Consistent with these missions, most regulations of the Department and its constituent bureaus are promulgated to interpret and implement the laws as enacted by the Congress and signed by the President. It is the policy of the Department to comply with applicable requirements to issue a notice of proposed rulemaking and carefully consider public comments before adopting a final rule. Also, the Department invites interested parties to submit views on rulemaking projects while a proposed rule is being developed.

To the extent permitted by law, it is the policy of the Department to adhere to the regulatory philosophy and principles set forth in Executive Orders 12866, 13563, and 13609 and to develop regulations that maximize aggregate net benefits to society while minimizing the economic and paperwork burdens imposed on persons and businesses subject to those regulations.

Alcohol and Tobacco Tax and Trade Bureau

The Alcohol and Tobacco Tax and Trade Bureau (TTB) issues regulations to implement and enforce the Federal laws relating to alcohol, tobacco, firearms, and ammunition excise taxes and certain non-tax laws relating to alcohol. TTB's mission and regulations are designed to:

1) Collect the taxes on alcohol, tobacco, firearms, and ammunition;

2) Protect the consumer by ensuring the integrity of alcohol products; and

3) Prevent unfair and unlawful market activity for alcohol and tobacco products.

As part of TTB's ongoing efforts to modernize its regulations, TTB continuously identifies changes in the industries it regulates, as well as new technologies available in compliance enforcement. TTB's modernization efforts focus on removing outdated requirements and revising the regulations to facilitate industry growth and reduce burdens where possible, while at the same time ensuring that TTB collects revenue due and protects consumers from deceptive labeling and advertising of alcohol beverages.

On June 21, 2016, TTB published a notice of proposed rulemaking (81 FR 40404) to clarify and streamline import procedures, and support the implementation of the International Trade Data System (ITDS) and the filing of import information electronically in conjunction with an electronic import filing with U.S. Customs and Border Protection (CBP). The proposed amendments include providing the option for importers to file TTB-specific import-related data electronically when filing entry or entry summary data electronically with CBP, as an alternative to current TTB requirements that importers submit paper documents to CBP upon importation.

On August 30, 2016, TTB published a final rule to amend its regulations governing specially denatured alcohol (SDA) and completely denatured alcohol (CDA) to, among other things, eliminate the need for industry members to submit certain formulas to TTB for approval. Under the authority of the Internal Revenue Code of 1986 (IRC), TTB regulates denatured alcohol that is unfit for beverage use, which may be removed from a regulated distilled spirits plant free of tax. SDA and CDA are widely used in the American fuel, medical, and manufacturing sectors. The industrial alcohol industry far exceeds the beverage alcohol industry in size and scope, and it is a rapidly growing industry in the United States. Some concerns had been raised that the existing regulations may create significant roadblocks for industry members in getting products to the marketplace quickly and efficiently. TTB determined that it could amend its regulations to address these concerns and reduce regulatory burdens, while posing no added risk to the revenue. The final rule eliminates outdated formulas, reclassifies certain SDA formulas as CDA, and provides new general-use formulas for articles made with SDA. TTB estimates that these changes will result in an 80 percent reduction in the formula approval submissions currently required from industry members.

On July 1, 2016, TTB published an interim final rule (81 FR 43062) to implement the provisions of the Federal Civil Penalties Inflation Adjustment Act of 1990 (Inflation Adjustment Act), as amended by the Debt Collection Improvement Act of 1996 and the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. This rulemaking increases the maximum civil monetary penalty for violations of the Alcoholic Beverage Labeling Act of 1988 from $10,000 to $19,787, in accordance with Federal law. The increased maximum penalty will help maintain the deterrent effect of the penalty, which is a stated goal of the Inflation Adjustment Act. As authorized under the law, TTB will announce future cost-of-living adjustments to the penalty by publishing a notice in the Federal Register and updating its Web site.

On June 21, 2016, TTB published a final rule (81 FR 40183) to adopt temporary regulations it had issued on June 27, 2013 (78 FR 38555) concerning permit and other requirements related to importers and manufacturers of tobacco products and processed tobacco. The regulatory amendments adopted in the final rule include an extension in the duration of new permits for importers of tobacco products and processed tobacco from three years to five years. Importers who wish to continue to engage in the business beyond the duration of the permit must renew their permits before expiration. Less frequent renewal reduces the regulatory burden on the importers. Temporary regulations issued under the IRC expire three years after the date of issuance, and publication of the final rule made permanent this extension of the duration of new importer permits.

In FY 2017, TTB will continue its multi-year Regulations Modernization effort by prioritizing projects that will update its Import and Export regulations, Labeling Requirements regulations, Nonbeverage Products regulations, and Distilled Spirits Plant Reporting requirements. Priority projects also include implementing new statutory provisions that go into effect in FY 2017 as a result of the Protecting Americans from Tax Hikes Act of 2015 (PATH Act).

This fiscal year TTB plans to give priority to the following regulatory matters:

Revisions to Import and Export Regulations Related to ITDS. TTB is currently preparing for the implementation of ITDS and, specifically, the transition to an all-electronic import and export environment. ITDS, as described in section 405 of the Security and Accountability for Every Port Act of 2006 (the "SAFE Port Act") (Pub. L. 109-347), is an electronic information exchange capability, or "single window," through which businesses will transmit data required by participating Federal agencies for the importation or exportation of cargo. To enhance Federal coordination associated with the development of ITDS and put in place specific deadlines for implementation, President Obama, on February 19, 2014, signed an Executive Order on Streamlining the Export/Import Process for America's Businesses. In line with section 3(e) of the Executive Order, TTB was required to develop a timeline for ITDS implementation. Updating the regulations for transition to the all-electronic environment is part of the implementation process.

TTB completed its review of the relevant regulatory requirements and identified those that it intends to update. With regard to imports, as noted above, TTB published a notice of proposed rulemaking in June 2016 to amend its import regulations to support the implementation of ITDS and incorporate needed updates. TTB also continues to operate a pilot program (originally announced in August 2015) for importers who want to gain experience with the ITDS "single window" functionality for providing data on the TTB-regulated commodities. This pilot program helps familiarize both TTB and the public with the new environment and assists TTB and the public to refine the implementation of ITDS. The pilot program also provides valuable information for TTB's ongoing efforts to amend its regulations. In FY 2017, TTB intends to publish a final rule on the proposed changes to its import regulations.

In addition, in recent years, TTB has identified selected sections of its export regulations (27 CFR parts 28 and 44) that it intends to amend to clarify and update the requirements. Under the IRC, the products taxed by TTB may be removed for exportation without payment of tax or with drawback of any excise tax previously paid, subject to the submission of proof of export. However, the current export regulations require industry members to follow procedures that do not adequately reflect current technology or take into account current industry business practices. In FY 2017, TTB intends to publish a notice of proposed rulemaking that will address electronic submission of information through ITDS for exports and will include proposals to amend the regulations to provide industry members with clear and updated procedures for removal of alcohol and tobacco products for exportation, thus facilitating exportation of those products. Increasing U.S. exports benefits the U.S. economy and is consistent with Treasury and Administration priorities.

Revisions to the Regulations to Implement the PATH Act. On December 18, 2015, the President signed into law the PATH Act, which is Division Q of the Consolidated Appropriations Act, 2016. The PATH Act contains changes to certain statutory provisions that TTB administers in the IRC regarding excise tax due dates, bond requirements, and the definition of wine eligible for the hard cider tax rate. These amendments take effect beginning in January 2017, and TTB is currently working on two separate rulemaking projects to be published in FY 2017 that will implement these changes. First, TTB is implementing provisions that allow certain small alcohol beverage excise taxpayers to file tax returns less frequently and to qualify for an exemption from certain bond requirements. These provisions will reduce regulatory burdens on small businesses. Second, TTB is implementing changes to the definition of wine that is eligible for the hard cider tax rate. These changes will increase the allowable alcohol content and carbonation level of such wines and authorize the use of pears, pear juice concentrate, and pear products and flavorings.

