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									                                           31074              Federal Register / Vol. 71, No. 105 / Thursday, June 1, 2006 / Rules and Regulations

                                           and tylosin to make four-way                            I Therefore, under the Federal Food,                  SUPPLEMENTARY INFORMATION:
                                           combination drug Type C medicated                       Drug, and Cosmetic Act and under
                                                                                                                                                         Background
                                           feeds for heifers fed in confinement for                authority delegated to the Commissioner
                                           slaughter.                                              of Food and Drugs and redelegated to                    This document amends 26 CFR part 1
                                                                                                   the Center for Veterinary Medicine, 21                to provide rules relating to the
                                           DATES: This rule is effective June 1,
                                                                                                   CFR part 558 is amended as follows:                   deduction for income attributable to
                                           2006.
                                                                                                                                                         domestic production activities under
                                           FOR FURTHER INFORMATION CONTACT:                        PART 558—NEW ANIMAL DRUGS FOR                         section 199 of the Internal Revenue
                                           Daniel A. Benz, Center for Veterinary                   USE IN ANIMAL FEEDS                                   Code (Code). Section 199 was added to
                                           Medicine (HFV–104), Food and Drug                                                                             the Code by section 102 of the American
                                           Administration, 7500 Standish Pl.,                      I 1. The authority citation for 21 CFR                Jobs Creation Act of 2004 (Pub. L. 108–
                                           Rockville, MD 20855, 301–827–0223, e-                   part 558 continues to read as follows:                357, 118 Stat. 1418), and amended by
                                           mail: daniel.benz@fda.hhs.gov.                              Authority: 21 U.S.C. 360b, 371.                   section 403(a) of the Gulf Opportunity
                                           SUPPLEMENTARY INFORMATION: Ivy                                                                                Zone Act of 2005 (Pub. L. 109–135, 119
                                                                                                   § 558.500    [Amended]                                Stat. 25) and section 514 of the Tax
                                           Laboratories, Division of Ivy Animal
                                           Health, Inc., 8857 Bond St., Overland                   I 2. In the table in paragraph (e)(2)(x) of           Increase Prevention and Reconciliation
                                           Park, KS 66214, filed ANADA 200–424                     § 558.500, in the ‘‘Limitations’’ column              Act of 2005 (Pub. L. 109–222, 120 Stat.
                                           for use of HEIFERMAX 500                                remove ‘‘No. 000009’’ and add in its                  345). On January 19, 2005, the IRS and
                                           (melengestrol acetate) Liquid Premix,                   place ‘‘Nos. 000009 and 021641’’, and in              Treasury Department issued Notice
                                           OPTAFLEXX (ractopamine                                  the ‘‘Sponsor’’ column add in numerical               2005–14 (2005–7 I.R.B. 498) providing
                                           hydrochloride), RUMENSIN (monensin                      sequence ‘‘021641’’.                                  interim guidance on section 199. On
                                           sodium), and TYLAN (tylosin                                                                                   November 4, 2005, the IRS and Treasury
                                                                                                     Dated: May 23. 2006.
                                           phosphate) single-ingredient Type A                                                                           Department published in the Federal
                                                                                                   Stephen F. Sundlof,
                                           medicated article to make dry and                                                                             Register proposed regulations under
                                                                                                   Director, Center for Veterinary Medicine.             section 199 (70 FR 67220). On January
                                           liquid, four-way combination drug Type                  [FR Doc. E6–8420 Filed 5–31–06; 8:45 am]
                                           C medicated feeds for heifers fed in                                                                          11, 2006, the IRS and Treasury
                                           confinement for slaughter. Ivy
                                                                                                   BILLING CODE 4160–01–S                                Department held a public hearing on the
                                           Laboratories’ ANADA 200–424 is                                                                                proposed regulations. Written and
                                           approved as a generic copy of Elanco                                                                          electronic comments responding to the
                                           Animal Health’s NADA 141–233 for                        DEPARTMENT OF THE TREASURY                            proposed regulations were received.
