Td 9750

Federal Register / Vol. 81, No. 32 / Thursday, February 18, 2016 / Rules and Regulations
the collections of information in 21 CFR
part 814, subpart B, have been approved
under OMB control number 0910–0231;
and the collections of information under
21 CFR part 801 have been approved
under OMB control number 0910–0485.
VI. Codification of Orders
Prior to the amendments by FDASIA,
section 515(b) of the FD&C Act provided
for FDA to issue regulations to require
approval of an application for premarket
approval for preamendments devices or
devices found substantially equivalent
to preamendments devices. Section
515(b) of the FD&C Act, as amended by
FDASIA, provides for FDA to require
approval of an application for premarket
approval for such devices by issuing a
final order following the issuance of a
proposed order in the Federal Register.
FDA will continue to codify the
requirement for an application for
premarket approval in the Code of
Federal Regulations (CFR). Therefore,
under section 515(b)(1) of the FD&C Act,
as amended by FDASIA, in this final
order, FDA is requiring approval of an
application for premarket approval for
total MoM semi-constrained hip joint
systems, which include the following
two specific preamendments class III
devices: Hip joint metal/metal semiconstrained, with a cemented acetabular
component, prosthesis; and hip joint
metal/metal semi-constrained, with an
uncemented acetabular component,
prosthesis; and the Agency is making
the language in 21 CFR 888.3320 and
888.3330 consistent with this final
order.

wgreen on DSK2VPTVN1PROD with RULES

VII. References
The following references are on
display in the Division of Dockets
Management (HFA–305), Food and Drug
Administration, 5630 Fishers Lane, Rm.
1061, Rockville, MD 20852, and are
available for viewing by interested
persons between 9 a.m. and 4 p.m.,
Monday through Friday; they are also
available electronically at http://
www.regulations.gov. FDA has verified
the Web site addresses, as of the date
this document publishes in the Federal
Register, but Web sites are subject to
change over time.
1. FDA, Orthopaedic and Rehabilitation
Devices Panel transcript, August 8, 2001.
Available at http://www.fda.gov/ohrms/
dockets/ac/01/transcripts/3780t1.rtf.
2. Kwon et al. ‘‘Risk Stratification Algorithm
for Management of Patients with Metalon-Metal Hip Arthroplasty.’’ Journal of
Bone and Joint Surgery, American
Volume, 96:e4, 2014.
3. FDA, Metal-on-Metal Hip Implants Web
site, Information for Orthopaedic
Surgeons. Available at http://
www.fda.gov/MedicalDevices/

VerDate Sep<11>2014

14:29 Feb 17, 2016

Jkt 238001

ProductsandMedicalProcedures/
ImplantsandProsthetics/MetalonMetal
HipImplants/ucm241667.htm.
4. FDA, Orthopaedic and Rehabilitation
Devices Panel, FDA Executive Summary,
June 27–28, 2012. Available at http://
www.fda.gov/downloads/
AdvisoryCommittees/Committees
MeetingMaterials/MedicalDevices/
MedicalDevicesAdvisoryCommittee/
OrthopaedicandRehabilitationDevices
Panel/UCM309302.pdf.
5. FDA, Orthopaedic and Rehabilitation
Devices Panel transcript, June 28, 2012.
Available at http://www.fda.gov/
downloads/AdvisoryCommittees/
CommitteesMeetingMaterials/
MedicalDevices/
MedicalDevicesAdvisoryCommittee/
OrthopaedicandRehabilitationDevices
Panel/UCM313605.pdf.

List of Subjects in 21 CFR Part 888
Medical devices.
Therefore, under the Federal Food,
Drug, and Cosmetic Act and under
authority delegated to the Commissioner
of Food and Drugs, 21 CFR part 888 is
amended as follows:
PART 888—ORTHOPEDIC DEVICES

8149

§ 888.3330 Hip joint metal/metal semiconstrained, with an uncemented
acetabular component, prosthesis.

*

*
*
*
*
(c) Date PMA or notice of completion
of PDP is required. A PMA or a notice
of completion of a PDP is required to be
filed with the Food and Drug
Administration on or before May 18,
2016, for any hip joint metal/metal
semi-constrained prosthesis with an
uncemented acetabular component that
was in commercial distribution before
May 28, 1976, or that has, on or before
May 18, 2016, been found to be
substantially equivalent to a hip joint
metal/metal semi-constrained prosthesis
with an uncemented acetabular
component that was in commercial
distribution before May 28, 1976. Any
other hip joint metal/metal semiconstrained prosthesis with an
uncemented acetabular component shall
have an approved PMA or a declared
completed PDP in effect before being
placed in commercial distribution.
Dated: February 11, 2016.
Leslie Kux,
Associate Commissioner for Policy.
[FR Doc. 2016–03331 Filed 2–17–16; 8:45 am]
BILLING CODE 4164–01–P

1. The authority citation for 21 CFR
part 888 continues to read as follows:

■

Authority: 21 U.S.C. 351, 360, 360c, 360e,
360j, 371.

