Proposed Rule2024-18437
Revising Qualified Domestic Trust Regulations Under Section 2056A To Update Outdated References and Procedures
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 21, 2024
Issuing agencies
Treasury DepartmentInternal Revenue Service
Abstract
This document contains proposed amendments to the Federal estate tax regulations applicable to estates of decedents passing property to or for the benefit of a noncitizen spouse in a domestic trust for which the executor of the decedent's estate has made an election to be a qualified domestic trust and the trust satisfies all of the requirements for such treatment under applicable Federal tax law and regulations. The proposed regulations would modify those regulations to update outdated references, information, and procedures. The proposed regulations primarily would affect the estates of decedents passing property to or for the benefit of a noncitizen spouse in such a trust pursuant to applicable Federal tax law.
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 162 (Wednesday, August 21, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 162 (Wednesday, August 21, 2024)]
[Proposed Rules]
[Pages 67580-67586]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-18437]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 20
[REG-119683-22]
RIN 1545-BQ88
Revising Qualified Domestic Trust Regulations Under Section 2056A
To Update Outdated References and Procedures
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: This document contains proposed amendments to the Federal
estate tax regulations applicable to estates of decedents passing
property to or for the benefit of a noncitizen spouse in a domestic
trust for which the executor of the decedent's estate has made an
election to be a qualified domestic trust and the trust satisfies all
of the requirements for such treatment under applicable Federal tax law
and regulations. The proposed regulations would modify those
regulations to update outdated references, information, and procedures.
The proposed regulations primarily would affect the estates of
decedents passing property to or for the benefit of a noncitizen spouse
in such a trust pursuant to applicable Federal tax law.
DATES: Written or electronic comments as well as requests for a public
hearing must be received by October 21, 2024.
ADDRESSES: Commenters are strongly encouraged to submit public comments
electronically via the Federal eRulemaking Portal at <a href="https://www.regulations.gov">https://www.regulations.gov</a> (indicate IRS and REG-119683-22) by following the
online instructions for submitting comments. Requests for a public
hearing must be submitted as prescribed in the ``Comments and Requests
for a Public Hearing'' section. Once submitted to the Federal
eRulemaking Portal, comments cannot be edited or withdrawn. The
Department of the Treasury (Treasury Department) and the IRS will
publish for public availability any comment submitted to the IRS's
public docket. Send paper submissions to: CC:PA:01:PR (REG-119683-22),
Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin
Station, Washington, DC 20044.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Donna Douglas, (202) 317-6859 (not a toll-free number); concerning the
submission of comments and/or requests for a public hearing, Vivian
Hayes by email at <a href="/cdn-cgi/l/email-protection#4d3d382f21242e25282c3f24232a3e0d243f3e632a223b"><span class="__cf_email__" data-cfemail="d4a4a1b6b8bdb7bcb1b5a6bdbab3a794bda6a7fab3bba2">[email protected]</span></a> or by phone at (202) 317-6901
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed amendments to the Estate Tax
Regulations (26 CFR part 20) under section 2056A of the Internal
Revenue Code (Code).
I. Statutory Overview
Although section 2056(d)(1) of the Code generally disallows a
marital deduction for the value of property passing to a noncitizen
spouse of a decedent or donor, section 2056(d)(2)(A) allows a marital
deduction for such property passing to the decedent's surviving spouse
in a qualified domestic trust (QDOT), as defined in section 2056A.
Section 2056A of the Code was added by the Technical and Miscellaneous
Revenue Act of 1988 (Pub. L. 100-647) and further amended by the
Revenue Reconciliation Act of 1989 (Pub. L. 101-239), the Revenue
Reconciliation Act of 1990 (Pub. L. 101-508), the Taxpayer Relief Act
of 1997 (Pub. L. 105-34), and the Economic Growth and Tax Relief
Reconciliation Act of 2001 (Pub. L. 107-16).
Generally, for purposes of sections 2056 and 2056A, section
2056A(a) defines the term ``qualified domestic trust,'' with respect to
any decedent, as any trust if (1) its trust instrument meets certain
requirements regarding the identity and powers of the trustee, (2) such
trust meets such requirements as the Secretary of the Treasury or her
delegate (Secretary) may by regulations prescribe to ensure the
collection of any tax imposed by section 2056A(b), and (3) an election
under section 2056A by the executor of the decedent's estate applies to
such trust. Section 2056A(b) generally prescribes rules relating to a
deferred estate tax on distributions of corpus from the QDOT during the
spouse's lifetime and on the balance of the corpus held in the QDOT on
the date of the spouse's death (section 2056A estate tax). Section
2056A(c) provides definitions of certain relevant terms, and section
2056A(d) provides rules regarding the section 2056A election. Finally,
section 2056A(e) directs the Secretary to prescribe regulations as may
be necessary or appropriate to carry out the purposes of section 2056A.
II. Regulatory Overview
Regulations addressing the application of sections 2056(d) and
2056A were published in the Federal Register (58 FR 305) as proposed
[[Page 67581]]
regulations on January 5, 1993 (1993 proposed regulations). The 1993
proposed regulations included proposed rules under Sec. Sec. 20.2056A-
1 through 20.2056A-13. Relevant to these proposed regulations, Sec.
