[Federal Register: June 16, 2000 (Volume 65, Number 117)]
[Proposed Rules]
[Page 37728-37738]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16jn00-18]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 301
[REG-105316-98]
RIN 1545-AW67
Information Reporting for Payments of Qualified Tuition and
Payments of Interest on Qualified Education Loans; Magnetic Media
Filing Requirements for Information Returns
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking and requests to videoconference
the public hearing.
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SUMMARY: This document contains proposed regulations relating to the
information reporting requirements under section 6050S of the Internal
Revenue Code for payments of qualified tuition and related expenses and
interest on qualified education loans, including the filing of
information returns on magnetic media. The regulations reflect changes
to the law made by the Taxpayer Relief Act of 1997. The regulations
provide guidance to eligible educational institutions and insurers
receiving payments of, or making reimbursements or refunds of,
qualified tuition and related expenses. The regulations also provide
guidance to payees receiving interest payments on qualified education
loans. This document also announces that a public hearing will be held
on the proposed regulations upon request and that persons outside the
Washington, DC, area who wish to testify at the hearing may request
that the IRS videoconference the hearing to their sites.
DATES: Written or electronically generated comments must be received by
September 14, 2000. Requests to videoconference the hearing to other
sites must be received by August 15, 2000.
[[Page 37729]]
ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-105316-98), room
5226, 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 5 p.m. to: CC:DOM:CORP:R (REG-
105316-98), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue, NW., Washington, DC. Taxpayers may also submit comments
electronically via the internet by selecting the ``Tax Regs'' option on
the IRS Home Page, or by submitting comments directly to the IRS
internet site at http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.irs.ustreas.gov/prod/tax_regs/regslist.html.
The IRS will publish the time and date of the public hearing and the locations
of any videoconferencing sites in the Federal Register.
FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Donna
Welch, (202) 622-4910; concerning submissions of comments, the hearing,
and/or to be placed on the building access list to attend the hearing,
Guy Traynor, (202) 622-7180; concerning the magnetic media filing
specifications, waivers for filing on magnetic media, and extensions of
time, contact the Internal Revenue Service, Martinsburg Computing
Center, (304) 263-8700 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in this notice of proposed
rulemaking has been submitted to the Office of Management and Budget
for review in accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)). Comments on the collection of information should be
sent to the Office of Management and Budget, Attn: Desk Officer for the
Department of the Treasury, Office of Information and Regulatory
Affairs, Washington, DC 20503, with copies to the Internal Revenue
Service, Attn: IRS Reports Clearance Officer, OP:FS:FP, Washington, DC
20224. Comments on the collection of information should be received by
August 15, 2000. Comments are specifically requested concerning:
Whether the proposed collection of information is necessary for the
proper performance of the functions of the IRS, including whether the
information will have practical utility;
The accuracy of the estimated burden associated with the proposed
collection of information (see below);
How the quality, utility, and clarity of the information to be
collected may be enhanced;
How the burden of complying with the proposed collection of
information may be minimized, including through the application of
automated collection techniques or other forms of information
technology; and
Estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to provide information.
The collection of information in this proposed regulation is in
Secs. 1.6050S-1 and 1.6050S-2. In general, eligible educational
institutions and insurers must file a Form 1098-T, ``Tuition Payments
Statement,'' with the IRS for each individual with respect to whom
payments of qualified tuition and related expenses were received, or
reimbursements or refunds of such expenses were made, and furnish an
information statement to such individual. This collection of
information is required in order to assist the IRS and taxpayers in
calculating the amount of any education tax credit allowable under
section 25A. In addition, payees who receive from any payor interest
payments aggregating $600 or more on one or more qualified education
loans must file a Form 1098-E, ``Student Loan Interest Statement,''
with the IRS and furnish an information statement to the payor. This
collection of information is required in order to assist the IRS and
taxpayers in calculating the amount of any student loan interest
deduction allowable under section 221. The likely respondents are
businesses or other for-profit institutions and nonprofit institutions.
Estimated total annual reporting burden for 1998 for Form 1098-T:
2,419,438 hours.
Estimated average annual burden hours per response for Form 1098-T:
7 minutes.
Estimated number of responses for 1998 for Form 1098-T: 20,738,039.
Estimated annual frequency of responses: Once.
Estimated total annual reporting burden for 1998 for Form 1098-E:
437,691 hours.
Estimated average annual burden hours per response for Form 1098-E:
3 minutes.
Estimated number of responses for 1998 for Form 1098-E: 8,753,819.
Estimated annual frequency of responses: Once.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a valid
control number assigned by the Office of Management and Budget.
Books or records relating to a collection of information must be
retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns and
tax return information are confidential, as required by 26 U.S.C. 6103.
Background
1. Information Reporting Requirements
This document contains proposed amendments to the Income Tax
Regulations (26 CFR part 1) relating to information reporting
requirements under section 6050S. The Taxpayer Relief Act of 1997
(Public Law 105-34 (111 Stat. 788) (TRA '97)) added section 25A of the
Internal Revenue Code to provide the Hope Scholarship Credit and the
Lifetime Learning Credit (education tax credits). In general, the Hope
Scholarship Credit and the Lifetime Learning Credit allow certain
taxpayers who pay qualified tuition and related expenses to an eligible
educational institution to claim a nonrefundable credit against their
Federal income tax liability. On January 6, 1999, the IRS issued
proposed regulations under section 25A. See 64 FR 794 (1999).
TRA '97 also added section 221 of the Internal Revenue Code to
allow certain taxpayers who pay interest on qualified education loans
to claim a Federal income tax deduction for their interest payments. In
general, a deduction is allowed for interest payments made during the
first 60 months in which interest payments are required on a qualified
education loan. However, no interest deduction is allowed for any
interest paid before January 1, 1998. On January 21, 1999, the IRS
issued proposed regulations under section 221. See 64 FR 3257 (1999).
In addition, TRA '97 added section 6050S of the Internal Revenue
Code, which requires eligible educational institutions to file
information returns and to furnish written information statements to
assist taxpayers and the IRS in determining any education tax credit
allowable under section 25A. Similarly, section 6050S requires any
person engaged in a trade or business of making payments to any
individual under an insurance agreement as reimbursements or refunds of
qualified tuition and related expenses to file information returns and
to furnish written information statements. Lastly, section 6050S
requires certain payees who receive payments of interest on one or more
qualified education loans to file information returns and to furnish
written information statements to assist taxpayers and the IRS in
determining
[[Page 37730]]
any interest deduction allowable under section 221.
