Subject to various exceptions, section 6033(a)(1) of the Internal Revenue Code (Code) requires every organization exempt from taxation under section 501(a) (tax-exempt organization) to file an annual return, stating specifically the items of gross income, receipts, and disbursements, and such other information for the purpose of carrying out the internal revenue laws as the Secretary of the Treasury or his delegate (Secretary) may by forms or regulations prescribe, and keep such records, render under oath such statements, make such other returns, and comply with such rules and regulations as the Secretary may from time to time prescribe. This requirement also applies to certain political organizations described in section 527(e)(1) (section 527 organizations). The annual information returns required under section 6033 are Forms 990, “Return of Organization Exempt From Income Tax;” 990-EZ, “Short Form Return of Organization Exempt From Income Tax;” 990-PF, “Return of Private Foundation;” and 990-BL, “Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Persons.” Annual returns filed by tax-exempt organizations, section 527 organizations, nonexempt private foundations described in section 6033(d), and section 4947(a)(1) trusts (which are both treated as organizations described in section 501(c)(3) for this purpose) are information returns intended to help ensure that the filing organizations comply with applicable federal tax laws. Most information on these annual returns is available for public inspection under section 6104.

Section 6033(a)(3) provides a list of organizations that are excepted from the filing requirements imposed under section 6033(a)(1). Specifically, section 6033(a)(3)(A)(ii) provides that section 6033(a)(1) shall not apply to any organization (other than a private foundation) that is described in section 6033(a)(3)(C) whose gross receipts are not normally more than $5,000 annually. The list of organizations provided in section 6033(a)(3)(C) includes certain fraternal beneficiary societies, orders or associations described in section 501(c)(8); certain organizations described in section 501(c)(3) (such as religious organizations and educational organizations described in section 170(b)(1)(A)(ii)); and organizations described in section 501(c)(1) that are corporations wholly owned by the United States or any agency or instrumentality thereof or wholly-owned subsidiaries of such corporations.

Section 6033(a)(3)(B) provides discretionary authority to the Secretary to relieve any organization required to file under section 6033(a)(1) (other than supporting organizations described in section 509(a)(3)) from filing an information return where he determines that such filing is “not necessary to the efficient administration of the internal revenue laws.”

Section 6033(b) provides a list of items that are generally required to be furnished annually by organizations described in section 501(c)(3), “at such time and in such manner as the Secretary may by forms or regulations prescribe.” The statutory list of items generally required to be furnished annually has been amended by Congress from time to time to account for additional requirements of organizations described in section 501(c)(3). For example, section 6033(b) was updated by the Taxpayer Bill of Rights 2, Public Law 104-168, in 1996 to include items in sections 6033(b)(10) (relating to taxes imposed on certain lobbying and political expenditures by organizations described in section 501(c)(3)) and 6033(b)(11) (relating to taxes imposed with respect to an organization, an organization manager, or any disqualified person under section 4958).

Section 6033(g) provides that a section 527 organization that has gross receipts of $25,000 or more for a taxable year¹ shall file an annual return containing the information required by section 6033(a)(1) for organizations exempt from taxation under section 501(a). The statute authorizes the Secretary to modify the information required to be reported to require only information that is necessary for purposes of carrying out section 527 and such other information as the Secretary deems necessary to carry out the provisions of section 6033(g).

Section 6033(h) provides additional reporting requirements for controlling organizations, within the meaning of section 512(b)(13). Section 6033(h) requires controlling organizations to include on their returns any (1) interest, annuities, royalties, or rents received from each controlled entity (within the meaning of section 512(b)(13)), (2) any loans made to each such controlled entity, and (3) any transfers of funds between such controlling organization and each such controlled entity.

Section 6033(k) provides additional reporting requirements for sponsoring organizations described in section 4966(d)(1). Section 6033(k) requires each such organization to report on its annual return (1) the total number of donor advised funds (as defined in section 4966(d)(2)) it owns at the end of such taxable year, (2) the aggregate value of assets held in such funds at the end of such taxable year, and (3) the aggregate contributions to and grants made from such funds during such taxable year.

Section 6033(l) provides additional reporting requirements for supporting organizations described in section 509(a)(3). Section 6033(l) requires each supporting organization to report on its annual return: (1) The supported organizations (as defined in section 509(f)(3)) with respect to which such organization provides support; (2) whether the organization meets the requirements of clause (i), (ii), or (iii) of section 509(a)(3)(B); and (3) a certification that the organization meets the requirements of section 509(a)(3)(C).

The general rule regarding confidentiality of returns is found in section 6103, which provides that returns and return information shall be confidential, and, except as authorized by the Code, no person having access to this information shall disclose any return or return information obtained by that person in any manner.

Section 6104 provides an exception to the general rule regarding confidentiality of returns. In general, under section 6104(b), the Secretary must make the annual returns filed under section 6033 available to the public. However, section 6104(b) does not authorize the Secretary to disclose to the public the name or address of any contributor to any tax-exempt organization except a private foundation (as defined in section 509(a), including a trust described in section 4947(a)(1) that is treated as a private foundation) or a section 527 organization. Section 301.6104(b)-1(b)(2) provides that although the names and addresses are not to be disclosed, the amounts of contributions to an organization shall be made available for public inspection unless the disclosure of such information can reasonably be expected to identify any contributor.

In addition to the required disclosure of annual returns by the Secretary, section 6104(d) and §301.6104(d)-1 require certain tax-exempt organizations to provide their annual information returns to a member of the public upon request. Similar to the restrictions on disclosing contributor information placed on the Secretary by section 6104(b), section 6104(d)(3)(A) provides that an organization, other than a private foundation or a section 527 organization, is not required to disclose the names and addresses of its contributors.

The Treasury Regulations in effect prior to this Treasury Decision (prior regulations), which remain largely unchanged, reflected many of the statutory requirements of section 6033. Consistent with section 6033(a)(1), §1.6033-2(a)(1) of the regulations provides that “except as provided in section 6033(a)(3) and paragraph (g) [of §1.6033-2], every organization exempt from taxation under section 501(a) shall file an annual information return specifically setting forth its items of gross income, gross receipts and disbursements, and such other information as may be prescribed in the instructions, issued with respect to the return.”

Although the information to be reported for any particular tax year is set forth in the forms and instructions for each such year, §1.6033-2(a)(2)(ii) of the regulations also provides a list of “information generally required to be furnished by an organization exempt under section 501(a)” on the annual return, which generally tracks section 6033(b).² However, the list in the prior regulations had not been updated to reflect certain information that the statute generally requires to be reported because the statute had been amended following the original issuance of the regulations. Specifically, items in sections 6033(b)(10) (relating to taxes imposed on certain lobbying and political expenditures by organizations described in section 501(c)(3)) and 6033(b)(11) (relating to taxes imposed with respect to an organization, an organization manager, or any disqualified person under section 4958) were not reflected in the prior regulations.