2. Section 888.3320 is amended by
revising paragraph (c) to read as follows:

■

§ 888.3320 Hip joint metal/metal semiconstrained, with a cemented acetabular
component, prosthesis.

*

*
*
*
*
(c) Date PMA or notice of completion
of PDP is required. A PMA or a notice
of completion of a PDP is required to be
filed with the Food and Drug
Administration on or before May 18,
2016, for any hip joint metal/metal
semi-constrained prosthesis with a
cemented acetabular component that
was in commercial distribution before
May 28, 1976, or that has, on or before
May 18, 2016, been found to be
substantially equivalent to a hip joint
metal/metal semi-constrained prosthesis
with a cemented acetabular component
that was in commercial distribution
before May 28, 1976. Any other hip joint
metal/metal semi-constrained prosthesis
with a cemented acetabular component
shall have an approved PMA or a
declared completed PDP in effect before
being placed in commercial
distribution.
3. Section 888.3330 is amended by
revising paragraph (c) to read as follows:

■

PO 00000

Frm 00017

Fmt 4700

Sfmt 4700

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9750]
RIN 1545–BM59

Reporting of Original Issue Discount
on Tax-Exempt Obligations; Basis and
Transfer Reporting by Securities
Brokers for Debt Instruments and
Options
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:

This document contains final
regulations relating to information
reporting by brokers for transactions
involving debt instruments and options,
including the reporting of original issue
discount (OID) on tax-exempt
obligations, the treatment of certain
holder elections for reporting a
taxpayer’s adjusted basis in a debt
instrument, and transfer reporting for
section 1256 options and debt
instruments. The regulations in this
document provide guidance to brokers
and payors and to their customers.
DATES:
Effective date: These regulations are
effective on February 18, 2016.
SUMMARY:

E:\FR\FM\18FER1.SGM

18FER1

8150

Federal Register / Vol. 81, No. 32 / Thursday, February 18, 2016 / Rules and Regulations

Applicability dates: For the dates of
applicability, see §§ 1.6045–
1(n)(11)(i)(A), 1.6045–1(n)(11)(i)(B),
1.6045–1(n)(12)(ii), 1.6045A–1(b)(3)(x),
1.6045A–1(b)(4)(iv), and 1.6049–10(c).
FOR FURTHER INFORMATION CONTACT:
Pamela Lew of the Office of the
Associate Chief Counsel (Financial
Institutions and Products) at (202) 317–
7053 (not a toll-free number).
SUPPLEMENTARY INFORMATION:

wgreen on DSK2VPTVN1PROD with RULES

Paperwork Reduction Act
The collection of information
contained in §§ 1.6045–1(n) and
1.6045A–1(b) of these final regulations
has been reviewed and approved by the
Office of Management and Budget in
accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C.
3507(d)) under control number 1545–
2186. The collection of information is
required to comply with the provisions
of section 403 of the Energy
Improvement and Extension Act of
2008, Division B of Public Law 110–343
(122 Stat. 3765, 3854 (2008)) (the Act).
The information required under
§ 1.6045–1(n) minimizes the need for
reconciliation between information
reported by a broker to both a customer
and the IRS and the amounts reported
on the customer’s tax return. The
information required under § 1.6045A–1
is necessary to allow brokers that effect
sales of transferred section 1256 options
and debt instruments that are covered
securities to determine and report the
adjusted basis of these securities in
compliance with section 6045(g) of the
Internal Revenue Code (Code). The
burden for the collection of information
contained in § 1.6049–10 of these final
regulations will be reflected in the
burden for Form 1099–OID, Original
Issue Discount (OMB control number
1545–0117), when it is revised to
request the additional information in
the regulations. This information is
required to enable the IRS to verify that
a taxpayer is reporting the correct
amount of tax-exempt interest each year
for alternative minimum tax and other
purposes. In addition, because this
information is used to determine a
taxpayer’s adjusted basis in a debt
instrument for purposes of section
6045(g), this information is required to
enable the IRS to verify that a taxpayer
is reporting the correct amount of gain
or loss upon the sale of a tax-exempt
obligation.
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.