Revisions to the Labeling Requirements (Parts 4 (Wine), 5 (Distilled Spirits), and 7 (Malt Beverages)). The Federal Alcohol Administration Act requires that alcohol beverages introduced in interstate commerce have a label issued and approved under regulations prescribed by the Secretary of the Treasury. In accordance with the mandate of Executive Order 13563 of January 18, 2011, regarding improving regulation and regulatory review, TTB conducted an analysis of its labeling regulations to identify any that might be outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with that analysis. These regulations were also reviewed to assess their applicability to the modern alcohol beverage marketplace. As a result of this review, TTB plans to propose in FY 2017 revisions to modernize the regulations concerning the labeling requirements for wine, distilled spirits, and malt beverages. TTB anticipates that these regulatory changes will assist industry in voluntary compliance, decrease industry burden, and result in the regulated industries being able to bring products to market without undue delay. TTB projects that it will receive over 160,000 label applications in FY 2016.

Revision of the Part 17 Regulations, Drawback on Taxpaid Distilled Spirits Used in Manufacturing Nonbeverage Products, to Allow Self-Certification of Nonbeverage Product Formulas. TTB is considering revisions to the regulations in 27 CFR part 17 governing nonbeverage products made with taxpaid distilled spirits. These nonbeverage products include foods, medicines, and flavors. This proposal, which TTB intends to publish in FY 2017, offers a new method of formula certification by incorporating quantitative standards into the regulations and establishing new voluntary procedures that would further streamline the formula review process for products that meet the standards. This proposal would provide adequate protection to the revenue because TTB would continue to receive submissions of certified formulas; however, TTB would not take action on certified formula submissions unless TTB discovered that the formulas require correction. By allowing for self-certification of certain nonbeverage product formulas, this proposal would eliminate the requirement for TTB to formally approve such formulas. These changes would result in significant cost savings for the nonbeverage alcohol industry, which currently must obtain formula approval from TTB, and reduce the number of formulas that TTB must review.

Revisions to Distilled Spirits Plant Reporting Requirements. In FY 2012, TTB published a notice of proposed rulemaking (NPRM) proposing to revise regulations in 27 CFR part 19 to replace the current four report forms used by distilled spirits plants to report their operations on a monthly basis with two new report forms that would be submitted on a monthly basis. (Plants that file taxes on a quarterly basis would submit the new reports on a quarterly basis.) This project will address concerns the distilled spirits industry has raised about reporting, and result in cost savings to industry and TTB by significantly reducing the number of monthly plant operations reports that must be completed and filed by industry members and processed by TTB. TTB preliminarily estimates that this project will result in a reduction of paperwork burden hours for industry members, as well as savings in processing hours and contractor time for TTB. In addition, TTB estimates that this project will result in additional savings in staff time because of the more efficient and effective processing of reports and the use of report data to reconcile industry member tax accounts. In FY 2017, TTB intends to publish a supplemental notice of proposed rulemaking that will include new proposals to address comments received in response to the initial notice of proposed rulemaking and incorporate additional improvements identified by TTB in the interim.

Community Development Financial Institutions Fund

The Community Development Financial Institutions Fund (CDFI Fund) was established by the Community Development Banking and Financial Institutions Act of 1994 (12 U.S.C. 4701 et seq.). The mission of the CDFI Fund is to expand economic opportunity for underserved people and communities by supporting the growth and capacity of a national network of community development lenders, investors, and financial service providers. The CDFI Fund currently administers the following programs: The Community Development Financial Institutions (CDFI) Program, the Bank Enterprise Award (BEA) Program, the Native American CDFI Assistance (NACA) Program, the New Markets Tax Credit (NMTC) Program, the Capital Magnet Fund (CMF), and the CDFI Bond Guarantee Program (BGP).

In FY 2017, the CDFI Fund will publish updated regulations for the Capital Magnet Fund and the CDFI Program to incorporate a variety of technical and policy changes.

Office of the Comptroller of the Currency

The Office of the Comptroller of the Currency (OCC) charters, regulates, and supervises all national banks and Federal savings associations (FSAs). The agency also supervises the Federal branches and agencies of foreign banks. The OCC's mission is to ensure that national banks and FSAs operate in a safe and sound manner, provide fair access to financial services, treat customers fairly, and comply with applicable laws and regulations.

Significant rules issued during fiscal year 2016 include:

Margin and Capital Requirements for Covered Swap Entities (12 CFR part 45). The banking agencies, Farm Credit Administration (FCA), and Federal Housing Finance Agency (FHFA) issued a final rule to establish minimum margin and capital requirements for registered swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants for which one of the Agencies is the prudential regulator. The rule implements sections 731 and 764 of the Dodd-Frank Act, which require the Agencies to adopt rules jointly to establish capital requirements and initial and variation margin requirements for such entities on all non-cleared swaps and non-cleared security-based swaps in order to offset the greater risk to such entities and the financial system arising from the use of swaps and security-based swaps that are not cleared. The Agencies also issued an interim final rule that exempts certain non-cleared swaps and non-cleared security-based swaps with certain counterparties that qualify for an exception or exemption from clearing from the initial and variation margin requirements promulgated under sections 731 and 764 of the Dodd-Frank Act. The rule implements Title III of the Terrorism Risk Insurance Program Reauthorization Act of 2015, which exempts from the Agencies' swap margin rules non-cleared swaps and non-cleared security-based swaps in which a counterparty qualifies for an exemption or exception from clearing under the Dodd-Frank Act. The final and interim final rules were issued on November 30, 2015, 81 FR 74839 and 74915 and the interim final rule was finalized on August 2, 2016, 81 FR 50605.

Guidelines Establishing Standards for Recovery Planning by Certain Large Insured National Banks, Insured FSAs, and Insured Federal Branches (12 CFR part 30). The OCC issued a proposed rule setting forth enforceable guidelines establishing standards for recovery planning by insured national banks, insured FSAs, and insured Federal branches of foreign banks with average total consolidated assets of $50 billion or more (Guidelines). The Guidelines would be issued as an appendix to the OCC's 12 CFR part 30 safety and soundness standards regulations and would be enforceable by the terms of the Federal statute that authorizes the OCC to prescribe operational and managerial standards for national banks and FSAs. The proposed rule was issued on December 17, 2015, 80 FR 78681 and the final rule was issued on October 29, 2016, 81 FR 66791.

Incentive-Based Compensation Arrangements (12 CFR part 42). Section 956 of the Dodd-Frank Act requires the banking agencies, National Credit Union Administration (NCUA), Securities and Exchange Commission (SEC), and FHFA to jointly prescribe regulations or guidance prohibiting any type of incentive-based payment arrangement, or any feature of any such arrangement, that the regulators determine encourages inappropriate risks by covered financial institutions by providing an executive officer, employee, director, or principal shareholder with excessive compensation, fees or benefits, or that could lead to material financial loss to the covered financial institution. The Dodd-Frank Act also requires such agencies to jointly prescribe regulations or guidelines requiring each covered financial institution to disclose to its regulator the structure of all incentive-based compensation arrangements offered by such institution sufficient to determine whether the compensation structure provides any executive officer, employee, director, or principal shareholder with excessive compensation or could lead to material financial loss to the institution. The proposed rule was issued on June 10, 2016, 81 FR 37669.

Net Stable Funding Ratio (12 CFR part 50). The banking agencies issued a proposed rule to implement the Basel net stable funding ratio standards. These standards would require large, internationally active banking organizations to maintain sufficient stable funding to support their assets, generally over a one-year time horizon. The proposed rule was issued on June 1, 2016, 81 FR 35123.

