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Part 32. Published Guidance and Other Guidance to Taxpayers

Chapter 1. Chief Counsel Regulation Handbook

Section 5. Required Format for Regulations (Cont. 1)

32.1.5  Required Format for Regulations (Cont. 1)

32.1.5.4 
Preamble

32.1.5.4.7 
SUPPLEMENTARY INFORMATION Caption

32.1.5.4.7.5 
Special Analyses

32.1.5.4.7.5.4 
Regulatory Flexibility Act

32.1.5.4.7.5.4.3  (08-11-2004)
Applicability of RFA: Interpretative Regulations

  1. If the regulation is interpretative, but does not involve the internal revenue laws of the United States, it is not subject to the RFA. Include a statement in the Special Analyses section explaining that the RFA does not apply because it does not involve any internal revenue laws.

  2. If the final regulation is an interpretative final regulation for which an NPRM was issued prior to March 29, 1996, it is not subject to the RFA. Include the following statement in the Special Analyses section:

      "It has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to this regulation, and because the notice of proposed rulemaking preceding the regulations was issued prior to March 29, 1996, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply."

  3. If a regulation is interpretative and involves the internal revenue laws of the United States, it is subject to the RFA if it imposes a collection of information requirement on small businesses.

    1. If the regulation does not impose any collection of information requirement on small businesses, it is not subject to the RFA and, therefore, a regulatory flexibility analysis is not required. Include the following statement in the Special Analyses section:

      "It has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to this regulation, and because the regulation does not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. "

  4. If the regulation contains a collection of information requirement and if the regulation (rather than the statute) imposes the collection of information requirement, will the collection of information requirement have a significant economic impact on a substantial number of small businesses?

    1. If the regulation imposes a collection of information requirement that will not have a significant economic impact on a substantial number of small businesses, the IRS may certify that the collection will not impose a significant economic impact on a substantial number of small businesses. In this situation, a regulatory flexibility analysis is not required. Include the following certification in the Special Analyses section:

        "It is hereby certified that the collection of information contained in this regulation will not have a significant economic impact on a substantial number of small entities. Accordingly, a regulatory flexibility analysis is not required."

      Note:

      Follow this statement with a factual explanation of the basis for the certification. If the number of small entities affected is not substantial, the statement should explain why and include, to the extent practicable, a quantification of the number of small entities affected. If the economic impact on affected small entities is not significant, include a discussion of the burden (as reflected in the required submission to OMB) imposed on small entities by the collection of information. If in doubt about the accuracy of the certification, the drafting team should request comment on the accuracy of the certification.

    2. If the regulation imposes a collection of information requirement that will have a significant economic impact on a substantial number of small businesses, a regulatory flexibility analysis is required. Prepare an initial or final regulatory flexibility analysis, depending on the stage of rulemaking, and include the analysis in the [Initial/Final] Regulatory Flexibility Analysis section, which follows the Special Analyses section. Include the following statement in the Special Analyses section:

        "An [initial/final] regulatory flexibility analysis has been prepared for the required collection of information in this [notice of proposed rulemaking/Treasury Decision] under 5 U.S.C. chapter 6. The analysis is set forth below under the heading [Initial/Final] Regulatory Flexibility Analysis."

  5. If the regulation contains a collection of information requirement and if the regulation implements a statute or other legal authority that imposes a significant economic impact on a substantial number of small entities, to the extent the significant economic impact on a substantial number of small entities contained in the regulation flows directly from the underlying statute or other legal authority, a regulatory flexibility analysis is not required. Include the following certification in the Special Analyses section:

      "It is hereby certified that this regulation will not have a significant economic impact on a substantial number of small entities. Accordingly, a regulatory flexibility analysis is not required."

    Note:

    Follow this statement with an explanation of why the effect on small entities flows directly from the statute or other legal authority being implemented. If in doubt about the accuracy of the certification, the drafting team should request comment on the accuracy of the certification.

32.1.5.4.7.5.4.4  (08-11-2004)
Applicability of RFA: Legislative Regulations

  1. Legislative regulations are subject to the RFA. A regulatory flexibility analysis, however, may not be required for all legislative regulations.

  2. A regulatory flexibility analysis is not required if the regulation either

    1. Will not have a significant economic impact on a substantial number of small entities; or

    2. Implements a statute or other legal authority that imposes a significant economic impact on a substantial number of small entities and all significant economic impact on a substantial number of small entities contained in the regulation flows directly from the underlying statute or authority.

  3. If either of the conditions described in CCDM 32.1.5.4.7.5.4.4(2) above apply, include the following certification in the Special Analyses section:

      "It is hereby certified that this regulation will not have a significant economic impact on a substantial number of small entities. Accordingly, a regulatory flexibility analysis is not required."