20.2056A-2 of the 1993 proposed regulations sets forth the proposed
qualification requirements for a QDOT; Sec. 20.2056A-4 of the 1993
proposed regulations sets forth the proposed procedures for conforming
marital trust and nontrust marital transfers to the requirements of a
QDOT; and Sec. 20.2056A-11 of the 1993 proposed regulations sets forth
the proposed rules relating to filing requirements and payment of the
section 2056A estate tax.
On August 22, 1995, after consideration of all written comments and
public hearing testimony, the 1993 proposed regulations were adopted as
final regulations by the publication of TD 8612 in the Federal Register
(60 FR 43531), with one exception: section 20.2056A-2(d) of the 1993
proposed regulations, which had proposed additional requirements to
ensure collection of the section 2056A estate tax, was not finalized.
On the same date, the Treasury Department and the IRS published TD 8613
in the Federal Register (60 FR 43554), which included temporary
regulations under Sec. 20.2056A-2T(d) (1995 temporary regulations).
The text of the 1995 temporary regulations also served, by cross-
reference, as the text of reissued proposed regulations published on
the same date in the Federal Register (60 FR 43574) to address and
solicit further commentary on the additional requirements necessary to
ensure collection of the section 2056A estate tax (1995 proposed
regulations). On November 29, 1996, the Treasury Department and the IRS
published TD 8686 in the Federal Register (61 FR 60551) to adopt Sec.
20.2056A-2(d) of the 1995 proposed regulations as final regulations
(1996 final regulations). In an apparent oversight, the 1996 final
regulations did not update the references to Sec. 20.2056A-2T(d) found
in Sec. Sec. 20.2056A-2, 20.2056A-4, and 20.2056A-11.
Explanation of Provisions
The Treasury Department and the IRS have determined that an update
of Sec. Sec. 20.2056A-2, 20.2056A-4, and 20.2056A-11 of the Estate Tax
Regulations is required to remove outdated references to Sec.
20.2056A-2T(d). An update of Sec. 20.2056A-2 is also required to
correct outdated references to a publication, to IRS officials and
offices, and to procedures and addresses to be used by certain trustees
to provide a security instrument to satisfy the requirements of a QDOT.
In addition, an update to the definition of ``finally determined'' in
Sec. 20.2056A-2(d)(1)(iii) is needed because the current definition of
that term includes an outdated reference to the issuance of an estate
tax closing letter. An update of Sec. Sec. 20.2056A-4 and 20.2056A-11
is required to properly identify the titles of IRS officials authorized
to enter into agreements with respect to the section 2056A estate tax
and to grant extensions of time to file a Form 706-QDT, U.S. Estate Tax
Return for Qualified Domestic Trusts, or to pay any section 2056A
estate tax.
The Treasury Department and the IRS are aware that other matters in
the current regulations under section 2056A may be outdated, but these
matters do not cause the current regulations to be substantively
inaccurate. For instance, the examples in Sec. 20.2056A-6 use outdated
figures but accurately illustrate the application of the rules of the
regulations. Modifications to update information that does not impede
the ability of taxpayers and their representatives to comply with the
regulations, or the ability of the IRS to process information provided
by taxpayers or their representatives, are outside the scope of these
proposed regulations.
I. Section 20.2056A-2--Qualification Requirements for QDOT
A. Updating References to the 1995 Temporary Regulations in Sec.
20.2056A-2(a) and (b)
Current Sec. 20.2056A-2(a) and (b)(2) and (3) refer to Sec.
20.2056A-2T(d) in describing certain qualification requirements for
QDOTs. Because the 1995 proposed regulations have been finalized, the
Treasury Department and the IRS propose to update these paragraphs to
reference Sec. 20.2056A-2(d) instead of Sec. 20.2056A-2T(d).
B. Updating the Definition of Finally Determined in Sec. 20.2056A-
2(d)(1)(iii)
Current Sec. 20.2056A-2(d)(1)(i) and (ii) provide alternate
additional requirements, one of which will apply to a QDOT depending
upon the fair market value, as finally determined for Federal estate
tax purposes, of the assets passing to the QDOT. Current Sec.
20.2056A-2(d)(1)(iii) provides the definition of ``finally determined''
for purposes of Sec. 20.2056A-2(d)(1)(i) and (ii). This definition
relies in part on the issuance by the IRS of an estate tax closing
letter, an IRS practice that was routine prior to June 1, 2015, for
every Federal estate tax return filed. Estate tax closing letters are
no longer routinely issued by the IRS. The Treasury Department and the
IRS propose to update Sec. 20.2056A-2(d)(1)(iii) to conform to current
IRS procedures for establishing the final value of an asset for Federal
estate tax purposes.
