Registration Requirements With Respect to Debt Obligations

redthe
entry regkatioa. &by
&CV
-- wfsb to devote ta eoch
- .;: -.- . m u m m y w m T K m : ; . - . .
cost to
o( L a u l n g obligatih
.
. . .
. ., .:. - '2s
~anG& 14,1983.
registeredform. . .
. - - ..
. fich'speaker will be k k d to.10
Tbe t e m p o r a r g ~ t l a n i nthe,:. .'
mtriutee far.* oral presentawi +A:.r-:$:
Rules a d ReguLetiom portion- of this exclusive of .time .anaumedby.:.. ,. :,.; :.; issue of the Fadsca Regbier add new
IPcnmetaxts.~rempti. : : .
questions from the panel for the . :.:.:lii+.#.?
part Sf to Title 28 of tbe Code of Federal
Deductions.
Tax
Equity
and
F
&
.
a n d answers
- Reaulationa. The f i n a l r e d a t i o n a which. Respansibility Act of
.
. ..... to these '.- .,
questions- :'thi; document proposes L baaed on
..
Because of controlled accecrr .
Comments 4R e q w for a
'those temporary regalatwould be .
He.
restrictions. attendees ~ a m obe
t
''.
added to Part 1 of -j--& a f,
-of
admitted beyond- the lobby of the
"
Federal Regulations. Sectinn -03-1
Before adopting these prop&ed' .
a:* Pm,: would be
Internal Revenue Building
5 =03qa)(7). 5 ~u~3-3
regdations. consideratioza wiU be given .
An a&dq
S~O*
the sch'of - would become P 1.183-5. and 3 8 Sf.iO3-1 to any written comments that are
. the speakers will be made after outlines
and 5f.163-1 would be deleted ..
submitted (preferably m e n copies) to
-

,

,

'

.

,

,

a

,

.

' .7; :

'

-

-

'

"

,

,

'

-'

"

,

.are =,wived from the speakers- Copies .

of t h e . a g d a will be avaiLbIe
charge at the hearing.
direction of tbe Comml.do-

Internal Revenue. . .,.
'&otp H. j d y .
.
~ i v i P i a a: . .

.

.

.

p~a~t-n-+at-,-"j
~

O

. .

O

t;

O

E

..

.
. ....

W

~

O

- ~- Y
.

--

26 CFR e r t ' f

.. .

~

'

.

CLR-HJ-

The mg&tiona pmvide d e s . e a to .,
what
obligations must be r e t e r e d . The
. . > . . - regulations
define registration and
of . r - . . provide rules for certain Federal tax
..
corisequencer that win apply if
obligations issued after December 31. .,
: 1982, are not ,iswedin registered form.
.
.. The regulations are necessary because
of the additions made to section 2(13 and
,
163 by tbe Tax Eqafty.and Fiscal
Responsibility Act of 1892 (Fth L 87c. . . . . . . . 24a,Q0Stat585).Tb-*tiarrsere
.
.proposedt~beissnedrmderthe
..
. . ' :. :
.
a
u
t
h
o
r
i
t
y
m
o
t
a
b
d
m
~
l
~
..
1 6 3 f 0 . a n d 7 8 m o f t h e I n t a n a l m). .
~ 0 d e ( m ~ t a t 5 s s ;. ~

public inspection end copying. Notice of
the time and place of the hearing
appears in the notice of hearing section
of this issue of the Federal R-i
Roscoe I E g g e Jr.
~

'

.

,

28 U . S L 7805). and in sectian 310 of the.
Tax Eqaity and F d Responsibility
Act of L982 (96Stat 595).

Nm-ApplicsbiLity of f i e c r r t h O n k

A&CT~
Lntemal Revenue S e d
Treasury.' :.
r e n o r Notice of proposed
by cross-reference to temporary
'.
regalationa : .
... . . ,

,12291

I&-'

'