    Note:

    Follow this statement with a factual explanation of the basis for the certification. If in doubt about the accuracy of the certification, the drafting team should request comment on the accuracy of the certification. If the regulation does not affect small entities, explain who is affected by the regulation. If the number of small entities affected is not substantial, explain why and include, to the extent practicable, a quantification of the number of small entities affected. If the economic impact on affected small entities is not significant, include a discussion of the economic impact/burden. If the effect on small entities flows directly from the statute or other legal authority being implemented, the statement should explain why that is the case.

  4. If the regulation (rather than the statute) will have a significant economic impact on a substantial number of small entities, a regulatory flexibility analysis is required. Prepare an initial or final regulatory flexibility analysis, depending on the stage of rulemaking, and include it in the [Initial/Final] Regulatory Flexibility Analysis section, which follows the Special Analyses section. Include the following statement in the Special Analyses section:

      "An [initial/final] regulatory flexibility analysis has been prepared for this [notice of proposed rulemaking/Treasury Decision] under 5 U.S.C. chapter 6. The analysis is set forth below under the heading [Initial/Final] Regulatory Flexibility Analysis."

32.1.5.4.7.5.4.5  (08-11-2004)
Applicability of the RFA to Temporary Regulations

  1. The RFA does not apply to Temporary Regulations. Include the following statement in the Special Analyses section:

      "For applicability of the Regulatory Flexibility Act, please refer to the cross-reference notice of proposed rulemaking published elsewhere in this Federal Register."

32.1.5.4.7.5.4.6  (08-11-2004)
Waiver or Delay of Regulatory Flexibility Analysis When a Regulation Responds to an Emergency Situation or Statutory or Judicial Deadline

  1. For rules and procedures for waiver or delay of initial and final regulatory flexibility analyses when an NPRM or final regulation responds to an emergency situation or statutory or judicial deadline, see section 2(g) of TD-28-01.

32.1.5.4.7.5.4.7  (08-11-2004)
RFA Checklist

  1. The drafting team must prepare a RFA Checklist for both the NPRM and the final regulation, regardless of whether a regulatory flexibility analysis is required. See Exhibit 32.1.5-2, Chief Counsel Notice N(30)(15)531-1; Exhibit 32.1.5-3, Reg Flex Checklist; and Exhibit 32.1.5-4, TD-28-01.

32.1.5.4.7.6  (08-11-2004)
Comments and Public Hearings

  1. For ANPRMs, the drafting team should use the heading Comments to notify the public that the IRS will consider written and electronic comments before the agency issues proposed regulations and that comments will be available for public inspection.

  2. For NPRMs, the drafting team should use the heading Comments and Public Hearing if the document includes a notice of public hearing (and location of the hearing). If the document invites the public to request a hearing, use the heading Comments and Requests for Public Hearing. Public comments on NPRMs may address the substantive provisions of the regulation and how to make the regulation easier to understand. See Exhibit 32.1.5-5, Model Language for "Comments and Public Hearing" and Exhibit 32.1.5-6, Model Language for "Comments and Requests for Public Hearing."

32.1.5.4.7.7  (08-11-2004)
Drafting Information

  1. This heading identifies the principal author(s) of the regulation.

    Example:

    Drafting Information
      The principal author of these proposed regulations is [Drafting Attorney Name] of the Office of Associate Chief Counsel (Income Tax and Accounting).

32.1.5.5  (08-11-2004)
List of Subjects

  1. In the List of Subjects section, the drafting team should list the index terms for each CFR part number cited in the CFR Title and Part Number section (see CCDM 32.1.5.3.3). If citing more than one CFR part, the drafting team should list them in numerical order. The drafting team should put the index terms within each CFR part in alphabetical order, separated by commas. (List all the index terms contained in a part even if some are not related to the regulation.) Capitalize only the first word of each term. See Exhibit 32.1.5-7, List of Subjects.

    Examples:

    Citing one CFR part List of Subjects in 26 CFR Part 1
     Income taxes, Reporting and recordkeeping requirements.
    Citing two or more CFR parts List of Subjects

    26 CFR Part 1
     Income taxes, Reporting and recordkeeping requirements.

    26 CFR Part 602
     Reporting and recordkeeping requirements.

  2. The Federal Register Thesaurus of Indexing Terms, containing the index terms is available at http://www.archives.gov/federal_register/code_of_ federal_regulations/thesaurus.html.

