[Title 26 CFR ]
[Code of Federal Regulations (annual edition) - April 1, 2003 Edition]
[From the U.S. Government Printing Office]
[[Page i]]
26
Parts 300 to 499
Revised as of April 1, 2003
Internal Revenue
Containing a codification of documents of general
applicability and future effect
As of April 1, 2003
With Ancillaries
Published by
Office of the Federal Register
National Archives and Records
[[Page ii]]
Administration
A Special Edition of the Federal Register
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2003
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[[Page iii]]
Table of Contents
Page
Explanation................................................. v
Title 26:
Chapter I--Internal Revenue Service, Department of
the Treasury (Continued) 3
Finding Aids:
Table of CFR Titles and Chapters........................ 783
Alphabetical List of Agencies Appearing in the CFR...... 801
Table of OMB Control Numbers............................ 811
List of CFR Sections Affected........................... 829
[[Page iv]]
----------------------------
Cite this Code: CFR
To cite the regulations in
this volume use title,
part and section number.
Thus, 26 CFR 300.0 refers
to title 26, part 300,
section 0.
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[[Page v]]
EXPLANATION
The Code of Federal Regulations is a codification of the general and
permanent rules published in the Federal Register by the Executive
departments and agencies of the Federal Government. The Code is divided
into 50 titles which represent broad areas subject to Federal
regulation. Each title is divided into chapters which usually bear the
name of the issuing agency. Each chapter is further subdivided into
parts covering specific regulatory areas.
Each volume of the Code is revised at least once each calendar year
and issued on a quarterly basis approximately as follows:
Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1
The appropriate revision date is printed on the cover of each
volume.
LEGAL STATUS
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noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie
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HOW TO USE THE CODE OF FEDERAL REGULATIONS
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To determine whether a Code volume has been amended since its
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EFFECTIVE AND EXPIRATION DATES
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OMB CONTROL NUMBERS
The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires
Federal agencies to display an OMB control number with their information
collection request.
[[Page vi]]
Many agencies have begun publishing numerous OMB control numbers as
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OBSOLETE PROVISIONS
Provisions that become obsolete before the revision date stated on
the cover of each volume are not carried. Code users may find the text
of provisions in effect on a given date in the past by using the
appropriate numerical list of sections affected. For the period before
January 1, 2001, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, 1973-1985, or 1986-2000, published in 11 separate
volumes. For the period beginning January 1, 2001, a ``List of CFR
Sections Affected'' is published at the end of each CFR volume.
CFR INDEXES AND TABULAR GUIDES
A subject index to the Code of Federal Regulations is contained in a
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and Finding Aids. This volume contains the Parallel Table of Statutory
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A List of CFR Sections Affected (LSA) is published monthly, keyed to
the revision dates of the 50 CFR titles.
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There are no restrictions on the republication of material appearing
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[[Page vii]]
The Office of the Federal Register also offers a free service on the
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Raymond A. Mosley,
Director,
Office of the Federal Register.
April 1, 2003.
[[Page ix]]
THIS TITLE
Title 26--Internal Revenue is composed of twenty volumes. The
contents of these volumes represent all current regulations issued by
the Internal Revenue Service, Department of the Treasury, as of April 1,
2003. The first thirteen volumes comprise part 1 (Subchapter A--Income
Tax) and are arranged by sections as follows: Secs. 1.0-1-1.60;
Secs. 1.61-1.169; Secs. 1.170-1.300; Secs. 1.301-1.400; Secs. 1.401-
1.440; Secs. 1.441-1.500; Secs. 1.501-1.640; Secs. 1.641-1.850;
Secs. 1.851-1.907; Secs. 1.908-1.1000; Secs. 1.1001-1.1400;
Secs. 1.1401--1.1503-2A; and Sec. 1.1551-1 to end. The fourteenth volume
containing parts 2-29, includes the remainder of subchapter A and all of
Subchapter B--Estate and Gift Taxes. The last six volumes contain parts
30-39 (Subchapter C--Employment Taxes and Collection of Income Tax at
Source); parts 40-49; parts 50-299 (Subchapter D--Miscellaneous Excise
Taxes); parts 300-499 (Subchapter F--Procedure and Administration);
parts 500-599 (Subchapter G--Regulations under Tax Conventions); and
part 600 to end (Subchapter H--Internal Revenue Practice).
The OMB control numbers for Title 26 appear in Sec. 602.101 of this
chapter. For the convenience of the user, Sec. 602.101 appears in the
Finding Aids section of the volumes containing parts 1 to 599.
[[Page x]]
[[Page 1]]
TITLE 26--INTERNAL REVENUE
(This book contains parts 300 to 499)
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Part
chapter i--Internal Revenue Service, Department of the
Treasury (Continued)...................................... 300
[[Page 3]]
CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY
(CONTINUED)
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Editorial Note: IRS published a document at 45 FR 6088, Jan. 25, 1980,
deleting statutory sections from their regulations. In chapter I cross
references to the deleted material have been changed to the
corresponding sections of the IRS Code of 1954 or to the appropriate
regulations sections. When either such change produced a redundancy, the
cross reference has been deleted. For further explanation, see 45 FR
20795, Mar. 31, 1980.
SUBCHAPTER F--PROCEDURE AND ADMINISTRATION
Part Page
300 User fees................................... 5
301 Procedure and administration................ 5
302 Taxes under the International Claims
Settlement Act, as amended August 9,
1955.................................... 742
303 Taxes under the Trading With the Enemy Act.. 748
304 [Reserved]
305 Temporary procedural and administrative tax
regulations under the Indian Tribal
Governmental Tax Status Act of 1982..... 754
306-399 [Reserved]
400 Temporary regulations under the Federal Tax
Lien Act of 1966........................ 757
401 Temporary procedures and administration
regulations under the Tax Equity and
Fiscal Responsibility Act of 1982 (Pub.
L. 97-248).............................. 769
402 [Reserved]
403 Disposition of seized personal property..... 770
404 Temporary regulations on procedure and
administration under the Tax Reform Act
of 1976................................. 776
405-419 [Reserved]
420 Temporary regulations on procedure and
administration under the Employee
Retirement Income Security Act of 1974.. 779
421-499 [Reserved]
[[Page 5]]
SUBCHAPTER F--PROCEDURE AND ADMINISTRATION
PART 300--USER FEES--Table of Contents
Sec.
300.0 User fees; in general.
300.1 Installment agreement fee.
300.2 Restructuring or reinstatement of installment agreement fee.
Authority: 31 U.S.C. 9701.
Source: T.D. 8589, 60 FR 8299, Feb. 14, 1995, unless otherwise
noted.
Sec. 300.0 User fees; in general.
(a) In general. The regulations in this part 300 are designated the
User Fee Regulations and provide rules relating to user fees under 31
U.S.C. 9701.
(b) Applicability. User fees are imposed on the following services:
(1) Entering into an installment agreement.
(2) Restructuring or reinstating an installment agreement.
(c) Effective date. This part 300 is effective March 16, 1995.
Sec. 300.1 Installment agreement fee.
(a) Applicability. This section applies to installment agreements
under section 6159 of the Internal Revenue Code.
(b) Fee. The fee for entering into an installment agreement is $43.
(c) Person liable for fee. The person liable for the installment
agreement fee is the taxpayer entering into an installment agreement.
Sec. 300.2 Restructuring or reinstatement of installment agreement fee.
(a) Applicability. This section applies to installment agreements
under section 6159 of the Internal Revenue Code that are in default. An
installment agreement is deemed to be in default when a taxpayer fails
to meet any of the conditions of the installment agreement.
(b) Fee. The fee for restructuring or reinstating an installment
agreement is $24.
(c) Person liable for fee. The person liable for the restructuring
or reinstatement fee is the taxpayer that has an installment agreement
restructured or reinstated.
PART 301--PROCEDURE AND ADMINISTRATION--Table of Contents
Information and Returns
Returns and Records
records, statements, and special returns
Sec.
301.6001-1 Notice or regulations requiring records, statements, and
special returns.
tax returns or statements
General Requirement
301.6011-1 General requirement of return, statement or list.
301.6011-2 Required use of magnetic media.
301.6011-3 Required use of magnetic media for partnership returns.
Income Tax Returns
301.6012-1 Persons required to make returns of income.
301.6013-1 Joint returns of income tax by husband and wife.
301.6014-1 Income tax return--tax not computed by taxpayer.
301.6015-1 Declaration of estimated income tax by individuals.
301.6016-1 Declarations of estimated income tax by corporations.
301.6017-1 Self-employment tax returns.
Estate and Gift Tax Returns
301.6018-1 Estate tax returns.
301.6019-1 Gift tax returns.
Miscellaneous Provisions
301.6020-1 Returns prepared or executed by district directors or other
internal revenue officers.
301.6021-1 Listing by district directors of taxable objects owned by
nonresidents of internal revenue districts.
information returns
Information Concerning Persons Subject to Special Provisions
301.6031(a)-1 Return of partnership income.
301.6032-1 Returns of banks with respect to common trust funds.
301.6033-1 Returns by exempt organizations.
301.6034-1 Returns by trusts described in section 4947(a)(2) or
claiming charitable or other deductions under section 642(c).
301.6035-1 Returns of officers, directors, and shareholders of foreign
personal holding companies.
301.6036-1 Notice required of executor or of receiver or other like
fiduciary.
[[Page 6]]
301.6037-1 Return of electing small business corporation.
301.6038-1 Information returns required of U.S. persons with respect to
certain foreign corporations.
301.6039-1 Information returns and statements required in connection
with certain options.
Information Concerning Transactions With Other Persons
301.6041-1 Returns of information regarding certain payments.
301.6042-1 Returns of information regarding payments of dividends and
corporate earnings and profits.
301.6043-1 Returns regarding liquidation, dissolution, termination, or
contraction.
301.6044-1 Returns of information regarding payments of patronage
dividends.
301.6046-1 Returns as to organization or reorganization of foreign
corporations and as to acquisitions of their stock.
301.6047-1 Information relating to certain trusts and annuity and bond
purchase plans.
301.6048-1 Returns as to creation of or transfers to certain foreign
trusts.
301.6049-1 Returns regarding payments of interest.
301.6050A-1 Information returns regarding services performed by certain
crewmen on fishing boats.
301.6050M-1 Information returns relating to persons receiving contracts
from certain Federal executive agencies.
Information Regarding Wages Paid Employees
301.6051-1 Receipts for employees.
301.6052-1 Information returns and statements regarding payment of
wages in the form of group-term life insurance.
301.6057-1 Employee retirement benefit plans; identification of
participant with deferred vested retirement benefit.
301.6057-2 Employee retirement benefit plans; notification of change in
plan status.
301.6058-1 Information required in connection with certain plans of
deferred compensation.
301.6059-1 Periodic report of actuary.
signing and verifying of returns and other documents
301.6061-1 Signing of returns and other documents.
301.6062-1 Signing of corporation returns.
301.6063-1 Signing of partnership returns.
301.6064-1 Signature presumed authentic.
301.6065-1 Verification of returns.
time for filing returns and other documents
301.6071-1 Time for filing returns and other documents.
301.6072-1 Time for filing income tax returns.
301.6073-1 Time for filing declarations of estimated income tax by
individuals.
301.6074-1 Time for filing declarations of estimated income tax by
corporations.
301.6075-1 Time for filing estate and gift tax returns.
extension of time for filing returns
301.6081-1 Extension of time for filing returns.
place for filing returns or other documents
301.6091-1 Place for filing returns and other documents.
301.6096-1 Designation by individuals for taxable years beginning after
December 31, 1972.
301.6096-2 Designation by individuals for taxable years ending on or
after December 31, 1972 and beginning before January 1, 1973.
miscellaneous provisions
301.6101-1 Period covered by returns or other documents.
301.6102-1 Computations on returns or other documents.
301.6103(a)-1 Disclosures after December 31, 1976, by officers and
employees of Federal agencies of returns and return
information (including taxpayer return information) disclosed
to such officers and employees by the Internal Revenue Service
before January 1, 1977, for a purpose not involving tax
administration.
301.6103(a)-2 Disclosures after December 31, 1976, by attorneys of the
Department of Justice and officers and employees of the Office
of the Chief Counsel for the Internal Revenue Service of
returns and return information (including taxpayer return
information) disclosed to such attorneys, officers, and
employees by the Service before January 1, 1977, for a purpose
involving tax administration.
301.6103(c)-1T Disclosure of returns and return information to designee
of taxpayer.
301.6103(h)(2)-1 Disclosure of returns and return information
(including taxpayer return information) to and by officers and
employees of the Department of Justice for use in Federal
grand jury proceeding, or in preparation for proceeding or
investigation, involving tax administration.
301.6103(i)-1 Disclosure of returns and return information (including
taxpayer return information) to and by officers and employees
of the Department of Justice or another Federal agency for use
in Federal grand jury proceeding, or preparation for
proceeding or investigation, involving enforcement of Federal
criminal statute not involving tax administration.
[[Page 7]]
301.6103(j)(1)-1. Disclosures of return information reflected on
returns to officers and employees of the Department of
Commerce for certain statistical purposes and related
activities.
301.6103(j)(5)-1 Disclosures of return information to officers and
employees of the Department of Agriculture for certain
statistical purposes and related activities.
301.6103(k)(6)-1 Disclosure of return information by Internal Revenue
officers and employees for investigative purposes.
301.6103(k)(9)-1 Disclosure of returns and return information relating
to payment of tax by credit card and debit card.
301.6103(l)(2)-1 Disclosure of returns and return information to
Pension Benefit Guaranty Corporation for purposes of research
and studies.
301.6103(l)(2)-2 Disclosure of returns and return information to
Department of Labor for purposes of research and studies.
301.6103(l)(2)-3 Disclosure to Department of Labor and Pension Benefit
Guaranty Corporation of certain returns and return
information.
301.6103(l)(14)-1 Disclosure of return information to United States
Customs Service.
301.6103(n)-1 Disclosure of returns and return information in
connection with procurement of property and services for tax
administration purposes.
301.6103(p)(2)(B)-1 Disclosure of returns and return information by
other agencies.
301.6103(p)(7)-1 Procedures for administrative review of a
determination that a State tax agency has failed to safeguard
Federal tax returns or return information.
301.6104(a)-1 Public inspection of material relating to tax-exempt
organizations.
301.6104(a)-2 Public inspection of material relating to pension and
other plans.
301.6104(a)-3 Public inspection of Internal Revenue Service letters and
documents relating to pension and other plans.
301.6104(a)-4 Requirement for 26 or more plan participants.
301.6104(a)-5 Withholding of certain information from public
inspection.
301.6104(a)-6 Procedural rules for inspection.
301.6104(b)-1 Publicity of information on certain information returns.
301.6104(c)-1 Disclosure of certain information to State officers.
301.6104(d)-0 Table of contents.
301.6104(d)-1 Public inspection and distribution of applications for
tax exemption and annual information returns of tax-exempt
organizations.
301.6104(d)-2 Making applications and returns widely available.
301.6104(d)-3 Tax-exempt organization subject to harassment campaign.
301.6105-1 Compilation of relief from excess profits tax cases.
301.6106-1 Publicity of unemployment tax returns.
301.6108-1 Publication of statistics of income.
301.6109-1 Identifying numbers.
301.6109-2 Authority of the Secretary of Agriculture to collect
employer identification numbers for purposes of the Food Stamp
Act of 1977.
301.6109-3 IRS adoption taxpayer identification numbers.
301.6110-1 Public inspection of written determinations and background
file documents.
301.6110-2 Meaning of terms.
301.6110-3 Deletion of certain information in written determinations
open to public inspection.
301.6110-4 Communications from third parties.
301.6110-5 Notice and time requirements; actions to restrain
disclosure; actions to obtain additional disclosure.
301.6110-6 Written determinations issued in response to requests
submitted before November 1, 1976.
301.6110-7 Miscellaneous provisions.
301.6111-1T Questions and answers relating to tax shelter registration.
301.6111-2 Confidential corporate tax shelters.
301.6112-1 Requirement to prepare, maintain, and furnish lists with
respect to potentially abusive tax shelters.
301.6114-1 Treaty-based return positions.
Time and Place for Paying Tax
Place and Due Date for Payment of Tax
301.6151-1 Time and place for paying tax shown on returns.
301.6152-1 Installment payments.
301.6153-1 Installment payments of estimated income tax by individuals.
301.6154-1 Installment payments of estimated income tax by
corporations.
301.6155-1 Payment on notice and demand.
301.6159-1 Agreements for payment of tax liability in installments.
Extension of Time for Payment
301.6161-1 Extension of time for paying tax.
301.6162-1 Extension of time for payment of tax on gain attributable to
liquidation of personal holding companies.
301.6163-1 Extension of time for payment of estate tax on value of
reversionary or remainder interest in property.
301.6164-1 Extension of time for payment of taxes by corporations
expecting carrybacks.
301.6165-1 Bonds where time to pay the tax or deficiency has been
extended.
[[Page 8]]
301.6166-1 Extension of time for payment of estate tax where estate
consists largely of interest in closely held business.
Assessment
In General
301.6201-1 Assessment authority.
301.6203-1 Method of assessment.
301.6204-1 Supplemental assessments.
301.6205-1 Special rules applicable to certain employment taxes.
Deficiency Procedures
301.6211-1 Deficiency defined.
301.6212-1 Notice of deficiency.
301.6212-2 Definition of last known address.
301.6213-1 Restrictions applicable to deficiencies; petition to Tax
Court.
301.6215-1 Assessment of deficiency found by Tax Court.
301.6221-1 Tax treatment determined at partnership level.
301.6222(a)-1 Consistent treatment of partnership items.
301.6222(a)-2 Application of consistent reporting and notification
rules to indirect partners.
301.6222(b)-1 Notification to the Internal Revenue Service when
partnership items are treated inconsistently.
301.6222(b)-2 Effect of notification of inconsistent treatment.
301.6222(b)-3 Partner receiving incorrect schedule.
301.6223(a)-1 Notice sent to tax matters partner.
301.6223(a)-2 Withdrawal of notice of the beginning of an
administrative proceeding.
301.6223(b)-1 Notice group.
301.6223(c)-1 Additional information regarding partners furnished to
the Internal Revenue Service.
301.6223(e)-1 Effect of Internal Revenue Service's failure to provide
notice.
301.6223(e)-2 Elections if Internal Revenue Service fails to provide
timely notice.
301.6223(f)-1 Duplicate copy of final partnership administrative
adjustment.
301.6223(g)-1 Responsibilities of the tax matters partner.
301.6223(h)-1 Responsibilities of pass-thru partner.
301.6224(a)-1 Participation in administrative proceedings.
301.6224(b)-1 Partner may waive rights.
301.6224(c)-1 Tax matters partner may bind nonnotice partners.
301.6224(c)-2 Pass-thru partner binds indirect partners.
301.6224(c)-3 Consistent settlements.
301.6226(a)-1 Principal place of business of partnership.
301.6226(b)-1 5-percent group.
301.6226(e)-1 Jurisdictional requirement for bringing an action in
District Court or United States Court of Federal Claims.
301.6226(f)-1 Scope of judicial review.
301.6227(c)-1 Administrative adjustment request by the tax matters
partner on behalf of the partnership.
301.6227(d)-1 Administrative adjustment request filed on behalf of a
partner.
301.6229(b)-1 Extension by agreement.
301.6229(b)-2 Special rule with respect to debtors in Title 11 cases.
301.6229(e)-1 Information with respect to unidentified partner.
301.6229(f)-1 Special rule for partial settlement agreements.
301.6230(b)-1 Request that correction not be made.
301.6230(c)-1 Claim arising out of erroneous computation, etc.
301.6230(e)-1 Tax matters partner required to furnish names.
301.6231(a)(1)-1 Exception for small partnerships.
301.6231(a)(2)-1 Persons whose tax liability is determined indirectly
by partnership items.
301.6231(a)(3)-1 Partnership items.
301.6231(a)(5)-1 Definition of affected item.
301.6231(a)(6)-1 Computational adjustments.
301.6231(a)(7)-1 Designation or selection of tax matters partner.
301.6231(a)(7)-2 Designation or selection of tax matters partner for a
limited liability company (LLC).
301.6231(a)(12)-1 Special rules relating to spouses.
301.6231(c)-1 Special rules for certain applications for tentative
carryback and refund adjustments based on partnership losses,
deductions, or credits.
301.6231(c)-2 Special rules for certain refund claims based on losses,
deductions, or credits from abusive tax shelter partnerships.
301.6231(c)-3 Limitation on applicability of Secs. 301.6231(c)-4
through 301.6231(c)-8.
301.6231(c)-4 Termination and jeopardy assessment.
301.6231(c)-5 Criminal investigations.
301.6231(c)-6 Indirect method of proof of income.
301.6231(c)-7 Bankruptcy and receivership.
301.6231(c)-8 Prompt assessment.
301.6231(d)-1 Time for determining profits interest of partners for
purposes of sections 6223(b) and 6231(a)(11).
301.6231(e)-1 Effect of a determination with respect to a
nonpartnership item on the determination of a partnership
item.
301.6231(e)-2 Judicial decision not a bar to certain adjustments.
301.6231(f)-1 Disallowance of losses and credits in certain cases.
301.6233-1 Extension to entities filing partnership returns.
301.6241-1T Tax treatment determined at corporate level.
301.6245-1T Subchapter S items.
[[Page 9]]
Collection
General Provisions
301.6301-1 Collection authority.
301.6302-1 Mode or time of collection of taxes.
301.6303-1 Notice and demand for tax.
301.6305-1 Assessment and collection of certain liability.
Receipt of Payment
301.6311-1 Payment by check or money order.
301.6311-2 Payment by credit card and debit card.
301.6312-1 Treasury certificates of indebtedness, Treasury notes, and
Treasury bills acceptable in payment of internal revenue taxes
or stamps.
301.6312-2 Certain Treasury savings notes acceptable in payment of
certain internal revenue taxes.
301.6313-1 Fractional parts of a cent.
301.6314-1 Receipt for taxes.
301.6315-1 Payments of estimated income tax.
301.6316-1 Payment of income tax in foreign currency.
301.6316-2 Definitions.
301.6316-3 Allocation of tax attributable to foreign currency.
301.6316-4 Return requirements.
301.6316-5 Manner of paying tax by foreign currency.
301.6316-6 Declarations of estimated tax.
301.6316-7 Payment of Federal Insurance Contributions Act taxes in
foreign currency.
301.6316-8 Refunds and credits in foreign currency.
301.6316-9 Interest, additions to tax, etc.
Lien for Taxes
301.6320-1 Notice and opportunity for hearing upon filing of notice of
Federal tax lien.
301.6321-1 Lien for taxes.
301.6323(a)-1 Purchasers, holders of security interests, mechanic's
lienors, and judgment lien creditors.
301.6323(b)-1 Protection for certain interests even though notice
filed.
301.6323(c)-1 Protection for commercial transactions financing
agreements.
301.6323(c)-2 Protection for real property construction or improvement
financing agreements.
301.6323(c)-3 Protection for obligatory disbursement agreements.
301.6323(d)-1 45-day period for making disbursements.
301.6323(e)-1 Priority of interest and expenses.
301.6323(f)-1 Place for filing notice; form.
301.6323(g)-1 Refiling of notice of tax lien.
301.6323(h)-0 Scope of definitions.
301.6323(h)-1 Definitions.
301.6323(i)-1 Special rules.
301.6323(j)-1 Withdrawal of notice of federal tax lien in certain
circumstances.
301.6324-1 Special liens for estate and gift taxes; personal liability
of transferees and others.
301.6324A-1 Election of and agreement to special lien for estate tax
deferred under section 6166 or 6166A.
301.6325-1 Release of lien or discharge of property.
301.6326-1 Administrative appeal of the erroneous filing of notice of
federal tax lien.
Seizure of Property for Collection of Taxes
301.6330-1 Notice and opportunity for hearing prior to levy.
301.6331-1 Levy and distraint.
301.6331-2 Procedures and restrictions on levies.
301.6331-3 Restrictions on levy while offers to compromise are pending.
301.6331-4 Restrictions on levy while installment agreements are
pending or in effect.
301.6332-1 Surrender of property subject to levy.
301.6332-2 Surrender of property subject to levy in the case of life
insurance and endowment contracts.
301.6332-3 The 21-day holding period applicable to property held by
banks.
301.6333-1 Production of books.
301.6334-1 Property exempt from levy.
301.6334-2 Wages, salary, and other income.
301.6334-3 Determination of exempt amount.
301.6334-4 Verified statements.
301.6335-1 Sale of seized property.
301.6336-1 Sale of perishable goods.
301.6337-1 Redemption of property.
301.6338-1 Certificate of sale; deed of real property.
301.6339-1 Legal effect of certificate of sale of personal property and
deed of real property.
301.6340-1 Records of sale.
301.6341-1 Expense of levy and sale.
301.6342-1 Application of proceeds of levy.
301.6343-1 Requirement to release levy and notice of release.
301.6343-2 Return of wrongfully levied upon property.
301.6361-1 Collection and administration of qualified taxes.
301.6361-2 Judicial and administrative proceedings; Federal
representation of State interests.
301.6361-3 Transfers to States.
301.6361-4 Definitions.
301.6361-5 Effective date of section 6361.
301.6362-1 Types of qualified tax.
301.6362-2 Qualified resident tax based on taxable income.
301.6362-3 Qualified resident tax which is a percentage of Federal tax.
[[Page 10]]
301.6362-4 Rules for adjustments relating to qualified resident taxes.
301.6362-5 Qualified nonresident tax.
301.6362-6 Requirements relating to residence.
301.6362-7 Additional requirements.
301.6363-1 State agreements.
301.6363-2 Withdrawal from State agreements.
301.6363-3 Transition years.