The ~ o d a s i o n e has
r determined . .
that this proposed reguletion is not
- subject to r w i e w tmder~xecdveOrder
lzzsl o r t b e T r e a ~ a n d O M J 3
SUM^' III the Rules and ~egulatione implementation of the Order dated April
nortion of this F
a R-;.&
. '.
28 1982
hiernat Revexme Service is issnEng - .
Regdattxy
FhdGIity Act
tempregulations that relate to *
Pursuant
to
5 USC. eoyb). the
mgistmtion requirements with respect'to
Secretary of the Treaeury bas certified
debt obligations. The text of Lbme
temporary ngdetionrr also
a s the that the requirements of the R e g h t n r y
Flexibility A c t do not appIy to this
comment document for this proposed. .
notice of proposed nrlemabing as it will
dem..
not have a significant economic impack
writtenComments and requests -on a substantial number of a m d
to sp&
a t the public bearing n i ~ P : b
entities. The impact of the requirement
delivered by Janoarp14.1983. me
that debt obligations b e issued m
regda tiona are proposed to be
registered form on both Bnall and -1
generally with respect to obligations..:
issuers is due to requirements imposed
issued after December 31,1982
directlv bv the statute. Ln the areas in
ADDRESS: Send comments and requests
which Ithg~evicehas been given
to speak at the public hearing to:
, significant discretion under the &awe.
Commissioner of I n t e n d Revenue.
the Service h a s exedged its discretion
Attention: (=C:LkTw-255-82).
s o a s to minimize the potential impact
Washington. D.C. 20224.
while ensuring compliance with the
statute. For example, the r . . q p i m n f d of
FOR N R l 7 E R fNFOFINAT#O?f
registretion of an obligation will be
Diane L Kroupa. Officeof the Chief
Counsel I n t d Revenue Service. 1111 satisfied where the owner of the
Constitution Avenue. N.W, Washington, obligation can be ascertained &rot& a
book en- s y s t e m The regulations are
D.C 20224 (Attenti- C C L R I ) (U22liberal in permitting the use of book
-1.
"

'

'

'

-

Commiaioaerof~~Revenne

~ ~ ~ ~ of
~-I7 ; ~ ~ublic
'~eporting
H
on Proposed Regulanons .. .

S t a t 590.28 U S C . B(fk
68A Stat W.
,

of I n t d R e v e n u e . .

All comments will be available f o r

'

f7egirtrahdn ~eq"Ircrnan& ~ 1 f . h .
Respect to Debt ObmtlOns;
Proposed Rule,
. . .

. .

the Commi&ner

.

.

.

AGE-

~

,

foternai ~ak-enoeService, -

Treasury.
ACTION: Notice of public h e a h on..
proposed regulations. . .
S U I I I MNotice
~
of public bearing'&' .
proposed regulations relating to
..
,
reporting of interest
D
A The~public baring win be beM on January25,1983. b e g h n q at 1aD0 .
a m . Outlineuoforal ccumartg mnst be' .
delivered b mailed by January14 1983.
.ADDRestThepablicheaTing*villbe '. :
held in the I=
Anditoriq !3ve&
r:
Floor, 74R)Corridor. f n t d R
.:.

B u i l ~ ' l l l ~1
C A
Q
NW., Washington, D.CThe oPtlirnw
should be submitted to the
Commissioner of InternalRevenue. A m

CC:lR:T CLR-2p-82k Washington. D.C
20224.
FOR F
U
-

IWF6RMAK))I -ACT:

Charles Hayden of the Legislation aad
Regulations Divisios Office of C h k f
Counsel, Intern& Revenue Service. 1111
Constitution Avenue. N.W., Washington
D.C. 20224. ZXXWXWL not a toll-free
,

call.

.

SUPF~EMEMTARY
The
subject of tbe public bearing is proposed
regulapons under section 6049of the
Internal Reverne Code of
proposed regulation appxm-mthe
Proposed Rules section of h s issue of

Q

redera] Register

/

V O ~ 47.'
. NO. 220
. -

/

Monday. November IS, 1982

isrued in registered form. Changes to the
applicable tax law were made by
section 310 of the Tax Eqwty end Fiscal
Responsibility,Act of 19at l 3 e
i regulations affect isnuera and holdem of
! obligations. and provide them with the
guidance needed to comply with the .
law. In addition. these temporary
regulations serve as the text of the
proposed regulations uoss+eferrnced in'
.' the notice of proposed rulemaking in the
Proposed Rules section of i.hb issue of
. .
the Federal Reeister.
.,
D A T E Generally, the regule tions apply
to oblinations issued after December 31.