C. Updating the Name of Offices, Addresses, Titles of Officials,
Reference to the Uniform Customs and Practice for Documentary Credits,
and Procedure for Filing Required Security Instruments Set Forth in
Sec. 20.2056A-2(d)(1)(i)(B) and (C)
Current Sec. 20.2056A-2(d)(1)(i) requires that QDOTs with assets
whose value exceeds $2 million must satisfy one of three alternative
security arrangements to secure the payment of the section 2056A estate
tax. Paragraphs (B) and (C) of Sec. 20.2056A-2(d)(1)(i), respectively,
describe the requirements and form of the bond and the letter of credit
that may be used as the required security arrangement. Both the
provisions describing the requirements for each type of security, and
the forms themselves, detail the notifications that must be given to
the IRS of a decision not to renew the security arrangement and of the
establishment of a replacement arrangement, if any. Precise addresses
and IRS officials are identified in these paragraphs as the recipients
of these notices but, as a result of changes in the titles of various
IRS officials and the identification and location of the IRS offices
responsible for the functions relevant to these security arrangements,
this information is no longer accurate. Specifically, with respect to
decedents who are residents of the United States, the required forms
refer to the District Director of the District Office for Estate and
Gift Tax Examination Group at the address of the District Office of the
IRS that has examination jurisdiction over the decedent's estate. With
respect to decedents who are nonresident noncitizens and U.S. citizens
who die domiciled outside the United States, the current regulations
direct these notices to the Estate Tax Group, Assistant Commissioner
(International) at 950 L'Enfant Plaza, CP:IN:D:C:EX:HQ:1114,
Washington, DC 20241. Neither of these tax examination groups currently
exists, and the examination of estate and gift tax returns is now part
of a specialty examination group that keeps a national inventory. The
Estate Tax Advisory Group currently is the collection advisory office
of the IRS tasked with monitoring the bond or letter of credit until
there is a taxable disposition of the QDOT's assets or until the IRS
determines that no tax will be owed (for
[[Page 67582]]
example, when a noncitizen spouse becomes a citizen and the
requirements of section 2056A(b)(12) are met). Accordingly, to correct
the outdated references and to avoid future obsolescence if an office
is moved, renamed, or eliminated, the Treasury Department and the IRS
propose to update Sec. 20.2056A-2(d)(1)(i)(B)(1) and (2), and Sec.
20.2056A-2(d)(1)(i)(C)(1) and (2) to direct trustees, taxpayers, and
their representatives to IRS Publication 4235, Collection Advisory
Offices Contact Information, or as otherwise provided in IRS forms and
instructions or on <a href="https://www.irs.gov">https://www.irs.gov</a>, to determine the correct
address to use when submitting the notices required in these sections
of the regulations.
The text required by current Sec. 20.2056A-2(d)(1)(i)(C)(2) and
(3) to be included in certain documents includes a reference to the
Uniform Customs and Practice for Documentary Credits, 1993 Revision,
ICC Publication No. 500 (Publication 500), which is published by the
International Chamber of Commerce. The 1993 revision of Publication 500
is no longer the most recent edition of that publication. Accordingly,
to correct the outdated references and to avoid any future obsolete
references, the Treasury Department and the IRS propose to update these
regulations to include language directing trustees, taxpayers, and
their representatives to the most recent revision of Publication 500,
which can be found on <a href="http://www.iccwbo.org">www.iccwbo.org</a>.
Current Sec. 20.2056A-2(d)(1)(i)(B)(4) and (C)(5), respectively,
provide that the bond or letter of credit is to be filed with the
decedent's Federal estate tax return (Form 706, United States Estate
(and Generation-Skipping Transfer) Tax Return, or Form 706-NA, United
States Estate (and Generation-Skipping Transfer) Tax Return, Estate of
nonresident not a citizen of the United States). Security instruments
attached to a decedent's Federal estate tax return are not easily
identified, which hinders prompt forwarding to the Estate Tax Advisory
Group. Accordingly, the Treasury Department and the IRS propose to
update these paragraphs to provide that a security instrument provided
in compliance with Sec. 20.2056A-2(d) is not to be attached to the
decedent's Federal estate tax return (Form 706 or Form 706-NA), but
instead is to be filed by submitting it directly to the Estate Tax
Advisory Group. In addition, the Treasury Department and the IRS
propose to update these paragraphs to direct trustees, taxpayers, and
their representatives to IRS Publication 4235, Collection Advisory
Offices Contact Information, or as otherwise provided in IRS forms and
instructions or on <a href="https://www.irs.gov">https://www.irs.gov</a>, to determine the correct
address that must be used to submit a security instrument provided in
compliance with Sec. 20.2056A-2(d).
II. Section 20.2056A-4--Procedures for Conforming Marital Trusts and
Nontrust Marital Transfers to the Requirements of a QDOT
A. Updating References to the 1995 Temporary Regulations in Sec.
20.2056A-4(a)(1), (2), and (c)(1)
Current Sec. 20.2056A-4(a)(1) applies the requirements of Sec.
20.2056A-2T(d) in setting out the procedures for conforming marital
trusts and nontrust marital transfers to the requirements of a QDOT.
Current Sec. 20.2056A-4(a)(2) refers to Sec. 20.2056A-2T(d)(1) in
describing the consequences of failing to comply with applicable
requirements in the case of a judicial reformation, and to Sec.
