulations.gov (IRS
REG–135491–10).
INFORMATION
FOR
FURTHER
CONTACT: Concerning the proposed
regulations, Gregory T. Armstrong, (202)
622–4940; concerning submissions of
comments and requests for a public hearing, Oluwafunmilayo (Funmi) Taylor of
the Publications and Regulation Branch at
(202) 622–7180 (not toll-free numbers).

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Paperwork Reduction Act

803

Estimated number of respondents:
1,612,708.
Estimated frequency of responses: on
occasion.
An agency may not conduct or sponsor,
and a person is not required to respond to, a
collection of information unless it displays
a valid control number assigned by the Office of Management and Budget. 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 section
6103 of the Internal Revenue Code.
Background and Explanation of
Provisions
This document contains proposed
amendments to the Procedure and Administration Regulations (26 CFR Part 301)
under section 6109 relating to identifying
numbers. In general, section 6109(a)(1)
provides that persons shall include taxpayer identifying numbers on returns,
statements, or other documents filed with
the IRS. Additionally, section 6109(c)
authorizes the Secretary to require such
information as may be necessary to assign
an identifying number to any person.
One of the principal types of taxpayer identifying numbers used to identify taxpayers is an employer identification number (EIN), which takes
See Treas.
the form 00–0000000.
Reg. §301.6109–1(a)(1); Treas. Reg.
§301.7701–12. In general, the IRS assigns an EIN for use by employers, sole
proprietors, corporations, partnerships,
non-profit associations, trusts, estates,
government agencies, certain individuals,
and other business entities for tax filing
and reporting purposes.
Section 301.6109–1(d)(2)(i) provides
that any person required to furnish an
EIN must apply for one with the IRS on
a Form SS–4, Application for Employer
Identification Number. The IRS accepts
applications for EINs electronically and
by telephone, facsimile, or mail.
With increasing frequency, EIN applicants authorize certain individuals
(sometimes referred to as “nominees”) to
act on the EIN applicants’ behalf. These

2012–16 I.R.B.

nominees are listed on the EIN application as principal officers, general partners,
grantors, owners, and trustors. The authority of these nominees to act on behalf of
the EIN applicant is often temporary and
expires after the application is processed.
The listing of a nominee prevents the IRS
from gathering correct ownership information with respect to the EIN applicant
once the nominee is no longer authorized
to act on behalf of the EIN applicant. In
response to concern with this practice and
the need for accurate records, effective
January 2010, the IRS revised line 7a on
the Form SS–4 requiring disclosure of the
name of the EIN applicant’s “responsible
party” and the responsible party’s Social
Security Number, Individual Taxpayer
Identification Number, or EIN.
The Instructions for Form SS–4 provide
a definition for “responsible party.” For entities with shares or interests traded on a
public exchange, or which are registered
with the Securities and Exchange Commission, the instructions currently provide
that a “responsible party” is (a) a principal
officer, if the business is a corporation, (b)
a general partner, if a partnership, (c) the
owner of an entity that is disregarded as
separate from its owner (disregarded entities owned by a corporation enter the corporation’s name and EIN), or (d) a grantor,
owner, or trustor, if a trust.
For all other entities, the “responsible
party” is the person who has a level of control over, or entitlement to, the funds or assets in the entity that, as a practical matter, enables the individual, directly or indirectly, to control, manage, or direct the
entity and the disposition of its funds and
assets. The ability to fund the entity or
the entitlement to the property of the entity
alone, however, without any corresponding authority to control, manage, or direct
the entity (such as in the case of a minor
child beneficiary), does not cause the individual to be a responsible party.
These proposed regulations require any
person issued an EIN to provide updated
information to the IRS in the manner and
frequency required by forms, instructions,
or other appropriate guidance, which the
IRS will issue in the near future. This
requirement includes updated application
information regarding the name and taxpayer identifying number of the responsible party. This requirement covers those
persons who previously applied for an EIN

2012–16 I.R.B.

by listing a person other than the applicant’s responsible party. This updated information will allow the IRS to ascertain
correct ownership details for persons who
have an EIN. In turn, the IRS can use that
knowledge to contact the correct persons
when resolving a tax matter related to a
business with an EIN and to help combat
schemes that abuse the tax system through
the use of nominees.
Proposed Effective/Applicability Date
These regulations are proposed to apply
to all persons possessing an EIN after the
date the Treasury decision adopting these
rules as final regulations is published in the
Federal Register.
Special Analyses
It has been determined that these proposed regulations are not a significant regulatory action as defined in Executive Order 12866, as supplemented by Executive
Order 13563. 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) does not apply to these regulations.
When an agency issues a rulemaking
proposal, the Regulatory Flexibility Act
(RFA) (5 U.S.C. chapter 6), requires the
agency to “prepare and make available for
public comment an initial regulatory flexibility analysis” that will “describe the impact of the proposed rule on small entities.” (5 U.S.C. 603(a)). Section 605 of
the RFA provides an exception to this requirement if the agency certifies that the
proposed rulemaking will not have a significant economic impact on a substantial
number of small entities.
The proposed rules affect entities that
have an EIN and the IRS has determined
that these proposed rules will have an impact on a substantial number of small entities. The IRS has determined, however,
that the impact on entities affected by the
proposed rule will not be significant. The
current Form SS–4 already requires entities to disclose the name of the EIN applicant’s “responsible party” and the responsible party’s Social Security Number, Individual Taxpayer Identification Number,
or EIN. The amount of time necessary to
submit the updated information required
in these proposed regulations, therefore,
should be minimal for these entities.

