TD 8813 (final)

Federal Register / Vol. 64, No. 21 / Tuesday, February 2, 1999 / Rules and Regulations
590 in the first column, the paragraphs
under ‘‘Dates’’ should be:
Effective Date: February 4, 1999.
Compliance Date: Tribal MICS must
be developed by August 4, 1999.
Gaming operations operating on or
before March 31, 1999, must be in full
compliance no later than February 4,
2000. Gaming operations which
commence operation after March 31,
1999, must be in full compliance prior
to commencement of operations.
Authority and Signature
This Final Rule Correction was
prepared under the direction of Barry
W. Brandon, General Counsel, National
Indian Gaming Commission, 1441 L
Street, NW, Suite 9100, Washington, DC
20005.
Signed at Washington, DC this 25th day of
January, 1999.
Barry W. Brandon,
General Counsel.
[FR Doc. 99–2219 Filed 2–1–99; 8:45 am]
BILLING CODE 7565–01–P

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 301 and 602
[TD 8813]
RIN 1545–AU74

Residence of Trusts and Estates—7701
Internal Revenue Service (IRS),
Treasury.
ACTION: Final Regulations.
AGENCY:

SUMMARY: This document contains final
regulations providing guidance
regarding the definition of a trust as a
United States person (domestic trust) or
a foreign trust. This document also
provides guidance regarding the
election for certain trusts to remain
domestic trusts for taxable years
beginning after December 31, 1996. The
regulations incorporate changes to the
law made by the Small Business Job
Protection Act of 1996 and by the
Taxpayer Relief Act of 1997. The final
regulations affect the determination of
the residency of trusts as foreign or
domestic for federal tax purposes.
DATES: Effective date: These regulations
are effective February 2, 1999.
Dates of applicability: See
§ 301.7701–7(e).
FOR FURTHER INFORMATION CONTACT:
Concerning the regulations, James A.
Quinn at (202) 622–3060 (not a toll-free
number).
SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act
The collections of information
contained in these final regulations have
been reviewed and approved by the
Office of Management and Budget for
review in accordance with the
Paperwork Reduction Act (44 U.S.C.
3507) under control number 1545–1600.
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 control number.
The collections of information in
these final regulations are in
§ 301.7701–7 (d)(2)(ii) and (f). This
information is required by the IRS to
assure compliance with the provisions
of the Small Business Job Protection Act
of 1996 and by the Taxpayer Relief Act
of 1997 for trusts seeking to retain their
residency as domestic or foreign trusts
in the event of an inadvertent change
and for trusts electing to remain
domestic trusts. The likely respondents
are trusts. The estimated average annual
burden per respondent is 0.5 hours.
Comments concerning the accuracy of
this burden estimate should be sent to
the Internal Revenue Service, Attn.: IRS
Reports Clearance Officer. OP:FS:FP,
Washington, DC 20224, and 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.
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.
Background
On June 5, 1997, the IRS published in
the Federal Register a notice of
proposed rulemaking (62 FR 30796) to
provide guidance on the definition of a
foreign trust and a domestic trust under
section 7701(a) (30) and (31), as
amended by section 1907 of the Small
Business Job Protection Act of 1996
(SBJP Act), Public Law 104–188, 110
Stat. 1755 (August 20, 1996).
Written comments responding to the
notice of proposed rulemaking were
received, and a public hearing was held
on September 16, 1997. After
consideration of the comments received,
the proposed regulations are adopted as
revised by this Treasury decision.
Section 1161(a) of the Taxpayer Relief
Act of 1997 (TRA 1997), Public Law
105–34, 111 Stat. 788 (August 5, 1997),
provides that, to the extent prescribed in

4967

regulations by the Secretary of the
Treasury or his delegate, a trust that was
in existence on August 20, 1996 (other
than a trust treated as owned by the
grantor under subpart E of part I of
subchapter J of chapter 1 of the Internal
Revenue Code of 1986 (Code)), and that
was treated as a United States person on
August 19, 1996, may elect to continue
to be treated as a United States person
notwithstanding the enactment of
section 7701(a)(30)(E). Notice 98–25
(1998–18 I.R.B. 11) provides guidance
regarding the election to remain a
domestic trust. The IRS and the
Treasury Department are incorporating
the guidance contained in Notice 98–25
concerning the election to remain a
domestic trust in these final regulations.
The final regulations also provide
guidance regarding the circumstances
that cause a termination of the election
and guidance concerning revocation of
the election to remain a domestic trust.
In addition, section 1601(i)(3)(A) of
TRA 1997 amended section
7701(a)(30)(E)(ii) by striking the word
‘‘fiduciaries’’ and inserting ‘‘persons’’ in
its place. The final regulations have
been drafted consistent with this
change.
Explanation of Provisions
A. Court Test and Safe Harbor Issues
1. Foreign Classification Bias and Safe
Harbor
Some commentators point out
generally that the Code and the
proposed regulations are biased in favor
of trusts being treated as foreign trusts.
The commentators recommend that the
regulations should reduce the bias in
favor of foreign treatment. The safe
harbor in the proposed regulations
provides that a trust is a domestic trust
if, pursuant to the terms of a trust
instrument, the trust has only United
States fiduciaries, such fiduciaries are
administering the trust exclusively in
the United States, and the trust is not
subject to an automatic migration
provision. One commentator
recommends that the safe harbor be
made clearly applicable in the case of
any trust if a majority of the trustees are
United States persons and the other
requirements are met.
The IRS and the Treasury Department
agree with the commentator that the safe
harbor should not be limited to trusts
with only United States fiduciaries.
Since the primary concern addressed by
the safe harbor is the difficulty in
determining whether the court of a
particular state would assert primary
supervision over the administration of a
trust if that trust had never appeared
before a court, the final regulations

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Federal Register / Vol. 64, No. 21 / Tuesday, February 2, 1999 / Rules and Regulations

provide a safe harbor only for the court
test. A trust that satisfies the safe harbor,
therefore, would also need to meet the
control test in order to be a domestic
trust. In addition, an example has been
added to the control test illustrating that
the control test is satisfied if United
States persons control all substantial
decisions by a majority vote.
Commentators note that many trust
instruments do not direct where the
trust is to be administered. Therefore,
they suggest that a trust should satisfy
the safe harbor if the trust is in fact
administered in the United States
(regardless of whether this is mandated
by the trust document).
The IRS and the Treasury Department
believe that, if a trust is administered
exclusively in the United States, it is not
necessary that the trust instrument
actually direct that the trust be
administered in the United States.
Accordingly, the final regulations
provide that a trust satisfies the safe
harbor if the trust instrument does not
direct that the trust be administered in
a jurisdiction outside the United States,
and the trust is in fact administered in
the United States.
These changes in the final regulations
will allow more trusts to fall within the
safe harbor.
2. Automatic Migration or Flee Clauses
The proposed regulations provide that
a trust will not satisfy the court test if
the trust instrument contains an
automatic migration clause that would
cause the trust to migrate from the
United States if a United States court
attempts to assert jurisdiction or
otherwise supervise the administration
of the trust. Commentators argue that
the rule in the proposed regulations
concerning automatic migration clauses
is too broad. They argue that an
automatic migration clause should not
cause a trust to be treated as a foreign
trust if migration is triggered only by
events that are not particular to a given
trust, its trustees, beneficiaries, or
grantors. For example, if a trust will
migrate because of foreign invasion of
the United States, the residency of the
trust should not be affected.
The final regulations adopt the
suggestion and provide that a trust will
not fail the court test if the trust
instrument provides that the trust will
migrate from the United States only in
the case of foreign invasion of the
United States or widespread
confiscation or nationalization of
property in the United States.