301.6363-4 Judicial review.
301.6365-1 Definitions.
301.6365-2 Commencement and cessation of applicability of subchapter E
to individual taxpayers.
Abatements, Credits, and Refunds
Procedure in General
301.6401-1 Amounts treated as overpayments.
301.6402-1 Authority to make credits or refunds.
301.6402-2 Claims for credit or refund.
301.6402-3 Special rules applicable to income tax.
301.6402-4 Payments in excess of amounts shown on return.
301.6402-5 Offset of past-due support against overpayment.
301.6402-6 Offset of past-due, legally enforceable debt against
overpayment.
301.6402-7 Claims for refund and applications for tentative carryback
adjustments involving consolidated groups that include
insolvent financial institutions.
301.6403-1 Overpayment of installment.
301.6404-0 Table of contents.
301.6404-1 Abatements.
301.6404-2 Abatement of interest.
301.6404-3 Abatement of penalty or addition to tax attributable to
erroneous written advice of the Internal Revenue Service.
301.6405-1 Reports of refunds and credits.
301.6407-1 Date of allowance of refund or credit.
Rules of Special Application
301.6411-1 Tentative carryback adjustments.
301.6413-1 Special rules applicable to certain employment taxes.
301.6414-1 Income tax withheld.
301.6425-1 Adjustment of overpayment of estimated income tax by
corporation.
Limitations
Limitations on Assessment and Collection
301.6501(a)-1 Period of limitations upon assessment and collection.
301.6501(b)-1 Time return deemed filed for purposes of determining
limitations.
301.6501(c)-1 Exceptions to general period of limitations on assessment
and collection.
301.6501(d)-1 Request for prompt assessment.
301.6501(e)-1 Omission from return.
301.6501(f)-1 Personal holding company tax.
301.6501(g)-1 Certain income tax returns of corporations.
301.6501(h)-1 Net operating loss or capital loss carrybacks.
301.6501(i)-1 Foreign tax carrybacks; taxable years beginning after
December 31, 1957.
301.6501(j)-1 Investment credit carryback; taxable years ending after
December 31, 1961.
301.6501(m)-1 Tentative carryback adjustment assessment period.
301.6501(n)-1 Special rules for chapter 42 and similar taxes.
301.6501(n)-2 Certain contributions to section 501(c)(3) organizations.
301.6501(n)-3 Certain set-asides described in section 4942(g)(2).
301.6501(o)-1 Work incentive program credit carrybacks, taxable years
beginning after December 31, 1971.
301.6501(o)-2 Special rules for partnership items of federally
registered partnerships.
301.6501(o)-3 Partnership items.
301.6502-1 Collection after assessment.
301.6503(a)-1 Suspension of running of period of limitation; issuance
of statutory notice of deficiency.
301.6503(b)-1 Suspension of running of period of limitation; assets of
taxpayer in control or custody of court.
301.6503(c)-1 Suspension of running of period of limitation; location
of property outside the United States or removal of property
from the United States; taxpayer outside of United States.
301.6503(d)-1 Suspension of running of period of limitation; extension
of time for payment of estate tax.
301.6503(e)-1 Suspension of running of period of limitation; certain
powers of appointment.
301.6503(f)-1 Suspension of running of period of limitation; wrongful
seizure of property of third party.
301.6503(g)-1 Suspension pending correction.
Limitations on Credit or Refund
301.6511(a)-1 Period of limitation on filing claim.
301.6511(b)-1 Limitations on allowance of credits and refunds.
301.6511(c)-1 Special rules applicable in case of extension of time by
agreement.
301.6511(d)-1 Overpayment of income tax on account of bad debts,
worthless securities, etc.
301.6511(d)-2 Overpayment of income tax on account of net operating
loss or capital loss carrybacks.
301.6511(d)-3 Special rules applicable to credit against income tax for
foreign taxes.
301.6511(d)-4 Overpayment of income tax on account of investment credit
carryback.
[[Page 11]]
301.6511(d)-7 Overpayment of income tax on account of work incentive
program credit carryback.
301.6511(e)-1 Special rules applicable to manufactured sugar.
301.6511(f)-1 Special rules for chapter 42 taxes.
301.6511(g)-1 Special rule for partnership items of federally
registered partnerships.
301.6512-1 Limitations in case of petition to Tax Court.
301.6513-1 Time return deemed filed and tax considered paid.
301.6514(a)-1 Credits or refunds after period of limitation.
301.6514(b)-1 Credit against barred liability.
Mitigation of Effect of Period of Limitations
301.6521-1 Mitigation of effect of limitation in case of related
employee social security tax and self-employment tax.
301.6521-2 Law applicable in determination of error.
Periods of Limitation in Judicial Proceedings
301.6532-1 Periods of limitation on suits by taxpayers.
301.6532-2 Periods of limitation on suits by the United States.
301.6532-3 Periods of limitation on suits by persons other than
taxpayers.
Interest
Interest on Underpayments
301.6601-1 Interest on underpayments.
301.6602-1 Interest on erroneous refund recoverable by suit.
Interest on Overpayments
301.6611-1 Interest on overpayments.
Determination of Interest Rate
301.6621-1 Interest rate.
301.6621-2T Questions and answers relating to the increased rate of
interest on substantial underpayments attributable to certain
tax motivated transactions (temporary).
301.6621-3 Higher interest rate payable on large corporate
underpayments.
301.6622-1 Interest compounded daily.
Additions to the Tax, Additional Amounts, and Assessable Penalties
Additions to the Tax and Additional Amounts
301.6651-1 Failure to file tax return or to pay tax.
301.6652-1 Failure to file certain information returns.
301.6652-2 Failure by exempt organizations and certain nonexempt
organizations to file certain returns or to comply with
section 6104(d) for taxable years beginning after December 31,
1969.
301.6652-3 Failure to file information with respect to employee
retirement benefit plan.
301.6653-1 Failure to pay tax.
301.6654-1 Failure by individual to pay estimated income tax.
301.6655-1 Failure by corporation to pay estimated income tax.
301.6656-1 Abatement of penalty.
301.6657-1 Bad checks.
301.6658-1 Addition to tax in case of jeopardy.
301.6659-1 Applicable rules.
Assessable Penalties
301.6671-1 Rules for application of assessable penalties.
301.6672-1 Failure to collect and pay over tax, or attempt to evade or
defeat tax.
301.6673-1 Damages assessable for instituting proceedings before the
Tax Court merely for delay.
301.6674-1 Fraudulent statement or failure to furnish statement to
employee.
301.6678-1 Failure to furnish statements to payees.
301.6679-1 Failure to file returns, etc. with respect to foreign
corporations or foreign partnerships for taxable years
beginning after September 3, 1982.
301.6682-1 False information with respect to withholding allowances
based on itemized deductions.
301.6684-1 Assessable penalties with respect to liability for tax under
chapter 42.
301.6685-1 Assessable penalties with respect to private foundations'
failure to comply with section 6104(d).
301.6686-1 Failure of DISC to file returns.
301.6688-1 Assessable penalties with respect to information required to
be furnished under section 7654 on allocation of tax to Guam
or the United States.
301.6689-1T Failure to file notice of redetermination of foreign tax
(temporary).
301.6690-1 Penalty for fraudulent statement or failure to furnish
statement to plan participant.
301.6692-1 Failure to file actuarial report.
301.6693-1 Penalty for failure to provide reports and documents
concerning individual retirement accounts or annuities.
301.6707-1T Questions and answers relating to penalties for failure to
furnish information regarding tax shelters.
301.6708-1T Failure to maintain list of investors in potentially
abusive tax shelters (temporary).
301.6712-1 Failure to disclose treaty-based return positions.
301.6721-0 Table of Contents.
301.6721-1 Failure to file correct information returns.
301.6722-1 Failure to furnish correct payee statements.
[[Page 12]]
301.6723-1 Failure to comply with other information reporting
requirements.
301.6724-1 Reasonable cause.
301.6724-1T Reasonable cause (temporary).
Regulations Applicable to Information Returns and Payee Statements the
Due Date for Which (Without Regard to Extensions) Is After December 31,
1986, and Before January 1, 1990
301.6723-1A Failure to include correct information.
General Provisions Relating to Stamps
301.6801-1 Authority for establishment, alteration, and distribution.
301.6802-1 Supply and distribution.
301.6803-1 Accounting and safeguarding.
301.6804-1 Attachment and cancellation.
301.6805-1 Redemption of stamps.
301.6806-1 Posting occupational tax stamps.
Jeopardy, Bankruptcy, and Receiverships
Jeopardy
termination of taxable year
301.6851-1 Termination of taxable year.
301.6852-1 Termination assessments of tax in the case of flagrant
political expenditures of section 501(c)(3) organizations.
jeopardy assessments
301.6861-1 Jeopardy assessments of income, estate, gift, and certain
excise taxes.
301.6862-1 Jeopardy assessment of taxes other than income, estate,
gift, and certain excise taxes.
301.6863-1 Stay of collection of jeopardy assessments; bond to stay
collection.
301.6863-2 Collection of jeopardy assessment; stay of sale of seized
property pending Tax Court decision.
301.6867-1 Presumptions where owner of large amount of cash is not
identified.
Bankruptcy and Receiverships
301.6871(a)-1 Immediate assessment of claims for income, estate, and
gift taxes in bankruptcy and receivership proceedings.
301.6871(a)-2 Collection of assessed taxes in bankruptcy and
receivership proceedings.
301.6871(b)-1 Claims for income, estate, and gift taxes in proceedings
under the Bankruptcy Act and receivership proceedings; claim
filed despite pendency of Tax Court proceedings.
301.6872-1 Suspension of running of period of limitations on
assessment.
301.6873-1 Unpaid claims in bankruptcy or receivership proceedings.
Transferees and Fiduciaries
301.6901-1 Procedure in the case of transferred assets.
301.6902-1 Burden of proof.
301.6903-1 Notice of fiduciary relationship.
301.6905-1 Discharge of executor from personal liability for decedent's
income and gift taxes.
Licensing
301.7001-1 License to collect foreign items.
Bonds
301.7101-1 Form of bond and security required.
301.7102-1 Single bond in lieu of multiple bonds.
Closing Agreements and Compromises
301.7121-1 Closing agreements.
301.7122-0 Table of contents.
301.7122-1 Compromises.
Crimes, Other Offenses, and Forfeitures
Crimes
general provisions
301.7207-1 Fraudulent returns, statements, or other documents.
301.7209-1 Unauthorized use or sale of stamps.
301.7214-1 Offenses by officers and employees of the United States.
301.7216-1 Penalty for disclosure or use of tax return information.
301.7216-2 Disclosure or use without formal consent of taxpayer.
301.7216-3 Disclosure or use only with formal consent of taxpayer.
penalties applicable to certain taxes
301.7231-1 Failure to obtain license for collection of foreign items.
Other Offenses
301.7269-1 Failure to produce records.
301.7272-1 Penalty for failure to register.
Forfeitures
property subject to forfeiture
301.7304-1 Penalty for fraudulently claiming drawback.
provisions common to forfeitures
301.7321-1 Seizure of property.
301.7322-1 Delivery of seized property to U.S. marshal.
301.7324-1 Special disposition of perishable goods.
301.7325-1 Personal property valued at $2,500 or less.
301.7326-1 Disposal of forfeited or abandoned property in special
cases.
301.7327-1 Customs laws applicable.
[[Page 13]]
Judicial Proceedings
Civil Actions by the United States
301.7401-1 Authorization.
301.7403-1 Action to enforce lien or to subject property to payment of
tax.
301.7404-1 Authority to bring civil action for estate taxes.
301.7406-1 Disposition of judgments and moneys recovered.
301.7409-1 Action to enjoin flagrant political expenditures of section
501(c)(3) organizations.
Proceedings by Taxpayers and Third Parties
301.7422-1 Special rules for certain excise taxes imposed by chapter 42
or 43.
301.7423-1 Repayments to officers or employees.
301.7424-2 Intervention.
301.7425-1 Discharge of liens; scope and application; judicial
proceedings.
301.7425-2 Discharge of liens; nonjudicial sales.
301.7425-3 Discharge of liens; special rules.
301.7425-4 Discharge of liens; redemption by United States.
301.7426-1 Civil actions by persons other than taxpayers.
301.7426-2 Recovery of damages in certain cases.
301.7429-1 Review of jeopardy and termination assessment and jeopardy
levy procedures; information to taxpayer.
301.7429-2 Review of jeopardy and termination assessment and jeopardy
levy procedures.
301.7429-3 Review of jeopardy and termination assessment and jeopardy
levy procedures; judicial action.
301.7430-0 Table of contents.
301.7430-1 Exhaustion of administrative remedies.
301.7430-2 Requirements and procedures for recovery of reasonable
administrative costs.
301.7430-3 Administrative proceeding and administrative proceeding
date.
301.7430-4 Reasonable administrative costs.
301.7430-5 Prevailing party.
301.7430-6 Effective dates.
301.7430-7T Qualified offers (temporary).
301.7430-8 Administrative costs incurred in damage actions for
violations of section 362 or 524 of the Bankruptcy Code.
301.7432-1 Civil cause of action for failure to release a lien.
301.7433-1 Civil cause of action for certain unauthorized collection
actions.
301.7433-2 Civil cause of action for violation of section 362 or 524 of
the Bankruptcy Code.
The Tax Court
procedure
301.7452-1 Representation of parties.
301.7454-1 Burden of proof in fraud and transferee cases.
301.7454-2 Burden of proof in foundation manager, etc. cases.
301.7456-1 Administration of oaths and procurement of testimony;
production of records of foreign corporations, foreign trusts
or estates and nonresident alien individuals.
301.7457-1 Witness fees.
301.7458-1 Hearings.
301.7461-1 Publicity of proceedings.
declaratory judgments relating to qualification of certain retirement
plans
301.7476-1 Declaratory judgments.
301.7477-1 Declaratory judgments relating to transfers of property from
the United States.
court review of tax court decisions
301.7481-1 Date when Tax Court decision becomes final; decision
modified or reversed.
301.7482-1 Courts of review; venue.
301.7483-1 Petition for review.
301.7484-1 Change of incumbent in office.
miscellaneous provisions
301.7502-1 Timely mailing of documents and payments treated as timely
filing and paying.
301.7502-2 Timely mailing of deposits.
301.7503-1 Time for performance of acts where last day falls on
Saturday, Sunday, or legal holiday.
301.7505-1 Sale of personal property acquired by the United States.
301.7506-1 Administration of real estate acquired by the United States.
301.7507-1 Banks and trust companies covered.
301.7507-2 Scope of section generally.
301.7507-3 Segregated or transferred assets.
301.7507-4 Unsegregated assets.
301.7507-5 Earnings.
301.7507-6 Abatement and refund.
301.7507-7 Establishment of immunity.
301.7507-8 Procedure during immunity.
301.7507-9 Termination of immunity.
301.7507-10 Collection of tax after termination of immunity.
301.7507-11 Exception of employment taxes.
301.7508-1 Time for performing certain acts postponed by reason of
service in a combat zone.
301.7508A-1 Postponement of certain tax-related deadlines by reason of
Presidentially declared disaster.
301.7510-1 Exemption from tax of domestic goods purchased for the
United States.
301.7512-1 Separate accounting for certain collected taxes.
301.7513-1 Reproduction of returns and other documents.
301.7514-1 Seals of office.
[[Page 14]]
301.7515-1 Special statistical studies and compilations on request.
301.7516-1 Training and training aids on request.
301.7517-1 Furnishing on request of statement explaining estate or gift
valuation.
Discovery of Liability and Enforcement of Title
Examination and Inspection
301.7601-1 Canvass of districts for taxable persons and objects.
301.7602-1 Examination of books and witnesses.
301.7602-1T Examination of books and witnesses.
301.7602-2 Third party contacts.
301.7603-1 Service of summons.
301.7604-1 Enforcement of summons.
301.7605-1 Time and place of examination.
301.7606-1 Entry of premises for examination of taxable objects.
301.7609-1 Special procedures for third-party summonses.
301.7609-2 Third-party recordkeepers.
301.7609-3 Right to intervene; right to institute a proceeding to
quash.
301.7609-4 Summonses excepted from section 7609 procedures.
301.7609-5 Suspension of statutes of limitations.
301.7610-1 Fees and costs for witnesses.
301.7611-1 Questions and answers relating to church tax inquiries and
examinations.
General Powers and Duties
301.7621-1 Internal revenue districts.
301.7622-1 Authority to administer oaths and certify.
301.7623-1 Rewards for information relating to violations of internal
revenue laws.
301.7624-1 Reimbursement to State and local law enforcement agencies
Supervision of Operations of Certain Manufacturers
301.7641-1 Supervision of operations of certain manufacturers.
Possessions
301.7654-1 Coordination of U.S. and Guam individual income taxes.
Definitions
301.7701-1 Classification of organizations for federal tax purposes.
301.7701-2 Business entities; definitions.
301.7701-3 Classification of certain business entities.
301.7701-4 Trusts.
301.7701-5 Domestic, foreign, resident, and nonresident persons.
301.7701-6 Definitions; person, fiduciary.
301.7701-7 Trusts--domestic and foreign.
301.7701-8 Military or naval forces and Armed Forces of the United
States.
301.7701-9 Secretary or his delegate.
301.7701-10 District director.
301.7701-11 Social security number.
301.7701-12 Employer identification number.
301.7701-13 Pre-1970 domestic building and loan association.
301.7701-13A Post-1969 domestic building and loan association.
301.7701-14 Cooperative bank.
301.7701-15 Income tax return preparer.
301.7701-16 Other terms.
301.7701-17T Collective-bargaining plans and agreements (temporary).
301.7701(b)-0 Outline of regulation provision for section 7701(b)-1
through (b)-9.
301.7701(b)-1 Resident alien.
301.7701(b)-2 Closer connection exception.
301.7701(b)-3 Days of presence in the United States that are excluded
for purposes of section 7701(b).
301.7701(b)-4 Residency time periods.
301.7701(b)-5 Coordination with section 877.
301.7701(b)-6 Taxable year.
301.7701(b)-7 Coordination with income tax treaties.
301.7701(b)-8 Procedural rules.
301.7701(b)-9 Effective dates of Secs. 301.7701(b)-1 through
301.7701(b)-7.
301.7701(i)-0 Outline of taxable mortgage pool provisions.
301.7701(i)-1 Definition of a taxable mortgage pool.
301.7701(i)-2 Special rules for portions of entities.
301.7701(i)-3 Effective dates and duration of taxable mortgage pool
classification.
301.7701(i)-4 Special rules for certain entities.
301.7704-2 Transition provisions.
General Rules
Application of Internal Revenue Laws
301.7803-1 Security bonds covering personnel of the Internal Revenue
Service.
301.7805-1 Rules and regulations.
301.7811-1 Taxpayer assistance orders.
Miscellaneous Provisions
301.9000-1 Procedure to be followed by officers and employees of the
Internal Revenue Service upon receipt of a request or demand
for disclosure of internal revenue records or information.
301.9001 Statutory provisions; Outer Continental Shelf Lands Act
Amendments of 1978.
301.9001-1 Collection of fee.
301.9001-2 Definitions.
301.9001-3 Cross reference.
301.9100-0 Outline of regulations.
301.9100-1 Extensions of time to make elections.
301.9100-2 Automatic extensions.
301.9100-3 Other extensions.
[[Page 15]]
301.9100-4T Time and manner of making certain elections under the
Economic Recovery Tax Act of 1981.
301.9100-5T Time and manner of making certain elections under the Tax
Equity and Fiscal Responsibility Act of 1982.
301.9100-6T Time and manner of making certain elections under the
Deficit Reduction Act of 1984.
301.9100-7T Time and manner of making certain elections under the Tax
Reform Act of 1986.
301.9100-8 Time and manner of making certain elections under the
Technical and Miscellaneous Revenue Act of 1988.
301.9100-9T Election by a bank holding company to forego grandfather
provision for all property representing pre-June 30, 1968,
activities.
301.9100-10T Election by certain family-owned bank holding companies to
divest all banking or nonbanking property.
301.9100-11T Election by a qualified bank holding corporation to pay in
installments the tax attributable to sales under the Bank
Holding Company Act.
301.9100-12T Various elections under the Tax Reform Act of 1976.
301.9100-14T Individual's election to terminate taxable year when case
commences.
301.9100-15T Election to use retroactive effective date.
301.9100-16T Election to accrue vacation pay.
301.9100-17T Procedure applicable to certain elections.
301.9100-18T Election to include in gross income in year of transfer.
301.9100-19T Election relating to passive investment income of electing
small business corporations.
301.9100-20T Election to treat certain distributions as made on the
last day of the taxable year.
301.9100-21 References to other temporary elections under various tax
acts.
Authority: 26 U.S.C. 7805.
Section 301.6011-2 also issued under 26 U.S.C. 6011(e).
Section 301.6011-3 also issued under 26 U.S.C. 6011.
Section 301.6036-1 also issued under 26 U.S.C. 6036.
Section 301.6050M-1 also issued under 26 U.S.C. 6050M.
Section 301.6061-1 also issued under 26 U.S.C. 6061.
Section 301.6103(c)-1 also issued under 26 U.S.C. 6103(c).
Section 301.6103(j)(1)-1 also issued under 26 U.S.C. 6103(j)(1).
Section 301.6103(j)(5)-1 also issued under 26 U.S.C. 6103(j)(5).
Section 301.6103(k)(9)-1 also issued under 26 U.S.C. 6103(k)(9) and
26 U.S.C. 6103(q).
Section 301.6103(l)(14)-1 also issued under 26 U.S.C. 6103(l)(14).
Section 301.6103(n)-1 also issued under 26 U.S.C. 6103(n).
Section 301.6103(p)(2)(B)-1 also issued under 26 U.S.C. 6103(p)(2).
Section 301.6103(p)(2)(B)-1T also issued under 26 U.S.C. 6103(p)(2).
Section 301.6104(d)-2 also issued under 26 U.S.C. 6104(d)(3).
Section 301.6104(d)-3 also issued under 26 U.S.C. 6104(d)(3).
Section 301.6104(d)-4 also issued under 26 U.S.C. 6104(e)(3).
Section 301.6104(d)-5 also issued under 26 U.S.C. 6104(e)(3).
Section 301.6109-1 also issued under 26 U.S.C. 6109 (a), (c), and
(d).
Section 301.6109-3 also issued under 26 U.S.C. 6109.
Section 301.6111-1T also issued under 26 U.S.C. 6111.
Section 301.6111-2T also issued under 26 U.S.C. 6111(f)(4).
Section 301.6112-1T also issued under 26 U.S.C. 6112.
Section 301.6114-1 also issued under 26 U.S.C. 6114.
Section 301.6222(a)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6222(a)-2T also issued under 26 U.S.C. 6230(k).
Section 301.6222(b)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6222(b)-2T also issued under 26 U.S.C. 6230(k).
Section 301.6222(b)-3T also issued under 26 U.S.C. 6230 (i) and (k).
Section 301.6223(a)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6223(a)-2T also issued under 26 U.S.C. 6230(k).
Section 301.6223(b)-1T also issued under 26 U.S.C. 6230 (i) and (k).
Section 301.6223(b)-2T also issued under 26 U.S.C. 6230(k).
Section 301.6223(c)-1T also issued under 26 U.S.C. 6223(c) and 6230
(i) and (k).
Section 301.6223(e)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6223(e)-2T also issued under 26 U.S.C. 6230 (i) and (k).
Section 301.6223(f)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6223(g)-1T also issued under 26 U.S.C. 6223(g) and 6230
(i) and (k).
Section 301.6223(h)-1T also issued under 26 U.S.C. 6230 (i) and (k).
Section 301.6224(a)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6224(b)-1T also issued under 26 U.S.C. 6230 (i) and (k).
Section 301.6224(c)-1T also issued under 26 U.S.C. 6230 (i) and (k).
Section 301.6224(c)-2T also issued under 26 U.S.C. 6230(k).
Section 301.6224(c)-3T also issued under 26 U.S.C. 6230 (i) and (k).
[[Page 16]]
Section 301.6226(a)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6226(b)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6226(e)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6226(f)-1T also issued under 26 U.S.C. C. 6230(k).
Section 301.6231(a)(6)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6231(a)(7)-1 also issued under 26 U.S.C. 6230 (i) and
(k).
Section 301.6231(a)(7)-2 also issued under 26 U.S.C. 6230 (i) and
(k).
Section 301.6231(a)(12)-1T also issued under 26 U.S.C. 6230(k) and
6231(a)(12).
Section 301.6231(c)-1 also issued under 26 U.S.C. 6231(c)(1) and
(3).
Section 301.6231(c)-2 also issued under 26 U.S.C. 6231(c)(1) and
(3).
Section 301.6231(c)-3T also issued under 26 U.S.C. 6230(k) and
6231(c).
Section 301.6231(c)-4T also issued under 26 U.S.C. 6230(k) and
6231(c).
Section 301.6231(c)-5T also issued under 26 U.S.C. 6230(k) and
6231(c).
Section 301.6231(c)-6T also issued under 26 U.S.C. 6230(k) and
6231(c).
Section 301.6231(c)-7T also issued under 26 U.S.C. 6230(k) and
6231(c).
Section 301.6231(c)-8T also issued under 26 U.S.C. 6230(k) and
6231(c).
Section 301.6231(d)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6231(e)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6231(e)-2T also issued under 26 U.S.C. 6230(k).
Section 301.6231(f)-1T also issued under 26 U.S.C. 6230 (i) and (k)
and 6231(f).
Section 301.6233-1T also issued under 26 U.S.C. 6230(k) and 6233.
Section 301.6241-1T also issued under 26 U.S.C. 6241.
Section 301.6245-1T also issued under 26 U.S.C. 6245.