Economic Growth and Regulatory Paperwork Reduction Act of 1996 Amendments (12 CFR parts 4 to 5, 7, 9 to 12, 16, 18, 31, 150 to 151, 155, 162 to 163, 194, and 197). The OCC issued a proposed rule with the goal of removing provisions that are outdated, unnecessary, or unduly burdensome. The proposal would revise certain licensing rules related to chartering applications, business combinations involving Federal mutual savings associations, and notices for changes in permanent capital; clarify national bank director oath requirements; revise certain fiduciary activity requirements for national banks and FSAs; remove certain financial disclosure regulations for national banks; remove certain unnecessary regulatory reporting, accounting, and management policy regulations for FSAs; update the electronic activities regulation for FSAs; integrate and update OCC regulations for national banks and FSAs relating to municipal securities dealers, Securities Exchange Act disclosure rules, and securities offering disclosure rules; update and revise recordkeeping and confirmation requirements for national banks' and FSAs' securities transactions; integrate and update regulations relating to insider and affiliate transactions; and make other technical and clarifying changes. The proposed rule was issued on March 14, 2016, 81 FR 13608.

Expanded Examination Cycle for Certain Small Insured Depository Institutions and U.S. Branches and Agencies of Foreign Banks (12 CFR part 4). The banking agencies issued an interim final rule to implement section 83001 of the Fixing America's Surface Transportation Act (the FAST Act). Section 83001 of the FAST Act permits a qualifying insured depository institution (institution) with up to $1 billion in total assets to be examined by its appropriate Federal banking agency no less than once during each 18-month period. The OCC's interim final rule expands eligibility for the 18-month examination cycle to qualifying national banks, Federal savings associations, and Federal branches and agencies with less than $500 million in total assets to those with less than $1 billion in total assets. The interim final rule was issued on February 29, 2016, 81 FR 10063.

Civil Money Penalty Inflation Adjustments (12 CFR parts 19 and 109). The OCC issued an interim final rule implementing the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the 2015 Act) (Pub. L. 114-74, title VII, section 701(b), November 2, 2015) and Office of Management and Budget guidance issued on February 24, 2016. The 2015 Act amended the Federal Civil Penalties Inflation Adjustment Act of 1990 (codified at 28 U.S.C. 2461 note). The 2015 Act changed the formula for calculating inflation adjustments and required agencies to adjust penalties for inflation on an annual basis. The interim final rule was issued on July 1, 2016, 81 FR 43021.

Appraisals for Higher-Priced Mortgage Loans Exemption Threshold (12 CFR part 34). The OCC, the FRB, and the CFPB issued a proposed rule amending the official interpretations for their regulations that implement section 129H of the Truth in Lending Act, which establishes special appraisal requirements for "higher-risk mortgages." The banking agencies, the CFPB, the NCUA and the FHFA issued joint final rules implementing these requirements, which exempted, among other loan types, transactions of $25,000 or less, and required that this loan amount be adjusted annually based on any annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). If there is no annual percentage increase in the CPI-W, the OCC, the FRB and the CFPB will not adjust this exemption threshold from the prior year. The proposal would memorialize this as well as the calculation method for determining the adjustment in years following a year in which there is no annual percentage increase in the CPI-W. The proposed rule was issued on August 4, 2016, 81 FR 51394.

Mandatory Contractual Stay Requirements for Qualified Financial Contracts (12 CFR parts 3, 47, and 50). The OCC issued a proposed rule to promote U.S. financial stability by enhancing the safety and soundness of the national banking system by mitigating potential negative impacts that could result from the disorderly resolution of certain systemically important national banks, FSAs, Federal branches and agencies, and the subsidiaries of these entities. A covered bank would be required to ensure that a covered qualified financial contract contains a contractual stay-and-transfer provision analogous to the statutory stay-and-transfer provision imposed under Title II of the Dodd-Frank Act and in the Federal Deposit Insurance Act and limits the exercise of default rights based on the insolvency of an affiliate of the covered bank. The proposed rule was issued on August 19, 2016, 81 FR 55381.

Regulatory priorities for fiscal year 2017 include finalizing any proposals listed above as well as the following rulemakings:

Automated Valuation Models (parts 34 and 164). The banking agencies, NCUA, FHFA and Consumer Financial Protection Bureau (CFPB), in consultation with the Appraisal Subcommittee (ASC) and the Appraisal Standards Board of the Appraisal Foundation, are required to promulgate regulations to implement quality-control standards required under the statute. Section 1473(q) of the Dodd-Frank Act requires that automated valuation models used to estimate collateral value in connection with mortgage origination and securitization activity, comply with quality-control standards designed to ensure a high level of confidence in the estimates produced by automated valuation models; protect against manipulation of data; seek to avoid conflicts of interest; require random sample testing and reviews; and account for other factors the agencies deem appropriate. The agencies plan to issue a proposed rule to implement the requirement to adopt quality-control standards.

Source of Strength (12 CFR part 47). The banking agencies plan to issue a proposed rule to implement section 616(d) of the Dodd-Frank Act. Section 616(d) requires that bank holding companies, savings and loan holding companies and other companies that directly or indirectly control an insured depository institution serve as a source of strength for the insured depository institution. The appropriate Federal banking agency for the insured depository institution may require that the company submit a report that would assess the company's ability to comply with the provisions of the statute and its compliance.

Reporting and Recordkeeping Requirements for Covered Trading Activities (12 CFR part 44). The banking agencies, the Commodity Futures Trading Commission (CFTC), and the SEC are planning to issue a proposed rule that would modify the reporting and recordkeeping requirements for covered trading activities under Appendix A of the final rule implementing section 13 of the Bank Holding Company Act of 1956, which was added by section 619 of the Dodd-Frank Act.

Loans in Areas Having Special Flood Hazards-Private Flood Insurance (12 CFR part 22). The banking agencies, the FCA, and the NCUA are planning to issue a proposed rule to amend their regulations regarding loans in areas having special flood hazards to implement the private flood insurance provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 (the Biggert-Waters Act). The proposed rule was issued on November 7, 2016, 81 FR 78063.

Receiverships for Uninsured National Banks (12 CFR part 51). The OCC is planning to issue a proposed rule addressing the conduct of receiverships of national banks that are not insured by the FDIC and for which the FDIC would not be appointed as receiver.

Enhanced Cyber Risk Management Standards (12 CFR part 30). The banking agencies are considering issuing an advance notice of proposed rulemaking setting forth enhanced cyber risk management standards for the largest and most interconnected financial organizations in the United States.

The banking agencies and the NCUA plan to issue interim final rules to clarify the applicability of recent amendments to the Financial Crimes Enforcement Network (FinCEN) customer due diligence rules to the depository institutions under their supervision. FinCEN clarified and strengthened its customer due diligence requirements for covered financial institutions, including banks, brokers or dealers in securities, mutual funds, and futures commission merchants and introducing brokers in commodities (FinCEN Rule). As part of that rulemaking, FinCEN amended the elements of the anti-money laundering program financial institutions must implement and maintain in order to satisfy program requirements under 31 U.S.C. 5318(h)(1). The banking agencies and the NCUA are amending their anti-money laundering program rules to maintain consistency with the FinCEN Rule.

Customs Revenue Functions

The Homeland Security Act of 2002 (the Act) provides that, although many functions of the former United States Customs Service were transferred to the Department of Homeland Security, the Secretary of the Treasury retains sole legal authority over customs revenue functions. The Act also authorizes the Secretary of the Treasury to delegate any of the retained authority over customs revenue functions to the Secretary of Homeland Security. By Treasury Department Order No. 100-16, the Secretary of the Treasury delegated to the Secretary of Homeland Security authority to prescribe regulations pertaining to the customs revenue functions subject to certain exceptions. This Order further provided that the Secretary of the Treasury retained the sole authority to approve such regulations.