20.2056A-2T(d)(3) with regard to the required annual statement. Current
Sec. 20.2056A-4(c)(1) refers to Sec. 20.2056A-2T(d) in describing the
circumstances under which property passing to a surviving spouse under
a plan, annuity, or other arrangement which is not assignable or
transferable (or is treated as such) can be treated as passing to the
surviving spouse in the form of a QDOT. The Treasury Department and the
IRS propose to update current Sec. 20.2056A-4(a)(1), (2), and (c)(1)
to reference Sec. 20.2056A-2(d) instead of Sec. 20.2056A-2T(d) to
reflect the publication of the 1996 final regulations.
B. Updating Titles of Officials in Sec. 20.2056A-4(c)(6) and (7)
Current Sec. 20.2056A-4(c)(2) and (3) describe alternative
procedures the executor may use to cause a plan, annuity, or other
arrangement which is not assignable or transferable (or is treated as
such) to be treated as passing to the surviving spouse in the form of a
QDOT. To conform a nonassignable annuity or other payment under current
Sec. 20.2056A-4(c)(2) or (3), current Sec. 20.2056A-4(c)(6) requires
the executor to file with the Federal estate tax return an Agreement to
Pay Section 2056A Estate Tax, whose required language is included in
this paragraph. Alternatively, current Sec. 20.2056A-4(c)(7) requires
an Agreement to Roll Over Annuity Payments, whose required language is
included in that paragraph. The required agreement under current Sec.
20.2056A-4(c)(6) refers to the District Director, and the required
agreement under current Sec. 20.2056A-4(c)(7) refers to the Assistant
Commissioner (International).
As discussed in part I.C. of this Explanation of Provisions, the
examination of estate and gift tax returns is now handled by a
specialty examination group that keeps a national inventory, and the
Estate Tax Advisory Group is tasked with monitoring the bond or letter
of credit until there is a taxable disposition of the QDOT's assets or
until the IRS determines that no tax will be owed (for example, when a
noncitizen spouse becomes a citizen and the requirements of section
2056A(b)(12) are met). Accordingly, the Treasury Department and the IRS
propose to update current Sec. 20.2056A-4(c)(6) and (7) by replacing
each reference to the District Director and Assistant Commissioner
(International) with a reference to the Chief Tax Compliance Officer,
IRS (or their delegate or designee or as otherwise provided in IRS
forms and instructions or on <a href="https://www.irs.gov">https://www.irs.gov</a>).
III. Section 20.2056A-11--Filing Requirements and Payment of the
Section 2056A Estate Tax
A. Updating References to the 1995 Temporary Regulations in Sec.
20.2056A-11(a)
Current Sec. 20.2056A-11(a) provides guidance on the due date of
the section 2056A estate tax and on obtaining an extension of time for
filing a Form 706-QDT. That paragraph also directs the reader to Sec.
20.2056A-2T(d)(3) regarding the requirements for filing Form 706-QDT in
the case of the required annual statement. The Treasury Department and
the IRS propose to update current Sec. 20.2056A-11(a) to reference
Sec. 20.2056A-2(d)(3) instead of Sec. 20.2056A-2T(d)(3) to reflect
the publication of the 1996 final regulations.
B. Updating Titles of Officials in Sec. 20.2056A-11(c)(1) and (2)
Current Sec. 20.2056A-11(c)(1) and (2) provide guidance on
obtaining an extension of time for paying the section 2056A estate tax,
and states that an extension may be granted by the District Director or
the Director of the service center where the Form 706-QDT is filed. The
Treasury Department and the IRS propose to update current Sec.
20.2056A-11(c)(1) and (2) by replacing each reference to ``the district
director or director of the service center where the Form 706-QDT is
filed'' with a reference to ``the Advisory Group Managers (or their
delegate or designee or as otherwise provided in IRS forms and
instructions or on <a href="https://www.irs.gov">https://www.irs.gov</a>).''
[[Page 67583]]
IV. Section 20.2056A-13--Applicability Dates
Current Sec. 20.2056A-13 provides the effective dates for all of
the provisions of Sec. 20.2056A. Because these regulations propose
applicability dates that are specific to the sections in which changes
are being proposed, the Treasury Department and the IRS propose to make
a coordinating change to Sec. 20.2056A-13 to reflect these specific
exceptions.
Proposed Applicability Date
The regulations are proposed to apply with respect to estates of
decedents dying on or after the date of publication of final
regulations in the Federal Register. For dates of applicability, see
proposed Sec. Sec. 20.2056A-2(e), 20.2056A-4(e), 20.2056A-11(e), and
20.2056A-13.
Special Analyses
I. Regulatory Planning and Review
Pursuant to the Memorandum of Agreement, Review of Treasury
Regulations under Executive Order 12866 (June 9, 2023), tax regulatory
actions issued by the IRS are not subject to the requirements of
section 6 of Executive Order 12866, as amended. Therefore, a regulatory
impact assessment is not required.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) (PRA)
requires that a Federal agency obtain the approval of the Office of
Management and Budget (OMB) before collecting information from the
public, whether such collection of information is mandatory, voluntary,
or required to obtain or retain a benefit. A Federal agency may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless the collection of information displays
a valid control number.