Section 301.6311-2 also issued under 26 U.S.C. 6311.
Section 301.6323(f)-(1)(c) also issued under 26 U.S.C. 6323(f)(3).
Section 301.6325-1T also issued under 26 U.S.C. 6326.
Section 301.6343-1 also issued under 26 U.S.C. 6343.
Section 301.6343-2 also issued under 26 U.S.C. 6343.
Section 301.6402-3 also issued under 95 Stat. 357 amending 88 Stat.
2351.
Section 301.6402-7 also issued under 26 U.S.C. 6402(i) and 6411(c).
Section 301.6404-2 also issued under 26 U.S.C. 6404.
Section 301.6404-3 also issued under 26 U.S.C. 6404(f)(3).
Section 301.6621-1 also issued under 26 U.S.C. 6230(k).
Section 301.6689-1T also issued under 26 U.S.C. 6689(a).
Section 301.7216-2, paragraphs (o) and (p) also issued under 26
U.S.C. 7216(b)(3).
Section 301.7502-1 also issued under 26 U.S.C. 7502.
Section 301.7502-1T also issued under 26 U.S.C. 7502(c).
Section 301.7502-2 also issued under 26 U.S.C. 7502.
Section 301.7507-1 also issued under 26 U.S.C. 597.
Section 301.7507-9 also issued under 26 U.S.C. 597.
Section 301.7508-1 also issued under 26 U.S.C. 7508(a)(1)(K).
Section 301.7508A-1 also issued under 26 U.S.C. 7508(a)(1)(K) and
7508A(a).
Section 301.7605-1 also issued under section 6228(b) of the
Technical and Miscellaneous Revenue Act of 1988.
Section 301.7624-1 also issued under 26 U.S.C. 7624.
Sections 301.7701(b)-1 through 301.7701(b)-9 also issued under 26
U.S.C. 7701(b)(11).
Section 301.7701(i)-1(g)(1) also issued under 26 U.S.C.
7701(i)(2)(D).
Section 301.7701(i)-4(b) also issued under 26 U.S.C. 7701(i)(3).
Section 301.9100-1T also issued under 26 U.S.C. 6081.
Section 301.9100-2T also issued under 26 U.S.C. 6081.
Section 301.9100-3T also issued under 26 U.S.C. 6081.
Section 301.9100-4T also issued under 26 U.S.C. 168(f)(8)(G).
Section 301.9100-7T also issued under 26 U.S.C. 42, 48, 56, 83, 141,
142, 143, 145, 147, 165, 168, 216, 263, 263A, 448, 453C, 468B, 469, 474,
585, 616, 617, 1059, 2632, 2652, 3121, 4982, 7701; and under the Tax
Reform Act of 1986, 100 Stat. 2746, sections 203, 204, 243, 311, 646,
801, 806, 905, 1704, 1801, 1802, and 1804.
Section 301.9100-8 also issued under 26 U.S.C. 1(i)(7), 41(h),
42(b)(2)(A)(ii), 42(d)(3), 42(f)(1), 42(g)(3), 42(i)(2)(B), 42(j)(5)(B),
121(d)(9), 142(i)(2), 165(l), 168(b)(2), 219(g)(4), 245(a)(10),
263A(d)(1), 263A(d)(3)(B), 263A(h), 460(b)(3), 643(g)(2), 831(b)(2)(A),
835(a), 865(f), 865(g)(3), 865(h)(2), 904(g)(10), 2056(b)(7)(c)(ii),
2056A(d), 2523(f)(6)(B), 3127, and 7520(a); the Technical and
Miscellaneous Revenue Act of 1988, 102 Stat. 3324, sections
1002(a)(23)(B), 1005(c)(11), 1006(d)(15), 1006(j)(1)(C), 1006(t)(18)(B),
1012(n)(3), 1014(c)(1), 1014(c)(2), 2004(j)(1), 2004(m)(5), 5012(e)(4),
6181(c)(2), and 6277; and under the Tax Reform Act of 1986, 100 Stat.
2746, section 905(a).
Sections 301.9100-9T, 301.9100-10T and 301.9100-11T also issued
under 26 U.S.C. 1103 (g) and (h) and 6158(a).
Sections 301.9100-13T, 301.9100-14T and 301.9100-15T also issued
under 26 U.S.C. 108(d)(8) and 1017(b)(3)(E).
Section 301.9100-16T also issued under 26 U.S.C. 463(d).
[[Page 17]]
Source: 32 FR 15241, Nov. 3, 1967, unless otherwise noted.
Editorial Note: In the text of this part, integral section
references are to sections of the Internal Revenue Code of 1954; decimal
section references are to the Code of Federal Regulations.
References in the text to the ``Code'' are references to sections of
the Internal Revenue Code of 1954.
INFORMATION AND RETURNS
Returns and Records--Table of Contents
records, statements, and special returns--Table of Contents
Sec. 301.6001-1 Notice or regulations requiring records, statements, and special returns.
For provisions requiring records, statements, and special returns,
see the regulations relating to the particular tax.
tax returns or statements
General Requirement
Sec. 301.6011-1 General requirement of return, statement or list.
(a) For provisions requiring returns, statements, or lists, see the
regulations relating to the particular tax.
(b) The Internal Revenue Service may prescribe in forms,
instructions, or other appropriate guidance the information or
documentation required to be included with any return or any statement
required to be made or other document required to be furnished under any
provision of the internal revenue laws or regulations.
[T.D. 9040, 68 FR 4921, Jan. 31, 2003]
Sec. 301.6011-2 Required use of magnetic media.
(a) Meaning of terms. The following definitions apply for purposes
of this section:
(1) Magnetic media. The term magnetic media means any media
permitted under applicable regulations, revenue procedures or
publications, or, in the case of returns filed with the Social Security
Administration, Social Security Administration publications. These
generally include magnetic tape, tape cartridge, and diskette, as well
as other media (such as electronic filing) specifically permitted under
the applicable regulations, procedures, or publications.
(2) Machine-readable paper form. The term ``machine-readable paper
form'' means--
(i) Optical-scan paper form; or
(ii) Any other machine-readable paper form permitted under
applicable regulations, revenue procedures, or Social Security
Administration publications.
(3) Person. The term ``person'' includes any person that is required
to file a return that is described in paragraph (b) of this section.
Thus, the term ``person'' includes the United States, a State, the
District of Columbia, a foreign government, a political subdivision of a
State or of a foreign government, or an international organization. In
addition, in the case of an affiliated group of corporations filing a
consolidated return, each member of the affiliated group is a separate
person.
(b) Returns required on magnetic media. (1) If the use of Form 1042-
S, 1098, 1098-E, 1098-T, 1099 series, 5498, 8027, W-2G, or other form
treated as a form specified in this paragraph (b)(1) is required by the
applicable regulations or revenue procedures for the purpose of making
an information return, the information required by the form must be
submitted on magnetic media, except as otherwise provided in paragraph
(c) of this section. Returns on magnetic media must be made in
accordance with applicable revenue procedures or publications (see
Sec. 601.601(d)(2)(ii)(b) of this chapter). Pursuant to these
procedures, the consent of the Commissioner of Internal Revenue (or
other authorized officer or employee of the Internal Revenue Service) to
a magnetic medium must be obtained by submitting Form 4419 (Application
for Filing Information Returns Magnetically/Electronically) prior to
submitting a return described in this paragraph (b)(1) on the magnetic
medium.
(2) If the use of Form W-2 (Wage and Tax Statement), Form 499R-2/W-
2PR (Withholding Statement (Puerto
[[Page 18]]
Rico)), Form W-2VI (U.S. Virgin Islands Wage and Tax Statement), Form W-
2GU (Guam Wage and Tax Statement), Form W-2AS (American Samoa Wage and
Tax Statement), or other form treated as a form specified in this
paragraph (b)(2) is required for the purpose of making an information
return, the information required by the form must be submitted on
magnetic media, except as otherwise provided in paragraph (c) of this
section. Returns described in this paragraph (b)(2) must be made in
accordance with applicable Social Security Administration procedures or
publications (which may be obtained from the local office of the Social
Security Administration).
(3) The Commissioner may prescribe by revenue procedure that
additional forms are treated, for purposes of this section, as forms
specified in paragraph (b)(1) or (b)(2) of this section.
(c) Exceptions--(1) Low-volume filers/250-threshold--(i) In general.
No person is required to file information returns on magnetic media
unless the person is required to file 250 or more returns during the
calendar year. Persons filing fewer than 250 returns during the calendar
year may make the returns on the prescribed paper form, or,
alternatively, such persons may make returns on magnetic media in
accordance with paragraph (b) of this section.
(ii) Machine-readable forms. Returns made on a paper form under this
paragraph (c)(1) shall be machine-readable if applicable revenue
procedures provide for a machine-readable paper form.
(iii) No aggregation. Each type of information return described in
paragraphs (b)(1) and (2) of this section is considered a separate
return for purposes of this paragraph (c)(1). Therefore, the 250-
threshold applies separately to each type of form required to be filed.
(iv) Examples. The provisions of paragraph (c)(1)(iii) of this
section are illustrated by the following examples:
Example 1. For the calendar year ending December 31, 1998, Company X
is required to file 200 returns on Form 1099-INT and 350 returns on Form
1099-MISC. Company X is not required to file Forms 1099-INT on magnetic
media but is required to file Forms 1099-MISC on magnetic media.
Example 2. During the calendar year ending December 31, 1998,
Company Y has 275 employees in Puerto Rico and 50 employees in American
Samoa. Company Y is required to file Forms 499R-2/W-2PR on magnetic
media but is not required to file Forms W-2AS on magnetic media.
Example 3. For the calendar year ending December 31, 1998, Company Z
files 300 original returns on Form 1099-DIV and later files 70 corrected
returns on Form 1099-DIV. Company Z is required to file the original
returns on magnetic media. However, Company Z is not required to file
the corrected returns on magnetic media because the corrected returns
fall under the 250-threshold. See Sec. 301.6721-1(a)(2)(ii).
(2) Waiver. (i) The Commissioner may waive the requirements of this
section if hardship is shown in a request for waiver filed in accordance
with this paragraph (c)(2)(i). The principal factor in determining
hardship will be the amount, if any, by which the cost of filing the
information returns in accordance with this section exceeds the cost of
filing the returns on other media. Notwithstanding the foregoing, if an
employer is required to make a final return on Form 941, or a variation
thereof, and expedited filing of Forms W-2, Forms 499R-2/W-2PR, Forms W-
2VI, Forms W-2GU, or Form W-2AS is required, the unavailability of the
specifications for magnetic media filing will be treated as creating a
hardship (see Sec. 31.6071(a)-1(a)(3)(ii) of this chapter). A request
for waiver must be made in accordance with applicable revenue procedures
or publications (see Sec. 601.601(d)(2)(ii)(b) of this chapter).
Pursuant to these procedures, a request for waiver should be filed at
least 45 days before the due date of the information return in order for
the Service to have adequate time to respond to the request for waiver.
The waiver will specify the type of information return and the period to
which it applies and will be subject to such terms and conditions
regarding the method of reporting as may be prescribed by the
Commissioner.
(ii) The Commissioner may prescribe rules that supplement the
provisions of paragraph (c)(2)(i) of this section.
(d) Paper form returns. Returns submitted on paper forms (whether or
not machine-readable) permitted under paragraph (c) of this section
shall be in accordance with applicable Internal
[[Page 19]]
Revenue Service or Social Security Administration procedures.
(e) Applicability of current procedures. Until procedures are
prescribed which further implement the mandatory filing on magnetic
media provided by this section, a return to which this section applies
shall be made in the manner and shall be subject to the requirements and
conditions (including the requirement of applying for consent to the
magnetic medium) prescribed in the regulations, revenue procedures and
Social Security Administration publications relating to the filing of
such return on magnetic media.
(f) Failure to file. If a person fails to file an information return
on magnetic media when required to do so by this section, the person is
deemed to have failed to file the return. In addition, if a person
making returns on a paper form under paragraph (c) of this section fails
to file a return on machine-readable paper form when required to do so
by this section, the person is deemed to have failed to file the return.
See sections 6652, 6693, and 6721 for penalties for failure to file
certain returns. See also section 6724 and the regulations under section
6721 for the specific rules and limitations regarding the penalty
imposed under section 6721 for failure to file on magnetic media.
(g) Effective dates. (1) Except as otherwise provided in paragraph
(g)(2) or (3) of this section, this section applies to returns required
to be filed after December 31, 1986.
(2) Paragraphs (a)(1), (b)(1), (b)(2), (c)(1)(i), (c)(1)(iii),
(c)(1)(iv), (c)(2), (d), (e), and (f) of this section are effective for
information returns required to be filed after December 31, 1996. For
information returns required to be filed after December 31, 1989, and
before January 1, 1997, see section 6011(e).
(3) This section applies to returns on Forms 1098-E, ``Student Loan
Interest Statement,'' and 1098-T, ``Tuition Statement,'' filed after
December 31, 2003.
[T.D. 8081, 51 FR 10348, Mar. 25, 1986, as amended by T.D. 8097, 51 FR
30352, Aug. 26, 1986; T.D. 8140, 52 FR 19137, May 21, 1987; T.D. 8636,
60 FR 66142, Dec. 21, 1995; T.D. 8772, 63 FR 35519, June 30, 1998; T.D.
8992, 67 FR 20907, Apr. 29, 2002; T.D. 9029, 67 FR 77687, Dec. 19, 2002]
Sec. 301.6011-3 Required use of magnetic media for partnership returns.
(a) Partnership returns required on magnetic media. If a partnership
with more than 100 partners is required to file a partnership return
pursuant to Sec. 1.6031(a)-1 of this chapter, the information required
by the applicable forms and schedules must be filed on magnetic media,
except as otherwise provided in paragraph (b) of this section. Returns
filed on magnetic media must be made in accordance with applicable
revenue procedures or publications. In prescribing revenue procedures or
publications, the Commissioner may determine that partnerships will be
required to use any one form of magnetic media filing. For example, the
Commissioner may determine that partnerships with more than 100 partners
must file their partnership returns electronically. In filing its
return, a partnership must register to participate in the magnetic media
filing program in the manner prescribed by the Internal Revenue Service
in applicable revenue procedures or publications.
(b) Waiver. The Commissioner may waive the requirements of this
section if hardship is shown in a request for waiver filed in accordance
with this paragraph (b). A determination of hardship will be based upon
all of the facts and circumstances. One factor in determining hardship
will be the reasonableness of the incremental cost to the partnership of
complying with the magnetic media filing requirements. Other factors,
such as equipment breakdowns or destruction of magnetic media filing
equipment, also may be considered. A request for waiver must be made in
accordance with applicable revenue procedures or publications. The
waiver will specify the type of partnership return and the period to
which it applies. The waiver will also be subject to such terms and
conditions regarding the method of filing as may be prescribed by the
Commissioner.
(c) Failure to file. If a partnership fails to file a partnership
return on magnetic media in the manner required and when required to do
so by this section, the partnership will be deemed to have failed to
file the return in the manner prescribed for purposes
[[Page 20]]
of the information return penalty under section 6721. See Sec. 301.6724-
1(c)(3) for rules regarding the waiver of penalties for undue economic
hardship relating to filing returns on magnetic media.
(d) Meaning of terms. The following definitions apply for purposes
of this section:
(1) Magnetic media. The term magnetic media means any magnetic media
permitted under applicable regulations, revenue procedures, or
publications. These generally include magnetic tape, tape cartridge, and
diskette, as well as other media (such as electronic filing)
specifically permitted under the applicable regulations, procedures, or
publications.
(2) Partnership. The term partnership means a partnership as defined
in Sec. 1.761-1(a) of this chapter.
(3) Partner. The term partner means a member of a partnership as
defined in section 7701(a)(2).
(4) Partnership return. The term partnership return means a form in
Series 1065 (including Form 1065, U.S. Partnership Return of Income, and
Form 1065-B, U.S. Return of Income for Electing Large Partnerships),
along with the corresponding Schedules K-1 and all other related forms
and schedules that are required to be attached to the Series 1065 form.
(5) Partnerships with more than 100 partners. A partnership has more
than 100 partners if, over the course of the partnership's taxable year,
the partnership had more than 100 partners, regardless of whether a
partner was a partner for the entire year or whether the partnership had
over 100 partners on any particular day in the year. For purposes of
this paragraph (d)(5), however, only those persons having a direct
interest in the partnership must be considered partners for purposes of
determining the number of partners during the partnership's taxable
year.
(e) Examples. The following examples illustrate the provisions of
paragraph (d)(5) of this section. In the examples, the partnerships
utilize the calendar year, and the taxable year in question is 2000:
Example 1. Partnership P had five general partners and 90 limited
partners on January 1, 2000. On March 15, 2000, 10 more limited partners
acquired an interest in P. On September 29, 2000, the 10 newest partners
sold their individual partnership interests to C, a corporation which
was one of the original 90 limited partners. On December 31, 2000, P had
the same five general partners and 90 limited partners it had on January
1, 2000. P had a total of 105 partners over the course of partnership
taxable year 2000. Therefore, P must file its 2000 partnership return on
magnetic media.
Example 2. Partnership Q is a general partnership that had 95
partners on January 1, 2000. On March 15, 2000, 10 partners sold their
individual partnership interests to corporation D, which was not
previously a partner in Q. On September 29, 2000, corporation D sold
one-half of its partnership interest in equal shares to five
individuals, who were not previously partners in Q. On December 31,
2000, Q had a total of 91 partners, and on no date in the year did Q
have more than 100 partners. Over the course of the year, however, Q had
101 partners. Therefore, Q must file its 2000 partnership return on
magnetic media.
Example 3. Partnership G is a general partnership with 100 partners
on January 1, 2000. There are no new partners added to G in 2000. One of
G's partners, A, is a partnership with 53 partners. A is one partner,
regardless of the number of partners A has. Therefore, G has 100
partners and is not required to file its 2000 partnership return on
magnetic media.
(f) Effective date. In general, this section applies to partnership
returns for taxable years ending on or after December 31, 2000. However,
electing large partnerships under section 775 and partnerships using
foreign addresses on their Series 1065 forms are not required to file
using magnetic media for taxable years ending before January 1, 2001.
[T.D. 8843, 64 FR 61503, Nov. 12, 1999]
Income Tax Returns
Sec. 301.6012-1 Persons required to make returns of income.
For provisions with respect to persons required to make returns of
income, see Secs. 1.6012-1 to 1.6012-4, inclusive, of this chapter
(Income Tax Regulations).
Sec. 301.6013-1 Joint returns of income tax by husband and wife.
For provisions with respect to joint returns of income tax by
husband and
[[Page 21]]
wife, see Secs. 1.6013-1 to 1.6013-7, inclusive, of this chapter (Income
Tax Regulations).
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7670, 45 FR 6932, Jan.
31, 1980]
Sec. 301.6014-1 Income tax return--tax not computed by taxpayer.
For provisions relating to the election not to show on an income tax
return the amount of tax due in connection therewith, see Secs. 1.6014-1
and 1.6014-2 of this chapter (Income Tax Regulations).
[T.D. 7102, 36 FR 5498, Mar. 24, 1971]
Sec. 301.6015-1 Declaration of estimated income tax by individuals.
For provisions relating to requirements of declarations of estimated
income tax by individuals, see Secs. 1.6015 (a)-1 through 1.6015 (j)-1
of this chapter (Income Tax Regulations).
[T.D. 7427, 41 FR 34033, Aug. 12, 1976]
Sec. 301.6016-1 Declarations of estimated income tax by corporations.
For provisions concerning the requirement of declarations of
estimated income tax by corporations, see Secs. 1.6016-1 to 1.6016-4,
inclusive, of this chapter (Income Tax Regulations).
Sec. 301.6017-1 Self-employment tax returns.
For provisions relating to the requirement of self-employment tax
returns, see Sec. 1.6017-1 of this chapter (Income Tax Regulations).
Estate and Gift Tax Returns
Sec. 301.6018-1 Estate tax returns.
For provisions relating to requirement of estate tax returns, see
Secs. 20.6018-1 to 20.6018-4, inclusive, of this chapter (Estate Tax
Regulations).
Sec. 301.6019-1 Gift tax returns.
For provisions relating to requirement of gift tax returns, see
Secs. 25.6019-1 to 25.6019-4, inclusive, of this chapter (Gift Tax
Regulations).
Miscellaneous Provisions
Sec. 301.6020-1 Returns prepared or executed by district directors or other internal revenue officers.
(a) Preparation of returns--(1) In general. If any person required
by the Code or by the regulations prescribed thereunder to make a return
fails to make such return, it may be prepared by the district director
or other authorized internal revenue officer or employee provided such
person consents to disclose all information necessary for the
preparation of such return. The return upon being signed by the person
required to make it shall be received by the district director as the
return of such person.
(2) Responsibility of person for whom return is prepared. A person
for whom a return is prepared in accordance with subparagraph (1) of
this paragraph shall for all legal purposes remain responsible for the
correctness of the return to the same extent as if the return had been
prepared by him.
(b) Execution of returns--(1) In general. If any person required by
any internal revenue law or by the regulations prescribed thereunder to
make a return (other than a declaration of estimated tax required under
section 6015 or 6016) fails to make such return at the time prescribed
therefor, or makes, willfully or otherwise, a false or fraudulent
return, the district director or other authorized internal revenue
officer or employee shall make such return from his own knowledge and
from such information as he can obtain through testimony or otherwise.
(2) Status of returns. Any return made in accordance with
subparagraph (1) of this paragraph and subscribed by the district
director or other authorized internal revenue officer or employee shall
be prima facie good and sufficient for all legal purposes.
(3) Deficiency procedures. For deficiency procedures in the case of
income, estate, and gift taxes, see sections 6211 to 6216, inclusive,
and Secs. 301.6211-1 to 301.6215-1, inclusive.
(c) Cross references. (1) For provisions that a return executed by a
district director or other authorized internal revenue officer or
employee will not start the running of the period of limitations
[[Page 22]]
on assessment and collection, see section 6501(b)(3) and paragraph (c)
of Sec. 301.6501(b)-1.
(2) For additions to the tax and additional amounts for failure to
file returns, see section 6651 and Sec. 301.6651-1, and section 6652 and
Sec. 301.6652-1, respectively.
(3) For additions to the tax for failure to pay tax, see section
6653 and Sec. 301.6653-1.
(4) For criminal penalties for willful failure to make returns, see
sections 7201, 7202, and 7203.
(5) For criminal penalties for willfully making false or fraudulent
returns, see sections 7206 and 7207.
(6) For authority to examine books and witnesses, see section 7602
and Sec. 301.7602-1.
Sec. 301.6021-1 Listing by district directors of taxable objects owned by nonresidents of internal revenue districts.
Whenever there are in any internal revenue district any articles
subject to tax, which are not owned or possessed by or under the care or
control of any person within such district, and of which no list has
been transmitted to the district director, as required by law or by
regulations prescribed pursuant to law, the district director, or other
authorized internal revenue officer or employee, shall enter the
premises where such articles are situated, shall make such inspection of
the articles as may be necessary, and shall make lists of the same
according to the forms prescribed. Such lists, being subscribed by the
district director or other authorized internal revenue officer or
employee, shall be sufficient lists of such articles for all purposes.
information returns
Information Concerning Persons Subject to Special Provisions
Sec. 301.6031(a)-1 Return of partnership income.
For provisions relating to the requirement of returns of partnership
income, see Sec. 1.6031(a)-1 of this chapter.
[T.D. 8841, 64 FR 61502, Nov. 12, 1999]
Sec. 301.6032-1 Returns of banks with respect to common trust funds.
For provisions relating to requirement of returns of banks with
respect to common trust funds, see Sec. 1.6032-1 of this chapter (Income
Tax Regulations).
Sec. 301.6033-1 Returns by exempt organizations.
For provisions relating to the requirement of returns by exempt
organizations, see Sec. 1.6033-1 of this chapter (Income Tax
Regulations).
Sec. 301.6034-1 Returns by trusts described in section 4947(a)(2) or claiming charitable or other deductions under section 642(c).
For provisions relating to the requirement of returns by trusts
described in section 4947(a)(2) or claiming charitable or other
deductions under section 642(c), see Sec. 1.6034-1 of this chapter
(Income Tax Regulations).
[T.D. 8026, 50 FR 20757, May 20, 1985]
Sec. 301.6035-1 Returns of officers, directors, and shareholders of foreign personal holding companies.
For provisions relating to the requirement of returns by officers,
directors, and shareholders of foreign personal holding companies, see
Secs. 1.6035-1 to 1.6035-3, inclusive, of this chapter (Income Tax
Regulations).
Sec. 301.6036-1 Notice required of executor or of receiver or other like fiduciary.
(a) Receivers and other like fiduciaries--(1) Exemption for
bankruptcy proceedings. (i) A bankruptcy trustee, debtor in possession
or other like fiduciary in a bankruptcy proceeding is not required by
this section to give notice of appointment, qualification or
authorization to act to the Secretary or his delegate. (However, see the
notice requirements under the Bankruptcy Rules.)
(ii) Paragraph (a)(1)(i) of this section is effective for
appointments, qualifications and authorizations to act made on or after
January 29, 1988. For appointments, qualifications and authorizations to
act made before the foregoing date, 26 CFR 301.6036-1 (a)(1) and (4)(i)
(revised as of April 1, 1986) apply.
[[Page 23]]
(2) Proceedings other than bankruptcy. A receiver in a receivership
proceeding or a similar fiduciary in any proceeding (including a
fiduciary in aid of foreclosure), designated by order of any court of
the United States or of any State or Territory or of the District of
Columbia as in control of all or substantially all the assets of a
debtor or other party to such proceeding shall, on, or within 10 days
of, the date of his appointment or authorization to act, give notice
thereof in writing to the district director for the internal revenue
district in which the debtor, or such other party, is or was required to
make returns. Moreover, any fiduciary in aid of foreclosure not
appointed by order of any such court, if he takes possession of all or
substantially all the assets of the debtor, shall, on, or within 10 days
of, the date of his taking possession, give notice thereof in writing to
such district director.
