Reg-109822-15

Federal Register / Vol. 80, No. 246 / Wednesday, December 23, 2015 / Proposed Rules

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§ 300.60

Waiver.

(a) FDA may, at the request of an
applicant or interested person or on its
own initiative, grant a waiver of any of
the requirements under § 300.53 with
regard to a fixed-combination or copackaged drug that is the subject of a
pending application under section 505
of the Federal Food, Drug, and Cosmetic
Act or section 351 of the Public Health
Service Act, or a combination of active
ingredients under consideration for
inclusion in an OTC monograph in
accordance with part 330 of this
chapter, if it finds one of the following:
(1)(i) There is a reasonable rationale
for the combination of the individual
active ingredients; and
(ii) Compliance with any of the
requirements of § 300.53 would be
infeasible or medically unreasonable or
unethical; or
(2) The product contains all or a
subset of the known components in the
same ratio as a natural-source drug or a
waived product provided the product is
intended for the same conditions of use
as the natural-source drug or the waived
product; there is a reasonable basis to
conclude that the product would
provide a comparable clinical effect to
the natural-source drug or the waived
product; and, for products containing
large molecules (macromolecules), the
macromolecules have the same
principal molecular structural features
and overall mechanism of action as
those in the natural-source drug or the
waived product.
(b) If an applicant wishes to request
a waiver, it must submit the waiver
request with supporting documentation
in an application under section 505 of
the Federal Food, Drug, and Cosmetic
Act or section 351 of the Public Health
Service Act. If an interested person
wishes to request a waiver, the waiver
request must be submitted as part of a
submission under part 330 of this
chapter.
(c) FDA will provide appropriate
written notice when the Agency grants
a waiver on its own initiative, or grants
or denies a request for a waiver. Fixedcombination and co-packaged drugs and
combinations of active ingredients
under consideration for inclusion in an
OTC monograph for which a waiver is
granted must still meet all other
applicable requirements under section
505 of the Federal Food, Drug, and
Cosmetic Act, section 351 of the Public
Health Service Act, or § 330.10(a)(4) of
this chapter, as appropriate.

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PART 330—OVER-THE-COUNTER
(OTC) HUMAN DRUGS WHICH ARE
GENERALLY RECOGNIZED AS SAFE
AND EFFECTIVE AND NOT
MISBRANDED

79795

Dated: December 17, 2015.
Leslie Kux,
Associate Commissioner for Policy.
[FR Doc. 2015–32246 Filed 12–22–15; 8:45 am]
BILLING CODE 4164–01–P

3. The authority citation for 21 CFR
part 330 continues to read as follows:

■

Authority: 21 U.S.C. 321, 351, 352, 353,
355, 360, 371.

4. Amend § 330.10 by revising
paragraph (a)(4)(iv) to read as follows:

DEPARTMENT OF THE TREASURY
Internal Revenue Service

■

§ 330.10 Procedures for classifying OTC
drugs as generally recognized as safe and
effective and not misbranded, and for
establishing monographs.

*

*
*
*
*
(a) * * *
(4) * * *
(iv) A combination of two or more
active ingredients that are individually
classified as drugs generally recognized
as safe and effective in accordance with
the requirements of § 300.53 of this
chapter must meet the requirements of
subpart B of part 300 of this chapter to
be generally recognized as safe and
effective and included in an OTC
monograph. If such combination is
granted a waiver under § 300.60 of this
chapter, it must still meet all other
applicable requirements of this
subparagraph to be generally recognized
as safe and effective and included in an
OTC monograph. Unless otherwise
specified in the applicable OTC
monograph(s), combinations of active
ingredients that are included in an OTC
monograph may be used in either fixedcombination or co-packaged drugs.
*
*
*
*
*
PART 610—GENERAL BIOLOGICAL
PRODUCTS STANDARDS
5. The authority citation for 21 CFR
part 610 continues to read as follows:

■

Authority: 21 U.S.C. 321, 331, 351, 352,
353, 355, 360, 360c, 360d, 360h, 360i, 371,
372, 374, 381; 42 U.S.C. 216, 262, 263, 263a,
264.

6. Amend § 610.17 by revising the
section heading, designating the existing
paragraph as paragraph (a), and by
adding paragraph (b) to read as follows:

■

§ 610.17

Permissible fixed-combinations.

(a) * * *
(b) A drug product subject to approval
under section 351 of the Public Health
Service Act may not be combined with
another drug product except in
accordance with subpart B of part 300
of this chapter.

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26 CFR Part 1
[REG–109822–15]
RIN 1545–BM70

Country-by-Country Reporting
Internal Revenue Service (IRS),
Treasury.

AGENCY:
ACTION:

Notice of proposed rulemaking.

This document contains
proposed regulations that would require
annual country-by-country reporting by
United States persons (U.S. persons)
that are the ultimate parent entity of a
multinational enterprise (MNE) group.
These proposed regulations affect U.S.
persons that are the ultimate parent
entity of an MNE group that has annual
revenue for the preceding annual
accounting period of $850,000,000 or
more. This document invites comments
from the public on all aspects of the
proposed rules and provides the
opportunity for the public to request a
public hearing.

SUMMARY:

Written or electronic comments
and requests for a public hearing must
be received by March 22, 2016.

DATES:

Send submissions to:
CC:PA:LPD:PR (REG–109822–15), room
5203, Internal Revenue Service, P.O.
Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions
may be hand-delivered Monday through
Friday between the hours of 8 a.m. and
4 p.m. to CC:PA:LPD:PR (REG–109822–
15), Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue NW.,
Washington, DC, or sent electronically
via the Federal eRulemaking Portal at
http://www.regulations.gov (indicate
IRS REG–109822–15).