3. Clarify That the List of Specific
Situations for Meeting the Court Test Is
Not an Exclusive List
Commentators recommend that the
regulations be clarified to provide that
the situations set forth in § 301.7701–
7(d)(2) of the proposed regulations that
meet the court test are not the exclusive
ways to meet the court test.
The purpose of setting forth specific
situations that meet the court test was
to provide bright-line rules that would
give taxpayers certainty of treatment to
the extent possible. These rules,
however, are not exclusive. The court
test will also be satisfied by meeting the
requirements set forth in the final
regulations in § 301.7701–7(c).
4. Disregard State Law
A commentator recommends that the
regulations should establish bright-line
rules for the court test without reference
to state law.
The IRS and the Treasury Department
believe that the proper interpretation of
section 7701(a)(30)(E) requires that state
law be applied under the court test. In
addition, the proposed regulations
provide bright-line rules for both the
court test and the control test to the
extent permitted by the statute. For
example, the regulations provide a safe
harbor and provide for specific cases
where the court test is satisfied.
Therefore, the final regulations remain
unchanged in this regard.
5. Court Test Excessively Broad
One commentator argues that the
court test is excessively broad because
many trusts that are, in the
commentator’s view, foreign trusts will
potentially be deemed domestic trusts.
Specifically, the commentator is
concerned about a trust in which the
only domestic aspect is a single United
States trustee who controls all
substantial decisions of the trust.
Another commentator recommends that
the regulations should make clear that
trustee meetings and other trustee
activities in the United States will not
cause the court test to be met.
The IRS and the Treasury Department
do not believe that there is statutory
authority for modifying the court test as
suggested and, therefore, the final
regulations remain unchanged.
Furthermore, trustee meetings and
activities in the United States may be a
relevant factor to be taken into account
in determining whether the court test
has been met.
6. Petition of Court by a Single
Beneficiary
A commentator recommends that
§ 301.7701–7(d)(2)(iii) of the proposed

regulations should be clarified to
provide that the court test is met only
if either (i) a court within the United
States actually exercises primary
supervision over the trust, or (ii) a
majority of beneficiaries take steps to
cause a United States court to exercise
primary supervision. The commentator
expresses concern about a possible
situation where, under the
commentator’s interpretation of the
regulations, a single beneficiary of a
foreign trust takes steps with a United
States court petitioning it to assume
primary supervision of the trust and,
regardless of whether the court does in
fact exercise primary supervision of the
trust, the foreign trust becomes a
domestic trust.
While § 301.7701–7(d)(2)(iii) of the
proposed regulations permits the
trustees and/or beneficiaries of a trust to
take steps to ensure that the court test
is satisfied, taking preliminary steps
with a United States court without in
fact causing the administration of the
trust to be subject to the primary
supervision of the United States court
would not satisfy the court test. Thus,
the concern about a single beneficiary
altering the residence of the trust by
merely taking preliminary steps is
unwarranted.
B. Control Test Issues
1. Who Counts for Purposes of the
Control Test
The proposed regulations provide that
substantial decisions do not include
decisions exercisable by a grantor or by
a beneficiary of the trust that affect
solely the beneficiary’s interest in the
trust, unless the grantor or beneficiary is
acting in a fiduciary capacity. The
proposed regulations provide this rule
because the statute prior to amendment
by TRA 1997 provided that United
States fiduciaries must control all
substantial decisions of a domestic trust.
Therefore, the proposed regulations
exclude decisions by those who are not
holding powers in a fiduciary capacity.
As noted, TRA 1997 substituted
‘‘persons’’ for ‘‘fiduciaries’’ in the
control test. In light of the change in the
statute, commentators point out that
there is no statutory basis for ignoring
the powers held by grantors and
beneficiaries for purposes of the control
test.
Therefore, the final regulations
change the rule set forth in the proposed
regulations and, for purposes of the
control test, count all powers held by
grantors and powers held by
beneficiaries including those that affect
solely the portion of the trust in which
the beneficiary has an interest.

Federal Register / Vol. 64, No. 21 / Tuesday, February 2, 1999 / Rules and Regulations
Accordingly, all persons with any
power over substantial decisions of the
trust, whether acting in a fiduciary
capacity or not, must be counted for
purposes of the control test.
Under the proposed regulations,
excluding grantors (and beneficiaries)
from the control test would have
allowed certain individual retirement
accounts (IRAs) and other tax-exempt
trusts to continue to be treated as
domestic trusts and thus retain their taxexempt status even if the grantor/
beneficiary of the trust is a foreign
person. The IRS and the Treasury
Department believe that Congress did
not intend the TRA 1997 changes to
affect the tax-exempt status of IRAs and
other tax-exempt trusts whose taxexempt status depends on their being
domestic trusts. Because these trusts are
required to be created or organized in
the United States, and are subject to
other detailed requirements for
qualification under the Code, the final
regulations provide that these trusts
satisfy the control test, provided that
United States fiduciaries control all of
the substantial decisions of the trust that
are made by trust fiduciaries. This
provision of the final regulations
generally reaches the same result as the
provision in the proposed regulations.
2. Time to Correct Inadvertent Changes
in Fiduciaries
The proposed regulations provide that
in the event of an inadvertent change in
the fiduciaries that would cause a
change in the residency of a trust, the
trust is allowed six months from the
date of change in the fiduciaries to
adjust either the fiduciaries or the
residence of the fiduciaries so as to
avoid a change in the residence of the
trust.
Commentators recommend that trusts
be given more time to take corrective
action to avoid a change in residency or,
alternatively, the regulations should
give the IRS discretionary authority to
continue treating a trust that
inadvertently fails the control test as a
domestic trust even if the control test is
not met within six months.
The final regulations extend the
period of time to 12 months from the
date of the change to complete
corrective action. The final regulations
also provide that the district director
may grant an extension of time to make
the modification if the failure to make
the modification within the 12-month
period was due to reasonable cause. In
addition, the final regulations define the
term inadvertent change to mean a
change with respect to a person who has
a power to make a substantial decision
of the trust, if such change (if not