(3) Assignment for benefit of creditors. An assignee for the benefit
of a creditor or creditors shall, on, or within 10 days of, the date of
an assignment, give notice thereof in writing to the district director
for the internal revenue district in which the debtor is or was required
to make returns. For purposes of this subparagraph, an assignee for the
benefit of creditors shall be any person who, by authority of law, by
the order of any court, by oral or written agreement, or in any other
manner acquires control or possession of or title to all or
substantially all the assets of a debtor, and who under such acquisition
is authorized to use, reassign, sell, or in any manner dispose of such
assets so that the proceeds from the use, sale, or other disposition may
be paid to or may inure directly or indirectly to the benefit of a
creditor or creditors of such debtor.
(4) Contents of notice--(i) Proceedings other than bankruptcy. The
written notice required under paragraph (a)(2) of this section shall
contain:
(a) The name and address of the person making such notice and the
date of his appointment or of his taking possession of the assets of the
debtor or other person whose assets are controlled,
(b) The name, address, and, for notices filed after December 21,
1972, the taxpayer identification number of the debtor or other person
whose assets are controlled.
(c) In the case of a court proceeding:
(1) The name and location of the court in which the proceedings are
pending,
(2) The date on which such proceedings were instituted,
(3) The number under which such proceedings are docketed, and
(4) When possible, the date, time, and place of any hearing, meeting
of creditors, or other scheduled action with respect to such
proceedings.
(ii) Assignment for benefit of creditors. The written notice
required under subparagraph (3) of this paragraph shall contain:
(a) The name and address of, and the date the asset or assets were
assigned to, the assignee,
(b) The name, address, and, for notice filed after December 21,
1972, the taxpayer identification number of the debtor whose assets were
assigned.
(c) A brief description of the assets assigned,
(d) An explanation of the action expected to be taken with respect
to such assets, and
(e) When possible, the date, time, and place of any hearing, meeting
of creditors, sale, or other scheduled action with respect to such
assets.
(iii) The notice required by this section shall be sent to the
attention of the Chief, Special Procedures Staff, of the district office
to which it is required to be sent.
(b) Executors, administrators, and persons in possession of property
of decedent. For provisions relating to the requirement of filing, by an
executor, administrator, or person in possession of property of a
decedent, of a preliminary notice in the case of the estate of a
decedent dying before January 1, 1971, see Sec. 20.6036-1 of this
chapter (Estate Tax Regulations).
(c) Notice of fiduciary relationship. When a notice is required
under Sec. 301.6903-1 of a person acting in a fiduciary capacity and is
also required of such person under this section, notice given in
accordance with the provisions of this section shall be considered as
complying with both sections.
[[Page 24]]
(d) Suspension of period on assessment. For suspension of the
running of the period of limitations on the making of assessments from
the date a proceeding is instituted to a date 30 days after receipt of
notice from a fiduciary in any proceeding under the Bankruptcy Act or
from a receiver in any other court proceeding, see section 6872 and
Sec. 301.6872-1.
(e) Applicability. Except as provided in paragraph (a)(1)(ii) of
this section, the provisions of this section shall apply to those
persons referred to in this section whose appointments, authorizations,
or assignments occur on or after the date of publication of these
regulations in the Federal Register as a Treasury decision.
(f) Cross references. (1) For criminal penalty for willful failure
to supply information, see section 7203.
(2) For criminal penalties for willfully making false or fraudulent
statements, see sections 7206 and 7207.
(3) For time for performance of acts where the last day falls on a
Saturday, Sunday, or legal holiday, see section 7503 and Sec. 301.7503-
1.
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7218, 37 FR 24748, Nov.
21, 1972; T.D. 7238, 37 FR 28738, Dec. 29, 1972; T.D. 8172, 53 FR 2600,
Jan. 29, 1988]
Sec. 301.6037-1 Return of electing small business corporation.
For provisions relating to requirement of return of electing small
business corporation, see Sec. 1.6037-1 of this chapter (Income Tax
Regulations).
Sec. 301.6038-1 Information returns required of U.S. persons with respect to certain foreign corporations.
For provisions relating to information returns required of U.S.
persons with respect to certain foreign corporations, see Secs. 1.6038-1
and 1.6038-2 of this chapter (Income Tax Regulations).
Sec. 301.6039-1 Information returns and statements required in connection with certain options.
For provisions relating to information returns and statements
required in connection with certain options, see Secs. 1.6039-1 and
1.6039-2 of this chapter (Income Tax Regulations).
[T.D. 7275, 38 FR 11346, May 7, 1973]
Information Concerning Transactions With Other Persons
Sec. 301.6041-1 Returns of information regarding certain payments.
For provisions relating to the requirement of returns of information
regarding certain payments, see Secs. 1.6041-1 to 1.6041-6, inclusive,
of this chapter (Income Tax Regulations).
Sec. 301.6042-1 Returns of information regarding payments of dividends and corporate earnings and profits.
For provisions relating to the requirement of returns of information
regarding payments of dividends and corporate earnings and profits, see
Secs. 1.6042-1 to 1.6042-4, inclusive, of this chapter (Income Tax
Regulations).
Sec. 301.6043-1 Returns regarding liquidation, dissolution, termination, or contraction.
For provisions relating to the requirement of returns of information
regarding liquidations, dissolutions, terminations, or contracts, see
Secs. l.6043-1, 1.6043-2, and 1.6043-3 of this chapter (Income Tax
Regulations).
[T.D. 7563, 43 FR 40222, Sept. 11, 1978]
Sec. 301.6044-1 Returns of information regarding payments of patronage dividends.
For provisions relating to the requirement of returns of information
regarding payments of patronage dividends, see Secs. 1.6044-1 to 1.6044-
5, inclusive, of this chapter (Income Tax Regulations).
Sec. 301.6046-1 Returns as to organization or reorganization of foreign corporations and as to acquisitions of their stock.
For provisions relating to requirement of returns as to organization
or reorganization of foreign corporations and as to acquisitions of
their stock, see Secs. 1.6046-1 to 1.6046-3, inclusive, of this chapter.
(Income Tax Regulations.)
[[Page 25]]
Sec. 301.6047-1 Information relating to certain trusts and annuity and bond purchase plans.
For provisions relating to the requirement of returns of information
regarding certain trusts and annuity and bond purchase plans, see
Sec. 1.6047-1 of this chapter (Income Tax Regulations).
Sec. 301.6048-1 Returns as to creation of or transfers to certain foreign trusts.
For provisions relating to the requirement of returns as to creation
of or transfers to certain foreign trusts, see Sec. 16.3-1 of this
chapter (Temporary Regulations under the Revenue Act of 1962).
Sec. 301.6049-1 Returns regarding payments of interest.
For provisions relating to the requirement of returns regarding
payments of interest, see Secs. 1.6049-1 to 1.6049-3, inclusive, of this
chapter (Income Tax Regulations).
Sec. 301.6050A-1 Information returns regarding services performed by certain crewmen on fishing boats.
For provisions relating to the requirement of returns of information
regarding services performed by certain crewmen on fishing boats, see
Sec. 1.6050A-1 of this chapter (Income Tax Regulations) and
Sec. 301.6652-1 of this chapter (Regulations on Procedure and
Administration).
[T.D. 7716, 45 FR 57124, Aug. 27, 1980]
Sec. 301.6050M-1 Information returns relating to persons receiving contracts from certain Federal executive agencies.
For provisions relating to the requirements of returns of
information relating to persons receiving contracts from certain Federal
executive agencies, see Sec. 1.6050M-1 of this chapter (Income Tax
Regulations).
[T.D. 8275, 54 FR 50372, Dec. 6, 1989]
Information Regarding Wages Paid Employees
Sec. 301.6051-1 Receipts for employees.
For provisions relating to statements for employees regarding
remuneration paid during calendar year, see Sec. 31.6051-1 of this
chapter (Employment Tax Regulations).
Sec. 301.6052-1 Information returns and statements regarding payment of wages in the form of group-term life insurance.
For provisions relating to information returns and statements
required in connection with the payment of wages in the form of group-
term life insurance, see Secs. 1.6052-1 and 1.6052-2 of this chapter
(income tax regulations).
[T.D. 7275, 38 FR 11346, May 7, 1973]
Sec. 301.6057-1 Employee retirement benefit plans; identification of participant with deferred vested retirement benefit.
(a) Annual registration statement--(1) In general. Under section
6057(a), the plan administrator (within the meaning of section 414(g))
of an employee retirement benefit plan must file with the Internal
Revenue Service information relating to each plan participant who
separates from service covered by the plan and is entitled to a deferred
vested retirement benefit under the plan, but is not paid this
retirement benefit. Plans subject to this filing requirement are
described in subparagraph (3) of this paragraph. Subparagraph (4)
describes how the information is to be filed with the Internal Revenue
Service. In the case of a plan to which only one employer contributes,
the time for filing the information with respect to each separated
participant is described in subparagraph (5). In the case of a plan to
which more than one employer contributes the time for filing the
information with respect to a participant is described in paragraph
(b)(2) of this section. Paragraph (b) of this section also provides
other rules applicable only to plans to which more than one employer
contributes.
(2) Deferred vested retirement benefit. For purposes of this
section, a plan participant's deferred retirement benefit is considered
a vested benefit if it is vested under the terms of the plan at the
close of the plan year described in paragraph (a)(5) or (b)(4) of this
section (whichever is applicable) for which information relating to any
deferred
[[Page 26]]
vested retirement benefit of the participant must be filed. A
participant's deferred retirement benefit need not be a nonforfeitable
benefit within the meaning of section 411(a) for the filing requirements
described in this section to apply. Accordingly, information relating to
a participant's deferred vested retirement benefit must be filed as
required by this section notwithstanding that the benefit is subject to
forfeiture by reason of an event or condition occurring subsequent to
the close of the plan year described in paragraph (a)(5) or (b)(4) of
this section (whichever is applicable) for which information relating to
any deferred vested retirement benefit of the participant must be filed.
(3) Plans subject to filing requirement. The term ``employee
retirement benefit plan'' means a plan to which the vesting standards of
section 203 of part 2 of subtitle B of title I of the Employee
Retirement Income Security Act of 1974 (88 Stat. 854) apply for any day
in the plan year. (For purposes of this section, ``plan year'' means the
plan year as determined for purposes of the annual return required by
section 6058(a)). Accordingly, a plan need not be a qualified plan
within the meaning of section 401(a) to be subject to these filing
requirements. A plan to which more than one employer contributes must
file the report of deferred vested retirement benefits described in this
section, but see paragraph (b) of this section for special rules
applicable to such a plan. The filing requirements described in this
section and Sec. 301.6057-2 (relating to notification of change in plan
status) do not apply to a governmental or church plan described in
section 414 (d) or (e).
(4) Filing requirements. Information relating to the deferred vested
retirement benefit of a plan participant must be filed on schedule SSA
as an attachment to the Annual Return/Report of Employee Benefit Plan
(form 5500 series). Schedule SSA shall be filed on behalf of an employee
retirement benefit plan for each plan year for which information
relating to the deferred vested retirement benefit of a plan participant
is filed under paragraph (a)(5) or (b)(2) of this section. There shall
be filed on schedule SSA the name and social security number of the
participant, a description of the nature, form, and amount of the
deferred vested retirement benefit to which the participant is entitled,
and such other information as is required by section 6057(a) or schedule
SSA and the accompanying instructions. The form of the benefit reported
on schedule SSA shall be the normal form of benefit under the plan, or,
if the plan administrator (within the meaning of section 414(g))
considers it more appropriate, any other form of benefit.
(5) Time for reporting deferred vested retirement benefit--(i) In
general. In the case of a plan to which only one employer contributes,
information relating to the deferred vested retirement benefit of a plan
participant must be filed no later than on the schedule SSA filed for
the plan year following the plan year within which the participant
separates from service covered by the plan. Information relating to a
separated participant may, at the option of the plan administrator, be
reported earlier (that is, on the schedule SSA filed for the plan year
in which the participant separates from service covered by the plan).
For purposes of this paragraph a participant is not considered to
separate from service covered by the plan solely because the participant
incurs a break in service under the plan. In addition, for purposes of
this paragraph, in the case of a plan which uses the elapsed time method
described in Department of Labor regulations for crediting service for
benefit accrual purposes, a participant is considered to separate from
service covered by the plan on the date the participant severs from
service covered by the plan.
(ii) Exception. Notwithstanding subdivision (i), no information
relating to the deferred vested retirement benefit of a separated
participant is required to be filed on schedule SSA if, before the date
such schedule SSA is required to be filed (including any extension of
time for filing granted pursuant to section 6081), the participant (A)
is paid some or all of the deferred vested retirement benefit under the
plan, (B) returns to service covered by the plan, or (C) forfeits all of
the deferred vested retirement benefit under the plan.
[[Page 27]]
(b) Plans to which more than one employer contributes--(1)
Application. Section 6057 and this section apply to a plan to which more
than one employer contributes with the modifications set forth in this
paragraph. For purposes of section 6057 and this section, whether or not
more than one employer contributes to a plan shall be determined by the
number of employers who are required to contribute to the plan. Thus,
for example, this paragraph applies to plans maintained by more than one
employer which are collectively bargained as described in section
413(a), multiple-employer plans described in section 413(c) and the
regulations thereunder, multiemployer plans described in section 414(f),
and plans adopted by more than one employer of certain controlled and
common control groups described in section 414 (b) and (c).
(2) Time for reporting deferred vested retirement benefit--(i) In
general. In the case of a plan to which more than one employer
contributes, information relating to the deferred vested retirement
benefit of a plan participant must be filed no later than on the
schedule SSA filed for the plan year within which the participant
completes the second of two consecutive one-year breaks in service (as
defined in the plan for vesting percentage purposes) in service
computation periods (as defined in the plan for vesting percentage
purposes) which begin after December 31, 1974. At the option of the plan
administrator, information relating to a participant's deferred vested
retirement benefit may be filed earlier (that is, on the schedule SSA
filed for the plan year in which the participant incurs the first one-
year break in service or, in the case of a separated participant, on the
schedule SSA filed for the plan year in which the participant separates
from service).
(ii) Special rules--For purposes of this subparagraph (1)--
(A) For the definition of the term ``1-year break in service'' in
the case of a plan which uses the elapsed time method described in
Department of Labor Regulations for crediting service for vesting
percentage purposes, see Sec. 1.411(a)-6(c)(2).
(B) In the case of a plan which does not define the term ``1-year
break in service'' for vesting percentage purposes, a plan participant
shall be deemed to incur a 1-year break in service under the plan in any
plan year within which the participant does not complete more than 500
hours of service covered by the plan.
(iii) Transitional rule. Notwithstanding subdivision (i), if the
second consecutive 1-year break in service described in subdivision (i)
is incurred in a plan year beginning before January 1, 1978, information
relating to the participant's deferred vested retirement benefit is not
required to be filed earlier than on the schedule SSA filed for the
first plan year beginning after December 31, 1977.
(iv) Exception. Notwithstanding subdivision (i) or (iii) of this
subparagraph, no information relating to a participant's deferred vested
retirement benefit is required to be filed on schedule SSA if, before
the date such schedule SSA is required to be filed (including any
extension of time for filing granted pursuant to section 6081), the
participant (A) is paid some or all of the deferred vested retirement
benefit under the plan, (B) accrues additional retirement benefits under
the plan, or (C) forfeits all of the deferred vested retirement benefit
under the plan.
(3) Information relating to deferred vested retirement benefit--(i)
Incomplete records. Section 6057(a) and paragraph (a)(4) of this section
require the filing on schedule SSA of a description of the deferred
vested retirement benefit to which the participant is entitled. If the
plan administrator of a plan to which more than one employer contributes
maintains records of a participant's service covered by the plan which
are incomplete as of the close of the plan year with respect to which
the plan administrator files information relating to the participant on
schedule SSA, the plan administrator may elect to file the information
required by schedule SSA based only upon these incomplete records. The
plan administrator is not required, for purposes of completing schedule
SSA, to compile from sources other than such records a complete record
of a participant's years of service covered by the plan. Similarly, if
[[Page 28]]
retirement benefits under the plan are determined by taking into account
a participant's service with an employer which is not service covered by
the plan, but the plan administrator maintains records only with respect
to periods of service covered by the plan, the plan administrator may
complete schedule SSA taking into account only the participant's period
of service covered by the plan.
(ii) Inability to determine correct amount of participant's deferred
vested retirement benefit. If the amount of a participant's deferred
vested retirement benefit which is filed on schedule SSA is computed on
the basis of plan records maintained by the plan administrator which--
(A) Are incomplete with respect to the participant's service covered
by the plan (as described in subdivision (i)), or
(B) Fail to account for the participant's service not covered by the
plan which is relevant to a determination of the participant's deferred
vested retirement benefit under the plan (as described in subdivision
(i)),
then the plan administrator must indicate on schedule SSA that the
amount of the deferred vested retirement benefit shown therein may be
other than that to which the participant is actually entitled because
the amount is based upon incomplete records.
(iii) Inability to determine whether participant vested in deferred
retirement benefit. Where, as described in subdivision (i), information
to be reported on schedule SSA is to be based upon records which are
incomplete with respect to a participant's service covered by the plan
or which fail to take into account relevant service not covered by the
plan, the plan administrator may be unable to determine whether or not
the participant is vested in any deferred retirement benefit. If, in
view of information provided either by the incomplete records or the
plan participant, there is a significant likelihood that the plan
participant is vested in a deferred retirement benefit under the plan,
information relating to the participant must be filed on schedule SSA
with the notation that the participant may be entitled to a deferred
vested retirement benefit under the plan, but information relating to
the amount of the benefit may be omitted. This subdivision (iii) does
not apply in a case in which it can be determined from plan records
maintained by the plan administrator that the participant is vested in a
deferred retirement benefit. Subdivision (ii), however, may apply in
such a case.
(c) Voluntary filing--(1) In general. The plan administrator of an
employee retirement benefit plan described in paragraph (a)(3) of this
section, or any other employee retirement benefit plan (including a
governmental or church plan), may at its option, file on schedule SSA
information relating to the deferred vested retirement benefit of any
plan participant who separates at any time from service covered by the
plan, including plan participants who separate from service in plan
years beginning before 1976.
(2) Deleting previously filed information. If, after information
relating to the deferred vested retirement benefit of a plan participant
is filed on schedule SSA, the plan participant--
(i) Is paid some or all of the deferred vested retirement benefit
under the plan, or
(ii) Forfeits all of the deferred vested retirement benefit under
the plan, the plan administrator may, at its option, file on schedule
SSA (or such other form as may be provided for this purpose) the name
and social security number of the participant with the notation that
information previously filed relating to the participant's deferred
vested retirement benefit should be deleted.
(d) Filing incident to cessation of payment of benefits--(1) In
general. As described in this section, no information relating to the
deferred vested retirement benefit of a plan participant is required to
be filed on schedule SSA if before the date such schedule SSA is
required to be filed, some of the deferred vested retirement benefit is
paid to the participant, and information relating to a participant's
deferred vested retirement benefit which was previously filed on
schedule SSA may be deleted if the participant is paid some of the
deferred vested retirement benefit. If payment of the deferred vested
retirement benefit ceases before all of the benefit to which the
participant is
[[Page 29]]
entitled is paid to the participant, information relating to the
deferred vested retirement benefit to which the participant remains
entitled shall be filed on the schedule SSA filed for the plan year
following the last plan year within which a portion of the benefit is
paid to the participant.
(2) Exception. Notwithstanding subparagraph (1) of this paragraph,
no information relating to the deferred vested retirement benefit to
which the participant remains entitled is required to be filed on
schedule SSA if, before the date such schedule SSA is required to be
filed (including any extension of time for filing granted pursuant to
section 6081), the participant (i) returns to service covered by the
plan, (ii) accrues additional retirement benefits under the plan, or
(iii) forfeits the benefit under the plan.
(e) Individual statement to participant. The plan administrator of
an employee retirement benefit plan defined in paragraph (a)(3) of this
section must provide each participant with respect to whom information
is required to be filed on schedule SSA a statement describing the
deferred vested retirement benefit to which the participant is entitled.
The description provided the participant must include the information
filed with respect to the participant on schedule SSA. The statement is
to be delivered to the participant or forwarded to the participant's
last known address no later than the date on which any schedule SSA
reporting information with respect to the participant is required to be
filed (including any extension of time for filing granted pursuant to
section 6081).
(f) Penalties. For amounts imposed in the case of failure to file
the report of deferred vested retirement benefits required by section
6057(a) and paragraph (a) or (b) of this section, see section
6652(e)(1). For the penalty relating to a failure to provide the
participant the individual statement of deferred vested retirement
benefit required by section 6057(e) and paragraph (e) of this section,
see section 6690.
(g) Effective dates--(1) Plans to which only one employer
contributes. In the case of a plan to which only one employer
contributes, this section is effective for plan years beginning after
December 31, 1975, and with respect to a participant who separates from
service covered by the plan in plan years beginning after that date.
(2) Plans to which more than one employer contributes. In the case
of a plan to which more than one employer contributes, this section is
effective for plan years beginning after December 31, 1977, and with
respect to a participant who completes two consecutive 1-year breaks in
service under the plan in service computation periods beginning after
December 31, 1974.
[T.D. 7561, 43 FR 38004, Aug. 25, 1978]
Sec. 301.6057-2 Employee retirement benefit plans; notification of change in plan status.
(a) Change in plan status. The plan administrator (within the
meaning of section 414(g)) of an employee retirement benefit plan
defined in Sec. 301.6057-1(a)(3) (including a plan to which more than
one employer contributes, as described in Sec. 301.6057-1(b)(1)) must
notify the Internal Revenue Service of the following changes in plan
status--
(1) A change in the name of the plan.
(2) A change in the name or address of the plan administrator,
(3) The termination of the plan, or
(4) The merger or consolidation of the plan with another plan or the
division of the plan into two or more plans.
(b) Notification. A notification of a change in status described in
paragraph (a) of this section, must be filed on the Annual Return/Report
of Employee Benefit Plan (form 5500 series) for the plan year in which
the change in status occurred. The notification must be filed at the
time and place and in the manner prescribed in the form and any
accompanying instructions.
(c) Penalty. For amounts imposed in the case of failure to file a
notification of a change in plan status required by section 6057(b) and
this section, see section 6652(e)(2).
(d) Effective date. This section is effective for changes in plan
status occurring within plan years beginning after December 31, 1975.
[T.D. 7561, 43 FR 38006, Aug. 25, 1978]
[[Page 30]]
Sec. 301.6058-1 Information required in connection with certain plans of deferred compensation.
(a) Reporting of information--(1) Annual return. For each funded
plan of deferred compensation an annual return must be filed with the
Internal Revenue Service. The annual return of the plan is the
appropriate Annual Return/Report of Employee Benefit Plan (Form 5500
series) as determined under these forms. The annual period for the
annual return of the plan shall be either the plan year or the taxable
year of the employer maintaining the plan as determined under these
forms. These forms are hereinafter referred to as the ``forms prescribed
by section 6058(a).''
(2) Plans subject to requirements. For purposes of this section, the
term ``funded plan of deferred compensation'' means each pension,
annuity, stock bonus, profit-sharing, or other funded plan of deferred
compensation described in part 1 of subchapter D of chapter 1.
Accordingly, the term includes qualified plans under sections 401(a),
403(a), and 405(a); individual retirement accounts and annuities
described in sections 408(a) and 408(b); and custodial accounts under
section 403(b)(7). The term also includes: funded plans of deferred
compensation which are not qualified plans; funded governmental plans
and church plans, whether or not qualified (See sections 414(d) and
414(e)); and plans maintained outside the United States primarily for
nonresident aliens (as described in subsection (b)(4) of section 4 of
subtitle A of title I of the Employee Retirement Income Security Act of
1974; (88 Stat. 840)). The term does not include annuity contracts
described in section 403(b)(1) or individual retirement accounts (an
individual participant or surviving beneficiary in such account must
file under paragraph (d)(2) of this section) and bonds described in
sections 408(c) and 409.
(3) Required information. The information required to be furnished
on the forms prescribed by section 6058(a) shall include such
information concerning the qualification of the plan, the financial
condition of the trust, fund, or custodial or fiduciary account which is
a part of the plan, and the operation of the plan as shall be required
by the forms, applicable accompanying schedules and related instructions
applicable to the annual period.
(4) Time of filing. The forms prescribed by section 6058(a) shall be
filed in the manner and at the time as required by the forms and related
instructions applicable to the annual period.
(b) Who must file--(1) In general. The annual return required to be
filed under section 6058(a) and paragraph (a) of this section for the
annual period shall be filed by either the employer maintaining the plan
or the plan administrator (as defined in section 414(g)) of the plan for
that annual period. Whether the employer or plan administrator files
shall be determined under the forms prescribed by section 6058(a) and
related instructions applicable to the annual period. Nothing in these
forms shall preclude an employer from filing the return on behalf of the
plan administrator, or the plan administrator from filing on behalf of
the employer.
(2) Definition of employer. For purposes of subparagraph (1) of this
paragraph, the term ``employer'' includes a sole proprietor and a
partnership.
(c) Other rules applicable to annual returns--(1) Extensions of time
for filing. For rules relating to the extension of time for filing, see
section 6081 and the regulations thereunder and the instructions on the
forms prescribed by section 6058(a).