ADDRESSES:

FOR FURTHER INFORMATION CONTACT:

Concerning the proposed regulations,
Melinda E. Harvey, (202) 317–6934;
concerning submissions of comments or
requests for a public hearing,
Oluwafunmilayo (Funmi) Taylor, (202)
317–6901 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:

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Federal Register / Vol. 80, No. 246 / Wednesday, December 23, 2015 / Proposed Rules

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Background
1. Objectives of Proposed Regulatory
Action
Pursuant to the authority granted
under sections 6001, 6011, 6012, 6031,
6038, and 7805, these proposed
regulations describe a new requirement
for certain U.S. persons that are the
ultimate parent entity of an MNE group
(U.S. MNE group) earning substantial
annual revenue to file an annual report
(U.S. CbC report) containing
information on a country-by-country
basis related to the MNE group’s income
and taxes paid, together with certain
indicators of the location of economic
activity within the MNE group. Because
the reporting form is currently under
development by the IRS and yet to be
officially numbered, it is referred to in
this preamble and the proposed
regulations as Form XXXX, Country-byCountry Report. The categories of
information required to be reported on
the U.S. CbC report were developed in
coordination with other member
countries of the Group of Twenty (G20)
and the Organisation for Economic Cooperation and Development (OECD). As
discussed later in this preamble, the
Treasury Department and the IRS have
determined that the information
required under these proposed
regulations will assist in better
enforcement of U.S. tax laws.
The G20 and OECD members, in
coordination with other countries,
developed a model template for the
collection of country-by-country
information from large MNE groups.
The model template is intended to
promote consistent and effective
implementation of country-by-country
reporting across tax jurisdictions
(including countries and jurisdictions
that are not countries but that have
fiscal autonomy). The Treasury
Department and the IRS anticipate that
other tax jurisdictions will adopt
information reporting requirements
based on the model template that will
mandate the filing of a country-bycountry report (foreign CbC report) by
MNE groups with an ultimate parent
entity that is not a U.S. person (foreign
MNE groups) that have substantial
revenues. In developing these proposed
regulations, the Treasury Department
and the IRS determined that it is
appropriate to use the model template
as a guide because the model template
was developed taking into account
extensive consultations with
stakeholders, including in particular
U.S. MNE groups, in order to
appropriately balance the benefits to tax
administrations of collecting the
information about an MNE group’s

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global operations against the
compliance costs and burdens imposed
on MNE groups. These consultations
significantly affected both the scope of
the information included in the model
template as well as the flexibility
afforded to MNE groups in determining
how to compile that information in light
of their different system capabilities. In
addition, the model template reflects an
agreed international standard for
reporting by MNE groups that will
promote consistency of reporting
obligations across tax jurisdictions and
reduce the risk that other countries will
depart from the agreed standard by
imposing inconsistent and overlapping
reporting obligations on U.S. MNE
groups. In this respect, the Treasury
Department and the IRS note that clear
and widely adopted documentation
rules for MNE groups also help to
reduce compliance costs. While the
proposed regulations generally are
consistent with the international
standard, the proposed regulations also
are tailored to be consistent with the
preexisting information reporting
requirements applicable to U.S. persons
under sections 6001, 6011, 6012, 6031,
and 6038.
The Treasury Department and the IRS
have determined that the information
required under these proposed
regulations will assist in better
enforcement of the federal income tax
laws by providing the IRS with greater
transparency regarding the operations
and tax positions taken by U.S. MNE
groups. In addition to this direct benefit
expected from collecting U.S. CbC
reports, as discussed in Part 2 of this
preamble, pursuant to income tax
conventions and other conventions and
bilateral agreements relating to the
exchange of tax information
(collectively, information exchange
agreements), a U.S. CbC report filed
with the IRS may be exchanged by the
United States with other tax
jurisdictions in which the U.S. MNE
group operates that have agreed to
provide the IRS with foreign CbC
reports filed in their jurisdiction by
foreign MNE groups that have
operations in the United States. Foreign
CbC reports will provide the IRS with
information that will assist the IRS in
performing risk assessment of foreign
MNE groups operating in the United
States.
In particular, it is expected that CbC
reports filed by both U.S. MNE groups
and foreign MNE groups (collectively
CbC reports) will help the IRS perform
high-level transfer pricing risk
identification and assessment. The
information in a CbC report will not
itself constitute conclusive evidence

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that transfer pricing practices are or are
not consistent with the arm’s length
standard. Accordingly, the information
in a CbC report will not be used as a
substitute for an appropriate transfer
pricing determination based on a best
method analysis (including a full
comparability analysis of factors such as
functions performed, resources
employed, and risks assumed) as
required by the arm’s length standard
set forth in the regulations under section
482, and transfer pricing adjustments
will not be based solely on a CbC report.
However, a CbC report may be used as
the basis for making further inquiries
into transfer pricing practices or other
tax matters in the course of an
examination of a member of an MNE
group, and adjustments may be based on
additional information developed
through those inquiries in accordance
with applicable law.
2. Exchange of Information,
Confidentiality, and Improper Use of
Information
Information reported pursuant to
these proposed regulations is return
information under section 6103. Section
6103 imposes strict confidentiality rules
with respect to all return information.
Moreover, section 6103(k)(4) allows the
IRS to exchange return information with
a competent authority of a tax
jurisdiction only to the extent provided
in, and subject to the terms and
conditions of, an information exchange
agreement. It is expected that the U.S.
competent authority will enter into
competent authority arrangements for
the automatic exchange of CbC reports
under the authority of information
exchange agreements to which the
United States is a party.
Consistent with established
international standards, all of the
information exchange agreements to
which the United States is a party
require the information exchanged to be
treated as confidential by both parties,
and disclosure and use of the
information must be in accordance with
the terms of the relevant information
exchange agreement. Information
exchange agreements generally prohibit
the parties from using any information
received for any purpose other than for
the administration of taxes (e.g.,
assessment or collection of, or
enforcement or prosecution in respect
of, the taxes covered by the information
exchange agreement). Accordingly,
under the terms of information
exchange agreements, neither tax
jurisdiction is permitted to disclose the
information received under the
information exchange agreement or use
such information for any non-tax

