Td 9713

Federal Register / Vol. 80, No. 49 / Friday, March 13, 2015 / Rules and Regulations
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9713]
RIN 1545–BL46; 1545–BM60

Reporting for Premium; Basis
Reporting by Securities Brokers and
Basis Determination for Debt
Instruments and Options
Internal Revenue Service (IRS),
Treasury.
ACTION: Final and temporary
regulations.
AGENCY:

This document contains final
regulations relating to information
reporting by brokers for bond premium
and acquisition premium. This
document also contains final and
temporary regulations relating to
information reporting by brokers for
transactions involving debt instruments
and options, including the reporting of
original issue discount (OID) on taxexempt obligations, the treatment of
certain holder elections for reporting a
taxpayer’s adjusted basis in a debt
instrument, and transfer reporting for
section 1256 options and debt
instruments. The regulations in this
document provide guidance to brokers
and payors and to their customers. The
text of the temporary regulations in this
document also serves as the text of the
proposed regulations (REG–143040–14)
set forth in the Proposed Rules section
in this issue of the Federal Register.
DATES: Effective date: These regulations
are effective on March 13, 2015.
Applicability dates: For the dates of
applicability, see §§ 1.6045–
1(m)(2)(ii)(B), 1.6045–1T(n)(11)(i)(A),
1.6045–1T(n)(11)(i)(B), 1.6045A–
1T(e)(1), 1.6045A–1T(f), 1.6049–9(a),
and 1.6049–10T(c).
FOR FURTHER INFORMATION CONTACT:
Pamela Lew of the Office of the
Associate Chief Counsel (Financial
Institutions and Products) at (202) 317–
7053 (not a toll-free number).
SUPPLEMENTARY INFORMATION:

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SUMMARY:

Paperwork Reduction Act
Section 1.6049–9 of the final
regulations in this document requires a
payor to report amortizable bond
premium on taxable and tax-exempt
debt instruments acquired on or after
January 1, 2014, and acquisition
premium on taxable debt instruments
acquired on or after January 1, 2014.
This information is required to enable
the IRS to verify that a taxpayer is
reporting the correct amount of interest

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(including OID) each year. In addition,
because this information is used to
report a taxpayer’s adjusted basis in a
debt instrument under section 6045(g),
this information is required to enable
the IRS to verify that a taxpayer is
reporting the correct amount of gain or
loss upon the sale of a debt instrument.
The burden for the collection of
information contained in § 1.6049–9
will be reflected in the burdens on Form
1099–INT (OMB control number 1545–
0112) and Form 1099–OID (OMB
control number 1545–0117) when
revised to request the additional
information in the regulations.
Section 1.6049–10T of the temporary
regulations in this document requires a
payor to report OID and acquisition
premium on tax-exempt obligations
acquired on or after January 1, 2017.
This information is required to enable
the IRS to verify that a taxpayer is
reporting the correct amount of taxexempt interest each year for alternative
minimum tax and other purposes. In
addition, because this information is
used to report a taxpayer’s adjusted
basis in a debt instrument under section
6045(g), this information is required to
enable the IRS to verify that a taxpayer
is reporting the correct amount of gain
or loss upon the sale of a tax-exempt
obligation. The burden for the collection
of information contained in § 1.6049–
10T will be reflected in the burden on
Form 1099–OID (OMB control number
1545–0117) when revised to request the
additional information in the
regulations.
Upon the transfer of a covered
security, section 6045A and § 1.6045A–
1 require the transferring broker to
provide to the transferee broker a
transfer statement containing certain
information relating to the security. This
transfer statement generally provides
the transferee broker the information
needed to determine a customer’s
adjusted basis and whether any gain or
loss with respect to the security is longterm, short-term, or ordinary as required
by section 6045(g). Prior to the issuance
of § 1.6045A–1T in this document, a
broker did not have to provide a transfer
statement for a section 1256 option. In
addition, a broker did not have to
provide the last date on or before the
transfer date that the broker made an
adjustment for a particular item relating
to a debt instrument. Section 1.6045A–
1T, however, now requires a broker to
transfer this information for a section
1256 option transferred on or after
January 1, 2016, and for a debt
instrument transferred on or after June
30, 2015.
The collection of information
contained in § 1.6045A–1 relating to the

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furnishing of information in connection
with the transfer of securities has been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)) under control
number 1545–2186. The collection of
information in § 1.6045A–1T and the
cross-reference notice of proposed
rulemaking under § 1.6045A–1 is
necessary to allow brokers that effect
sales of transferred section 1256 options
and debt instruments that are covered
securities to determine and report the
adjusted basis of these securities in
compliance with section 6045(g). This
collection of information is required to
comply with the provisions of section
403 of the Energy Improvement and
Extension Act of 2008, Division B of
Public Law 110–343 (122 Stat. 3765,
3854 (2008)) (the Act). The collection of
information contained in § 1.6045A–1T
and the cross-reference notice of
proposed rulemaking under § 1.6045A–
1 is an increase in the total annual
burden under control number 1545–
2186. The likely respondents are brokers
transferring section 1256 options and
debt instruments that are covered
securities.
Estimated total annual reporting
burden is 3,333 hours.
Estimated average annual burden per
respondent is 2 hours.
Estimated average burden per
response is 4 minutes.
Estimated number of respondents is
7,500.
Estimated total frequency of responses
is 200,000.
The collection of information is
required to comply with the provisions
of section 403 of the Act.
The holder of a debt instrument is
permitted to make a number of elections
that affect how basis is computed. To
minimize the need for reconciliation
between information reported by a
broker to both a customer and the IRS
and the amounts reported on the
customer’s tax return, a broker is
required to take into account certain
specified elections, including the
election under § 1.1272–3 to treat all
interest as OID and the election under
section 1276(b)(2) to accrue market
discount on a constant yield method, in
reporting information to the customer. A
customer, therefore, must provide
certain information concerning an
election to the broker in a written
notification. A written notification
includes a writing in electronic format.
See § 1.6045–1(n)(5).
The collection of information
contained in § 1.6045–1(n)(5) relating to
the furnishing of information by a