804

Based on these facts, the IRS hereby
certifies that the collection of information
contained in this notice of proposed rulemaking will not have a significant economic impact on a substantial number of
small entities. Accordingly, a Regulatory
Flexibility Analysis is not required.
Pursuant to section 7805(f) of the Code,
these regulations have been submitted to
the Chief Counsel for Advocacy of the
Small Business Administration for comment on its impact on small business.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS.
Treasury and the IRS request comments
on all aspects of the proposed rules. All
comments submitted by the public will be
made available for public inspection and
copying. A public hearing will be scheduled if requested in writing by any person
that timely submits comments. If a public hearing is scheduled, notice of the date,
time, and place for the public hearing will
be published in the Federal Register.
Drafting Information
The principal authors of these regulations are Tammie A. Geier and
Gregory T. Armstrong of the Office of the
Associate Chief Counsel (Procedure and
Administration).
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 301 is proposed to be amended as follows:
PART 301—PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation for
part 301 continues to read as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 301.6109–1 is amended
by adding paragraphs (d)(2)(ii)(A) and
(d)(2)(ii)(B) to read as follows:
§301.6109–1. Identifying numbers.
*****

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(d) * * *
(2) * * *
(ii) * * *
(A) Requirement to update. Persons issued employer identification numbers in
accordance with the application process
set forth in paragraph (d)(2)(i) of this section shall provide to the Internal Revenue
Service any updated application information in the manner and frequency required
by forms, instructions, or other appropriate
guidance.

(B) Effective/applicability date. Paragraph (d)(2)(ii)(A) of this section applies
to all persons possessing an employer
identification number after the date of publication of the Treasury decision adopting
these rules as final regulations in the Federal Register.

(Filed by the Office of the Federal Register on March 13,
2012, 8:45 a.m., and published in the issue of the Federal
Register for March 14, 2012, 77 F.R. 15004)

*****
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.

ANNOUNCEMENT AND REPORT CONCERNING ADVANCE PRICING AGREEMENTS
ANNOUNCEMENT 2012–13
April 2, 2012
This Announcement is issued pursuant to § 521(b) of Pub. L. 106–170, the Ticket to Work and Work Incentives Improvement Act
of 1999, which requires the Secretary of the Treasury to report annually to the public concerning Advance Pricing Agreements
(APAs) and the APA Program. The first report covered calendar years 1991 through 1999. Subsequent reports covered separately
each calendar year 2000 through 2010. This thirteenth report describes the experience, structure, and activities of the APA
Program during calendar year 2011. It does not provide guidance regarding the application of the arm’s length standard.
As described in greater detail below, in the first quarter of calendar year 2012, the APA Program merged with that portion of the
Office of the U.S. Competent Authority (USCA) that resolves transfer pricing cases under the mutual agreement procedures of the
United States’ bilateral income tax conventions. As the successor to the APA Program, the new Advance Pricing and Mutual
Agreement (APMA) office has prepared and finalized this report.
Throughout the period covered by this report, and most particularly following the announcement of the new combined APMA
Office, the APA Program and the USCA engaged in extensive efforts to ensure a smooth transition and successful realignment. In
addition to addressing personnel transfer, systems management, and other logistical issues, during the fall of 2011, the USCA
hired additional managers and staff for the APMA Office, representing a 50-percent increase in total headcount. These new
employees are receiving extensive training and mentoring from existing staff and management.
In part because of these transitional issues, during 2011, case closures fell short of normal expectations and average cycle times
increased. APA, with some assistance from USCA, completed 43 APAs (including one amended APA) and 47 recommended
negotiating positions (RNPs), down from totals of 69 APAs and 58 RNPs in 2010. The average time to complete an APA
increased from 37.2 months in 2010 to 40.7 months in 2011.
Additional contributing factors to these results were the decrease in APA personnel for most of 2011 and the record number of
new APA applications filed during the past four years. It is anticipated that when the transition to the APMA Office is complete,
the number of completed APAs will increase and the average cycle time will decrease. Despite a decrease in 2011, over the last
several years the APA program experienced increasing productivity, as measured by the number of completed APA items (e.g.,
APAs, APA amendments, and recommended US negotiating positions) divided by total APA staff hours.
In view of the existing backlog of APA submissions, the hiring of new personnel, an expected growth in requests in coming years,
and the expanding role of APMA in examinations and other matters involving treaty jurisdictions, it is difficult to predict APMA’s
future resource needs with confidence. With the recently augmented staff, however, management anticipates steady growth in the
productivity of the new APMA Office in the years to come.
Samuel M. Maruca
Director, Office of Transfer Pricing Operations

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