                                           combination feed use of MGA                                                                                   Contemporaneous with the publication
                                                                                                   Internal Revenue Service                              of these temporary regulations, final
                                           (melengestrol acetate), OPTAFLEXX,
                                           RUMENSIN, and TYLAN. The                                                                                      regulations have been published under
                                                                                                   26 CFR Part 1                                         section 199.
                                           application is approved as of April 27,
                                           2006, and the regulations are amended                   [TD 9262]                                             General Overview
                                           in 21 CFR 558.500 to reflect the                        RIN 1545–BF57                                           Section 199(a)(1) allows a deduction
                                           approval. The basis of approval is
                                                                                                                                                         equal to 9 percent (3 percent in the case
                                           discussed in the freedom of information                 Computer Software Under Section                       of taxable years beginning in 2005 or
                                           summary.                                                199(c)(5)(B)                                          2006, and 6 percent in the case of
                                              In accordance with the freedom of                                                                          taxable years beginning in 2007, 2008,
                                           information provisions of 21 CFR part                   AGENCY:  Internal Revenue Service (IRS),
                                                                                                   Treasury.                                             or 2009) of the lesser of (A) the qualified
                                           20 and 21 CFR 514.11(e)(2)(ii), a                                                                             production activities income (QPAI) of
                                           summary of safety and effectiveness                     ACTION: Temporary regulations.
                                                                                                                                                         the taxpayer for the taxable year, or (B)
                                           data and information submitted to                                                                             taxable income (determined without
                                                                                                   SUMMARY: This document contains
                                           support approval of this application                                                                          regard to section 199) for the taxable
                                                                                                   temporary regulations concerning the
                                           may be seen in the Division of Dockets                                                                        year (or, in the case of an individual,
                                                                                                   application of section 199 of the Internal
                                           Management (HFA–305), Food and Drug                                                                           adjusted gross income (AGI)).
                                                                                                   Revenue Code, which provides a
                                           Administration, 5630 Fishers Lane, rm.
                                                                                                   deduction for income attributable to                  Qualified Production Activities Income
                                           1061, Rockville, MD 20852, between 9
                                                                                                   domestic production activities, to
                                           a.m. and 4 p.m., Monday through                                                                                  Section 199(c)(1) defines QPAI for any
                                                                                                   certain transactions involving computer
                                           Friday.                                                                                                       taxable year as an amount equal to the
                                                                                                   software. The regulations will affect
                                              The agency has determined under 21                                                                         excess (if any) of (A) the taxpayer’s
                                                                                                   taxpayers engaged in certain domestic
                                           CFR 25.33(a)(2) that this action is of a                                                                      domestic production gross receipts
                                                                                                   production activities involving
                                           type that does not individually or                                                                            (DPGR) for such taxable year, over (B)
                                                                                                   computer software. The text of these
                                           cumulatively have a significant effect on                                                                     the sum of (i) the cost of goods sold
                                                                                                   temporary regulations also serves as the
                                           the human environment. Therefore,                                                                             (CGS) that are allocable to such receipts;
                                                                                                   text of the proposed regulations set forth
                                           neither an environmental assessment                                                                           and (ii) other expenses, losses, or
                                                                                                   in the notice of proposed rulemaking on
                                           nor an environmental impact statement                                                                         deductions (other than the deduction
                                                                                                   this subject in the Proposed Rules
                                           is required.                                                                                                  under section 199) that are properly
                                                                                                   section in this issue of the Federal
                                              This rule does not meet the definition               Register.                                             allocable to such receipts.