Two provisions of the prior regulations expanded upon the statute with regard to the reporting of certain contributor information. First, section 6033(b)(5) requires organizations described in section 501(c)(3) generally to provide on the annual information return filed with the IRS the names and addresses of persons who contribute $5,000 or more during the taxable year. Section 1.6033-2(a)(2)(ii)(F) of the prior regulations had extended this requirement beyond section 501(c)(3) organizations to all organizations exempt from taxation under section 501(a). Second, §1.6033-2(a)(2)(iii)(D) of the prior regulations provided that organizations described in section 501(c)(7) (social clubs), section 501(c)(8) (fraternal beneficiary societies), or section 501(c)(10) (domestic fraternal societies) generally must report the name of each person who contributes more than $1,000 to be used exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals.

Incorporating the statutory filing exceptions of section 6033(a)(3), §1.6033-2(g)(1) provides a list of organizations that are not required to file an annual return under section 6033(a)(1). Within that list, §1.6033-2(g)(1)(iii) previously provided that certain specified organizations described in section 6033(a)(3)(C) whose gross receipts are generally not more than $5,000 annually are not required to file the return required under section 6033(a)(1). Further, §1.6033-2(g)(6) provides that the Commissioner may relieve any organization or class of organizations (other than a supporting organization described in section 509(a)(3)) from filing, in whole or in part, the annual return required under section 6033 if the Commissioner “determines that such returns are not necessary for the efficient administration of the internal revenue laws.”

Accordingly, other than with regard to supporting organizations, section 6033 and the regulations under section 6033 provide the Commissioner with broad discretionary authority to determine what information must be reported and to grant relief, in whole or in part, from the annual filing requirements of tax-exempt organizations if the Commissioner determines that the information is not necessary for the efficient administration of the internal revenue laws.

For decades, the Commissioner has exercised discretion under section 6033(a)(3)(B) and §1.6033-2(g)(6) to relieve organizations of filing requirements under section 6033 through subregulatory guidance such as revenue procedures and annual information return instructions including, for example, Rev. Proc. 95-48, 1995-2 C.B. 418, which grants reporting relief for governmental units and affiliates of governmental units, and Rev. Proc. 96-10, 1996-1 C.B. 577, which relieves from a filing requirement under section 6033(a) certain organizations that are operated, controlled, or supervised by one or more churches, integrated auxiliaries, or conventions or associations of churches. (Both revenue procedures are discussed further in Part VI of the Summary of Comments and Explanation of Provisions section of this preamble.) Revenue Procedure 83-23, 1983-1 C.B. 687, represents another exercise of this discretion. In that revenue procedure, the Department of the Treasury (Treasury Department) and the IRS increased to $25,000 the minimum amount of gross receipts normally required to be received in a year by an organization exempt under section 501(a) to trigger a filing requirement under section 6033(a). That revenue procedure also expanded the group of tax-exempt organizations not required to file an annual information return due to a gross receipts threshold beyond those listed in section 6033(a)(3)(C). Revenue Procedure 2011-15, 2011-3 I.R.B. 322, further increased this gross receipts threshold amount to $50,000 for most organizations exempt under section 501(a).³ Revenue Procedure 2011-15 also relieved most foreign organizations and organizations formed in a United States possession from a filing requirement under section 6033(a) if their gross receipts from sources within the United States do not exceed the $50,000 threshold and if they have no significant activity (including lobbying and political activity and the operation of a trade or business, but excluding investment activity) in the United States.

Similarly, consistent with past exercises of authority under section 6033 and the prior regulations, the Treasury Department and the IRS issued Rev. Proc. 2018-38, 2018-31 I.R.B. 280, granting tax-exempt organizations required to file the Form 990 or Form 990–EZ, other than organizations described in section 501(c)(3), relief from reporting the names and addresses of contributors on Schedules B, “Schedule of Contributors,” filed with Form 990 or 990-EZ (or completing the similar portions of Part IV of the Form 990–BL). Revenue Procedure 2018-38 also provided that organizations described in sections 501(c)(7), (8), or (10) need not provide the names and addresses of persons who contributed more than $1,000 during the taxable year to be used for exclusively charitable purposes on their annual information returns required under section 6033. Revenue Procedure 2018-38 did not affect the information required to be reported on Forms 990, 990-EZ, or 990-PF by organizations described in section 501(c)(3) (which for purposes of section 6033 include nonexempt charitable trusts described in section 4947(a)(1) and nonexempt private foundations described in section 6033(d)) or section 527 organizations.

On July 30, 2019, the United States District Court for the District of Montana set aside Rev. Proc. 2018-38 on procedural grounds because, in the court’s view, the notice and comment procedures of the Administrative Procedure Act applied and Rev. Proc. 2018-38 had not been subject to such notice and comment. See Bullock, et al. v. IRS, 401 F.Supp.3d 1144 (D. Mont. Jul. 30, 2019). However, the court emphasized that its ruling did not implicate the merits of the revenue procedure and that “the substance” of the Commissioner’s ultimate decision on reporting the names and addresses of contributors “remains subject to the Commissioner’s discretion.” Id. at 1154, 1159.

On September 10, 2019, the Treasury Department and the IRS published a notice of proposed rulemaking (REG-102508-16) in the Federal Register (84 FR 47447) containing proposed regulations under section 6033 (2019 proposed regulations). The Treasury Department and the IRS received 8,387 written and electronic comments responding to the 2019 proposed regulations. Comments are available at www.regulations.gov or upon request. A public hearing on the 2019 proposed regulations was held on February 7, 2020.

After consideration of all comments received on the 2019 proposed regulations and the testimony presented at the public hearing, this Treasury Decision adopts the proposed regulations with minor modifications, as described in the Summary of Comments and Explanation of Provisions.

The following publication is obsolete as of May 28, 2020: Rev. Proc. 2018-38 (2018-31 I.R.B. 280).

The principal authors of these regulations are personnel from the Office of the Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). However, other personnel from the Treasury Department and the IRS participated in their development.

IRS revenue procedures and other guidance cited in this document are published in the Internal Revenue Bulletin (or Cumulative Bulletin) and are available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS website at http://www.irs.gov.

26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 56

Public Charity Excise Taxes

Amendments to the Regulations

Accordingly, 26 CFR parts 1 and 56 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. In §1.401-1, revise the last sentence of paragraph (e)(2) to read as follows:

§ 1.401–1 Qualified pension, profit-sharing, and stock bonus plans.