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customer to a broker in connection with
the sale or transfer of a debt instrument
that is a covered security has been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)) under control
number 1545–2186. Under § 1.6045–
1T(n)(11)(i)(A) of the temporary
regulations in this document, unlike the
rule in current § 1.6045–1(n)(5) adopted
in 2013, a broker must not take into
account the election under § 1.1272–3 in
reporting a customer’s adjusted basis in
a debt instrument. Therefore, a customer
is no longer required to notify the broker
that the customer has made or revoked
an election under § 1.1272–3. This
change represents a decrease in the total
annual burden under OMB control
number 1545–2186. In addition, under
§ 1.6045–1T(n)(11)(i)(B), a broker must
take into account the election under
section 1276(b)(2) unless the customer
timely notifies the broker that the
customer has not make the election. The
temporary regulations reverse the
assumption in current § 1.6045–1(n)(5)
adopted in 2013. Because the section
1276(b)(2) election results in a more
taxpayer-favorable result than the
default ratable method for accruing
market discount in most cases, it is
anticipated that more customers will
want to use this method and these
customers will no longer need to notify
their brokers that they have made the
election. As a result, this change
represents a decrease in the total annual
burden under OMB control number
1545–2186.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a valid control
number assigned by the Office of
Management and Budget.
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 section
6103.
Background
Section 6045 of the Internal Revenue
Code (Code) generally requires a broker
to report gross proceeds upon the sale
of a security. Section 6045 was amended
by section 403 of the Act to require the
reporting of adjusted basis for a covered
security and whether any gain or loss
upon the sale of the security is longterm or short-term. In addition, the Act
added section 6045A of the Code, which
requires certain information to be
reported in connection with a transfer of

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a covered security to another broker,
and section 6045B of the Code, which
requires an issuer of a specified security
to file a return relating to certain actions
that affect the basis of the security.
Section 6049 of the Code requires the
reporting of interest payments
(including accruals of OID treated as
payments).
On November 25, 2011, the Treasury
Department and the IRS published in
the Federal Register (76 FR 72652)
proposed regulations (REG–102988–11)
relating to information reporting by
brokers, transferors, and issuers of
securities under sections 6045, 6045A,
and 6045B for debt instruments,
options, and securities futures contracts
(the 2011 proposed basis reporting
regulations). On April 18, 2013, the
Treasury Department and the IRS
published in the Federal Register (TD
9616 at 78 FR 23116) final regulations
under sections 6045, 6045A, and 6045B
(the 2013 final basis reporting
regulations). A number of commenters
on the 2011 proposed basis reporting
regulations requested that the rules for
reporting interest income associated
with a debt instrument acquired at a
premium be conformed to the rules
regarding basis reporting for these debt
instruments. Accordingly, TD 9616 also
contained temporary regulations
relating to information reporting for
bond premium and acquisition
premium under section 6049 (the 2013
temporary interest reporting
regulations). A notice of proposed
rulemaking cross-referencing the 2013
temporary interest reporting regulations
also was published in the Federal
Register on April 18, 2013 (REG–
154563–12 at 78 FR 23183) (the 2013
proposed interest reporting regulations).
No written comments were received
on the 2013 proposed interest reporting
regulations. No public hearing was
requested or held. These final
regulations adopt the provisions of the
2013 proposed interest reporting
regulations with certain clarifications
and one conforming change for
acquisition premium. These final
regulations also remove the
corresponding 2013 temporary interest
reporting regulations.
After the publication of the 2013 final
basis reporting regulations in the
Federal Register, the Treasury
Department and the IRS received
written comments on certain provisions
of the 2013 final basis reporting
regulations. In response to these written
comments, this document contains final
and temporary regulations under
sections 6045 and 6045A relating to
certain aspects of the 2013 final basis