The IRS has published several notices prescribing limited
information reporting for eligible educational institutions for the
years 1998, 1999, and 2000. On December 22, 1997, the IRS published
Notice 97-73 (1997-2 C.B. 335), which describes the information that an
eligible educational institution must report for 1998. On September 8,
1998, the IRS published Notice 98-46 (1998-36 I.R.B. 21), which extends
the application of Notice 97-73 to information returns required under
section 6050S for 1999. On December 7, 1998, the IRS published Notice
98-59 (1998-49 I.R.B. 16), which modifies the prior Notices by
providing that an institution is not required to file information
returns for students who are: (1) Enrolled during the year only in
courses for which the student receives no academic credit; or (2)
nonresident alien students, unless the student requests the institution
to report. On July 26, 1999, the IRS published Notice 99-37 (1999-30
I.R.B. 124), which extends the application of Notice 97-73 (as
modified) to information returns required under section 6050S for 2000.
In addition, the IRS has published several notices describing the
information reporting for certain payees who receive interest on
qualified education loans during the years 1998, 1999, and 2000. On
January 20, 1998, the IRS published Notice 98-7 (1998-3 I.R.B. 54),
which describes the information reporting required under section 6050S
for 1998. On November 16, 1998, the IRS published Notice 98-54 (1998-46
I.R.B. 25), which modifies Notice 98-7 to reflect a technical change to
section 221 made by the Internal Revenue Service Restructuring and
Reform Act of 1998 (Public Law 105-206 (112 Stat. 685)), and extends
the application of Notice 98-7 (as modified) to information reporting
required under section 6050S for 1999. On July 26, 1999, the IRS
published Notice 99-37, which extends the application of Notice 98-7
(as modified) to information returns required under section 6050S for
2000.
2. Magnetic Media Requirements
This document also contains proposed amendments to the Regulations
on Procedure and Administration (26 part 301) relating to the filing of
information returns on magnetic media under section 6011(e). Section
6011(e) authorizes the Secretary to prescribe regulations providing the
standards for determining which returns must be filed on magnetic
media. Section 6011(e)(2)(A) provides that the Secretary shall not
require any person to file returns on magnetic media unless the person
is required to file at least 250 returns during the calendar year.
Section 6011(e)(2)(B) provides that, in prescribing regulations, the
Secretary shall consider the ability of the taxpayer to comply at
reasonable cost with the requirements of the regulations.
Explanation of Provisions
1. Information Reporting for Payments and Reimbursements or Refunds of
Qualified Tuition and Related Expenses
The proposed regulations require an eligible educational
institution (as defined in section 25A(f)(2) and the regulations
thereunder) (an institution) that receives payments of qualified
tuition and related expenses (as defined in section 25A(f)(1) and the
regulations thereunder) with respect to any individual, or makes
reimbursements or refunds of such amounts, to file a Form 1098-T with
the IRS. In addition, the proposed regulations require any person
engaged in a trade or business of making payments under an insurance
arrangement as reimbursements or refunds (or other similar amounts) of
qualified tuition and related expenses (an insurer) to file a Form
1098-T with the IRS.
Under the proposed regulations, the following information must be
reported on Form 1098-T: (a) The name, address, and taxpayer
identification number (TIN) (as defined in section 7701(a)(41)) of the
institution or the insurer; (b) the name, address, and TIN of the
individual with respect to whom payments of qualified tuition and
related expenses were received, or reimbursements or refunds were made;
(c) the aggregate amount of payments of qualified tuition and related
expenses from any source that the institution received with respect to
the individual during the calendar year; (d) the aggregate amount of
reimbursements or refunds of qualified tuition and related expenses
that the institution or insurer made with respect to the individual
during the calendar year; (e) the aggregate amount of any scholarships
or grants that the institution processed during the calendar year for
the payment of the individual's costs of attendance; (f) an indication
by the institution whether the individual was enrolled for at least
half of the normal full-time work load for the course of study the
individual is pursuing for at least one academic period that begins
during the calendar year; (g) an indication by the institution whether
the individual was enrolled in a program leading to a graduate-level
degree, graduate-level certificate, or other recognized graduate-level
educational credential; and (h) any other information required by Form
1098-T and its instructions.
The proposed regulations reserve the requirement in section
6050S(b)(2)(B) that an institution or insurer obtain and report the
name, address, and TIN of any taxpayer who will claim the individual
with respect to whom payments are received, or reimbursements or
refunds are made, as a dependent for purposes of the deduction
allowable under section 151 for the taxable year. Thus, under the
proposed regulations, there is no requirement to obtain and report the
name, address, and TIN of any taxpayer who will claim the individual as
a dependent on the taxpayer's Federal income tax return.
Consistent with the exceptions to required reporting in Notice 98-
59, the proposed regulations provide that an institution or insurer is
not required to file a Form 1098-T for an individual who is a
nonresident alien, unless the individual requests that the institution
or insurer report. In addition, an institution is not required to file
a Form 1098-T for an individual who is enrolled during the calendar
year only in courses for which the individual receives no academic
credit. Under the proposed regulations, the term academic credit means
credit awarded by an institution for the completion of coursework
leading toward a post-secondary degree, certificate, or other
recognized post-secondary educational credential.
The proposed regulations provide that, in determining the payments
for qualified tuition and related expenses that an institution must
report, payments received with respect to an individual from any source
(except for any scholarship or grant that, by its terms, must be
applied to expenses other than qualified tuition and related expenses,
such as room and board) are treated as payments of qualified tuition
and related expenses up to the total amount billed for such expenses.
The proposed regulations provide that an institution or insurer
must furnish an information statement to each individual for whom it is
required to file a Form 1098-T. The proposed regulations provide that
the statement must include the information included on the Form 1098-T
filed with the IRS and a legend that identifies the statement as
important tax information being furnished to the IRS. The statement
must include instructions that state that the taxpayer may not be able
to claim an education tax credit under
[[Page 37731]]
section 25A and the regulations thereunder with respect to the total
payments of qualified tuition and related expenses reported for the
calendar year. The instructions must state that the amount of the
scholarships, grants, reimbursements, or refunds reported for the
calendar year and other similar amounts not reported (because they are
not processed by the institution) may reduce the amount of any
allowable education tax credit for the taxable year or a prior taxable
year. The instructions must state that the taxpayer should refer to
relevant IRS forms and publications (such as Form 8863, ``Education
Credits,'' and Publication 970, ``Tax Benefits for Higher Education'')
for explanations relating to the eligibility requirements for, and the
calculation of, any allowable education tax credit.
The proposed regulations reserve the requirement in section
6050S(d) that an institution or insurer furnish a statement to any
taxpayer who will claim the individual with respect to whom payments
are received, or reimbursements or refunds are made, as a dependent for
purposes of the deduction allowable under section 151 for the taxable
year. Thus, under the proposed regulations, there is no requirement to
furnish a statement to any taxpayer who will claim the individual as a
dependent on the taxpayer's Federal income tax return.
The proposed regulations describe the rules for the time and manner
of filing information returns with the IRS and furnishing information
statements. Forms 1098-T must generally be filed with the IRS on or
before February 28 (March 31 if filed electronically) of the year
following the calendar year in which the payments were received, or
reimbursements or refunds were made. In general, an institution or
insurer must furnish an information statement to each individual with
respect to whom payments of qualified tuition and related expenses were
received, or reimbursements or refunds were made, on or before January
31 of the year following the calendar year in which payments were
received, or reimbursements or refunds were made. Although the
regulations do not specifically address the issue of electronic
transmission of information statements, the IRS is currently studying
the issue. Accordingly, the IRS may address that issue in future
guidance.
