part32-9
- 32.1.4.1
Overview of Drafting Process - 32.1.4.2
Outlining a Regulation before Drafting - 32.1.4.3
Draft Identification Block - 32.1.4.4
Drafting - Exhibit 32.1.4-1
Regulation Checklist - Exhibit 32.1.4-2
Sample Advanced Notice of Proposed Rulemaking (ANPRM) - Exhibit 32.1.4-3
Sample Notice of Proposed Rulemaking (NPRM) - Exhibit 32.1.4-4
Sample Notice of Proposed Rulemaking by Cross-Reference to Temporary
Regulation - Exhibit 32.1.4-5
Sample Temporary Regulation - Exhibit 32.1.4-6
Sample Final Regulation - Exhibit 32.1.4-7
Sample Notice of Proposed Rulemaking by Cross-Reference to Temporary
Regulation that Amends Existing Final Regulation - Exhibit 32.1.4-8
Sample Existing Final Regulations Amended by Temporary Regulations
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After the initial policy decisions are made, the drafting team should
begin drafting the regulation. Outlines are not required, but may be useful
in certain cases. The drafting team should consult this Handbook and contact
the FRL assigned to the project to ensure compliance with all required procedures. See Exhibit 32.1.4-1, Regulation Checklist.
-
Executive Order 12866 mandates that the following drafting standards
are to be used (unless one or more standard is determined to be unreasonable):-
Draft regulations to minimize litigation,
-
Draft regulations to provide a clear legal standard for affected conduct
rather than a general standard, to promote simplification and burden reduction, -
Specify in clear language the preemptive effect, if any, to be given to
the regulation, -
Specify in clear language the effect, if any, on existing Federal law
or regulation, including all provisions repealed, circumscribed, displaced,
impaired, or modified, -
Specify in clear language the retroactive effect, if any, to be given
to the regulation, -
Specify whether administrative proceedings are to be required before parties
may file suit in court and, if so, describe those proceedings and any requirement
of the exhaustion of administrative remedies, and -
Define key terms used in regulations, either explicitly or by reference
to other regulations or statutes that explicitly define those items.
-
-
An outline is not required but outlining may help structure the regulation
into manageable pieces. Additionally, an outline enables the drafter to visualize
different ways to organize a regulation without the burden of editing text.
For example, an initial outline may organize a regulation in the same sequence
as the corresponding Code section, and a later outline might show that the
regulation is shorter and clearer if organized by the type of taxpayer affected. -
The drafting team should consider the following general guidelines:
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Place general provisions before specific provisions,
-
Place more important provisions before less important provisions,
-
Place more frequently used provisions before less frequently used provisions,
-
Place permanent provisions before interim, transitional, and ”
grand-fathered”
provisions, and -
Place technical “housekeeping”
provisions, usually
including the applicability date and transition rules, at the end.
Example 1:
An
initial outline may reveal that the organization of the regulation results
in too many levels of subtopics. Before drafting any text, the drafting team
should correct this problem by breaking a large section into two smaller sections.
This eliminates the lowest levels.THIS NOT THIS -1 VOLUNTARY PRODUCTION OF RECORDS -2 INVOLUNTARY PRODUCTION
OF RECORDS(a) Summons
(1) Courts that can approve issuance
(2)
Ex parte proceedings
(i) Notice after proceeding
(ii) Special court
approval
(b) District conference
(c) Appellate conference-1 PROCEDURE FOR PRODUCING RECORDS (a) Voluntary basis
(b)
Involuntary basis
(1) Summons
(i) Courts that can approve issuance
(ii)
Ex parte proceedings
(A) Notice after proceeding
(B) Special court approval
(2)
District conference
(3) Appellate conference
Example 2:
The
initial outline may reveal that the organization of the regulation is lopsided.
The drafting team should combine sections that are too small or divide sections
that are too large.THIS NOT THIS New (a)(1) portion of old (a)(1)
(2) portion of old (a)(1)
(3)
portion of old (a)(1)
(4) portion of old (a)(1)
etc.New
(b)(1) old (a)(2)
(2) old (a)(3)
(3) old (a)(4)
(4)
old (a)(5)New (c) old (b)
(a)(1) 5 pages
(2) 4 lines
(3) 14 lines
(4) 6 lines
(5)
5 lines
(b) 1 page -
-
Until a regulation is put in signature package, the regulation should
include the draft identification block on the first three lines of the first
page of every draft, flush at the left margin. -
The draft identification block includes:
-
The type of draft (precirculation or circulation) and the draft date
-
The project number
-
The drafters organization, branch number, and name
Example:
Circulation draft of 10-31-2002
REG-123456-02
PA:APJP:2:JOAttorney -
-
The drafting team should consider the following when drafting the text
of regulations:-
Be precise; avoid legalese; to the extent possible, use singular nouns
and pronouns; use the active voice; use gender-neutral terms; use short, simple
sentences and brief paragraphs -
Do not use “i.e.,”
“e.g.,”
“shall,”
“such,”
“herein,
”
“thereunder,”
“hereinafter,”
“above,”
or “below.”