32.1.5.6  (08-11-2004)
Words of Issuance

  1. The words of issuance describe how the agency proposes to amend (in the case of an NPRM) or amends (in the case of a final or temporary regulation) the CFR and serves as a "bridge" between the preamble and the amendments proposed or adopted. The drafting team should state the words of issuance in the present tense.

    Examples:

    NPRM Proposed Amendments to the Regulations


     Accordingly, 26 CFR part 1 is proposed to be amended as follows:
    TD Adoption of Amendments to the Regulations


     Accordingly, 26 CFR parts 1 and 602 are amended as follows:

32.1.5.7  (08-11-2004)
Structure of Regulatory Text

  1. A regulation makes changes to the CFR. Therefore, the regulation must be drafted exactly as it is to appear in the CFR by conforming to the structure and nomenclature of the CFR. To ensure that a new regulation will conform to existing regulations in the CFR, the drafting team should check the existing regulations in the current CFR volume, the latest "List of CFR Sections Affected" (LSA), and the monthly List of CFR Sections Affected in the Reader Aids section in the latest FR.

  2. The current CFR printed volume and the most recent List of CFR Sections Affected are online at www.gpoaccess.gov/cfr. The Electronic Code of Federal Regulations (eCFR) is a currently updated version of the CFR and the eCFR is online at www.gpoaccess.gov/ecfr. The staff of the OFR has given their assurance that the site is accurate; however, it is not yet an official legal edition of the CFR.

  3. For guidelines on numbering a regulation, see CCDM 32.1.2.2.6.

32.1.5.7.1  (08-11-2004)
Paragraphs

  1. The text of a regulation must be in paragraphs. In general, all paragraphs must be designated with one of the following level designations that are used in the CFR:

    • Level 1 (a), (b), (c), etc.

    • Level 2 (1), (2), (3), etc.

    • Level 3 (i), (ii), (iii), etc.

    • Level 4 (A), (B), (C), etc.

    • Level 5 (1), (2), ( 3), etc.

    • Level 6 (i), (ii), (iii), etc.

  2. If a paragraph numbering is not sequential (for example, to leave space for rules to be added later), the drafting team should designate and reserve the missing paragraph.

  3. There are three exceptions to the requirement that a paragraph must be designated. A designation is not required:

    1. If a regulation section consists of only one paragraph,

    2. If the text is introductory text to a paragraph, and

    3. If the paragraph is in a definition section and the definitions are listed in alphabetical order.

  4. The drafting team should avoid paragraphs below level 3 (for example, the (a)(1)(i) level in §1.501(c)(3)-1(b)(i)). If the regulation requires 4 or more levels, the drafting team should limit the last level to lists of items that can be expressed in words or phrases. The drafting team should reduce the rules to their simplest form, review the outline, and consider the spin-off technique illustrated in CCDM 32.1.4.2, Example 1.

  5. The OFR does not permit paragraphs that contain succeeding flush material (which is concluding text or undesignated language following one or more lower level paragraphs).

    THIS NOT THIS
    (a) Definition. A qualified agreement is a written agreement between an employer and an employee that--

    1. Was entered into after 1989;

    2. Is binding under State law;

    3. Includes an arbitration procedure; and

    4. If entered into after 1991, satisfies section 1 of the Arbitration Agreements Act.


    (b) Definitions. The following definitions apply to this section--
     Employee means...
     Employer means...
     Fee means...     		(a) Definition. A qualified agreement is a written agreement between an employer and an employee that--

    1. Was entered into after 1989;

    2. Is binding under State law; and

    3. Includes an arbitration procedure.


    An agreement entered into after 1991, however, is not a qualified agreement unless it also satisfies section 1 of the Arbitration Agreements Act.

32.1.5.7.2  (08-11-2004)
Headings of Sections and Paragraphs

  1. General headings for sections and paragraphs identify the subject matter discussed. Each section must have a heading. Headings are optional for paragraphs but, if used for one paragraph in a section, headings must be used for all paragraphs at that same level. Because headings are beneficial to the reader, the drafting team should use them for at least all level 1 paragraphs.

  2. Except as provided in paragraph 2 of CCDM 32.1.5.7.2, the drafting team should capitalize the first letter of the first word of a section or paragraph heading and end the heading with a period. The drafting team should underline the heading, but not the period. When published in the FR, section headings appear in bold face and paragraph headings appear in italics.

  3. If a paragraph heading is immediately followed by a heading for one or more lower level paragraphs, use a double dash (--) instead of a period and place a period after the heading of the last lower level paragraph.

    Example 1:

      (a) Introduction--(1) Overview . Text.
      (2) General approach. Text

    Example 2:

      (c) Definitions and scope--(1) Notional principal contract--(i) In general. Text.
      (ii) Excluded contracts. Text.