,

/

Rules a n d Regulations

On September 15,1982 tbt' Semiiesued e news release soliciting
comments on provisions of the Tax
Equity and Fiscal R e s p o n ~ i b i l l ~
t ~ coft
1982 relating to the requirement of . :
registration of debt obligations. T h e
Semce bar received numemur
. ..comments. aU of which have been
qrefidly considered in the preparation
. addition, p-m
of these ~ g u l a t i o r i sIn
encouraged to make written
comments by mail and oral cbrnmenb'at
the public hearing. Notice of the time
and place of the hearingappears in the
notict of hearing secton of this issue of
the Federal Register. - . '- . .

FOR'FVRMER

I N F O R M A n O N COKTACX

This doctunen! contains temporary
regulations relating to the requirement ,
that certain debt obligations be issued in
-registered form under sections 103 and
'363 of the Internal Revenue Code of
1954. as ahended by the Tax Equity and
Fiscal Responsibilj ty Act of 19a2
L
97-248 96 Stat. 595). The temporary .
regulations provided by this document
will remain in effect until superseded by
final regulations on &is subject

Internal Revenue Service

26,eF-R-part 51

,

Temporary income Tax Regulations
Under the Tax Equity and Fis-1
Responsibility Act of 1982;
Registration Requlremene With
Respect to Debt Obligations
AGENCY: Internal Rercnue Service.
Treasury.
ACTION: Temporary regulations.
This docwnent provides
temporary regulations with respect to
the requiremen1 that debt obligahons be

S U M M A RY :

mb.

Rules
;
The temporary regulations provide
1 generally that any obligation issued
. after December 31.1982 must be issued
in registered form. If an obligation
issued after December 31. 1982, is not
, issued in registered form. the issuer
be denied a deduction for interest paid
or accrued on such obligation- Further.
: interest on an obligation issued after
such date that otherwise would be
exempt from tax will not be tax exempt
unless the oblination is issued in
registered f o k m e regulations provide
examples of certain obligations that are
not tequired to -be registired.
.
* .The temporary regula tjons provide
that an obligation ie issued in registered
form if the transfer of the obligation can
only be effected by the surrender of the
old instrument to the issuer and either
reissuance of the old instNment or
issuance of a new instrument to the new
holder. An obligation is also considered
issued i n registered form if the right to
the principal of, and a n y stated inlerest
on, h e obligation can be transferred
only through a book entry system. h
book entry is a record of the ownership
of en obligation.

I

~

2

'

Diane L Kroupa of the Legislation and
Regulations Division Office of the Chief
~ o u n s e L h t e r n a Revenue
1
Service. 1111
Constihrtion Avenue, N.W, Waslugton
D.C.20224 (Attention: C C m T (202)
586-3590)., . - . .
SUPPLEMENTARY IMFORMAnOH:
..

I

5 x 3 ~ ~

The ~ ~ m m i s s i o nhas
e r determbed
that this temporary regulation is not a
.
major rule subject to review undu
Executive Order 12291 or the Treasury
, and OMB implementation of the Order
, - .
dated.Apri1 28, 1982-. - .'
No general notice Gf pivposed -.
rulemaking is required by 5 US..C'S~~
fb)for temporegulations.
~ c c o r d i ~ lthe
y . Repuletory Flon'bility
Act does not apply and no Regulatory
Flexibility,Analgsis is required for these
.
. ..
rules.

Tbe.principal author of these
proposed regulations is Diane L k o u p a
of the Legislation a n d Regulations
Division of tbe O f i c e of Chief Counsel.
Internal Revenue Service. However.
personnel om other offices of the
Lnternal Revenue Service and Treasury
Department partidpaled in developing
the regulation?. both on matters of
substance and style.
List of Subjects in 26 CFR Part sf
lncome laxes; Deduction;.
Exemptions. Tax Equity and Fiscal
Responsibility Act of 1982
.
Adoption of amendments to tbe
rrtgula tions

Accordingly. Part Sf, Temporary
Income Tax Regulations under the Tax
Equity and Fiscal Responsibility A C of
~ .
1982. is amended by adding new .
5 5 5f.103-1 and 5t163-'3 immediately
before 5 5f.168 (Tj(8)-1. to read as
follows:
5 51.103-7 Obtlg~UonsIssued rtter
December 31. 1982, requlred lo be In
r e g l r t e d form