VerDate Sep<11>2014

14:29 Feb 17, 2016

Jkt 238001

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.
Background
Section 6045 generally requires a
broker to report gross proceeds upon the
sale of a security. Section 6045 was
amended by section 403 of the Act to
require the reporting of adjusted basis
for a covered security and whether any
gain or loss upon the sale of the security
is long-term or short-term. In addition,
the Act added section 6045A of the
Code, which requires certain
information to be reported in
connection with a transfer of a covered
security to another broker, and section
6045B of the Code, which requires an
issuer of a specified security to file a
return relating to certain actions that
affect the basis of the security. Section
6049 requires the reporting of interest
payments (including accruals of OID
treated as payments).
On November 25, 2011, the Treasury
Department and the IRS published in
the Federal Register proposed
regulations relating to information
reporting by brokers, transferors, and
issuers of securities under sections
6045, 6045A, and 6045B for debt
instruments, options, and securities
futures contracts (REG–102988–11 at 76
FR 72652) (the 2011 proposed basis
reporting regulations). On April 18,
2013, the Treasury Department and the
IRS published in the Federal Register
final regulations under sections 6045,
6045A, and 6045B (the 2013 final basis
reporting regulations) and temporary
regulations relating to information
reporting for bond premium and
acquisition premium under section 6049
(TD 9616 at 78 FR 23116) (the 2013
temporary interest reporting
regulations). A notice of proposed
rulemaking cross-referencing the 2013
temporary interest reporting regulations
also was published in the Federal
Register on April 18, 2013 (REG–
154563–12 at 78 FR 23183) (the 2013
proposed interest reporting regulations).
On March 13, 2015, the Treasury
Department and the IRS published in
the Federal Register final regulations
under sections 6045, 6045A, and 6049
(TD 9713 at 80 FR 13233) (the 2015 final
basis reporting regulations, and,
together with the 2013 final basis
reporting regulations, the final basis
reporting regulations). A number of
commenters on the 2013 final basis
reporting regulations requested changes

PO 00000

Frm 00018

Fmt 4700

Sfmt 4700

to the basis reporting rules relating to
certain debt elections. In addition, for
purposes of section 6045A, several
commenters requested that a
transferring broker provide additional
information on the transfer statement for
a debt instrument and that a transferring
broker provide a transfer statement for
a section 1256 option contract. Several
commenters also suggested that the
rules for reporting OID associated with
a tax-exempt obligation be conformed to
the rules regarding basis reporting for
those debt instruments. Accordingly, TD
9713 also included temporary
regulations relating to information
reporting for debt instruments under
sections 6045, 6045A, and 6049 (the
2015 temporary reporting regulations).
A notice of proposed rulemaking crossreferencing the 2015 temporary
reporting regulations was published in
the Federal Register on March 13, 2015
(REG–143040–14 at 80 FR 13292) (the
2015 proposed reporting regulations). A
correction to § 1.6045A–1T(f) was
published on June 5, 2015 (TD 9713 at
80 FR 31995), delaying the effective date
of § 1.6045A–1T(f) from June 30, 2015,
to January 1, 2016.
Written comments were received on
the 2015 proposed reporting regulations
and are summarized below. No public
hearing was requested or held. In
general, these final regulations adopt the
provisions of the 2015 proposed
reporting regulations. These final
regulations also remove the
corresponding 2015 temporary reporting
regulations.
After the publication of the 2015 final
basis reporting regulations, the Treasury
Department and the IRS received
written comments on certain provisions
of the final basis reporting regulations.
In response to these comments, this
document contains final regulations
under section 6045 relating to the
treatment of certain debt instruments as
non-covered securities.
The written comments on the 2015
proposed reporting regulations and the
2015 final basis reporting regulations
are available for public inspection at
http://www.regulations.gov or upon
request.
Explanation of Provisions
A. Constant Yield Election for Accruals
of Market Discount
Under section 1276(b)(2), a customer
may elect to accrue market discount on
a constant yield method rather than a
ratable method. The election may be
made on a debt instrument by debt
instrument basis and must be made for
the earliest taxable year for which the
customer is required to determine

