| Announcement 2006-56 |
August 28, 2006 |
Computer Software Under Section 199(c)(5)(B); Correction
Internal Revenue Service (IRS), Treasury.
This document contains a correction to temporary regulations (T.D. 9262,
2006-24 I.R.B. 1040) 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.
These corrections are effective June 1, 2006.
FOR FURTHER INFORMATION CONTACT:
Paul Handleman or Lauren Ross Taylor, (202) 622-3040 (not a toll-free
number).
SUPPLEMENTARY INFORMATION:
The correction notice that is the subject of this document is under
section 199 of the Internal Revenue Code.
As published, the correction notice (T.D. 9262) contains errors that
may prove to be misleading and are in need of clarification.
* * * * *
Correction of Publication
Accordingly, 26 CFR Part 1 is corrected by making the following correcting
amendments:
Paragraph 1. The authority citation
for part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.199-3T is amended by revising paragraphs (i)(6)(iii)
introductory text and Example 5 to read as follows:
§ 1.199-3T 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 § 1.199-3 are met).
Par. 3. Section 1.199-8T is amended by revising paragraph (i)(4) to
read as follows:
§ 1.199-8T Other rules (temporary).
* * * * *
(i) * * *
(4) Computer software. Section 1.199-3T(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 § 1.199-3T(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).
Note
(Filed by the Office of the Federal Register on July 5, 2006, 8:45 a.m.,
and published in the issue of the Federal Register for July 6, 2006, 71 F.R.
38262)
Internal Revenue Bulletin 2006-35
SEARCH:
You can either: Search all IRS Bulletin Documents issued since January 1996, or Search the entire site. For a more focused search, put your search word(s) in quotes.
2006 Document Types | 2006 Weekly IRBs
IRS Bulletins Main | Home
|