During the past fiscal year, among the customs-revenue function regulations issued were the Customs and Border Protection's Bond Program final rule, the United States-Australia Free Trade Agreement final rule, Investigation of Claims of Evasion of Antidumping and Countervailing Duties interim final rule, and the North American Free Trade Agreement Preference Override notice of proposed rulemaking. On November 13, 2015, U.S. Customs and Border Protection (CBP) published the final rule (80 FR 70154) to the CBP regulations which amended CBP regulations to reflect the centralization of the continuous bond program at CBP's Revenue Division. The changes support CBP's bond program by ensuring an efficient and uniform approach to the approval, maintenance, and periodic review of continuous bonds, as well as accommodating the use of information technology and modern business practices. On January 15, 2016, CBP published the United States-Australia Free Trade Agreement final rule (81 FR 2086) to the CBP regulations, which finalized the implementation of the preferential tariff treatment and other customs-related provisions of the United States-Australia Free Trade Agreement Implementation Act. In addition, on August 22, 2016, CBP and Treasury issued an interim final rule titled "Investigation of Claims of Evasion of Antidumping and Countervailing Duties" which amended CBP regulations implementing section 421 of the Trade Facilitation and Trade Enforcement Act of 2015. CBP and Treasury also issued on July 8, 2016, a proposed rule (81 FR 44555) titled "North American Free Trade Agreement Preference Override" which proposed amending CBP regulations to liberalize provisions of the North American Free Trade Agreement (NAFTA) preference rules of origin that relate to certain goods, including certain spices.

This past fiscal year, Treasury and CBP worked towards the implementation of the International Trade Data System (ITDS). The ITDS, as described in section 405 of the Security and Accountability for Every Port Act of 2006 (the "SAFE Port Act") (Pub. L. 109-347), is an electronic information exchange capability, or "Single Window," through which businesses will transmit data required by participating agencies for the importation or exportation of cargo. To enhance Federal coordination associated with the development of the ITDS, Treasury and CBP issued an interim regulation (80 FR 61278) in connection with the establishment of the Automated Commercial Environment (ACE) as a CBP-authorized Electronic Data Interchange (EDI) System. This regulatory document informed the public that the Automated Commercial System (ACS) is being phased out as a CBP-authorized EDI System for the processing electronic entry and entry summary filings (also known as entry filings). CBP issued subsequent Federal Register notices announcing the dates when ACE replaced the Automated Commercial System (ACS) as the CBP-authorized EDI system for processing commercial trade data.

During fiscal year 2017, CBP and Treasury also plan to give priority to the following regulatory matters involving the customs revenue functions:

Disclosure of Information for Certain Intellectual Property Rights Enforced at the Border. Treasury and CBP plan to finalize interim amendments to the CBP regulations which provides a pre-seizure notice procedure for disclosing information appearing on the imported merchandise and/or its retail packing suspected of bearing a counterfeit mark to an intellectual property right holder for the limited purpose of obtaining the right holder's assistance in determining whether the mark is counterfeit or not.

Free Trade Agreements. Treasury and CBP also plan to issue final regulations this fiscal year to implement the preferential trade benefit provisions of the United States-Singapore Free Trade Agreement Implementation Act. Treasury and CBP also expect to issue final regulations implementing the liberalization of the NAFTA preference rules of origin that relate to certain goods, including certain spices.

In-Bond Process. Consistent with the practice of continuing to move forward with Customs Modernization provisions of the North American Free Trade Implementation Act to improve its regulatory procedures, Treasury and CBP plan to finalize this fiscal year the proposal to change the in-bond process by issuing final regulations to amend the in-bond regulations that were proposed on February 22, 2012 (77 FR 10622). The proposed changes, including the automation of the in-bond process, would modernize, simplify, and facilitate the in-bond process while enhancing CBP's ability to regulate and track in-bond merchandise to ensure that in-bond merchandise is properly entered or exported.

Inter-Partes Proceedings Concerning Exclusion Orders Based on Unfair Practices in Import Trade. Treasury and CBP plans to publish a proposal to amend its regulations with respect to administrative rulings related to the importation of articles in light of exclusion orders issued by the United States International Trade Commission ("Commission") under section 337 of the Tariff Act of 1930, as amended. The proposed amendments seek to promote the speed, accuracy, and transparency of such rulings through the creation of an inter partes proceeding to replace the current ex parte process.

Financial Crimes Enforcement Network

As chief administrator of the Bank Secrecy Act (BSA), the Financial Crimes Enforcement Network (FinCEN) is responsible for developing and implementing regulations that are the core of the Department's anti-money laundering and counter-terrorism financing efforts. FinCEN's responsibilities and objectives are linked to, and flow from, that role. In fulfilling this role, FinCEN seeks to enhance U.S. national security by making the financial system increasingly resistant to abuse by money launderers, terrorists and their financial supporters, and other perpetrators of crime.

The Secretary of the Treasury, through FinCEN, is authorized by the BSA to issue regulations requiring financial institutions to file reports and keep records that are determined to have a high degree of usefulness in criminal, tax, or regulatory matters or in the conduct of intelligence or counter-intelligence activities to protect against international terrorism. The BSA also authorizes requiring designated financial institutions to establish anti-money laundering programs and compliance procedures. To implement and realize its mission, FinCEN has established regulatory objectives and priorities to safeguard the financial system from the abuses of financial crime, including terrorist financing, money laundering, and other illicit activity. These objectives and priorities include: (1) issuing, interpreting, and enforcing compliance with regulations implementing the BSA; (2) supporting, working with, and as appropriate, overseeing compliance examination functions delegated to other Federal regulators; (3) managing the collection, processing, storage, and dissemination of data related to the BSA; (4) maintaining a government-wide access service to that same data and for network users with overlapping interests; (5) conducting analysis in support of policymakers, law enforcement, regulatory and intelligence agencies, and the financial sector; and (6) coordinating with and collaborating on anti-terrorism and anti-money laundering initiatives with domestic law enforcement and intelligence agencies, as well as foreign financial intelligence units.

During fiscal year 2016, FinCEN issued the following regulatory actions:

Civil Monetary Penalty Adjustment and Table. On June 30, 2016, FinCEN issued an Interim Final Rule amending the BSA regulations to adjust the maximum amount or range, as set by statute, of certain civil monetary penalties within its jurisdiction to account for inflation. The action was taken to implement the requirements of the Federal Civil Penalties Inflation Adjustment Act of 1990, as further amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015.

Customer Due Diligence Requirements. On May 11, 2016, FinCEN issued Final Rules under the BSA to clarify and strengthen customer due diligence requirements for banks, brokers or dealers in securities, mutual funds, and futures commission merchants and introducing brokers in commodities. The rules contain explicit customer due diligence requirements and include a new regulatory requirement to identify beneficial owners of legal entity customers, subject to certain exemptions.

Report of Foreign Bank and Financial Accounts. On March 10, 2016, FinCEN issued a Notice of Proposed Rulemaking to address requests from filers for clarification of certain requirements regarding the Report of Foreign Bank and Financial Accounts, including requirements with respect to employees, who have signature authority over, but no financial interest in, the foreign financial accounts of their employers.

Amendments to the Definitions of Broker or Dealer in Securities. On April 4, 2016, FinCEN issued an NPRM proposing amendments to the regulatory definitions of broker or dealer in securities under the BSA regulations. The proposed changes would expand the current scope of the definitions to include funding portals and would require them to implement policies and procedures reasonably designed to achieve compliance with all of the BSA requirements that are currently applicable to brokers or dealers in securities.

Anti-Money Laundering Program Requirements for Banks Lacking a Federal Functional Regulator. On August 25, 2016, FinCEN issued an NPRM to remove the anti-money laundering (AML) program exemption for banks that lack a Federal functional regulator, including, but not limited to, private banks, non-federally insured credit unions, and certain trust companies. The proposed rule would prescribe minimum standards for AML programs and would ensure that all banks, regardless of whether they are subject to Federal regulation and oversight, are required to establish and implement AML programs.