* * * * *

(e) * * *

(2) * * * For information required to be furnished periodically by an employer with respect to the qualification of a plan, see §§ 1.404(a)–2, and 1.6033–2(a)(2)(ii)(I).

Par. 3. Section 1.6033-2 is amended by:

The revisions and additions read as follows:

§ 1.6033-2 Returns by exempt organizations and returns by certain nonexempt organizations.

(a) * * *

(2) * * *

(ii) * * *

(F) The total of the contributions, gifts, grants, and similar amounts received by it during the taxable year, and, in the case of an organization described in section 501(c)(3), the names and addresses of all persons that contributed, bequeathed, or devised $5,000 or more (in money or other property) during the taxable year. * * * For special rules with respect to contributors and donors, see paragraph (a)(2)(iii) of this section.

* * * * *

(H) A schedule showing the compensation and other payments made to each person whose name is required to be listed pursuant to paragraph (a)(2)(ii)(G) of this section during the calendar year ending within the organization’s annual accounting period, or during such other period as prescribed by publication, form, or instructions.

* * * * *

(K) In the case of an organization described in section 501(c)(3), the respective amounts (if any) of the taxes imposed on the organization, or any organization manager of the organization, during the taxable year under any of the following provisions (and the respective amounts (if any) of reimbursements paid by the organization during the taxable year with respect to taxes imposed on any such organization manager under any of such provisions):

(1) Section 4911 (relating to tax on excess expenditures to influence legislation);

(2) Section 4912 (relating to tax on disqualifying lobbying expenditures of certain organizations); and

(3) Section 4955 (relating to taxes on political expenditures of section 501(c)(3) organizations), except to the extent that, by reason of section 4962, the taxes imposed under such section are not required to be paid or are credited or refunded.

(L) In the case of organizations described in section 501(c)(3), (4), or (29), the respective amounts (if any) of—

(1) The taxes imposed with respect to the organization on any organization manager, or any disqualified person, during the taxable year under section 4958 (relating to taxes on excess benefit transactions); and

(2) Reimbursements paid by the organization during the taxable year with respect to taxes imposed under such section, except to the extent that, by reason of section 4962, the taxes imposed under such section are not required to be paid or are credited or refunded.

* * * * *

(iii) * * * In providing the names and addresses of contributors and donors under paragraph (a)(2)(ii)(F) of this section:

* * * * *

(B) * * * In such case, unless the organization has actual knowledge that a particular employee gave more than $5,000 (and in excess of 2 percent if paragraph (a)(2)(iii)(A) of this section is applicable), the organization need report only the name and address of the employer, and the total amount paid over by the employer.

(C) Separate and independent gifts made by one person in a particular year need be aggregated to determine whether his contributions and bequests exceed $5,000 (and are in excess of 2 percent if paragraph (a)(2)(iii)(A) of this section is applicable), only if such gifts are of $1,000 or more.

(D)(1) Organizations described in section 501(c)(7), (8), or (10) that receive contributions or bequests to be used exclusively for purposes described in section 170(c)(4), 2055(a)(3), or 2522(a)(3), must attach a schedule with respect to all gifts that aggregate more than $1,000 from any one person showing the total amount of the contributions or bequests from each such person, the specific purpose or purposes for which such amount was received, and the specific use or uses to which such amount was put. * * *

* * * * *

(4) * * * Similarly, for purposes of paragraph (a)(2)(ii)(D) of this section, the purposes for which a section 4947(a)(1) trust or a nonexempt private foundation is organized shall be treated as the purposes for which it is exempt. * * *

(5) Political organizations, as defined by section 527(e)(1), that have gross receipts of $25,000 or more for the taxable year (or in the case of a qualified State or local political organization, as defined in section 527(e)(5), that has gross receipts of $100,000 or more for the taxable year) generally must comply with the requirements of section 6033 and this section in the same manner as organizations exempt from tax under section 501(a), except to the extent that the Commissioner may modify such requirements through forms, instructions to forms, or guidance published in the Internal Revenue Bulletin as appropriate for carrying out the purposes of section 527. For the purposes of this section, all references to organizations exempt from tax under section 501(a) shall include political organizations referred to in section 6033(g), other than those referred to in section 6033(g)(3) and except to the extent the Commissioner exercises discretion under section 6033(g)(4). This discretion may be exercised through forms, instructions to forms, or guidance published in the Internal Revenue Bulletin. In addition to the reporting requirements applicable to organizations exempt under section 501(a), such political organizations generally must report the names and addresses of all persons that contributed, bequeathed, or devised $5,000 or more (in money or other property) during the taxable year.

(6) Each controlling organization (within the meaning of section 512(b)(13)) that is subject to the requirements of section 6033(a) shall include on its annual return such information required by that return regarding—

(i) Any interest, annuities, royalties, or rents received from each controlled entity (within the meaning of section 512(b)(13));

(ii) Any loans made to each such controlled entity; and

(iii) Any transfers of funds between such controlling organization and each such controlled entity.

(7) Every organization described in section 4966(d)(1) shall, on its annual return for the taxable year—

(i) List the total number of donor advised funds (as defined in section 4966(d)(2)) it owns at the end of such taxable year;

(ii) Report the aggregate value of assets held in such funds at the end of such taxable year; and

(iii) Report the aggregate contributions to and grants made from such funds during such taxable year.

(8) Every organization described in section 509(a)(3) shall, on its annual return—

(i) List the supported organizations (as defined in section 509(f)(3)) with respect to which such organization provides support;

(ii) Specify whether the organization meets the requirements of clause (i), (ii), or (iii) of section 509(a)(3)(B); and

(iii) Certify that the organization meets the requirements of section 509(a)(3)(C).

* * * * *

(d) * * *

(5) In providing the information required by paragraphs (a)(2)(ii)(F), (G), and (H) of this section, such information may be provided: * * *

(ii) * * * A central or parent organization shall indicate whether it has provided such information in the manner described in paragraphs (d)(5)(i) or (ii) of this section, and may not change the manner in which it provides such information without the consent of the Commissioner.

* * * * *

(g) * * *

(1) * * *

(iii) Except as provided in paragraph (g)(1)(viii) of this section, an organization described in section 501(c) (other than a private foundation or a supporting organization described in section 509(a)(3)) the gross receipts of which in each taxable year are normally not more than $50,000 (as described in paragraph (g)(3) of this section);

* * * * *

(viii) A foreign organization (described in paragraph (k)(1) of this section) or a United States possession organization (described in paragraph (k)(2) of this section) (other than a private foundation or a supporting organization described in section 509(a)(3))—

(A) The gross receipts of which in each taxable year from sources within the United States (as determined under paragraph (k)(3) of this section) are normally not more than $50,000 (as described in paragraph (g)(3) of this section); and

(B) That has no significant activity (including lobbying and political activity and the operation of a trade or business, but excluding investment activity) in the United States.