(2) Amended filing. Any form prescribed by this section may be filed
as an amendment to a form previously filed under this section with
respect to the same annual period pursuant to the instructions for such
forms.
(3) Additional information. In addition to the information otherwise
required to be furnished by this section, the district director may
require any further information that is considered necessary to
determine allowable deductions under section 404, qualification under
section 401, or the financial condition and operation of the plan.
(4) Records. Records substantiating all data and information
required by this section to be filed must be kept at all times available
for inspection by internal revenue officers at the principal
[[Page 31]]
office or place of business of the employer or plan administrator.
(5) Relief from filing. Notwithstanding paragraph (a) of this
section, the Commissioner may, in his discretion, relieve an employer,
or plan administrator, from reporting information on the forms
prescribed by section 6058(a). This discretion includes the ability to
relieve an employer, or plan administrator, from filing the applicable
form.
(d) Special rules for individual retirement arrangements--(1)
Application. This paragraph, in lieu of paragraph (a) of this section,
applies to an individual retirement account described in section 408(a)
and an individual retirement annuity described in section 408(b),
including such accounts and annuities for which a deduction is allowable
under section 220 (spousal individual retirement arrangements).
(2) General rule. For each taxable year beginning after December 31,
1974, every individual who during such taxable year--
(i) Establishes or maintains an individual retirement account
described in section 408(a) (including an individual who is a
participant in an individual retirement account described in section
408(c)).
(ii) Purchases or maintains an individual retirement annuity
described in section 408(b), or
(iii) Is a surviving beneficiary with respect to an account or
annuity referred to in this subparagraph which is in existence during
such taxable year, shall file Form 5329 (or any other form designated by
the Commissioner for this purpose), as an attachment to or part of the
Form 1040 filed by such individual for such taxable year, setting forth
in full the information required by that form and the accompanying
instructions.
(3) Special information returns. If an individual described in
subparagraph (2) of this paragraph is not required to file a Form 1040
for such taxable year, such individual shall file a Form 5329 (or any
other designated form) with the Internal Revenue Service by the 15th day
of the 4th month following the close of such individual's taxable year
setting forth in full the information required by that form and the
accompanying instructions.
(4) Relief from filing. The Commissioner may, in his discretion,
relieve an individual from filing the form prescribed by this paragraph.
(5) Retirement bonds. An individual who purchases, holds, or
maintains a retirement bond described in section 409 may be required to
file a return under other provisions of the Code.
(e) Actuarial statement in case of mergers, etc. For requirements
with respect to the filing of actuarial statements in the case of a
merger, consolidation, or transfer of assets or liabilities, see section
6058(b) and section 414(l) and the regulations thereunder.
(f) Effective dates--(1) Section 6058 (a) requirements. The rules
with respect to annual returns required under section 6058(a) (the rules
in this section, other than paragraph (e) thereof) are effective for
plan years beginning after September 2, 1974.
(2) Section 6058(b) requirements. The requirements of section
6058(b) relating to mergers, etc., and paragraph (e) of this section are
effective on September 2, 1974, with respect to events described in
section 6058(b) occurring on or after such date.
[T.D. 7551, 43 FR 29292, July 7, 1978]
Sec. 301.6059-1 Periodic report of actuary.
(a) In general. The actuarial report described in this section must
be filed on behalf on a defined benefit plan to which the minimum
funding standards of section 412 apply. The actuarial report must be
filed by the plan administrator (within the meaning of section 414(g))
on Schedule B as an attachment to the annual Return/Report of Employee
Benefit Plan (Form 5500 series). The instructions accompanying the Form
5500 series prescribe the place and date for filing Schedule B.
(b) Plan years for which report required. In the case of a plan in
existence on January 1, 1974, Schedule B must be filed for the first
plan year beginning after December 31, 1975, for which the minimum
funding standards apply to the plan, and for each plan year thereafter
for which the Schedule must be filed under the instructions accompanying
the Schedule and the Form 5500 series. In the case of a plan not in
existence on January 1, 1974,
[[Page 32]]
Schedule B must be filed for the first plan year beginning after
September 2, 1974, for which the minimum funding standards apply to the
plan, and for each plan year thereafter for which the Schedule must be
filed under the instructions accompanying the Schedule and the Form 5500
series. For rules relating to when a plan is considered to be in
existence, see Sec. 1.410(a)-2(c). For purposes of this section, ``plan
year'' means the plan year as determined for purposes of the minimum
funding standards.
(c) Contents of report. The actuarial report of a plan filed on
Schedule B must contain--
(1) The date of the actuarial valuation applicable to the plan year
for which the report is filed (see section 412(c)(9) for rules relating
to the frequency with which an actuarial valuation of the plan is
required to be made),
(2) A description of the funding method and actuarial assumptions
used to determine costs under the plan,
(3) A certification of the contribution necessary to reduce the
accumulated funding deficiency (as defined in section 412(a)) to zero,
(4) A statement by the enrolled actuary signing the report that to
the best of the actuary's knowledge the report is complete and accurate,
(5) A statement by the enrolled actuary signing the report that in
the actuary's opinion the actuarial assumptions used are in the
aggregate (i) reasonably related to the experience of the plan and to
reasonable expectations, and (ii) represent the actuary's best estimate
of anticipated experience under the plan,
(6) Such other information as may be necessary to fully and fairly
disclose the actuarial position of the plan, and
(7) Such other information as may be required by Schedule B or the
instructions accompanying the Schedule and the Form 5500 series.
(d) Certification by enrolled actuary. The actuarial report filed on
Schedule B must be signed by an enrolled actuary (within the meaning of
section 7701(a)(35)) or there may be attached to the report a statement
signed by the actuary that contains the statements described in
paragraph (c) (4) and (5) of this section.
An actuarial report filed for a plan year ending after January 25, 1982,
does not satisfy the requirements of this section if the actuary seeks
to materially qualify such statements. For this purpose, the following
are not considered to materially qualify a statement required by
paragraph (c) (4) or (5) of this section:
(1) A statement that the report is based in part on information
provided to the actuary by another person, that such information would
customarily not be verified by the actuary, and that the actuary has no
reason to doubt the substantial accuracy of the information (taking into
account the facts and circumstances that are known or reasonably should
be known to the actuary, including the contents of any other actuarial
report prepared by the actuary for the plan),
(2) A statement that the report is based in part on information
provided by another person, that the actuary believes such information
is or may be inaccurate or incomplete, but that the inaccuracies or
omissions are not material, the inaccuracies or omissions are not so
numerous or flagrant as to suggest that there may be material
inaccuracies, and that therefore the actuarial report is substantially
accurate and complete and fairly discloses the actuarial position of the
plan,
(3) A statement that the report reflects the requirement of a
regulation or ruling, and that any statement regarding the actuarial
position of the plan is made only in light of such requirement,
(4) A statement that the report reflects an interpretation of a
statute, regulation or ruling, that the actuary has no reason to doubt
the validity of that interpretation, and that any statement regarding
the actuarial position of the plan is made only in light of such
interpretation,
(5) A statement that in the opinion of the actuary the report fully
reflects the requirements of an applicable statute, but does not conform
to the requirements of a regulation or ruling promulgated under the
statute that the actuary believes is contrary to the statute, or
[[Page 33]]
(6) A statement furnished to comply with the requirements of
paragraph (c)(6) of this section.
A statement otherwise described in a subparagraph of this paragraph (d)
shall not be considered to satisfy the requirements of such subparagraph
unless the statement identifies, with particularity, that matter to
which the statement relates and the facts and circumstances surrounding
the statement. In addition, a statement otherwise described in
subparagraph (5) of this paragraph (d) shall not be considered to
satisfy the requirements of that subparagraph unless the statement
indicates whether an accumulated funding deficiency or a contribution
that is not wholly deductible may result if the actuary's belief is
determined to be incorrect.
(e) Relief from filing. Notwithstanding paragraph (a) of this
section, the Commissioner may, in the Commissioner's discretion, relieve
a plan administrator from filing Schedule B or from reporting
information required by Schedule B or paragraph (c) of this section.
(f) Penalty. For the penalty imposed in the case of a failure to
file the actuarial report required by this section, see section 6692 and
Sec. 301.6692-1.
(Secs. 6059 and 7805 of the Internal Revenue Code of 1954 (88 Stat. 947,
68A Stat. 917; 26 U.S.C. 6059, 7805))
[T.D. 7798, 46 FR 57483, Nov. 24, 1981; 46 FR 60435, Dec. 10, 1981]
signing and verifying of returns and other documents
Sec. 301.6061-1 Signing of returns and other documents.
(a) In general. For provisions concerning the signing of returns and
other documents, see the regulations relating to the particular tax.
(b) Method of signing. The Secretary may prescribe in forms,
instructions, or other appropriate guidance the method of signing any
return, statement, or other document required to be made under any
provision of the internal revenue laws or regulations.
(c) Effective dates. The rule in paragraph (a) is effective December
12, 1996. The rule in paragraph (b) is effective on July 21, 1995.
[T.D. 8689, 61 FR 65320, Dec. 12, 1996]
Sec. 301.6062-1 Signing of corporation returns.
For provisions relating to the signing of corporation income tax
returns, see Sec. 1.6062-1 of this chapter (Income Tax Regulations).
Sec. 301.6063-1 Signing of partnership returns.
For provisions relating to the signing of returns of partnership
income, see Sec. 1.6063-1 of this chapter (Income Tax Regulations).
Sec. 301.6064-1 Signature presumed authentic.
An individual's name signed to a return, statement, or other
document shall be prima facie evidence for all purposes that the return,
statement, or other document was actually signed by him.
Sec. 301.6065-1 Verification of returns.
For provisions concerning the verification of returns and other
documents, see the regulations relating to the particular tax.
time for filing returns and other documents
Sec. 301.6071-1 Time for filing returns and other documents.
For provisions concerning the time for filing returns and other
documents, see the regulations relating to the particular tax.
Sec. 301.6072-1 Time for filing income tax returns.
For provisions relating to time for filing income tax returns, see
Secs. 1.6072-1 to 1.6072-4, inclusive, of this chapter (Income Tax
Regulations).
Sec. 301.6073-1 Time for filing declarations of estimated income tax by individuals.
For provisions relating to time for filing declarations of estimated
income tax by individuals, see Secs. 1.6073-1 to 1.6073-4, inclusive, of
this chapter (Income Tax Regulations).
[[Page 34]]
Sec. 301.6074-1 Time for filing declarations of estimated income tax by corporations.
For provisions relating to time for filing declarations of estimated
income tax by corporations, see Secs. 1.6074-1 to 1.6074-3, inclusive,
of this chapter (Income Tax Regulations).
Sec. 301.6075-1 Time for filing estate and gift tax returns.
For provisions relating to time for filing estate tax returns and
gift tax returns, see Sec. 20.6075-1 of this chapter (Estate Tax
Regulations) and Sec. 25.6075-1 of this chapter (Gift Tax Regulations),
respectively.
extension of time for filing returns
Sec. 301.6081-1 Extension of time for filing returns.
For provisions concerning extensions of time for filing returns or
other documents, see the regulations relating to the particular tax.
place for filing returns or other documents
Sec. 301.6091-1 Place for filing returns and other documents.
(a) General rule. For provisions concerning the place for filing
returns, including hand-carried returns, see the regulations relating to
the particular tax. Except as provided in paragraph (b) of this section,
for provisions concerning the place for filing documents other than
returns, see the regulations relating to the particular tax.
(b) Exception for hand-carried documents other than returns.
Notwithstanding any other provisions of this chapter--
(1) Persons other than corporations. If a document, other than a
return, of a person (other than a corporation) is hand carried, and if
the document is otherwise required to be filed with a service center,
such document may be filed with the district director (or with any
person assigned the administrative supervision of an area, zone or local
office constituting a permanent post of duty within the internal revenue
district of such director) for the internal revenue district in which is
located the legal residence or principal place of business of such
person, or, in the case of an estate, the internal revenue district in
which was the domicile of the decedent at the time of his death. A
document may also be filed by hand carrying such document to the
appropriate service center, or, in the case of a document required to be
filed (i) with the Office of International Operations, by hand carrying
to such Office, or (ii) with the office of the assistant regional
commissioner (alcohol and tobacco tax) by hand carrying to such office.
(2) Corporations. If a document, other than a return, of a
corporation is hand carried, and if the document is otherwise required
to be filed with a service center, such document may be filed with the
district director (or with any person assigned the administrative
supervision of an area, zone or local office constituting a permanent
post of duty within the internal revenue district of such director) for
the internal revenue district in which is located the principal place of
business or principal office or agency of the corporation. A document
may also be filed by hand carrying such document to the appropriate
service center, or, in the case of a document required to be filed (i)
with the Office of International Operations, by hand carrying to such
Office, or (ii) with the office of the assistant regional commissioner
(alcohol and tobacco tax) by hand carrying to such office.
(c) Definition of hand carried. For purposes of this section and
section 6091(b)(4) and the regulations issued thereunder, a return or
document will be considered to be hand carried if it is brought to the
district director by the person required to file the return or other
document, or by his agent. Examples of persons who will be considered to
be agents, for purposes of the preceding sentence, are: Members of the
taxpayer's family, an employee of the taxpayer, the taxpayer's attorney,
accountant, or tax advisor, and messengers employed by the taxpayer. A
return or document will not be considered to be hand carried if it is
sent to
[[Page 35]]
the Internal Revenue Service through the U.S. Mail.
[T.D. 6950, 33 FR 5359, Apr. 4, 1968, as amended by T.D. 7008, 34 FR
3673, Mar. 1, 1969; T.D. 7012, 34 FR 7697, May 15, 1969; T.D. 7188, 37
FR 12794, June 29, 1972; T.D. 7238, 37 FR 28739, Dec. 29, 1972; T.D.
ATF-33, 41 FR 44038, Oct. 6, 1976; T.D. 7495, 42 FR 33727, July 1, 1977]
301.6096-1 Designation by individuals for taxable years beginning after December 31, 1972.
(a) In general. Every individual (other than a nonresident alien)
whose income tax liability, as defined in paragraph (b) of this section,
is one dollar or more may, at his option, designate that one dollar
shall be paid over to the Presidential Election Campaign Fund, in
accordance with the provisions of section 9006. In the case of a joint
return of a husband and wife, each spouse may designate that one dollar
be paid to the fund as provided in this paragraph only if the joint
income tax liability of the husband and wife is two dollars or more.
(b) Income tax liability. For purposes of paragraph (a) of this
section, the income tax liability of an individual for any taxable year
is the amount of the tax imposed by chapter 1 on such individual for the
taxable year (as shown on his or her return) reduced by the sum of the
credits (as shown on his or her return) allowable under sections 33, 37,
38, 40, 41, 42, 44, and 44A.
(c) Manner and time of designation. (1) A designation under
paragraph (a) of this section may be made with respect to any taxable
year at the time of the filing of the return of the tax imposed by
chapter 1 for such taxable year, and shall be made either on the first
page of the return or on the page bearing the taxpayer's signature, in
accordance with the instructions applicable thereto.
(2) With respect to any taxable year beginning after December 31,
1972 for which no designation was made under paragraph (c)(1) of this
section, a designation may be made on the form furnished by the Internal
Revenue Service for such purpose, filed within 20 and one half months
after the due date for the original return for such taxable year. In the
case of a joint return where neither spouse made a designation or where
only one spouse made a designation, a designation may be made, as
provided in this subparagraph, by the spouse or spouses who had not
previously made a designation.
(3) A designation once made, whether by an original return or
otherwise, may not be revoked.
(d) Effective date. This section shall apply to taxable years
beginning after December 31, 1972.
[T.D. 7304, 39 FR 4476, Feb. 4, 1974, as amended by T.D. 7643, 44 FR
50338, Aug. 28, 1979]
Sec. 301.6096-2 Designation by individuals for taxable years ending on or after December 31, 1972 and beginning before January 1, 1973.
(a) In general. (1) For taxable years ending on or after December
31, 1972 and beginning before January 1, 1973, every individual (other
than a non-resident alien) whose income tax liability, as defined in
paragraph (b) of this section, is one dollar or more, may, at his
option, designate that one dollar shall be paid over to the Presidential
Election Campaign Fund, referred to in Sec. 301.6096-1 (a). Where in
accordance with prior law, such a designation was made for the account
of any candidate of any specified political party, or for a general
account for all candidates for election to the offices of President and
Vice President of the United States, such a designation shall be treated
solely as a designation to such fund.
(2) In the case of a joint return of a husband and wife, each spouse
may designate that one dollar be paid to the fund as provided in
paragraph (a)(1) of this section only if the joint income tax liability
of the husband and wife is two dollars or more.
(b) Income tax liability. For purposes of paragraph (a) of this
section, the income tax liability of an individual for any taxable year
is the amount of the tax imposed by chapter 1 on such individual for
such taxable year (as shown on his return), reduced by the sum of the
credits (as shown on his return).
(c) Manner and time of designation. (1) A designation under
paragraph (a) of this section may be made with respect to any such
taxable year at the time of the filing of the return of the tax imposed
by chapter 1 for such taxable year. If such designation is made at the
[[Page 36]]
time of filing the original return for such year, it shall be made by
the individual on the form furnished by the Internal Revenue Service for
such purpose in accordance with the instructions applicable thereto.
(2) With respect to any taxable year ending on or after December 31,
1972 and beginning before January 1, 1973, for which no designation was
made under paragraph (c)(1) of this section, a designation may be made
on the form furnished by the Internal Revenue Service for such purpose,
filed within 20 and one half months after the due date for the original
return for such taxable year. In the case of a joint return where
neither spouse made a designation or where only one spouse made a
designation, a designation may be made, as provided in this
subparagraph, by the spouse or spouses who had not previously made a
designation.
(3) A designation once made, whether by an original return or
otherwise, may not be revoked.
[T.D. 7304, 39 FR 4476, Feb. 4, 1974]
miscellaneous provisions
Sec. 301.6101-1 Period covered by returns or other documents.
For provisions concerning the period covered by returns or other
documents, see the regulations relating to the particular tax.
Sec. 301.6102-1 Computations on returns or other documents.
(a) Amounts shown on forms. To the extent permitted by any internal
revenue form or instructions prescribed for use with respect to any
internal revenue return, declaration, statement, other document, or
supporting schedules, any amount required to be reported on such form
shall be entered at the nearest whole dollar amount. The extent to
which, and the conditions under which, such whole dollar amounts shall
be entered on any form will be set forth in the instructions issued with
respect to such form. For the purpose of the computation to the nearest
dollar, a fractional part of a dollar shall be disregarded unless it
amounts to one-half dollar or more, in which case the amount (determined
without regard to the fractional part of a dollar) shall be increased by
$1. The following illustrates the application of this paragraph:
------------------------------------------------------------------------
To be
Exact amount reported
as--
------------------------------------------------------------------------
$18.49...................................................... $18
$18.50...................................................... 19
$18.51...................................................... 19
------------------------------------------------------------------------
(b) Election not to use whole dollar amounts--(1) Method of
election. Where any internal revenue form, or the instructions issued
with respect to such form, provide that whole dollar amounts shall be
reported, any person making a return, declaration, statement, or other
document on such form may elect not to use whole dollar amounts by
reporting thereon all amounts in full, including cents.
(2) Time of election. The election not to use whole dollar amounts
must be made at the time of filing the return, declaration, statement,
or other document. Such election may not be revoked after the time
prescribed for filing such return, declaration, statement, or other
document, including extensions of time granted for such filing. Such
election may be made on any return, declaration, statement, or other
document which is filed after the time prescribed for filing (including
extensions of time), and such an election is irrevocable.
(3) Effect of election. The taxpayer's election shall be binding
only on the return, declaration, statement, or other document filed for
a taxable year or period, and a new election may be made on the return,
declaration, statement, or other document filed for a subsequent taxable
year or period. An election by either a husband or a wife not to report
whole dollar amounts on a separate income tax return shall be binding on
any subsequent joint return filed under the provisions of section
6013(b).
(4) Fractional part of a cent. For treatment of the fractional part
of a cent in the payment of taxes, see section 6313 and Sec. 301.6313-1.
(c) Inapplicability to computation of amount. The provisions of
paragraph (a) of this section apply only to amounts required to be
reported on a return,
[[Page 37]]
declaration, statement, or other document. They do not apply to items
which must be taken into account in making the computations necessary to
determine such amounts. For example, each item of receipt must be taken
into account at its exact amount, including cents, in computing the
amount of total receipts required to be reported on an income tax return
or supporting schedule. It is the amount of total receipts, so computed,
which is to be reported at the nearest whole dollar on the return or
supporting schedule.
(d) Effect on accounting method. Section 6102 and this section have
no effect on any authorized accounting method.
Sec. 301.6103(a)-1 Disclosures after December 31, 1976, by officers and
employees of Federal agencies of returns and return information (including
taxpayer
return information) disclosed to such officers and employees
by the Internal Revenue Service before January 1, 1977, for a
purpose not involving tax administration.
(a) General rule. Except as provided by paragraph (b) of this
section, a return or return information (including taxpayer return
information), as defined in section 6103(b) (1), (2), and (3) of the
Internal Revenue Code, disclosed by the Internal Revenue Service before
January 1, 1977, to an officer or employee of a Federal agency (as
defined in section 6103(b)(9)) for a purpose not involving tax
administration (as defined in section 6103(b)(4)) pursuant to the
authority of section 6103 (or any order of the President under section
6103 or rules and regulations thereunder prescribed by the Secretary or
his delegate and approved by the President) before amendment of such
section by section 1202 of the Tax Reform Act of 1976 (Pub. L. 94-455,
90 Stat. 1667) may be disclosed by, or on behalf of, such officer,
employee, or agency after December 31, 1976, for any purpose authorized
by such section (or such order or rules and regulations) before such
amendment.
(b) Exception. Notwithstanding the provisions of paragraph (a) of
this section, a return or return information (including taxpayer return
information) disclosed before January 1, 1977, by the Service to an
officer or employee of a Federal agency for a purpose unrelated to tax
administration as described in paragraph (a) may, after December 31,
1976, be disclosed by, or on behalf of, such agency, officer, or
employee in an administrative or judicial proceeding only if such
proceeding is one described in section 6103(i)(4) of the Code and if the
requirements of section 6103(i)(4) have first been met.
(Secs. 6103 and 7805 of the Internal Revenue Code of 1954 (90 Stat.
1667, 68A Stat. 917; 26 U.S.C. 6103 and 7805))
[T.D. 7723, 45 FR 65566, Oct. 3, 1980]
Sec. 301.6103(a)-2 Disclosures after December 31, 1976, by attorneys of the
Department of Justice and officers and employees of the Office of the Chief
Counsel
for the Internal Revenue Service of returns and return
information (including taxpayer return information) disclosed
to such attorneys, officers, and employees by the Service
before January 1, 1977, for a purpose involving tax
administration.
(a) General rule. Except as provided by paragraph (b) of this
section and subject to the requirements of this paragraph, a return or
return information (including taxpayer return information), as defined
in section 6103(b) (1), (2), and (3), of the Internal Revenue Code
disclosed by the Internal Revenue Service before January 1, 1977, to an
attorney of the Department of Justice (including a United States
attorney) or to an officer or employee of the Office of the Chief
Counsel for the Service for a purpose involving tax administration (as
defined in section 6103(b)(4)) pursuant to the authority of section 6103
(or any order of the President under section 6103 or rules and
regulations thereunder prescribed by the Secretary or his delegate and
approved by the President) before amendment of such section by section
1202 of the Tax Reform Act of 1976 (Pub. L. 94-455, 90 Stat. 1667) may
be disclosed by, or on behalf of, such attorney, officer, or employee
after December 31, 1976, for any purpose authorized by such section (or
such order or rules and regulations) before such amendment.
(b) Exception. Notwithstanding the provisions of paragraph (a) of
this section, a return or return information
[[Page 38]]
(including taxpayer return information) disclosed before January 1,
1977, by the Service to an attorney of the Department of Justice or to
an officer or employee of the Office of the Chief Counsel for the
Service for a purpose related to tax administration as described in
paragraph (a) may, after December 31, 1976, be disclosed by, or on
behalf of, such attorney, officer, or employee in an administrative or
judicial proceeding only if such proceeding is one described in section
6103(h)(4) of the Code and if the requirements of section 6103 (h)(4)
have first been met.
(Secs. 6103 and 7805 of the Internal Revenue Code of 1954 (90 Stat.
1667, 68A Stat. 917; 26 U.S.C. 6103 and 7805))
[T.D. 7723, 45 FR 65567, Oct. 3, 1980]
Sec. 301.6103(c)-1T Disclosure of returns and return information to designee of taxpayer.
(a) Overview. Subject to such requirements and conditions as the
Secretary of the Treasury may prescribe by regulation, section 6103(c)
of the Internal Revenue Code authorizes the Internal Revenue Service to
disclose a taxpayer's return or return information to such person or
persons as the taxpayer may designate in a request for or consent to
such disclosure, or to any other person at the taxpayer's request to the
extent necessary to comply with the taxpayer's request to such other
person for information or assistance. This regulation contains the
requirements that must be met before, and the conditions under which,
the Internal Revenue Service may make such disclosures. Paragraph (b) of
this section provides the requirements that are generally applicable to
designate a third party to receive the taxpayer's returns and return
information. Paragraph (c) of this section provides requirements under
which the Internal Revenue Service may disclose information in
connection with a taxpayer's written or nonwritten request for a third
party to provide information or assistance with regard to a tax matter,
for example, a Congressional inquiry. Paragraph (d) of this section
provides the parameters for disclosure consents connected with
electronic return filing programs and combined Federal State filing.
Finally, paragraph (e) provides definitions and general rules related to
requests for or consents to disclosure.