corrected) would cause an unintended
change to the foreign or domestic
residency of the trust.
3. Effect of Power To Veto Decisions
The proposed regulations define
control to mean having the power, by
vote or otherwise, to make all of the
substantial decisions of the trust, with
no other person having the power to
veto any of the substantial decisions.
Thus, if United States fiduciaries have
the power to make all the substantial
decisions of the trust, but a foreign
person could veto one of the decisions,
the trust would fail the control test and
would be a foreign trust. A commentator
disagrees with the conclusion that the
power to veto decisions may be
determinative of who has control.
The final regulations retain the
definition of control set forth in the
proposed regulations. The effect of a
veto power is specifically noted in the
legislative history. H.R. Rep. No. 542,
Part 2, 104th Cong., 2d Sess. 31 (1996).
Furthermore, control should be defined
to mean full power over the trust
consistent with a trustee’s traditional
role in trust administration.
Accordingly, if a United States person
only has the power to veto the decisions
of a foreign trustee, the control test is
not satisfied. Likewise, if a foreign
person has the power to veto the
decisions of a United States trustee, the
control test is not satisfied. Thus, in
both cases, the trust would be a foreign
trust.
4. Power To Remove, Add, or Replace
a Trustee
Some commentators disagree with
treating a decision to remove, add, or
replace a trustee as a substantial
decision. Commentators also argue that
the proposed regulations are not
consistent with the rules that apply for
determining the ownership of grantor
trusts or with the rules for determining
whether property is included in a
decedent’s estate for estate tax purposes.
A commentator recommends that the
final regulations provide that a decision
to appoint a trustee to succeed a trustee
who has died, resigned, or otherwise
ceased to act as a trustee, without the
power to remove the trustee, is not a
substantial decision.
The IRS and the Treasury Department
believe that the purpose of the control
test is to determine the residence of a
trust and therefore is different from the
purpose of the rules for grantor trusts
and for estate taxes. The final
regulations continue to treat the
decision to remove, add, or replace a
trustee as a substantial decision. In
addition, the final regulations provide

4969

that the decision to appoint a successor
fiduciary to succeed a fiduciary who has
died, resigned, or otherwise ceased to
act as a trustee, even if it is not
accompanied by an unrestricted power
to remove a trustee, is a substantial
decision, unless this power is limited
such that it cannot be exercised in a
manner that would change the trust’s
residency from foreign to domestic, or
vice versa.
5. Investment Decisions
Commentators argue that investment
decisions should not be treated as
substantial decisions.
The final regulations continue to treat
investment decisions as substantial
decisions. However, the final
regulations provide that if a United
States fiduciary contracts for the
services of an investment advisor, and
the advisor’s power to make investment
decisions can be terminated at the will
of the United States fiduciary, the
United States fiduciary will be treated
as retaining control over the investment
decisions made by the investment
advisor, whether the investment advisor
is foreign or domestic.
C. Transition Rule and Grandfathering
Issues
1. Pre-existing Foreign Trusts
Commentators recommend various
grandfathering rules for pre-existing
foreign trusts that would allow them to
remain treated as foreign trusts. A
commentator recommends that a trust
would be deemed to be a foreign trust
prior to the effective date of section
7701(a) (30) and (31), as amended by the
SBJP Act (new law), if the trust is
treated as a foreign trust under the new
law. In particular, the commentator
expresses concern that some trusts
believed to be foreign trusts under
section 7701(a) (30) and (31), prior to
amendment by the SBJP Act (prior law),
may have in fact been domestic trusts
under prior law. If such trusts qualify as
foreign trusts under the new law, they
will be considered to have changed their
classification from domestic to foreign
on January 1, 1997. Trusts that change
from domestic to foreign may be subject
to tax for the deemed transfer to a
foreign trust under section 1491 (as in
effect prior to its repeal by TRA 1997)
and subject to penalties for failure to
report such transfer under section 6677
if they continue to treat themselves as
foreign trusts.
In addition, a commentator
recommends that trusts that were
formed prior to August 20, 1996, as
group trust arrangements exempt from
tax under sections 501(a) and 408(e) and

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Federal Register / Vol. 64, No. 21 / Tuesday, February 2, 1999 / Rules and Regulations

described in Rev. Rul. 81–100 (1981–1
C.B. 326) not be subject to section
7701(a) (30) and (31) as amended by the
SBJP Act, but should be subject to
section 7701(a) (30) and (31) as in effect
prior to August 20, 1996.
The IRS and the Treasury Department
do not believe that there is statutory
authority for adopting the requested
grandfathering rules for pre-existing
foreign trusts or for applying prior law
to group trust arrangements described in
Rev. Rul. 81–100. The election
provision included in TRA 1997
provides specific transition relief only
for trusts that treated themselves as
domestic trusts prior to August 20,
1996, not for trusts that treated
themselves as foreign trusts. Therefore,
the final regulations do not include the
recommended transition rules.
2. Foreign Trust Safe Harbor
A commentator recommends that
newly-created trusts established under
foreign law should benefit from a
foreign trust safe harbor. The
commentator suggests a safe harbor that
would provide that a trust established
under foreign law, which does not by its
terms provide for administration in the
United States, and which does not file
United States federal income tax returns
as a United States trust will fail the
court test and will be treated as a foreign
trust unless the trust is described in
§ 301.7701–7(d)(2) (i) or (ii) of the
proposed regulations (situations that
meet the court test).
Given the statutory bias towards
foreign trust classification, the IRS and
Treasury Department do not agree that
a safe harbor for foreign trusts is
necessary because sufficient guidance is
given as to the circumstances that will
cause a trust to be foreign. Therefore,
the final regulations do not include the
recommended rules.
D. Puerto Rico Trusts
The statute uses the term the United
States in a geographical sense and thus,
for purposes of the court test, the United
States includes only the States and the
District of Columbia. See Section
7701(a)(9). Accordingly, a court within
a territory or possession of the United
States is not a court within the United
States and all trusts subject to the
supervision of such a court are thereby
foreign. That rule was stated explicitly
in the proposed regulations.
Some commentators argue that
adverse tax consequences result from
this rule. Therefore, they recommend
that the final regulations provide,
contrary to what the statute implies, that
Puerto Rico courts are ‘‘courts within
the United States’’ for purposes of

section 7701(a)(30)(E)(i) and, therefore,
that Puerto Rico trusts will meet the
court test.
The final regulations do not adopt the
suggestion. Rather, the final regulations
continue to provide that a trust that is
subject to the primary supervision of the
Puerto Rico courts will be treated as a
foreign trust for federal tax purposes.
E. Effective Date
The proposed regulations provide that
the regulations would be applicable to
trusts for taxable years beginning after
December 31, 1996, and to trusts whose
trustees have elected to apply sections
7701(a)(30) and (31) to the trusts for
taxable years ending after August 20,
1996, under section 1907(a)(3)(B) of the
SBJP Act.
The final regulations modify the
effective date in the proposed
regulations. Except for § 301.7701–7(f)
of the final regulations, which applies
beginning February 2, 1999, the final
regulations are applicable to trusts for
taxable years ending after February 2,
1999. In addition, trusts may rely on the
final regulations (i) for taxable years of
the trusts beginning after December 31,
1996, and (ii) for taxable years ending
after August 20, 1996, in the case of
trusts electing under section
1907(a)(3)(B) of the SBJP Act.
If a trust is created after August 19,
1996, and before April 5, 1999, and the
trust satisfies the control test set forth in
the proposed regulations published
under section 7701(a)(30) and (31) (62
FR 30796, June 5, 1997), but does not
satisfy the control test set forth in the
final regulations, the trust may be
modified to satisfy the control test of the
final regulations by December 31, 1999.
If the modification is completed by
December 31, 1999, the trust will be
treated as satisfying the control test of
the final regulations for taxable years
beginning after December 31, 1996 (and
for taxable years ending after August 20,
1996, if the election under section
1907(a)(3)(B) of the SBJP Act has been
made for the trust).
Effect on Other Documents
Notice 98–25 (1998–18 I.R.B. 11) is
obsolete as of February 2, 1999.
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in EO
12866. Therefore, a regulatory
assessment is not required. It is hereby
certified that the collections of
information in these regulations will not
have a significant economic impact on
a substantial number of small entities.
This certification is based upon the fact