Under the proposed regulations, an institution or insurer may be
subject to a penalty under section 6721 for failure to file correct
Forms 1098-T and a penalty under section 6722 for failure to furnish
correct information statements. The proposed regulations generally
follow the rules under section 6724 for waivers of penalties for
certain failures due to reasonable cause. The regulations also provide
special rules for soliciting an individual's TIN. An institution or
insurer that complies with those rules will not be penalized for any
failure to obtain or include a correct TIN on a Form 1098-T or the
related information statement.
2. Information Reporting for Payments of Interest on Qualified
Education Loans
The proposed regulations require any person engaged in a trade or
business that receives from any payor interest of $600 or more for any
calendar year on one or more qualified education loans (as defined in
section 221(e)(1) and the regulations thereunder) (a payee) to file a
Form 1098-E with the IRS. Under the proposed regulations, a payee must
report the name, address, and taxpayer identification number (TIN) of
the payee; the name, address, and TIN of the payor; and the aggregate
amount of interest received during the calendar year from the payor.
The payee may be the lender, the holder of the loan, or the loan
servicer. The regulations define the payor as the individual carried on
the books and records of the payee as the borrower on a qualified
education loan. If there are multiple borrowers, the principal borrower
indicated on the payee's books and records is treated as the payor for
purposes of section 6050S.
Under the proposed regulations, a payee is required to report only
interest payments received on a qualified education loan during the
first 60 months in which interest payments are required on the loan.
The proposed regulations, in general, incorporate the rules of section
221 and the regulations thereunder to determine the 60-month period for
which interest payments must be reported. Under the proposed
regulations, the 60-month period generally begins on the date the
qualified education loan first enters repayment status. However, for
qualified education loans made before January 1, 1998, if the payee
does not know, and does not have reason to know, the date on which the
loan entered repayment status, then, for information reporting
purposes, the 60-month period begins on January 1, 1998. For defaulted
loans made before January 1, 1998, if the payee does not know, and does
not have reason to know, the date on which the loan entered repayment
status, then, for information reporting purposes, the 60-month period
begins on the earlier of the date the loan went into default or January
1, 1998. If the payee does not know, and does not have reason to know,
either the date the loan entered repayment status or the default date,
then, for information reporting purposes, the 60-month period begins on
January 1, 1998.
The proposed regulations provide that, in determining the aggregate
amount of interest payments to be reported by a payee, the term
interest includes stated interest, loan origination fees (other than
any fees for services), and capitalized interest as described in
proposed regulations Sec. 1.221-1(h)(2). However, in order to provide
payees sufficient time to develop systems to report amounts other than
stated interest, the proposed regulations do not require payees to
report loan origination fees and capitalized interest for loans made
before January 1, 2002.
The proposed regulations provide rules to determine which loans are
qualified education loans subject to information reporting under
section 6050S. The regulations provide that, unless the loan is
subsidized, guaranteed, financed, or otherwise treated as a student
loan under a program of the Federal, state, or local government or an
eligible educational institution, the payee must request and obtain a
certification from the payor that the loan will be used solely to pay
qualified higher education expenses. The regulations provide that the
payee may use Form W-9S, ``Request for Student's Social Security Number
and Borrower Certification,'' to request and obtain the certification.
If a payee fails to obtain a required certification, the loan is not
treated as a qualified education loan for purposes of section 6050S.
The proposed regulations provide that a payee must furnish an
information statement to each payor for whom it is required to file a
Form 1098-E. The proposed regulations provide that the statement must
include the information included on the Form 1098-E filed with the IRS
and a legend that identifies the statement as important tax information
being furnished to the IRS. The statement must include instructions
that state that, under section 221 and the regulations thereunder, the
payor may not be able to deduct the full amount of interest reported on
the statement. The instructions must state that interest payments are
deductible only during the first 60-months that interest payments are
required. If the payee reports only stated interest, the instructions
must state that the payor may be able to deduct additional amounts
(e.g., certain loan origination fees and capitalized interest) not
reported on the statement. The instructions must also state that the
payor should refer to relevant IRS forms
[[Page 37732]]
and publications (such as Publication 970) for explanations relating to
the eligibility requirements for, and the calculation of, any allowable
interest deduction on qualified education loans.
The proposed regulations describe the rules for the time and manner
of filing information returns with the IRS and furnishing information
statements to payors. Forms 1098-E must generally be filed with the IRS
on or before February 28 (March 31 if filed electronically) of the year
following the calendar year in which the interest payments were
received. In general, a payee must furnish an information statement to
the payor on or before January 31 of the year following the calendar
year in which interest payments were received. Although the regulations
do not specifically address the issue of electronic transmission of
information statements, the IRS is currently studying the issue.
Accordingly, the IRS may address that issue in future guidance.
Under the proposed regulations, a payee may be subject to a penalty
under section 6721 for failure to file correct Forms 1098-E and a
penalty under section 6722 for a failure to furnish correct information
statements. The proposed regulations generally follow the rules under
section 6724 for waivers of penalties for certain failures due to
reasonable cause. The regulations also provide special rules for
soliciting the payor's TIN. A payee that complies with those rules will
not be penalized for any failure to obtain or include a correct TIN on
a Form 1098-E or the related information statement.
3. Requirement to File Information Returns on Magnetic Media
The proposed regulations amend the regulations under section
6011(e) to require eligible educational institutions, insurers, and
payees who are required to file 250 or more Forms 1098-T or 1098-E to
file on magnetic media. Under Sec. 301.6011-2(a)(1), the term magnetic
media means any media permitted under applicable regulations, revenue
procedures, or publications, including magnetic tape, tape cartridge,
and diskette, as well as other media (such as electronic filing).
Proposed Effective Date
These regulations are proposed to apply to information returns
required to be filed, and information statements required to be
furnished, after December 31, 2001. Taxpayers may rely on these
proposed regulations for guidance pending the issuance of final
regulations. If, and to the extent, future guidance is more restrictive
than the guidance in the proposed regulations, the future guidance will
be applied without retroactive effect.
Special Analyses
It has been determined that these proposed regulations are not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It has also been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these regulations. An initial
regulatory flexibility analysis has been prepared for this notice of
proposed rulemaking under 5 U.S.C. 603 and is set forth under the
heading ``Initial Regulatory Flexibility Analysis'' in this preamble.
Pursuant to section 7805(f), 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.