(b) Disclosure of returns and return information to person or
persons designated in a written request or consent--(1) General
requirements. Pursuant to section 6103(c) of the Internal Revenue Code,
the Internal Revenue Service (or an agent or contractor of the Internal
Revenue Service) may disclose a taxpayer's return or return information
to such person or persons as the taxpayer may designate in a request for
or consent to such disclosure. A request for or consent to disclosure
under this paragraph (b) must be in the form of a separate written
document pertaining solely to the authorized disclosure. (For the
meaning of separate written document, see paragraph (e)(1) of this
section.) The separate written document must be signed (see paragraph
(e)(2) of this section) and dated by the taxpayer who filed the return
or to whom the return information relates. The taxpayer must also
indicate in the written document--
(i) The taxpayer's taxpayer identity information described in
section 6103(b)(6);
(ii) The identity of the person or persons to whom the disclosure is
to be made;
(iii) The type of return (or specified portion of the return) or
return information (and the particular data) that is to be disclosed;
and
(iv) The taxable year or years covered by the return or return
information.
(2) Requirement that request or consent be received within sixty
days of when signed and dated. The disclosure of a return or return
information authorized by a written request for or written consent to
the disclosure shall not be made unless the request or consent is
received by the Internal Revenue Service (or an agent or contractor of
the Internal Revenue Service) within 60 days following the date upon
which the request or consent was signed and dated by the taxpayer.
(c) Disclosure of returns and return information to designee of
taxpayer to comply with a taxpayer's request for information or
assistance. Where a taxpayer makes a written or nonwritten request,
[[Page 39]]
directly to another person or to the Internal Revenue Service, that such
other person (for example, a member of Congress, friend, or relative of
the taxpayer) provide information or assistance relating to the
taxpayer's return or to a transaction or other contact between the
taxpayer and the Internal Revenue Service, the Internal Revenue Service
(or an agent or contractor of the Internal Revenue Service or a Federal
government agency performing a Federal tax administration function) may
disclose returns or return information to such other person under the
circumstances set forth in paragraphs (c) (1) through (3) of this
section.
(1) Written request for information or assistance. (i) The
taxpayer's request for information or assistance may be in the form of a
letter or other written document, which must be signed (see paragraph
(e)(2) of this section) and dated by the taxpayer. The taxpayer must
also indicate in the written request--
(A) The taxpayer's taxpayer identity information described in
section 6103(b)(6);
(B) The identity of the person or persons to whom disclosure is to
be made; and
(C) Sufficient facts underlying the request for information or
assistance to enable the Internal Revenue Service to determine the
nature and extent of the information or assistance requested and the
returns or return information to be disclosed in order to comply with
the taxpayer's request.
(ii) A person who receives a copy of a taxpayer's written request
for information or assistance but who is not the addressee of the
request, such as a member of Congress who is provided with a courtesy
copy of a taxpayer's letter to another member of Congress or to the
Internal Revenue Service, cannot receive returns or return information
under paragraph (c)(1) of this section.
(2) Nonwritten request or consent. (i) A request for information or
assistance may also be nonwritten. Disclosure of returns and return
information to a designee pursuant to a taxpayer's nonwritten request
will be made only after the Internal Revenue Service has--
(A) Obtained from the taxpayer sufficient facts underlying the
request for information or assistance to enable the Internal Revenue
Service to determine the nature and extent of the information or
assistance requested and the return or return information to be
disclosed in order to comply with the taxpayer's request;
(B) Confirmed the identity of the taxpayer and the designee; and
(C) Confirmed the date, the nature, and the extent of the
information or assistance requested.
(ii) Examples of disclosures pursuant to nonwritten requests for
information or assistance under this paragraph (c)(2) include, but are
not limited to, disclosures to a friend, relative, or other person whom
the taxpayer brings to an interview or meeting with Internal Revenue
Service officials, or disclosures to a person whom the taxpayer wishes
to involve in a telephone conversation with Internal Revenue Service
officials.
(3) Rules applicable to written and nonwritten requests for
information or assistance. A return or return information will be
disclosed to the taxpayer's designee as provided by this paragraph only
to the extent considered necessary by the Internal Revenue Service to
comply with the taxpayer's request or consent. Such disclosures shall
not be made unless the request or consent is received by the Internal
Revenue Service, its agent or contractor, or a Federal government agency
performing a Federal tax administration function in connection with a
request for advice or assistance relating to such function. This
paragraph (c) does not apply to disclosures to a taxpayer's
representative in connection with practice before the Internal Revenue
Service (as defined in Treasury Department Circular No. 230). For
disclosures in these cases, see section 6103(e)(6) and Secs. 601.501
through 601.508 of this chapter.
(d) Acknowledgments of electronically filed returns and other
documents; combined filing programs with State tax agencies--(1)
Acknowledgment of, and notices regarding, electronically filed returns
and other documents. When a taxpayer files returns or other documents or
information with the Internal Revenue Service electronically, the
taxpayer
[[Page 40]]
may consent to the disclosure of return information to the transmitter
or other third party, such as the taxpayer's financial institution,
necessary to acknowledge that the electronic transmission was received
and either accepted or rejected by the Internal Revenue Service, the
reason for any rejection, and such other information as the Internal
Revenue Service determines is necessary to the operation of the
electronic filing program. The consent must inform the taxpayer of the
return information that will be transmitted and to whom disclosure will
be made. The requirements of paragraphs (b) and (c) of this section do
not apply to a consent under this paragraph (d)(1).
(2) Combined return filing programs with State tax agencies. (i) A
taxpayer's participation in a combined return filing program between the
Internal Revenue Service and a State agency, body, or commission (State
agency) described in section 6103(d)(1) constitutes a consent to the
disclosure by the Internal Revenue Service, to the State agency, of
taxpayer identity information, signature, and items of common data
contained on such return. For purposes of this paragraph, common data
means information reflected on the Federal return required by State law
to be attached to or included on the State return. Instructions
accompanying the forms or published procedures involved in such program
must indicate that by participating in the program, the taxpayer is
consenting to the Internal Revenue Service's disclosure to the State
agency of the taxpayer identity information, signature, and items of
common data, and that such information will be treated by the State
agency as if it had been directly filed with the State agency. Such
instructions or procedures must also describe any verification that
takes place before the taxpayer identity information, signature and
common data is transmitted by the Internal Revenue Service to the State
agency.
(ii) No disclosures may be made under this paragraph (d)(2) unless
there are provisions of State law protecting the confidentiality of such
items of common data.
(e) Definitions and rules applicable to this section--(1) Separate
written document. (i) For the purposes of paragraph (b) of this section,
separate written document means--
(A) One side of a standard (8\1/2\ by 11 or
larger) sheet of paper, which may be included as part of a larger
document;
(B) Text appearing on a single computer screen containing all the
elements described in paragraph (b)(1) of this section, which can be
signed (see paragraph (e)(2) of this section) and dated by the taxpayer,
and which can be reproduced, if necessary; or
(C) A consent on the record in an administrative or judicial
proceeding, or a transcript of such proceeding recording such consent,
containing the information required under paragraph (b)(1) of this
section.
(ii) A provision included in a taxpayer's application for a loan or
other benefit authorizing the grantor of the loan or other benefit to
obtain any financial information, including returns or return
information, from any source as the grantor may request for purposes of
verifying information supplied on the application, does not meet the
requirements of paragraph (b)(1) of this section because the provision
is not a separate written document relating solely to the disclosure of
returns and return information. In addition, the provision does not
contain the other information specified in paragraph (b)(1) of this
section.
(2) Method of signing. A request for or consent to disclosure may be
signed by any method of signing the Secretary of the Treasury has
prescribed pursuant to Sec. 301.6061-1(b) in forms, instructions, or
other appropriate guidance.
(3) Permissible designees and public forums. Permissible designees
under this section include individuals; trusts; estates; corporations;
partnerships; Federal, State, local and foreign government agencies or
subunits of such agencies; or the general public. When disclosures are
to be made in a public forum, such as in a courtroom or congressional
hearing, the request for or consent to disclosure must describe the
circumstances surrounding the public disclosure, e.g., congressional
hearing, judicial proceeding, media, and the date or dates of the
disclosure.
[[Page 41]]
(4) Authority to execute a request for or consent to disclosure. Any
person who may obtain returns under section 6103(e)(1) through (5),
except section 6103(e)(1)(D)(iii), may execute a request for or consent
to disclose a return or return information to third parties. For
taxpayers that are legal entities, such as corporations and municipal
bond issuers, any officer of the entity with authority under applicable
State law to legally bind the entity may execute a request for or
consent to disclosure. A person described in section 6103(e)(6) (a
taxpayer's representative or individual holding a power of attorney) may
not execute a request for or consent to disclosure unless the
designation of representation or power of attorney specifically
delegates such authority. A designee pursuant to this section does not
have authority to execute a request for or consent to disclosure
permitting the Internal Revenue Service to disclose returns or return
information to another person.
(5) No disclosure of return information if impairment. A disclosure
of return information shall not be made under this section if the
Internal Revenue Service determines that the disclosure would seriously
impair Federal tax administration (as defined in section 6103(b)(4) of
the Internal Revenue Code).
(f) Effective date. This section is applicable on January 11, 2001
through January 12, 2004.
[T.D. 8935, 66 FR 2264, Jan. 11, 2001]
Sec. 301.6103(h)(2)-1 Disclosure of returns and return information (including
taxpayer return information) to and by officers and employees of the Department
of Justice for use in Federal grand jury proceeding, or in
preparation for proceeding or investigation, involving tax
administration.
(a) Disclosure of returns and return information (including taxpayer
return information) to and by officers and employees of the Department
of Justice. (1) Returns and return information (including taxpayer
return information), as defined in section 6103(b) (1), (2), and (3) of
the Internal Revenue Code, shall, to the extent provided by section
6103(h)(2) (A), (B), and (C) and subject to the requirements of section
6103(h)(3), be open to inspection by or disclosure to officers and
employees of the Department of Justice (including United States
attorneys) personally and directly engaged in, and for their necessary
use in, any Federal grand jury proceeding, or preparation for any
proceeding (or for their necessary use in an investigation which may
result in such a proceeding) before a Federal grand jury or any Federal
or State court, in a matter involving tax administration (as defined in
section 6103(b)(4)), including any such proceeding (or any such
investigation) also involving the enforcement of a related Federal
criminal statute which has been referred by the Secretary to the
Department of Justice.
(2) Returns and return information (including taxpayer return
information) inspected by or disclosed to officers and employees of the
Department of Justice as provided in paragraph (a)(1) of this section
may also be used by such officers and employees or disclosed by them to
other officers and employees (including United States attorneys and
supervisory personnel, such as Section Chiefs, Deputy Assistant
Attorneys General, Assistant Attorneys General, the Deputy Attorney
General, and the Attorney General), of the Department of Justice where
necessary--
(i) In connection with any Federal grand jury proceeding, or
preparation for any proceeding (or with an investigation which may
result in such a proceeding), described in paragraph (a)(1), or
(ii) In connection with any Federal grand jury proceeding, or
preparation for any proceeding (or with an investigation which may
result in such a proceeding), described in paragraph (a)(1) which also
involves enforcement of a specific Federal criminal statute other than
one described in paragraph (a)(1) to which the United States is or may
be a party, provided such matter involves or arises out of the
particular facts and circumstances giving rise to the proceeding (or
investigation) described in paragraph (a)(1) and further provided the
tax portion of such proceeding (or investigation) has been duly
authorized by or on behalf of the Assistant Attorney General for the Tax
Division of the Department of Justice,
[[Page 42]]
pursuant to the request of the Secretary, as a proceeding (or
investigation) described in paragraph (a)(1). If, in the course of a
Federal grand jury proceeding, or preparation for a proceeding (or the
conduct of an investigation which may result in such a proceeding),
described in subdivision (ii) of this subparagraph, the tax
administration portion thereof is terminated for any reason, any further
use or disclosure of such returns or taxpayer return information in such
Federal grand jury proceeding, or preparation or investigation, with
respect to the remaining portion may be made only pursuant to, and upon
the grant of, a court order as provided by section 6103(i)(1)(A),
provided, however, that the returns and taxpayer return information may
in any event be used for purposes of obtaining the necessary court
order.
(b) Disclosure of returns and return information (including taxpayer
return information) by officers and employees of the Department of
Justice. (1) Returns and return information (including taxpayer return
information), as defined in section 6103(b) (1), (2), and (3) of the
Code, inspected by or disclosed to officers and employees of the
Department of Justice as provided by paragraph (a) of this section may
be disclosed by such officers and employees to other persons, including,
but not limited to, persons described in paragraph (b)(2), but only to
the extent necessary in connection with a Federal grand jury proceeding,
or the proper preparation for a proceeding (or in connection with an
investigation which may result in such a proceeding), described in
paragraph (a). Such disclosures may include, but are not limited to,
disclosures--
(i) To properly accomplish any purpose or activity of the nature
described in section 6103(k)(6) and the regulations thereunder which is
essential to such Federal grand jury proceeding, or to such proper
preparation (or to such investigation);
(ii) To properly interview, consult, depose, or interrogate or
otherwise obtain relevant information from, the taxpayer to whom such
return or return information relates (or such taxpayer's legal
representative) or from any witness who may be called to give evidence
in the proceeding; or
(iii) To properly conduct negotiations concerning, or obtain
authorization for, settlement or disposition of the proceeding, in whole
or in part, or stipulations of fact in connection with the proceeding.
Disclosure of a return or return information to a person other than the
taxpayer to whom such return or return information relates or such
taxpayer's legal representative to properly accomplish any purpose or
activity described in this paragraph should be made, however, only if
such purpose or activity cannot otherwise properly be accomplished
without making such disclosure.
(2) Among those persons to whom returns and return information may
be disclosed by officers and employees of the Department of Justice as
provided by paragraph (a)(1) of this section are--
(i) Other officers and employees of the Department of Justice, such
as personnel of an office, board, division, or bureau of such department
(for example, the Federal Bureau of Investigation or the Drug
Enforcement Administration), clerical personnel (for example,
secretaries, stenographers, docket and file room clerks, and mail room
employees) and supervisory personnel (such as supervisory personnel of
the Federal Bureau of Investigation or the Drug Enforcement
Administration);
(ii) Officers and employees of another Federal agency (as defined in
section 6103(b)(9)) working under the direction and control of any such
officers and employees of the Department of Justice; and
(iii) Court reporters.
(Secs. 6103 and 7805 of the Internal Revenue Code of 1954 (90 Stat.
1667, 68A Stat. 917; 26 U.S.C. 6103 and 7805))
[T.D. 7723, 45 FR 65567, Oct. 3, 1980]
[[Page 43]]
Sec. 301.6103(i)-1 Disclosure of returns and return information (including
taxpayer return information) to and by officers and employees of the Department
of
Justice or another Federal agency for use in Federal grand
jury proceeding, or preparation for proceeding or
investigation, involving enforcement of Federal criminal
statute not involving tax administration.
(a) Disclosure of returns and return information (including taxpayer
return information) to officers and employees of the Department of
Justice or another Federal agency. Returns and return information
(including taxpayer return information), as defined in section
6103(b)(1), (2), and (3) of the Internal Revenue Code, shall, to the
extent provided by section 6103(i) (1), (2), and (3) and subject to the
requirements of section 6103(i) (1) and (2), be open to inspection by or
disclosure to officers and employees of the Department of Justice
(including United States attorneys) or of another Federal agency (as
defined in section 6103(b)(9)) personally and directly engaged in, and
for their necessary use in, any Federal grand jury proceeding, or
preparation for any administration or judicial proceeding (or their
necessary use in an investigation which may result in such a
proceeding), pertaining to enforcement of a specifically designated
Federal criminal statute not involving or related to tax administration
to which the United States or such agency is or may be a party.
(b) Disclosure of returns and return information (including taxpayer
return information) by officers and employees of the Department of
Justice or another Federal agency. (1) Returns and return information
(including taxpayer return information), as defined in section 6103(b)
(1), (2), and (3) of the Code, disclosed to officers and employees of
the Department of Justice or other Federal agency (as defined in section
6103(b)(9)) as provided by paragraph (a) of this section may be
disclosed by such officers and employees to other persons, including,
but not limited to, persons described in subparagraph (2) of this
paragraph, but only to the extent necessary in connection with a Federal
grand jury proceeding, or the proper preparation for a proceeding (or in
connection with an investigation which may result in such a proceeding),
described in paragraph (a). Such disclosures may include, but are not
limited to, disclosures where necessary--
(i) To properly obtain the services of persons having special
knowledge or technical skills (such as, but not limited to, handwriting
analysis, photographic development, sound recording enhancement, or
voice identification);
(ii) To properly interview, consult, depose, or interrogate or
otherwise obtain relevant information from, the taxpayer to whom such
return or return information relates (or such taxpayer's legal
representative) or any witness who may be called to give evidence in the
proceeding; or
(iii) To properly conduct negotiations concerning, or obtain
authorization for, disposition of the proceeding, in whole or in part,
or stipulations of fact in connection with the proceeding.
Disclosure of a return or return information to a person other than the
taxpayer to whom such return or return information relates or such
taxpayer's legal representative to properly accomplish any purpose or
activity described in this subparagraph should be made, however, only if
such purpose or activity cannot otherwise properly be accomplished
without making such disclosures.
(2) Among those persons to whom returns and return information may
be disclosed by officers and employees of the Department of Justice or
other Federal agency as provided by subparagraph (1) of this paragraph
are--
(i) Other officers and employees of the Department of Justice
(including an office, board, division, or bureau of such department,
such as the Federal Bureau of Investigation or the Drug Enforcement
Administration) or other Federal agency described in subparagraph (1),
such as clerical personnel (for example, secretaries, stenographers,
docket and file room clerks, and mail room employees) and supervisory
personnel (for example, in the case of the Department of Justice,
Section Chiefs, Deputy Assistant Attorneys General, Assistant Attorneys
General, the Deputy Attorney General, the
[[Page 44]]
Attorney General, and supervisory personnel of the Federal Bureau of
Investigation or the Drug Enforcement Administration);
(ii) Officers and employees of another Federal agency (as defined in
section 6103(b)(9)) working under the direction and control of such
officers and employees of the Department of Justice or other Federal
agency described in subparagraph (1); and
(iii) Court reporters.
(Secs. 6103 and 7805 of the Internal Revenue Code of 1954 (90 Stat.
1667, 68A Stat. 917; 26 U.S.C. 6103 and 7805))
[T.D. 7723, 45 FR 65568, Oct. 3, 1980]
Sec. 301.6103(j)(1)-1 Disclosures of return information reflected on returns to officers and employees of the Department of Commerce for certain statistical
purposes and related activities.
(a) General rule. Pursuant to the provisions of section 6103(j)(1)
of the Internal Revenue Code and subject to the requirements of
paragraph (d) of this section, officers or employees of the Internal
Revenue Service will disclose return information (as defined by section
6103(b)(2) but not including return information described in section
6103(o)(2)) reflected on returns to officers and employees of the
Department of Commerce to the extent, and for such purposes as may be,
provided by paragraphs (b) and (c) of this section. Further, in the case
of any disclosure of return information reflected on returns so provided
by paragraphs (b) and (c) of this section, the tax period or accounting
period to which such information relates will also be disclosed.
``Return information reflected on returns'' includes, but is not limited
to, information on returns, information derived from processing such
returns, and information derived from the Social Security Administration
and other sources for the purposes of establishing and maintaining
taxpayer information relating to returns.
(b) Disclosure of return information reflected on returns to
officers and employees of the Bureau of the Census.
(1) Officers or employees of the Internal Revenue Service will
disclose the following return information reflected on returns of
individual taxpayers to officers and employees of the Bureau of the
Census for purposes of, but only to the extent necessary in, conducting
and preparing, as authorized by chapter 5 of title 13, United States
Code, intercensal estimates of population and income for all geographic
areas included in the population estimates program and demographic
statistics programs, censuses, and related program evaluation:
(i) Taxpayer identity information (as defined in section 6103(b)(6)
of the Internal Revenue Code), validity code with respect to the
taxpayer identifying number (as described in section 6109), and taxpayer
identity information of spouse and dependents, if reported.
(ii) Location codes (including area/district office and campus/
service center codes).
(iii) Marital status.
(iv) Number and classification of reported exemptions.
(v) Wage and salary income.
(vi) Dividend income.
(vii) Interest income.
(viii) Gross rent and royalty income.
(ix) Total of--
(A) Wages, salaries, tips, etc.;
(B) Interest income;
(C) Dividend income;
(D) Alimony received;
(E) Business income;
(F) Pensions and annuities;
(G) Income from rents, royalties, partnerships, estates, trusts,
etc.;
(H) Farm income;
(I) Unemployment compensation; and
(J) Total Social Security benefits.
(x) Adjusted gross income.
(xi) Type of tax return filed.
(xii) Entity code.
(xiii) Code indicators for Form 1040, Form 1040 (Schedules A, C, D,
E, F, and SE), and Form 8814.
(xiv) Posting cycle date relative to filing.
(xv) Social Security benefits.
(2) Officers or employees of the Internal Revenue Service will
disclose to officers and employees of the Bureau of the Census for
purposes of, but only to the extent necessary in, conducting, as
authorized by chapter 5 of title 13,
[[Page 45]]
United States Code, demographic, economic, and agricultural statistics
programs and censuses and related program evaluation--
(i) From the business master files of the Internal Revenue Service--
the taxpayer name directory and entity records consisting of taxpayer
identity information (as defined in section 6103(b)(6)) with respect to
taxpayers engaged in a trade or business, the principal industrial
activity code, the filing requirement code, the employment code, the
physical location, the location codes (including area/district office
and campus/service center codes), and monthly corrections of, and
additions to, such entity records;
(ii) From Form SS-4--all information reflected on such form;
(iii) From an employment tax return--
(A) Taxpayer identifying number (as described in section 6109) of
the employer;
(B) Total compensation reported;
(C) Master file tax account code (MFT);
(D) Taxable period covered by such return;
(E) Employer code;
(F) Document locator number;
(G) Record code;
(H) Total number of individuals employed in the taxable period
covered by the return;
(I) Total taxable wages paid for purposes of chapter 21; and
(J) Total taxable tip income reported for purposes of chapter 21;
(iv) From Form 1040 (Schedule SE)--
(A) Taxpayer identifying number of self-employed individual;
(B) Business activities subject to the tax imposed by chapter 21;
(C) Net earnings from farming;
(D) Net earnings from nonfarming activities;
(E) Total net earnings from self-employment; and
(F) Taxable self-employment income for purposes of chapter 2;
(v) Total Social Security taxable earnings; and
(vi) Quarters of Social Security coverage.
(3) Officers or employees of the Internal Revenue Service will
disclose the following business related return information reflected on
returns of taxpayers to officers and employees of the Bureau of the
Census for purposes of, but only to the extent necessary in, conducting
and preparing, as authorized by chapter 5 of title 13, United States
Code, demographic and economic statistics programs, censuses, and
surveys. (The ``returns of taxpayers'' include, but are not limited to:
Form 941; Form 990 series; Form 1040 series and Schedules C and SE; Form
1065 and all attending schedules and Form 8825; Form 1120 series and all
attending schedules and Form 8825; Form 851; Form 1096; and other
business returns, schedules and forms that the Internal Revenue Service
may issue.):
(i) Taxpayer identity information (as defined in section 6103(b)(6))
including parent corporation, shareholder, partner, and employer
identity information.
(ii) Gross income, profits, or receipts.
(iii) Returns and allowances.
(iv) Cost of labor, salaries, and wages.
(v) Total expenses or deductions.
(vi) Total assets.
(vii) Beginning- and end-of-year inventory.
(viii) Royalty income.
(ix) Interest income, including portfolio interest.
(x) Rental income, including gross rents.
(xi) Tax-exempt interest income.
(xii) Net gain from sales of business property.
(xiii) Other income.
(xiv) Total income.
(xv) Percentage of stock owned by each shareholder.
(xvi) Percentage of capital ownership of each partner.
(xvii) End-of-year code.
(xviii) Months actively operated.
(xix) Principal industrial activity code, including the business
description.
(xx) Total number of documents and the total amount reported on the
Form 1096 transmitting Forms 1099-MISC.
(xxi) Form 941 indicator and business address on Form 1040 (Schedule
C).
(xxii) Consolidated return indicator.
(xxiii) Wages, tips, and other compensation.
(xxiv) Social Security wages.
(xxv) Deferred wages.
[[Page 46]]
(xxvi) Social Security tip income.
(xxvii) Total Social Security taxable earnings.
(xxviii) Gross distributions from employer-sponsored and individual
retirement plans from Form 1099-R.
(4) Officers or employees of the Internal Revenue Service will
disclose return information reflected on returns of taxpayers contained
in the exempt organization master files of the Internal Revenue Service
to officers and employees of the Bureau of the Census for purposes of,
but only to the extent necessary in, conducting and preparing, as
authorized by chapter 5 of title 13, United States Code, economic
censuses. This return information reflected on returns of taxpayers
consists of taxpayer identity information (as defined in section
6103(b)(6)), activity codes, and filing requirement code, and monthly
corrections of, and additions to, such information.
(5) Subject to the requirements of paragraph (d) of this section and
Sec. 301.6103(p)(2)(B)-1, officers or employees of the Social Security
Administration to whom the following return information reflected on
returns has been disclosed as provided by section 6103(l)(1)(A) or
(l)(5) may disclose such information to officers and employees of the
Bureau of the Census for necessary purposes described in paragraph
(b)(2) or (3) of this section:
(i) From Form SS-4--all information reflected on such form.
(ii) From Form 1040 (Schedule SE)--
(A) Taxpayer identifying number of self-employed individual;
(B) Business activities subject to the tax imposed by chapter 21;
(C) Net earnings from farming;
(D) Net earnings from nonfarming activities;
(E) Total net earnings from self-employment; and
(F) Taxable self-employment income for purposes of chapter 2.