that the estimated average burden per
trust in complying with the collection of
information in § 301.7701–7(d)(2)(ii)
and (f) is 0.5 hours. In addition, each
trust will only have to file the election
statement to remain a domestic trust
once. Therefore, a Regulatory Flexibility
Analysis under the Regulatory
Flexibility Act (5 U.S.C. chapter 6) is
not required. Pursuant to section 7805(f)
of the Code, the notice of proposed
rulemaking preceding these regulations
was submitted to the Small Business
Administration for comment on its
impact on small business.
Drafting Information: The principal
author of these regulations is James A.
Quinn of the Office of Assistant Chief
Counsel (Passthroughs and Special
Industries). However, other personnel
from the IRS and Treasury Department
participated in their development.
List of Subjects
26 CFR Part 301
Employment taxes, Estate taxes,
Excise taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping
requirements.
26 CFR Part 602
Reporting and recordkeeping
requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 301 and
602 are amended as follows:
PART 301—PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation
for part 301 continues to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
§ 301.7701–5

[Amended]

Par. 2. The last sentence of
§ 301.7701–5 is removed.
Par. 3. Section 301.7701–7 is added to
read as follows:
§ 301.7701–7
foreign.

Trusts—domestic and

(a) In general. (1) A trust is a United
States person if—
(i) A court within the United States is
able to exercise primary supervision
over the administration of the trust
(court test); and
(ii) One or more United States persons
have the authority to control all
substantial decisions of the trust
(control test).
(2) A trust is a United States person
for purposes of the Internal Revenue
Code (Code) on any day that the trust
meets both the court test and the control

Federal Register / Vol. 64, No. 21 / Tuesday, February 2, 1999 / Rules and Regulations
test. For purposes of the regulations in
this chapter, the term domestic trust
means a trust that is a United States
person. The term foreign trust means
any trust other than a domestic trust.
(3) Except as otherwise provided in
part I, subchapter J, chapter 1 of the
Code, the taxable income of a foreign
trust is computed in the same manner
as the taxable income of a nonresident
alien individual who is not present in
the United States at any time. Section
641(b). Section 7701(b) is not applicable
to trusts because it only applies to
individuals. In addition, a foreign trust
is not considered to be present in the
United States at any time for purposes
of section 871(a)(2), which deals with
capital gains of nonresident aliens
present in the United States for 183 days
or more.
(b) Applicable law. The terms of the
trust instrument and applicable law
must be applied to determine whether
the court test and the control test are
met.
(c) The court test—(1) Safe harbor. A
trust satisfies the court test if—
(i) The trust instrument does not
direct that the trust be administered
outside of the United States;
(ii) The trust in fact is administered
exclusively in the United States; and
(iii) The trust is not subject to an
automatic migration provision described
in paragraph (c)(4)(ii) of this section.
(2) Example. The following example
illustrates the rule of paragraph (c)(1) of
this section:
Example. A creates a trust for the equal
benefit of A’s two children, B and C. The
trust instrument provides that DC, a State Y
corporation, is the trustee of the trust. State
Y is a state within the United States. DC
administers the trust exclusively in State Y
and the trust instrument is silent as to where
the trust is to be administered. The trust is
not subject to an automatic migration
provision described in paragraph (c)(4)(ii) of
this section. The trust satisfies the safe harbor
of paragraph (c)(1) of this section and the
court test.

(3) Definitions. The following
definitions apply for purposes of this
section:
(i) Court. The term court includes any
federal, state, or local court.
(ii) The United States. The term the
United States is used in this section in
a geographical sense. Thus, for purposes
of the court test, the United States
includes only the States and the District
of Columbia. See section 7701(a)(9).
Accordingly, a court within a territory
or possession of the United States or
within a foreign country is not a court
within the United States.
(iii) Is able to exercise. The term is
able to exercise means that a court has

or would have the authority under
applicable law to render orders or
judgments resolving issues concerning
administration of the trust.
(iv) Primary supervision. The term
primary supervision means that a court
has or would have the authority to
determine substantially all issues
regarding the administration of the
entire trust. A court may have primary
supervision under this paragraph
(c)(3)(iv) notwithstanding the fact that
another court has jurisdiction over a
trustee, a beneficiary, or trust property.
(v) Administration. The term
administration of the trust means the
carrying out of the duties imposed by
the terms of the trust instrument and
applicable law, including maintaining
the books and records of the trust, filing
tax returns, managing and investing the
assets of the trust, defending the trust
from suits by creditors, and determining
the amount and timing of distributions.
(4) Situations that cause a trust to
satisfy or fail to satisfy the court test. (i)
Except as provided in paragraph
(c)(4)(ii) of this section, paragraphs
(c)(4)(i) (A) through (D) of this section
set forth some specific situations in
which a trust satisfies the court test. The
four situations described are not
intended to be an exclusive list.
(A) Uniform Probate Code. A trust
meets the court test if the trust is
registered by an authorized fiduciary or
fiduciaries of the trust in a court within
the United States pursuant to a state
statute that has provisions substantially
similar to Article VII, Trust
Administration, of the Uniform Probate
Code, 8 Uniform Laws Annotated 1
(West Supp. 1998), available from the
National Conference of Commissioners
on Uniform State Laws, 676 North St.
Clair Street, Suite 1700, Chicago, Illinois
60611.
(B) Testamentary trust. In the case of
a trust created pursuant to the terms of
a will probated within the United States
(other than an ancillary probate), if all
fiduciaries of the trust have been
qualified as trustees of the trust by a
court within the United States, the trust
meets the court test.
(C) Inter vivos trust. In the case of a
trust other than a testamentary trust, if
the fiduciaries and/or beneficiaries take
steps with a court within the United
States that cause the administration of
the trust to be subject to the primary
supervision of the court, the trust meets
the court test.
(D) A United States court and a
foreign court are able to exercise
primary supervision over the
administration of the trust. If both a
United States court and a foreign court
are able to exercise primary supervision