E:\FR\FM\18FER1.SGM

18FER1

wgreen on DSK2VPTVN1PROD with RULES

Federal Register / Vol. 81, No. 32 / Thursday, February 18, 2016 / Rules and Regulations
accrued market discount. The election
may not be revoked once it has been
made. In most cases, the use of a
constant yield method backloads market
discount and is therefore more taxpayer
favorable than the use of a ratable
method.
In response to comments on the 2013
final basis reporting regulations (which
required the broker to assume that the
customer had not made a constant yield
election), § 1.6045–1T(n)(11)(i)(B) of the
2015 temporary reporting regulations
provided that for a debt instrument
acquired on or after January 1, 2015,
brokers are required to assume that a
customer has elected to determine
accrued market discount using a
constant yield method unless the
customer notifies the broker otherwise.
A customer that does not want to use a
constant yield method to determine
accrued market discount must, by the
end of the calendar year in which the
customer acquired the debt instrument
in an account with the broker, notify the
broker in writing that the customer
wants the broker to use the ratable
method to determine accrued market
discount.
No comments were received on the
substantive rules in § 1.6045–
1T(n)(11)(i)(B). Accordingly, the rules in
the final regulations in this document
are the same as the rules in § 1.6045–
1T(n)(11)(i)(B). Several commenters
requested permission to apply the
default constant yield method to debt
instruments acquired on or after January
1, 2014, which was the first date for
which a broker was required to report
accrued market discount under section
6045, provided that the broker had not
reported accrued market discount to a
customer for the 2014 calendar year
using the ratable method. According to
the commenters, the use of a single
method to compute market discount
accruals for all covered securities with
market discount would simplify the
calculation of accrued market discount
and the reporting of this information to
their customers.
The final regulations in this document
permit, but do not require, a broker to
apply the default constant yield method
to a debt instrument acquired on or after
January 1, 2014, and before January 1,
2015, provided the broker was not
informed that the customer had made a
section 1278(b) election (the election to
include market discount in income as it
accrues rather than upon a disposition
or receipt of a partial principal
payment), there were no principal
payments on the debt instrument during
the 2014 calendar year, and the broker
therefore had not reported accrued
market discount to the customer for the

VerDate Sep<11>2014

14:29 Feb 17, 2016

Jkt 238001

2014 calendar year using the ratable
method.
B. Transfer Statements
Under § 1.6045A–1T(e) of the 2015
temporary reporting regulations, a
transferring broker is required to
provide a transfer statement upon the
transfer of a section 1256 option to
ensure that the receiving broker has all
of the information required for purposes
of section 6045. The temporary
regulations provide that a transfer
statement is required for the transfer of
a section 1256 option that occurs on or
after January 1, 2016. The temporary
regulations also list the data specific to
section 1256 options that must be
provided.
One commenter asserted that
including the fair market value
information on a transfer statement for
a section 1256 option is unnecessary
because the receiving broker can look
up the information if it is needed and
suggested saving space on the transfer
statement by eliminating this data item.
After considering the suggestion, the
Treasury Department and IRS decline to
adopt this suggestion. Providing fair
market value information on a transfer
statement will help ensure that the
receiving broker is reporting an amount
of realized but unrecognized gain or loss
from the prior year that is consistent
with the amount reported in the prior
year by the transferring broker, which
will minimize the possibility of double
counting or omission of gain or loss.
No other comments were received on
§ 1.6045A–1T of the 2015 temporary
reporting regulations. The rules in the
final regulations in this document are
substantively the same as the rules in
the 2015 temporary regulations.
However, the rules in § 1.6045A–1T(e)
are in § 1.6045A–1(b)(4)(iv) of the final
regulations in this document and the
rules in § 1.6045A–1T(f) are in
§ 1.6045A–1(b)(3)(x) of the final
regulations in this document.
C. Reporting of OID on a Tax-Exempt
Obligation
To coordinate the reporting of OID
under section 6049 with the reporting of
basis for tax-exempt obligations under
section 6045, § 1.6049–10T of the 2015
temporary reporting regulations
provides that a payor must report under
section 6049 the daily portions of OID
on a tax-exempt obligation. The daily
portions of OID are determined as if
section 1272 and § 1.1272–1 applied to
a tax-exempt obligation. A payor must
determine whether a tax-exempt
obligation was issued with OID and the
amount that accrues for each relevant
period. In addition, OID on a tax-exempt