(iii) From Form W-2, and related forms and schedules--
(A) Social Security number;
(B) Employer identification number;
(C) Wages, tips, and other compensation;
(D) Social Security wages; and
(E) Deferred wages.
(iv) Total Social Security taxable earnings.
(v) Quarters of Social Security coverage.
(6)(i) Officers or employees of the Internal Revenue Service will
disclose the following return information (but not including return
information described in section 6103(o)(2)) reflected on returns of
corporations with respect to the tax imposed by chapter 1 to officers
and employees of the Bureau of the Census for purposes of, but only to
the extent necessary in, developing and preparing, as authorized by law,
the Quarterly Financial Report:
(A) From the business master files of the Internal Revenue Service--
(1) Taxpayer identity information (as defined in section
6103(b)(6)), including parent corporation identity information;
(2) Document code;
(3) Location codes (including area/district office and campus/
service center codes);
(4) Consolidated return and final return indicators;
(5) Principal industrial activity code;
(6) Partial year indicator;
(7) Annual accounting period;
(8) Gross receipts less returns and allowances; and
(9) Total assets.
(B) From Form SS-4--
(1) Month and year in which such form was executed;
(2) Taxpayer identity information; and
(3) Principal industrial activity, geographic, firm size, and reason
for application codes.
(ii) Subject to the requirements of paragraph (d) of this section
and Sec. 301.6103(p)(2)(B)-1, officers or employees of the Social
Security Administration to whom return information reflected on returns
of corporations described in paragraph (b)(6)(i)(B) of this section has
been disclosed as provided by section 6103(l)(1)(A) or (l)(5) may
disclose such information to officers and employees of the Bureau of the
Census for a purpose described in this paragraph (b)(6).
(iii) Return information reflected on employment tax returns
disclosed pursuant to paragraphs (b)(2)(iii) (A), (B), (D), (I) and (J)
of this section may be
[[Page 47]]
used by officers and employees of the Bureau of the Census for the
purpose described in and subject to the limitations of this paragraph
(b)(6).
(c) Disclosure of return information reflected on returns of
corporations to officers and employees of the Bureau of Economic
Analysis. (1) Officers or employees of the Internal Revenue Service will
disclose to officers and employees of the Bureau of Economic Analysis
for purposes of, but only to the extent necessary in, conducting and
preparing, as authorized by law, statistical analyses return information
consisting of Statistics of Income transcript-edit sheets containing
return information reflected on returns of designated classes or
categories of corporations with respect to the tax imposed by chapter 1
of the Internal Revenue Code and microfilmed records of return
information reflected on such returns where needed for further use in
connection with such conduct or preparation.
(2) Subject to the requirements of paragraph (d) of this section and
Sec. 301.6103(p)(2)(B)-1, officers and employees of the Social Security
Administration to whom the following return information reflected on
returns of designated classes or categories of corporations has been
disclosed as provided by section 6103(l)(1)(A) or (l)(5) may disclose
such information to officers and employees of the Bureau of Economic
Analysis for necessary purposes described in paragraph (c)(1) of this
section:
(i) From Form SS-4--Principal industrial activity and geographic
codes.
(ii) From an employment tax return--
(A) Total compensation reported; and
(B) Taxable wages paid for purposes of chapter 21 to each employee.
(d) Procedures and restrictions. Disclosure of return information
reflected on returns by officers or employees of the Internal Revenue
Service or the Social Security Administration as provided by paragraphs
(b) and (c) of this section will be made only upon written request to
the Commissioner of Internal Revenue by the Secretary of Commerce
describing--
(1) The particular return information reflected on returns to be
disclosed;
(2) The taxable period or date to which such return information
reflected on returns relates; and
(3)(i) The particular purpose for which the return information
reflected on returns is to be used, and designating by name and title
the officers and employees of the Bureau of the Census or the Bureau of
Economic Analysis to whom such disclosure is authorized.
(ii) No such officer or employee to whom return information
reflected on returns is disclosed pursuant to the provisions of
paragraph (b) or (c) of this section shall disclose such information to
any person, other than the taxpayer to whom such return information
reflected on returns relates or other officers or employees of such
bureau whose duties or responsibilities require such disclosure for a
purpose described in paragraph (b) or (c) of this section, except in a
form which cannot be associated with, or otherwise identify, directly or
indirectly, a particular taxpayer. If the Internal Revenue Service
determines that the Bureau of the Census or the Bureau of Economic
Analysis, or any officer or employee thereof, has failed to, or does
not, satisfy the requirements of section 6103(p)(4) of the Internal
Revenue Code or regulations or published procedures thereunder (see
Sec. 601.601(d)(2) of this chapter), the Internal Revenue Service may
take such actions as are deemed necessary to ensure that such
requirements are or will be satisfied, including suspension of
disclosures of return information reflected on returns otherwise
authorized by section 6103 (j)(1) and paragraph (b) or (c) of this
section, until the Internal Revenue Service determines that such
requirements have been or will be satisfied.
(e) Effective date. This section is applicable to the Bureau of the
Census on January 21, 2003.
[T.D. 9037, 68 FR 2693, Jan. 21, 2003]
[[Page 48]]
Sec. 301.6103(j)(5)-1 Disclosures of return information to officers and employees of the Department of Agriculture for certain statistical purposes and related
activities.
(a) General rule. Pursuant to the provisions of section 6103(j)(5)
of the Internal Revenue Code and subject to the requirements of
paragraph (c) of this section, officers or employees of the Internal
Revenue Service (IRS) will disclose return information to officers and
employees of the Department of Agriculture to the extent, and for such
purposes as may be, provided by paragraph (b) of this section.
(b) Disclosure of return information to officers and employees of
the Department of Agriculture. (1) Officers or employees of the IRS will
disclose the following return information for individuals, partnerships,
and corporations with agricultural activity, as determined generally by
industry code classification or the filing of returns for such activity,
to officers and employees of the Department of Agriculture for purposes
of, but only to the extent necessary in, structuring, preparing, and
conducting, as authorized by chapter 55 of title 7, United States Code,
the Census of Agriculture.
(2) From Form 1040/Schedule F--
(i) Taxpayer Identity Information (as defined in section 6103(b)(6)
of the Internal Revenue Code);
(ii) Spouse's SSN;
(iii) Annual Accounting Period;
(iv) Principal Business Activity (PBA) Code;
(v) Sales of livestock and produce raised;
(vi) Taxable cooperative distributions;
(vii) Income from custom hire and machine work;
(viii) Gross income;
(ix) Master File Tax (MFT) Code;
(x) Document Locator Number (DLN);
(xi) Cycle Posted;
(xii) Final return indicator; and
(xiii) Part year return indicator.
(xiv) Taxpayer telephone number.
(3) From Form 943--
(i) Taxpayer Identity Information;
(ii) Annual Accounting Period;
(iii) Total wages subject to Medicare taxes;
(iv) Master File Tax (MFT) Code;
(v) Document Locator Number (DLN);
(vi) Cycle Posted;
(vii) Final return indicator; and
(viii) Part year return indicator.
(4) From Form 1120 series--
(i) Taxpayer Identity Information;
(ii) Annual Accounting Period;
(iii) Gross receipts less returns and allowances;
(iv) PBA Code;
(v) Parent corporation Employer Identification Number, and related
Name and PBA Code for entities with agricultural activity;
(vi) Master File Tax (MFT) Code;
(vii) Document Locator Number (DLN);
(viii) Cycle posted;
(ix) Final return indicator;
(x) Part year return indicator; and
(xi) Consolidated return indicator.
(5) From Form 851--
(i) Subsidiary Taxpayer Identity Information;
(ii) Annual Accounting Period;
(iii) Subsidiary PBA Code;
(iv) Parent Taxpayer Identity Information;
(v) Parent PBA Code;
(vi) Master File Tax (MFT) Code;
(vii) Document Locator Number (DLN); and
(viii) Cycle Posted.
(6) From Form 1065 series--
(i) Taxpayer Identity Information;
(ii) Annual Accounting Period;
(iii) PBA Code;
(iv) Gross receipts less returns and allowances;
(v) Net farm profit (loss);
(vi) Master File Tax (MFT) Code;
(vii) Document Locator Number (DLN);
(viii) Cycle Posted;
(ix) Final return indicator; and
(x) Part year return indicator.
(c) Procedures and restrictions. (1) Disclosure of return
information by officers or employees of the IRS as provided by paragraph
(b) of this section shall be made only upon written request designating,
by name and title, the officers and employees of the Department of
Agriculture to whom such disclosure is authorized, to the Commissioner
of Internal Revenue by the Secretary of the Department of Agriculture
and describing--
[[Page 49]]
(i) The particular return information to be disclosed;
(ii) The taxable period or date to which such return information
relates; and
(iii) The particular purpose for which the return information is to
be used.
(2) No such officer or employee to whom return information is
disclosed pursuant to the provisions of paragraph (b) of this section
shall disclose such return information to any person, other than the
taxpayer to whom such return information relates or other officers or
employees of the Department of Agriculture whose duties or
responsibilities require such disclosure for a purpose described in
paragraph (b) of this section, except in a form that cannot be
associated with, or otherwise identify, directly or indirectly, a
particular taxpayer. If the IRS determines that the Department of
Agriculture, or any officer or employee thereof, has failed to, or does
not, satisfy the requirements of section 6103(p)(4) of the Internal
Revenue Code or regulations or published procedures thereunder, the IRS
may take such actions as are deemed necessary to ensure that such
requirements are or shall be satisfied, including suspension of
disclosures of return information otherwise authorized by section
6103(j)(5) and paragraph (b) of this section, until the IRS determines
that such requirements have been or will be satisfied.
(d) Effective dates. This section is applicable on July 31, 2001,
except paragraph (b)(2)(xiv) which is applicable on June 19, 2002.
[T.D. 8958, 66 FR 39438, July 31, 2001, as amended by T.D. 9001, 67 FR
41621, June 19, 2002]
Sec. 301.6103(k)(6)-1 Disclosure of return information by Internal Revenue officers and employees for investigative purposes.
(a) Disclosure of taxpayer identity information and fact of
investigation in connection with official duties relating to
examination, collection activity, civil or criminal investigation,
enforcement activity, or other offense under the internal revenue laws.
In connection with the performance of official duties relating to any
examination, collection activity, civil or criminal investigation,
enforcement activity, or other offense under the internal revenue laws,
or in connection with preparation for any proceeding (or investigation
which may result in such a proceeding) described in section 6103(h)(2)
of the Internal Revenue Code, an officer or employee of the Internal
Revenue Service or Office of the Chief Counsel therefor is authorized to
disclose taxpayer identity information (as defined in section
6103(b)(6)), the fact that the inquiry pertains to the performance of
official duties, and the nature of the official duties in order to
obtain necessary information relating to performance of such official
duties or where necessary in order to properly accomplish any activity
described in subparagraph (6) of paragraph (b) of this section.
Disclosure of taxpayer identity information to a person other than the
taxpayer to whom such taxpayer identity information relates or such
taxpayer's legal representative for the purpose of obtaining such
necessary information or otherwise properly accomplishing such
activities as authorized by this paragraph should be made, however, only
if the necessary information cannot, under the facts and circumstances
of the particular case, otherwise reasonably be obtained in accurate and
sufficiently probative form, or in a timely manner, and without
impairing the proper performance of the official duties, or if such
activities cannot otherwise properly be accomplished without making such
disclosure.
(b) Disclosure of return information in connection with official
duties relating to examination, collection activity, civil or criminal
investigation, enforcement activity, or other offense under the internal
revenue laws. In connection with the performance of official duties
relating to any examination, collection activity, civil or criminal
investigation, enforcement activity, or other offense under the internal
revenue laws, an officer or employee of the Service or Office of the
Chief Counsel therefor is authorized to disclose return information (as
defined in section 6103(b)(2)) in order to obtain necessary information
relating to the following--
(1) To establish or verify the correctness or completeness of any
return (as
[[Page 50]]
defined in section 6103(b)(1) of the Code) or return information;
(2) To determine the responsibility for filing a return, for making
a return where none has been made, or for performing such acts as may be
required by law concerning such matters;
(3) To establish or verify the liability (or possible liability) of
any person, or the liability (or possible liability) at law or in equity
of any transferee or fiduciary of any person, for any tax, penalty,
interest, fine, forfeiture, or other imposition or offense under the
internal revenue laws or the amount thereof to be collected;
(4) To establish or verify misconduct (or possible misconduct) or
other activity proscribed by the internal revenue laws;
(5) To obtain the services of persons having special knowledge or
technical skills (such as, but not limited to, knowledge of particular
facts and circumstances relevant to a correct determination of a
liability described in subparagraph (3) of this paragraph or skills
relating to handwriting analysis, photographic development, sound
recording enhancement, or voice identification) or having recognized
expertise in matters involving the valuation of property where relevant
to proper performance of a duty or responsibility described in this
paragraph;
(6) To establish or verify the financial status or condition and
location of the taxpayer against whom collection activity is or may be
directed, to locate assets in which the taxpayer has an interest, to
ascertain the amount of any liability described in subparagraph (3) of
this paragraph to be collected, or otherwise to apply the provisions of
the Code relating to establishment of liens against such assets, or levy
on, or seizure, or sale of, the assets to satisfy any such liability; or
(7) To prepare for any proceeding described in section 6103(h)(2) or
conduct an investigation which may result in such a proceeding, or where
necessary in order to accomplish any activity described in subparagraph
(6) of this paragraph.
Disclosure of return information to a person other than the taxpayer to
whom such return information relates or such taxpayer's legal
representative for the purpose of obtaining information necessary to
properly carry out the foregoing duties and responsibilities as
authorized by this paragraph or for the purpose of otherwise properly
accomplishing any activity described in subparagraph (6) of this
paragraph should be made, however, only if such necessary information
cannot, under the facts and circumstances of the particular case,
otherwise reasonably be obtained in accurate and sufficiently probative
form, or in a timely manner, and without impairing the proper
performance of such duties and responsibilities, or if the activities
described in subparagraph (6) of this paragraph cannot otherwise
properly be accomplished without making such disclosure.
(c) Disclosure of return information in connection with certain
personnel or claimant representative matters. In connection with the
performance of official duties relating to any investigation concerned
with the enforcement of any provision of the Code, including enforcement
of any rules, directives, or manual issuances prescribed by the
Secretary or his delegate under section 7803 or any other provision of
the Code, which affect or may affect the personnel or employment rights
or status, or civil or criminal liability, of any employee or former or
prospective employee of the Treasury Department or the rights of any
person who is or may be a party to an administrative action or
proceeding pursuant to 31 U.S.C. 1026, an officer or employee of the
Service or Office of the Chief Counsel therefor is authorized to
disclose return information (as defined in section 6103(b)(2)) for the
purpose of obtaining, verifying, or establishing other information which
is or may be relevant and material to such investigation. Disclosure of
return information to a person other than the taxpayer to whom such
return information relates or such taxpayer's legal representative for
the purpose of obtaining information necessary to properly carry out the
foregoing duties and responsibilities as authorized by this paragraph
should be made, however, only if such necessary information cannot,
under the facts and circumstances of the particular case, otherwise
reasonably be
[[Page 51]]
obtained in accurate and sufficiently probative form, or in a timely
manner, and without impairing the proper performance of such duties and
responsibilities.
(Secs. 6103 and 7805 of the Internal Revenue Code of 1954 (90 Stat.
1667, 68A Stat. 917; 26 U.S.C. 6103 and 7805))
[T.D. 7723, 45 FR 65569, Oct. 3, 1980]
Sec. 301.6103(k)(9)-1 Disclosure of returns and return information relating to payment of tax by credit card and debit card.
Officers and employees of the Internal Revenue Service may disclose
to card issuers, financial institutions, or other persons such return
information as the Commissioner deems necessary in connection with
processing credit card and debit card transactions to effectuate payment
of tax as authorized by Sec. 301.6311-2. Officers and employees of the
Internal Revenue Service may disclose such return information to such
persons as the Commissioner deems necessary in connection with billing
or collection of the amounts charged or debited, including resolution of
errors relating to the credit card or debit card account as described in
Sec. 301.6311-2(d).
[T.D. 8969, 66 FR 64742, Dec. 14, 2001]
Sec. 301.6103(l)(2)-1 Disclosure of returns and return information to Pension Benefit Guaranty Corporation for purposes of research and studies.
(a) General rule. Pursuant to the provisions of section 6103(l)(2)
of the Internal Revenue Code and subject to the requirements of
paragraph (b) of this section, officers and employees of the Internal
Revenue Service may disclose returns and return information (as defined
by section 6103(b)) to officers and employees of the Pension Benefit
Guaranty Corporation for purposes of, but only to the extent necessary
in, conducting research and studies authorized by title IV of the
Employee Retirement Income Security Act of 1974.
(b) Procedures and restrictions. Disclosure of returns or return
information by officers or employees of the Service as provided by
paragraph (a) of this section will be made only upon written request to
the Commissioner of Internal Revenue by the Executive Director of the
Pension Benefit Guaranty Corporation describing the returns or return
information to be disclosed, the taxable period or date to which such
returns or return information relates, and the purpose for which the
returns or return information is needed in the administration of title
IV of the Employee Retirement Income Security Act of 1974, and
designating by title the officers and employees of such corporation to
whom such disclosure is authorized. No such officer or employee to whom
returns or return information is disclosed pursuant to the provisions of
paragraph (a) shall disclose such returns or return information to any
person, other than the taxpayer by whom the return was made or to whom
the return information relates or other officers or employees of such
corporation whose duties or responsibilities require such disclosure for
a purpose described in paragraph (a), except in a form which cannot be
associated with, or otherwise identify, directly or indirectly, a
particular taxpayer.
(Secs. 6103 and 7805 of the Internal Revenue Code of 1954 (90 Stat.
1667, 68A Stat. 917; 26 U.S.C. 6103 and 7805))
[T.D. 7723, 45 FR 65570, Oct. 3, 1980]
Sec. 301.6103(l)(2)-2 Disclosure of returns and return information to Department of Labor for purposes of research and studies.
(a) General rule. Pursuant to the provisions of section 6103(l)(2)
of the Internal Revenue Code and subject to the requirements of
paragraph (b) of this section, officers or employees of the Internal
Revenue Service may disclose returns and return information (as defined
by section 6103(b)) to officers and employees of the Department of Labor
for purposes of, but only to the extent necessary in, conducting
research and studies authorized by section 513 of the Employee
Retirement Income Security Act of 1974.
(b) Procedures and restrictions. Disclosure of returns or return
information by officers or employees of the Service as provided by
paragraph (a) of this section will be made only upon written request to
the Commissioner of Internal Revenue by the Administrator of
[[Page 52]]
the Pension and Welfare Benefit Programs of the Department of Labor
describing the returns or return information to be disclosed, the
taxable period or date to which such returns or return information
relates, and the purpose for which the returns or return information is
needed in the administration of title I of the Employee Retirement
Income Security Act of 1974, and designating by title the officers and
employees of such department to whom such disclosure is authorized. No
such officer or employee to whom returns or return information is
disclosed pursuant to the provisions of paragraph (a) shall disclose
such returns or return information to any person, other than the
taxpayer by whom the return was made or to whom the return information
relates or other officers or employees of such department whose duties
or responsibilities require such disclosure for a purpose described in
paragraph (a), except in a form which cannot be associated with, or
otherwise identify, directly or indirectly, a particular taxpayer.
(Secs. 6103 and 7805 of the Internal Revenue Code of 1954 (90 Stat.
1667, 68A Stat. 917; 26 U.S.C. 6103 and 7805))
[T.D. 7723, 45 FR 65571, Oct. 3, 1980]
Sec. 301.6103(l)(2)-3 Disclosure to Department of Labor and Pension Benefit Guaranty Corporation of certain returns and return information.
(a) Disclosures following general requests. Pursuant to the
provisions of section 6103(l)(2) of the Internal Revenue Code and
subject to the requirements of this paragraph, officers or employees of
the Internal Revenue Service may disclose the following returns and
return information (as defined by section 6103(b)) to officers and
employees of the Department of Labor or the Pension Benefit Guaranty
Corporation for purposes of, but only to the extent necessary in, the
administration of title I or IV of the Employee Retirement Income
Security Act of 1974 (hereinafter referred to in this section as the
Act)--
(1) Notification of receipt by the Service of an application by a
particular taxpayer for a determination of whether a pension, profit-
sharing, or stock bonus plan, a trust which is a part of such a plan, or
an annuity or bond purchase plan meets the applicable requirements of
part I of subchapter D of chapter 1 of the Code;
(2) Notification that a particular application described in
subparagraph (1) of this paragraph alleges that certain employees may be
excluded from participation by reason of section 410(b)(2) (A) and (B)
for the purpose of obtaining the finding necessary for the application
of such section;
(3) An application by a particular taxpayer for a determination of
whether a pension, profit-sharing, or stock bonus plan, or an annuity or
bond purchase plan, meets the applicable requirements of part I of
subchapter D of chapter 1 of the Code with respect to a termination or
proposed termination of the plan or to a partial termination or proposed
partial termination of the plan, and any statement filed as provided by
section 6058(b);
(4) Notification that the Service has determined that a plan or
trust described in subparagraph (1) or (3) of this paragraph meets or
does not meet the applicable requirements of part I of subchapter D of
chapter 1 of the Code and has issued a determination letter to such
effect to a particular taxpayer or that an application for such a
determination has been withdrawn by the taxpayer;
(5) If the Department of Labor or the Pension Benefit Guaranty
Corporation has commented on an application upon which a determination
letter described in subparagraph (4) of this paragraph has been issued,
a copy of the letter or document issued to the applicant;
(6) Notification to a particular taxpayer that the Service intends
to disqualify a pension, profit-sharing, or stock bonus plan, a trust
which is a part of such plan, or an annuity or bond purchase plan
because such plan or trust does not meet the requirements of section
410(a) or 411 as of the date that such notification is issued;
(7) Notification required by section 3002(a) of the Act of the
commencement of any proceeding to determine whether a particular
pension, profit-sharing, or stock bonus plan, a trust which is a part of
such plan, or an annuity or bond purchase plan meets the requirements of
section 410(a) or 411;
[[Page 53]]
(8) Prior to issuance of a notice of deficiency to a particular
taxpayer under section 6212, notification that the Service has
determined that a deficiency exists under section 6211 with respect to
the tax imposed by section 4971 (a) or (b) on such taxpayer, except that
if the Service determines that the collection of such tax is in jeopardy
within the meaning of section 6861(a), such notification may be
disclosed after issuance of the notice of deficiency or jeopardy
assessment;
(9) Notification of receipt by the Service of, and action taken with
respect to, an application by or on behalf of a particular taxpayer for
a waiver of the tax imposed by section 4971 (b);
(10) Prior to issuance of a notice of deficiency to a particular
taxpayer under section 6212, notification that a deficiency exists under
section 6211 with respect to the tax imposed by section 4975 (a) or (b)
on such taxpayer, except that if the Service determines that the
collection of such tax is in jeopardy within the meaning of section
6861(a), such notification may be disclosed after issuance of the notice
of deficiency or jeopardy assessment;
(11) Notification that the Service has waived the tax imposed by
section 4975(b) on a particular taxpayer;
(12) Notification of applicability of section 4975 to a particular
pension, profit-sharing, or stock bonus plan, a trust which is a part of
such plan, or an annuity or stock purchase plan engaged in prohibited
transactions within the meaning of section 4975(c);
(13) Notification to a plan administrator that the Service has
determined that a pension, profit-sharing, stock bonus, annuity, or
stock purchase plan no longer meets the requirements of section 401(a)
or 404(a)(2);
(14) Notification that the Service has determined that there has
been a termination or partial termination of a particular pension,
profit-sharing, stock bonus, annuity, or stock purchase plan within the
meaning of section 411(d)(3);
(15) Notification of the occurrence of an event (other than an event
described in subparagraph (13), (14), or (18) of this paragraph) which
the Service has determined to indicate that a particular pension,
profit-sharing, stock bonus, annuity, or stock purchase plan may not be
sound under section 4043(c)(2) of the Act;
(16) Notification that the Service has received and responded to a
request on behalf of a particular pension, profit-sharing, or stock
bonus plan, a trust which is a part of such plan, or an annuity or stock
purchase plan for an extension of time for filing an annual return by
such plan or trust;
(17) Notification that the Service has received and responded to a
request on behalf of a particular pension, profit-sharing, or stock
bonus plan, a trust which is a part of such plan, or an annuity or stock
purchase plan to change the annual accounting period of such plan or
trust;
(18) Notification that the Service has determined that a particular
plan does not meet the requirements of section 412 without regard to
whether such plan is one described in section 4021(a)(2) of the Act;
(19) Notification of the results of an investigation by the Service
requested by the Department of Labor or the Pension Benefit Guaranty
Corporation, or both, with respect to whether the tax described in
section 4971 should be imposed on any employer named in such request or
whether the tax imposed by section 4975 should be paid by any person
named in the request;
(20) Notification of receipt by the Service of an application by a
particular taxpayer for exemption under section 4975(c)(2) or of
initiation by the Service of an administrative proceeding for such
exemption;
(21) Notification of receipt by the Service of, and action taken
with respect to, an application by or on behalf of a particular taxpayer
for a waiver or variance of the minimum funding standard under section
303 of the Act or section 412(d);
(22) Notification that the Service intends to undertake, is
undertaking, or has completed, an examination to determine whether--
(i) A particular pension, profit-sharing, or stock bonus plan, a
trust which is a part of such plan, or an annuity or stock purchase plan
meets the applicable requirements of part I of subchapter D of chapter 1
of the Code,
[[Page 54]]
(ii) Any particular person is, or may be, liable for any tax imposed
by section 4971 or 4975, or
(iii) A particular employee welfare benefit plan, as defined in
section 3(1) of the Act, meets the applicable requirements of section
501(c) or 120, together with any completed Department of Labor or
Pension Benefit Guaranty Corporation form (and supplemental schedules)
relating to such examination;
(23) Copies of initial pleadings indicating that the Service intends
to intervene in a civil action under section 502(h) of the Act;
(24) Notification of receipt by the Service of a request for
technical advice as to whether a particular pension, profit-sharing, or
stock bonus plan, a trust which is a part of such plan, or an annuity or
bond purchase plan should be disqualified because of fiduciary actions
subject to part 4 of subtitle B of title I of the Act which may violate
the exclusive benefit rule of section 401(a);
(25) Notification of receipt by the National Office of the Service
of a request by or on behalf of a particular taxpayer for a ruling,
opinion, variance, or waiver under any provision of title I of the Act
and a copy of any such ruling, opinion, variance or waiver;
(26) Notification that the Service proposes to take substantive
action which would significantly impact on or substantially affect
collectively bargained plans and a description of such proposed
substantive action; and
(27) Notification of receipt by the Service of, and action taken
with respect to, a request by a particular taxpayer for a ruling under
section 412(c)(8), 412(e), or 412(f).