* * * * *

(3) For purposes of paragraphs (g)(1)(iii) and (viii) of this section, the gross receipts (as defined in paragraph (g)(4) of this section) of an organization are normally not more than $50,000 if:

(i) In the case of an organization that has been in existence for 1 year or less, the organization has received, or donors have pledged to give, gross receipts of $75,000 or less during the first taxable year of the organization;

(ii) In the case of an organization that has been in existence for more than one but less than 3 years, the average of the gross receipts received by the organization in its first 2 taxable years is $60,000 or less; and

(iii) In the case of an organization that has been in existence for 3 years or more, the average of the gross receipts received by the organization in the immediately preceding 3 taxable years, including the year for which the return would be required to be filed, is $50,000 or less.

* * * * *

(5) An organization that is not required to file an annual return by virtue of paragraphs (g)(1)(iii) and (viii) of this section must submit an annual electronic notification as described in section 6033(i). See §1.6033-6.

(6) * * * This discretion may be exercised through forms, instructions to forms, or guidance published in the Internal Revenue Bulletin.

* * * * *

(k) Foreign organizations and United States possession organizations—(1) Foreign organization. For purposes of this section, a foreign organization is any organization not described in section 170(c)(2)(A).

(2) United States possession organization. For purposes of this section, a United States possession organization is any organization created or organized in a possession of the United States.

(3) Source of funds. For purposes of paragraph (g)(1)(viii) of this section, the source of an organization’s gross receipts from gifts, grants, contributions or membership fees is determined by applying the rules found in §53.4948-1(b) of this chapter. For purposes of paragraph (g)(1)(viii) of this section, the source of an organization’s gross receipts other than gifts, grants, contributions, and membership fees is determined by applying the rules in sections 861 through 865 and the regulations in this part issued under section 861 through 865. For purposes of applying this paragraph (k)(3) regarding United States possession organizations, a United States person does not include individuals who are bona fide residents of a United States possession.

(l) Applicability date—(1) Generally. This section applies to returns filed on or after January 30, 2020. Section 1.6033-2T (as contained in 26 CFR part 1, revised April 2019) applies to returns filed before January 30, 2020.

(2) Paragraphs (a)(2)(ii)(F), (a)(2)(iii)(D)(1), (g)(1)(iii) and (viii), and (g)(3) of this section apply to annual information returns filed after May 28, 2020. Under section 7805(b)(7) an organization may choose to apply the paragraphs listed in this paragraph (l)(2) to returns filed after September 6, 2019.

PART 56 – PUBLIC CHARITY EXCISE TAXES

Par. 4. The authority citation for part 56 continues to read in part as follows:

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

§ 56.4911-9 [Amended]

Par. 5. In §56.4911-9, amend paragraphs (d)(2) and (3) and (d)(4) introductory text by removing the language “1.6033-2(a)(2)(ii)(k)” and adding in its place “1.6033-2(a)(2)(ii)(M)”.

§ 56.4911-10 [Amended]

Par. 6. In §56.4911-10, amend paragraph (f)(1) by removing the language “1.6033-2(a)(2)(ii)(k)” and adding in its place “1.6033-2(a)(2)(ii)(M).”

Sunita Lough,

Deputy Commissioner for Services and Enforcement.

Approved: May 20, 2020

David J. Kautter,

Assistant Secretary of the Treasury (Tax Policy).

(Filed by the Office of the Federal Register on May 26, 2020, 4:15 p.m., and published in the issue of the Federal Register for May 28, 2020, 85 F.R. 31959)

¹ In the case of a qualified State or local political organization described in section 527(e)(5), $25,000 is replaced by $100,000.

² The list in the regulations includes, but is not limited to, gross income for the year; dues and assessments from members and affiliates for the year; expenses incurred within the year attributable to gross income; disbursements (including prior years’ accumulations) made within the year for the purposes for which it is exempt; a balance sheet showing its assets, liabilities, and net worth as of the beginning and end of such year; the total of the contributions, gifts, grants and similar amounts received by it during the taxable year; the names and addresses of all officers, directors, or trustees (or any person having responsibilities or powers similar to those of officers, directors or trustees) of the organization; and certain compensation and payment information. See §1.6033-2(a)(2)(ii).

³ An organization that is not required to file an annual return by virtue of Rev. Proc. 2011-15 must submit a Form 990-N e-Postcard annually in electronic format as described in section 6033(i)(1). Rev. Proc. 2011-15, section 3.03.

⁴ No comments were received specifically addressing the removal of the requirement to provide the names of certain contributors to organizations described in sections 501(c)(7), (8), and (10). However, most comments did not distinguish between types of tax-exempt organizations affected by the proposed changes, and some of the issues discussed are applicable to the specific change to reporting requirements of organizations described in sections 501(c)(7), (8), and (10).

⁵ Citizens United v. Schneiderman, 882 F.3d 374 (2d Cir. 2018); Center for Competitive Politics v. Harris, 784 F.3d 1307 (9th Cir. 2015).

⁶ The confidentiality and disclosure of tax returns and return information in both tax and non-tax investigations is governed by section 6103. Section 6103 contains several provisions authorizing the disclosure of returns and return information to Federal law enforcement agencies under prescribed circumstances after meeting specified procedural requirements. For example, these include disclosures to DOJ for the investigation and prosecution of non-tax Federal crimes via an ex parte court order or via a request from the highest ranking official of a Federal agency or the highest officials within DOJ and in the course of an investigation after referral to and approval by DOJ as a Grand Jury Tax Investigation. In the context of states, sections 6103 and 6104 authorize disclosure of certain returns and return information to the states for specified purposes. Generally, section 6103(d) authorizes disclosure to state tax agencies for state tax administration purposes only, while section 6104(c) permits disclosure of return information, in the case of organizations other than those described in section 501(c)(1) or (3), to an appropriate state officer to the extent necessary in administering state laws relating to the solicitation or administration of charitable funds or charitable assets of such organizations, if certain requirements are met. Some states may also independently obtain contributor information from the organizations.

⁷ See note 6.

⁸ Note that some commenters are unclear as to how the states obtained the Schedule B information. Information that a state obtains directly from a tax-exempt organization as part of its state filing is not information disclosed by the IRS under either section 6103 or section 6104.

