2019-03-13_SS_1545-1438rLV

Supporting Statement

Internal Revenue Service

(TD 8643)

OMB # 1545-1438

1. CIRCUMSTANCES NECESSITATING COLLECTION OF INFORMATION

Section 1.305-5(b) of the Income Tax Regulations relates to constructive distributions on preferred stock. The regulations revise the treatment of preferred stock callable at a premium by the issuer, generally treating the call premium as a constructive distribution only if redemption pursuant to the call provision is more likely than not to occur. Generally, the issuer’s determination of the likelihood of the exercise of a right is binding on all holders of the stock, unless a holder discloses that it has made a determination different from that of the issuer. A holder can take an inconsistent position only after adequate disclosure. Accordingly, the information requested is necessary to notify the Internal Revenue Service that a holder has made a determination regarding the likelihood of exercise of a right that is different from the issuer’s determination.

2. USE OF DATA

This information is required to notify the Internal Revenue Service that a holder of preferred stock callable at a premium by the issuer has made a determination regarding the likelihood of exercise of the right to call that is different from the issuer’s determination. Unless such disclosure is made, the issuer’s determination of the likelihood of exercise of a right is binding on all holders of the stock.

3. USE OF IMPROVED INFORMATION TECHNOLOGY TO REDUCE BURDEN

There are no plans to provide electronic filing because electronic filing is not appropriate for the collection of information in this submission due to the requirement to attach the document of record. IRS publication, regulations, notices and letters are to be electronically enabled on an as practicable basis in accordance with the IRS Reform and Restructuring Act of 1998.

4. EFFORTS TO IDENTIFY DUPLICATION

The information obtained through this collection is unique and is not already available for use or adaptation from another source.

5. METHODS TO MINIMIZE BURDEN ON SMALL BUSINESSES OR OTHER SMALL ENTITIES

The collection of information requirement will not have a significant economic impact on a substantial number of small entities.

6. CONSEQUENCES OF LESS FREQUENT COLLECTION ON FEDERAL PROGRAMS OR POLICY ACTIVITIES

If the IRS did not collect this information, the IRS would not be able to make a determination regarding the likelihood of exercise of a right that is different from the issuer’s determination.

7. SPECIAL CIRCUMSTANCES REQUIRING DATA COLLECTION TO BE INCONSISTENT WITH GUIDELINES IN 5 CFR 1320.5(d)(2)

There are no special circumstances requiring data collection to be inconsistent with Guidelines in 5 CFR 1320.5(d)(2).

7. CONSULTATION WITH INDIVIDUALS OUTSIDE OF THE AGENCY ON AVAILABILITY OF DATA, FREQUENCY OF COLLECTION, CLARITY OF INSTRUCTIONS AND FORMS, AND DATA ELEMENTS

We received no comments during the comment period in response to the Federal Register notice dated December 6, 2018 (83 FR 62957).

7. EXPLANATION OF DECISION TO PROVIDE ANY PAYMENT OR GIFT TO RESPONDENTS

No payment or gift has been provided to any respondents.

10. ASSURANCE OF CONFIDENTIALITY OF RESPONSES

Generally, tax returns and tax return information are confidential as required by 26 U.S.C. 6103.

11. JUSTIFICATION OF SENSITIVE QUESTIONS

There is no sensitive personally identifiable information (PII) in this collection.

12. ESTIMATED BURDEN OF INFORMATION COLLECTION

Burden Estimation:

Section 1.305-5(b)(5) provides that an issuer’s determination of the likelihood of exercise of a right is binding on all holders of the stock, unless the holder discloses that its determination of the likelihood of exercise is different from the issuer’s determination. The disclosure must be made in the manner prescribed by the Commissioner for disclosing an item for purposes of section 6662(d)(2)(B) and attached to the holder’s timely filed Federal income tax return for the taxable year that includes the date the holder acquires the preferred stock. The issuer must provide information as to its determination to the holder in a reasonable manner.

We estimate that there will be 2,000 respondents. The estimated annual burden per respondent varies from 5 minutes to 15 minutes, depending on individual circumstances, with an estimated average of 10 minutes. The estimated total annual reporting burden will be 333 hours.

Authority	Description	# of Respondents	# Responses per Respondent	Annual Responses	Hours per Response	Total Burden
§1.305(b)(5)	TD 8643	2000	1	2000	Est. between 5-15 min, depending on individual circumstances with and estimated avg. of 10 min	333
Totals

13. ESTIMATED TOTAL ANNUAL COST BURDEN TO RESPONDENTS

To ensure more accuracy and consistency across its information collections, IRS is currently in the process of revising the methodology it uses to estimate burden and costs. Once this methodology is complete, IRS will update this information collection to reflect a more precise estimate of burden and costs.

14. ESTIMATED ANNUALIZED COST TO THE FEDERAL GOVERNMENT

To ensure more accuracy and consistency across its information collections, IRS is currently in the process of revising the methodology it uses to estimate burden and costs. Once this methodology is complete, IRS will update this information collection to reflect a more precise estimate of burden and costs.

15. REASONS FOR CHANGE IN BURDEN

There is no change in the paperwork burden previously approved by OMB. This is being submitted for renewal purposes only.

16. PLANS FOR TABULATION, STATISTICAL ANALYSIS AND PUBLICATION

There are no plans for tabulation, statistical analysis and publication.

17. REASONS WHY DISPLAYING THE OMB EXPIRATION DATE IS INAPPROPRIATE

We believe that displaying the OMB expiration date is inappropriate because it could cause confusion by leading taxpayers to believe that the regulation sunsets as of the expiration date. Taxpayers are not likely to be aware that the Service intends to request renewal of the OMB approval and obtain a new expiration date before the old one expires.

18. EXCEPTION TO THE CERTIFICATION STATEMENT

There are no exceptions to the certification statement for this collection.

Note: The following paragraph applies to all of the collections of information in this submission:

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.