(a) Registmtion. geneml rule. Lnterest
on ti registra:ion-required obligation ( a s

;13~2

Federa] Register

/

VOL 47. NO. 220

/

-

Monday. November 15.'1982 / Rules and Ke*auur,>

g 5f.163-1
A d of 1933 and was istued
of h t m dbductkn on
defined in paragaph (b) of his ~ e c u o n j ' Se-ties
~
-loow *nu
before August 10,1982
shall nof be exempt from tejr
31,1982. unku
)n rPpmemd 10notwithstanding section l(13(a) or any
( e )ObligaLians first issued after
(a)
Denial
of
deduction
genemlly. .
other provision of law. exclusive of an?
December31,
whem rhe
Interest
paid
or
accsued
on
a
.
t r e a t y oblige tion of the United States.'
.exists for h e hdlder LO mnrefi spch
rtgistration-required obligation (as
unless the obligation is issued in .
obligation from registemd jonn in&
defined in paragraph (b) of thin section)
registered form (as defined in paragraph bearer form.meserved] - , .
ahall not be allowed a s a deduction
(c]of this s e c ~ o n ) .
(f) Examples. The appliwtion of thir
under section 163 o r any other provision
(b) ~ e ~ i r h l i o n - r r p u i ~ o b l i ~ o ~ n - may be il]urmted by be
of law unless such obligation is issued in
.
.
For purpoees of his section. the t e r n
foljo,,,.jngexamples:
regirtered form ( a s defined in 5 5f.103"regis tration-required obl&alion" means
l3ainple (1). Mdcipality X publicly oflen
lfcll.
a n y obligation except any o n e of a e
-,
-... Ib general debt obligation, lo United Str ter - .. @] ~egishtion-&ru&dobl&lion
following:
(11
,,bligatio~
o f a fype offered
Pemon~.The ~blgetiowhave a maWV 81
For purpose8 of &s S ~ C ~ ~ the
O Rterm.
Issue ex~erdvyI yew.
0b@a60- u
"m.gistration-required obligation" means .
. to the pubfis nedetermioation a s to
%isbtion-rrsuirrd obligetiom under
whether an obljgation is not of a
any obligation except any one of the.. .
i 5f.lD~1Ib).Wben individual A buys an
foliowing: ..-- .
offered to the public ahall be baBed.01~
, . ..
obligation isrun a obligetion in
name
(1)An obligation issued by a natural -.:
whether similar obligation8 arein fact
c,-jdcncin8
o[ bep ~ d p d
publicly offered or traded.
a d interest under tbc obligatioa A can
person
. .
(2) h obligation that baa a maturity
(2) An obligation notof a type o f f e k d
transfer the obligation only by .-d&q
a t h e date of issue of not m o m than 1
the obligation Lo X m d by J( isruing. new
.
to the public The delermination 9 s to
:
.
instnuneat to the new bolder, l l . e obligation
year.
wbetber an obligation is not of a type
(3) kt obligetido issued before
'
i s issued in registmd form. . ...
offered to the public shall be based oe
homple (2). Municipality Y irsuer a mingle whetber similar obligations are in factJanuary 1.1983. An obligation fist
obligation on January4 1983.in bc-r form
shaU not
issued before January 1.
publicly offered or trade"
be
to beve been issued on or
to
M provided
[i) Bank
not
obligation that has a.mahuity' (3)
after batdate
a
of the
*Y time bm'fu-3'
btemsl b
not mom than I .
obligation 10 =Y pmon unles~Oe w f e r i a 8;'tbe date of issue. of
e.stence of a rigbl on the pnfiof he
vear.
.
. . .
rrsoided On MunidpaQe y a
"
I
*
holder of 8uch obfigafion to'sonvert the
(4) An obligation G e d befon . . -.
by m e m n ~ f trandu
a
pendnrd in (5)of Lbi..
form
into
hm
example). a d (ii) internis in h e obkgation . January1,1983.An obliBation first : bearer fomr or as a result of t h e
. * . that art sold by Bank M (and any pvrom
issued before January 1.1%.
shall not '
exem-se of such a right
who acquire iaterrsbfrom M) will be
be considered to have been irsued on or
(41 A n obligation destribed in .
.
+eflectedin book entrie~C an bdividud
Bfter such date merely a r a resuh of the
5 51.163-1 (c) (relating to certain
buya an intertd in Ys obligation from Bank
existence of a fight on the part of the
obligations issued to foreign penons). ' , U Bank M
by r e l ] ~holder of such obligation to convert such