⁹ The nineteen attorneys general represented the states of New Jersey, New York, California, Connecticut, Colorado, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, Oregon, Pennsylvania, Rhode Island, and Virginia.

¹⁰ The eleven attorneys general represented the states of Arizona, Alabama, Alaska, Indiana, Kansas, Louisiana, Oklahoma, South Carolina, Tennessee, Texas, and West Virginia.

Section 7508A provides the Secretary with the authority to postpone the time for performing certain acts under the internal revenue laws for a taxpayer determined by the Secretary to be affected by a federally declared disaster as defined in section 165(i)(5)(A). Pursuant to section 7508A(a), a period of up to one year may be disregarded in determining whether the performance of certain acts is timely under the internal revenue laws.

Section 7508A(b) provides that, in the case of a pension or other employee benefit plan, or any sponsor, administrator, participant, beneficiary, or other person with respect to such a plan, affected by a federally declared disaster or a terroristic or military action described in section 7508A(a), the Secretary may specify a period of up to one year that may be disregarded in determining the date by which any action is required or permitted to be completed. If the Secretary exercises that authority, no plan will be treated as failing to be operated in accordance with its terms solely because the plan disregards any period pursuant to this relief.¹

Following the Emergency Declaration, the Department of the Treasury (Treasury Department) and the IRS published guidance utilizing the authority provided under section 7508A for the Secretary of the Treasury or his delegate (Secretary) to postpone certain deadlines in the case of a federally declared disaster.

On March 18, 2020, the Treasury Department and IRS issued Notice 2020-17, 2020-15 IRB 590, providing relief under section 7508A(a), which postponed the due date for certain federal income tax payments from April 15, 2020, until July 15, 2020. On March 20, 2020, the Treasury Department and IRS issued Notice 2020-18, which superseded Notice 2020-17 and provided expanded relief, postponing the due date for filing federal income tax returns and for making federal income tax payments from April 15, 2020, until July 15, 2020. On March 27, 2020, the Treasury Department and the IRS issued Notice 2020-20, which amplified Notice 2020-18 and provided additional relief, postponing certain federal gift (and generation-skipping transfer) tax return filings and payments from April 15, 2020, until July 15, 2020.

On April 9, 2020, the Treasury Department and the IRS issued Notice 2020-23, which provided additional relief pursuant to the Emergency Declaration. Notice 2020-23 provides relief for persons with a federal tax payment obligation specified in section III.A of the notice (Specified Payment), or a federal tax return or other form filing obligation specified in section III.A of the notice (Specified Form), due to be performed (originally or pursuant to a valid extension) on or after April 1, 2020, and before July 15, 2020 (Affected Taxpayers). Notice 2020-23 also provides that the term Affected Taxpayer includes any person who performs a time-sensitive action listed in either § 301.7508A-1(c)(1)(iv) - (vi) of the Regulations or Rev. Proc. 2018-58, 2018-50 IRB 990, due to be performed (originally or pursuant to a valid extension) on or after April 1, 2020, and before July 15, 2020 (Specified Time-Sensitive Action). Thus, for example, under Notice 2020-23, Affected Taxpayers include persons described in section 7508A(b), such as sponsors or plan administrators of qualified retirement plans, due to perform a Specified Time-Sensitive Action. In addition, Affected Taxpayers include exempt organizations with a federal tax payment, federal tax return, or other form filing obligation specified in section III.A of Notice 2020-23, and exempt organizations performing time-sensitive acts listed in Rev. Proc. 2018-58, which includes the filing of Form 990 series annual information returns.

1. Interest-free adjustments to correct employment tax reporting errors

For purposes of this notice, “employment tax” means Federal Insurance Contributions Act (FICA) tax imposed on employees by sections 3101(a) and 3101(b) and on employers by sections 3111(a) and 3111(b); Railroad Retirement Tax Act (RRTA) tax imposed on employees by sections 3201(a) and 3201(b) and on employers by sections 3221(a) and 3221(b); and income tax withholding (ITW) imposed by section 3402. To the extent other types of withholding are treated as ITW under section 3402(a) (such as gambling withholding, pension withholding, and backup withholding as set forth in sections 3402(q)(7), 3405(f), and 3406(h)(10), respectively), these other types of withholding are also included in the term “employment tax.”

Sections 6205 and 6413 permit interest-free adjustments to correct employment tax reporting errors, and sections 31.6205-1, 31.6413(a)-1 and 31.6413(a)-2 of the Regulations provide related rules for making these adjustments. Notice 2020-23 provided relief for filing claims for credit or refund of any tax, including employment tax, due to be filed on or after April 1, 2020, and before July 15, 2020. However, Notice 2020-23 did not provide relief for employers making interest-free adjustments to correct employment tax reporting errors.

2. Electronic filing requirements for CPEOs

Section 31.3511-1(g)(2) provides that CPEOs must file on magnetic media any Form 941, Employer’s QUARTERLY Federal Tax Return, and Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees, along with all required accompanying schedules. However, § 31.3511-1(g)(2)(ii) provides that the IRS may waive the requirements to file on magnetic media in cases of undue economic hardship. Individual requests for waivers from CPEOs must be made in accordance with applicable guidance. The term “magnetic media” generally includes electronic filing as well as other media specifically permitted under applicable guidance.

1. Funding provisions for qualified defined benefit pension plans

Section 412 provides minimum funding standards for qualified defined benefit and other pension plans. Section 412(c) provides for waivers of the minimum funding requirements in the event of temporary substantial business hardship. In order for a plan other than a multiemployer plan to receive a waiver, section 412(c)(5) provides that an application for a waiver must be submitted no later than the 15th day of the 3rd month beginning after the close of the plan year for which the waiver is sought.

Section 432(b)(3)(A) provides special rules for certain multiemployer defined benefit plans. For a plan that is subject to those requirements, the plan actuary must make certain certifications each year regarding the plan’s funded status. The deadline for these certifications for a plan year is the 90th day of the plan year. Under section 432(b)(3)(D), in certain circumstances, the plan sponsor is required to provide notice regarding the plan’s funded status to the participants and beneficiaries, the bargaining parties, the Pension Benefit Guaranty Corporation, the Secretary of Labor and, if applicable, the Secretary of the Treasury. Section 432(c)(1) requires, for the first plan year that a multiemployer plan is in endangered status, that the plan sponsor adopt a funding improvement plan providing one or more schedules of revised benefit structures, revised contribution structures, or both, no later than 240 days following the required date for the actuarial certification of endangered status and notify the bargaining parties of the schedules within 30 days after their adoption. Section 432(c)(6) requires the plan sponsor to update the funding improvement plan and schedules annually and attach that update to the Form 5500 filed for the plan year. Section 432(e)(1)(A) and (3)(B) impose similar adoption, notification, and update requirements with respect to a rehabilitation plan for a multiemployer plan that is certified to be in critical status.

