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Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Rules and Regulations
Books or records relating to this
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.

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
[TD 8953]
RIN 1545–AV61

Eligibility Requirements After Denial of
the Earned Income Credit
AGENCY: Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations and removal of
temporary regulations.
SUMMARY: This document contains final
regulations that provide guidance to
taxpayers who have been denied the
earned income credit (EIC) as a result of
the deficiency procedures and wish to
claim the EIC in a subsequent year. The
temporary regulations apply to
taxpayers claiming the EIC for taxable
years beginning after December 31,
1997, where the taxpayer’s EIC claim
was denied for a taxable year beginning
after December 31, 1996.
DATES: Effective date: These regulations
are effective June 25, 2001.
Applicability dates: For dates of
applicability, see § 1.32–3(f) of these
regulations.
FOR FURTHER INFORMATION CONTACT:
Karin Loverud at 202–622–6080 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act
The collection of information
contained in these final regulations has
been reviewed and approved by the
Office of Management and Budget in
accordance with the Paperwork
Reduction Act (44 U.S.C. 3507) under
control number 1545–1575. Responses
to this collection of information are
mandatory.
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 control number
assigned by the Office of Management
and Budget.
The burden is reflected in the burden
of Form 8862.
Comments and suggestions for
reducing the burden imposed by this
regulation should be sent to the Internal
Revenue Service, Attn: IRS Reports
Clearance Officer, W:CAR:MP:FP,
Washington, DC 20224, and to the
Office of Management and Budget, Attn:
Desk Officer for the Department of the
Treasury, Office of Information and
Regulatory Affairs, Washington, DC
20503.

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Background
Section 32(k) was added by the
Taxpayer Relief Act of 1997. Section
32(k)(2) provides that, in the case of a
taxpayer who is denied the EIC as a
result of the deficiency procedures, no
EIC is allowed for any subsequent
taxable year unless the taxpayer
provides such information as the
Secretary may require to demonstrate
eligibility for the credit. On June 25,
1998, temporary regulations (TD 8773)
relating to earned income credit
eligibility requirements under section
32(k)(2) were published in the Federal
Register (63 FR 34594). A notice of
proposed rulemaking (REG–116608–97)
cross-referencing the temporary
regulations was published in the
Federal Register for the same day (63
FR 34615).
No written comments responding to
the notice of proposed rulemaking were
received. No public hearing was
requested or held.
As part of an audit pertaining to the
IRS’s management of the EIC eligibility
program, the Treasury Inspector General
for Tax Administration recommended
that the Treasury and the IRS reconsider
(1) the time at which the taxpayer
should be required to establish
eligibility to claim the EIC, and (2)
whether the eligibility requirement
should pertain to the reason the EIC was
denied. For example, under the
temporary regulations, a taxpayer who
is denied the credit on the basis of a
child who is determined not to be a
qualifying child must establish
eligibility the next time the taxpayer
claims the EIC, regardless of whether
the taxpayer is claiming the credit on
the basis of one or more qualifying
children or on the basis of no qualifying
children. Treasury and the IRS believe
that the purpose of the eligibility
requirement (to prevent erroneous
claims) is better effectuated if the
taxpayer establishes eligibility the next
time the taxpayer claims the credit with
one or more qualifying children, rather
than the next time the taxpayer claims
the credit.
The IRS is currently exploring
whether, and to what extent, its system
is capable of undertaking such a change.
If a change is made, it would not affect
the method of establishing eligibility,
that is, the taxpayer would continue to

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be required to attach a completed Form
8862 to his or her tax return. The
Treasury and the IRS do not expect any
change will affect returns for tax year
2001.
If a change is made, the IRS expects
to inform taxpayers of the change in two
specific ways. First, the IRS would
revise Letter 3094, which informs the
taxpayer of the eligibility requirements.
Second, the IRS would revise the
instructions for Form 8862 to clarify the
return to which it must be attached. In
addition, the IRS would include
information regarding the change in all
IRS taxpayer publications that deal with
the EIC eligibility requirements.
The proposed regulations under
section 32(k)(2) are adopted as revised
by this Treasury decision. The revisions
are discussed below.
Explanation of Revisions
To permit the IRS to make changes to
the EIC eligibility program as indicated
above, § 1.32–3(c) is revised to state that
the Form 8862 instructions will instruct
the taxpayer when to file Form 8862. A
new sentence is added to § 1.32–3(c) to
the effect that, if the taxpayer attaches
Form 8862 to an incorrect return, the
taxpayer will nevertheless be required
to attach Form 8862 to the correct
return.
The IRS and Treasury will consider
written comments pertaining to these
revisions. Submissions should be sent
to: CC:ITA:RU (TD8953), room 5226,
Internal Revenue Service, POB 7604,
Ben Franklin Station, Washington, DC
20044. Submissions may be hand
delivered Monday through Friday
between the hours of 8 a.m. and 5 p.m.
to: CC:ITA:RU (TD 8953), Courier’s
Desk, Internal Revenue Service, 1111
Constitution Avenue, NW., Washington,
DC. Alternatively, taxpayers may submit
comments electronically via the Internet
by selecting the ‘‘Tax Regs’’ option on
the IRS Home Page, or by submitting
comments directly to the IRS Internet
site at http://www.irs.gov/tax_regs/
regslist.html.
Special Analyses
It has been determined that these final
regulations are 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.
It is hereby certified that these
regulations will not have a significant
economic impact on a substantial
number of small entities. This
certification is based upon the fact that

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Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Rules and Regulations
the underlying statute applies only to
individuals. Therefore, a regulatory
flexibility analysis under the Regulatory
Flexibility Act (5 U.S.C. chapter 6) is
not required.
Pursuant to section 7805(f) of the
Code, the notice of proposed rulemaking
preceding these regulations was
submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on its
impact on small business.
Drafting Information
The principal author of these
regulations is Karin Loverud, Office of
Division Counsel/Associate Chief
Counsel (Tax Exempt and Government
Entities). However, other personnel
from the IRS and the Treasury
Department participated in their
development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping
requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 1 and 602
are 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 1.32–3 is added to read
as follows:
§ 1.32–3 Eligibility requirements after
denial of the earned income credit.