( c ) Registered form-- [I) Gf?i?eJUjrule. C
. ownership on Bank M S boob. Bank M
obligation from registered form into
An obligation is in regstered form ifreceives the interest or principal payment.
bearer f o r m or a s a resuli of the
with respect to C8 intcrrrst in Lbe obligation .
t i ) Tbe obligation i s registered a s to
as agent for C Any transfer of C a intemst - exercise of such a rigbt
both principal and any stated interest .
( 5 ) An obligation described
mu31 be rrneded in a book e n w system
and transfer of the obligation may be
s u b p a r a p p h (1) of paragraph (c)
Since C a interest
O ~ be
Y m f e m d
only by b e surrender of the old
(relating to certain obligations issued to
w u 8 h " book e.4 nk'sbe obba60~
i n s w e n t rind eilfier hereissuance by
foreign
persons).
wnaidered
issued
in
ngjntered
form
L
n
k
~
t
i n s w e n t to the ..
issuer of the
[c) Obligations issued ta foreign
by i' ucludable from PC''
new holder or the issuance by b e issuer "ceived
lDcomeunder
lo' fa).
persons-41) Geneml rule. An obligation
of a new inl-rnt
to i be new bolder,
Example (3). Municipality Z wisher to sell
is described in this subparagraph if.
3r
itJ debt obligationr baving r mehuity in
(i) There are a r r q e l o e 2 t s reasonably ,
6 )The right to the principal and
excesn of1 year. T h e obhgations are sold 10
stated interest o n the obligation may be . ~h
N; 0,d, p, ,u of wbd are located in designed t o ensure that such obligation
will be sold (or resold in connection
transferred only through a book e n m .
Municipality Z By their terms h e obligations
with its original issuance] only to a
system ( a s described in paragraph fcl (2) are freely transferable. alhougb each of the
person who is not a United States
banks bar rteted that it acquired the
of this section).
person. a n d
obligatiom for purpoaes of investment and
( 2 ) Special rule jorregistmlion of a
not for resale. Obligations similar 10 the
(ii) Ln the case of a n obligation which
book enoy obligolion. An obligation
obligatioru mold by Municipality an b d e d
is not in registered f o r m ,
shall be considered transferable through
in the market lor municipal securities. T b e
of
( A ) Interest on such obligation is -e book. enw sys,-em.if the
obligatiok issued by hlunicipalily Z are of a
payable only outside the United States
in he ob)jgaeonis required
an
type offemd to the public and arc therefore
and its possessions. and
to be reflected in a book e n q
rrgishetion-rtquired under 5f.103-1 (bl.
@] On the face of such obligation
or not physical seem-ties are issued. A
there is a statement t b a t any United
(g) Cmss-references. See section
book entry is a record of ownership that
States p e n o n who holds such obligation
103Alj)(l) for the regisbation
identifies the owner of an bteESt i n the
will be s u b j s t to limitations under the
requirement
of
certain
mortgage
subsidy
rlligation.
United States income tax laws.
bonds issued after December 31.1981,
(d) EJYective d&. The provisions of
includmg
the
limitations
provided
in
. ,
and
5
6a.103A-l(a)(5)
for
the
definition
his section &all apply to obligatlone
of registered form for such obligations . sections 165Lj) and 1232(d).
issued after December 31.1982 unless
( 2 ) Aules for oppIicaLion of this issued after December 31. 1981. and on
.
issued on an exercjse of a warrant for
parogmph ---(i) Obligotions which -.
or before December 31.19U See also
the conversion of a convertjble
so f isfy porng'mph (c)(l)(i/ of this
section 103[h) (requiring regisbation of
obligation if such warrant or obli,oab'on
section; conversion into bearer or
certain energy bonds issued on or after
was offered or 50ld outside the United
regislemdfonn. An obligation. whether
October 18,1979).
Slates wilhout registration under the

.,

,,.,

~

as

~

>-.

*

-*

'

-.
...
-.

-.

I;:

-.

,

,

I

'

,

c:
-.
---.-..
-.
-..
.-,
a:.