PO 00000

Frm 00019

Fmt 4700

Sfmt 4700

8151

obligation is determined without regard
to the de minimis rule in section
1273(a)(3) and § 1.1273–1(d). Because
the temporary regulations require the
reporting of OID, payors also must
report amortized acquisition premium
(which offsets OID) on a tax-exempt
obligation. A broker may report either a
gross amount for both OID and
amortized acquisition premium, or a net
amount of OID that reflects the offset of
the OID by the amount of amortized
acquisition premium allocable to the
OID. Section 1.6049–10T of the 2015
temporary reporting regulations applies
to a tax-exempt obligation acquired on
or after January 1, 2017.
No comments were received on the
substantive rules in § 1.6049–10T.
Accordingly, the rules in the final
regulations in this document are the
same as the rules in § 1.6049–10T.
However, several commenters requested
that, for taxable years beginning after
December 31, 2016, a broker be
permitted to report on Form 1099–OID
the OID and acquisition premium on a
tax-exempt obligation that is a covered
security acquired before January 1,
2017. According to the commenters,
customers might be confused because of
the difference between the date that a
tax-exempt obligation generally became
a covered security (that is, an obligation
acquired on or after January 1, 2014),
and the date after which a tax-exempt
obligation that is a covered security
becomes subject to mandatory reporting
of OID and acquisition premium (that is,
an obligation acquired on or after
January 1, 2017). Because a broker is
required to track basis for a tax-exempt
obligation that is a covered security for
purposes of section 6045, the broker is
responsible for calculating OID on a taxexempt obligation acquired on or after
January 1, 2014, even if the broker has
no obligation to report the obligation’s
OID to the customer for purposes of
section 6049. To simplify the reporting
of OID and acquisition premium and to
minimize any customer confusion, the
commenters requested that the final
regulations permit a broker to report
OID and acquisition discount on all taxexempt bonds that are covered
securities.
After considering the requests, for
taxable years beginning after December
31, 2016, the final regulations in this
document permit, but do not require, a
broker to report OID and acquisition
discount for a tax-exempt obligation that
is a covered security acquired before
January 1, 2017.

E:\FR\FM\18FER1.SGM

18FER1

8152

Federal Register / Vol. 81, No. 32 / Thursday, February 18, 2016 / Rules and Regulations

wgreen on DSK2VPTVN1PROD with RULES

D. Treatment of Certain Debt
Instruments Subject to January 1, 2016,
Reporting
Under § 1.6045–1(n)(3) of the 2013
final basis reporting regulations, certain
debt instruments are subject to basis
reporting only if the debt instrument is
acquired by a customer on or after
January 1, 2016. For example, § 1.6045–
1(n)(3) applies to a contingent payment
debt instrument, a debt instrument that
is not issued by a U.S. issuer, and a debt
instrument the terms of which are not
reasonably available to a broker within
90 days of acquisition of the debt
instrument by the customer.
Several commenters on the 2013 final
basis reporting regulations requested
guidance for a debt instrument the terms
of which are not reasonably available to
the broker. The commenters stated that
they would not have the information
necessary to comply with the
information reporting rules for these
instruments. Several commenters stated
that information for a debt instrument
issued by a non-U.S. issuer and for a
tax-exempt obligation is particularly
difficult to obtain. One commenter
noted that under SEC Release 34–67908,
issued on September 21, 2012 (77 FR
59427), issuers of municipal securities
are required to provide certain data to
the Electronic Municipal Market Access
system set up by the Municipal
Securities Rulemaking Board for new
issuances, but there is no requirement to
file similar information for issuances
already outstanding as of the November
1, 2012, effective date of the release.
The Treasury Department and the IRS
agree that a broker may not always be
able to obtain information for a debt
instrument issued by a non-U.S. issuer
or for a tax-exempt obligation issued
before January 1, 2014. The final
regulations in this document therefore
provide that a debt instrument issued by
a non-U.S. issuer or a tax-exempt
obligation issued before January 1, 2014,
is treated as a noncovered security (and,
therefore, is not subject to basis
reporting under section 6045) if the
terms of the debt instrument are not
reasonably available to the broker
within 90 days of the date the debt
instrument was acquired by the
customer. The Treasury Department and
the IRS believe that the information
necessary for section 6045 compliance
should be available for other debt
instruments.
Applicability Dates
The final regulations under section
6045 in this document (other than
§ 1.6045–1(n)(12)) apply to a debt
instrument acquired on or after January