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reporting regulations, as discussed in
this preamble.
Explanation of Provisions
A. Final Regulations for Reporting Bond
Premium and Acquisition Premium
Under section 171, a taxpayer may
elect to amortize bond premium on a
taxable debt instrument and must
amortize bond premium on a taxexempt debt instrument. In general, a
taxpayer amortizes bond premium by
offsetting the qualified stated interest
allocable to an accrual period by the
amount of the bond premium allocable
to the accrual period. This offset occurs
when the taxpayer takes the qualified
stated interest into account under the
taxpayer’s regular method of
accounting. For example, the offset
occurs when a cash method taxpayer
receives a payment of qualified stated
interest. See section 171(e) and § 1.171–
2. As a result, only the portion of
qualified stated interest that is not offset
by the amortized bond premium is
treated as interest for federal income tax
purposes. A taxpayer’s basis in a debt
instrument acquired with bond
premium is reduced by amortized bond
premium. For purposes of section 6045,
a broker is required to report the
adjusted basis of a taxable debt
instrument that is a covered security
and that is acquired with bond premium
by presuming that the taxpayer has
elected to amortize bond premium
unless the taxpayer notifies the broker
in writing that the taxpayer does not
want to amortize bond premium. See
§ 1.6045–1(n)(5) of the 2013 final basis
reporting regulations.
Under section 1272(a)(7) and
§ 1.1272–2, a taxpayer who purchases a
debt instrument with acquisition
premium is required to reduce the
amount of OID includible in income
each year by the amount of acquisition
premium allocable to the taxable year.
In general, the amount of acquisition
premium allocable to a taxable year is
determined using a ratable method,
although a taxpayer may elect under
§ 1.1272–3 to determine the amount of
acquisition premium allocable to a
taxable year based on a constant yield
method. See § 1.1272–2(b)(5). A
taxpayer’s basis in a taxable debt
instrument purchased with acquisition
premium is increased by the amount of
OID included in income by the
taxpayer. A taxpayer’s basis in a taxexempt debt instrument purchased with
acquisition premium is increased by the
amount of OID that accrues in
accordance with section 1272(a),
including section 1272(a)(7). For
purposes of section 6045, a broker

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Federal Register / Vol. 80, No. 49 / Friday, March 13, 2015 / Rules and Regulations
currently is required to report the
adjusted basis of a debt instrument that
is a covered security using the ratable
method for acquisition premium, unless
the taxpayer notifies the broker in
writing that the taxpayer has elected to
determine the amount of acquisition
premium allocable to a taxable year
based on a constant yield method. See
§ 1.6045–1(n)(5) of the 2013 final basis
reporting regulations. However, as
explained in Part B.2.a in this preamble,
under these final regulations, for a debt
instrument acquired on or after January
1, 2015, a broker must use the ratable
method to determine the amount of
acquisition premium allocable to a
taxable year for purposes of basis
reporting under section 6045, regardless
of any election under § 1.1272–3.
Under section 6049(a), the Secretary
may prescribe regulations to implement
the reporting of interest payments,
which includes the determination of the
amount of a payment that is reportable
interest. Similarly, under section
6049(a) the Secretary may prescribe by
regulations how to determine the
amount reportable as OID.
Section 1.6049–9T of the 2013
temporary interest reporting regulations
was issued by the Treasury Department
and the IRS in response to comments
suggesting that the rules under section
6049 for reporting interest income
associated with a debt instrument
acquired at a premium be conformed to
the rules under section 6045 for basis
reporting for these debt instruments.
Section 6045 generally requires a broker
to report on an information return, such
as a Form 1099–B, the adjusted basis of
a debt instrument that is a covered
security, including basis adjustments
attributable to amortized bond premium
or acquisition premium. See § 1.6045–
1(n) of the 2013 final basis reporting
regulations. However, prior to the
issuance of § 1.6049–9T, interest income
(including OID) on a debt instrument
acquired at a premium was reported
under section 6049 without adjustment
for amortized bond premium or
acquisition premium. Consequently, a
customer generally could not reconcile
the interest income reported to the
customer on Form 1099–INT or Form
1099–OID, whichever was applicable,
with the adjusted basis reported to the
customer on Form 1099–B upon the sale
of the debt instrument. The Treasury
Department and the IRS issued the 2013
temporary interest reporting regulations
to coordinate the information reporting
for income and basis. Under section
1.6049–9T of the 2013 temporary
interest reporting regulations, a broker
generally is required to report to a
customer any amortized bond premium

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and acquisition premium on a debt
instrument that is a covered security.
The amount reported may either be a
gross number for both stated interest
and amortized bond premium (or OID
and amortized acquisition premium) or
a net number that reflects the offset of
the stated interest (or OID) by the
amortized bond premium (or amortized
acquisition premium).
No comments were received on the
2013 proposed interest reporting
regulations and the final regulations in
this document generally adopt the
provisions of the 2013 temporary
interest reporting regulations. However,
as explained in the final paragraph of
this Part A in this preamble, the final
regulations contain a change for the
reporting of acquisition premium for a
debt instrument acquired on or after
January 1, 2015, to conform to the
change in this document for reporting
basis adjustments for acquisition
premium under section 6045.
Under these final regulations, for
purposes of section 6049, a broker is
required to presume that a customer has
elected to amortize bond premium on
taxable debt instruments unless the
broker has been notified that the
customer does not want the broker to
take into account the election or has
revoked the election. This presumption
applies only to the information reported
by the broker to its customer. Thus, a
customer that chooses not to make the
section 171 election may report interest
on the customer’s income tax return
unadjusted for bond premium because
the information reporting rules do not
change the substantive rules affecting
amortizable bond premium (or any of
the other rules pertaining to OID or
acquisition premium). If a broker is
required to report amounts reflecting
amortization of bond premium, the final
regulations allow a broker to report
either a gross amount for both stated
interest and amortized bond premium or
a net amount of stated interest that
reflects the offset of the stated interest
payment by the amount of amortized
bond premium allocable to the payment.
In addition, under these final
regulations, unlike the 2013 temporary
interest reporting regulations, a broker
must report OID adjusted for acquisition
premium based on the ratable method.
Under these final regulations, for a debt
instrument acquired on or after January
1, 2015, even if a customer has made an
election to amortize acquisition
premium based on a constant yield
under § 1.1272–3, a broker must not take
the election into account for reporting
acquisition premium. This change
conforms the rules for reporting OID
with the rules for reporting adjustments