Initial Regulatory Flexibility Analysis
The collection of information contained in Secs. 1.6050S-1(a) and
(b) and 1.6050S-2(a) and (c) is needed to assist the IRS and taxpayers
in determining the amount of any education credit allowable under
section 25A and the amount of any interest deduction allowable under
section 221. The objectives of the proposed regulations are to provide
uniform, practicable, and administrable rules under section 6050S. The
types of small entities to which the proposed regulations may apply are
small eligible educational institutions (such as colleges and
universities), certain insurers who reimburse educational expenses, and
certain payees who receive payments of interest on qualified education
loans. As of the end of December 1999, a total of 20,738,039 Forms
1098-T were filed with the IRS for 1998 and a total of 8,753,819 Forms
1098-E were filed with the IRS for 1998. The current estimated
reporting burden is 7 minutes per Form 1098-T and 3 minutes per Form
1098-E. No special professional skills are necessary for preparation of
the reports or records. There are no known Federal rules that
duplicate, overlap, or conflict with these proposed regulations. The
regulations proposed are considered to have the least economic impact
on small entities of all alternatives considered.
Moreover, the proposed regulations requiring filing Forms 1098-T
and 1098-E on magnetic media impose no additional reporting or
recordkeeping and only prescribe the method of filing information
returns that are already required to be filed. Further, these
regulations are consistent with the statutory requirement that an
eligible educational institution, insurer, or payee is not required to
file Forms 1098-T or 1098-E on magnetic media unless required to file
at least 250 or more returns during the year. Finally, the economic
impact caused by requiring Forms 1098-T and 1098-E on magnetic media
should be minimal because most institution's, insurer's, and payee's
operations are computerized. Even if their operations are not
computerized, the incremental cost of magnetic media reporting should
be minimal in most cases because of the availability of computer
service bureaus. In addition, the existing regulations under section
6011(e) provide that the IRS may waive the magnetic media filing
requirements on a showing of hardship. The waiver authority will be
exercised so as not to unduly burden institutions, insurers, and payees
lacking both the necessary data processing facilities and access at a
reasonable cost to computer service bureaus.
Comments and Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any written and electronic comments that
are submitted timely to the IRS. The IRS and Treasury specifically
request comments on the clarity of the proposed regulations 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 in the Internal Revenue
Building, 1111 Constitution Avenue, NW., Washington, DC. The IRS
recognizes that persons outside the Washington, DC, area may also wish
to testify at the public hearing through videoconferencing. Requests to
include videoconferencing sites must be received by August 15, 2000. If
the IRS receives sufficient indications of interest to warrant
videoconferencing to a particular city, and if the IRS has
videoconferencing facilities available in that city on the date the
public hearing is to be scheduled, the IRS will try to accommodate the
requests.
The IRS will publish the time and date of the public hearing and
the locations of any videoconferencing sites in a document in the
Federal Register.
Drafting Information
The principal author of the regulations is Donna Welch, Office of
Assistant Chief Counsel (Income Tax and Accounting). However, other
personnel from the IRS and the Treasury Department participated in the
development of the regulations.
[[Page 37733]]
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 301 are proposed to be amended as
follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.6050S-1 also issued under section 26 U.S.C. 6050S(g).
Section 1.6050S-2 also issued under section 26 U.S.C. 6050S(g).
* * *
Par. 2. Sections 1.6050S-0 through 1.6050S-2 are added to read as
follows:
Sec. 1.6050S-0 Table of contents.
This section lists captions contained in Secs. 1.6050S-1 and
1.6050S-2.
Sec. 1.6050S-1 Information reporting for payments and
reimbursements or refunds of qualified tuition and related expenses.
(a) Information reporting requirement.
(1) In general.
(2) Exceptions.
(i) No reporting for nonresident alien individuals.
(ii) No reporting for individuals enrolled in noncredit courses.
(A) In general.
(B) Academic credit defined.
(C) Example.
(b) Requirement to file return.
(1) Form of return.
(2) Information included on return.
(i) In general.
(ii) Requirement to include name, address, and TIN of any
taxpayer who will claim the individual as a dependent on the
taxpayer's Federal income tax return. [Reserved]
(3) Time and place for filing return.
(i) In general.
(ii) Return for nonresident alien individual.
(iii) Extensions of time.
(4) Use of magnetic media.
(c) Requirement to furnish statement.
(1) In general.
(2) Statement furnished to any taxpayer who will claim the
individual as a dependent on the taxpayer's Federal income tax
return. [Reserved]
(3) Time and manner for furnishing statement.
(i) In general.
(ii) Statement to nonresident alien individual.
(iii) Extensions of time.
(4) Time and manner for furnishing statement to any taxpayer who
will claim the individual as a dependent on the taxpayer's Federal
income tax return. [Reserved]
(5) Copy of Form 1098-T.
(d) Special rules.
(1) Payments received for qualified tuition and related expenses
determined.
(i) In general.
(ii) Example.
(2) Payments of qualified tuition and related expenses received
or collected on behalf of an institution.
(i) In general.
(ii) Exception.
(3) Governmental units.
(e) Penalty provisions.
(1) Failure to file correct returns.
(2) Failure to furnish correct information statements.
(3) Waiver of penalties for failures to include a correct TIN.
(i) In general.
(ii) Acting in a responsible manner.
(iii) Manner of soliciting TIN.
(4) Requirement to request and obtain TIN of any taxpayer who
will claim the individual as a dependent on the taxpayer's Federal
income tax return. [Reserved]
(5) Failure to furnish TIN.
(f) Effective date.
Sec. 1.6050S-2 Information reporting for payments of interest on
qualified education loans.
(a) Information reporting requirement.
(1) In general.
(2) Reporting period.
(i) In general.
(ii) Calculation of 60-month period.
(iii) Transitional rules for reporting on loans made before
January 1, 1998.
(b) Definitions.
(c) Requirement to file return.
(1) Form of return.
(2) Information included on return.
(3) Time and place for filing return.
(i) In general.
(ii) Extensions of time.
(4) Use of magnetic media.
(d) Requirement to furnish statement.
(1) In general.
(2) Time and manner for furnishing statement.
(i) In general.
(ii) Extensions of time.
(3) Copy of Form 1098-E.
(e) Special rules.
(1) Transitional rule for reporting of loan origination fees and
capitalized interest.
(2) Qualified education loan certification.
(3) Payments of interest received or collected by one or more
persons.
(i) In general.
(ii) Exception.
(4) Reporting by foreign persons.
(5) Governmental units.
(f) Penalty provisions.
(1) Failure to file correct returns.
(2) Failure to furnish correct information statements.
(3) Waiver of penalties for failures to include a correct TIN.
(i) In general.
(ii) Acting in a responsible manner.
(iii) Manner of soliciting TIN.
(4) Failure to furnish TIN.
(g) Effective date.
Sec. 1.6050S-1 Information reporting for payments and reimbursements
or refunds of qualified tuition and related expenses.