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purpose. Under the contemplated
competent authority arrangements for
the exchange of CbC reports, the
competent authorities of the United
States and other tax jurisdictions intend
to further limit the permissible uses of
exchanged CbC reports to assessing
high-level transfer pricing and other tax
risks and, where appropriate, for
economic and statistical analysis.
Prior to entering into an information
exchange agreement with another tax
jurisdiction, the Treasury Department
and the IRS closely review the tax
jurisdiction’s legal framework for
maintaining confidentiality of taxpayer
information and its track record of
complying with that legal framework. In
order to conclude an information
exchange agreement with another tax
jurisdiction, the Treasury Department
and the IRS must be satisfied that the
tax jurisdiction has the necessary legal
safeguards in place to protect exchanged
information, such protections are
enforced, and adequate penalties apply
to any breach of that confidentiality.
Moreover, even when these conditions
have been met and an information
exchange agreement is in effect, the U.S.
competent authority will not enter into
a reciprocal automatic exchange of
information relationship with a tax
jurisdiction unless it has reviewed the
tax jurisdiction’s policies and
procedures regarding confidentiality
protections and has determined that
such an exchange relationship is
appropriate.
If the United States determines that a
tax jurisdiction is not in compliance
with confidentiality requirements, data
safeguards, and the appropriate use
standards provided for under the
information exchange agreement or the
competent authority arrangement, the
United States will pause automatic
exchange of CbC reports with that tax
jurisdiction until such time as the
United States is satisfied that the tax
jurisdiction is meeting its obligations
under the applicable information
exchange or competent authority
agreement or arrangement.

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Explanation of Provisions
1. U.S. Persons Required To File Form
XXXX, Country-by-Country Report
The proposed regulations generally
require a U.S. business entity that is the
ultimate parent entity of a U.S. MNE
group to file Form XXXX, Country-byCountry Report. However, proposed
§ 1.6038–4(j) provides an exception
from filing by a U.S. MNE group for an
annual accounting period if the U.S.
MNE group had revenues of less than
$850,000,000 for the preceding annual

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accounting period. Generally, an
ultimate parent entity of a U.S. MNE
group is a U.S. business entity that
controls a group of business entities, at
least one of which is organized or tax
resident outside of the United States,
that are required to consolidate their
accounts for financial reporting
purposes under U.S. generally accepted
accounting principles (GAAP), or that
would be required to consolidate their
accounts if equity interests in the U.S.
business entity were publicly traded on
a U.S. securities exchange. For purposes
of the proposed regulations, the term
business entity means a person as
defined in section 7701(a) that is not an
individual, as well as a permanent
establishment that prepares financial
statements separate from those of its
owner for financial reporting,
regulatory, tax reporting, or internal
management control purposes.
Under proposed § 1.6038–4(b)(6), a
business entity generally is considered
resident in a tax jurisdiction if, under
the laws of that tax jurisdiction, the
business entity is liable to tax therein
based on place of management, place of
organization, or another similar
criterion. However, a business entity
will not be considered resident in a tax
jurisdiction if it is liable to tax in such
jurisdiction solely with respect to
income from sources in such
jurisdiction, or capital situated in such
jurisdiction. The proposed regulations
also provide rules for determining the
tax jurisdiction of residence of a
business entity that is resident in more
than one tax jurisdiction or that is a
permanent establishment.
Proposed § 1.6038–4(b)(4) defines a
U.S. MNE group as a group of business
entities, including the U.S. business
entity that is the ultimate parent entity,
that are required to consolidate their
accounts under U.S. GAAP, or would be
required to consolidate their accounts if
equity interests in the ultimate parent
entity were publicly traded on a U.S.
securities exchange. Generally, under
U.S. GAAP, if an entity owns a majority
voting interest in another legal entity,
the majority owner must combine the
financial statements of the majorityowned entity with its own financial
statements in consolidated financial
statements. Financial Accounting
Standards Board, Accounting Standards
Codification 810–10–15,
‘‘Consolidation—Overall—Scope and
Scope Exceptions.’’ A U.S. MNE group
does not include business entities that
are accounted for under the equity
method (because those entities do not
consolidate their accounts with the
equity owner), notwithstanding that the
equity owner’s proportionate share of

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79797

the business income of such entities is
included in the equity owner’s
consolidated financial statements. The
ultimate parent entity of a U.S. MNE
group that is required to file Form
XXXX, Country-by-Country Report, may
be required to consolidate under U.S.
GAAP one or more affiliated groups as
defined in section 1504(a) that file a
consolidated income tax return even
though the ultimate parent entity is not
an includible corporation as defined
under section 1504(b) with respect to
any of such consolidated groups. In
such cases, the ultimate parent entity
would report country-by-country
information with respect to all such
affiliated group entities (and any other
business entities in the U.S. MNE group)
on Form XXXX, Country-by-Country
Report, and the parent corporations of
the respective consolidated groups
would not file a Form XXXX, Countryby-Country Report.
The Treasury Department and the IRS
request comments on whether
additional guidance is needed for
determining which U.S. persons must
file Form XXXX, Country-by-Country
Report, or which entities are considered
constituent entities of the filer.
Specifically, the Treasury Department
and the IRS request comments on
whether additional guidance on the
definition of U.S. MNE group is
necessary to address situations where
U.S. GAAP or regulations governing
securities publicly traded on a U.S.
securities exchange (U.S. securities
regulations) permit or require
consolidated financial accounting for
reasons other than majority ownership
and situations, if any, where U.S. GAAP
or U.S. securities regulations permit
separate financial accounting of
majority-owned enterprises.
Additionally, consideration has been
given to the possible need for an
exception to filing some or all of the
information required on Form XXXX,
Country-by-Country Report, for national
security reasons. Requests by a U.S.
person otherwise subject to the
requirements to file Form XXXX,
Country-by-Country Report, for an
exception would require the Treasury
Department and affected U.S. persons to
coordinate with other federal agencies,
such as the Department of Defense, to
determine whether such an exception is
warranted. The Treasury Department
and the IRS request comments with
respect to the procedures that a U.S.
person should be required to follow in
order to demonstrate a national security
reason to receive an exception from
filing some or all of the information

