Internal Revenue Bulletin:  2005-35 

August 29, 2005 

REG-149436-04

Notice of Proposed Rulemaking Return Required by Subchapter T Cooperatives Under Section 6012


AGENCY:

Internal Revenue Service (IRS), Treasury.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

This document contains proposed regulations that prescribe the form that cooperatives must use to file their income tax returns. The regulations affect all cooperatives that are currently required to file an income tax return on either Form 1120, “U.S. Corporation Income Tax Return,” or Form 990-C, “Farmers’ Cooperative Association Income Tax Return.”

DATES:

Written or electronic comments and requests for a public hearing must be received by October 27, 2005.

ADDRESSES:

Send submissions to: CC:PA:LPD:PR (REG-149436-04), room 5203, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-149436-04), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC, or sent electronically, via the IRS Internet site at www.irs.gov/regs, or via the Federal eRulemaking Portal at  www.regulations.gov (IRS-REG-149436-04). A public hearing may be scheduled if requested by any person who timely submits comments.

FOR FURTHER INFORMATION CONTACT:

Concerning the proposed regulations, Donnell M. Rini-Swyers, (202) 622-4910; concerning submissions of comments, or to request a hearing, Richard Hurst, (202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

Under existing regulations, all cooperatives to which subchapter T applies (Subchapter T cooperatives) are required to make income tax returns. Except in the case of farmers’ cooperatives, the regulations require that the return be made on Form 1120. In the case of farmers’ cooperatives, the regulations require that the return be made on Form 990-C.

Most taxpayers required to make an income tax return on Form 1120 must file their return on or before the 15th day of the third month following the close of the taxpayer’s taxable year (21/2 month deadline). Some Subchapter T cooperatives that make their returns on Form 1120 are required to file by the 21/2 month deadline, but others are not required to file their returns until the 15th day of the ninth month following the close of the taxpayer’s taxable year (81/2 month deadline). Because the Form 1120 does not distinguish between Subchapter T cooperatives that must file by the 21/2 month deadline and those that must file by the 81/2 month deadline, the IRS has difficulty determining which filing deadline applies and deciding whether to assert delinquency and failure to pay penalties in the case of returns filed after the 21/2 month deadline.

Explanation of Provisions

The proposed regulations provide that all Subchapter T cooperatives must make their income tax returns on Form 1120-C, “U.S. Income Tax Return for Cooperative Associations,” or such other form as may be designated by the Commissioner. The information that Subchapter T cooperatives will be required to provide on new Form 1120-C will assist taxpayers and the IRS in determining the appropriate filing deadline. Having that information will reduce the burden on taxpayers and will help the IRS avoid asserting penalties in inappropriate cases. Having all Subchapter T cooperatives make their income tax returns on Form 1120-C will also eliminate confusion over which form to file and will promote efficiency in addressing income tax issues common to Subchapter T cooperatives.

Effect on Other Documents

The following publication is obsolete as of the date this regulation is published as a final rule in the Federal Register.

Announcement 84-26, 1984-11 I.R.B. 42.

Special Analyses

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because these 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 Internal Revenue Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Comments and Requests for a Public Hearing

Before these proposed regulations are adopted as final regulations, consideration will be given to any written (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. The IRS and Treasury Department request comments on the clarity of the proposed rules and how they can be made easier to understand. All comments will be available for public inspection and copying. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the Federal Register.

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1—INCOME TAXES, REPORTING AND RECORDKEEPING REQUIREMENTS

Paragraph 1. The authority citation for part 1 continues to read, in part, as follows:

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

Par. 2. Section 1.6012-2 is amended by revising paragraph (f) to read as follows:

§1.6012-2 Corporations required to make returns of income.

* * * * *

(f) Subchapter T cooperatives—(1) In general. For taxable years ending on or after December 31, 2006, a cooperative organization described in section 1381 (including a farmers’ cooperative exempt from tax under section 521) is required to make a return, whether or not it has taxable income and regardless of the amount of its gross income, on Form 1120-C, “U.S. Income Tax Return for Cooperative Associations,” or such other form as may be designated by the Commissioner.

(2) Farmers’ cooperatives. For taxable years ending before December 31, 2006, a farmers’ cooperative organization described in section 521(b)(1) (including a farmers’ cooperative that is not exempt from tax under section 521) is required to make a return on Form 990-C, “Farmers’ Cooperative Association Income Tax Return.”

* * * * *

Mark E. Matthews,
Deputy Commissioner for
Services and Enforcement.

Note

(Filed by the Office of the Federal Register on July 28, 2005, 8:45 a.m., and published in the issue of the Federal Register for July 29, 2005, 70 F.R. 43811)

Drafting Information

The principal author of these regulations is Donnell M. Rini-Swyers, Office of Assistant Chief Counsel (Procedure & Administration).

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