4971

over the administration of the trust, the
trust meets the court test.
(ii) Automatic migration provisions.
Notwithstanding any other provision in
this section, a court within the United
States is not considered to have primary
supervision over the administration of
the trust if the trust instrument provides
that a United States court’s attempt to
assert jurisdiction or otherwise
supervise the administration of the trust
directly or indirectly would cause the
trust to migrate from the United States.
However, this paragraph (c)(4)(ii) will
not apply if the trust instrument
provides that the trust will migrate from
the United States only in the case of
foreign invasion of the United States or
widespread confiscation or
nationalization of property in the
United States.
(5) Examples. The following examples
illustrate the rules of this paragraph (c):
Example 1. A, a United States citizen,
creates a trust for the equal benefit of A’s two
children, both of whom are United States
citizens. The trust instrument provides that
DC, a domestic corporation, is to act as
trustee of the trust and that the trust is to be
administered in Country X, a foreign country.
DC maintains a branch office in Country X
with personnel authorized to act as trustees
in Country X. The trust instrument provides
that the law of State Y, a state within the
United States, is to govern the interpretation
of the trust. Under the law of Country X, a
court within Country X is able to exercise
primary supervision over the administration
of the trust. Pursuant to the trust instrument,
the Country X court applies the law of State
Y to the trust. Under the terms of the trust
instrument the trust is administered in
Country X. No court within the United States
is able to exercise primary supervision over
the administration of the trust. The trust fails
to satisfy the court test and therefore is a
foreign trust.
Example 2. A, a United States citizen,
creates a trust for A’s own benefit and the
benefit of A’s spouse, B, a United States
citizen. The trust instrument provides that
the trust is to be administered in State Y, a
state within the United States, by DC, a State
Y corporation. The trust instrument further
provides that in the event that a creditor sues
the trustee in a United States court, the trust
will automatically migrate from State Y to
Country Z, a foreign country, so that no
United States court will have jurisdiction
over the trust. A court within the United
States is not able to exercise primary
supervision over the administration of the
trust because the United States court’s
jurisdiction over the administration of the
trust is automatically terminated in the event
the court attempts to assert jurisdiction.
Therefore, the trust fails to satisfy the court
test from the time of its creation and is a
foreign trust.

(d) Control test—(1) Definitions—(i)
United States person. The term United
States person means a United States

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person within the meaning of section
7701(a)(30). For example, a domestic
corporation is a United States person,
regardless of whether its shareholders
are United States persons.
(ii) Substantial decisions. The term
substantial decisions means those
decisions that persons are authorized or
required to make under the terms of the
trust instrument and applicable law and
that are not ministerial. Decisions that
are ministerial include decisions
regarding details such as the
bookkeeping, the collection of rents, and
the execution of investment decisions.
Substantial decisions include, but are
not limited to, decisions concerning—
(A) Whether and when to distribute
income or corpus;
(B) The amount of any distributions;
(C) The selection of a beneficiary;
(D) Whether a receipt is allocable to
income or principal;
(E) Whether to terminate the trust;
(F) Whether to compromise, arbitrate,
or abandon claims of the trust;
(G) Whether to sue on behalf of the
trust or to defend suits against the trust;
(H) Whether to remove, add, or
replace a trustee;
(I) Whether to appoint a successor
trustee to succeed a trustee who has
died, resigned, or otherwise ceased to
act as a trustee, even if the power to
make such a decision is not
accompanied by an unrestricted power
to remove a trustee, unless the power to
make such a decision is limited such
that it cannot be exercised in a manner
that would change the trust’s residency
from foreign to domestic, or vice versa;
and
(J) Investment decisions; however, if a
United States person under section
7701(a)(30) hires an investment advisor
for the trust, investment decisions made
by the investment advisor will be
considered substantial decisions
controlled by the United States person
if the United States person can
terminate the investment advisor’s
power to make investment decisions at
will.
(iii) Control. The term control means
having the power, by vote or otherwise,
to make all of the substantial decisions
of the trust, with no other person having
the power to veto any of the substantial
decisions. To determine whether United
States persons have control, it is
necessary to consider all persons who
have authority to make a substantial
decision of the trust, not only the trust
fiduciaries.
(iv) Treatment of certain employee
benefit trusts. Provided that United
States fiduciaries control all of the
substantial decisions made by the
trustees or fiduciaries, the following

types of trusts are deemed to satisfy the
control test set forth in paragraph
(a)(1)(ii) of this section—
(A) A qualified trust described in
section 401(a);
(B) A trust described in section 457(g);
(C) A trust that is an individual
retirement account described in section
408(a);
(D) A trust that is an individual
retirement account described in section
408(k) or 408(p);
(E) A trust that is a Roth IRA
described in section 408A;
(F) A trust that is an education
individual retirement account described
in section 530;
(G) A trust that is a voluntary
employees’ beneficiary association
described in section 501(c)(9);
(H) Such additional categories of
trusts as the Commissioner may
designate in revenue procedures,
notices, or other guidance published in
the Internal Revenue Bulletin (see
§ 601.601(d)(2)(ii)(b)).
(v) Examples. The following examples
illustrate the rules of paragraph (d)(1) of
this section:
Example 1. Trust has three fiduciaries, A,
B, and C. A and B are United States citizens
and C is a nonresident alien. No persons
except the fiduciaries have authority to make
any decisions of the trust. The trust
instrument provides that no substantial
decisions of the trust can be made unless
there is unanimity among the fiduciaries. The
control test is not satisfied because United
States persons do not control all the
substantial decisions of the trust. No
substantial decisions can be made without
C’s agreement.
Example 2. Assume the same facts as in
Example 1, except that the trust instrument
provides that all substantial decisions of the
trust are to be decided by a majority vote
among the fiduciaries. The control test is
satisfied because a majority of the fiduciaries
are United States persons and therefore
United States persons control all the
substantial decisions of the trust.
Example 3. Assume the same facts as in
Example 2, except that the trust instrument
directs that C is to make all of the trust’s
investment decisions, but that A and B may
veto C’s investment decisions. A and B
cannot act to make the investment decisions
on their own. The control test is not satisfied
because the United States persons, A and B,
do not have the power to make all of the
substantial decisions of the trust.
Example 4. Assume the same facts as in
Example 3, except A and B may accept or
veto C’s investment decisions and can make
investments that C has not recommended.
The control test is satisfied because the
United States persons control all substantial
decisions of the trust.

