[Code of Federal Regulations]
[Title 26, Volume 18]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR301.6365-2]

[Page 336-337]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 301_PROCEDURE AND ADMINISTRATION--Table of Contents
 
               Seizure of Property for Collection of Taxes
 
Sec. 301.6365-2  Commencement and cessation of applicability of subchapter 
E to individual taxpayers.

    (a) General rule. Except for purposes of chapter 24 (relating to the 
collection of income tax at source on wages), whenever subchapter E 
begins or ceases to apply to any State (i.e., a State

[[Page 337]]

agreement begins or ceases to be effective) as of any January 1, such 
commencement or cessation of applicability shall apply to taxable years 
of individuals beginning on or after such date. For example, if 
subchapter E begins to apply to a particular State on January 1, 1980, 
it would become applicable for calendar year 1980 for calendar-year 
taxpayers in that State; but if a taxpayer in the State is using a 
fiscal year running from July 1 to June 30, the subchapter would begin 
to apply (except for purposes of chapter 24) to that taxpayer on July 1, 
1980, for his taxable year ending June 30, 1981. Similarly, if the 
subchapter ceases to apply to such State on January 1, 1982, it would 
cease to apply to calendar-year taxpayers after the end of calendar year 
1981; but it would cease to apply (except for purposes of chapter 24) to 
fiscal-year taxpayers at the end of their fiscal years which are in 
progress on January 1, 1982. The cessation of applicability of 
subchapter E to a State does not affect rights, duties, and liabilities 
with respect to any taxable year for which subchapter E does apply with 
respect to any taxpayer (or his employer).
    (b) Special rules pertaining to withholding--(1) Subchapter E 
beginning to apply. The Federal withholding system provided in chapter 
24 shall go into effect for State individual income tax purposes with 
respect to wages paid on or after the January 1 as of which subchapter E 
begins to apply to a State. If an employee is subject to a qualified tax 
imposed by the State, such withholding system shall apply to his wages 
paid on or after that January 1, without regard to whether he is a 
calendar-year or fiscal-year taxpayer. See Sec. 301.6363-3 with respect 
to transition-year rules.
    (2) Subchapter E ceasing to apply. The Federal withholding system 
provided in chapter 24 shall cease to be effective for State tax 
purposes with respect to wages paid on or after the January 1 as of 
which subchapter E ceases to apply to the State, although fiscal-year 
taxpayers of that State continue to be subject to the other provisions 
of subchapter E for the remainder of their fiscal years then in 
progress. See Sec. 301.6363-3 with respect to transition-year rules.

[T.D. 7577, 43 FR 59375, Dec. 20, 1978]