Imposition of Special Measure against FBME Bank Ltd., formerly known as Federal Bank of the Middle East, Ltd., as a Financial Institution of Primary Money Laundering Concern. On July 29, 2015, FinCEN issued a final rule imposing the fifth special measure under section 311 of the USA PATRIOT Act against FBME. This action followed a notice of finding issued on July 22, 2014 that FBME is a financial institution of primary money laundering concern and an NPRM proposing the imposition of the fifth special measure. FBME filed suit on August 7, 2015 in the U.S. District Court for the District of Columbia; FBME also moved for a preliminary injunction. On August 27, 2015, the Court granted the preliminary injunction and enjoined the rule from taking effect before the rule's effective date of August 28, 2015. On March 31, 2016, FinCEN issued a Final Rule imposing a prohibition on U.S. financial institutions from opening or maintaining a correspondent account for, or on behalf of, FBME in place of the rule published in 2015. On July 22, 2016, the U.S. District Court for the District of Columbia ordered that the implementation of the Final Rule be stayed until further notice from the Court.

Administrative Rulings and Written Guidance. FinCEN published 4 written guidance pieces, and provided 17 responses to requests for administrative rulings and written inquiries/correspondence interpreting the BSA and providing clarity to regulated industries.

FinCEN's regulatory priorities for fiscal year 2017 include finalizing any initiatives mentioned above that are not finalized by fiscal year end, as well as the following in-process and potential projects:

Cross-Border Electronic Transmittal of Funds. On September 27, 2010, FinCEN issued an NPRM in conjunction with the feasibility study prepared pursuant to the Intelligence Reform and Terrorism Prevention Act of 2004 concerning the issue of obtaining information about certain cross-border funds transfers and transmittals of funds. As FinCEN has continued to work on developing the system to receive, store, and use this data, FinCEN is considering various regulatory actions to update the previously published proposed rule and provide additional information to those banks and money transmitters that will become subject to the rule.

Anti-Money Laundering Program and SAR Requirements for Investment Advisers. On August 25, 2015, FinCEN published in the Federal Register an NPRM to solicit public comment on proposed rules under the BSA that would prescribe minimum standards for anti-money laundering programs to be established by certain investment advisers and to require such investment advisers to report suspicious activity to FinCEN.

Registration Requirements of Money Services Businesses. FinCEN is considering issuing an NPRM to amend the requirements for money services businesses with respect to registering with FinCEN.

Changes to the Travel and Recordkeeping Requirements for Funds Transfers and Transmittals of Funds. FinCEN is considering changes to require that more information be collected and maintained by financial institutions on funds transfers and transmittals of funds and to lower the threshold.

Changes to the Currency and Monetary Instrument Report (CMIR) Reporting Requirements. FinCEN will research, obtain, and analyze relevant data to validate the need for changes aimed at updating and improving the CMIR and ancillary reporting requirements. Possible areas of study to be examined could include current trends in cash transportation across international borders, transparency levels of physical transportation of currency, the feasibility of harmonizing data fields with bordering countries, and information derived from FinCEN's experience with Geographic Targeting Orders.

Other Requirements. FinCEN also will continue to issue proposed and final rules pursuant to section 311 of the USA PATRIOT Act, as appropriate. Finally, FinCEN expects that it may propose various technical and other regulatory amendments in conjunction with its ongoing, comprehensive review of existing regulations to enhance regulatory efficiency, and as a result of the efforts of an interagency task force currently focusing on improvements to the U.S. regulatory framework for anti-money laundering.

Bureau of the Fiscal Service

The Bureau of the Fiscal Service (Fiscal Service) administers regulations pertaining to the Government's financial activities, including: (1) implementing Treasury's borrowing authority, including regulating the sale and issue of Treasury securities; (2) administering Government revenue and debt collection; (3) administering Governmentwide accounting programs; (4) managing certain Federal investments; (5) disbursing the majority of Government electronic and check payments; (6) assisting Federal agencies in reducing the number of improper payments; and (7) providing administrative and operational support to Federal agencies through franchise shared services.

During fiscal year 2017, the Fiscal Service will accord priority to the following regulatory projects:

Notice of Proposed Rulemaking for Publishing Delinquent Debtor Information. The Debt Collection Improvement Act of 1996, Pub. L. 104-134, 110 Stat. 1321 (DCIA) authorizes Federal agencies to publish or otherwise publicly disseminate information regarding the identity of persons owing delinquent nontax debts to the United States for the purpose of collecting the debts, provided certain criteria are met. Treasury proposes to issue a notice of proposed rulemaking seeking comments on a proposed rule that would establish the procedures Federal agencies must follow before promulgating their own rules to publish information about delinquent debtors and the standards for determining when use of this debt collection remedy is appropriate.

Offset of Tax Refund Payments to Collect Past-Due Support. On December 30, 2015, the Fiscal Service published an Interim Final Rule, with request for comments, limiting the time period during which Treasury may recover certain tax refund offset collections from States to six months from the date of such collection. Previously, there was no time limit to recoup offset amounts that were collected from tax refunds to which the debtor taxpayer was not entitled. The Fiscal Service proposes to publish a Final Rule for this time limit for such recoupments in fiscal year 2017.

Management of Federal Agency Receipts, Disbursements and Operation of the Cash Management Improvements Fund. The Fiscal Service plans to publish a notice of proposed rulemaking to amend 31 CFR 206 governing the collection of public money, along with a request for public comments. This notice will propose implementing statutory authority which mandates that some or all nontax payments made to the Government, and accompanying remittance information, be submitted electronically. Receipt of such items electronically offers significant efficiencies and cost-savings to the government, compared to the receipt of cash, check or money order payments.

Internal Revenue Service

The Internal Revenue Service (IRS), working with the Office of Tax Policy, promulgates regulations that interpret and implement the Internal Revenue Code (Code) and related tax statutes. The purpose of these regulations is to carry out the tax policy determined by Congress in a fair, impartial, and reasonable manner, taking into account the intent of Congress, the realities of relevant transactions, the need for the Government to administer the rules and monitor compliance, and the overall integrity of the Federal tax system. The goal is to make the regulations practical and as clear and simple as possible.

During fiscal year 2017, the IRS will accord priority to the following regulatory projects:

Tax-Related Affordable Care Act Provisions. On March 23, 2010, the President signed the Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-148) and on March 30, 2010, the President signed the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) (referred to collectively as the Affordable Care Act (ACA)). The ACA's reform of the health insurance system affects individuals, families, employers, health care providers, and health insurance providers. The ACA provides authority for Treasury and the IRS to issue regulations and other guidance to implement tax provisions in the ACA, some of which are already effective and some of which will become effective over the next several years. Since enactment of the ACA, Treasury and the IRS have issued a series of temporary, proposed, and final regulations implementing over a dozen provisions of the ACA, including the premium tax credit under section 36B of the Code, the small-business health coverage tax credit under section 45R of the Code, new requirements for charitable hospitals under section 501(r) of the Code, limits on tax preferences for remuneration provided by certain health insurance providers under section 162(m)(6) of the Code, the employer shared responsibility provisions under section 4980H of the Code, the individual shared responsibility provisions under section 5000A of the Code, insurer and employer reporting under sections 6055 and 6056 of the Code, and several revenue-raising provisions, including fees on branded prescription drugs under section 9008 of the ACA, fees on health insurance providers under section 9010 of the ACA, the tax on indoor tanning services under 5000B of the Code, the net investment income tax under section 1411 of the Code, and the additional Medicare tax under sections 3101 and 3102 of the Code.