The proposed regulations would update the current regulations under
section 2056A by modifying and replacing outdated references,
information, and procedures, such as references to IRS officials,
offices, and addresses that no longer exist and references to temporary
regulations. The collections of information within these proposed
regulations include reporting and third-party disclosure requirements
imposed by the IRS to ensure that the IRS has been provided with
adequate security for the collection of the section 2056A estate tax,
to allow marital trusts and nontrust marital transfers to be conformed
to the requirements of a QDOT, and to provide extensions of time for
the payment of section 2056A estate tax.
The proposed regulations include third-party disclosure and
reporting requirements under proposed Sec. 20.2056A-2(d)(1)(i) for
surety and banks to notify trustees and the IRS of the failure to renew
a bond or letter of credit. These collection requirements are already
approved by OMB under 1545-1443 for all filers. These proposed
regulations would not change the already approved collection
requirements, and only would modify the location of where to file. An
update to the filing location does not change the already approved
burden.
The proposed regulations include reporting requirements related to
a security instrument used to meet the qualifications of a QDOT and
filed at the time the executor of an estate files a Form 706 or 706-NA.
The proposed regulations also include reporting requirements related to
Form 706-QDT used to calculate and report the section 2056A estate tax
due or to notify the IRS that the trust is exempt from future filing
because a noncitizen spouse has become a citizen. These reporting
requirements are already approved by OMB under 1545-1443 for all
filers. These proposed regulations would not substantively change the
collection requirements, and only would modify the location of where to
file the security instruments and arrangements. An update to the filing
location does not change the already approved burden.
The proposed regulations include reporting requirements related to
requesting extensions using Form 4768 to file Form 706-QDT, Form 706,
and Form 706-NA. These reporting requirements are already approved by
OMB under 1545-0181 for all filers. These proposed regulations would
not substantively change the collection requirements, and only would
modify the location of where to file the extension. An update to the
filing location does not change the already approved burden.
Books and records relating to a collection of information must be
retained as long as their contents might become material in the
administration of any internal revenue law. Generally, tax returns and
tax return information are confidential, as required by section 6103 of
the Code.
III. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it
is hereby certified that the proposed regulations would not have a
significant economic impact on a substantial number of small entities.
This rule primarily affects individuals (or their estates) and trusts,
which are not small entities for purposes of the Regulatory Flexibility
Act. Although it is anticipated that there may be an incremental
economic impact on executors that are small entities, including
entities that provide tax and legal services that assist individuals in
preparing tax returns, any impact would not be significant and would
not affect a substantial number of small entities. Therefore, a
Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5
U.S.C. chapter 6) is not required.
IV. Section 7805(f)
Pursuant to section 7805(f) of the Code, this regulation has been
submitted to the Chief Counsel for the Office of Advocacy of the Small
Business Administration for comment on its impact on small business.
V. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits and take
certain other actions before issuing a final rule that includes any
Federal mandate that may result in expenditures in any one year by a
State, local, or Tribal government, in the aggregate, or by the private
sector, of $100 million in 1995 dollars, updated annually for
inflation. This rule does not include any Federal mandate that may
result in expenditures by State, local, or Tribal governments, or by
the private sector in excess of that threshold.
VI. Executive Order 13132: Federalism
Executive Order 13132 (Federalism) prohibits an agency from
publishing any rule that has federalism implications if the rule either
imposes substantial, direct compliance costs on State and local
governments and is not required by statute, or preempts State law
unless the agency meets the consultation and funding requirements of
section 6 of the executive order. These proposed regulations do not
have federalism implications and do not impose substantial direct
compliance costs on State and local governments or preempt State law
within the meaning of the executive order.
Comments and Requests for Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any comments that are submitted timely
to the IRS as prescribed in this preamble under the ADDRESSES heading.
In addition to requesting comments on all
[[Page 67584]]
aspects of the proposed regulations, the Treasury Department and the
IRS request comments on whether other rules in the current regulations
under section 2056A require revision or removal to update information
that is outdated (e.g., as a result of amendments to the Code,
regulations, or local laws made after such rules were promulgated). All
commenters are strongly encouraged to submit comments electronically.
The Treasury Department and the IRS will publish for public
availability any comment submitted electronically or on paper to its
public docket at <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
A public hearing will be scheduled if requested in writing by any
person who timely submits electronic or written comments. Requests for
a public hearing are encouraged to be made electronically. If a public
hearing is scheduled, a notice of the date and time for the public
hearing will be published in the Federal Register.
Drafting Information
The principal author of these proposed regulations is Donna Douglas
of the Office of Associate Chief Counsel (Passthroughs and Special
Industries). However, other personnel from the Treasury Department and
the IRS participated in their development.
List of Subjects in 26 CFR Part 20
Estate taxes, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, the Treasury Department and the IRS propose to amend
26 CFR part 20 as follows:
PART 20--ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16,
1954
0
Paragraph 1. The authority citation for part 20 continues to read in
part as follows:
Authority: 26 U.S.C. 7805.
* * * * *
0
Par. 2. Section 20.2056A-0 is amended by:
0
1. Revising the entry for paragraph (d)(6) of Sec. 20.2056A-2;
0
2. Adding an entry for paragraph (e) of Sec. 20.2056A-2;
0
3. Adding an entry for paragraph (e) of Sec. 20.2056A-4; and
0
4. Adding an entry for paragraph (e) of Sec. 20.2056A-11.
The revision and additions read as follows:
Sec. 20.2056A-0 Table of contents.