(a) Information reporting requirement--(1) In general. Except as
provided in paragraph (a)(2) of this section, any eligible educational
institution (as defined in section 25A(f)(2) and Sec. 1.25A-2(b)) (an
institution) that receives payments of qualified tuition and related
expenses (as defined in section 25A(f)(1) and Sec. 1.25A-2(d)) from any
source for any calendar year, or that makes reimbursements or refunds
(or similar payments) of such amounts, and any person engaged in a
trade or business of making payments under an insurance arrangement as
reimbursements or refunds (or other similar amounts) of qualified
tuition and related expenses (an insurer) must--
(i) File an information return, as described in paragraph (b) of
this section, with the Internal Revenue Service (IRS) with respect to
each individual for whom such payments are received, or reimbursements
or refunds are made; and
(ii) Furnish a statement, as described in paragraph (c) of this
section, to each individual described in paragraph (c) of this section.
(2) Exceptions--(i) No reporting for nonresident alien individuals.
The information reporting requirements of this section do not apply
with respect to any individual who is a nonresident alien (as defined
in section 7701(b) and Sec. 301.7701(b)-3 of this chapter) during the
calendar year, unless the individual requests the institution or
insurer to report. If a nonresident alien individual requests an
institution or insurer to report, the institution or insurer must
comply with the requirements of this section for the year with respect
to which the request is made and all years after such request in which
it receives payments of qualified tuition and related expenses or makes
reimbursements or refunds of such amounts with respect to such
individual.
(ii) No reporting for individuals enrolled in noncredit courses--
(A) In general. The information reporting requirements of this section
do not apply with respect to any individual who is enrolled during the
calendar year only in courses for which the individual receives no
academic credit.
(B) Academic credit defined. Academic credit means credit awarded
by an institution for the completion of coursework leading toward a
post-
[[Page 37734]]
secondary degree, certificate, or other recognized post-secondary
educational credential.
(C) Example. The following example illustrates the rules of this
paragraph (a)(2)(ii):
Example. Student A, a medical doctor, takes a course at
University X's medical school. Student A takes the course to fulfill
State Y's licensing requirement that medical doctors attend
continuing medical education courses each year. Student A is not
enrolled in a degree program at University X and takes the medical
course through University X's continuing professional education
division. University X does not award Student A credit toward a
post-secondary degree on an academic transcript for the completion
of the course but gives Student A a certificate of attendance upon
completion. Under this paragraph (a)(2)(ii), University X is not
subject to the information reporting requirements of section 6050S
and this section for the medical education course taken by Student
A.
(b) Requirement to file return--(1) Form of return. Except as
otherwise provided in this section, an institution or insurer must file
an information return for each individual with respect to whom payments
of qualified tuition and related expenses are received, or
reimbursements or refunds of such amounts are made, during the calendar
year on Form 1098-T, ``Tuition Payments Statement.'' An institution or
insurer may use a substitute for Form 1098-T if the substitute form
complies with applicable revenue procedures relating to substitute
forms.
(2) Information included on return--(i) In general. An institution
or insurer must include on Form 1098-T--
(A) The name, address, and taxpayer identification number (TIN) (as
defined in section 7701(a)(41)) of the institution or the insurer;
(B) The name, address, and TIN of the individual with respect to
whom payments of qualified tuition and related expenses were received,
or reimbursements or refunds of such amounts were made;
(C) The aggregate amount of payments of qualified tuition and
related expenses from any source that the institution received with
respect to the individual during the calendar year;
(D) The aggregate amount of reimbursements or refunds of qualified
tuition and related expenses that the institution or insurer made with
respect to the individual during the calendar year;
(E) The aggregate amount of any scholarships or grants that the
institution processed during the calendar year for the payment of the
individual's costs of attendance;
(F) An indication by the institution whether the individual was
enrolled for at least half of the normal full-time work load for the
course of study the individual is pursuing for at least one academic
period that begins during the calendar year (see Sec. 1.25A-
3(d)(1)(ii));
(G) An indication by the institution whether the individual was
enrolled in a program leading to a graduate-level degree, graduate-
level certificate, or other recognized graduate-level educational
credential; and
(H) Any other information required by Form 1098-T and its
instructions.
(ii) Requirement to include name, address, and TIN of any taxpayer
who will claim the individual as a dependent on the taxpayer's Federal
income tax return. [Reserved]
(3) Time and place for filing return--(i) In general. Except as
provided in paragraphs (b)(3)(ii) and (iii) of this section, Form 1098-
T must be filed on or before February 28 (March 31 if filed
electronically) of the year following the calendar year in which
payments of qualified tuition or related expenses were received, or
reimbursements or refunds of such amounts were made. An institution or
insurer must file Form 1098-T with the IRS according to the
instructions to Form 1098-T.
(ii) Return for nonresident alien individual. In general, an
institution or insurer is not required to file a return on behalf of a
nonresident alien individual. However, if a nonresident alien
individual requests an institution or insurer to report, the
institution or insurer must file a return described in paragraph (b)(2)
of this section with the IRS on or before the date prescribed in
paragraph (b)(3)(i) of this section, or on or before the thirtieth day
after the request, whichever is later.
(iii) Extensions of time. The IRS may grant an institution or
insurer an extension of time to file returns required in this section
upon a showing of good cause. See the instructions to Form 1098-T and
applicable revenue procedures for rules relating to extensions of time
to file.
(4) Use of magnetic media. See section 6011(e) and Sec. 301.6011-2
of this chapter for rules relating to the requirement to file Forms
1098-T on magnetic media.
(c) Requirement to furnish statement--(1) In general. An
institution or insurer must furnish a statement to each individual for
whom it is required to file a Form 1098-T. The statement must include--
(i) The information required under paragraph (b)(2) of this
section;
(ii) A legend that identifies the statement as important tax
information that is being furnished to the IRS;
(iii) Instructions that--
(A) State that the taxpayer may not be able to claim an education
tax credit under section 25A and the regulations thereunder with
respect to the total payments of qualified tuition and related expenses
reported for the calendar year;
(B) State that the amount of any scholarships, grants, refunds, or
reimbursements reported for the calendar year and other similar amounts
not reported (because they are not processed by the institution) may
reduce the amount of any allowable education tax credit for the taxable
year or a prior taxable year;
(C) State that the taxpayer should refer to relevant IRS forms and
publications for explanations relating to the eligibility requirements
for, and calculation of, any allowable education tax credit; and
(D) Include the name, address, and phone number of the individual
who is the information contact for the institution or insurer that
filed the Form 1098-T.
(2) Statement furnished to any taxpayer who will claim the
individual as a dependent on the taxpayer's Federal income tax return.
[Reserved]
(3) Time and manner for furnishing statement--(i) In general.
Except as provided in paragraphs (c)(3)(ii) and (iii) of this section,
an institution or insurer must furnish the statement described in
paragraph (c)(1) of this section to each individual with respect to
whom payments of qualified tuition and related expenses were received,
or reimbursements or refunds were made, on or before January 31 of the
year following the calendar year in which payments were received or
reimbursements or refunds were made. If mailed, the statement must be
sent to the individual's permanent address, or the individual's
temporary address if the institution or insurer does not know the
individual's permanent address.