In fiscal year 2017, Treasury and the IRS will continue to provide guidance to implement tax provisions of the ACA, including:

• Proposed and final regulations related to numerous aspects of the premium tax credit under section 36B, including the determination of minimum value of eligible-employer-sponsored plans;

• Regulations related to the employer shared responsibility provisions under section 4980H;

• Regulations under section 4980I of the Code relating to the excise tax on high cost employer-provided coverage;

• Final regulations on expatriate health plans under the Expatriate Health Coverage Clarification Act of 2014 for purposes of sections 36B, 162(m)(6), 4377, 5000A, 6055, and 6056 of the Code, and section 9010 of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act;

• Final regulations regarding issues related to the net investment income tax under section 1411 of the Code.

Interest on Deferred Tax Liability for Contingent Payment Installment Sales. Section 453 of the Code generally allows taxpayers to report the gain from a sale of property in the taxable year or years in which payments are received, rather than in the year of sale. Section 453A of the Code imposes an interest charge on the tax liability that is deferred as a result of reporting the gain when payments are received. The interest charge generally applies to installment obligations that arise from a sale of property using the installment method if the sales price of the property exceeds $150,000, and the face amount of all such installment obligations held by a taxpayer that arose during, and are outstanding as of the close of, a taxable year exceeds $5,000,000. The interest charge provided in section 453A cannot be determined under the terms of the statute if an installment obligation provides for contingent payments. Accordingly, in section 453A(c)(6), Congress authorized the Secretary of the Treasury to issue regulations providing for the application of section 453A in the case of installment sales with contingent payments. Treasury and the IRS intend to issue proposed regulations that, when finalized, will provide guidance and reduce uncertainty regarding the application of section 453A to contingent payments.

Rules for Home Construction Contracts. In general, section 460(a) of the Code requires taxpayers to use the percentage-of-completion method (PCM) to account for taxable income from any long-term contract. Under the PCM, income is generally reported in installments as work is performed, and expenses are generally deducted in the taxable year incurred. However, taxpayers with contracts that meet the definition of a "home construction contract," under section 460(e)(4), are not required to use the PCM for those contracts and may, instead, use an exempt method. Exempt methods include the completed contract method (CCM) and the accrual method. Under the CCM, for example, a taxpayer generally takes into account the entire gross contract price and all incurred allocable contract costs in the taxable year the taxpayer completes the contract. Treasury and the IRS believe that amended rules are needed to reduce uncertainty and controversy, including litigation, regarding when a contract qualifies as a "home construction contract" and when the income and allocable deductions are taken into account under the CCM. On August 4, 2008, Treasury and the IRS published proposed regulations on the types of contracts that are eligible for the home construction contract exemption. The preamble to those regulations stated that Treasury and the IRS expected to propose additional rules specific to home construction contracts accounted for using the CCM. After considering comments received and the need for additional and clearer rules to reduce ongoing uncertainty and controversy, Treasury and the IRS have determined that it would be beneficial to taxpayers to present all of the proposed changes to the current regulations in a single document. Treasury and the IRS plan to withdraw the 2008 proposed regulations and replace them with new, more comprehensive proposed regulations.

Research Expenditures. Section 41 of the Code provides a credit against taxable income for certain expenses paid or incurred in conducting research activities. To assist in resolving areas of controversy and uncertainty with respect to research expenses, Treasury and the IRS plan to issue final regulations with respect to the definition and credit eligibility of expenditures for internal use software. In addition, on December 18, 2015, the President signed the Protecting Americans from Tax Hikes of 2015 (the PATH Act), which added new section 41(h). That section allows qualified small businesses to elect to claim a portion of the section 41 credit against the employer's portion of certain payroll taxes. Treasury and the IRS plan to provide guidance on eligibility for the election, how and where to claim the election, and how the credit will be recaptured in certain situations.

Domestic Production Activities Income. Section 199 of the Code provides a deduction for certain income attributable to domestic production activities. To assist in resolving areas of controversy and uncertainty with respect to the eligibility of income from online computer software, Treasury and the IRS plan to issue regulations regarding the application of section 199 to online computer software.

Consistent Basis Reporting between Estate and Person Acquiring Property from Decedent. On July 31, 2015, the President signed H.R. 3236, Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (Act) (Pub.. 114-41), into law. Section 2004 of the Act added new Code sections 1014(f), 6035, and 6662(k). Section 1014(f) provides rules requiring that the basis of certain property acquired from a decedent be consistent with the estate tax value of the property. Section 6035 requires executors who are required to file a return under section 6018(a) of the Code (and other persons required to file a return under section 6018(b)) after July 31, 2015, to file statements with the IRS and furnish statements to certain estate beneficiaries providing information regarding the value of certain property acquired from a decedent. Section 6662(k) provides a penalty for certain recipients of property acquired from an estate required to file a return after July 31, 2015, who report a basis that is inconsistent with the value determined under section 1014(f) when the property is sold (or deemed sold). Treasury and the IRS published three notices and proposed and temporary regulations under sections 1014, 6035, and 6662(k) providing, respectively, guidance on the compliance date under section 6035 and guidance regarding: (1) the requirement that a recipient's basis in certain property acquired from a decedent be consistent with the value of the property as finally determined for Federal estate tax purposes; and (2) the accompanying filing requirements for certain executors and other persons. On August 21, 2015, Notice 2015-57 (2015-36 IRB 294) was issued delaying the due date for any statements required by section 6035 to February 29, 2016. On February 11, 2016, Treasury and IRS issued Notice 2016-19 (2016-9 IRB 362), providing that statements required under section 6035 need not be filed until March 31, 2016, and on March 23, 2016, issued Notice 2016-27 (2016-15 IRB 576), providing that statements under section 6035 need not be filed until June 30, 2016. For statements required under sections 6035(a)(1) and (a)(2) that are required to be filed after June 30, 2016, those statements are to be filed in no case at a time later than the earlier of (i) the date which is 30 days after the date on which the return under section 6018 was required to be filed (including extensions, if any) or (ii) the date which is 30 days after the date such return is filed. The IRS is in the process of finalizing the regulations, the applicable form, schedule, and instructions to facilitate compliance with sections 1014(f), 6035, and 6662(k). It is expected that Treasury and IRS will issue final regulations within 18 months of July 31, 2015.

Definition of Issue Price for Tax-Exempt Bonds. On September 16, 2013, Treasury and the IRS published proposed regulations (78 FR 56842) to address certain issues involving the arbitrage investment restrictions under section 148 of the Code, including guidance on the issue price definition used in the computation of bond yield. On June 24, 2015, Treasury and the IRS published proposed regulations (80 FR 36301) that revised the 2013 guidance on the issue price definition. Treasury and the IRS plan to finalize the 2015 proposed regulations.

Guidance on the Definition of Political Subdivision for Tax-Exempt, Tax-Credit, and Direct-Pay Bonds. A political subdivision may be a valid issuer of tax-exempt, tax-credit, and direct-pay bonds. Concerns have been raised about what is required for an entity to be a political subdivision for purposes of section 103 of the Code. Proposed regulations (REG-129067-15) were published in the Federal Register on February 23, 2016 (81 FR 8870). Treasury and the IRS are considering comments on the proposed regulations and expect to issue regulations on this issue in fiscal year 2017.

Contingent Notional Principal Contract Regulations. Notice 2001-44 (2001-2 CB 77) outlined four possible approaches for recognizing nonperiodic payments made or received on a notional principal contract (NPC) when the contract includes a nonperiodic payment that is contingent in fact or in amount. The Notice solicited further comments and information on the treatment of such payments. After considering the comments received in response to Notice 2001-44, Treasury and the IRS published proposed regulations (69 FR 8886) (the 2004 proposed regulations) that would amend section 1.446-3 and provide additional rules regarding the timing and character of income, deduction, gain, or loss with respect to such nonperiodic payments, including termination payments. On December 7, 2007, Treasury and the IRS released Notice 2008-2 (2008-1 CB 252) requesting comments and information with respect to transactions frequently referred to as prepaid forward contracts. On May 8, 2015, Treasury and the IRS published temporary and proposed regulations (80 FR 26437) relating to the treatment of nonperiodic payments. Treasury and the IRS plan to finalize the temporary regulations and to re-propose regulations to address issues relating to the timing and character of nonperiodic contingent payments on NPCs, including termination payments and payments on prepaid forward contracts.