(a) In general. A taxpayer who has
been denied the earned income credit
(EIC), in whole or in part, as a result of
the deficiency procedures under
subchapter B of chapter 63 (deficiency
procedures) is ineligible to file a return
claiming the EIC subsequent to the
denial until the taxpayer demonstrates
eligibility for the EIC in accordance with
paragraph (c) of this section. If a
taxpayer demonstrates eligibility for a
taxable year in accordance with
paragraph (c) of this section, the
taxpayer need not comply with those
requirements for any subsequent taxable
year unless the Service again denies the
EIC as a result of the deficiency
procedures.
(b) Denial of the EIC as a result of the
deficiency procedures. For purposes of
this section, denial of the EIC as a result

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of the deficiency procedures occurs
when a tax on account of the EIC is
assessed as a deficiency (other than as
a mathematical or clerical error under
section 6213(b)(1)).
(c) Demonstration of eligibility. In the
case of a taxpayer to whom paragraph
(a) of this section applies, and except as
otherwise provided by the
Commissioner in the instructions for
Form 8862, ‘‘Information To Claim
Earned Income Credit After
Disallowance,’’ no claim for the EIC
filed subsequent to the denial is allowed
unless the taxpayer properly completes
Form 8862, demonstrating eligibility for
the EIC, and otherwise is eligible for the
EIC. If any item of information on Form
8862 is incorrect or inconsistent with
any item on the return, the taxpayer will
be treated as not demonstrating
eligibility for the EIC. The taxpayer
must follow the instructions for Form
8862 to determine the income tax return
to which Form 8862 must be attached.
If the taxpayer attaches Form 8862 to an
incorrect tax return, the taxpayer will
not be relieved of the requirement that
the taxpayer attach Form 8862 to the
correct tax return and will, therefore,
not be treated as meeting the taxpayer’s
obligation under paragraph (a) of this
section.
(d) Failure to demonstrate eligibility.
If a taxpayer to whom paragraph (a) of
this section applies fails to satisfy the
requirements of paragraph (c) of this
section with respect to a particular
taxable year, the IRS can deny the EIC
as a mathematical or clerical error under
section 6213(g)(2)(K).
(e) Special rule where one spouse
denied EIC. The eligibility requirements
set forth in this section apply to
taxpayers filing a joint return where one
spouse was denied the EIC for a taxable
year prior to marriage and has not
established eligibility as either an
unmarried or married taxpayer for a
subsequent taxable year.
(f) Effective date. This section applies
to returns claiming the EIC for taxable
years beginning after December 31,
1997, where the EIC was denied for a
taxable year beginning after December
31, 1996.
§ 1.32–3T

[Removed]

Par. 3. Section 1.32–3T is removed.
PART 602—OMB CONTROL NUMBERS
UNDER THE PAPERWORK
REDUCTION ACT
Par. 4. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.

Par. 5. In § 602.101, paragraph (b) is
amended by:

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1. Removing the entry for 1.32–3T
from the table.
2. Adding an entry for 1.32–3 to read
as follows:
§ 602.101

*

OMB Control numbers.

*
*
(b) * * *

*

*

CFR part or section where
identified and described
*
*
*
1.32–3 ...................................
*

*

*

Current OMB
control No.
*
*

*
1545–1575
*

Approved: June 20, 2001.
Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
Mark A. Weinberger,
Assistant Secretary of the Treasury.
[FR Doc. 01–15907 Filed 6–22–01; 8:45 am]
BILLING CODE 4830–01–P

DEPARTMENT OF TRANSPORTATION
Coast Guard
33 CFR Parts 1, 25, 54, 62, 64, 66, 67,
72, 100, 114, 117, 120, 151, 154, 159,
164, and 165
[USCG–2001–9286]

Technical Amendments;
Organizational Changes;
Miscellaneous Editorial Changes and
Conforming Amendments
Coast Guard, DOT.
Final rule.

AGENCY:
ACTION:

SUMMARY: This rule makes editorial and
technical changes throughout title 33 of
the Code of Federal Regulations (CFR) to
update the title before it is recodified on
July 1, 2001. It corrects addresses,
updates cross-references, makes
conforming amendments, and makes
other technical corrections. This rule
will have no substantive effect on the
regulated public.
DATES: This final rule is effective June
30, 2001.
ADDRESSES: Documents as indicated in
this preamble are available for
inspection or copying at the Docket
Management Facility, (USCG–2001–
9286), U.S. Department of
Transportation, room PL–401, 400
Seventh Street SW., Washington, DC,
20590–0001, between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal
holidays. You may also find this docket
on the Internet at http://dms.dot.gov.
FOR FURTHER INFORMATION CONTACT: If
you have questions on this rule, call

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