VerDate Sep<11>2014

14:29 Feb 17, 2016

Jkt 238001

1, 2015. Section 1.6045–1(n)(12) applies
to a debt instrument acquired on or after
February 18, 2016. The final regulations
under section 6049 in this document
apply to a tax-exempt obligation that is
a covered security acquired on or after
January 1, 2017. The final regulations
under section 6045A in this document
apply to a transfer of a section 1256
option that occurs on or after January 1,
2016, and to a transfer of a debt
instrument that occurs on or after
January 1, 2016.
Special Analyses
Certain IRS regulations, including this
one, are exempt from the requirements
of Executive Order 12866, as
supplemented and reaffirmed 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.
It is hereby certified that the final
regulations in this document will not
have a significant economic impact on
a substantial number of small entities.
Therefore, a Regulatory Flexibility
Analysis under the Regulatory
Flexibility Act (5 U.S.C. chapter 6) is
not required. It is anticipated that the
requirements in the final regulations in
this document, except in the case of the
notification by a customer discussed in
the next paragraph, will fall only on
financial services firms with annual
receipts greater than the $38.5 million
threshold and, therefore, on no small
entities.
Section 403(a) of the Act requires a
broker to report the adjusted basis of a
debt instrument that is a covered
security. Although a holder of a debt
instrument (customer) is permitted to
make a number of elections that affect
how basis is computed, a broker only is
required to take into account specified
elections in reporting the adjusted basis
of a debt instrument, including the
election under section 1276(b)(2) to
determine accruals of market discount
on a constant yield method. Under the
2013 final basis reporting regulations, a
customer was required to notify the
broker that the customer had made the
section 1276(b)(2) election. However,
§ 1.6045–1(n)(11)(i)(B) requires a broker
to take into account the election under
section 1276(b)(2) in reporting a debt
instrument’s adjusted basis unless the
customer timely notifies the broker that
the customer has not made the election.
The notification must be in writing,
which includes a writing in electronic
format. In most cases, this election
results in a more taxpayer-favorable
result than the default ratable method.

PO 00000

Frm 00020

Fmt 4700

Sfmt 4700

It is anticipated that this collection of
information in the regulations will not
fall on a substantial number of small
entities, especially because fewer
customers will need to notify brokers
about the election. Further, the
regulations implement the statutory
requirements for reporting adjusted
basis under section 403 of the Act.
Moreover, any economic impact is
expected to be minimal because it
should take a customer no more than
seven minutes to satisfy the
information-sharing requirement in
these regulations.
Section 403(c) of the Act added
section 6045A, which requires
applicable persons to provide a transfer
statement in connection with the
transfer of custody of a covered security.
Section 1.6045A–1 effectuates the Act
by giving the broker who receives the
transfer statement the information
necessary to determine and report
adjusted basis and whether any gain or
loss with respect to a debt instrument or
section 1256 option is long-term or
short-term as required by section 6045
when the security is subsequently sold.
Consequently, § 1.6045A–1 does not add
to the impact on small entities imposed
by the statutory provisions. Instead, the
regulations limit the information to be
reported to only those items necessary
to effectuate the statutory scheme.
The information required under
§ 1.6049–10 will enable the IRS to verify
that a taxpayer is reporting the correct
amount of tax-exempt interest each year
for alternative minimum tax and other
purposes. In addition, because this
information is used to determine a
taxpayer’s adjusted basis in a debt
instrument for purposes of section
6045(g), this information is required to
enable the IRS to verify that a taxpayer
is reporting the correct amount of gain
or loss upon the sale of a tax-exempt
obligation. Any economic impact on
small entities is expected to be minimal
because a broker already is required to
determine the accruals of OID and
acquisition premium for purposes of
determining and reporting a customer’s
adjusted basis on Form 1099–B under
section 6045. Moreover, any effect on
small entities of the rules in the final
regulations flows from section 6049 and
section 403 of the Act.
Therefore, because the final
regulations in this document will not
have a significant economic impact on
a substantial number of small entities, a
regulatory flexibility analysis is not
required.
Pursuant to section 7805(f) of the
Internal Revenue Code, the proposed
regulations preceding the final
regulations in this document were

E:\FR\FM\18FER1.SGM

18FER1

Federal Register / Vol. 81, No. 32 / Thursday, February 18, 2016 / Rules and Regulations
submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on their
impact on small businesses. No
comments were received.
Drafting Information
The principal author of these
regulations is Pamela Lew, Office of
Associate Chief Counsel (Financial
Institutions and Products). However,
other personnel from the Treasury
Department and the IRS participated in
their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by removing the
entries for §§ 1.6045A–1T and 1.6049–
10T and adding an entry for § 1.6049–
10 to read in part as follows:

■

Authority: 26 U.S.C. 7805 * * *
Section 1.6049–10 also issued under 26
U.S.C. 6049(a). * * *

Par. 2. Section 1.6045–1 is amended
by:
■ 1. Adding a sentence at the end of
paragraph (n)(4) introductory text.
■ 2. Revising the last sentence in
paragraph (n)(4)(iv).
■ 3. Revising the last sentence in
paragraph (n)(5)(i).
■ 4. Revising the second sentence in
paragraph (n)(6)(i).
■ 5. Adding a sentence at the end of
paragraph (n)(6)(ii).
■ 6. Revising the last sentence in
paragraph (n)(7)(iii).
■ 7. Revising ‘‘§ 1.6049–9T’’ to read
‘‘§ 1.6049–9’’ in two places in paragraph
(n)(9).
■ 8. Revising paragraph (n)(11).
■ 9. Adding paragraph (n)(12).
The revisions and additions read as
follows:
■