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to basis attributable to acquisition
premium described in section B.2.a of
this preamble. See § 1.6045–
1T(n)(11)(i)(A). As in the 2013
temporary interest reporting regulations,
the final regulations allow a broker to
report either a gross amount for both
OID and acquisition premium, or a net
amount of OID that reflects the offset of
the OID by the amount of amortized
acquisition premium allocable to the
OID.
B. Final and Temporary Regulations
Relating to Basis and Transfer Reporting
After the publication of the 2013 final
basis reporting regulations, commenters
recommended a number of changes to
the 2013 final basis reporting
regulations. Upon consideration of these
comments, the Treasury Department
and the IRS have decided to make the
following changes to the 2013 final basis
reporting regulations and to add broker
reporting for OID on tax-exempt
obligations under section 6049.
1. Request for Delayed Effective Date for
Options on Certain Foreign Debt
Instruments
Under the 2013 final basis reporting
regulations, if a debt instrument
requires a payment of either interest or
principal in a currency other than the
U.S. dollar or if the debt instrument is
issued by a non-U.S. issuer, a broker is
required to report the debt instrument’s
basis only if the instrument is acquired
on or after January 1, 2016. See
§ 1.6045–1(n)(2)(ii)(D) and (G). The 2013
final basis reporting regulations delayed
the applicability date for these types of
debt instruments to address
commenters’ concerns that it would take
extra time to build the systems to
account for the complexity of these debt
instruments (for example, brokers
would be required to track and retain on
a daily basis foreign exchange rates for
translation purposes) and, in some
cases, a lack of publicly available
information.
Under the 2013 final basis reporting
regulations, a broker is required to
report gross proceeds and basis for
certain options on a debt instrument
granted or acquired on or after January
1, 2014. See § 1.6045–1(m). The 2013
final basis reporting regulations apply to
an option on a debt instrument that
requires a payment of either interest or
principal in a currency other than the
U.S. dollar or an option on a debt
instrument issued by a non-U.S. issuer.
Because a broker is not required to
report basis for these types of debt
instruments until January 1, 2016, one
commenter requested a delay in the
applicability date for reporting gross

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proceeds and basis for these types of
options. The commenter stated that the
data collection and computation
difficulties related to the underlying
debt instruments also exist for options
on these types of debt instruments.
Responding to this comment, the final
regulations in this document delay until
January 1, 2016, the applicability date
for reporting gross proceeds and basis
for options on debt instruments that
provide for one or more payments
denominated in a foreign currency and
options on debt instruments issued by
non-U.S. issuers.
2. Certain Debt Elections Relating to
Broker Basis Reporting
Under the 2013 final basis reporting
regulations, for purposes of reporting
adjusted basis to a customer, a broker
must take into account only the debtrelated elections specified in § 1.6045–
1(n)(4). If an election is not specified in
§ 1.6045–1(n)(4), a broker may not take
the election into account for reporting
adjusted basis to a customer. In general,
a broker must take into account a
specified election if a customer timely
notifies the broker that the customer has
made the election. Two of the specified
elections are the election to treat all
interest as OID under § 1.1272–3 and the
election to accrue market discount
based on a constant yield under section
1276(b)(2).

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a. Election To Treat All Interest as OID
Under § 1.1272–3, a customer may
elect to treat all interest on a debt
instrument, adjusted by any amortizable
bond premium or acquisition premium,
as OID. If this election is made, the
amount of interest (including any
adjustment) that accrues during a period
is based on a constant yield. This
election is made on a debt instrument
by debt instrument basis; however, if
made, the election may affect other debt
instruments with amortizable bond
premium or market discount held by the
customer even if the debt instrument is
held in a separate account with the
broker or any other broker.
One commenter on the 2013 final
basis reporting regulations indicated
that it was extremely difficult to
program the election given its effects on
other debt instruments. Another
commenter argued that the results of the
election could mostly be achieved by a
combination of other debt elections that
the brokers also must support. Also,
according to the commenters, the types
of customers who receive Forms 1099–
B, such as individuals, partnerships, or
S corporations, rarely make the election
to treat all interest as OID.

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In consideration of the comments
received and the burden that the rule in
the 2013 final basis reporting
regulations would impose, these
temporary and proposed regulations
provide that a broker may not take into
account the election under § 1.1272–3
when computing basis. The temporary
and proposed regulations supersede the
2013 final basis reporting regulations
relating to the broker’s treatment of the
election under § 1.1272–3.
In general, the amount of acquisition
premium allocable to a taxable year is
determined using a ratable method,
unless the taxpayer elects under
§ 1.1272–3 to determine the amount of
acquisition premium allocable to a
taxable year based on a constant yield
method. See § 1.1272–2(b)(4) and (5). As
noted in the final paragraph in Part A
in this preamble, to conform the rules
for reporting OID with the rules for
reporting adjustments to basis
attributable to acquisition premium, a
broker must report acquisition premium
for purposes of section 6049 on the
ratable method even if a customer has
made the election under § 1.1272–3 to
use a constant yield method.
The temporary regulations apply to a
debt instrument acquired on or after
January 1, 2015. A broker may, however,
rely on the temporary regulations for a
debt instrument acquired on or after
January 1, 2014, and before January 1,
2015.
b. Constant Yield Election for Market
Discount
Under section 1276(b)(2), a customer
may elect to accrue market discount on
a constant yield method rather than a
ratable method. The election may be
made on a debt instrument by debt
instrument basis and must be made for
the earliest taxable year for which the
customer is required to determine
accrued market discount. The election
may not be revoked once it has been
made.
The 2011 proposed basis reporting
regulations attempted to simplify broker
reporting by requiring brokers to
compute accrued market discount by
assuming that a customer had made an
election under section 1276(b)(2) to use
a constant yield method. The use of a
constant yield method to determine
accruals of market discount backloads
market discount and is therefore more
taxpayer favorable than the use of a
ratable method in most cases. A number
of commenters to the 2011 proposed
basis reporting regulations indicated a
desire by brokers to support debt
instrument election choices made by
their customers rather than rely on
assumptions provided in the

