Regulations Regarding Advance Payments for Goods and Long-Term Contracts
| Published date | 15 July 2019 |
| Citation | 84 FR 33691 |
| Record Number | 2019-14947 |
| Section | Rules and Regulations |
| Court | Internal Revenue Service |
Federal Register, Volume 84 Issue 135 (Monday, July 15, 2019)
[Federal Register Volume 84, Number 135 (Monday, July 15, 2019)]
[Rules and Regulations]
[Pages 33691-33692]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-14947]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 84, No. 135 / Monday, July 15, 2019 / Rules
and Regulations
[[Page 33691]]
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
[TD 9870]
RIN 1545-BO66
Regulations Regarding Advance Payments for Goods and Long-Term
Contracts
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final regulations that streamline IRS
regulations by removing regulations that are no longer necessary after
the enactment of recent tax legislation. Specifically, these final
regulations remove existing regulations regarding advance payments for
goods and long-term contracts. These final regulations affect accrual
method taxpayers who receive advance payments for goods, including
those for inventoriable goods.
DATES:
Effective date: These regulations are effective on July 15, 2019.
Applicability date: These regulations apply for taxable years
ending on or after July 15, 2019.
FOR FURTHER INFORMATION CONTACT: Charles Gorham, (202) 317-5091, or
Joanna L. Trebat, (202) 317-6890.
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to the Income Tax Regulations (26
CFR parts 1 and 602), under section 451 of the Internal Revenue Code
(Code) relating to the treatment of advance payments for goods and
long-term contracts. On October 15, 2018, the Department of the
Treasury (Treasury Department) and the IRS published a notice of
proposed rulemaking (REG-104872-18) in the Federal Register (83 FR
51904) containing proposed regulations under section 451 of the Code
(proposed regulations).
The Treasury Department and the IRS received no written or
electronic comments responding to the proposed regulations.
Accordingly, no public hearing was held on the proposed regulations.
This Treasury Decision adopts the proposed regulations without
modification.
Explanation of Provisions
These final regulations remove Sec. 1.451-5, and its cross-
references, relating to the treatment of advance payments for goods and
long-term contracts under section 451. Section 1.451-5 generally
allowed accrual method taxpayers to defer the inclusion of income for
advance payments for goods until the taxable year in which they were
properly included in income under the taxpayer's method of accounting
for federal income tax purposes if that method resulted in the advance
payments being included in gross income no later than when the advance
payments were recognized in gross receipts under the taxpayer's method
of accounting for financial reporting purposes.
Section 13221 of ``the Tax Cuts and Jobs Act (TCJA),'' Public Law
115-97 (2017), amended section 451 by redesignating section 451(b)
through (i) as (d) through (k) and adding new subsections (b) and (c).
New section 451(c) generally requires an accrual method taxpayer that
receives any advance payment described in section 451(c)(4) during the
taxable year to include the advance payment in income in the taxable
year of receipt or make an election to: (1) Include any portion of the
advance payment in income in the taxable year of receipt to the extent
required under new section 451(b); and (2) include the remaining
portion of the advance payment in income in the following taxable year.
New section 451(c) and its election to defer advance payments
override the deferral method provided by Sec. 1.451-5. See H.R. Rep.
No. 115-466, at 429 n.880 (2017) (Conf. Rep.). Accordingly, these final
regulations remove Sec. 1.451-5 and its cross references. Removing
Sec. 1.451-5 ensures that the new deferral rules of section 451(c)
apply uniformly and consistently to all taxpayers and simplifies tax
administration. The rules of section 446 regarding changes in methods
of accounting apply to taxpayers changing a method of accounting for
advance payments from a method described in Sec. 1.451-5 to another
method of accounting.
Effective/Applicability Date
These final regulations apply for taxable years ending on or after
July 15, 2019.
Special Analyses
This regulation is not subject to review under section 6(b) of
Executive Order 12866 pursuant to the Memorandum of Agreement (April
11, 2018) between the Department of the Treasury and the Office of
Management and Budget regarding review of tax regulations. Because the
regulations do not impose a collection of information on small
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f) of the Code, the notice of proposed
rulemaking preceding this final rule was submitted to the Chief Counsel
for Advocacy of the Small Business Administration for comment on its
impact on small business and no comments were received.
Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits and take
certain other actions before issuing a final rule that includes any
Federal mandate that may result in expenditures in any one year by a
state, local, or tribal government, in the aggregate, or by the private
sector, of $100 million in 1995 dollars, updated annually for
inflation. In 2018, that threshold is approximately $150 million. This
rule does not include any Federal mandate that may result in
expenditures by state, local, or tribal governments, or by the private
sector in excess of that threshold.
Executive Order 13132: Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial direct compliance costs on state and local
governments, and is not required by statute, or preempts state law,
unless the agency meets the consultation and funding requirements of
section 6 of the Executive Order. This rule does not have federalism
implications and does not impose
[[Page 33692]]
substantial direct compliance costs on state and local governments or
preempt state law within the meaning of the Executive Order.
Drafting Information
The principal author of these final regulations is Joanna L.
Trebat, Office of the Associate Chief Counsel (Income Tax and
Accounting). Other personnel from the IRS and Treasury Department
participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements.
Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 602 are amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 1.381(c)(4)-1 is amended by revising the second
sentence of paragraph (b)(2) to read as follows:
Sec. 1.381(c)(4)-1 Method of accounting.
* * * * *
(b) * * *
(2) * * * The installment method under section 453, the mark-to-
market method under section 475, the amortization of bond premium under
section 171, the percentage of completion method under section 460, the
recurring item exception of Sec. 1.461-5, and the income deferral
method under section 455 are examples of special methods of accounting.
* * *
* * * * *
0
Par. 3. Section 1.382-7 is amended by revising the third sentence of
paragraph (a) to read as follows:
Sec. 1.382-7 Built in gains and losses.
(a) * * * Examples to which this paragraph (a) will apply include,
but are not limited to, income received prior to the change date that
is deferred under section 455 or Rev. Proc. 2004-34 (2004-1 CB 991
(June 1, 2004)) (or any successor revenue procedure) (see Sec.
601.601(d)(2)(ii)(b)).
* * * * *
Sec. 1.451-5 [Removed]
0
Par. 4. Section 1.451-5 is removed.
Sec. 1.861-18 [Amended]
0
Par. 5. Section 1.861-18 is amended in paragraph (i)(4) by:
0
1. Removing Example 2;
0
2. Designating Examples 1 and 3 as paragraphs (i)(4)(i) and (ii),
respectively; and
0
3. In the heading for newly designated paragraph (i)(4)(ii), removing
``3'' and adding ``2'' in its place.
Sec. 1.6655-0 [Amended]
0
Par. 6. Section 1.6655-0 is amended by removing the entries for Sec.
1.6655-2(f)(3)(i) and (f)(3)(i)(A) and redesignating the entry for
Sec. 1.6655-2(f)(3)(i)(B) as Sec. 1.6655-2(f)(3)(i).
Sec. 1.6655-2 [Amended]
0
Par. 7. Section 1.6655-2 is amended by removing the paragraph (f)(3)(i)
heading and paragraph (f)(3)(i)(A) and redesignating (f)(3)(i)(B) as
(f)(3)(i).
0
Par. 8. Section 1.6655-6 is amended in paragraph (c) by:
0
1. Revising the heading and introductory text;
0
2. Removing Example 1;
0
3. Designating Example 2 as paragraph (c)(1) and revising the heading
of newly designated paragraph (c)(1); and
0
4. Adding reserved paragraph (c)(2). The revisions read as follows:
Sec. 1.6655-6 Methods of accounting.
* * * * *
(c) Example. The following example illustrates the rules of this
section:
(1) Example. * * *
* * * * *
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
0
Par. 9. Add an authority citation for part 602 to read as follows:
Authority: 26 U.S.C. 7805.
Sec. 602.101 [Amended]
0
Par. 10. Section 602.101 is amended by removing the entry for Sec.
1.451-5 in the table in paragraph (b) and by removing the parenthetical
authority citation at the end of the section.
Kirsten Wielobob,
Deputy Commissioner for Services and Enforcement.
Approved: June 27, 2019.
David J. Kautter,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2019-14947 Filed 7-11-19; 4:15 pm]
BILLING CODE 4830-01-P
