Federal Register: July 6, 2006 (Volume 71, Number 129)
DOCID: FR Doc E6-10245
DEPARTMENT OF THE TREASURY
Internal Revenue Service
CFR Citation: 26 CFR Part 1
RIN ID: RIN 1545-BF57
TD ID: [TD 9262]
ACTION: Income taxes:
DOCUMENT ACTION: Correcting amendments.
Computer Software Under Section 199(c)(5)(B); Correction
DATES: These corrections are effective June 1, 2006.
This document contains a correction to temporary regulations (TD 9262) that were published in the Federal Register on Thursday, June 1, 2006 (71 FR 31074) concerning the application of section 199 of the Internal Revenue Code, which provides a deduction for income attributable to domestic production activities, to certain transactions involving computer software.
Computer software; Correction,
The correction notice that is the subject of this document is under section 199 of the Internal Revenue Code.
Need for Correction
As published, the correction notice (TD 9262) contains errors that may prove to be misleading and are in need of clarification. List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements. Correction of Publication
Accordingly, 26 CFR part 1 is corrected by making the following correcting amendments:
PART 1INCOME TAXES
Paragraph 1. The authority citation for part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Sec. 1.1993T [Corrected]
Par. 2. Section 1.1993T is amended by revising paragraphs (i)(6)(iii) introductory text and Example 5 to read as follows:
Sec. 1.1993T Domestic production gross receipts (temporary). * * * * *
(i) * * *
(6) * * *
(iii) Exceptions. Notwithstanding paragraph (i)(6)(ii) of this section, if a taxpayer derives gross receipts from providing to customers computer software MPGE in whole or in significant part by the taxpayer within the United States for the customers' direct use while connected to the Internet (online software), then such gross receipts will be treated as being derived from the lease, rental, license, sale, exchange, or other disposition of computer software only if * * * * *
Example 5. The facts are the same as in Example 4, except that O
does not sell the tax preparation computer software to customers
affixed to a compact disc or by download and O's only method of
providing the tax preparation computer software to customers is over
the Internet. P, an unrelated person, derives, on a regular and
ongoing basis in its business, gross receipts from the sale to
customers of P's substantially identical tax preparation computer
software that has been affixed to a compact disc as well as from the
sale to customers of P's substantially identical tax preparation
computer software that customers have downloaded from the Internet.
Under paragraph (i)(6)(iii)(B) of this section, O's gross receipts
derived from providing its tax preparation computer software to
customers over the Internet will be treated as derived from the
lease, rental, license, sale, exchange, or other disposition of
computer software and are DPGR (assuming all the other requirements of Sec. 1.1993 are met).
* * * * *
Sec. 1.1998T [Corrected]
Par. 3. Section 1.1998T is amended by revising paragraph (i)(4) to read as follows:
Sec. 1.1998T Other rules (temporary).
(i) * * *
(4) Computer software. Section 1.1993T(i)(6)(ii) through (v) are applicable for taxable years beginning on or after June 1, 2006. Taxpayers may apply these temporary regulations to taxable years beginning after December 31, 2004, and before June 1, 2006. The applicability of Sec. 1.1993T(i)(6)(ii) through (v) expires on or before May 22, 2009.
Guy R. Traynor,
Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration).
[FR Doc. E610245 Filed 7506; 8:45 am]
BILLING CODE 483001P
FOR FURTHER INFORMATION CONTACT
Paul Handleman or Lauren RossTaylor, (202) 6223040 (not a tollfree number).