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otherwise required by Form XXXX,
Country-by-Country Report.
Generally, a constituent entity will
have a tax jurisdiction of residence as
determined under proposed § 1.6038–
4(b)(6). However, a business entity that
is treated as a partnership in the tax
jurisdiction in which it is organized and
that does not own or create a permanent
establishment in another tax jurisdiction
generally will have no tax jurisdiction of
residence under the definition in
proposed § 1.6038–4(b)(6) (other than
for purposes of determining the ultimate
parent entity of a U.S. MNE group). In
these cases, it is expected that the
partners will report their share of the
partnership’s items in the partners’
respective tax jurisdictions of residence
in order to determine the aggregate
amounts reported on Form XXXX,
Country-by-Country Report, regardless
of whether the partnership has elected
to be treated as an association for U.S.
federal tax purposes. The Treasury
Department and the IRS continue to
consider whether a different rule is
needed in the case of entities that are
not treated as fiscally transparent in the
owner or owners’ tax jurisdiction(s) of
residence but are treated as fiscally
transparent in the entity’s country of
organization. The Treasury Department
and the IRS request comments on the
treatment of such entities in the CbC
Report. In the case of a permanent
establishment owned or created by a
business entity that is treated as a
partnership in the tax jurisdiction in
which it is organized, the tax
jurisdiction of residence of the
permanent establishment for purposes
of Form XXXX, Country-by-Country
Report, is the location of the permanent
establishment regardless of whether the
permanent establishment is treated as a
permanent establishment of the
partnership or of the partners of the
partnership by the tax jurisdiction in
which the permanent establishment is
located.

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2. Information Required on Form XXXX,
Country-by-Country Report
A. Constituent Entity Information
Proposed § 1.6038–4(d)(1) describes
the information that Form XXXX,
Country-by-Country Report, may require
with respect to each constituent entity
of the U.S. MNE group. Generally, each
business entity of a U.S. MNE group is
considered a separate constituent entity
of that U.S. MNE group; however, the
term constituent entity does not include
a foreign corporation or foreign
partnership for which the ultimate
parent entity is not required to furnish
information under section 6038(a),

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determined without regard to § 1.6038–
2(j) and § 1.6038–3(c) (exceptions to
information reporting for certain
constructive owners and when more
than one person otherwise would be
required to submit the same
information), or any permanent
establishment of such foreign
corporation or foreign partnership. For
example, if none of the constituent
entities owned by the ultimate parent
entity directly, indirectly, or
constructively owns enough stock in a
foreign corporation to be considered a
United States shareholder of a
controlled foreign corporation, the
foreign corporation is not a constituent
entity. However, if the ultimate parent
entity of a U.S. MNE group
constructively owns more than 50
percent of the voting stock of a foreign
corporation because a wholly-owned
domestic subsidiary directly owns such
stock and the domestic subsidiary
reports information with respect to the
foreign corporation pursuant to section
6038(a), the foreign corporation is a
constituent entity of the U.S. MNE
group notwithstanding that under
§ 1.6038–2(j)(2) the ultimate parent
entity itself is not required to report
information under section 6038(a). The
IRS requests comments on whether
additional guidance is needed regarding
which business entities of a U.S. MNE
group are considered constituent
entities, particularly with respect to the
exclusion of foreign corporations and
partnerships for which an ultimate
parent entity would not be required to
furnish information under section
6038(a) without regard to §§ 1.6038–2(j)
and 1.6038–3(c).
The information required with respect
to each constituent entity includes
identification of the tax jurisdiction, if
any, in which the constituent entity is
resident for tax purposes, the tax
jurisdiction in which the constituent
entity is organized or incorporated (if
different from the tax jurisdiction of
residence), and the main business
activity or activities of the constituent
entity. The tax identification number of
each constituent entity used by the tax
administration in its jurisdiction of tax
residence also will be reported on Form
XXXX, Country-by-Country Report.
B. Financial and Employee Information
Proposed § 1.6038–4(d)(2) requires
certain information to be reported for
each tax jurisdiction in which one or
more constituent entities of the MNE
group is resident. The information for
each tax jurisdiction must be presented
on Form XXXX, Country-by-Country
Report, as an aggregate of the requested
information from all of the constituent