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regulations. In response to these
comments, the 2013 final basis reporting
regulations instructed brokers to assume
that a customer did not make an
election to determine accrued market
discount using a constant yield method
unless the broker received timely
notification from the customer that the
election had been or would be made.
After the 2013 final basis reporting
regulations were published, the majority
of commenters reconsidered their initial
objections to the 2011 proposed basis
reporting regulations requirement to use
a constant yield method to determine
accrued market discount. These
commenters indicated that the use of
the constant yield method would
generally result in a more favorable tax
result for most Form 1099–B recipients.
The commenters therefore requested
that the broker assumption for
calculating accrued market discount be
changed so that brokers will assume that
a customer has made the election unless
the customer timely notifies the broker
otherwise. The Treasury Department
and the IRS agree with the
recommendation that brokers should
assume the constant yield method for
accruing market discount. Accordingly,
the temporary regulations supersede the
assumption in the 2013 final debt
reporting regulations and provide that
for a debt instrument acquired on or
after January 1, 2015, brokers are
required to assume that a customer has
elected to determine accrued market
discount using a constant yield method
unless the customer notifies the broker
otherwise. A customer that does not
want to use a constant yield method to
determine accrued market discount
must, by the end of the calendar year in
which the customer acquired the debt
instrument in an account with the
broker, notify the customer’s broker in
writing that the customer wants the
broker to use the ratable method to
determine accrued market discount.
3. Transfer Reporting
a. Section 1256 Options
Under § 1.6045A–1(a)(1)(vi) of the
2013 final basis reporting regulations, a
transferring broker is not required to
provide a transfer statement for the
transfer of a section 1256 option. In
response to the 2013 final basis
reporting regulations, a number of
commenters stated that brokers often
treat the transfer of a section 1256
option in the same manner as transfers
of equities or debt instruments and do
not treat the transferred section 1256
option contract as being novated. Thus,
commenters stated that a transfer
statement, as provided for by section

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Federal Register / Vol. 80, No. 49 / Friday, March 13, 2015 / Rules and Regulations
6045A, is necessary to ensure that a
receiving broker has all relevant data
required to properly report information
for section 1256 options.
In response to these comments, these
temporary and proposed regulations
supersede the exception for section
1256 options in the 2013 final basis
reporting regulations and extend
transfer reporting to section 1256
options. Because the 2013 final basis
reporting regulations explicitly instruct
brokers not to send transfer statements
for section 1256 options, it is
understood that brokers may need some
additional time to modify their systems
to generate the required transfer
statements. The temporary regulations
therefore provide that a transfer
statement is required for the transfer of
a section 1256 option that occurs on or
after January 1, 2016. The temporary
regulations also list the data specific to
section 1256 options that must be
provided in addition to the data
required for the transfer of a non-section
1256 option.
b. Debt Instruments
Under § 1.6045A–1 of the 2013 final
basis reporting regulations, brokers are
required to provide to a receiving broker
certain information relating to a transfer
of a debt instrument that is a covered
security. The preamble to the 2013 final
basis reporting regulations indicated
that the information required to be
provided included the date through
which the transferor broker made
adjustments. However, several
commenters on the 2013 final basis
reporting regulations noted that this
item of information was not included in
the list of information required to be
provided in the 2013 final basis
reporting regulations. The temporary
and proposed regulations correct this
omission by adding the date through
which the transferring broker made
adjustments to the list of information
required to be provided upon the
transfer of a debt instrument that is a
covered security. This change applies to
a transfer that occurs on or after June 30,
2015.

tkelley on DSK3SPTVN1PROD with RULES

4. Reporting of OID on a Tax-Exempt
Obligation
The 2013 final basis reporting
regulations require a broker to report the
adjusted basis for a debt instrument that
is a covered security, including a taxexempt obligation. However, under
Notice 2006–93 (2006–2 CB 798), for
purposes of section 6049, a broker is not
required to report OID on tax-exempt
obligations until further guidance is
issued.