Use ”
for example,”
“must,”
“that,”
and “in this paragraph”
and “in this section”
.
-
-
The drafting team should place the general rule before exceptions and
special rules. This is referred to as a “stop sign format.”
For
the stop sign format to work, the general rule must contain a cross-reference
to the exceptions or special rules and a statement about the scope of those
rules. -
Writing a regulation using the stop sign format may reduce the complexity
of a long regulation. This format allows the reader to determine if the exceptions
or special rules apply without reading the entire regulation.Example:
If an additional set of complex requirements applies to a corporation with
assets or gross receipts that exceed particular thresholds:THIS NOT THIS Additional rules apply to corporations with assets that exceed
[threshold 1] or gross receipts that exceed [threshold 2]. See [cross-reference
to later rules].For additional rules applicable to certain large corporations,
see [cross-reference to later rules].
-
After developing a particular rule and any exceptions, the drafting
team should review the rule to ensure that the organization is logical.Example:
THIS NOT THIS A taxpayer receives tax result [X] if: -
The taxpayer [condition 1];
-
The taxpayer [condition 2]; and
-
[condition 3].
A taxpayer that [condition 1] receives tax result [X] if the
taxpayer [condition 2], provided that [condition 3]. -
-
A new regulation may incorporate rules in an existing regulation. For
example, a new regulation might provide that, “For purposes
of making this determination, the provisions of §1.XXX-X(a)(5) apply.
” -
If a new regulation will not incorporate all the rules of another regulation
section, the drafting team should specify the exception with language such
as, “However, the rule in §1.XXX-X(a)(5)(iii) (include
general description) does not apply.”
If the new regulation will add
to the incorporated rules, the drafting team should note the addition with
language such as, “In addition, the following special rule applies
to returns described in §1.XXX-5 (include general description).” -
The drafting team should not use internal incorporation if changes to
the incorporated provisions are needed to conform them to the new regulation.
For example, do not incorporate an S corporation rule into a partnership provision
by stating, “Substitute partnership for S corporation each
place that it appears.” -
The drafting team should be aware that any future changes to incorporated
existing regulations will automatically affect the new regulation. For example,
if §1.XXX-1 incorporates material from §1.XXX-5, an amendment to
§1.XXX-5 will also amend §1.XXX-1.
-
A cross-reference refers to rules in another part of a regulation or
in a separate regulation. The drafting team should explain the cross-reference,
usually with an identifying parenthetical. For example, a cross-reference
to §1.382-1 might be explained with: (limitation on net operating losses
and built-in losses of a corporation following an ownership change). Similarly,
a cross-reference to another part of the regulation that provides an exception
might read as follows, “Except as otherwise provided in paragraph
(b)(3) of this section (relating to the de minimis exception), this section
is effective January 1, 2003.”
-
If a regulation repeatedly uses words that need to be defined, the drafting
team should define the words in a separate paragraph or section, usually at
the beginning of the regulation. -
The drafting team should not define ordinary words used in their usual
dictionary meaning. If a term is rarely used, it does not need to be separately
defined. Instead, the drafting team should consider replacing the term with
specific explanatory language in the few places it appears. -
The drafting team should not include operative rules within definitions.
THIS NOT THIS -
Tax on sales. A tax is imposed on each sale of an
alcoholic beverage. -
Definition. For purposes of this section, alcoholic beverage means beer and wine.
-
Definition. For purposes of this section, alcoholic beverage means beer and wine. A tax is imposed on
each sale of an alcoholic beverage.
-
-
In the definition section of a regulation, the drafting team should
underline the terms defined. Do not put the term in quotation marks. Only
underline the term the first time when it is being defined. The drafting team
should use “means”
or “is”
in definitional
sentences. For example, “The term qualified individual
means any natural person who…” -
If a regulation contains a series of definitions, the definitions may
be listed in alphabetical order in a separate section or paragraph and need
not be individually designated. The drafting team should begin each definition
with the term being defined. If a definition has lower level paragraphs, the
drafting team should designate those paragraphs based on the designation of
the overall definitional section.Example:
(b) Definitions.
Employee means
a person who—
(1) [TEXT]; and
(2) [TEXT]
Employer
means…
Taxable year means… -
Use the following instructional paragraph to add a new definition to
an alphabetical series:Example:
Par. 2. In §1.XXX-2, paragraph (b) is amended by adding
a new definition in alphabetical order to read as follows:
§1.XXX-2 [HEADING OF REGULATION].
* * * * *
(b) Definitions.
Employee means
a person who—
(1) [TEXT]; and
(2) [TEXT]
-
The drafting team should use handles as a substitute for long, unwieldy
phrases that are used repeatedly. For example, the phrase: ”
the amount of any income, war profits, and excess profits taxes paid or accrued
during the taxable year to any foreign country or possession of the United
States with respect to foreign mineral income from sources within that country
or possession,”
might be substituted with a handle, such as ”
(foreign mineral income taxes)”
after the second use of the word “possession.” -
Acronyms also keep the regulation text clean. For example, ozone-depleting
chemicals becomes ODCs, voluntary employees’ beneficiary association
becomes VEBA, and foreign oil related income becomes FORI. -
The drafting team should assign a handle or acronym when a phrase or
term is first used in the regulation. The drafting team should spell out the
handle or acronym in parentheses without quotation marks following the phrase
or term for which it will substitute.
-
The drafting team may use examples in the regulation to illustrate specific
provisions of the regulation. It is not necessary to set forth all the facts
that form the basis for an example’s conclusion. Instead, the drafting
team should provide only the facts necessary to illustrate the pertinent rule
and include intermediate legal conclusions as assumed facts. The drafting
team should then provide the legal analysis the example is meant to illustrate.
An example cannot be the source of a rule. -
Examples follow a specified format. The drafting team should begin the
paragraph containing one or more examples with a brief introductory text.
Single-space the text of an example. If an example has more than one paragraph,
the drafting team should designate each paragraph. If there is only one example,
use the heading “Example.”
. If there
are multiple examples, number the headings “
Example 1.”
, “Example 2.
”
, etc. Descriptive titles should be used to assist the reader whenever
possible. -
For computations, the drafting team should use the percent sign “%”
, the dollar sign “$”
, and the multiplication
sign “x”
. The drafting team should use letters of the
alphabet, rather than proper names, to designate taxpayers. Use different
portions of the alphabet for different types of taxpayers. For example, A,
B, and C for three individuals, and X and Y for two corporations. -
For a series of examples relying on a common set of facts, the drafting
team may provide the facts before beginning the examples. The drafting team
may also instruct the reader in an example to assume the same facts, with
modifications, as in the previous example. -
If using a numbering system in an example, the drafting team should
begin with (i) and progress as follows:-
(i), (ii), (iii), etc.
-
(A), (B), (C), etc.
-
(1), (2), (
3), etc. -
(i), (ii), (
iii), etc.
-
-
The drafting team should identify the first line of each numbering level
used in an example and should avoid using multiple numbering levels in examples
whenever possible.
Example 1:
(g) Examples. The following examples illustrate
the rules of this section:
Example 1. No qualified
intermediary. (i) A uses the calendar year as the taxable year and
the cash receipts and disbursements method of accounting…(ii) Under the agreement, B must deposit cash into the qualified
escrow account equal to the agreed upon fair market…
Example 2. Qualified intermediary
. (i) The facts are the same as in Example 1,
except that the agreement between A and B requires B to pay $100,000 to a
qualified intermediary (QI)…(ii) QI deposits the $100,000 received from B into a qualified
escrow account, the $100,000 is invested in a…
Example 2:
(4) Examples. The rules of this paragraph
(h) are illustrated by the following examples in which X is an S corporation
owned 50% by A and 50% by A’s brother B:
-
The various types of special formats used in drafting regulatory text
are discussed separately in this subsection.
-
A table of contents lists the caption headings in the regulation. The
drafting team should designate the table of contents as paragraph (a) if there
is one regulation section. If there are multiple regulation sections, or multiple
sections are anticipated, the drafting team should designate the table of
contents as section -0. -
The drafting team should start the table of contents with undesignated
introductory text identifying the table of contents. The table of contents
appears flush left, single-spaced. All paragraph headings end with a period.
The drafting team should not underline paragraph headings. It is not necessary
to include every paragraph level in the table of contents, but the drafting
team must be consistent from section to section.Example:
Par. 2. Section 52.4681-0 is amended as follows:
1.
The introductory text is revised.
2. Entries are added for §52.4682-5.
The
revision and addition read as follows:
§52.4681-0 Table
of contents.
This section lists the table of contents for
§§52.4681-1 through 52.4681-5.
* * * * *§52.4681-5 Exports. (a) Overview.
(b) Exemption or partial exemption from tax.
(1)
In general.
(2) Tax imposed if exemption amount exceeded.
(i) Post-1989
ODCs.
(ii) Post-1990 ODCs.
(3) Mixtures.
(c) Exemption amount.
(d)
Effective date.