  4. Any change to a section or paragraph heading must be made by amending the regulation.

32.1.5.7.3  (08-11-2004)
References to Code Sections and CFR Provisions

  1. The drafting team should state all references to regulations in terms of a specific part, section, or paragraph. The drafting team should not use "subparagraph" , "herein" , " supra" , and "infra."

  2. References to a specific section or chapter in the regulation text are understood to refer to that section or chapter in the Code. For example, "… any exchange described in section 367(b)" is understood to refer to section 367(b) of the Code.

  3. When the regulation text refers to a section or chapter of the Internal Revenue Code and a section or chapter of another law/document, the drafting team should write the regulation’s text in a way that clearly distinguishes which law/document is being referenced.

  4. The drafting team should use "§" to refer to another regulation section, unless it is the first word in a sentence. In that case, "Section" must be spelled out. Do not type a space between the "§" symbol and the regulation section number. To refer to two or more sections, use "§§. " (For example, §1.461-4; §§1.446-1(e)(3) and 1.461-4.)

  5. To refer to paragraph (b)(1) when in paragraph (a) of the same section, use "paragraph (b)(1) of this section." To refer to a provision within the same paragraph (a), use "this paragraph (a)."

  6. To refer to a regulation in a different part of the CFR, follow the reference with "of this chapter." For example, to refer to the rules of §301.6109-1 in §1.461-4, write "See the rules in §301.6109-1 of this chapter."

32.1.5.7.4  (08-11-2004)
Language to Explain, Add, Amend, or Remove Text from the CFR

  1. The drafting team must use certain language to explain, add, amend, or remove text from the CFR. This language is described in this subsection.

32.1.5.7.4.1  (08-11-2004)
CFR Part Heading

  1. Immediately following the words of issuance, the drafting team must state the CFR PART heading for the first part amended. Capitalize the heading and type it flush left.

  2. If a regulation affects more than one CFR part, each subsequent CFR PART heading immediately precedes the text of the regulation for that part. Present the CFR parts in numerical order.

    Example:

    PART 1--INCOME TAXES

32.1.5.7.4.2  (08-11-2004)
Instructional Paragraphs

  1. The drafting team must designate the first instructional paragraph in a regulation as "Paragraph 1" . Designate subsequent paragraphs as "Par. 2." , "Par. 3." , etc. The drafting team must continue this numbering, even with a change in Part numbers.

  2. Following each PART heading, the drafting team must set out an instructional paragraph giving the CFR authority citation for the specific CFR part the text is amending.

  3. After the instructional paragraph giving the CFR authority citation, the drafting team must set out one or more instructional paragraphs stating the text of the regulation as amendments to the CFR part. Use required terms (amendatory language) to identify each specific change that is to be made to the CFR. In these instructional paragraphs first set out the instructions for changing the CFR and then set out the text.

  4. Use one instructional paragraph for one or more amendments to a single regulation section, or the addition of entire consecutive regulation sections.

    Example 1 (No change to the authority citation):

       Paragraph 1. The authority citation for part 1 continues to read in part as follows:
    Authority: 26 U.S.C. 7805 * * *
      Par. 2. In §1.451-2, paragraphs (g) and (h) are revised to read as follows:
    [REGULATION TEXT]
      Par. 3. In §1.451-4, paragraph (a)(1)(ii) is added to read as follows:
    [REGULATION TEXT]
      Par. 4. Sections 1.467-1 through 1.467-9 are added to read as follows:
    [REGULATION TEXT]

    Example 2 (Additions to the authority citation):

       Paragraph 1. The authority citation for part 31 is amended by adding entries in numerical order to read in part as follows:
      Authority: 26 U.S.C. 7805 * * *
      Section 31.6302-1 also issued under 26 U.S.C. 6302(a).
      Section 31.6302-2 also issued under 26 U.S.C. 6302(a). * * *
      Section 31.6704-1 also issued under 26 U.S.C. 6704. * * *
      Par. 2. Section 31.6302-0 is amended by:
      1. Removing the entry for §31.6302-1(i).
        2. Redesignating the entry for §31.6302-1(h) as the entry for §31.6302-1(i).
        3. Redesignating the entry for §31.6302-1(m) as the entry for §31.6302-1(n).
        4. Redesignating the entry for §31.6302-1(k) as the entry for §31.6302-1(m).
        5. Redesignating the entry for §31.6302-1(j) as the entry for §31.6302-1(k).
      6. Adding an entry for §31.6302-1(h).
      7. Adding an entry for §31.6302-1(j).
      The revisions and additions read as follows:
    [REGULATION TEXT]
      Par. 3. Section 31.6302-1 is amended by:
      1. Revising paragraph (k)(1).
      2. Revising paragraph (m) (1).
      3. Adding a new sentence at the end of paragraph (n).
      The addition and revisions read as follows:
    [REGULATION TEXT]
    PART 54 -- PENSION EXCISE TAXES
      Par. 4. The authority citation for part 54 continues to read as follows:
      Authority: 26 U.S.C. 7805 * * *
      Par. 5. Section 54.4980F-1 is added to read as follows:
    [REGULATION TEXT]