Tax Treatment of Distressed Debt. A number of tax issues relating to the amount, character, and timing of income, expense, gain, or loss on distressed debt remain unresolved. During the fiscal year, Treasury and the IRS plan to address certain of these issues in published guidance.

Definition of Real Property and Qualifying Income for REIT Purposes. A taxpayer must satisfy certain asset and income requirements to qualify as a real estate investment trust (REIT) under section 856 of the Code. REITs have sought to invest in various types of assets that are not directly addressed by the current regulations or other published guidance. On May 14, 2014, Treasury and the IRS published proposed regulations (79 FR 27508) to update and clarify the definition of real property for REIT qualification purposes, including guidance addressing whether a component of a larger item is tested on its own or only as part of the larger item, the scope of the asset to be tested, and whether certain intangible assets qualify as real property. Treasury and the IRS plan to finalize the proposed regulations in the fiscal year. Treasury and the IRS also plan to provide guidance clarifying the definition of income for purposes of section 856.

Treatment of Certain Interests in Corporations as Stock or Indebtedness. Section 385 of the Code grants the Secretary of the Treasury the authority to prescribe regulations as necessary or appropriate to determine whether an interest in a corporation is to be treated as stock or indebtedness or as part stock and part indebtedness for Federal income tax purposes. On April 4, 2016, Treasury and the IRS issued proposed regulations under section 385 that would establish threshold documentation requirements for determining whether certain related party interests in a corporation are characterized as stock or indebtedness for Federal tax purposes. The proposed regulations also would treat certain related party interests that otherwise would be treated as indebtedness for Federal income tax purposes as stock. Treasury and the IRS issued final and temporary regulations on these issues on October 21, 2016 (81 FR 72858).

Corporate Spin-offs and Split-offs. Section 355 and related provisions of the Code allow for the tax-free distribution of stock or securities of a controlled corporation if certain requirements are met. For example, both the distributing and controlled corporations must be engaged in the active conduct of a trade or business immediately after the distribution, and the transaction must not be used as a device for the distribution of earnings and profits or to circumvent Congress' intent in repealing the General Utilities doctrine. Treasury and the IRS have published proposed regulations that address (a) whether the active trade or business requirement is met when a distribution involves small active businesses relative to other assets and (b) whether a distribution raises device concerns because either the distributing or controlled corporation has a substantial percentage of nonbusiness assets. Treasury and the IRS intend to issue final regulations on these issues. Treasury and the IRS also intend to issue additional guidance addressing: (a) when a distribution, otherwise qualifying under section 355, circumvents Congress' intent in repealing the General Utilities doctrine; and (b) the tax treatment under sections 355 and 361 when debt of the distributing corporation is issued and such debt is retired using stock or securities of the controlled corporation, and (c) the tax treatment when cash or property is transferred between a distributing or controlled corporation and its shareholder(s) in connection with the distribution. Treasury and the IRS also intend to finalize proposed regulations that would define predecessor and successor corporations for purposes of the exception to tax-free treatment under section 355(e).

Assistance to Troubled Financial Institutions. Section 597 grants the Secretary of the Treasury wide latitude to prescribe regulations determining the treatment of any transaction in which Federal financial assistance is provided to a bank or domestic building and loan association. Treasury and the IRS have issued final regulations under section 597. In the wake of the most recent financial crisis and changes in the form of government assistance that have developed since the final regulations were issued, Treasury and the IRS published proposed regulations that would reflect those changes. Treasury and the IRS intend to issue final regulations on these issues.

Redetermination of the Consolidated Net Unrealized Built-in Gain and Net Unrealized Built-in Loss. Section 382 limits the amount of taxable income that can be offset by net operating loss carryovers. Treasury and the IRS published proposed regulations modifying the application of section 382 to consolidated groups, specifically regarding the time that recognized built-in loss is treated as reducing consolidated net unrealized built-in loss. Treasury and the IRS intend to issue final regulations on these issues.

Disguised Payments for Services. Section 707(a)(2)(A) of the Code provides that if a partner performs services for a partnership and receives a related direct or indirect allocation and distribution, and the performance of services and the allocation and distribution, when viewed together, are properly characterized as a transaction occurring between the partnership and a partner acting other than in its capacity as a partner, the transfer will be treated as occurring between the partnership and one who is not a partner. Treasury and the IRS published proposed regulations on July 23, 2015, to provide guidance on when an arrangement that is purported to be a distributive share under section 704(b) of the Code will be recharacterized as a disguised payment for services under section 707(a)(2)(A). The proposed regulations also provide for modifications to the regulations governing guaranteed payments under section 707(c) to make those regulations consistent with the proposed regulations under section 707(a)(2)(A). Treasury and the IRS expect to issue final regulations during Fiscal Year 2017.

Transfers of Property to Partnerships with Related Foreign Partners. Section 721(c) of the Code provides authority to issue regulations that prevent the use of a partnership to shift gain to a foreign person. On August 6, 2015, Treasury and the IRS issued Notice 2015-54 (2015-34 IRB 210) describing regulations to be issued under that authority. By the end of 2016, Treasury and the IRS plan to issue temporary and proposed regulations implementing the guidance described in Notice 2015-52. Treasury and the IRS intend to finalize the temporary and proposed regulations in this fiscal year.

Reporting requirements applicable to certain foreign-owned entities. On May 5, 2016, Treasury and the IRS issued proposed regulations that would require foreign-owned entities that are disregarded entities for tax purposes, including foreign-owned single-member limited liability companies (LLCs), to obtain an employer identification number (EIN) with the IRS. These changes are intended to provide the IRS with improved access to information that will allow the United States to comply with international standards on tax and transparency, as well as strengthen the enforcement of U.S. tax laws. Treasury and the IRS intend to finalize the proposed regulations in this fiscal year.

Currency. On September 6, 2006, Treasury and the IRS published a notice of proposed rulemaking under section 987 of the Code that proposes rules for translating a section 987 qualified business unit's income or loss into the taxpayer's functional currency for each taxable year, as well as for determining the amount of section 987 currency gain or loss that must be recognized when a section 987 qualified business unit makes a remittance. Treasury and the IRS expect to finalize the proposed regulations in this fiscal year. In addition, Treasury and the IRS intend to issue proposed regulations in Fiscal Year 2017 to provide guidance on the treatment of foreign currency gain or loss of a controlled foreign corporation (CFC) under the exclusion from foreign personal holding company income for income from transactions directly related to the business needs of the CFC, as well as related timing and other issues.

Disguised Sale and Allocation of Liabilities. A contribution of property by a partner to a partnership may be recharacterized as a sale under section 707(a)(2)(B) of the Code if the partnership distributes to the contributing partner cash or other property that is, in substance, consideration for the contribution. The allocation of partnership liabilities to the partners under section 752 of the Code may impact the determination of whether a disguised sale has occurred and whether gain is otherwise recognized upon a distribution. Treasury and the IRS published proposed regulations on January 30, 2014, to address certain issues that arise in the disguised sale context and other issues regarding the partners' shares of partnership liabilities. Treasury and the IRS are considering comments on the proposed regulations and expect to issue regulations on this issue in fiscal year 2017.