-
The drafting team should begin each list with introductory material
identifying the list. -
If the introductory material ends in a complete sentence, the drafting
team should end the introduction with a colon and end each item in the list
with a period. -
If the introductory material ends in an incomplete sentence, the drafting
team should end the introduction with two dashes (no space between the dashes
and no space between the last word of the introduction and the dashes) and
end each item in the list (except the last one) with a semicolon. After the
last semicolon use “and” or “or” and end the last item in the list with a
period. Flush language is not allowed at the end of the list.
Example 1:
(iii) Examples of capital service costs. Costs
incurred in the following departments or functions are generally allocated
among production or resale activities:(A) The administration and coordination of production or resale
activities (wherever performed in the business organization of the taxpayer).(B) Personnel operation, including the cost of recruiting, hiring,
relocation, assigning, and maintaining personnel records or employees.(C) Purchasing operations, including purchasing materials and
equipment, scheduling and coordinating delivery of materials and equipment
to or from factories or job sites, and expediting and follow-up.
Example 2:
(a) In general. An escrow account, trust,
or fund that is not a qualified settlement fund is a disputed ownership fund
if—(1) It is established to hold money or property subject to conflicting
claims of ownership;(2) The fund is subject to the continuing jurisdiction of a court;
and(3) Money or property cannot be paid or distributed from the
fund to, or on behalf of, a claimant or transferor without the approval of
the court.
-
A regulation may refer to a form, publication, or notice. The drafting
team should include the title of the item when first discussed in the preamble
and first discussed in each regulation section amended. The drafting team
should place the title in quotation marks, offset by commas.Example:
If the taxpayer timely files Form 3115, “Application for Change
in Accounting Method,”
. . . the Form 3115 will be . . .
-
The drafting team should set out citations in parentheses.
Examples:
Paperwork Reduction Act (44 U.S.C. 3504(h)) Taxpayer Relief Act of 1997, Public Law 105-34 (11 Stat. 788, 955 (1997)) Notice 97-65 (1997-2 C.B. 326 (December 22, 1997)), (see §601.601(d)(2)(ii)(b) of this chapter) Rev. Proc. 81-46 (1981-2 C.B. 621), (see §601.601(d)(2)(ii)(b) of this chapter)
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Regulations may contain graphs, time lines, flowcharts, diagrams, pictures,
drawings, formulas, and tables as either substantive rules or examples. The
OFR has special printing requirements with respect to documents with graphs,
timelines, flowcharts, etc. Documents containing these features may need to
be prepared in camera-ready copy. The FRL assigned to the project will help
the drafting team prepare the document to meet the OFR requirements.
-
For sample documents, see the following exhibits:
-
Exhibit 32.1.4-2, Sample ANPRM
-
Exhibit 32.1.4-3, Sample NPRM
-
Exhibit 32.1.4-4, Sample NPRM By Cross-Reference To Temporary Regulation
-
Exhibit 32.1.4-5, Sample Temporary Regulation
-
Exhibit 32.1.4-6, Sample Final Regulation
-
Exhibit 32.1.4-7, Sample NPRM By Cross-Reference To Temporary Regulations
That Amend Existing Final Regulations -
Exhibit 32.1.4-8, Sample Existing Final Regulations Amended By Temporary
Regulations
-
| Task | Complete Date | |||||
| RIN | ||||||
| 7 Point Memo | ||||||
| ANPRM: | ||||||
| NPRM: | ||||||
| TEMP: | ||||||
| Copy to Federal Register Liaison |
||||||
| Green Version (via email) |
||||||
| Comments Due | ||||||
| Signature Package | ||||||
| Chief Counsel | ||||||
| Commissioner | ||||||
| Delivered to Treasury | ||||||
| Treasury | ||||||
| Plain Language Summary | ||||||
| Submit Regulation to FRL |
||||||
| Filing and Publication Date Assigned |
||||||
| Deliver to Regulations Unit (Room 5203) |
||||||
| 14 copies (double sided + “cover sheet” ) |
||||||
| 2 Diskettes (removed hidden codes) |
||||||
| Form 12971 | [Deliver on Date Filed with FR] | |||||
| Form 12972 | [Deliver on Date Filed with FR] | |||||
| Congressional/GAO Submission |
[Deliver on Date Filed with FR] | |||||
| Email FILING DATE to: floyd.Williams@irs.gov |
[on Filing Date] | |||||
| Email Regulation and PL Summary to Treena Garrett (cc: Cynthia Grigsby & Guy Traynor) |
||||||
| Proofread regulation after publication |
||||||
| Public Hearing | ||||||
| Contact Regulations Unit to schedule |
||||||
| Assemble Legal File | ||||||
| Final Regulation | ||||||
| Close File | ||||||
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