Rules Relating to General Definition of
Dependent

DEPARTMENT OF THE TREASURY             
Internal Revenue Service 26 CFR Part 1 [REG-107279-00] RIN 1545-AY18

TITLE: Rules Relating to General Definition of Dependent

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains proposed regulations that amend the
definition of "authorized placement agency" for purposes of
determining whether a child placed for legal adoption in a
taxpayer’s home is a dependent of the taxpayer. A taxpayer who has a
child placed for legal adoption in his or her home by an authorized
placement agency will be affected by these regulations.

DATES: Written or electronically generated comments and requests for
a public hearing must be received by February 28, 2001.

ADDRESSES: Send submissions to: CC:M&SP:RU (REG-107279-00), room
5226, 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 5 p.m. to: CC:M&SP
(REG-107279-00), Courier's Desk, Internal Revenue Service, 1111
Constitution Avenue., NW., Washington, DC. Taxpayers may also submit
comments electronically via the internet by selecting the "Tax Regs"
option on the IRS Home Page, or by submitting comments directly to
the IRS internet site at .

The IRS will publish the time and date of any public hearing in the
Federal Register .

FOR FURTHER INFORMATION CONTACT: Concerning the regulations,
Elizabeth Kaye, (202) 622-4910; concerning submissions of comments
and requests for a public hearing, Guy Traynor, (202) 622-7180 (not
toll-free calls);

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

        This document contains proposed amendments to §1.152-2(c)(2)
of the Income Tax Regulations (26 CFR part 1) relating to the
general definition of a dependent.

       On October 12, 1999, the IRS published final regulations
under section 6109 regarding IRS adoption taxpayer identification
numbers (TD 8839, 64 FR 51241). Those regulations provided, in part,
that in order for an adoption taxpayer identification number (ATIN)
to be assigned, a child must be placed for adoption by an
"authorized placement agency" as defined in §1.152-2(c)(2).
Commentators expressed concern that because of this requirement,
ATINs are not available in the case of independent adoptions as
defined by state law. In general, independent adoptions take two
forms. In one type, the biological parent(s) uses an attorney or
other intermediary to place the child with the adoptive parents. In
other independent adoptions, no intermediary is necessary because
the adoptive parents and the biological parent(s) know one another.

       The proposed regulations amend the definition of "authorized
placement agency" to provide that an authorized placement agency is
not limited to governmental and private organizations authorized by
state law to place children for legal adoption, but also includes
biological parents and other persons authorized by state law to
place children for legal adoption.

       These regulations are proposed to apply for taxable years
beginning after December 31, 2000. Taxpayers may rely on these
proposed regulations for guidance pending the issuance of the final
regulations. If, and to the extent, future guidance is more
restrictive than the guidance in the proposed regulations, the
future guidance will be applied without retroactive effect.

Special Analyses

       It has been determined that this notice of proposed
rulemaking is not a significant regulatory action as defined in
Executive Order 12866. Therefore, a regulatory assessment is not
required. It has also been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to
these regulations, and because these regulations do not impose on
small entities a collection of information requirement, the
Regulatory Flexibility Act (5 U.S.C. Chapter 6) does not apply.
Pursuant to section 7805(f) of the Internal Revenue Code, this
notice of proposed rulemaking will be submitted to the Chief Counsel
for Advocacy of the Small Business Administration for comment on its
impact on small business.

Comments and Requests for a Public Hearing

       Before these proposed regulations are adopted as final
regulations, consideration will be given to any written and
electronic comments that are submitted timely to the IRS. The IRS
and Treasury specifically request comments on the clarity of the
proposed regulations and how it can be made easier to understand.
All comments will be available for public inspection and copying. A
public hearing will be scheduled if requested by any person who
timely submits comments. If a public hearing is scheduled, notice of
the date, time, and place for the public hearing will be published
in the Federal Register.

Drafting Information

       The principal author of these proposed regulations is
Elizabeth Kaye, Office of Assistant Chief Counsel (Income Tax and
Accounting). However, other personnel from the IRS and the Treasury
Department participated in the development of the regulations.

List of Subjects in 26 CFR Part 1

       Income taxes, Reporting and recordkeeping requirments.

Proposed Amendments to the Regulations

       Accordingly, 26 CFR part 1 is proposed to be amended as
	   follows:

PART 1--INCOME TAXES

       Paragraph 1. The authority citation for part 1 continues to
read in part as follows:

   Authority: 26 U.S.C. 7805 * * *

        Par. 2. Section 1.152-2 is amended by revising paragraph (c)
		(2) to read as

follows:

§ 1.152-2 Rules relating to general definition of dependent.

* * * * *

        (c) * * *

(2) For any taxable year beginning after December 31, 2000, a child
who is a member of an individual’s household will be treated as a
child of that individual by blood if the child was placed with the
individual by an authorized placement agency for legal adoption
pursuant to a formal application filed by the individual with the
agency. For purposes of this paragraph (c)(2), an authorized
placement agency is any agency that is authorized by a State, the
District of Columbia, a possession of the United States, a foreign
country, or a political subdivision of any of the foregoing to place
children for adoption. An authorized placement agency also includes
biological parents and other persons authorized by state law to
place children for legal adoption.

* * * * *

Deputy Commissioner of Internal Revenue

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