(ii) Statement to nonresident alien individual. If an information
return is filed for a nonresident alien individual, the institution or
insurer must furnish a statement described in paragraph (c)(1) of this
section to the individual in the manner and on or before the date
prescribed in paragraph (c)(3)(i) of this section, or on or before the
thirtieth day after the nonresident alien's request to report,
whichever is later.
(iii) Extensions of time. The IRS may grant an institution or
insurer an extension of time to furnish the statements required in this
section upon
[[Page 37735]]
a showing of good cause. See the instructions to Form 1098-T and
applicable revenue procedures for rules relating to extensions of time
to furnish statements.
(4) Time and manner for furnishing statement to any taxpayer who
will claim the individual as a dependent on the taxpayer's Federal
income tax return. [Reserved]
(5) Copy of Form 1098-T. An institution or insurer may satisfy the
requirement of this paragraph (c) by furnishing either a copy of Form
1098-T and its instructions or another document that contains all of
the information filed with the IRS and the information required by
paragraph (c)(1) of this section if the document complies with
applicable revenue procedures relating to substitute statements.
(d) Special rules--(1) Payments received for qualified tuition and
related expenses determined--(i) In general. In determining the
aggregate amount of payments of qualified tuition and related expenses
that an institution must report, payments received with respect to an
individual during the calendar year from any source (except for any
scholarship or grant that, by its terms, must be applied to expenses
other than qualified tuition and related expenses, such as room and
board) will be treated as payments of qualified tuition and related
expenses up to the total amount billed by the institution for such
expenses.
(ii) Example. The following example illustrates the rules of this
paragraph (d)(1):
Example. (i) During the 2002 Spring semester, Student C attends
College X and enrolls in a program leading toward an associate's
degree. Student C lives on-campus. In December 2001, College X
charges Student C $2,000 for room and board for the 2002 Spring
semester. In addition, in December 2001, College X charges Student C
$4,000 for qualified tuition and related expenses for the 2002
Spring semester. In December 2001, Student C pays College X $1,500.
In early January 2002, College X receives and processes a $4,500
scholarship that may be applied to any of Student C's costs of
attendance. Assume that there are no other payments during the
calendar years 2001 and 2002.
(ii) Under this paragraph (d)(1), for the calendar year 2001,
College X must report $1,500 for payments of qualified tuition and
related expenses received during the calendar year 2001. In
addition, for the calendar year 2002, College X must report:
(A) $2,500 for payments of qualified tuition and related
expenses received during the calendar year 2002 ($4,000 total
charges for qualified tuition and related expenses less the $1,500
payments received during 2001); and
(B) $4,500 of scholarships processed during the calendar year
2002.
(2) Payments of qualified tuition and related expenses received or
collected on behalf of an institution--(i) In general. If an
institution contracts with another person to receive or collect
payments of qualified tuition and related expenses on its behalf, the
other person must satisfy the information reporting requirements of
this section.
(ii) Exception. If the institution does not provide the other
person with the information necessary to comply with the reporting
requirements of this section, the other person must request the
information necessary to comply with the information reporting
requirements from the institution. If the institution does not provide
the other person with the necessary information upon request, the
institution must satisfy the information reporting requirements of this
section.
(3) Governmental units. An institution or insurer that is a
governmental unit, or an agency or instrumentality of a governmental
unit, is subject to the information reporting requirements of this
section and an appropriately designated officer or employee of the
governmental entity must satisfy the information reporting requirements
of this section.
(e) Penalty provisions--(1) Failure to file correct returns. The
section 6721 penalty may apply to an institution or insurer that fails
to file information returns required by section 6050S and this section
on or before the required filing date; that fails to include all of the
required information on the return; or that includes incorrect
information on the return. See section 6721, and the regulations
thereunder, for rules relating to penalties for failure to file correct
returns. See section 6724, and the regulations thereunder, for rules
relating to waivers of penalties for certain failures due to reasonable
cause.
(2) Failure to furnish correct information statements. The section
6722 penalty may apply to an institution or insurer that fails to
furnish statements required by section 6050S and this section on or
before the prescribed date; that fails to include all the required
information on the statement; or that includes incorrect information on
the statement. See section 6722, and the regulations thereunder, for
rules relating to penalties for failure to furnish correct statements.
See section 6724, and the regulations thereunder, for rules relating to
waivers of penalties for certain failures due to reasonable cause.
(3) Waiver of penalties for failures to include a correct TIN--(i)
In general. In the case of a failure to include a correct TIN on Form
1098-T or a related information statement, penalties may be waived if
the failure is due to reasonable cause. Reasonable cause may be
established if the failure arose from events beyond the institution's
or insurer's control, such as a failure of the individual to furnish a
correct TIN. However, the institution or insurer must establish that it
acted in a responsible manner both before and after the failure.
(ii) Acting in a responsible manner. An institution or insurer must
request the TIN of each individual with respect to whom payments of
qualified tuition were received, or reimbursements or refunds were
made, if it does not already have a record of the individual's correct
TIN. If the institution or insurer does not have a record of the
individual's correct TIN, then it must solicit the TIN in the manner
described in paragraph (e)(3)(iii) of this section on or before
December 31 of each year during which it receives payments of, or makes
reimbursements of, qualified tuition and related expenses with respect
to the individual. If an individual refuses to provide his or her TIN
upon request, the institution or insurer must file the return and
furnish the statement required by this section without the individual's
TIN, but with all other required information. The specific solicitation
requirements of paragraph (e)(3)(iii) of this section apply in lieu of
the solicitation requirements of Sec. 301.6724-1(e) and (f) of this
chapter for the purpose of determining whether an institution or
insurer acted in a responsible manner in attempting to obtain a correct
TIN. An institution or insurer that complies with the requirements of
this paragraph (e)(3) will be considered to have acted in a responsible
manner within the meaning of Sec. 301.6724-1(d) of this chapter with
respect to any failure to include the correct TIN of an individual on a
return or statement required by section 6050S and this section.
(iii) Manner of soliciting TIN. An institution or insurer must
request the individual's TIN in writing and must clearly notify the
individual that the law requires the individual to furnish a TIN so
that it may be included on an information return filed by the
institution or insurer. An institution or insurer must notify the
individual that the individual's failure to furnish his or her TIN to
the institution or insurer may result in a $50 penalty being imposed
against the individual as authorized by law. A request for a TIN made
on Form W-9S, ``Request for Student's or Borrower's Social Security
Number and Certification,'' satisfies the requirements of this
paragraph (e)(3)(iii). An institution or insurer may establish a
[[Page 37736]]
system for individuals to submit Forms W-9S electronically as described
in applicable forms and instructions. An institution or insurer may
also develop a separate form to request the individual's TIN or
incorporate the request into other forms customarily used by the
institution or insurer, such as financial aid applications.