Certain Partnership Distributions Treated as Sales or Exchanges. In 1954, Congress enacted section 751 to prevent the use of a partnership to convert potential ordinary income into capital gain. In 1956, Treasury and the IRS issued regulations implementing section 751 of the Code. The current regulations, however, do not always achieve the purpose of the statute. In 2006, Treasury and the IRS published Notice 2006-14 (2006-1 CB 498) to propose and solicit alternative approaches to section 751 that better achieve the purpose of the statute while providing greater simplicity. Treasury and the IRS published proposed regulations following up on Notice 2006-14 on November 3, 2014. These regulations were intended to provide guidance on determining a partner's interest in a partnership's section 751 property and how a partnership recognizes income required by section 751. Treasury and the IRS expect to issue final regulations during fiscal year 2017.

Penalties and Limitation Periods. Congress amended several penalty provisions in the Internal Revenue Code in the past several years. Treasury and the IRS intend to publish a number of guidance projects in this fiscal year addressing these penalty provisions. Specifically, Treasury and the IRS intend to publish final regulations under section 6708 of the Code regarding the penalty for failure to make available upon request a list of advisees that is required to be maintained under section 6112 of the Code. The proposed regulations were published on March 8, 2013. Treasury and the IRS also intend to publish proposed regulations under sections 6662, 6662A, and 6664 of the Code to provide further guidance on the circumstances under which a taxpayer could be subject to the accuracy-related penalty on underpayments or reportable transaction understatements and the reasonable cause exception.

Inversion Transactions. On January 17, 2014, Treasury and the IRS issued temporary and proposed regulations providing guidance on the application of the ownership test under section 7874(a)(2)(B)(ii). On April 4, 2016, Treasury and the IRS issued temporary and proposed regulations providing further guidance on the application of sections 7874 and 367 of the Code to inversion transactions, as well as on certain tax avoidance transactions that are commonly undertaken after an inversion transaction. In this fiscal year, Treasury and the IRS expect to issue additional guidance to further limit inversion transactions that are contrary to the purposes of section 7874 and the benefits of post-inversion tax avoidance transactions.

Information Reporting for Foreign Accounts of U.S. Persons. In March 2010, chapter 4 (sections 1471 to 1474) was added to subtitle A of the Code as part of the Hiring Incentives to Restore Employment Act (HIRE Act) (Pub. L. 111-147). Chapter 4 was enacted to address concerns with offshore tax evasion by U.S. citizens and residents and generally requires foreign financial institutions (FFIs) to enter into an agreement (FFI Agreement) with the IRS to report information regarding financial accounts of U.S. persons and certain foreign entities with significant U.S. ownership. An FFI that does not enter into an FFI Agreement, or that is not otherwise deemed compliant with FATCA, generally will be subject to a withholding tax on the gross amount of certain payments from U.S. sources. Treasury and the IRS have issued proposed, temporary, and final regulations under chapter 4, followed by proposed and temporary regulations modifying certain provisions of the final regulations; proposed and temporary regulations under chapters 3 and 61, and section 3406, to coordinate with those chapter 4 regulations; and implementing revenue procedures and other guidance. Treasury and the IRS expect to issue further guidance with respect to FATCA and related provisions in this fiscal year, including finalizing the aforementioned chapter 3, 4 and 61 regulations; issuing proposed regulations covering the compliance requirements of entities acting as sponsoring entities on behalf of certain foreign entities; issuing updated agreements for foreign financial institutions, qualified intermediaries (including qualified derivatives dealers), and withholding foreign partnerships and withholding foreign trusts; and issuing regulations on refunds and credits.

Foreign Tax Credits and Covered Asset Acquisitions. Section 901(m) of the Code limits the availability of foreign tax credits in certain cases in which U.S. tax law and foreign tax law provide different rules for recognizing income and gain. In 2014, Treasury and the IRS issued two notices providing guidance under section 901(m) regarding the treatment of gains and losses from dispositions. By the end of 2016, Treasury and the IRS expect to issue temporary and proposed regulations setting forth the rules described in those notices. Treasury and the IRS also plan to issue proposed regulations setting forth substantial additional guidance under section 901(m). Treasury and the IRS expect to finalize the proposed regulations during this fiscal year.

Transfers of Property to Foreign Corporations. Section 367 of the Code provides special rules to address the transfer of property, including intangible property, by U.S. persons to foreign corporations in certain nonrecognition transactions. Under existing temporary regulations issued in 1986, favorable treatment is afforded to the outbound transfer of "foreign goodwill and going concern value," which has created incentives for taxpayers to categorize transfers of high-value intangible property as such. On September 14, 2015, Treasury and the IRS released proposed regulations that would eliminate that favorable treatment. Treasury and the IRS intend to finalize the proposed section 367 regulations in this fiscal year.

ABLE Account guidance. On December 19, 2014, Congress passed The Stephen Beck, Jr., Achieving a Better Life Experience (ABLE) Act of 2014, adding section 529A to the Code to enable states to create qualified ABLE programs under which disabled individuals may establish a tax-advantaged account to pay for disability-related expenses. To be eligible to establish an ABLE account, the individual must have become disabled prior to age 26. As required by the statute, Treasury and the IRS on June 19, 2015, published proposed regulations implementing the provision. States may rely on the proposed regulations for establishing a qualified ABLE program. Treasury and the IRS intend to finalize the regulations during the 2017 fiscal year, taking into account all comments received.

Certified Professional Employer Organization guidance. On May 6, 2016, Treasury and the IRS published final, temporary, and proposed regulations which set forth the Federal employment tax liabilities and other obligations of persons certified by the IRS as certified professional employer organizations (CPEOs) in accordance with provisions enacted as part of the ABLE Act. The temporary regulations address the requirements relating to applying for and maintaining certification as a CPEO and some related definitions. In July 2016, the IRS opened the application process for being certified as a CPEO. Treasury and the IRS intend to finalize the temporary and proposed regulations during the 2017 fiscal year, taking into account all comments received.

Guidance Relating to Publicly Traded Partnerships. Section 7704 of the Code provides that a partnership whose interests are traded on either an established securities market or on a secondary market (a "publicly traded partnership") is generally treated as a corporation for Federal tax purposes. However, section 7704(c) permits publicly traded partnerships to be treated as partnerships for Federal tax purposes if 90 percent or more of partnership income consists of "qualifying income." Section 7704(d) provides that income is generally qualifying income if it is passive income or is derived from exploration, development, mining or production, processing, refining, transportation, or marketing of a mineral or natural resource. Treasury and the IRS issued proposed regulations in 2015 to provide guidance and reduce uncertainty regarding the scope of the natural resource exception. After considering comments on the proposed regulations, Treasury and the IRS expect to issue final regulations in fiscal year 2017.

Guidance implementing the Bipartisan Budget Act of 2015. The Bipartisan Budget Act of 2015 repealed the current procedures governing audits of partnerships and replaced them with new procedures. Treasury and the IRS intend to publish regulations implementing these new procedures. Proposed regulations will provide guidance on electing out of the new procedures, partner reporting and adjustments, designation of a partnership representative, imputed underpayments, and requests for administrative adjustments.

Guidance on User Fees. Treasury and the IRS intend to publish regulations charging (or updating) user fees for certain applications made by individuals to the IRS, including for an installment agreement, an offer in compromise, and a preparer tax identification number, as well as to take the special enrollment examination to become an enrolled agent.

Guidance under the Protecting Americans from Tax Hikes Act of 2015. On December 25, 2015, Congress passed the Protecting Americans from Tax Hikes Act (PATH Act). The Path Act made changes to numerous provisions of the Code. Treasury and the IRS intend to publish guidance implementing these changes, including guidance on the issuance of individual taxpayer identifying numbers, an update to the revenue procedure on acceptance agents, proposed regulations on the use of truncated taxpayer identification numbers on the Form W-2, and regulations under sections 6721 and 6722 regarding de minimis errors on information returns.