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June 9, 1992
TO: TAX COMMITTEE NO. 21-92
OPERATIONS COMMITTEE NO. 17-92
TRANSFER AGENT ADVISORY COMMITTEE NO. 30-92
RE: PROPOSED AMENDMENTS TO TAX DEPOSIT REGULATIONS
__________________________________________________________
The Internal Revenue Service ("IRS") has issued the
attached proposed amendments to the regulations under Code
section 6302 that provide the rules for depositing, among other
things, amounts withheld under the backup withholding
requirements of Code section 3406. In essence, the proposed
amendments would provide tax deposit rules comparable to those
that were contained in the tax bill vetoed in March. (See, e.g.,
Institute Memorandum to Tax Members No. 14-92, Closed-End Fund
Members No. 12-92, Unit Investment Trust Members No. 17-92,
Accounting/Treasurers Members No. 10-92, Operations Members No.
10-92, International Committee No. 6-92, Institutional Funds
Committee No. 2-92 and Transfer Agent Advisory Committee No. 12-
92, dated March 16, 1992).
Under the proposed tax deposit system, backup withholding
amounts would be deposited under one of three methods. First,
deposits would be required to be made once a month if the amounts
withheld by a payor under section 3406 in each of the prior four
calendar quarters was $12,000 or less. Second, deposits would be
required to be made twice a week, on Tuesdays and Fridays, if the
amounts withheld in any of the prior four quarters exceeded
$12,000. Finally, if the amount of undeposited backup
withholding accumulated to $100,000 or more, the payor would be
required to deposit this amount by the close of the next business
day. In determining whether the various dollar amount thresholds
have been met, payors could treat backup withholding amounts
separate from tax withheld on the payor’s payroll (i.e.,
employment tax). The regulations are proposed to be effective
with respect to payments made after December 31, 1992.
The IRS has announced that it intends to finalize these
regulations later this year. To meet this goal, the IRS has
scheduled a public hearing on these regulations for August 3,
1992 and has requested that all comments on the proposed
regulations be received by July 20, 1992. Please contact the
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undersigned at (202) 955-3585 no later than July 6, 1992 with any
comments that the Institute should submit on these regulations.
We will keep you informed of developments.
Keith D. Lawson
Associate Counsel - Tax
Attachment
KDL:bmb