(4) Requirement to request and obtain TIN of any taxpayer who will
claim the individual as a dependent on the taxpayer's Federal income
tax return. [Reserved]
(5) Failure to furnish TIN. The section 6723 penalty may apply to
any individual who is required (but fails) to furnish his or her TIN to
an institution or insurer. See section 6723, and the regulations
thereunder, for rules relating to the penalty for failure to furnish a
TIN.
(f) Effective date. The rules in this section apply to information
returns required to be filed, and information statements required to be
furnished, after December 31, 2001.
Sec. 1.6050S-2 Information reporting for payments of interest on
qualified education loans.
(a) Information reporting requirement--(1) In general. Except as
otherwise provided in this section, any person engaged in a trade or
business that, in the course of that trade or business, receives from
any payor (as defined in paragraph (b)(2) of this section) interest
payments that aggregate $600 or more for any calendar year on one or
more qualified education loans (as defined in section 221(e)(1) and
Sec. 1.221-1(f)(3))(a payee) must--
(i) File an information return, as described in paragraph (c) of
this section, with the IRS with respect to the payor; and
(ii) Furnish a statement, as described in paragraph (d) of this
section, to the payor.
(2) Reporting period--(i) In general. The information reporting
requirements of this section apply only to interest payments received
on a qualified education loan during the first 60 months in which
interest payments are required on the loan.
(ii) Calculation of 60-month period. In general, the 60-month
period described in paragraph (a)(2)(i) of this section begins on the
date the qualified education loan first enters repayment status and
ends 60 months later. However, if the payee knows, or has reason to
know, of any periods of deferment or forbearance during which the 60-
month period is suspended under the rules described in Sec. 1.221-
1(e)(3), the 60-month period described in paragraph (a)(2)(i) of this
section is extended by the period of such deferment or forbearance. The
date on which the qualified education loan first enters repayment
status is determined under the terms of the loan agreement or, in the
case of a loan issued or guaranteed under a federal post-secondary
education loan program, under applicable federal regulations. For
purposes of reporting under section 6050S and this section for
refinanced loans and consolidated and collapsed loans, the rules of
Sec. 1.221-1(h)(1), relating to the date on which the 60-month period
begins, apply.
(iii) Transitional rules for reporting on loans made before January
1, 1998. For qualified education loans made before January 1, 1998, the
60-month period described in paragraph (a)(2)(i) of this section is
determined in accordance with the rules of paragraph (a)(2)(ii) of this
section, except that if the payee does not know, and does not have
reason to know, the date on which the loan entered repayment status,
then, for reporting purposes only, the 60-month period begins on
January 1, 1998. For defaulted loans made before January 1, 1998, if
the payee does not know, and does not have reason to know, the date on
which the loan entered repayment status, then, for reporting purposes
only, the 60-month period begins on the earlier of the date the loan
went into default or January 1, 1998. If the payee does not know, and
does not have reason to know, either the date the loan entered
repayment status or the default date, then, for reporting purposes
only, the 60-month period begins on January 1, 1998. For purposes of
this paragraph (a)(2)(iii), a defaulted loan is a loan with respect to
which required payments of interest and principal have not been made
when due over a period of time such that the holder has declared the
loan in default based on its terms and conditions, and, if applicable,
has sought recourse against the ultimate guarantor of the loan.
(b) Definitions. The following definitions apply for purposes of
this section:
(1) Interest includes stated interest, loan origination fees (other
than fees for services), and capitalized interest as described in
Sec. 1.221-1(h)(2). See paragraph (e)(1) of this section for a special
transitional rule relating to reporting of loan origination fees and
capitalized interest.
(2) Payor means the individual who is carried on the books and
records of the payee as the borrower on a qualified education loan. If
there are multiple borrowers, the principal borrower on the payee's
books and records is treated as the payor for purposes of section 6050S
and this section.
(c) Requirement to file return--(1) Form of return. A payee must
file an information return for the payor on Form 1098-E, ``Student Loan
Interest Statement.'' A payee may use a substitute for Form 1098-E if
the substitute form complies with the applicable revenue procedures
relating to substitute forms.
(2) Information included on return. A payee must include on Form
1098-E--
(i) The name, address, and taxpayer identification number (TIN)(as
defined in section 7701(a)(41)) of the payee;
(ii) The name, address, and TIN of the payor;
(iii) The aggregate amount of interest payments received during the
calendar year from the payor; and
(iv) Any other information required by Form 1098-E and its
instructions.
(3) Time and place for filing return--(i) In general. Except as
provided in paragraph (c)(3)(ii) of this section, the Form 1098-E must
be filed on or before February 28 (March 31 if filed electronically) of
the year following the calendar year in which interest payments were
received. A payee must file Form 1098-E with the IRS according to the
instructions to Form 1098-E.
(ii) Extensions of time. The IRS may grant a payee an extension of
time to file returns required in this section upon a showing of good
cause. See the instructions to Form 1098-E and applicable revenue
procedures for rules relating to extensions of time to file.
(4) Use of magnetic media. See section 6011(e) and Sec. 301.6011-2
of this chapter for rules relating to the requirement to file Forms
1098-E on magnetic media.
(d) Requirement to furnish statement--(1) In general. A payee must
furnish a statement to each payor for whom it is required to file a
Form 1098-E. The statement must include--
(i) The information required under paragraph (c)(2) of this
section;
(ii) A legend that identifies the statement as important tax
information that is being furnished to the IRS;
(iii) Instructions that--
(A) State that, under section 221 and the regulations thereunder,
the payor may not be able to deduct the full amount of interest
reported on the statement;
(B) State that interest payments are deductible only during the
first 60 months that interest payments are required;
(C) In the case of qualified education loans made before January 1,
2002, for which the payee does not report payments of interest other
than stated
[[Page 37737]]
interest, state that the payor may be able to deduct additional amounts
(such as certain loan origination fees and capitalized interest) not
reported on the statement;
(D) State that the payor should refer to relevant IRS forms and
publications for explanations relating to the eligibility requirements
for, and calculation of, any allowable deduction for interest paid on a
qualified education loan; and
(E) Include the name, address, and phone number of the individual
who is the information contact for the payee that filed the Form 1098-
E.
(2) Time and manner for furnishing statement--(i) In general.
Except as provided in paragraph (d)(2)(ii) of this section, a payee
must furnish the statement described in paragraph (d)(1) of this
section to the payor on or before January 31 of the year following the
calendar year in which payments of interest on a qualified education
loan were received. If mailed, the statement must be sent to the
payor's last known address.
(ii) Extensions of time. The IRS may grant a payee an extension of
time to furnish statements required in this section upon a showing of
good cause. See the instructions to Form 1098-E and applicable revenue
procedures for rules relating to extensions of time to furnish
statements.
(3) Copy of Form 1098-E. A payee may satisfy the requirement of
this paragraph (d) by furnishing either a copy of Form 1098-E and its
instructions or another document that contains all the information
filed with the IRS and the information required by paragraph (d)(1) of
this section if the document complies with applicable revenue
procedures relating to substitute statements.