* * * * *
Sec. 20.2056A-2 Requirements for qualified domestic trust.
* * * * *
(d) * * *
(6) Special rules.
(e) Applicability date.
* * * * *
Sec. 20.2056A-4 Procedures for conforming marital trusts and
nontrust marital transfers to the requirements of a qualified domestic
trust.
* * * * *
(e) Applicability date.
* * * * *
Sec. 20.2056A-11 Filing requirements and payment of the section 2056A
estate tax.
* * * * *
(e) Applicability date.
* * * * *
0
Par. 3. Section 20.2056A-2 is amended by:
0
1. Revising the first sentence of paragraph (a);
0
2. Revising paragraph (b)(2);
0
3. Revising the first sentence of paragraph (b)(3);
0
4. Removing the fourth sentence of paragraph (d)(1)(i)(B)(1) and adding
in its place two new sentences;
0
5. Revising the ninth and tenth sentences of paragraph (d)(1)(i)(B)(2);
0
6. Revising the first sentence of paragraph (d)(1)(i)(B)(4), and adding
a new sentence at the end of the paragraph;
0
7. Removing the fourth sentence of paragraph (d)(1)(i)(C)(1) and adding
in its place two new sentences;
0
8. Revising the first, fourteenth, and fifteenth sentences of paragraph
(d)(1)(i)(C)(2);
0
9. Revising the first, tenth, and eleventh sentences of paragraph
(d)(1)(i)(C)(3);
0
10. Revising the first sentence of paragraph (d)(1)(i)(C)(5), and
adding a new sentence at the end of the paragraph;
0
11. Revising paragraph (d)(1)(iii);
0
12. Revising the paragraph heading of paragraph (d)(6);
0
13. Deleting paragraph (d)(6)(i);
0
14. Redesignating paragraphs (d)(6)(ii) and (iii) as paragraphs
(d)(6)(i) and (ii) respectively; and
0
15. Adding paragraph (e).
The revisions and addition read as follows:
Sec. 20.2056A-2 Requirements for qualified domestic trust.
(a) In general. To qualify as a qualified domestic trust (QDOT),
the requirements of paragraphs (b) through (d) of this section must be
satisfied. * * *
(b) * * *
(2) Property passing outright to spouse. If property does not pass
from a decedent to a QDOT, but passes to a noncitizen surviving spouse
in a form that meets the requirements for a marital deduction without
regard to section 2056(d)(1)(A), and that is not described in paragraph
(b)(1) of this section, the surviving spouse must either actually
transfer the property, or irrevocably assign the property, to a trust
(whether created by the decedent, by the decedent's executor, or by the
surviving spouse) that meets the requirements of paragraphs (c) and (d)
of this section (pertaining, respectively, to statutory requirements
and regulatory requirements imposed to ensure collection of tax) prior
to the filing of the estate tax return for the decedent's estate and on
or before the last date prescribed by law that the QDOT election may be
made (see Sec. 20.2056A-3(a)).
(3) * * * If property does not pass from a decedent to a QDOT, but
passes under a plan or other arrangement that meets the requirements
for a marital deduction without regard to section 2056(d)(1)(A) and
whose payments are not assignable or transferable (see Sec. 20.2056A-
4(c)), the property is treated as meeting the requirements of this
section, and the requirements of Sec. 20.2056A-2(d), if the
requirements of Sec. 20.2056A-4(c) are satisfied. * * *
* * * * *
(d) * * *
(1) * * *
(i) * * *
(B) * * *
(1) * * * Any notice of failure to renew is required to be sent to
the Estate Tax Advisory Group of the Internal Revenue Service. See IRS
Publication 4235, Collection Advisory Offices Contact Information, or
as otherwise provided in IRS forms and instructions or on <a href="https://www.irs.gov">https://www.irs.gov</a>, to determine the correct address to use when submitting
the required documentation. * * *
(2) * * * All notices required to be sent to the Internal Revenue
Service under this instrument should be sent to the Estate Tax Advisory
Group of the Internal Revenue Service. See IRS Publication 4235,
Collection Advisory Offices Contact Information, or as otherwise
provided in IRS forms and instructions or on <a href="https://www.irs.gov">https://www.irs.gov</a>, to
determine the correct address to use when submitting the required
documentation. * * *
* * * * *
(4) * * * The bond is to be filed (separately from the decedent's
Federal estate tax return) by submitting it
[[Page 67585]]
directly to the Estate Tax Advisory Group of the Internal Revenue
Service on or before the later of the filing date or due date of the
decedent's Federal estate tax return (Form 706 or 706-NA) unless an
extension for filing the bond is granted under Sec. 301.9100 of this
chapter. * * * See IRS Publication 4235, Collection Advisory Offices
Contact Information, or as otherwise provided in IRS forms and
instructions or on <a href="https://www.irs.gov">https://www.irs.gov</a>, to determine the correct
address to use when submitting the required documentation.