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entities that are resident in the tax
jurisdiction. In addition, proposed
§ 1.6038–4(d)(3)(i) provides that the
information must be reported, in the
aggregate, for any constituent entity or
entities of a U.S. MNE group that have
no tax jurisdiction of residence.
Specifically, the information required
to be reported for each tax jurisdiction
includes: (i) Revenues generated from
transactions with other constituent
entities of the U.S. MNE group; (ii)
revenues not generated from
transactions with other constituent
entities of the U.S. MNE group; (iii)
profit (or loss) before income tax; (iv)
income tax paid on a cash basis to all
tax jurisdictions, including any taxes
withheld on payments received; (v)
accrued tax expense recorded on taxable
profits (or losses), reflecting only the
operations in the relevant annual
accounting period and excluding
deferred taxes or provisions for
uncertain tax positions; (vi) stated
capital; (vii) accumulated earnings; (viii)
number of employees on a full-time
equivalent basis in the relevant tax
jurisdiction; and (ix) net book value of
tangible assets other than cash or cash
equivalents.
The Treasury Department and the IRS
have sought to minimize deviations
from the model template that was
developed by G20 and OECD member
countries based on extensive
consultations with stakeholders.
Nonetheless, the Treasury Department
and the IRS understand that there may
be areas where further clarification or
refinement is warranted to take into
account the purpose of these proposed
regulations to collect relevant
information for high-level risk
assessment while minimizing the
burdens imposed. For example, the
report seeks information on the taxes
paid or accrued by MNE groups and
their constituent entities on taxable
income earned in the relevant
accounting period. The Treasury
Department and the IRS specifically
solicit comments on the manner in
which the proposed regulations request
that information. The Treasury
Department and the IRS also request
comments on whether any of the other
items should be further refined or
whether additional guidance is needed
with respect to how to determine any of
the items in proposed § 1.6038–
4(d)(2)(i)–(ix).
Proposed § 1.6038–4(d)(3)(iii)
provides that the number of employees
on a full-time equivalent basis may be
determined as of the end of the
accounting period, on the basis of
average employment levels for the
annual accounting period, or on any

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other reasonable basis, and that
independent contractors that participate
in the ordinary operating activities of a
constituent entity may be considered
employees of such constituent entity for
this purpose. The number of full-time
equivalent employees in a tax
jurisdiction of residence should be
determined by reference to the
employees that perform their activities
for the U.S. MNE group within such tax
jurisdiction of residence. U.S. MNE
groups should use a reasonable basis to
determine the tax jurisdiction of
residence for which to report employees
that perform activities for the U.S. MNE
group in more than one tax jurisdiction
or in a tax jurisdiction in which none
of the constituent entities of the U.S.
MNE group is resident. For example, a
reasonable basis may be to report a
travelling employee as part of the home
office jurisdiction, as part of the tax
jurisdiction in which the travelling
employee spends the majority of his or
her time, or as a fraction of one full-time
equivalent employee in multiple tax
jurisdictions based on the employee’s
time spent working in those
jurisdictions. The Treasury Department
and the IRS request comments on

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whether guidance is needed regarding
the treatment of other employment
situations. The number of employees
that a U.S. MNE group has in a
particular tax jurisdiction should be
determined on a consistent basis across
entities, tax jurisdictions in which the
U.S. MNE operates, and from year to
year. It is not expected that the basis on
which a U.S. MNE group determines the
number of employees in a tax
jurisdiction of residence will change
from year to year. However, it is
expected that Form XXXX, Country-byCountry Report, will provide a section
for additional information that the
ultimate parent entity of the U.S. MNE
group will use to explain, among other
things, any new approach adopted to
determine the number of employees and
why it was necessary or appropriate.
Proposed § 1.6038–4(e)(2) provides
that the financial information reported
on Form XXXX, Country-by-Country
Report, may be based on certified
financial statements, books and records
maintained with respect to each
constituent entity, or records used for
tax reporting purposes. It is not
necessary to reconcile the revenue,
profit, and tax reported in the aggregate

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or with respect to a specific tax
jurisdiction on Form XXXX, Country-byCountry Report, to the consolidated
financial statements of the U.S. MNE
group or to the tax returns filed in any
particular tax jurisdiction. Additionally,
there is no need to make adjustments for
differences in accounting principles
applied from tax jurisdiction to tax
jurisdiction. It is expected that Form
XXXX, Country-by-Country Report, will
include a section to provide additional
information, including a brief
description of the sources of data used
in preparing the form, and, if a change
is made in the source of data used from
year to year, an explanation of the
reasons for the change and its
consequences. Permission to change the
accounting principles, to make new or
different adjustments for differences in
accounting principles, or to change the
source of data used in preparing Form
XXXX, Country-by-Country Report, is
not required.
C. Template for Form XXXX, Countryby-Country Report
The template on which Form XXXX,
Country-by-Country Report, will be
based is provided below.

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3. Manner of Filing and Maintenance of
Records for Form XXXX, Country-byCountry Report
Proposed § 1.6038–4(f) requires that
Form XXXX, Country-by-Country
Report, be filed with the ultimate parent
entity’s timely-filed income tax return
(with extensions). The proposed
regulations do not require any U.S.
business entity to provide notification
that it is a constituent entity of a U.S.
MNE group that is required to file a

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Form XXXX, Country-by-Country
Report.
While a U.S. business entity is not
required to reconcile information
reported on Form XXXX, Country-byCountry Report, with its financial
statements or income tax returns,
proposed § 1.6038–4(g) provides that a
U.S. person required to file as an
ultimate parent entity of a U.S. MNE
group must maintain records to support
the information provided on Form
XXXX, Country-by-Country Report.

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Proposed Effective/Applicability Date
These regulations are proposed to be
applicable to taxable years of ultimate
parent entities of US MNE groups that
begin on or after the date of publication
of the Treasury decision adopting these
rules as final regulations in the Federal
Register and that include annual
accounting periods determined under
section 6038(e)(4) of all foreign
constituent entities and taxable years of
all domestic constituent entities

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EP23DE15.005

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Federal Register / Vol. 80, No. 246 / Wednesday, December 23, 2015 / Proposed Rules
beginning on or after the date of
publication of the Treasury decision
adopting these rules as final regulations
in the Federal Register.