(e) Special rules--(1) Transitional rule for reporting of loan
origination fees and capitalized interest. For qualified education
loans made before January 1, 2002, a payee is not required to report
payments of loan origination fees and capitalized interest as interest
under section 6050S and this section.
(2) Qualified education loan certification. If a loan is not
subsidized, guaranteed, financed, or is not otherwise treated as a
student loan under a program of the Federal, state, or local government
or an eligible educational institution, a payee must request a
certification from the payor that the loan will be used solely to pay
for qualified higher education expenses. A payee may use Form W-9S,
``Request for Student's or Borrower's Social Security Number and
Certification,'' to obtain the certification. A payee may establish an
electronic system for payors to submit Forms W-9S electronically as
described in applicable forms and instructions. A payee may also
develop a separate form to obtain the payor certification or may
incorporate certification into other forms customarily used by the
payee, such as loan applications, provided the certification is clearly
set forth. If the certification is not received, the loan is not a
qualified education loan for purposes of section 6050S and this
section.
(3) Payments of interest received or collected by one or more
persons--(i) In general. If a payee contracts with another person to
receive or collect payments on a qualified education loan on its
behalf, the other person must satisfy the information reporting
requirements of this section.
(ii) Exception. If the payee does not provide the other person with
information necessary to comply with the information reporting
requirements of this section, the other person must request the
information necessary to comply with the information reporting
requirements from the payee. If the payee does not provide the other
person with the necessary information upon request, the payee must
satisfy the information reporting requirements of this section.
(4) Reporting by foreign persons. A payee that is not a United
States person (as defined in section 7701(a)(30)) must report payments
of interest it receives on a qualified education loan only if it
receives the payment--
(i) At a location in the United States; or
(ii) At a location outside the United States if the payee is--
(A) A controlled foreign corporation (within the meaning of section
957(a)); or
(B) A person 50 percent or more of the gross income of which, from
all sources for the three-year period ending with the close of the
taxable year preceding the taxable year in which interest payments were
received (or for such part of the period as the person was in
existence), was effectively connected with the conduct of a trade or
business within the United States.
(5) Governmental units. A governmental unit, or an agency or
instrumentality of a governmental unit, that receives from any payor
interest payments that aggregate $600 or more for any calendar year on
one or more qualified education loans is a payee, without regard to the
requirement of paragraph (a)(1) of this section that the interest be
received in the course of a trade or business.
(f) Penalty provisions--(1) Failure to file correct returns. The
section 6721 penalty may apply to a payee that fails to file
information returns required by section 6050S and this section on or
before the required filing date; that fails to include all of the
required information on the return; or that includes incorrect
information on the return. See section 6721, and the regulations
thereunder, for rules relating to penalties for failure to file correct
returns. See section 6724, and the regulations thereunder, for rules
relating to waivers of penalties for certain failures due to reasonable
cause.
(2) Failure to furnish correct information statements. The section
6722 penalty may apply to a payee that fails to furnish statements
required by section 6050S and this section on or before the prescribed
date; that fails to include all the required information on the
statement; or that includes incorrect information on the statement. See
section 6722, and the regulations thereunder, for rules relating to
penalties for failure to furnish correct statements. See section 6724,
and the regulations thereunder, for rules relating to waivers of
penalties for certain failures due to reasonable cause.
(3) Waiver of penalties for failures to include a correct TIN--(i)
In general. In the case of a failure to include a correct TIN on Form
1098-E or a related information statement, penalties may be waived if
the failure is due to reasonable cause. Reasonable cause may be
established if the failure arose from events beyond the payee's
control, such as a failure of the payor to furnish a correct TIN.
However, the payee must establish that it acted in a responsible manner
both before and after the failure.
(ii) Acting in a responsible manner. A payee must request the TIN
of each payor if it does not already have a record of the payor's
correct TIN. If the payee does not have a record of the payor's correct
TIN, then it must solicit the TIN in the manner described in paragraph
(f)(3)(iii) of this section on or before December 31 of each year
during which it receives payments of interest. If a payor refuses to
provide his or her TIN upon request, the payee must file the return and
furnish the statement required by this section without the payor's TIN,
but with all other required information. The specific solicitation
requirements of paragraph (f)(3)(iii) of this section apply in lieu of
the solicitation requirements of Sec. 301.6724-1(e) and (f) of this
chapter for the purpose of determining whether a payee acted in a
responsible manner in attempting to obtain a correct TIN. A payee that
complies with the
[[Page 37738]]
requirements of this paragraph (f)(3) will be considered to have acted
in a responsible manner within the meaning of Sec. 301.6724-1(d) of
this chapter with respect to any failure to include the correct TIN of
a payor on a return or statement required by section 6050S and this
section.
(iii) Manner of soliciting TIN. A payee must request the payor's
TIN in writing and must clearly notify the payor that the law requires
the payor to furnish a TIN so that it may be included on an information
return filed by the payee. A payee must notify the payor that the
payor's failure to furnish his or her TIN to the payee may result in a
$50 penalty being imposed against the individual as authorized by law.
A request for a TIN made on Form W-9S, ``Request for Student's or
Borrower's Social Security Number and Certification,'' satisfies the
requirements of this paragraph (f)(3)(iii). A payee may establish a
system for payors to submit Forms W-9S electronically as described in
applicable forms and instructions. A payee may also develop a separate
form to request the payor's TIN or incorporate the request into other
forms customarily used by the payee, such as loan applications.
(4) Failure to furnish TIN. The section 6723 penalty may apply to
any payor who is required (but fails) to furnish his or her TIN to a
payee. See section 6723, and the regulations thereunder, for rules
relating to the penalty for failure to furnish a TIN.
(g) Effective date. The rules in this section apply to information
returns required to be filed, and information statements required to be
furnished, after December 31, 2001.
PART 301--PROCEDURE AND ADMINISTRATION
Par. 3. The authority citation for part 301 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 4. Section 301.6011-2 is amended by:
1. Revising the first sentence of paragraph (b)(1).
2. Revising paragraph (g)(1).
3. Adding paragraph (g)(3).
The revisions and additions read as follows:
Sec. 301.6011-2 Required use of magnetic media.
* * * * *
(b) Returns required on magnetic media. (1) If the use of Form
1042-S, 1098 series, 1099 series, 5498, 8027, W-2G, or other form
treated as a form specified in this paragraph (b)(1) is required by the
applicable regulations or revenue procedures for the purpose of making
an information return, the information required by the form must be
submitted on magnetic media, except as otherwise provided in paragraph
(c) of this section. * * *
* * * * *
(g) Effective dates. (1) Except as otherwise provided in paragraph
(g)(2) or (g)(3) of this section, this section applies to returns
required to be filed after December 31, 1986.
* * * * *
(3) This section applies to returns on Forms 1098-T and 1098-E
required to be filed after December 31, 2001.
Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
[FR Doc. 00-13774 Filed 6-15-00; 8:45 am]
BILLING CODE 4830-01-U
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