(2) Replacement of any person who
had authority to make a substantial
decision of the trust—(i) Replacement
within 12 months. In the event of an

inadvertent change in any person that
has the power to make a substantial
decision of the trust that would cause
the domestic or foreign residency of the
trust to change, the trust is allowed 12
months from the date of the change to
make necessary changes either with
respect to the persons who control the
substantial decisions or with respect to
the residence of such persons to avoid
a change in the trust’s residency. For
purposes of this section, an inadvertent
change means the death, incapacity,
resignation, change in residency or
other change with respect to a person
that has a power to make a substantial
decision of the trust that would cause a
change to the residency of the trust but
that was not intended to change the
residency of the trust. If the necessary
change is made within 12 months, the
trust is treated as retaining its prechange residency during the 12-month
period. If the necessary change is not
made within 12 months, the trust’s
residency changes as of the date of the
inadvertent change.
(ii) Request for extension of time. If
reasonable actions have been taken to
make the necessary change to prevent a
change in trust residency, but due to
circumstances beyond the trust’s control
the trust is unable to make the
modification within 12 months, the
trust may provide a written statement to
the district director having jurisdiction
over the trust’s return setting forth the
reasons for failing to make the necessary
change within the required time period.
If the district director determines that
the failure was due to reasonable cause,
the district director may grant the trust
an extension of time to make the
necessary change. Whether an extension
of time is granted is in the sole
discretion of the district director and, if
granted, may contain such terms with
respect to assessment as may be
necessary to ensure that the correct
amount of tax will be collected from the
trust, its owners, and its beneficiaries. If
the district director does not grant an
extension, the trust’s residency changes
as of the date of the inadvertent change.
(iii) Examples. The following
examples illustrate the rules of
paragraphs (d)(2)(i) and (ii) of this
section:
Example 1. A trust that satisfies the court
test has three fiduciaries, A, B, and C. A and
B are United States citizens and C is a
nonresident alien. All decisions of the trust
are made by majority vote of the fiduciaries.
The trust instrument provides that upon the
death or resignation of any of the fiduciaries,
D, is the successor fiduciary. A dies and D
automatically becomes a fiduciary of the
trust. When D becomes a fiduciary of the
trust, D is a nonresident alien. Two months

Federal Register / Vol. 64, No. 21 / Tuesday, February 2, 1999 / Rules and Regulations
after A dies, B replaces D with E, a United
States person. Because D was replaced with
E within 12 months after the date of A’s
death, during the period after A’s death and
before E begins to serve, the trust satisfies the
control test and remains a domestic trust.
Example 2. Assume the same facts as in
Example 1 except that at the end of the 12month period after A’s death, D has not been
replaced and remains a fiduciary of the trust.
The trust becomes a foreign trust on the date
A died unless the district director grants an
extension of the time period to make the
necessary change.

(3) Automatic migration provisions.
Notwithstanding any other provision in
this section, United States persons are
not considered to control all substantial
decisions of the trust if an attempt by
any governmental agency or creditor to
collect information from or assert a
claim against the trust would cause one
or more substantial decisions of the
trust to no longer be controlled by
United States persons.
(4) Examples. The following examples
illustrate the rules of this paragraph (d):
Example 1. A, a nonresident alien
individual, is the grantor and, during A’s
lifetime, the sole beneficiary of a trust that
qualifies as an individual retirement account
(IRA). A has the exclusive power to make
decisions regarding withdrawals from the
IRA and to direct its investments. The IRA’s
sole trustee is a United States person within
the meaning of section 7701(a)(30). The
control test is satisfied with respect to this
trust because the special rule of paragraph
(d)(1)(iv) of this section applies.
Example 2. A, a nonresident alien
individual, is the grantor of a trust and has
the power to revoke the trust, in whole or in
part, and revest assets in A. A is treated as
the owner of the trust under sections 672(f)
and 676. A is not a fiduciary of the trust. The
trust has one trustee, B, a United States
person, and the trust has one beneficiary, C.
B has the discretion to distribute corpus or
income to C. In this case, decisions
exercisable by A to have trust assets
distributed to A are substantial decisions.
Therefore, the trust is a foreign trust because
B does not control all substantial decisions of
the trust.
Example 3. A trust, Trust T, has two
fiduciaries, A and B. Both A and B are United
States persons. A and B hire C, an investment
advisor who is a foreign person, and may
terminate C’s employment at will. The
investment advisor makes the investment
decisions for the trust. A and B control all
other decisions of the trust. Although C has
the power to make investment decisions, A
and B are treated as controlling these
decisions. Therefore, the control test is
satisfied.
Example 4. G, a United States citizen,
creates a trust. The trust provides for income
to A and B for life, remainder to A’s and B’s
descendants. A is a nonresident alien and B
is a United States person. The trustee of the
trust is a United States person. The trust
instrument authorizes A to replace the
trustee. The power to replace the trustee is

a substantial decision. Because A, a
nonresident alien, controls a substantial
decision, the control test is not satisfied.

(e) Effective date—(1) General rule.
Except for the election to remain a
domestic trust provided in paragraph (f)
of this section, this section is applicable
to trusts for taxable years ending after
February 2, 1999. This section may be
relied on by trusts for taxable years
beginning after December 31, 1996, and
also may be relied on by trusts whose
trustees have elected to apply sections
7701(a)(30) and (31) to the trusts for
taxable years ending after August 20,
1996, under section 1907(a)(3)(B) of the
Small Business Job Protection Act of
1996, (the SBJP Act) Public Law 104–
188, 110 Stat. 1755 (26 U.S.C. 7701
note).
(2) Trusts created after August 19,
1996. If a trust is created after August
19, 1996, and before April 5, 1999, and
the trust satisfies the control test set
forth in the regulations project REG–
251703–96 published under section
7701(a)(30) and (31) (1997–1 C.B. 795)
(See § 601.601(d)(2) of this chapter), but
does not satisfy the control test set forth
in paragraph (d) of this section, the trust
may be modified to satisfy the control
test of paragraph (d) by December 31,
1999. If the modification is completed
by December 31, 1999, the trust will be
treated as satisfying the control test of
paragraph (d) for taxable years
beginning after December 31, 1996, (and
for taxable years ending after August 20,
1996, if the election under section
1907(a)(3)(B) of the SBJP Act has been
made for the trust).
(f) Election to remain a domestic
trust—(1) Trusts eligible to make the
election to remain domestic. A trust that
was in existence on August 20, 1996,
and that was treated as a domestic trust
on August 19, 1996, as provided in
paragraph (f)(2) of this section, may
elect to continue treatment as a
domestic trust notwithstanding section
7701(a)(30)(E). This election is not
available to a trust that was whollyowned by its grantor under subpart E,
part I, subchapter J, chapter 1, of the
Code on August 20, 1996. The election
is available to a trust if only a portion
of the trust was treated as owned by the
grantor under subpart E on August 20,
1996. If a partially-owned grantor trust
makes the election, the election is
effective for the entire trust. Also, a trust
may not make the election if the trust
has made an election pursuant to
section 1907(a)(3)(B) of the SBJP Act to
apply the new trust criteria to the first
taxable year of the trust ending after
August 20, 1996, because that election,
once made, is irrevocable.