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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 impact assessment is not
required. It also has been determined
that section 553(b) and (d) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these
regulations.
The IRS intends that the information
collection requirements in these
proposed regulations will be satisfied by
submitting a new reporting form with an
income tax return. The new reporting
form has not yet been numbered and is
referred to as Form XXXX, Country-byCountry Report, in this Preamble and
the proposed regulations. For purposes
of the Paperwork Reduction Act, the
reporting burden associated with the
collection of information in these
proposed regulations will be reflected in
the OMB Form 83–1, Paperwork
Reduction Act Submission, associated
with Form XXXX, Country-by-Country
Report.
It is hereby certified that this
regulation will not have a significant
economic impact on a substantial
number of small entities within the
meaning of section 601(6) of the
Regulatory Flexibility Act (5 U.S.C.
chapter 6). Accordingly, a regulatory
flexibility analysis is not required. This
certification is based on the fact that
these regulations will only affect U.S.
corporations, partnerships, and trusts
that have foreign operations when the
combined annual revenue of the
business entities owned by the U.S.
person meets or exceeds $850,000,000.
Pursuant to section 7805(f), these
regulations have been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment
on their impact on small business.
Comments and Requests for Public
Hearing
Before these proposed regulations are
adopted as final regulations,
consideration will be given to any
comments that are submitted timely to
the IRS as prescribed in this preamble
under the ‘‘Addresses’’ heading. The
Treasury Department and the IRS
request comments on aspects of the
proposed rules for which additional
guidance is desired. All comments will
be available at www.regulations.gov or
upon request. A public hearing will be

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scheduled if requested in writing by any
person that timely submits written
comments. If a public hearing is
scheduled, then notice of the date, time,
and place for the public hearing will be
published in the Federal Register.
Drafting Information
The principal author of these
proposed regulations is Melinda E.
Harvey of the Office of Associate Chief
Counsel (International). However, other
personnel from the IRS and the
Department of the Treasury participated
in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
proposed to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding the
following entry in numerical order to
read in part as follows:

■

Authority: 26 U.S.C. 7805 * * *

*

*

*

*

*

Section 1.6038–4 also issued under 26
U.S.C. 6038.

*

*
*
*
*
Par. 2. Section 1.6038–4 is added to
read as follows:

■

§ 1.6038–4 Information returns required of
certain United States persons with respect
to such person’s U.S. multinational
enterprise group.

(a) Requirement of return. Except as
provided in paragraph (j) of this section,
every United States person (U.S. person)
that is an ultimate parent entity of a U.S.
multinational enterprise (MNE) group as
defined in paragraph (b)(1) of this
section must make an annual return on
Form XXXX, Country-by-Country
Report, setting forth the information
described in this section and any other
information required by Form XXXX,
Country-by-Country Report, with respect
to each annual accounting period
described in paragraph (c) of this
section.
(b) Definitions—(1) Ultimate parent
entity of a U.S. MNE group. An ultimate
parent entity of a U.S. MNE group is a
U.S. business entity that:
(i) Owns directly or indirectly a
sufficient interest in one or more other
business entities, at least one of which
is organized or tax resident in a tax
jurisdiction other than the United
States, such that the U.S. business entity
is required to consolidate the accounts

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of the other business entities with its
own accounts under U.S. generally
accepted accounting principles, or
would be so required if equity interests
in the U.S. business entity were publicly
traded on a U.S. securities exchange;
and
(ii) Is not owned directly or indirectly
by another business entity that
consolidates the accounts of such U.S.
business entity with its own accounts
under generally accepted accounting
principles in the other business entity’s
tax jurisdiction of residence, or would
be so required if equity interests in the
other business entity were traded on a
public securities exchange in its tax
jurisdiction of residence.
(2) Business entity. For purposes of
this section, a business entity is a
person as defined in section 7701(a)(1)
that is not an individual, and includes
any entity that has a single owner and
that is disregarded as a separate entity
from its owner under § 301.7701–3 of
this chapter. Also for purposes of this
section, the term business entity
includes a business establishment in a
jurisdiction that is treated as a
permanent establishment under an
income tax convention to which that
jurisdiction is a party or that would be
treated as a permanent establishment
under the Organisation for Economic
Co-operation and Development (OECD)
Model Tax Convention on Income and
on Capital 2014 and that prepares
financial statements separate from those
of its owner for financial reporting,
regulatory, tax reporting, or internal
management control purposes.
(3) U.S. business entity. A U.S.
business entity is a business entity that
is organized or has its tax jurisdiction of
residence in the United States.
(4) U.S. MNE group. A U.S. MNE
group comprises the ultimate parent
entity of a U.S. MNE group as defined
in paragraph (b)(1) of this section and
all of the business entities required to
consolidate their accounts with the
ultimate parent entity’s accounts under
U.S. generally accepted accounting
principles, or that would be so required
if equity interests in the ultimate parent
entity were publicly traded on a U.S.
securities exchange, regardless of
whether any such business entities
could be excluded from consolidation
solely on size or materiality grounds.
(5) Constituent entity. With respect to
a U.S. MNE group, a constituent entity
is any separate business entity of such
U.S. MNE group, except that the term
constituent entity does not include a
foreign corporation or foreign
partnership for which the ultimate
parent entity is not required to furnish
information under section 6038(a)

