Td 8871

RIC’s or REIT’s taxable year for which the
corporation qualifies to be taxed as a RIC
or REIT. In the case of a C corporation
that transfers property to a RIC or REIT in
a carryover basis transaction, the 10-year
recognition period begins on the day the
assets are acquired by the RIC or REIT.
(3) Making the election. A RIC or REIT
validly makes a section 1374 election with
the following statement: “[Insert name and
employer identification number of electing
RIC
or
REIT]
elects
under
§1.337(d)–5T(b) to be subject to the rules
of section 1374 and the regulations thereunder with respect to its assets which formerly were held by a C corporation, [insert
name and employer identification number
of the C corporation, if different from
name and employer identification number
of RIC or REIT].” This statement must be
signed by an official authorized to sign the
income tax return of the RIC or REIT and
attached to the RIC’s or REIT’s Federal income tax return for the first taxable year in
which the assets of the C corporation become assets of the RIC or REIT.
(c) Special rule. In cases where the first
taxable year in which the assets of the C
corporation become assets of the RIC or

REIT ends after June 10, 1987 but before
March 8, 2000, the section 1374 election
may be filed with the first Federal income
tax return filed by the RIC or REIT after
March 8, 2000.
(d) Effective date. In the case of carryover basis transactions involving the
transfer of property of a C corporation to
a RIC or REIT, the regulations apply to
transactions occurring on or after June 10,
1987. In the case of a C corporation that
qualifies to be taxed as a RIC or REIT, the
regulations apply to such qualifications
that are effective for taxable years beginning on or after June 10, 1987.
Par. 3. In §1.852–12, paragraph (d) is
added to read as follows:
§1.852–12 Non-RIC earnings and profits.
*****
(d) For treatment of net built-in gain assets of a C corporation that become assets
of a RIC, see §1.337(d)–5T.
Par. 4. In §1.857–11, paragraph (e) is
added to read as follows:
§1.857–11 Non-REIT earnings and profits.
*****
(e) For treatment of net built-in gain assets of a C corporation that become assets

of a REIT, see §1.337(d)–5T.
PART 602–OMB CONTROL
NUMBERS UNDER THE
PAPERWORK REDUCTION ACT
Par. 3. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 4. In §602.101, paragraph (b) is
amended by adding an entry in numerical
order to the table to read as follows:
§602.101––OMB Control numbers.
*****
(b) ***
Robert E. Wenzel,
Deputy Commissioner of
Internal Revenue.
Approved January 21, 2000.
Jonathan Talisman,
Acting Assistant Secretary
for Tax Policy.
(Filed by the Office of the Federal Register on February 4, 2000, 8:45 a.m., and published in the issue
of the Federal Register for February 7, 2000, 65 F.R.
5775)

CFR part or section where
identified and described

Current OMB
control No.

*****
1.337(d)–5T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1545–1672
*****

Section 401.—Qualified
Pensions, Profit-sharing, and
Stock Bonus Plans
26 CFR 1.401(b)–1: Certain retroactive changes in
plan.

T.D. 8871
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
Remedial Amendment Period
AGENCY: Internal Revenue Service
(IRS), Treasury.

2000–8 I.R.B.

ACTION: Final and temporary regulations.
SUMMARY: This document contains
regulations relating to the remedial
amendment period, during which a sponsor of a qualified retirement plan or an
employer that maintains a qualified retirement plan can make retroactive amendments to the plan to eliminate certain
qualification defects for the entire period.
These final regulations clarify the scope
of the Commissioner’s authority to provide relief from plan disqualification
under the regulations. These clarifications confirm the Commissioner’s authority to provide appropriate relief for plan
amendments relating to changes to the
plan qualification rules made in recent
legislation. These final regulations affect

641

sponsors of qualified retirement plans,
employers that maintain qualified retirement plans, and qualified retirement plan
participants.
EFFECTIVE DATES: These regulations
are effective February 4, 2000.
FOR FURTHER INFORMATION CONTACT: Linda S.F. Marshall at (202)6226030 or Lisa A. Tavares at (202) 6226090 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments
to the Income Tax Regulations (26 CFR
part 1) under section 401(b). These regulations provide guidance to clarify the