Section 433 provides special funding rules for cooperative and small employer charity pension (CSEC) plans as defined under section 414(y), including rules for certification of funded status and the adoption of a funding restoration plan.

Sections 302, 305 and 306 of ERISA contain provisions that are parallel to sections 412, 432 and 433 of the Code, respectively.

2. Form 5330, Return of Excise Taxes Related to Employee Benefit Plans

The Form 5330 is used to report and pay a variety of excise taxes with respect to employee benefit arrangements and tax-exempt entities. See Table 1 of the Instructions for Form 5330 for a list of filing deadlines for those excise taxes.

3. Certain Tax Exempt and Government Entities/Employee Plans programs

a. Initial remedial amendment period for section 403(b) plans

Section 21.02 of Rev. Proc. 2013-22, 2013-18 IRB 985, as modified by Rev. Proc. 2014-28, 2014-16 IRB 944, and Rev. Proc. 2015-22, 2015-11 IRB 754, and clarified by Rev. Proc. 2017-18, 2017-5 IRB 743, establishes a remedial amendment period that permits an eligible employer to retroactively correct form defects in its written section 403(b) plan by timely adopting a section 403(b) pre-approved plan or by otherwise timely amending its section 403(b) individually designed plan. Rev. Proc. 2017-18 provides that March 31, 2020, is the last day of this initial remedial amendment period.

Rev. Proc. 2019-39, 2019-42 IRB 945, sets forth a system of recurring remedial amendment periods for correcting form defects in section 403(b) individually designed plans and section 403(b) pre-approved plans first occurring after the initial remedial amendment period ends, and provides a limited extension of the initial remedial amendment period for certain form defects that is based, in part, on the initial March 31, 2020, deadline. Rev. Proc. 2019-39 also provides deadlines for the adoption of plan amendments for section 403(b) individually designed plans and section 403(b) pre-approved plans with respect to a form defect first occurring after the end of the initial remedial amendment period.

b. Pre-approved defined benefit plans

Rev. Proc. 2016-37, 2016-29 IRB 136, provides a regular six-year remedial amendment cycle that applies for pre-approved plans. Section 15.03(1) of Rev. Proc. 2016-37 provides that the remedial amendment period for a disqualifying provision will not end before the last day of a plan’s first applicable remedial amendment cycle in which an application for an opinion or advisory letter that considers the disqualifying provision may be submitted.

Announcement 2018-05, 2018-13 IRB 461, provides that an adopting employer who adopts, by April 30, 2020, a master and prototype (M&P) or volume submitter (VS) defined benefit plan that was approved based on Notice 2012-76, 2012-52 IRB 775 (2012 Cumulative List), will be considered to have adopted the plan within the second six-year remedial amendment cycle. Announcement 2018-05 also provides that an adopting employer of an M&P or VS plan may apply for an individual determination letter (if otherwise eligible) during the period beginning on May 1, 2018, and ending April 30, 2020. Announcement 2018-05 further provides that April 30, 2020, is the end of the second six-year remedial amendment cycle for pre-approved defined benefit plans. Rev. Proc. 2020-10, 2020-2 IRB 295, provides that the third six-year remedial amendment cycle for pre-approved defined benefit plans begins on the following day, and ends on January 31, 2025.

c. Deadlines for voluntary correction under EPCRS

Rev. Proc. 2019-19, 2019-19 IRB 1086, sets forth a system of correction programs for sponsors of retirement plans that are intended to satisfy the requirements of section 401(a), 403(a), 403(b), 408(k), or 408(p). The Employee Plans Compliance Resolution System (EPCRS) permits employers sponsoring these plans to correct certain failures and thereby continue to provide their employees with retirement benefits on a tax-favored basis. The components of EPCRS are the Self-Correction Program (SCP), the Voluntary Correction Program (VCP), and the Audit Closing Agreement Program (Audit CAP).

Under VCP, a plan sponsor may, at any time before audit, pay a limited fee and receive the IRS’s approval for correction of a plan failure that has been identified to the IRS, in writing, by the plan sponsor. Once agreement has been reached with the plan sponsor as to the appropriate corrective action to be undertaken, the IRS will send the plan sponsor a compliance statement specifying the corrective action required. Pursuant to section 10.06(9) of Rev. Proc. 2019-19, the plan sponsor must implement the corrective action set forth in the compliance statement within 150 days of the date of the compliance statement. In addition, if the corrective action specified in the compliance statement includes the adoption of a corrective plan amendment, the corrective amendment must be adopted no later than 150 days after the date of the compliance statement (with a later deadline in the case of a governmental plan described in section 414(d)).

d. Substitute mortality tables

Rev. Proc. 2017–55, 2017–43 IRB 373, provides guidance with respect to the use of a substitute mortality table in accordance with section 430(h)(3)(C). Section 4 of Rev. Proc. 2017-55 notes that, under section 430(h)(3)(C)(v)(I), a request for approval to use substitute mortality tables generally must be submitted at least 7 months before the first day of the first plan year for which the substitute mortality tables are to apply.

1. Form 990-N electronic notice requirement for certain small exempt organizations

Section 6033(i) requires organizations that are excused from filing an annual information return (Form 990 series) by reason of normally having annual gross receipts below a certain specified amount (currently $50,000) to furnish an annual electronic notification. The annual electronic notification (Form 990-N, e-Postcard) is due by the 15th day of the fifth month after the close of the organization’s tax year.

2. Time for filing suit for declaratory judgment

Section 7428 provides that an organization may file, within a specified period, an appropriate pleading for declaratory judgment with the United States Tax Court, the United States Court of Federal Claims, or the district court of the United States for the District of Columbia, involving the IRS’s determination, or failure to make a determination, with respect to the organization’s initial or continuing qualification or classification as an exempt organization described in section 501(c) or (d) and exempt from tax under section 501(a), an organization described in section 170(c)(2), a private foundation under section 509(a), a private operating foundation under section 4942(j)(3), or a cooperative described in section 521(b). Although Notice 2020-23 postponed the time to commence an action for declaratory judgment with the United States Tax Court, it did not cover similar suits filed with the Court of Federal Claims or the district court of the United States for the District of Columbia.

Form 5498, IRA Contribution Information, Form 5498-ESA, Coverdell ESA Contribution Information, and Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, must be filed with the IRS and furnished to participants and beneficiaries by the times specified in the instructions to these forms.

