2021 Supporting Statement (1545-1290)

Supporting Statement

Internal Revenue Service

(TD 8513) Bad Debt Reserves of Banks

OMB #1545-1290

1. CIRCUMSTANCES NECESSITATING COLLECTION OF INFORMATION

Section 585(c) of the Internal Revenue Code was added by the Tax Reform Act of 1986 (Pub. L. No. 99‑514, § 901), 100 Stat. 2085, 2375‑2380 (1986), and amended by section 1009(a) of the Technical and Miscellaneous Revenue Act of 1988, (Pub. L. No. 100‑647), 102 Stat. 3342, 3445 (1988). Section 585(c) requires large banks to change from the reserve method of accounting to the specific charge off method of accounting for bad debts. Section 1.585‑8 of the regulation establishes a reporting requirement in cases in which large banks elect (1) to include in income an amount greater than that prescribed by the Code; (2) to use the elective cut‑off method of accounting; or (3) to revoke any elections previously made.

2. USE OF DATA

The reporting requirement applies to all large banks making an election under section 585(c) of the Code. The institution reports its election by filing a statement with its return (or amended return) for the tax year in which it becomes a large bank. The reports are necessary to monitor the elections made by the taxpayer.

3. USE OF IMPROVED INFORMATION TECHNOLOGY TO REDUCE BURDEN

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. 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.

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 Internal Revenue Service (IRS) did not collect this information, the IRS will not be able to monitor the elections made by the taxpayer. Also, less frequent collection will affect the IRS by not allowing IRS to monitor the elections by the institution that is reported on the returns/amended returns for the tax year in which it becomes a large bank.

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

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

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

In response to the Federal Register notice dated September 16, 2021 (86 FR 51726), we received no comments during the comment period regarding TD 8513.

9. 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 return information are confidential as required by 26 USC 6103.

11. JUSTIFICATION OF SENSITIVE QUESTIONS

No sensitive personally identifiable information (PII) is being collected.

12 ESTIMATED BURDEN OF INFORMATION COLLECTION

The burden estimation was arrived at after consultation with representatives of the Office of the Comptroller of the Currency and the American Bankers Association as to the number of potential respondents.

Section 1.585‑8 establishes a reporting requirement in cases in which large banks elect (1) to include in income an amount greater than that prescribed by the Code; (2) to use the elective cut‑off method of accounting; or (3) to revoke any elections previously made. We estimate that it will affect 2,500 respondents and that it will take them 0.25 hour each to complete the requirement. The total estimated burden is 625 hours.

Authority	Description	# of Respondents	# Responses per Respondent	Annual Responses	Hours per Response	Total Burden
Treasury Regulation §§1.585-8	TD 8513	2,500	1	2,500	.25	625
Total				2,500		625

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.

1. 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.

14. REASONS FOR CHANGE IN BURDEN

There is no change in the paperwork burden previously approved by OMB. IRS is making this submission to renew the OMB approval.

14. PLANS FOR TABULATION, STATISTICAL ANALYSIS AND PUBLICATION

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

14. REASONS WHY DISPLAYING THE OMB EXPIRATION DATE IS INAPPROPRIATE

IRS believes 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

14. EXCEPTIONS TO THE CERTIFICATION STATEMENT

There are no exceptions to the certification statement.

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.