                                           of ‘‘rule’’ in 5 U.S.C. 804(3)(A) because                                                                        Section 199(c)(4)(A)(i) defines DPGR,
                                           it is a rule of ‘‘particular applicability.’’           DATES:  Effective Date: These regulations             in part, to mean the taxpayer’s gross
                                           Therefore, it is not subject to the                     are effective June 1, 2006.                           receipts that are derived from any lease,
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                                           congressional review requirements in 5                    Applicability Date: For date of                     rental, license, sale, exchange, or other
                                           U.S.C. 801–808.                                         applicability, see § 1.199–8T(i)(4).                  disposition of qualifying production
                                                                                                   FOR FURTHER INFORMATION CONTACT: Paul                 property (QPP) that was manufactured,
                                           List of Subjects in 21 CFR Part 558
                                                                                                   Handleman or Lauren Ross Taylor, (202)                produced, grown, or extracted (MPGE)
                                              Animal drugs, Animal feeds.                          622–3040 (not a toll-free number).                    by the taxpayer in whole or in


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                                                              Federal Register / Vol. 71, No. 105 / Thursday, June 1, 2006 / Rules and Regulations                                         31075

                                           significant part within the United                      customer that gives the customer                      while connected to the Internet (online
                                           States. Section 199(c)(5) defines QPP to                permission to use the computer                        software) and also derives gross receipts
                                           mean: (A) Tangible personal property;                   software; (2) whether the use of                      from the lease, rental, license, sale,
                                           (B) any computer software; and (C) any                  computer software is merely incidental                exchange, or other disposition to
                                           property described in section 168(f)(4)                 to the provision of a separate service or             customers that are unrelated persons of
                                           (certain sound recordings).                             transaction; (3) whether the end user                 computer software that has been
                                                                                                   has made a payment to the computer                    provided to such customers affixed to a
                                           Computer Software
                                                                                                   software producer directly for the right              tangible medium or by allowing them to
                                              Section 4.04(7)(d) of Notice 2005–14                 to access and use the computer                        download the computer software from
                                           provides that gross receipts derived                    software’s functionality, as opposed to a             the Internet. The second exception
                                           from computer software do not include                   payment for a separate service or good                applies if a taxpayer that derives gross
                                           gross receipts derived from Internet                    in which the use of the underlying                    receipts from providing online software
                                           access services, online services,                       computer software is only incidental to               and an unrelated person derives on a
                                           customer support, telephone services,                   the separate service or transaction; (4)              regular and ongoing basis in the
                                           games played through a Web site,                        whether the computer software                         unrelated person’s business gross
                                           provider-controlled software online                     producer holds itself out to the public               receipts from the lease, rental, license,
                                           access services, and other services that                as being in the computer software                     sale, exchange, or other disposition of
                                           do not constitute the lease, rental,                    business; (5) whether the computer                    substantially identical software to its
                                           license, sale, exchange, or other                       software producer uses alternate                      customers affixed to a tangible medium
                                           disposition of computer software that                   channels for distributing its computer                or by allowing its customers to
                                           was developed by the taxpayer.                          software product or functionality other               download the substantially identical
                                           Consistent with Notice 2005–14, the                     than through online access; and (6)                   computer software from the Internet.
                                           proposed regulations in § 1.199–                        whether a competitive marketplace                        The temporary regulations define
                                           3(h)(6)(i) state that the provision of                  exists for the same or similar computer               substantially identical software as
                                           online computer software does not rise                  software functionality that provides                  computer software that, from a
                                           to the level of a lease, rental, license,               customers with alternative distribution               customer’s perspective, has the same
                                           sale, exchange, or other disposition as                 choices in addition to online access.                 functional result as the online software
                                           required under section 199, but is                      The commentators explained that this                  and has a significant overlap of features
                                           instead a service.                                      proposed list of factors is not exhaustive            or purpose with the online software. To
                                           Congressional Letter                                    and there may be other relevant factors.              avoid controversy between taxpayers
                                                                                                   The commentators suggested that no                    and the IRS, the temporary regulations
                                              On July 21, 2005, the Chairman and                   single factor should control and that                 provide a safe harbor under which all
                                           Ranking Member of the Senate Finance                    failure to satisfy one or more factors                computer software games are deemed to
                                           Committee and the Chairman of the                       should not necessarily result in gross                be substantially identical software.