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Several commenters on the 2013 final
basis reporting regulations pointed out
that the section 6045 rules now require
a broker to compute the OID on a taxexempt obligation to properly report
adjusted basis at the time of a transfer,
sale, or other disposition of a taxexempt obligation. These commenters
requested that, similar to what was done
in § 1.6049–9T for amortizable bond
premium and acquisition premium on a
debt instrument that is a covered
security, reporting of OID under section
6049 be coordinated with reporting of
basis for tax-exempt obligations.
To align the rules and improve
consistency between OID reporting and
basis reporting, § 1.6049–10T of the
temporary regulations in this document
provides that a payor must report under
section 6049 the daily portions of OID
on a tax-exempt obligation. The daily
portions of OID are determined as if
section 1272 and § 1.1272–1 applied to
a tax-exempt obligation. A payor must
determine whether a tax-exempt
obligation was issued with OID and the
amount that accrues for each relevant
period. In addition, OID on a tax-exempt
obligation is determined without regard
to the de minimis rule in section
1273(a)(3) and § 1.1273–1(d). Because
the temporary regulations require the
reporting of OID, payors also must
report amortized acquisition premium
(which offsets OID) on a tax-exempt
obligation. A broker may report either a
gross amount for both OID and
amortized acquisition premium, or a net
amount of OID that reflects the offset of
the OID by the amount of amortized
acquisition premium allocable to the
OID. To provide payors with time to
adapt their systems to report this
information, the temporary regulations
apply to a tax-exempt obligation
acquired on or after January 1, 2017.
Applicability Dates
The final regulations under section
6049 apply to a debt instrument that is
a covered security (that is, a debt
instrument described in § 1.6045–
1(a)(15)(i)(C) acquired on or after
January 1, 2014, or a debt instrument
described in § 1.6045–1(a)(15)(i)(D)
acquired on or after January 1, 2016).
The temporary regulations under
section 6049 apply to a tax-exempt
obligation acquired on or after January
1, 2017. The temporary regulations
under section 6045A apply to a transfer
of a section 1256 option that occurs on
or after January 1, 2016, and to a transfer
of a debt instrument that occurs on or
after June 30, 2015. The temporary
regulations under section 6045 apply to
a debt instrument acquired on or after
January 1, 2015. The final regulations

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13237

under section 6045 apply to an option
on a debt instrument that provides for
one or more payments denominated in
a foreign currency or a debt instrument
issued by a non-U.S. issuer if the option
is granted or acquired on or after
January 1, 2016.
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in
Executive Order 12866, as
supplemented by Executive Order
13563. 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 the final
regulations in this document will not
have a significant economic impact on
a substantial number of small entities.
Therefore, a Regulatory Flexibility
Analysis under the Regulatory
Flexibility Act (5 U.S.C. chapter 6) is
not required. It is anticipated that the
requirements in the final regulations in
this document will fall only on financial
services firms with annual receipts
greater than the $38.5 million threshold
and, therefore, on no small entities.
In addition, any economic impact is
expected to be minimal because a broker
already is required to determine the
amortization of bond premium and
acquisition premium for purposes of
determining and reporting a customer’s
adjusted basis on Form 1099–B under
section 6045. The information provided
to a customer on Form 1099–INT or
Form 1099–OID, whichever is
applicable, generally will allow a
customer to reconcile the interest
information reported to the customer
with the adjusted basis information
reported to the customer on Form 1099–
B. Moreover, any effect on small entities
by the rules in the final regulations
flows from section 6049 of the Code and
section 403 of the Act.
Therefore, because the final
regulations in this document will not
have a significant economic impact on
a substantial number of small entities, a
regulatory flexibility analysis is not
required.
For the applicability of the Regulatory
Flexibility Act to the other regulations
in this document, please refer to the
cross-reference notice of proposed
rulemaking published elsewhere in this
issue of the Federal Register.
Pursuant to section 7805(f) of the
Internal Revenue Code, the proposed
regulations preceding the final
regulations in this document were
submitted to the Chief Counsel for

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Federal Register / Vol. 80, No. 49 / Friday, March 13, 2015 / Rules and Regulations

Advocacy of the Small Business
Administration for comment on their
impact on small businesses. No
comments were received. In addition,
the proposed regulations accompanying
the temporary regulations in this
document have been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment
on their impact on small business.
Drafting Information
The principal author of these
regulations is Pamela Lew, Office of
Associate Chief Counsel (Financial
Institutions and Products). However,
other personnel from the IRS and the
Treasury Department participated in
their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
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 is amended by removing the
entry for § 1.6049–9T and adding entries
for §§ 1.6045–1T, 1.6045A–1T, 1.6049–
9, and 1.6049–10T in numerical order to
read in part as follows:

■

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

Section 1.6045–1T also issued under
26 U.S.C. 6045(g). * * *
Section 1.6045A–1T also issued under
26 U.S.C. 6045A(a). * * *
Section 1.6049–9 also issued under 26
U.S.C. 6049(a). * * *
Section 1.6049–10T also issued under
26 U.S.C. 6049(a). * * *
Par. 2. Section 1.6045–1 is amended
by:
■ 1. Revising paragraph (m)(2)(ii).
■ 2. Adding a sentence at the end of
paragraph (n)(4)(iv).
■ 3. Adding a sentence at the end of
paragraph (n)(5)(i).
■ 4. Adding paragraph (n)(11).
The revision and additions read as
follows:
■

§ 1.6045–1 Returns of information of
brokers and barter exchanges.

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*

*
*
*
*
(m) * * *
(2) * * *
(ii) Delayed effective date for certain
options—(A) Notwithstanding
paragraph (m)(2)(i) of this section, if an
option, stock right, or warrant is issued
as part of an investment unit described
in § 1.1273–2(h), paragraph (m) of this
section applies to the option, stock

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right, or warrant if it is acquired on or
after January 1, 2016.
(B) Notwithstanding paragraph
(m)(2)(i) of this section, if the property
referenced by an option (that is, the
property underlying the option) is a
debt instrument that is issued by a nonU.S. person or that provides for one or
more payments denominated in, or
determined by reference to, a currency
other than the U.S. dollar, paragraph (m)
of this section applies to the option if it
is granted or acquired on or after
January 1, 2016.
*
*
*
*
*
(n) * * *
(4) * * *
(iv) * * * However, see § 1.6045–
1T(n)(11)(i)(A) for a debt instrument
acquired on or after January 1, 2014.
*
*
*
*
*
(5) * * *
(i) * * * However, see § 1.6045–
1T(n)(11) for the treatment of an
election described in paragraph
(n)(4)(iii) of this section (election to
accrue market discount based on a
constant yield) and an election
described in paragraph (n)(4)(iv) of this
section (election to treat all interest as
OID).
*
*
*
*
*
(11) [Reserved]. For further guidance,
see § 1.6045–1T(n)(11).
*
*
*
*
*
■ Par. 3. Section 1.6045–1T is amended
by revising paragraphs (h) through (p) to
read as follows:
§ 1.6045–1T Returns of information of
brokers and barter exchanges (temporary).

*

*
*
*
*
(h) through (n)(10) [Reserved]. For
further guidance, see § 1.6045–1(h)
through (n)(10).
(11) Additional rules for certain
holder elections—(i) In general. For
purposes of § 1.6045–1, the rules in this
paragraph (n)(11) apply notwithstanding
any other rule in § 1.6045–1(n).
(A) Election to treat all interest as
OID. A broker must report the
information required under § 1.6045–
1(d) without taking into account any
election described in § 1.6045–
1(n)(4)(iv) (the election to treat all
interest as OID in § 1.1272–3). As a
result, for example, a broker must
determine the amount of any acquisition
premium taken into account each year
for purposes of § 1.6045–1 in
accordance with § 1.1272–2(b)(4). This
paragraph (n)(11)(i)(A) applies to a debt
instrument acquired on or after January
1, 2015. A broker may, however, rely on
this paragraph (n)(11)(i)(A) for a debt
instrument acquired on or after January
1, 2014, and before January 1, 2015.

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(B) Election to accrue market discount
based on a constant yield. A broker
must report the information required
under § 1.6045–1(d) by assuming that a
customer has made the election
described in § 1.6045–1(n)(4)(iii) (the
election to accrue market discount
based on a constant yield). However, if
a customer notifies a broker in writing
that the customer does not want the
broker to take into account this election,
the broker must report the information
required under § 1.6045–1(d) without
taking into account this election. The
customer must provide this notification
to the broker by the end of the calendar
year in which the customer acquired the
debt instrument in an account with the
broker. This paragraph (n)(11)(i)(B)
applies to a debt instrument acquired on
or after January 1, 2015.
(ii) Expiration date. The applicability
of this paragraph (n)(11) expires on or
before March 12, 2018.
(o) through (p) [Reserved]. For further
guidance, see § 1.6045–1(o) through (p).
*
*
*
*
*
■ Par. 4. Section 1.6045A–1 is amended
by removing paragraph (a)(1)(vi) and
adding paragraphs (e) and (f) to read as
follows:
§ 1.6045A–1 Statements of information
required in connection with transfers of
securities.

*

*
*
*
*
(e) Section 1256 options. [Reserved.]
For further guidance, see § 1.6045A–
1T(e).
(f) Additional information required
for a debt instrument. [Reserved.] For
further guidance, see § 1.6045A–1T(f).
■ Par. 5. Section 1.6045A–1T is added
to read as follows:
§ 1.6045A–1T Statements of information
required in connection with transfers of
securities (temporary).

(a) through (d) [Reserved.] For further
guidance, see § 1.6045A–1(a) through
(d).
(e) Section 1256 options—(1) In
general. A transferor of an option
described in § 1.6045–1(m)(3) (section
1256 option) is required to furnish to
the receiving broker a transfer statement
for a transfer that occurs on or after
January 1, 2016. The transfer statement
must include the information described
in § 1.6045A–1(b) and paragraph (e)(2)
of this section for a section 1256 option
that is a covered security or in
§ 1.6045A–1(b) for a section 1256 option
that is a noncovered security.
(2) Additional information required
for a section 1256 option. In addition to
the information required in § 1.6045A–
1(b), the following information is

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Federal Register / Vol. 80, No. 49 / Friday, March 13, 2015 / Rules and Regulations
required for a transfer of a section 1256
option that is a covered security:
(i) The original basis of the option;
and
(ii) The fair market value of the option
as of the end of the prior calendar year.
(f) Additional information required
for a debt instrument. In addition to the
information required in § 1.6045A–
1(b)(3) for a transfer of a debt instrument
that is a covered security, the transferor
must provide the last date on or before
the transfer date that the transferor
made an adjustment for a particular
item (for example, the last date on or
before the transfer date that bond
premium was amortized). This
paragraph (f) applies to a transfer that
occurs on or after June 30, 2015.
(g) Expiration date. The applicability
of this section expires on or before
March 12, 2018.
■ Par. 6. Section 1.6049–5 is amended
by adding a sentence after the third
sentence in paragraph (f) to read as
follows:
§ 1.6049–5 Interest and original issue
discount subject to reporting after
December 31, 1982.

*

*
*
*
*
(f) * * * However, see § 1.6049–9 for
the reporting of premium for a debt
instrument acquired on or after January
1, 2014. * * *
*
*
*
*
*
■ Par. 7. Section 1.6049–9 is added to
read as follows:

tkelley on DSK3SPTVN1PROD with RULES

§ 1.6049–9 Premium subject to reporting
for a debt instrument acquired on or after
January 1, 2014.

(a) General rule. Notwithstanding
§ 1.6049–5(f), for a debt instrument
acquired on or after January 1, 2014, if
a broker (as defined in § 1.6045–1(a)(1))
is required to file a statement for the
debt instrument under § 1.6049–6, the
broker generally must report any bond
premium (as defined in § 1.171–1(d)) or
acquisition premium (as defined in
§ 1.1272–2(b)(3)) for the calendar year.
This section, however, only applies to a
debt instrument that is a covered
security as defined in § 1.6045–1(a)(15).
(b) Reporting of bond premium
amortization. Unless a broker has been
notified in writing in accordance with
§ 1.6045–1(n)(5) that a customer does
not want to amortize bond premium
under section 171, the broker must
report the amount of any amortizable
bond premium allocable to a stated
interest payment made to the customer
during the calendar year. See §§ 1.171–
2 and 1.171–3 to determine the amount
of amortizable bond premium allocable
to a stated interest payment. Instead of
reporting a gross amount for both stated

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interest and amortizable bond premium,
a broker may report a net amount of
stated interest that reflects the offset of
the stated interest payment by the
amount of amortizable bond premium
allocable to the payment. In this case,
the broker must not report the
amortizable bond premium as a separate
item. This paragraph (b) also applies to
amortizable bond premium on a taxexempt obligation, which is required to
be amortized under section 171.
(c) Reporting of acquisition premium
amortization. A broker must report the
amount of any acquisition premium
amortization that reduces the amount of
original issue discount includible in
income by the customer during a
calendar year. For a debt instrument
acquired on or after January 1, 2015, a
broker must use the rules in § 1.1272–
2(b)(4) to determine the amount of
acquisition premium amortization.
However, for a debt instrument acquired
on or after January 1, 2014, and before
January 1, 2015, if a customer timely
notifies the broker in accordance with
§ 1.6045–1(n)(5), a broker may use the
rules in § 1.1272–3 to determine the
amount of acquisition premium
amortization. Instead of reporting a
gross amount for both original issue
discount and acquisition premium
amortization, a broker may report a net
amount of original issue discount that
reflects the offset of the original issue
discount includible in income by the
customer for the calendar year by the
amount of acquisition premium
allocable to the original issue discount.
In this case, the broker must not report
the acquisition premium amortization as
a separate item. See § 1.6049–10T for
the reporting of acquisition premium on
a tax-exempt obligation.
§ 1.6049–9T

[Removed]

Par. 8. Section 1.6049–9T is removed.
Par. 9. Section 1.6049–10T is added to
read as follows:

■
■

§ 1.6049–10T Reporting of original issue
discount on a tax-exempt obligation
(temporary).

(a) In general. For purposes of section
6049, a payor (as defined in § 1.6049–
4(a)(2)) of original issue discount (OID)
on a tax-exempt obligation (as defined
in section 1288(b)(2)) is required to
report the daily portions of OID on the
obligation as if the daily portions of OID
that accrued during a calendar year
were paid to the holder (or holders) of
the obligation in the calendar year. The
amount of the daily portions of OID that
accrues during a calendar year is
determined as if section 1272 and
§ 1.1272–1 applied to a tax-exempt
obligation. Notwithstanding any other

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13239

rule in section 6049 and the regulations
thereunder, a payor must determine
whether a tax-exempt obligation was
issued with OID and the amount of OID
that accrues for each relevant period. As
prescribed by section 1288(b)(1), OID on
a tax-exempt obligation is determined
without regard to the de minimis rules
in section 1273(a)(3) and § 1.1273–1(d).
(b) Acquisition premium. A payor is
required to report acquisition premium
amortization on a tax-exempt obligation
in accordance with the rules in
§ 1.6049–9(c) as if section 1272 applied
to a tax-exempt obligation. See
paragraph (a) of this section to
determine the amount of OID allocable
to an accrual period.
(c) Effective/applicability date. This
section applies to a tax-exempt
obligation acquired on or after January
1, 2017.
(d) Expiration date. The applicability
of this section expires on or before
March 12, 2018.
John Dalrymple,
Deputy Commissioner for Services and
Enforcement.
Approved: February 19, 2015.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2015–05648 Filed 3–12–15; 8:45 am]
BILLING CODE 4830–01–P

PENSION BENEFIT GUARANTY
CORPORATION
29 CFR Parts 4022 and 4044
Allocation of Assets in SingleEmployer Plans; Benefits Payable in
Terminated Single-Employer Plans;
Interest Assumptions for Valuing and
Paying Benefits
Pension Benefit Guaranty
Corporation.
ACTION: Final rule.
AGENCY:

This final rule amends the
Pension Benefit Guaranty Corporation’s
regulations on Benefits Payable in
Terminated Single-Employer Plans and
Allocation of Assets in Single-Employer
Plans to prescribe interest assumptions
under the benefit payments regulation
for valuation dates in April 2015 and
interest assumptions under the asset
allocation regulation for valuation dates
in the second quarter of 2015. The
interest assumptions are used for
valuing and paying benefits under
terminating single-employer plans
covered by the pension insurance
system administered by PBGC.
DATES: Effective April 1, 2015.
SUMMARY:

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