§ 1.6045–1 Returns of information of
brokers and barter exchanges.

wgreen on DSK2VPTVN1PROD with RULES

*

*
*
*
*
(n) * * *
(4) * * * However, see paragraph
(n)(11) of this section for the treatment
of an election described in paragraph
(n)(4)(iii) of this section (election to
accrue market discount based on a
constant yield) and an election
described in paragraph (n)(4)(iv) of this
section (election to treat all interest as
OID).

VerDate Sep<11>2014

14:29 Feb 17, 2016

Jkt 238001

(iv) * * * However, see paragraph
(n)(11)(i)(A) of this section for a debt
instrument acquired on or after January
1, 2014.
*
*
*
*
*
(5) * * *
(i) * * * However, see paragraph
(n)(11) of this section for the treatment
of an election described in paragraph
(n)(4)(iii) of this section (election to
accrue market discount based on a
constant yield) and an election
described in paragraph (n)(4)(iv) of this
section (election to treat all interest as
OID).
*
*
*
*
*
(6) * * *
(i) * * * See paragraphs (n)(5) and
(n)(11)(i)(B) of this section to determine
whether the amount reported should
take into account a customer election
under section 1276(b)(2). * * *
(ii) * * * See paragraphs (n)(5) and
(n)(11)(i)(B) of this section to determine
whether the amount reported should
take into account a customer election
under section 1276(b)(2).
(7) * * *
(iii) * * * However, if a broker took
into account a customer election under
§ 1.1272–3 in 2014, the broker must
decrease the customer’s basis in the debt
instrument by the amount of acquisition
premium that is taken into account each
year to reduce the amount of the
original issue discount that is otherwise
includible in the customer’s income for
that year in accordance with §§ 1.1272–
2(b)(5) and 1.1272–3.
*
*
*
*
*
(11) Additional rules for certain
holder elections—(i) In general. For
purposes of this section, the rules in this
paragraph (n)(11) apply notwithstanding
any other rule in paragraph (n) of this
section.
(A) Election to treat all interest as
OID. A broker must report the
information required under paragraph
(d) of this section without taking into
account any election described in
paragraph (n)(4)(iv) of this section (the
election to treat all interest as OID in
§ 1.1272–3). As a result, for example, a
broker must determine the amount of
any acquisition premium taken into
account each year for purposes of this
section in accordance with § 1.1272–
2(b)(4). This paragraph (n)(11)(i)(A)
applies to a debt instrument acquired on
or after January 1, 2015. A broker,
however, may rely on this paragraph
(n)(11)(i)(A) for a debt instrument
acquired on or after January 1, 2014, and
before January 1, 2015.
(B) Election to accrue market discount
based on a constant yield. A broker
must report the information required

PO 00000

Frm 00021

Fmt 4700

Sfmt 4700

8153

under paragraph (d) of this section by
assuming that a customer has made the
election described in paragraph
(n)(4)(iii) of this section (the election to
accrue market discount based on a
constant yield). However, if a customer
notifies a broker in writing that the
customer does not want the broker to
take into account this election, the
broker must report the information
required under paragraph (d) of this
section without taking into account this
election. The customer must provide
this notification to the broker by the end
of the calendar year in which the
customer acquired the debt instrument
in an account with the broker. This
paragraph (n)(11)(i)(B) applies to a debt
instrument acquired on or after January
1, 2015. A broker, however, may rely on
this paragraph (n)(11)(i)(B) to report
accrued market discount for a debt
instrument that is a covered security
acquired on or after January 1, 2014, and
before January 1, 2015, if the customer
had not informed the broker that the
customer had made a section 1278(b)
election and there were no principal
payments on the debt instrument during
this period.
(ii) [Reserved].
(12) Certain debt instruments treated
as noncovered securities—(i) In general.
Notwithstanding paragraph (a)(15) of
this section, a debt instrument is treated
as a noncovered security for purposes of
this section if the terms of the debt
instrument are not reasonably available
to the broker within 90 days of the date
the debt instrument was acquired by the
customer and the debt instrument is
either—
(A) A debt instrument issued by a
non-U.S. issuer; or
(B) A tax-exempt obligation issued
before January 1, 2014.
(ii) Effective/applicability date.
Paragraph (n)(12)(i) of this section
applies to a debt instrument described
in paragraph (n)(12)(i)(A) or (B) of this
section that is acquired on or after
February 18, 2016. However, a broker
may rely on paragraph (n)(12)(i) of this
section for a debt instrument described
in paragraph (n)(12)(i)(A) or (B) of this
section acquired before February 18,
2016.
*
*
*
*
*
■ Par. 3. Section 1.6045–1T is amended
by revising paragraphs (h) through (p) to
read as follows:
§ 1.6045–1T Returns of information of
brokers and barter exchanges (temporary).