                                           House Ways and Means Committee sent                     receipts derived from online access to                   If a taxpayer’s provision of computer
                                           a letter to the Treasury Department                     computer software being non-DPGR.                     software for online use meets the
                                           suggesting that the Treasury Department                    Other commentators suggested that a                requirements set forth in the temporary
                                           consider further the treatment of online                customer’s use of computer software is                regulations, then an allocation of gross
                                           access to computer software and, in                     tantamount to a license of the computer               receipts between DPGR and non-DPGR
                                           particular, whether such treatment                      software. In addition, several                        will be necessary if, as part of the same
                                           should be similar to the treatment of                   commentators asserted that the phrase                 transaction, the taxpayer derives gross
                                           computer software distributed by other                  ‘‘other disposition’’ in section                      receipts other than from providing
                                           means, such as by physical delivery or                  199(c)(4)(A) is broad enough to include               computer software to a customer for the
                                           delivery via Internet download. The                     the provision of computer software for                customer’s direct use while connected
                                           letter notes that gross receipts from the               online use.                                           to the Internet. For example, if in
                                           provision of services are not treated as                                                                      connection with providing computer
                                           DPGR, regardless of the fact that                       Explanation of Provisions
                                                                                                                                                         software to a customer for the
                                           computer software may be used to                          The temporary regulations do not                    customer’s direct use while connected
                                           facilitate such service transactions.                   adopt these comments. However, as a                   to the Internet, a taxpayer also provides
                                                                                                   matter of administrative convenience,                 a service such as storing its customers’
                                           Summary of Comments                                     the temporary regulations provide two                 data or providing telephone support,
                                              Numerous commentators have                           exceptions under which gross receipts                 then the taxpayer must allocate its gross
                                           suggested that the provision of                         derived by a taxpayer from providing                  receipts between DPGR and non-DPGR
                                           computer software for online use should                 computer software to customers for the                using any reasonable method.
                                           qualify under section 199. Some                         customers’ direct use while connected                    These rules are specifically limited to
                                           commentators proposed that gross                        to the Internet will be treated as being              the deduction under section 199 and no
                                           receipts derived from providing online                  derived from the lease, rental, license,              inference can be drawn with respect to
                                           access to computer software should                      sale, exchange, or other disposition of               any other provision of the Code (such as
                                           qualify under section 199 if the                        such computer software. Such gross                    the tax treatment of these transactions
                                           substance of the transaction that gives                 receipts will be treated as DPGR if all               under those provisions regarding
                                           rise to the gross receipts is the                       the other requirements of section 199                 character, timing, or source).
                                           distribution of the computer software’s                 are met (for example, the taxpayer
                                           functionality to end users. These                       MPGE computer software in whole or in                 Effective Date
                                           commentators suggested that factors to                  significant part within the United                      Section 199 applies to taxable years
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                                           be considered in determining the                        States).                                              beginning after December 31, 2004.
                                           substance of the transaction should                       The first exception applies to a                    These temporary regulations are
                                           include: (1) Whether an agreement                       taxpayer that derives gross receipts from             applicable for taxable years beginning
                                           exists, regardless of its form, between                 providing computer software to                        on or after June 1, 2006. A taxpayer may
                                           the computer software producer and the                  customers for the customers’ direct use               apply these temporary regulations to


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                                           31076              Federal Register / Vol. 71, No. 105 / Thursday, June 1, 2006 / Rules and Regulations

                                           taxable years beginning after December                  I Par. 2. Section 1.199–3T is added to                described in paragraph (i)(6)(iv)(A) of
                                           31, 2004, and before June 1, 2006. The                  read as follows:                                      this section) (as compared to the
                                           applicability of these temporary                                                                              taxpayer’s online software) to its
                                           regulations expires on or before May 25,                1.199–3T Domestic production gross                    customers pursuant to an activity
                                                                                                   receipts (temporary).
                                           2009. Section 1.199–8(i)(1) of the final                                                                      described in paragraph (i)(6)(iii)(A)(3) of
                                           regulations issued contemporaneous                         (a) through (h) [Reserved]. For further            this section.
                                           with these temporary regulations                        guidance, see § 1.199–3(a) through (h).                  (iv) Definitions and special rules—(A)
                                           provides that, in certain circumstances,                   (i) Derived from the lease, rental,                Substantially identical software. For
                                           a taxpayer may rely on the guidance in                  license, sale, exchange, or other                     purposes of paragraph (i)(6)(iii)(B) of
                                           Notice 2005–14 (2005–7 I.R.B. 498), the                 disposition.                                          this section, substantially identical
                                                                                                      (1) through (5) [Reserved]. For further            software is computer software that—
                                           proposed regulations under section 199
                                                                                                   guidance, see § 1.199–3(i)(1) through (5).               (1) From a customer’s perspective, has
                                           that were published in the Federal
                                                                                                      (6) Computer software—(i) [Reserved].              the same functional result as the online
                                           Register on November 4, 2005 (70 FR
                                                                                                   For further guidance, see § 1.199–                    software described in paragraph
                                           67220), or the final regulations.
                                                                                                   3(i)(6)(i).                                           (i)(6)(iii) of this section; and
                                           Regardless of which guidance a taxpayer                    (ii) Gross receipts derived from
                                           applies, the taxpayer may apply these                                                                            (2) Has a significant overlap of
                                                                                                   services. Gross receipts (as defined in               features or purpose with the online
                                           temporary regulations.                                  § 1.199–3(c)) derived from customer and               software described in paragraph
                                           Special Analyses                                        technical support, telephone and other                (i)(6)(iii) of this section.
                                                                                                   telecommunication services, online                       (B) Safe harbor for computer software
                                             It has been determined that this                      services (such as Internet access                     games. For purposes of paragraph
                                           Treasury decision is not a significant                  services, online banking services,                    (i)(6)(iv)(A) of this section, all computer
                                           regulatory action as defined in                         providing access to online electronic                 software games are deemed to be
                                           Executive Order 12866. Therefore, a                     books, newspapers, and journals), and                 substantially identical software. For
                                           regulatory assessment is not required. It               other similar services do not constitute              example, computer software sports
                                           also has been determined that section                   gross receipts derived from a lease,                  games are deemed to be substantially
                                           553(b) of the Administrative Procedure                  rental, license, sale, exchange, or other             identical to computer software card
                                           Act (5 U.S.C. chapter 5) does not apply                 disposition of computer software (as                  games.
                                           to these regulations. For applicability of              defined in § 1.199–3(j)(3)).                             (C) Regular and ongoing basis. For
                                           the Regulatory Flexibility Act (5 U.S.C.                   (iii) Exceptions. Notwithstanding                  purposes of paragraph (i)(6)(iii) of this
                                           601 et seq.), refer to the cross-reference              paragraph (i)(6)(ii) of this section, if a            section, in the case of a newly-formed
                                           notice of proposed rulemaking                           taxpayer derives gross receipts from                  trade or business or a taxpayer in its
                                           published elsewhere in this issue of the                providing to customers computer                       first taxable year, the taxpayer is
                                           Federal Register. Pursuant to section                   software MPGE in whole or in                          considered to be engaged in an activity
                                           7805(f) of the Code, these temporary                    significant by the taxpayer within the                described in paragraph (i)(6)(iii) of this
                                           regulations will be submitted to the                    United States for the customers’ direct               section on a regular and ongoing basis
                                           Chief Counsel for Advocacy of the Small                 use while connected to the Internet                   if the taxpayer reasonably expects that
                                           Business Administration for comment                     (online software), then such gross                    it will engage in the activity on a regular
                                           on their impact on small business.                      receipts will be treated as being derived             and ongoing basis.
                                           Drafting Information                                    from the lease, rental, license, sale,                   (D) Attribution. For purposes of
                                                                                                   exchange, or other disposition of                     paragraph (i)(6)(iii)(A) of this section—
                                             The principal authors of these                        computer software only if—                               (1) All members of an expanded
                                           regulations are Paul Handleman and                         (A) The taxpayer also derives, on a                affiliated group (as defined in § 1.199–
                                           Lauren Ross Taylor, Office of the                       regular and ongoing basis in the                      7(a)(1)) are treated as a single taxpayer;
                                           Associate Chief Counsel (Passthroughs                   taxpayer’s business, gross receipts from              and
                                           and Special Industries), IRS. However,                  the lease, rental, license, sale, exchange,              (2) In the case of an EAG partnership
                                           other personnel from the IRS and                        or other disposition to customers that                (as defined in § 1.199–9(j)), the EAG
                                           Treasury Department participated in                     are unrelated persons (as defined in                  partnership and all members of the EAG
                                           their development.                                      § 1.199–3(b)(1)) of computer software                 to which the EAG partnership’s partners
                                                                                                   that—                                                 belong are treated as a single taxpayer.
                                           List of Subjects in 26 CFR Part 1
                                                                                                      (1) Has only minor or immaterial                      (E) Qualified computer software
                                             Income taxes, Reporting and                           differences from the online software;                 maintenance agreements. Section
                                           recordkeeping requirements.                                (2) Has been MPGE (as defined in                   1.199–3(i)(4)(i)(B)(5) does not apply if
                                                                                                   § 1.199–3(e)) by the taxpayer (as defined             the computer software is online
                                           Amendments to the Regulations                           in § 1.199–3(f)) in whole or in                       software under paragraph (i)(6)(ii) of
                                                                                                   significant part (as defined in § 1.199–              this section.
                                           IAccordingly, 26 CFR part 1 is                                                                                   (v) Examples. The following examples
                                           amended as follows:                                     3(g)) within the United States (as
                                                                                                   defined in § 1.199–3(h)); and                         illustrate the application of this
                                           PART 1—INCOME TAXES                                        (3) Has been provided to such                      paragraph (i)(6):
                                                                                                   customers either affixed to a tangible                   Example 1. L is a bank and produces
                                           I Paragraph 1. The authority citation                   medium (for example, a disk or DVD) or                computer software within the United States
                                           for part 1 is amended by adding entries                 by allowing them to download the                      that enables its customers to receive online
                                           in numerical order to read, in part, as                 computer software from the Internet; or               banking services for a fee. Under paragraph
                                           follows:                                                   (B) An unrelated person derives, on a              (i)(6)(ii) of this section, gross receipts derived
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                                                                                                   regular and ongoing basis in the                      from online banking services are attributable
                                             Authority: 26 U.S.C. 7805 * * *                                                                             to a service and do not constitute a lease,
                                             Section 1.199–3T also issued under 26                 unrelated person’s business, gross                    rental, license, sale, exchange, or other
                                           U.S.C. 199(d). * * *                                    receipts from the lease, rental, license,             disposition of computer software. Therefore,
                                             Section 1.199–8T also issued under 26                 sale, exchange, or other disposition of               L’s gross receipts derived from the online
                                           U.S.C. 199(d). * * *                                    substantially identical software (as                  banking services are non-DPGR.



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                                                              Federal Register / Vol. 71, No. 105 / Thursday, June 1, 2006 / Rules and Regulations                                        31077

                                              Example 2. M is an Internet auction                  of computer software and are DPGR                     PENSION BENEFIT GUARANTY
                                           company that produces computer software                 (assuming all the other requirements of               CORPORATION
                                           within the United States that enables its               § 1.199–3 are met).
                                           customers to participate in Internet auctions              Example 6. P produces payroll                      29 CFR Parts 4000, 4006, and 4007
                                           for a fee. Under paragraph (i)(6)(ii) of this           management computer software within the
                                           section, gross receipts derived from online                                                                   RIN 1212–AB02
                                                                                                   United States. For a fee, P provides the
                                           services are attributable to a service and do
                                           not constitute a lease, rental, license, sale,          payroll management computer software to               Electronic Premium Filing
                                           exchange, or other disposition of computer              customers for the customers’ direct use while
                                           software. M’s activities constitute the                 connected to the Internet. This is P’s sole           AGENCY:  Pension Benefit Guaranty
                                           provision of online services. Therefore, M’s            method of providing its payroll management            Corporation.
                                           gross receipts derived from the Internet                computer software to customers. In                    ACTION: Final rule.
                                           auction services are non-DPGR.                          conjunction with the payroll management
                                              Example 3. N provides telephone services,            computer software, P provides storage of              SUMMARY: The PBGC is changing its
                                           voicemail services, and e-mail services. N              customers’ data and telephone support. Q, an          regulations to require that premium
                                           produces computer software within the                   unrelated person, derives, on a regular and           declarations be filed electronically. The
                                           United States that runs all of these services.
                                           Under paragraph (i)(6)(ii) of this section,
                                                                                                   ongoing basis in its business, gross receipts         requirement becomes effective for plans
                                           gross receipts derived from telephone and               from the sale to customers of Q’s                     with 500 or more participants for the
                                           related telecommunication services are                  substantially identical payroll management            prior plan year starting with filings for
                                           attributable to a service and do not constitute         software that has been affixed to a compact           plan years beginning in 2006 that are
                                           a lease, rental, license, sale, exchange, or            disc as well as from the sale to customers of         made on or after July 1, 2006, and for
                                           other disposition of computer software.                 Q’s substantially identical payroll                   smaller plans starting with filings for
                                           Therefore, N’s gross receipts derived from the          management software that customers have               plan years beginning after 2006. Plans
                                           telephone and other telecommunication                   downloaded from the Internet. Under                   may apply for exemptions on a case-by-
                                           services are non-DPGR.                                  paragraph (i)(6)(iii)(B) of this section, P’s         case basis. Filings may be submitted
                                              Example 4. O produces tax preparation                gross receipts derived from providing its
                                           computer software within the United States.                                                                   through the PBGC’s on-line e-filing
                                                                                                   payroll management computer software to               application (‘‘My Plan Administration
                                           O derives, on a regular and ongoing basis in
                                                                                                   customers over the Internet will be treated as        Account,’’ or ‘‘My PAAA’’). My PAA
                                           its business, gross receipts from both the sale
                                           to customers that are unrelated persons of O’s          derived from the lease, rental, license, sale,        has data entry and editing screens that
                                           computer software that has been affixed to a            exchange, or other disposition of computer            can be used to create and submit a
                                           compact disc as well as from the sale to                software and are DPGR (assuming all the               filing, and can also accept uploaded
                                           customers of O’s computer software that                 other requirements of § 1.199–3 are met).             files containing filing information that
                                           customers have downloaded from the                      However, P’s gross receipts derived from the          has been prepared and formatted using
                                           Internet. O also derives gross receipts from            fees it receives that are properly allocable to       private-sector software in accordance
                                           customers from providing the computer                   the storage of customers’ data and telephone
                                           software to its customers for the customers’                                                                  with the PBGC’s published standards.
                                                                                                   support are non-DPGR.
                                           direct use while connected to the Internet.                                                                   DATES: Effective date: July 1, 2006. For
                                           Assume that the computer software sold on                 Par. 3. Section 1.199–8T is added to                a discussion of applicability of these
                                           compact disc or by download has only minor              read as follows:                                      amendments, see the Applicability
                                           or immaterial differences from the computer                                                                   section in SUPPLEMENTARY INFORMATION.
                                           software provided over the Internet, and O              § 1.199–8T    Other rules (temporary).                FOR FURTHER INFORMATION CONTACT: John
                                           does not provide any services in connection
                                           with the computer software provided over                   (a) through (h) [Reserved]. For further            H. Hanley, Director, or Deborah C.
                                           the Internet. Under paragraph (i)(6)(iii)(A) of         guidance, see § 1.199–8(a) through (h).               Murphy, Attorney, Legislative and
                                           this section, O’s gross receipts derived from                                                                 Regulatory Department, Pension Benefit
                                                                                                      (i) Effective dates. (1) through (3)
                                           providing its computer software to customers                                                                  Guaranty Corporation, 1200 K Street,
                                           over the Internet will be treated as derived            [Reserved]. For further guidance, see                 NW., Washington, DC 20005–4026, 202–
                                           from the lease, rental, license, sale, exchange,        § 1.199–8(i)(1) through (3).                          326–4024. (For TTY/TTD users, call the
                                           or other disposition of computer software                  (4) Computer software. Section 1.199–              Federal relay service toll-free at 1–800–
                                           and are domestic production gross receipts              3T(i)(6)(ii) through (v) are applicable for           877–8339 and ask to be connected to
                                           (DPGR) (as defined in § 1.199–3) (assuming
                                           all the other requirements of § 1.199–3 are             taxable years beginning on or after June              202–326–4024.)
                                           met).                                                   1, 2006. Taxpayers may apply these                    SUPPLEMENTARY INFORMATION: This final
                                              Example 5. The facts are the same as in              temporary regulations to taxable years                rule is part of an ongoing
                                           Example 4, except that O does not sell the              beginning after December 31, 2004, and                implementation of the Government
                                           tax preparation computer software to                    before June 1, 2006. The applicability of             Paperwork Elimination Act by the
                                           customers affixed to a compact disc and O’s             § 1.199–3T(i)(6)(ii) through (v) expires              Pension Benefit Guaranty Corporation
                                           only method of providing the tax preparation
                                                                                                   on or before May 25, 2009.                            (‘‘PBGC’’) and is consistent with the
                                           computer software to customers is over the
                                           Internet. P, an unrelated person, derives, on                                                                 Office of Management and Budget’s
                                                                                                   Mark E. Mathews,                                      directive to remove regulatory
                                           a regular and ongoing basis in its business,
                                           gross receipts from the sale to customers of            Deputy Commissioner for Services and                  impediments to electronic transactions.
                                           P’s substantially identical tax preparation             Enforcement.                                          The rule addresses electronic
                                           computer software that has been affixed to a              Approved: May 2, 2006.                              submission of premium filings that are
                                           compact disc as well as from the sale to                Eric Solomon,                                         required under the regulation on
                                           customers of P’s substantially identical tax                                                                  Payment of Premiums (29 CFR part
                                                                                                   Acting Deputy Assistant Secretary of the
                                           preparation computer software that                                                                            4007) and builds in the flexibility
                                           customers have downloaded from the                      Treasury.
                                                                                                                                                         needed to allow updating of the
mstockstill on PROD1PC68 with RULES




                                           Internet. Under paragraph (i)(6)(iii)(B) of this        [FR Doc. 06–4828 Filed 5–24–06; 11:47 am]
                                           section, O’s gross receipts derived from                                                                      electronic filing process as technology
                                                                                                   BILLING CODE 4830–01–P
                                           providing its tax preparation computer                                                                        advances.
                                           software to customers over the Internet will                                                                     The PBGC administers the pension
                                           be treated as derived from the lease, rental,                                                                 insurance programs under Title IV of
                                           license, sale, exchange, or other disposition                                                                 the Employee Retirement Income


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