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(determined without regard to § 1.6038–
2(j) and § 1.6038–3(c)) or any permanent
establishment of such foreign
corporation or foreign partnership.
(6) Tax jurisdiction of residence. For
purposes of this section, a tax
jurisdiction is a country or a jurisdiction
that is not a country but that has fiscal
autonomy. A business entity is
considered a resident in a tax
jurisdiction if, under the laws of that tax
jurisdiction, the business entity is liable
to tax therein based on place of
management, place of organization, or
another similar criterion. However, a
business entity will not be considered a
resident in a tax jurisdiction if such
business entity is liable to tax in such
tax jurisdiction solely with respect to
income from sources in such tax
jurisdiction, or capital situated in such
tax jurisdiction. If a business entity is
resident in more than one tax
jurisdiction, then the applicable income
tax convention rules, if any, should be
applied to determine the business
entity’s tax jurisdiction of residence. If
a business entity is resident in more
than one tax jurisdiction and no
applicable income tax convention exists
between those tax jurisdictions, or if the
applicable income tax convention
provides that the determination of
residence is based on a determination
by the competent authorities of the
relevant tax jurisdictions and no such
determination has been made, the
business entity’s tax jurisdiction of
residence is the tax jurisdiction of the
business entity’s place of effective
management determined in accordance
with Article 4 of the OECD Model Tax
Convention on Income and on Capital
2014. The tax jurisdiction of residence
of a permanent establishment is the
jurisdiction in which the permanent
establishment is located. If a business
entity does not have a tax jurisdiction of
residence, then solely for purposes of
paragraph (b)(1) of this section, the tax
jurisdiction of residence is the business
entity’s country of organization.
(7) Applicable financial statements.
An applicable financial statement is a
certified audited financial statement
that is accompanied by a report of an
independent certified public accountant
or similarly qualified independent
professional that is used for purposes of
reporting to shareholders, partners, or
similar persons; for purposes of
reporting to creditors in connection
with securing or maintaining financing;
or for any other substantial non-tax
purpose.
(c) Period covered by return. The
information required under paragraph
(d) of this section with respect to a U.S.
MNE group must be furnished for the

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annual accounting period with respect
to which the ultimate parent entity
prepares its applicable financial
statements ending with or within the
ultimate parent entity’s taxable year for
which the Form XXXX, Country-byCountry Report, is filed. However, if the
ultimate parent entity does not prepare
applicable financial statements that
consolidate the accounts of all
constituent entities, the ultimate parent
entity may provide the information
required under paragraph (d) of this
section based on applicable financial
statements of constituent entities for
their accounting period or periods that
end with or within the ultimate parent
entity’s taxable year.
(d) Contents of return—(1)
Constituent entity information. The
return on Form XXXX, Country-byCountry Report, must contain so much
of the following information with
respect to each constituent entity, and
in such form or manner, as the form
prescribes:
(i) The tax jurisdiction, if any, in
which the constituent entity is resident
for tax purposes;
(ii) The tax jurisdiction in which the
constituent entity is organized or
incorporated (if different from the tax
jurisdiction of residence);
(iii) The tax identification number, if
any, used for the constituent entity by
the tax administration of the constituent
entity’s tax jurisdiction of residence;
and
(iv) The main business activity or
activities of the constituent entity.
(2) Tax jurisdiction of residence
information. The return on Form XXXX,
Country-by-Country Report, will contain
so much of the following information
with respect to each tax jurisdiction in
which one or more constituent entities
of a U.S. MNE group is resident, and in
such form or manner, as the form
prescribes:
(i) Revenues generated from
transactions with other constituent
entities;
(ii) Revenues not generated from
transactions with other constituent
entities;
(iii) Profit or loss before income tax;
(iv) Total income tax paid on a cash
basis to all tax jurisdictions, and any
taxes withheld on payments received by
the constituent entities;
(v) Total accrued tax expense
recorded on taxable profits or losses,
reflecting only operations in the
relevant annual accounting period and
excluding deferred taxes or provisions
for uncertain tax liabilities;
(vi) Stated capital of all the
constituent entities, except that the
stated capital of a permanent

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establishment must be reported by the
legal entity of which it is a permanent
establishment unless there is a defined
capital requirement in the permanent
establishment tax jurisdiction for
regulatory purposes;
(vii) Total accumulated earnings,
except that accumulated earnings of a
permanent establishment must be
reported by the legal entity of which it
is a permanent establishment;
(viii) Total number of employees on a
full-time equivalent basis in the relevant
tax jurisdiction; and
(ix) Net book value of tangible assets
other than cash or cash equivalents.
(3) Special rules—(i) Constituent
entity with no tax jurisdiction of
residence. The information listed in
paragraph (d)(2) of this section also
must be provided, in the aggregate, for
any constituent entity or entities that
have no tax jurisdiction of residence.
(ii) Definition of revenue. For
purposes of this section, the term
revenue includes all amounts of
revenue, including revenue from sales
of inventory and property, services,
royalties, interest, and premiums. The
term revenue does not include
payments received from other
constituent entities that are treated as
dividends in the payor’s tax jurisdiction
of residence.
(iii) Number of employees. For
purposes of this section, the number of
employees on a full-time equivalent
basis may be reported as of the end of
the accounting period, on the basis of
average employment levels for the
annual accounting period, or on any
other reasonable basis consistently
applied across tax jurisdictions and
from year to year. Independent
contractors participating in the ordinary
operating activities of a constituent
entity may be reported as employees of
such constituent entity. Reasonable
rounding or approximation of the
number of employees is permissible,
provided that such rounding or
approximation does not materially
distort the relative distribution of
employees across the various tax
jurisdictions. Consistent approaches
should be applied from year to year and
across entities.
(iv) Income tax paid and accrued tax
expense of permanent establishment. In
the case of a constituent entity that is a
permanent establishment, the amount of
income tax paid and the amount of
accrued tax expense referred to in
paragraphs (d)(2)(iv) and (v) of this
section should not include the income
tax paid or tax expense accrued by the
business entity of which the permanent
establishment would be a part but for
the second sentence of paragraph (b)(2)