4973

(2) Determining whether a trust was
treated as a domestic trust on August
19, 1996—(i) Trusts filing Form 1041 for
the taxable year that includes August
19, 1996. For purposes of the election,
a trust is considered to have been
treated as a domestic trust on August 19,
1996, if: the trustee filed a Form 1041,
‘‘U.S. Income Tax Return for Estates and
Trusts,’’ for the trust for the period that
includes August 19, 1996 (and did not
file a Form 1040NR, ‘‘U.S. Nonresident
Alien Income Tax Return,’’ for that
year); and the trust had a reasonable
basis (within the meaning of section
6662) under section 7701(a)(30) prior to
amendment by the SBJP Act (prior law)
for reporting as a domestic trust for that
period.
(ii) Trusts not filing a Form 1041.
Some domestic trusts are not required to
file Form 1041. For example, certain
group trusts described in Rev. Rul. 81–
100 (1981–1 C.B. 326) (See
§ 601.601(d)(2) of this chapter)
consisting of trusts that are parts of
qualified retirement plans and
individual retirement accounts are not
required to file Form 1041. Also, a
domestic trust whose gross income for
the taxable year is less than the amount
required for filing an income tax return
and that has no taxable income is not
required to file a Form 1041. Section
6012(a)(4). For purposes of the election,
a trust that filed neither a Form 1041
nor a Form 1040NR for the period that
includes August 19, 1996, will be
considered to have been treated as a
domestic trust on August 19, 1996, if the
trust had a reasonable basis (within the
meaning of section 6662) under prior
law for being treated as a domestic trust
for that period and for filing neither a
Form 1041 nor a Form 1040NR for that
period.
(3) Procedure for making the election
to remain domestic—(i) Required
Statement. To make the election, a
statement must be filed with the
Internal Revenue Service in the manner
and time described in this section. The
statement must be entitled ‘‘Election to
Remain a Domestic Trust under Section
1161 of the Taxpayer Relief Act of
1997,’’ be signed under penalties of
perjury by at least one trustee of the
trust, and contain the following
information—
(A) A statement that the trust is
electing to continue to be treated as a
domestic trust under section 1161 of the
Taxpayer Relief Act of 1997;
(B) A statement that the trustee had a
reasonable basis (within the meaning of
section 6662) under prior law for
treating the trust as a domestic trust on
August 19, 1996. (The trustee need not

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Federal Register / Vol. 64, No. 21 / Tuesday, February 2, 1999 / Rules and Regulations

explain the reasonable basis on the
election statement.);
(C) A statement either that the trust
filed a Form 1041 treating the trust as
a domestic trust for the period that
includes August 19, 1996, (and that the
trust did not file a Form 1040NR for that
period), or that the trust was not
required to file a Form 1041 or a Form
1040NR for the period that includes
August 19, 1996, with an accompanying
brief explanation as to why a Form 1041
was not required to be filed; and
(D) The name, address, and employer
identification number of the trust.
(ii) Filing the required statement with
the Internal Revenue Service. (A) Except
as provided in paragraphs (f)(3)(ii)(E)
through (G) of this section, the trust
must attach the statement to a Form
1041. The statement may be attached to
either the Form 1041 that is filed for the
first taxable year of the trust beginning
after December 31, 1996 (1997 taxable
year), or to the Form 1041 filed for the
first taxable year of the trust beginning
after December 31, 1997 (1998 taxable
year). The statement, however, must be
filed no later than the due date for filing
a Form 1041 for the 1998 taxable year,
plus extensions. The election will be
effective for the 1997 taxable year, and
thereafter, until revoked or terminated.
If the trust filed a Form 1041 for the
1997 taxable year without the statement
attached, the statement should be
attached to the Form 1041 filed for the
1998 taxable year.
(B) If the trust has insufficient gross
income and no taxable income for its
1997 or 1998 taxable year, or both, and
therefore is not required to file a Form
1041 for either or both years, the trust
must make the election by filing a Form
1041 for either the 1997 or 1998 taxable
year with the statement attached (even
though not otherwise required to file a
Form 1041 for that year). The trust
should only provide on the Form 1041
the trust’s name, name and title of
fiduciary, address, employer
identification number, date created, and
type of entity. The statement must be
attached to a Form 1041 that is filed no
later than October 15, 1999.
(C) If the trust files a Form 1040NR for
the 1997 taxable year based on
application of new section
7701(a)(30)(E) to the trust, and satisfies
paragraph (f)(1) of this section, in order
for the trust to make the election the
trust must file an amended Form
1040NR return for the 1997 taxable year.
The trust must note on the amended
Form 1040NR that it is making an
election under section 1161 of the
Taxpayer Relief Act of 1997. The trust
must attach to the amended Form
1040NR the statement required by

paragraph (f)(3)(i) of this section and a
completed Form 1041 for the 1997
taxable year. The items of income,
deduction and credit of the trust must
be excluded from the amended Form
1040NR and reported on the Form 1041.
The amended Form 1040NR for the
1997 taxable year, with the statement
and the Form 1041 attached, must be
filed with the Philadelphia Service
Center no later than the due date, plus
extensions, for filing a Form 1041 for
the 1998 taxable year.
(D) If a trust has made estimated tax
payments as a foreign trust based on
application of section 7701(a)(30)(E) to
the trust, but has not yet filed a Form
1040NR for the 1997 taxable year, when
the trust files its Form 1041 for the 1997
taxable year it must note on its Form
1041 that it made estimated tax
payments based on treatment as a
foreign trust. The Form 1041 must be
filed with the Philadelphia Service
Center (and not with the service center
where the trust ordinarily would file its
Form 1041).
(E) If a trust forms part of a qualified
stock bonus, pension, or profit sharing
plan, the election provided by this
paragraph (f) must be made by attaching
the statement to the plan’s annual return
required under section 6058
(information return) for the first plan
year beginning after December 31, 1996,
or to the plan’s information return for
the first plan year beginning after
December 31, 1997. The statement must
be attached to the plan’s information
return that is filed no later than the due
date for filing the plan’s information
return for the first plan year beginning
after December 31, 1997, plus
extensions. The election will be
effective for the first plan year beginning
after December 31, 1996, and thereafter,
until revoked or terminated.
(F) Any other type of trust that is not
required to file a Form 1041 for the
taxable year, but that is required to file
an information return (for example,
Form 5227) for the 1997 or 1998 taxable
year must attach the statement to the
trust’s information return for the 1997 or
1998 taxable year. However, the
statement must be attached to an
information return that is filed no later
than the due date for filing the trust’s
information return for the 1998 taxable
year, plus extensions. The election will
be effective for the 1997 taxable year,
and thereafter, until revoked or
terminated.
(G) A group trust described in Rev.
Rul. 81–100 consisting of trusts that are
parts of qualified retirement plans and
individual retirement accounts (and any
other trust that is not described above
and that is not required to file a Form