For purposes of the relief provided with respect to Time-Sensitive Actions described in section III.B of this notice, Affected Taxpayers include:

The Time-Sensitive Actions to which the relief under this section III applies are:

1. Correction of employment tax reporting errors using the interest-free adjustment process under sections 6205 and 6413

Actions to correct underpayments or overpayments pursuant to sections 6205 and 6413, respectively.

2. Qualified retirement plans

a. Funding waiver

Application for a funding waiver under section 412(c) for a defined benefit pension plan that is not a multiemployer plan.

b. Multiemployer plan funding

With respect to a multiemployer defined benefit pension plan, actions due to be performed on or before the dates described in:

c. CSEC plans

With respect to a CSEC plan, actions to be performed on or before the date described in:

d. Form 5330

Filing of Form 5330 and payment of the associated excise taxes. The period beginning on March 30, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest or penalty for failure to file the Form 5330 or to pay the excise tax postponed by this notice. Interest and penalties with respect to such postponed filing and payment obligations will begin to accrue on July 16, 2020.

e. Tax Exempt and Government Entities Division, Employee Plans programs

3. Exempt organizations

a. Form 990-N electronic notice requirement for certain small exempt organizations

Electronic submissions of Form 990-N under section 6033(i).

b. Time for Commencing a Suit for Declaratory Judgment Pursuant to Section 7428

Filings by organizations listed in section 7428(a)(1) of an appropriate pleading for declaratory judgment with the United States Court of Federal Claims or the district court of the United States for the District of Columbia, within the period specified in section 7428(b)(3).

4. Form 5498 series

With respect to the Form 5498, IRA Contribution Information, Form 5498-ESA, Coverdell ESA Contribution Information, and the Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, the due date for filing and furnishing the forms is postponed to August 31, 2020. The period beginning on the original due date of those forms and ending on August 31, 2020, will be disregarded in the calculation of any penalty for failure to file those forms. Penalties with respect to such a postponed filing will begin to accrue on September 1, 2020.

Rev. Proc. 2016-37 describes a staggered remedial amendment system for pre-approved plans that are qualified under § 401(a) of the Internal Revenue Code (Code). The revenue procedure provides separate six-year remedial amendment cycles for pre-approved defined benefit and pre-approved defined contribution plans.

Rev. Proc. 2017-41, 2017-29 I.R.B. 92, modifies the pre-approved letter program by combining the former master and prototype and volume submitter programs into a single opinion letter program. Under this program, providers of pre-approved plans may continue to apply for new opinion letters once every six years. Rev. Proc. 2017-41 sets forth the procedures for providers to obtain opinion letters for qualified pre-approved plans submitted with respect to the third (and subsequent) six-year remedial amendment cycles.

The on-cycle submission period for providers of pre-approved defined contribution plans to submit opinion letter requests under the third six-year remedial amendment cycle (set forth in Rev. Proc. 2016-37, and extended by Rev. Proc. 2017-41 and Rev. Proc. 2018-42, 2018-36 I.R.B. 424) was October 2, 2017, through December 31, 2018. Rev. Proc. 2017-41 required pre-approved plan providers to restate their pre-approved defined contribution plans for the qualification requirements included on the 2017 Cumulative List and to apply for new opinion letters during this submission period.

Rev. Proc. 2016-37 and Rev. Proc. 2017-41 provide that the IRS will review plans that have been submitted during the applicable on-cycle submission period for a six-year remedial amendment cycle, taking into account the applicable Cumulative List of Changes in Plan Qualification Requirements that identifies changes in the qualification requirements of the Code. When the review process for a cycle of pre-approved plans has neared completion, the IRS will announce the date by which an adopting employer must adopt a newly approved plan. Depending on the date the review process is completed, employers will have approximately two years to adopt the newly approved plans and, if eligible, to apply for an individual determination letter.

The end of the third six-year remedial amendment cycle for pre-approved defined contribution plans is January 31, 2023. An adopting employer whose defined contribution plan is eligible for the six-year remedial amendment cycle and who adopts, by July 31, 2022, a newly approved plan, will be considered to have adopted the plan within the third six-year remedial amendment cycle.

An adopting employer of a pre-approved defined contribution plan may apply for an individual determination letter (if otherwise eligible) during the period beginning August 1, 2020, and ending July 31, 2022. See Rev. Proc. 2020-4, 2020-1 I.R.B. 148, for additional information regarding determination letter application procedures for adopting employers of pre-approved plans with respect to the third six-year remedial amendment cycle, including sections 8 and 12B of the revenue procedure, relating to the circumstances under which an employer may apply for a determination letter.

This announcement is effective as of June 1, 2020.

The collection of information contained in Rev. Proc. 2017-41 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 1545-1674.

The principal author of this announcement is Arslan Malik of the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). For further information regarding this announcement contact Employee Plans at (513) 975-6319 (not a toll-free number).

This document sets forth a proposed amendment to the Employment Tax Regulations (26 CFR Parts 31 and 35) under section 3405 of the Internal Revenue Code (Code). This proposed regulation would update certain provisions of §35.3405-1T to conform to a change to section 3405(a)(4) made by section 11041(c)(2)(G) of the Tax Cuts and Jobs Act, Pub. L. No. 115-97, 131 Stat. 2054 (2017) (TCJA). Prior to amendment by TCJA, section 3405(a)(4) provided that, in the case of any periodic payment for which a withholding certificate is not in effect, the amount withheld from the periodic payment (the default rate of withholding) is determined by treating the payee as a married individual claiming three withholding exemptions. As amended by TCJA, section 3405(a)(4) provides that the default rate of withholding on periodic payments is determined under rules prescribed by the Secretary. Section 35.3405-1T reflects the rule under section 3405(a)(4) prior to amendment by TCJA.

This regulation is proposed to apply to periodic payments made after December 31, 2020. Notwithstanding §35.3405-1T, taxpayers may rely on the rules set forth in this notice of proposed rulemaking, in their entirety, until the date of publication of a Treasury Decision adopting this proposed rule as a final regulation.

IRS Notices cited in this preamble are published in the Internal Revenue Bulletin and are available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS web site at http://www.irs.gov.

Before this proposed amendment to the regulations is adopted as a final regulation, consideration will be given to comments that are submitted timely to the IRS as prescribed in the preamble under the “ADDRESSES” section. The Treasury Department and the IRS request comments on all aspects of the proposed regulation. Any electronic comments submitted, and to the extent practicable any paper comments submitted, will be made available at www.regulations.gov or upon request.