32.1.5.7.4.3  (08-11-2004)
Amendatory Language

  1. Amendatory language describes the specific changes a regulation is making to the CFR. These are the instructions to the editors of the CFR. The most common changes are changes to sections and paragraphs. However, if it becomes necessary to change a part or add a part, the same drafting principles apply.

  2. To determine the correct amendatory language to use, the drafting team should reference the most recent version of the regulations. First, the drafting team should review the regulations in the current CFR published by the OFR (not the CCH, PH, or RIA version). The drafting team should then review the "List of CFR Sections Affected," a cumulative monthly numerical index to regulations amended since the CFR was last updated. Finally, if there is the possibility that the regulations have been amended in the last month, the drafting team should check the "CFR Parts Affected" in the Reader Aids section of the most recent FR.

  3. The current CFR printed volume and the most recent List of CFR Sections Affected are online at www.gpoaccess.gov/cfr. The Electronic Code of Federal Regulations (eCFR) is a currently updated version of the CFR. The eCFR is online at www.gpoaccess.gov/ecfr. The staff of the OFR has given their assurance that it is accurate; however, eCFR is not yet an official legal edition of the CFR.

  4. If the regulation describes a change to the CFR but does not set forth the text of the new provision, the drafting team should place the regulation section changed and the appropriate amendatory term on a separate line before the instructional paragraph. The drafting team should place the section and amendatory term flush left, in bold font, with the amendatory text in brackets. See CCDM 32.1.5.7.4.3.1, examples for CORRECT and NOMENCLATURE CHANGE.

32.1.5.7.4.3.1  (08-11-2004)
Terms and Instructional Paragraphs

  1. The drafting team should use only the following terms in an instructional paragraph to describe changes to the CFR.

  2. AMEND. Existing CFR text is changed. This term is an introductory term and must be used with one or more amendatory terms.

    Example:

      Par. 2. Section 1.163-1 is amended by:
      1. Adding paragraph (e)(2)(iii).
      2. Revising paragraph (e)(4).
      The addition and revision read as follows:

  3. ADD. Use this term when adding new text (such as a section or paragraph) to the CFR.

    Example:

    Par. 3. Section 1.163-13 is added to read as follows:

  4. CORRECT. Use this term when fixing a clerical or typographical error or oversight in a recently published regulation. The Publications and Regulations Branch generally fixes clerical and typographical errors.

    Example:

    §1.6045-4 [Corrected]
       Par. 4. In §1.6045-4, paragraph (r), paragraph (i) of Example 4, line 1, the language "$20,000" is corrected to read "$10,000" .

  5. NOMENCLATURE CHANGE. Use this term when changing a term or phrase throughout a regulation (or portion thereof).

    Example:

    §1.468B-4 [Amended]
       Par. 5. Section 1.468B-4 is amended by removing the language "Assistant Chief Counsel (Income Tax & Accounting) " and adding "Associate Chief Counsel (Income Tax & Accounting)" in its place.

  6. REDESIGNATE. Use this term when moving existing text to a vacant position and when assigning existing text a new designation.

    Example:

       Par. 6. Section 1.468B-0 is amended by:
       1. Revising the introductory text.
       2. Redesignating the entry in the table of contents for §1.468B-1(k) as the entry for §1.468B-1(l).
       3. Adding a new entry in the table of contents for §1.468B-1(k), and adding entries for §§1.468B-5(c) and 1.468B-9.
       The revisions and additions read as follows:

  7. REMOVE. Use this term when taking existing text out of the CFR.

    Example:

    §40.6011(a)-1T [Removed]
      Par. 7. Section 40.6011(a)-1T is removed.

  8. RESERVE. Use this term when reserving a section, paragraph, or lower level of a paragraph. Use it to maintain the numerical continuity within a regulation and to indicate where future text will be added.

    Example 1:

    §1.904-1T(a) [Removed and Reserved]
      Par. 8. In §1.904-1T, paragraph (a) is removed and reserved.

    Example 2: