PROPOSED REGS ON NEW FORM 1120-C FOR COOPERATIVES.

[Editor's Note: At 72 F.R. 41441-41442, July 30, 2007, the IRS published Treasury Decision 9336 which adopted the following proposed regs (REG-149436-04).]

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains proposed regulations that prescribe the form that cooperatives must use to file their income tax returns. The regulations affect all cooperatives that are currently required to file an income tax return on either Form 1120, "U.S. Corporation Income Tax Return," or Form 990-C, "Farmers' Cooperative Association Income Tax Return."

DATES: Written or electronic comments and requests for a public hearing must be received by October 27, 2005.

ADDRESSES: Send submissions to: CC::PA:LPD:PR (REG-149436-04), room 5203, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-149436-04), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC, or sent electronically, via the IRS Internet site at www.irs.gov/regs, or via the Federal eRulemaking Portal at www.regulations.gov (IRS-REG-149436-04). A public hearing may be scheduled if requested by any person who timely submits comments.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Donnell M. Rini-Swyers, (202) 622-4910; concerning submissions of comments, or to request a hearing, Richard Hurst, (202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

Under existing regulations, all cooperatives to which subchapter T applies (Subchapter T cooperatives) are required to make income tax returns. Except in the case of farmers' cooperatives, the regulations require that the return be made on Form 1120. In the case of farmers' cooperatives, the regulations require that the return be made on Form 990-C.

Most taxpayers required to make an income tax return on Form 1120 must file their return on or before the 15th day of the third month following the close of the taxpayer's taxable year (2 1/2 month deadline). Some Subchapter T cooperatives that make their returns on Form 1120 are required to file by the 2 1/2 month deadline, but others are not required to file their returns until the 15th day of the ninth month following the close of the taxpayer's taxable year (8 1/2 month deadline). Because the Form 1120 does not distinguish between Subchapter T cooperatives that must file by the 2 1/2 month deadline and those that must file by the 8 1/2 month deadline, the IRS has difficulty determining which filing deadline applies and deciding whether to assert delinquency and failure to pay penalties in the case of returns filed after the 2 1/2 month deadline.

Explanation of Provisions

The proposed regulations provide that all Subchapter T cooperatives must make their income tax returns on Form 1120-C, "U.S. Income Tax Return for Cooperative Associations," or such other form as may be designated by the Commissioner. The information that Subchapter T cooperatives will be required to provide on new Form 1120-C will assist taxpayers and the IRS in determining the appropriate filing deadline. Having that information will reduce the burden on taxpayers and will help the IRS avoid asserting penalties in inappropriate cases. Having all Subchapter T cooperatives make their income tax returns on Form 1120-C will also eliminate confusion over which form to file and will promote efficiency in addressing income tax issues common to Subchapter T cooperatives.

Effect on Other Documents

The following publication is obsolete as of the October 27, 2005.

(2) Farmers' cooperatives. For taxable years ending before December 31, 2006, a farmers' cooperative organization described in section 521(b)(1) (including a farmers' cooperative that is not exempt from tax under section 521) is required to make a return on Form 990-C, "Farmers' Cooperative Association Income Tax Return."