A public hearing will be scheduled if requested in writing by any person who timely submits electronic or written comments. Requests for a public hearing are also encouraged to be made electronically. If a public hearing is scheduled, notice of the date and time for the public hearing will be published in the Federal Register. Announcement 2020-4, 2020-17 IRB 1, provides that until further notice, public hearings conducted by the IRS will be held telephonically. Any telephonic hearing will be made accessible to people with disabilities.

The principal author of these proposed regulations is Kara M. Soderstrom, Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). However, other personnel from the Treasury Department and the IRS participated in the development of these proposed regulations.

26 CFR Part 31

Employment taxes, Fishing vessels, Gambling, Income taxes, Penalties, Pensions, Railroad retirement, Reporting and recordkeeping requirements, Social security, Unemployment compensation.

26 CFR Part 35

Employment taxes, Income taxes, Pensions, Reporting and recordkeeping requirements.

Accordingly, 26 CFR parts 31 and 35 are proposed to be amended as follows:

PART 31—EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE

Paragraph 1. The authority citation for part 31 is amended by adding an entry for §31.3405(a)-1 in numerical order to read in part as follows:

Authority: 26 U.S.C. 7805.

* * * * *

Section 31.3405(a)-1 also issued under 26 U.S.C. 3405(a)(4).

* * * * *

Par. 2. Section 31.3405(a)-1 is added to read as follows:

§31.3405(a)-1 Questions and answers relating to Federal income tax withholding on periodic retirement and annuity payments

(a) The following questions and answers relate to Federal income tax withholding on periodic payments under section 3405(a), as amended by section 11041(c)(2)(G) of the Tax Cuts and Jobs Act (Public Law 115-97, 131 Stat. 2054 (2017)). The withholding rules of section 3405(a) do not apply to periodic payments that are eligible rollover distributions (as defined in section 402(f)(2)(A)). See generally section 3405(c) and §31.3405(c)-1 for Federal income tax withholding rules applicable to eligible rollover distributions. See section 3405(e)(13) for additional rules applicable to certain periodic payments under section 3405(a) and nonperiodic distributions under section 3405(b) that are to be delivered outside the United States and its possessions. For additional guidance regarding periodic payments, see §§35.3405-1 and 35.3405-1T of this chapter.

(b)(1) Q-1: How will Federal income tax be withheld from a periodic payment?

(2) A-1: In the case of a periodic payment that is subject to withholding under section 3405(a), amounts are withheld as if the payment were a payment of wages by an employer to the employee for the appropriate payroll period. If the payee has not furnished a withholding certificate, the amount to be withheld is determined in the manner described in the applicable forms, instructions, publications, and other guidance prescribed by the Commissioner. The rules for withholding when the payee has not furnished a withholding certificate apply regardless of whether the payor is aware of the payee’s actual marital status or actual Federal income tax filing status.

(c)(1) Q-2: Do rules similar to those for wage withholding apply to the furnishing of a withholding certificate for periodic payments?

(2) A-2: Yes. Unless the rules of section 3405 specifically conflict with the rules of section 3402, the rules for withholding on periodic payments that are not eligible rollover distributions will parallel the rules for wage withholding. Thus, if a withholding certificate is furnished by a payee, it will generally take effect in accordance with section 3402(f)(3) and as provided in applicable forms, instructions, publications, and other guidance prescribed by the Commissioner. If no withholding certificate is furnished, the amount withheld must be determined in the manner described in the applicable forms, instructions, publications, and other guidance prescribed by the Commissioner for withholding on periodic payments when no withholding certificate is furnished.

(d)(1) Q-3: What is the applicability date of this section?

(2) A-3: This section applies with respect to periodic payments made after December 31, 2020.

PART 35—EMPLOYMENT TAX AND COLLECTION OF INCOME TAX AT SOURCE REGULATIONS UNDER THE TAX EQUITY AND FISCAL RESPONSIBILITY ACT OF 1982

Par. 3. The authority citation for part 35 continues to read in part as follows:

Authority: 26 U.S.C. 6047(e), 7805; 68A Stat. 917; 96 Stat. 625; Public Law 97-248 (96 Stat. 623)* * *

§35.3405-1T [Amended]

Par. 4. Section 35.3405-1T is amended by removing and reserving Q&A a-10, Q&A b-3, and Q&A b-4.

Sunita Lough

Deputy Commissioner for Services and Enforcement.

(Filed by the Office of the Federal Register on May 26, 2020, 8:45 a.m., and published in the issue of the Federal Register for May 27, 2020, 85 F.R. 31714)

¹ Under section 3405(e)(1)(B), a designated distribution does not include any amount that is wages without regard to section 3405; the portion of a distribution or payment (excluding any distribution or payment from or under an individual retirement plan, other than a Roth IRA) which it is reasonable to believe is not includible in gross income; any amount that is subject to withholding under subchapter A of chapter 3 (relating to withholding of tax on nonresident aliens and foreign corporations) by the person paying such amount or which would be so subject but for a tax treaty; or any distribution described in section 404(k)(2) (relating to distributions of “applicable dividends” by an employee stock ownership plan).

² Notice 2020-3 also provides that the Treasury Department and the IRS are considering whether the default rate of withholding from periodic payments that is in effect for 2020 will continue to be appropriate for calendar years after 2020, and requests comments on whether the adoption of a new default rate of withholding on periodic payments that applies prospectively would present any administrative challenges. One comment was received on this issue (available at: https://www.regulations.gov/document?D=IRS-2019-0051-0004). The commenter provides suggestions regarding the effective date and prospective application of any change to the default rate of withholding on periodic payments and suggestions regarding the applicable withholding tables for periodic payments for calendar years after 2020.

³ In addition to the amendment made by section 11041(c)(2)(G) of TCJA, described in the Background section of the preamble, section 11041(c)(2)(F) of TCJA amended section 3405(a)(3) and (4) (and the heading for paragraph (4)) to replace each reference to “exemption” with “allowance,” effectively replacing references to “withholding exemption certificate” with “withholding allowance certificate.” However, the Treasury Department and the IRS have determined that no updates to §35.3405-1T are required to implement section 11041(c)(2)(F) of TCJA because §35.3405-1T refers to a “withholding certificate.”

⁴ As described in Section 2 of this Explanation of Provisions, the Treasury Department and the IRS intend to update other Q&As in §35.3405-1T in the future.

⁵ Thus, proposed §31.3405(a)-1 addresses the amendment of section 3402(f)(3)(B) by section 10302(a) of the Omnibus Budget Reconciliation Act of 1987, Pub. L. No. 100-203, 101 Stat. 1330 (1987). The amendment to section 3402(f)(3)(B) affected the rules in Q&A b-3 of §35.3405-1T for determining the effective date of a payee’s Form W-4P.