*

*
*
*
*
(h) through (p) [Reserved]. For further
guidance, see § 1.6045–1(h) through (p).
*
*
*
*
*

E:\FR\FM\18FER1.SGM

18FER1

8154

Federal Register / Vol. 81, No. 32 / Thursday, February 18, 2016 / Rules and Regulations

Par. 4. Section 1.6045A–1 is amended
by:
■ 1. Removing ‘‘and’’ at the end of
paragraph (b)(3)(viii), removing the
period at the end of paragraph (b)(3)(ix)
and adding ‘‘and;’’ in its place, and
adding paragraph (b)(3)(x).
■ 2. Removing ‘‘and’’ at the end of
paragraph (b)(4)(ii), removing the period
at the end of paragraph (b)(4)(iii) and
adding ‘‘and;’’ in its place, and adding
paragraph (b)(4)(iv).
■ 3. Removing paragraphs (e) and (f).
The additions read as follows:
■

§ 1.6045A–1 Statements of information
required in connection with transfers of
securities.

*
*
*
*
(b) * * *
(3) * * *
(x) For a transfer that occurs on or
after January 1, 2016, the last date on or
before the transfer date that the
transferor made an adjustment for a
particular item (for example, the last
date on or before the transfer date that
bond premium was amortized). A
broker, however, may rely on this
paragraph (b)(3)(x) for a transfer of a
covered security that occurs on or after
June 30, 2015, and before January 1,
2016.
(4) * * *
(iv) For a transfer of an option
described in § 1.6045–1(m)(3) (section
1256 option) that occurs on or after
January 1, 2016, the original basis of the

wgreen on DSK2VPTVN1PROD with RULES

*

VerDate Sep<11>2014

14:29 Feb 17, 2016

Jkt 238001

option and the fair market value of the
option as of the end of the prior
calendar year.
*
*
*
*
*
§ 1.6045A–1T

[Removed]

Par. 5. Section 1.6045A–1T is
removed.
■ Par. 6. Section 1.6049–10 is added to
read as follows:
■

§ 1.6049–10 Reporting of original issue
discount on a tax-exempt obligation.

(a) In general. For purposes of section
6049, a payor (as defined in § 1.6049–
4(a)(2)) of original issue discount (OID)
on a tax-exempt obligation (as defined
in section 1288(b)(2)) is required to
report the daily portions of OID on the
obligation as if the daily portions of OID
that accrued during a calendar year
were paid to the holder (or holders) of
the obligation in the calendar year. The
amount of the daily portions of OID that
accrues during a calendar year is
determined as if section 1272 and
§ 1.1272–1 applied to a tax-exempt
obligation. Notwithstanding any other
rule in section 6049 and the regulations
thereunder, a payor must determine
whether a tax-exempt obligation was
issued with OID and the amount of OID
that accrues for each relevant period. As
prescribed by section 1288(b)(1), OID on
a tax-exempt obligation is determined
without regard to the de minimis rules
in section 1273(a)(3) and § 1.1273–1(d).

PO 00000

Frm 00022

Fmt 4700

Sfmt 9990

(b) Acquisition premium. A payor is
required to report acquisition premium
amortization on a tax-exempt obligation
in accordance with the rules in
§ 1.6049–9(c) as if section 1272 applied
to a tax-exempt obligation. See
paragraph (a) of this section to
determine the amount of OID allocable
to an accrual period.
(c) Effective/applicability date. This
section applies to a tax-exempt
obligation that is a covered security
(within the meaning of § 1.6045–1(a)(15)
and (n)(12)) acquired on or after January
1, 2017. For a taxable year beginning
after December 31, 2016, a broker,
however, may rely on this section to
report OID and acquisition premium for
a tax-exempt obligation that is a covered
security acquired before January 1,
2017.
§ 1.6049–10T

[Removed]

Par. 7. Section 1.6049–10T is
removed.

■

John Dalrymple,
Deputy Commissioner for Services and
Enforcement.
Approved: January 13, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2016–03429 Filed 2-17–16; 8:45 am]
BILLING CODE 4830–01–P

E:\FR\FM\18FER1.SGM

18FER1