(C) * * *
(1) * * * Any notice of failure to renew or closure of a U.S.
branch of a foreign bank required to be sent to the Internal Revenue
Service must be sent to the Estate Tax Advisory Group of the Internal
Revenue Service. See IRS Publication 4235, Collection Advisory Offices
Contact Information, or as otherwise provided in the IRS forms and
instructions or on <a href="https://www.irs.gov">https://www.irs.gov</a>, to determine the correct
address to use when submitting the required documentation. * * *
(2) * * * The letter of credit must be made in the following form
(or in the form that is the same as the following form in all material
respects), or an alternative form that the Commissioner prescribes by
guidance published in the Internal Revenue Bulletin (see Sec.
601.601(d)(2) of this chapter):
[Issue Date]
To: Internal Revenue Service
Attention: Estate Tax Advisory Group. (See IRS Publication 4235,
Collection Advisory Offices Contact Information, or as otherwise
provided in IRS forms and instructions or on <a href="https://www.irs.gov">https://www.irs.gov</a>, to
determine the correct address to use when submitting the required
documentation). * * *
Except where otherwise stated herein, this Letter of Credit is
subject to the most recent revision of the Uniform Customs and Practice
for Documentary Credits published by the International Chamber of
Commerce (ICC), which can be found on <a href="https://www.iccwbo.org">https://www.iccwbo.org</a>. If we
notify you of our election not to consider this Letter of Credit
renewed and the expiration date occurs during an interruption of
business described in the most recent revision of that publication,
unless you had consented to cancellation prior to the expiration date,
the bank hereby specifically agrees to effect payment if this Letter of
Credit is drawn against within 30 days after the resumption of
business. * * *
(3) Form of confirmation. If the requirements of this paragraph
(d)(1)(i)(C) are satisfied by the issuance of a letter of credit by a
foreign bank with confirmation by a bank as defined in section 581, the
confirmation must be made in the following form (or in a form that is
the same as the following form in all material respects), or an
alternative form that the Commissioner prescribes by guidance published
in the Internal Revenue Bulletin (see Sec. 601.601(d)(2) of this
chapter):
[Issue Date]
To: Internal Revenue Service
Attention: Estate Tax Advisory Group. (See IRS Publication 4235,
Collection Advisory Offices Contact Information, or as otherwise
provided in IRS forms and instructions or on <a href="https://www.irs.gov">https://www.irs.gov</a>, to
determine the correct address to use when submitting the required
documentation). * * *
Except where otherwise stated herein, this Confirmation is subject
to the most recent version of the Uniform Customs and Practice for
Documentary Credits published by the International Chamber of Commerce
(ICC), which can be found on <a href="https://www.iccwbo.org">https://www.iccwbo.org</a>. If we notify you
of our election not to consider this Confirmation renewed and the
expiration date occurs during an interruption of business described in
the most recent version of that publication, unless you had consented
to cancellation prior to the expiration date, the bank hereby
specifically agrees to effect payment if this Confirmation is drawn
against within 30 days after the resumption of business. * * *
* * * * *
(5) Procedure. The letter of credit (and confirmation, if
applicable) is to be filed separately from the decedent's Federal
estate tax return (Form 706 or Form 706-NA) by submitting it directly
to the Estate Tax Advisory Group of the Internal Revenue Service on or
before the later of the filing date or the due date of the decedent's
Federal estate tax return (unless an extension for filing the letter of
credit is granted under Sec. 301.9100 of this chapter). * * * See IRS
Publication 4235, Collection Advisory Offices Contact Information, or
as otherwise provided in IRS forms and instructions or on <a href="https://www.irs.gov">https://www.irs.gov</a>, to determine the correct address to use when submitting
the required documentation.
* * * * *
(iii) Definition of finally determined--(A) In general. For
purposes of Sec. 20.2056A-2(d)(1)(i) and (ii), the fair market value
of assets is the fair market value of those assets as finally
determined for Federal estate tax purposes. That value is--
(1) The value reported on an estate tax return filed with the
Internal Revenue Service, once the period of limitations on assessment
(see section 6501) of estate tax has expired without that value having
been timely adjusted by the Internal Revenue Service;
(2) The value determined or specified by the Internal Revenue
Service for unreported property, or for reported property where the
value determined or specified by the Internal Revenue Service differs
from the value reported on an estate tax return filed with the Internal
Revenue Service, once the period of limitations on assessment
applicable to the estate tax has expired without that value having been
timely contested by the executor;
(3) The value determined in a written agreement with the Internal
Revenue Service (whether entered into during the course of the
administrative proceedings between the estate and the Internal Revenue
Service or after the commencement of litigation) once that written
agreement has been executed by both the executor and the Internal
Revenue Service and is binding on all parties (including, but not
limited to, the executor, the Internal Revenue Service, and the
beneficiaries); or
(4) The value determined by a court for the purpose of determining
the estate tax liability of the estate, once the court's determination
no longer can be appealed to any court.
(B) Contested and Executor defined. For purposes of this paragraph
(d)(1)(iii), the term contested means to put at issue the value of
property in a written communication to the Internal Revenue Service
that identifies the specific property, states that the executor does
not accept as correct the value of that property as determined or
specified by the Internal Revenue Service, and provides the executor's
claimed value for that property as determined in accordance with the
requirements of section 2031, the corresponding regulations, and other
applicable guidance. An issue cannot be contested by a general
protective statement or written communication that does not include
each of these specified elements. For purposes of this paragraph
(d)(1)(iii), the term executor includes any person described in section
2203, as expanded to include all persons required under section 6018(b)
to file an estate tax return.