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Federal Register / Vol. 80, No. 246 / Wednesday, December 23, 2015 / Proposed Rules
of this section in that business entity’s
tax jurisdiction of residence on the
income derived by the permanent
establishment.
(v) Certain transportation income. If a
constituent entity of a U.S. MNE group
derives income from international
transportation or transportation in
inland waterways that is covered by
income tax convention provisions that
are specific to such income and under
which the taxing rights on such income
are allocated exclusively to one tax
jurisdiction, then the U.S. MNE group
should report the information required
under paragraph (d)(2) of this section
with respect to such income for the tax
jurisdiction to which the relevant
income tax convention provisions
allocate these taxing rights.
(e) Reporting of financial amounts.—
(1) Reporting in U.S. dollars required.
All amounts furnished under paragraph
(d)(2) of this section, other than
paragraph (d)(2)(viii) of this section,
must be expressed in U.S. dollars. If an
exchange rate is used other than in
accordance with U.S. generally accepted
accounting principles for conversion to
U.S. dollars, the exchange rate must be
indicated.
(2) Sources of financial amounts. All
amounts furnished under paragraph
(d)(2) of this section, other than
paragraph (d)(2)(viii) of this section,
should be based on applicable financial
statements, books and records
maintained with respect to the
constituent entity, or records used for
tax reporting purposes.
(f) Time and manner for filing.
Returns on Form XXXX, Country-byCountry Report, required under
paragraph (a) of this section for a taxable
year will be filed with the ultimate
parent entity’s income tax return for the
taxable year on or before the due date
(including extensions) for filing that
person’s income tax return.
(g) Maintenance of records. The U.S.
person filing Form XXXX, Country-byCountry Report, as an ultimate parent
entity of a U.S. MNE group must
maintain records to support the
information provided on Form XXXX,
Country-by-Country Report. However,
the U.S. person is not required to have
or maintain records that reconcile the
amounts provided on Form XXXX,
Country-by-Country Report, with the tax
returns of any tax jurisdiction or
applicable financial statements.
(h) Exceptions to furnishing
information. A U.S. person that is an
ultimate parent entity of a U.S. MNE
group is not required to report
information under this section for an
annual accounting period described in
paragraph (c) of this section if the

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annual revenue of the U.S. MNE group
for the immediately preceding annual
accounting period was less than
$850,000,000.
(j) Effective/applicability dates. The
rules of this section apply to taxable
years of ultimate parent entities of U.S.
MNE groups that begin on or after the
date of publication of the Treasury
decision adopting these rules as final
regulations in the Federal Register and
that include annual accounting periods
determined under section 6038(e)(4) of
all foreign constituent entities and
taxable years of all domestic constituent
entities beginning on or after the date of
publication of the Treasury decision
adopting these rules as final regulations
in the Federal Register.
John Dalrymple,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2015–32145 Filed 12–21–15; 4:15 pm]
BILLING CODE 4830–01–P

ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 171
[EPA–HQ–OPP–2011–0183; FRL–9940–59]
RIN 2070–AJ20

Pesticides; Certification of Pesticide
Applicators; Second Extension of the
Comment Period
Environmental Protection
Agency (EPA).
ACTION: Proposed rule; extension of
comment period.
AGENCY:

EPA issued a proposed rule in
the Federal Register of August 24, 2015,
concerning certification of applicators of
restricted use pesticides. This document
extends the comment period to January
22, 2016. The comment period is being
extended to provide additional time for
commenters to prepare their responses.
DATES: The comment period for the
proposed rule published August 24,
2015, at 80 FR 51356, is extended.
Comments, identified by docket
identification (ID) number EPA–HQ–
OPP–2011–0183, must be received on or
before January 22, 2016.
ADDRESSES: Follow the detailed
instructions provided under ADDRESSES
in the Federal Register document of
August 24, 2015 (80 FR 51356) (FRL–
9931–83).
FOR FURTHER INFORMATION CONTACT:
Michelle Arling, Field and External
Affairs Division (7506P), Office of
Pesticide Programs, Environmental
Protection Agency, 1200 Pennsylvania
SUMMARY:

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Ave. NW., Washington, DC 20460;
telephone number: (703) 308–5891;
email address: [email protected].
SUPPLEMENTARY INFORMATION: This
document extends the public comment
period established in the Federal
Register document of November 18,
2015 (80 FR 72029) (FRL–9936–82),
which extended the comment period
originally set in the Federal Register
document of August 24, 2015. In the
November 18, 2015 document,
comments were required to be
submitted by December 23, 2015. EPA is
hereby extending the comment period to
January 22, 2016.
To submit comments, or access the
docket, please follow the detailed
instructions provided under ADDRESSES
in the Federal Register document of
August 24, 2015. If you have questions,
consult the person listed under FOR
FURTHER INFORMATION CONTACT.
List of Subjects in 40 CFR Part 171
Environmental protection,
Administrative practice and procedure,
Certified applicator, Commercial
applicator, Indian Country, Indian
Tribes, Noncertified applicator,
Pesticides and pests, Private applicator,
Reporting and recordkeeping
requirements, Restricted use pesticides.
Dated: December 21, 2015.
Oscar Morales,
Acting Assistant Administrator, Office of
Chemical Safety and Pollution Prevention.
[FR Doc. 2015–32457 Filed 12–22–15; 8:45 am]
BILLING CODE 6560–50–P

DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Office of Inspector General
42 CFR Part 1001
Solicitation of New Safe Harbors and
Special Fraud Alerts
Office of Inspector General
(OIG), HHS.
ACTION: Notice of intent to develop
regulations.
AGENCY:

In accordance with section
205 of the Health Insurance Portability
and Accountability Act of 1996
(HIPAA), this annual document solicits
proposals and recommendations for
developing new, and modifying
existing, safe harbor provisions under
the Federal anti-kickback statute
(section 1128B(b) of the Social Security
Act), as well as developing new OIG
Special Fraud Alerts.
DATES: To ensure consideration, public
comments must be delivered to the
SUMMARY:

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