February 22, 2000

scope of the Commissioner’s authority to
provide relief from plan disqualification
under section 401(b) and the regulations.
On August 1, 1997, temporary regulations
(T.D. 8727, 1997–2 C.B. 47) under section 401(b) were published in the Federal
Register (62 F.R. 41272). A notice of
proposed rulemaking (REG–106043–97,
1997–2 C.B. 654) cross-referencing the
temporary regulations, was published in
the Federal Register (62 F.R. 41322) on
the same day. The temporary regulations
enabled the Commissioner to provide appropriate relief concerning the timing of
plan amendments relating to changes to
the plan qualification rules made in recent
legislation, as well as for other plan
amendments that may be needed as a result of future changes to the Internal Revenue Code (Code).
No written comments responding to the
notice of proposed rulemaking were received. No public hearing was requested
or held. The proposed regulations under
section 401(b) are adopted by this Treasury decision, and the corresponding temporary regulations are removed.
Explanation of Provisions
Section 401(b) provides that a plan is
considered to satisfy the qualification requirements of section 401(a) for the period beginning with the date on which it
was put into effect, or for the period beginning with the earlier of the date on
which any amendment that caused the
plan to fail to satisfy those requirements
was adopted or put into effect, and ending
with the time prescribed by law for filing
the employer’s return for the taxable year
in which that plan or amendment was
adopted (including extensions) or such
later time as the Secretary may designate,
if all provisions of the plan needed to satisfy the qualification requirements are in
effect by the end of the specified period
and have been made effective for all purposes for the entire period.
Section 1.401(b)–1(b) lists the plan provisions that may be amended retroactively
pursuant to the rules of section 401(b).
These plan provisions, termed disqualifying provisions, include the plan provisions
described in section 401(b), as well as
plan provisions that result in failure of a
plan to satisfy the qualification requirements of the Code by reason of a change

February 22, 2000

in those requirements effected by the legislation listed in §1.401(b)–1(b)(2)(i) and
(ii). Under §1.401(b)–1(b)(2)(ii), a disqualifying provision also includes a plan
provision that is integral to a qualification
requirement changed by specified legislation. As in effect prior to the previously
issued final and temporary regulations,
§1.401(b)–1(b)(2)(iii) provided that a disqualifying provision includes a plan provision that results in failure of the plan to
satisfy the Code’s qualification requirements by reason of a change in those requirements effected by amendments to the
Code, that is designated by the Commissioner, at the Commissioner’s discretion,
as a disqualifying provision.
Section 1.401(b)–1(d) provides rules
for determining the period for which the
relief provided under section 401(b) applies (the “remedial amendment period”). Section 1.401(b)–1(d)(1) defines
the beginning of the remedial amendment period for the disqualifying provisions listed in §§1.401(b)–(1)(b)(1) and
1.401(b)–1(b)(2)(i) and (ii).
The final regulations retain the rules set
forth in the temporary regulations to clarify the scope of the Commissioner’s authority to provide relief from plan disqualification under section 401(b). These
changes are needed to clarify the rules relating to the plan provisions that may be
designated by the Commissioner as disqualifying provisions based on amendments to the plan qualification requirements of the Internal Revenue Code.
Section 1.401(b)–1(b)(3) retains the rule
set forth in the temporary regulations to
provide that a disqualifying provision includes a plan provision designated by the
Commissioner, at the Commissioner’s
discretion, as a disqualifying provision
that either (1) results in the failure of the
plan to satisfy the qualification requirements of the Code by reason of a change
in those requirements; or (2) is integral to
a qualification requirement of the Code
that has been changed.
Section
1.401(b)–1(c)(2) retains the rule set forth
in the temporary regulations to provide
the Commissioner with explicit authority
to impose limits and provide additional
rules regarding the amendments that may
be made with respect to disqualifying provisions during the remedial amendment
period. Section 1.401(b)–1(d)(1)(iv) and
(v) provide conforming rules, as previ-

642

ously provided in the temporary regulations, regarding the beginning of the remedial amendment period for disqualifying
provisions
described
in
§1.401(b)–1(b)(3).
Special Analyses
It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order
12866. 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, and because the regulation does not
impose a collection of information on
small entities, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Internal
Revenue Code, the notice of proposed
rulemaking preceding these regulations
was submitted to the Small Business Administration for comment on its impact on
small businesses.
Drafting Information
The principal authors of these regulations are Linda S. F. Marshall and Lisa A.
Tavares, Office of the Associate Chief
Counsel (Employee Benefits and Exempt
Organizations). However, other personnel from the IRS and Treasury Department participated in their development.
* * * * *
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 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.401(b)–1 is amended
by:
1. Revising paragraphs (b)(3), (c), and
(d)(1)(iv).
2. Adding paragraph (d)(1)(v).
The addition and revisions read as follows:
§1.401(b)–1 Certain retroactive changes
in plan.
*****
(b) * * *

2000–8 I.R.B.