1041 or an information return) need not
attach the statement to any return and
should file the statement with the
Philadelphia Service Center. The trust
must make the election provided by this
paragraph (f) by filing the statement by
October 15, 1999. The election will be
effective for the 1997 taxable year, and
thereafter, until revoked or terminated.
(iii) Failure to file the statement in the
required manner and time. If a trust fails
to file the statement in the manner or
time provided in paragraphs (f)(3)(i) and
(ii) of this section, the trustee may
provide a written statement to the
district director having jurisdiction over
the trust setting forth the reasons for
failing to file the statement in the
required manner or time. If the district
director determines that the failure to
file the statement in the required
manner or time was due to reasonable
cause, the district director may grant the
trust an extension of time to file the
statement. Whether an extension of time
is granted shall be in the sole discretion
of the district director. However, the
relief provided by this paragraph
(f)(3)(iii) is not ordinarily available if the
statute of limitations for the trust’s 1997
taxable year has expired. Additionally,
if the district director grants an
extension of time, it may contain terms
with respect to assessment as may be
necessary to ensure that the correct
amount of tax will be collected from the
trust, its owners, and its beneficiaries.
(4) Revocation or termination of the
election—(i) Revocation of election. The
election provided by this paragraph (f)
to be treated as a domestic trust may
only be revoked with the consent of the
Commissioner. See sections 684, 6048,
and 6677 for the federal tax
consequences and reporting
requirements related to the change in
trust residence.
(ii) Termination of the election. An
election under this paragraph (f) to
remain a domestic trust terminates if
changes are made to the trust
subsequent to the effective date of the
election that result in the trust no longer
having any reasonable basis (within the
meaning of section 6662) for being
treated as a domestic trust under section
7701(a)(30) prior to its amendment by
the SBJP Act. The termination of the
election will result in the trust changing
its residency from a domestic trust to a
foreign trust on the effective date of the
termination of the election. See sections
684, 6048, and 6677 for the federal tax
consequences and reporting
requirements related to the change in
trust residence.
(5) Effective date. This paragraph (f) is
applicable beginning on February 2,
1999.

Federal Register / Vol. 64, No. 21 / Tuesday, February 2, 1999 / Rules and Regulations
PART 602—OMB CONTROL NUMBERS
UNDER THE PAPERWORK
REDUCTION ACT
Par. 4. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.

Par. 5. In § 602.101, paragraph (c) is
amended by adding an entry in
numerical order to the table to read as
follows:
§ 602.101

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301.7701–7 .........................
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Current OMB
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1545–1600

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Dated: January 13, 1999.
Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
Donald C. Lubick,
Assistant Secretary of the Treasury.
[FR Doc. 99–1892 Filed 2–1–99; 8:45 am]
BILLING CODE 4830–01–U

ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 136
[FRL–6227–4]

Whole Effluent Toxicity: Guidelines
Establishing Test Procedures for the
Analysis of Pollutants; Final Rule,
Technical Corrections
Environmental Protection
Agency (EPA).
ACTION: Final rule, technical corrections.
AGENCY:

SUMMARY: EPA is amending the
‘‘Guideline Establishing Test Procedures
for the Analysis of Pollutants’’ at 40 CFR
part 136 for whole effluent toxicity
(WET) testing under the Clean Water
Act, and also is amending three
technical documents incorporated by
reference in those regulations. The
amendments correct minor errors and
omissions, provide technical
clarifications, and establish consistency
among the technical documents.
DATES: These corrections are effective
March 4, 1999. The incorporation by
reference of the publication dates listed
in this rule is approved by the Director
of the Office of the Federal Register on
March 4, 1999. In accordance with 40
CFR 23.2, this rule shall be considered
issued for the purposes of judicial

review February 16, 1999, at 1:00 pm
EST.
FOR FURTHER INFORMATION CONTACT:
Marion Thompson, Engineering and
Analysis Division (4303), U.S.
Environmental Protection Agency,
Office of Science and Technology, 401
M Street, SW, Washington, DC 20460, or
call (202) 260–7117; or Teresa J.
Norberg-King, National Health and
Environmental Effects Research
Laboratory, Mid-Continent Ecology
Division, Office of Research and
Development, U.S. Environmental
Protection Agency, 6201 Congdon
Boulevard, Duluth, MN 55804, or call
(218) 529–5163.
SUPPLEMENTARY INFORMATION:
I. Background
In 1995, EPA amended the
‘‘Guidelines Establishing Test
Procedures for the Analysis of
Pollutants,’’ 40 CFR part 136, to add
whole effluent toxicity (WET) testing
methods to the list of Agency approved
methods in Tables IA and II, for data
gathering and compliance monitoring
under the Clean Water Act (60 FR
53529, October 16, 1995). This ‘‘WET
final rule’’ amended 40 CFR 136.3 by
adding methods that employ
standardized freshwater, marine, and
estuarine vertebrates, invertebrates, and
plants to directly measure the acute and
short-term chronic toxicity of effluents
and receiving waters. The WET final
rule incorporated the following three
technical documents by reference:
Methods for Measuring the Acute
Toxicity of Effluents and Receiving
Water to Freshwater and Marine
Organisms; Fourth Edition, August 1993
(EPA/600/4-90/027F); Short-Term
Methods for Estimating the Chronic
Toxicity of Effluents and Receiving
Water to Freshwater Organisms, Third
Edition, July 1994 (EPA/600/4–91/002);
and Short-Term Methods for Estimating
the Chronic Toxicity of Effluents and
Receiving Water to Marine and
Estuarine Organisms, Second Edition,
July 1994 (EPA/600/4–91/003).
The WET final rule and the aquatic
toxicity test manuals contained various
minor errors; today’s amendments
correct typographical errors and minor
omissions. These amendments also
provide technical clarifications and
changes for consistency among the three
test manuals.
The Administrative Procedure Act, 5
U.S.C. 553, states that when an Agency
finds good cause, it may issue a rule
without first providing for notice and
comment. This rule corrects
typographical errors and minor
omissions, and provides consistency

4975

among the WET final rule and the
aquatic toxicity test manuals
incorporated by reference at 40 CFR
136.3. Today’s revisions eliminate
confusion and provide clarification. The
revisions are not substantive. Most of
these minor, non-substantive
corrections were brought to the
Agency’s attention by the public.
Therefore, prior notice and public
opportunity for comment is
unnecessary.
II. Corrections to the Regulation
This rule corrects typographical errors
and minor omissions and provides
consistency in the regulatory language
and the three aquatic toxicity test
manuals incorporated by reference in
the WET final rule. Corrections include
replacing or amending text with
appropriate wording for clarification
and consistency.
Specifically, this rule corrects a
typographical error in the regulatory
language for the WET final rule in Table
II at § 136.3(e) by changing the
‘‘maximum holding time’’ for aquatic
toxicity tests from 6 hours to 36 hours.
Despite the inclusion of the correct 36
hour maximum holding time in the
aquatic toxicity test manuals, 6 hours
was inadvertently listed in the
regulatory language for the WET final
rule. The Agency’s intention was to
include the 36 hour maximum holding
time in the regulatory language for the
WET final rule.
This rule also incorporates by
reference an ‘‘errata’’ document that
lists specific corrections to each aquatic
toxicity test manual incorporated by
reference in the WET final rule. The
following three paragraphs (A, B, and C)
describe the errata for each aquatic
toxicity methods manual and address
specific corrections included in each
manual that the Agency believes require
further explanation. The title of the
errata document is: Errata for the
Effluent and Receiving Water Toxicity
Testing Manuals: Acute Toxicity of
Effluents and Receiving Waters to
Freshwater and Marine Organisms;
Short-Term Methods for Estimating the
Chronic Toxicity of Effluents and
Receiving Waters to Freshwater
Organisms; and Short-Term Methods for
Estimating the Chronic Toxicity of
Effluents and Receiving Waters to
Marine and Estuarine Organisms (EPA–
600/R–98/182, January 1999). A listing
of the reference for this errata document
and where it can be viewed or obtained
is provided in Sections IV and V of this
notice.