* * * * *
(6) Special rules.
* * * * *
(e) Applicability date. This section applies with respect to
estates of decedents dying on or after [the date of publication of
final regulations in the Federal Register].
[[Page 67586]]
0
Par. 4. Section 20.2056A-4 is amended by:
0
1. Revising the second sentence of paragraph (a)(1).
0
2. Revising the fifth and sixth sentences of paragraph (a)(2).
0
3. Revising the sixth sentence of paragraph (c)(1).
0
4. Revising the final sentence of (c)(6)(ii).
0
5. Revising the final sentence of (c)(7)(ii).
0
6. Revising paragraph (e).
The revisions read as follows:
Sec. 20.2056A-4 Procedures for conforming marital trusts and
nontrust marital transfers to the requirements of a qualified domestic
trust.
(a) * * *
(1) * * * For this purpose, the requirements of a QDOT include all
of the applicable requirements set forth in Sec. 20.2056A-2. * * *
(2) * * * Thus, the trustee of the trust is responsible for filing
the Form 706-QDT, paying any section 2056A estate tax that becomes due,
and filing the annual statement required under Sec. 20.2056A-2(d)(3),
if applicable. Failure to comply with these requirements may cause the
trust to be subject to the anti-abuse rule under Sec. 20.2056A-
2(d)(1)(v). * * *
* * * * *
(c) * * *
(1) * * * In the case of a plan, annuity, or other arrangement
which is not assignable or transferable (or is treated as such), the
property passing under the plan from the decedent is treated as meeting
the requirements of Sec. 20.2056A-2 (pertaining to the general
requirements, qualified marital interest requirements, statutory
requirements, and requirements to ensure collection of the tax) if the
requirements of either paragraph (c)(2) or (3) of this section are
satisfied. * * *
* * * * *
(6) * * *
(ii) * * * I agree, at the request of the Chief Tax Compliance
Officer, IRS (or their delegate or designee or as otherwise provided in
IRS forms and instructions or on <a href="https://www.irs.gov">https://www.irs.gov</a>), to enter into a
security agreement to secure my undertakings under this agreement.
(7) * * *
(ii) * * * I agree, at the request of the Chief Tax Compliance
Officer, IRS (or their delegate or designee or as otherwise provided in
IRS forms and instructions or on <a href="https://www.irs.gov">https://www.irs.gov</a>), to enter into a
security agreement to secure my undertakings under this agreement.
* * * * *
(e) Applicability date. This section applies with respect to
estates of decedents dying on or after [the date of publication of the
final regulations in the Federal Register].
0
Par. 5. Section 20.2056A-11 is amended by:
0
1. Revising the final sentence of paragraph (a);
0
2. Revising the final sentence of paragraph (c)(1);
0
3. Revising paragraph (c)(2); and
0
4. Adding paragraph (e).
The revisions and addition read as follows:
Sec. 20.2056A-11 Filing requirements and payment of the section
2056A estate tax.
(a) * * * See also Sec. 20.2056A-5(c)(1) regarding the
requirements for filing a Form 706-QDT in the case of a distribution to
the surviving spouse on account of hardship, and Sec. 20.2056A-2(d)(3)
regarding the requirements for filing Form 706-QDT in the case of the
required annual statement.
* * * * *
(c) * * *
(1) * * * Such extension may be granted by the Advisory Group
Managers (or their delegate or designee or as otherwise provided in IRS
forms and instructions or on <a href="https://www.irs.gov">https://www.irs.gov</a>).
(2) Extension of time for paying tax under section 6161(a)(1). An
extension of time beyond the due date to pay any part of the estate tax
imposed on lifetime distributions under section 2056A(b)(1)(A), or
imposed at the death of the surviving spouse under section
2056A(b)(1)(B), or imposed at the termination of the QDOT (such as on
the death or resignation of the U.S. trustee), may be granted for a
reasonable period of time, not to exceed 6 months (12 months in the
case of the estate tax imposed under section 2056A(b)(1)(B) at the
surviving spouse's death), by the Advisory Group Managers (or their
delegate or designee or as otherwise provided in IRS forms and
instructions or on <a href="https://www.irs.gov">https://www.irs.gov</a>).
* * * * *
(e) Applicability date. This section applies with respect to
estates of decedents dying on or after [the date of publication of the
final regulations in the Federal Register].
0
Par. 6. Section 20.2056A-13 is amended by revising the section heading
and the first sentence to read as follows:
Sec. 20.2056A-13 Applicability dates.
Except as provided in this section and in Sec. Sec. 20.2056A-2(e),
20.2056A-4(e), and 20.2056A-11(e), the provisions of Sec. Sec.
20.5056A-1 through 20.2056A-12 are applicable with respect to estates
of decedents dying on or after August 22, 1995. * * *
Douglas W. O'Donnell,
Deputy Commissioner.
[FR Doc. 2024-18437 Filed 8-20-24; 8:45 am]
BILLING CODE 4830-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on August 21, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.