Return information disclosed under this paragraph includes the taxpayer
identity information (as defined in section 6103(b)(6)) of the plan or
trust, the name and address of the sponsor and administrator of the plan
or trustee of the trust, and the name and address of the person
authorized to represent the plan or trust before the Service. Disclosure
of returns or return information as provided by this paragraph will be
made only following receipt by the Commissioner of Internal Revenue or
his delegate of an annual written request for such disclosure by the
Secretary of Labor or his delegate or the Executive Director of the
Pension Benefit Guaranty Corporation or his delegate describing the
categories of returns or return information to be disclosed by the
Service and the particular purpose for which the returns or return
information is needed in the administration of title I or IV of the Act,
and designating by title the officers and employees of the Department of
Labor or such corporation to whom such disclosure is authorized.
(b) Additional returns and return information subject to disclosure-
-(1) Returns and return information relating to automatic notification.
(i) Subject to the requirements of subparagraph (3)(i) of this
paragraph, officers or employees of the Service may disclose to officers
and employees of the Department of Labor or the Pension Benefit Guaranty
Corporation for purposes of, but only to the extent necessary in, the
administration of title I or IV of the Act additional return and return
information relating to any item described in paragraph (a) of this
section.
(ii) Subject to the requirements of subparagraph (3)(ii) of this
paragraph, in connection with the disclosure of any item as provided by
paragraph (a) of this section, officers and employees of the Service may
disclose to officers and employees of the Department of Labor or the
Pension Benefit Guaranty Corporation such additional returns and return
information relating to such item as the Service determines are or may
be necessary in the administration of title I or IV of the Act.
(2) Other returns and return information. Subject to the
requirements of subparagraph (3)(i) of this paragraph, officers or
employees of the Service may disclose to officers and employees of the
Department of Labor or the Pension Benefit Guaranty Corporation returns
and return information (other than returns and return information
disclosed as provided by paragraph (a) of this section or
Sec. 301.6103(l)(2)-1 or Sec. 301.6103(l)(2)-2 for purposes of, but only
to the extent necessary in, administration of title I or IV of the Act.
(3) Procedures. (i) Disclosure of returns or return information by
officers or employees of the Service as provided by subparagraph (1)(i)
or (2) of this
[[Page 55]]
paragraph will be made only following receipt by the Commissioner of
Internal Revenue or his delegate of a written request for such
disclosure by the Secretary of Labor or his delegate or the Executive
Director of the Pension Benefit Guaranty Corporation or his delegate
identifying the particular taxpayer by whom such return was made or to
whom such return information relates, describing the particular returns
or return information to be disclosed, stating the purpose for which the
returns or return information is needed in the administration of title I
or IV of the Act, and designating by title the officers and employees of
such department or corporation to whom such disclosure is authorized.
(ii) Disclosure of returns or return information by officers or
employees of the Service as provided by subparagraph (1)(ii) of this
paragraph will be made only following receipt by the Commissioner of
Internal Revenue or his delegate of an annual written request for such
disclosure by the Secretary of Labor or his delegate or the Executive
Director of the Pension Benefit Guaranty Corporation or his delegate
stating the purpose for which the returns or return information is
needed in the administration of title I or IV of the Act, and
designating by title the officers and employees of such department or
corporation to whom such disclosure is authorized.
(c) Disclosure and use of returns and return information by officers
and employees of Department of Labor, Pension Benefit Guaranty
Corporation, and Department of Justice--(1) Use by officers and
employees of Department of Labor and Pension Benefit Guaranty
Corporation. Returns and return information disclosed to officers and
employees of the Department of Labor and the Pension Benefit Guaranty
Corporation as provided by this section may be used by such officers and
employees for purposes of, but only to the extent necessary in,
administration of any provision of title I or IV of the Act, including
any preparation for any administrative or judicial proceeding (or
investigation which may result in such a proceeding) authorized by, or
described in, title I or IV of the Act.
(2) Disclosure by officers and employees of Department of Labor and
Pension Benefit Guaranty Corporation to, and use by, other persons,
including officers and employees of the Department of Justice. (i)
Returns and return information disclosed to officers and employees of
the Department of Labor or the Pension Benefit Guaranty Corporation as
provided by this section may be disclosed by such officers and employees
to officers and employees of the Department of Justice (including United
States attorneys) personally and directly engaged in, and for their
necessary use in, any Federal grand jury proceeding, or preparation for
any civil or criminal judicial proceeding (or for their necessary use in
an investigation which may result in such a proceeding), authorized by,
or described in, title I or IV of the Act.
(ii) Returns and return information disclosed to officers and
employees of the Department of Labor, the Pension Benefit Guaranty
Corporation, and the Department of Justice as provided by this section
may be disclosed by such officers and employees to other persons,
including, but not limited to, persons described in subparagraph
(2)(iii) of this paragraph, but only to the extent necessary in
connection with administration of the provisions of title I or IV of the
Act, including a Federal grand jury proceeding, and proper preparation
for a proceeding (or investigation), described in subparagraph (1) or
(2)(i). Such disclosures may include, but are not limited to,
disclosures where necessary--
(A) To properly obtain the services of persons having special
knowledge or technical skills;
(B) To properly interview, consult, depose, or interrogate or
otherwise obtain relevant information from the taxpayer to whom such
return or return information relates (or the legal representative of
such taxpayer) or any witness who may be called to give evidence in the
proceeding; or
(C) To properly conduct negotiations concerning, or obtain
authorization for, settlement or disposition of the proceeding, in whole
or in part, or stipulations of fact in connection with the proceeding.
[[Page 56]]
Disclosure of a return or return information to a person other than the
taxpayer to whom such return or return information relates (or the legal
representative of such taxpayer) to properly accomplish any purpose or
activity described in this subparagraph should be made, however, only if
such purpose or activity cannot otherwise properly be accomplished
without making such disclosure.
(iii) Among those persons to whom returns and return information may
be disclosed by officers and employees of the Department of Labor, the
Pension Benefit Guaranty Corporation, and the Department of Justice as
provided by subparagraph (2)(ii) of this paragraph are:
(A) Other officers and employees of the Department of Labor, the
Pension Benefit Guaranty Corporation, and the Department of Justice;
(B) Officers and employees of another Federal agency (as defined in
section 6103(b)(9)) working under the direction and control of such
officers and employees of the Department of Labor, the Pension Benefit
Guaranty Corporation, or the Department of Justice; and
(C) Court reporters.
Disclosure of returns or return information to other persons by officers
and employees of the Department of Labor or the Pension Benefit Guaranty
Corporation as provided by subparagraph (2)(ii) of this paragraph for
purposes of conducting research, surveys, studies, and publications
referred to in section 513(a), or authorized by title IV, of the Act
shall be restricted, however, to disclosure to other officers and
employees of such department or corporation to whom such disclosure is
necessary in connection with such conduct or to the taxpayer by whom
such return was made or to whom such return information relates if the
return or return information can be associated with, or otherwise
identify, directly or indirectly, a particular taxpayer.
(3) Disclosure in judicial proceedings. A return or return
information disclosed to officers and employees of the Department of
Labor, the Pension Benefit Guaranty Corporation, or the Department of
Justice as provided by this section may be entered into evidence by such
officers or employees in a civil or criminal judicial proceeding
authorized by, or described in, title I or IV of the Act, provided that,
in the case of a judicial proceeding described in section 6103(i)(4),
the requirements of section 6103(i)(4) have first been met.
(d) Disclosure of returns and return information in connection with
certain consultations between Departments of the Treasury and Labor.
Upon general written request to the Commissioner of Internal Revenue by
the Secretary of Labor, officers and employees of the Service may
disclose to officers and employees of the Department of Labor such
returns and return information as may be necessary to properly carry out
any consultation required by section 3002, 3003, or 3004 of the Act.
(e) Return information open to public inspection under section 6104.
Nothing in these regulations shall be construed to deny officers and
employees of the Department of Labor and the Pension Benefit Guaranty
Corporation the right to inspect return information available to the
public under section 6104 of the Code.
(Secs. 6103 and 7805 of the Internal Revenue Code of 1954 (90 Stat.
1667, 1685, 68A Stat. 917; 26 U.S.C. 6103 and 7805))
[T.D. 7723, 45 FR 65571, Oct. 3, 1980, as amended by T.D. 7757, 46 FR
6930, Jan. 22, 1981; T.D. 7911, 48 FR 40377, Sept. 7, 1983]
Sec. 301.6103(l)(14)-1 Disclosure of return information to United States Customs Service.
(a) General rule. Pursuant to the provisions of section 6103(l)(14)
of the Internal Revenue Code, officers and employees of the Internal
Revenue Service may disclose to officers and employees of the United
States Customs Service return information (as defined by section
6103(b)) with respect to taxes imposed by chapters 1 and 6 of the
Internal Revenue Code solely for purposes of, and only to the extent
necessary in--
(1) Ascertaining the correctness of any entry in audits as provided
for in section 509 of the Tariff Act of 1930 or;
(2) Other actions to recover any loss of revenue, or to collect
duties, taxes, and fees, determined to be due and owing pursuant to such
audits.
(b) Procedures. Disclosure of return information by officers or
employees of
[[Page 57]]
the Internal Revenue Service as provided by paragraph (a) of this
section will be made only following receipt by the Internal Revenue
Service of a written request for the disclosure by the Commissioner of
the U.S. Customs Service identifying--
(1) The particular items of return information to be disclosed;
(2) The particular taxpayer to whom the return information relates;
(3) The taxable period or date to which the return information
relates;
(4) The particular purpose for which each item of return information
is needed, including an explanation as to how the requested information
is necessary to accomplish that purpose. In addition, the request must
designate by title the officers and employees of the Customs Service to
whom the disclosure is authorized and certify that the Customs Service
has initiated or intends to initiate, under section 509 of the Tariff
Act of 1930, an audit of each taxpayer for whom return information is
requested or that the taxpayer has a transactional or ownership
relationship with the subject of such an audit.
(c) Return information subject to disclosure. Any return information
requested must be necessary to a Customs determination of the
correctness of any entry in audits conducted under section 509 of the
Tariff Act of 1930. Taxpayers as to whom return information is requested
must either be the subject of a Customs audit (or intended audit) or
have a transactional or ownership relationship with the subject of a
Customs audit. Requested information must relate to the declared value,
classification or rate of duty applicable to entered merchandise.
Requested information may also include any adjustment by the IRS to the
items of return information described by this paragraph.
(d) Return information not subject to disclosure. The following
return information may not be requested or disclosed pursuant to section
6103(l)(14) of the Internal Revenue Code: any Advance Pricing Agreement
or information submitted to or generated by the IRS as part of the
negotiation process for an Advance Pricing Agreement, or any information
to the extent its disclosure would be inconsistent with a tax treaty or
executive agreement with respect to which the United States is a party.
(e) Impairment of tax administration. Return information with
respect to a taxpayer may not be disclosed pursuant to this section if
the IRS determines that the disclosure would identify a confidential
informant or seriously impair any civil or criminal tax investigation or
proceeding.
(f) Use by Customs Service. Return information disclosed under this
section may be used by the U.S. Customs Service to the extent necessary
to ascertain or to document the correctness of any entry in audits as
provided for in section 509 of the Tariff Act of 1930 and in any related
administrative proceedings to recover any loss of revenue, or to collect
duties, taxes or fees, determined to be due and owing pursuant to these
audits. Uses may include, to the extent necessary, disclosure to the
importer (or the legal representative of such importer) subject to the
audit with respect to which the information was requested.
(g) Disclosure to, and use by, the Department of Justice. Return
information disclosed to officers and employees of the U.S. Customs
Service as provided by this section may be disclosed by these officers
and employees to officers and employees of the Department of Justice
(including United States attorneys) personally and directly engaged in,
and solely for their necessary use in, advocating or defending the
correctness of Customs determinations with respect to any entry, in any
civil judicial proceeding, or any preparations therefor (or for their
necessary use in an investigation which may result in such a
proceeding), to recover any loss of revenue, or to collect duties, taxes
or fees, determined to be due and owing as a consequence of an audit
provided for in section 509 of the Tariff Act of 1930.
(h) Disclosure by officers and employees of the Department of
Justice. Return information disclosed to officers and employees of the
Department of Justice (including United States Attorneys) as provided by
this section may be disclosed by these officers and employees to other
persons as is necessary to properly accomplish the purposes or
[[Page 58]]
activities described in paragraph (g). Disclosure of return information
to a person, other than the importer (or the legal representative of the
importer) subject to the audit with respect to which the information was
originally requested, to properly accomplish any purpose or activity
described in paragraph (g) may be made, however, only if the purpose or
activity cannot otherwise properly be accomplished without making the
disclosure. Disclosures may include, but are not limited to, disclosures
where necessary--
(1) To properly obtain the services of persons having special
knowledge or technical skills;
(2) To properly interview, consult, depose, or interrogate or
otherwise obtain relevant information from, the taxpayer (or the legal
representative of the taxpayer) to whom the return information relates
or any witness who may be called to give evidence in the proceeding; or
(3) To properly conduct negotiations concerning, or obtain
authorization for, settlement or disposition of the proceeding, in whole
or in part, or stipulations of fact in connection with the proceeding.
(i) Use in criminal judicial proceedings. Return information
disclosed pursuant to this section may not be used in any criminal
judicial proceeding, or any preparations therefor (or in a criminal
investigation which may result in such a proceeding), involving the
enforcement of a criminal statute, without compliance with the
requirements of section 6103(i) (1) or (2) as appropriate. However, the
return information may in any event be used for purposes of complying
with the requirements of section 6103(i).
(j) Restrictions. Return information disclosed to officers and
employees of the U.S. Customs Service or to the Department of Justice as
provided by this section may not be used or disclosed for any purpose
other than to ascertain, or advocate or defend the correctness of,
Customs determinations with respect to, any entry in the audits for
which the information was requested or in certain actions resulting from
the audits as described above. Return information disclosed to officers
and employees of the U.S. Customs Service or to the Department of
Justice as provided by this section may not be disclosed to any person,
including any contractor of the U.S. Customs Service, except as provided
by this section, or as otherwise provided by section 6103 of the
Internal Revenue Code.
[T.D. 8527, 59 FR 11548, Mar. 11, 1994. Redesignated by T.D. 8694, 61 FR
66220, Dec. 17, 1996]
Sec. 301.6103(n)-1 Disclosure of returns and return information in connection with procurement of property and services for tax administration purposes.
(a) General rule. Pursuant to the provisions of section 6103(n) of
the Internal Revenue Code and subject to the requirements of paragraphs
(b), (c), and (d) of this section, officers or employees of the Treasury
Department, a State tax agency, the Social Security Administration, or
the Department of Justice, are authorized to disclose returns and return
information (as defined in section 6103(b)) to any person (including, in
the case of the Treasury Department, any person described in section
7513(a)), or to an officer or employee of such person, to the extent
necessary in connection with contractual procurement of--
(1) Equipment or other property, or
(2) Services relating to the processing, storage, transmission, or
reproduction of such returns or return information, the programming,
maintenance, repair, or testing of equipment or other property, or the
providing of other services, for purposes of tax administration (as
defined in section 6103(b)(4)).
No person, or officer or employee of such person, to whom a return or
return information is disclosed by an officer or employee of the
Treasury Department, the State tax agency, the Social Security
Administration, or the Department of Justice, under the authority of
this paragraph shall in turn disclose such return or return information
for any purpose other than as described in this paragraph, and no such
further disclosure for any such described purpose shall be made by such
person, officer, or employee to anyone, other than another officer or
employee of such person whose duties or responsibilities require such
disclosure for a
[[Page 59]]
purpose described in this paragraph, without written approval by the
Internal Revenue Service.
(b) Limitations. For purposes of paragraph (a) of this section,
disclosure of returns or return information in connection with
contractual procurement of property or services described in such
paragraph will be treated as necessary only if such procurement or the
performance of such services cannot otherwise be reasonably, properly,
or economically carried out or performed without such disclosure. Thus,
for example, disclosures of returns or return information to employees
of a contractor for purposes of programming, maintaining, repairing, or
testing computer equipment used by the Internal Revenue Service or a
State tax agency should be made only if such services cannot be
reasonably, properly, or economically performed by use of information or
other data in a form which does not identify a particular taxpayer. If,
however, disclosure of returns or return information is in fact
necessary in order for such employees to reasonably, properly, or
economically perform the computer related services, such disclosures
should be restricted to returns or return information selected or
appearing at random. Further, for purposes of paragraph (a), disclosure
of returns or return information in connection with the contractual
procurement of property or services described in such paragraph should
be made only to the extent necessary to reasonably, properly, or
economically conduct such procurement activity. Thus, for example, if an
activity described in paragraph (a) can be reasonably, properly, and
economically conducted by disclosure of only parts or portions of a
return or if deletion of taxpayer identity information (as defined in
section 6103(b)(6) of the Code) reflected on a return would not
seriously impair the ability of the contractor or his officers or
employees to conduct the activity, then only such parts or portions of
the return, or only the return with taxpayer identity information
deleted, should be disclosed.
(c) Notification requirements. Persons to whom returns or return
information is or may be disclosed as authorized by paragraph (a) of
this section shall provide written notice to their officers or
employees--
(1) That returns or return information disclosed to such officer or
employee can be used only for a purpose and to the extent authorized by
paragraph (a) of this section;
(2) That further inspection of any returns or return information for
a purpose or to an extent unauthorized by paragraph (a) of this section
constitutes a misdemeanor, punishable upon conviction by a fine of as
much as $1,000, or imprisonment for as long as 1 year, or both, together
with costs of prosecution;
(3) That further disclosure of any returns or return information for
a purpose or to an extent unauthorized by paragraph (a) of this section
constitutes a felony, punishable upon conviction by a fine of as much as
$5,000, or imprisonment for as long as 5 years, or both, together with
the costs of prosecution;
(4) That any such unauthorized further inspection or disclosure of
returns or return information may also result in an award of civil
damages against any person who is not an officer or employee of the
United States in an amount not less than $1,000 for each act of
unauthorized inspection or disclosure or the sum of actual damages
sustained by the plaintiff as a result of such unauthorized disclosure
or inspection as well as an award of costs and reasonable attorneys
fees; and
(5) If such person is an officer or employee of the United States, a
conviction for an offense referenced in paragraph (c)(2) or (c)(3) of
this section shall result in dismissal from office or discharge from
employment.
(d) Safeguards. Any person to whom a return or return information is
disclosed as authorized by paragraph (a) of this section shall comply
with all applicable conditions and requirements which may be prescribed
by the Internal Revenue Service for the purposes of protecting the
confidentiality of returns and return information and preventing
disclosures of returns or return information in a manner unauthorized by
paragraph (a). The terms of any contract between the Treasury
Department, a State tax agency, the Social
[[Page 60]]
Security Administration, or the Department of Justice, and a person
pursuant to which a return or return information is or may be disclosed
for a purpose described in paragraph (a) shall provide, or shall be
amended to provide, that such person, and officers and employees of the
person, shall comply with all such applicable conditions and
restrictions as may be prescribed by the Service by regulation,
published rules or procedures, or written communication to such person.
If the Service determines that any person, or an officer or employee of
any such person, to whom returns or return information has been
disclosed as provided in paragraph (a) has failed to, or does not,
satisfy such prescribed conditions or requirements, the Service may take
such actions as are deemed necessary to ensure that such conditions or
requirements are or will be satisfied, including--
(1) Suspension or termination of any duty or obligation arising
under a contract with the Treasury Department referred to in this
paragraph or suspension of disclosures by the Treasury Department
otherwise authorized by paragraph (a) of this section, or
(2) Suspension of further disclosures of returns or return
information by the Service to the State tax agency, or to the Department
of Justice, until the Service determines that such conditions and
requirements have been or will be satisfied.
(e) Definitions. For purposes of this section--
(1) The term Treasury Department includes the Internal Revenue
Service and the Office of the Chief Counsel for the Internal Revenue
Service;
(2) The term State tax agency means an agency, body, or commission
described in section 6103(d) of the Code; and
(3) The term Department of Justice includes offices of the United
States Attorneys.
(f) Effective date. Section 301.6103(n)-1(c) is applicable on March
12, 2003.
[T.D. 7723, 45 FR 65573, Oct. 3, 1980, as amended by T.D. 8271, 54 FR
46383, Nov. 3, 1989; T.D. 8695, 61 FR 66218, Dec. 17, 1996; T.D. 9044,
68 FR 11741, Mar. 12, 2003]
Sec. 301.6103(p)(2)(B)-1 Disclosure of returns and return information by other agencies.
(a) General rule. Subject to the requirements of paragraphs (b),
(c), and (d) of this section, returns or return information that have
been obtained by a Federal, state or local agency, or its agents or
contractors, in accordance with section 6103 (the first recipient) may
be disclosed by the first recipient to another recipient authorized to
receive such returns or return information under section 6103 (the
second recipient).
(b) Approval by Commissioner. A disclosure described in paragraph
(a) of this section may be made if the Commissioner of Internal Revenue
(the Commissioner) determines, after receiving a written request under
this section, that such returns or return information are more readily
available from the first recipient than from the Internal Revenue
Service (IRS). The disclosure authorization by the Commissioner shall be
directed to the head of the first recipient and may contain such
conditions or restrictions as the Commissioner may prescribe. The
disclosure authorization may be revoked by the Commissioner at any time.
(c) Requirements and restrictions. The second recipient may receive
only returns or return information as authorized by the provision of
section 6103 applicable to such second recipient. Any returns or return
information disclosed may be used by the second recipient only for a
purpose authorized by and subject to any conditions imposed by section
6103 and the regulations thereunder, including, if applicable,
safeguards imposed by section 6103(p)(4).
(d) Records and reports of disclosure. The first recipient shall
maintain to the satisfaction of the IRS a permanent system of
standardized records regarding such disclosure authorization described
in paragraph (a) of this section and any disclosure of returns and
return information made pursuant to such authorization, and shall
provide such information as prescribed by the Commissioner in order to
enable the IRS to comply with its obligations under section 6103(p)(3)
to keep accountings for disclosures and to make annual reports of
disclosures to the
[[Page 61]]
Joint Committee on Taxation. The information required for reports to the
Joint Committee on Taxation must be provided within 30 days after the
close of each calendar year. The requirements of this paragraph do not
apply to the disclosure of returns and return information as provided by
paragraph (a) of this section which, had such disclosures been made
directly by the IRS, would not have been subject to the recordkeeping
requirements imposed by section 6103(p)(3)(A).
(e) Effective date. This section is applicable on January 21, 2003.
[T.D. 9036, 68 FR 2696, Jan. 21, 2003]
Sec. 301.6103(p)(7)-1 Procedures for administrative review of a determination that a State tax agency has failed to safeguard Federal tax returns or return
information.
(a) Notice of Service's intention to terminate disclosure to a State
tax agency. Notwithstanding subsection (d) of section 6103, the Internal
Revenue Service may terminate disclosure of Federal returns and return
information to a State agency, body, or commission described in section
6103(d) (hereinafter in this section referred to as a State tax agency)
if the Service makes a determination that:
(1) A State tax agency has made unauthorized disclosure of Federal
returns or return information received from the Service and that the
State tax agency has not taken adequate corrective action to prevent
repetition of the unauthorized disclosure, or
(2) A State tax agency does not satisfactorily maintain the
safeguards described in subsection (p)(4) of section 6103, and has made
no adequate plan to improve its system to maintain those safeguards
satisfactorily. Prior to terminating disclosure, the Service will notify
the State tax agency in writing of the Service's preliminary
determination and of the Service's intention to discontinue disclosure
of Federal returns and return information to the State tax agency. Upon
so notifying the State tax agency, the Service, if it determines that
Federal tax administration would otherwise be seriously impaired, may
suspend further disclosure of Federal returns and return information to
the State tax agency pending a final determination by the Commissioner
or Deputy Commissioner described in subparagraph (2) of paragraph (c) of
this section.
(b) State tax agency's right to appeal. A State tax agency shall
have 30 days from the date of receipt of a notice described in paragraph
(a) of this section to appeal the preliminary determination described in
paragraph (a) of this section. The appeal shall be made directly to the
Commissioner.
(c) Procedures for administrative review. (1) To appeal a
preliminary determination described in paragraph (a) of this section,
the State agency shall send a written request for a conference to:
Commissioner of Internal Revenue (Attention: C), 1111 Constitution
Avenue, NW., Washington, D.C. 20224. The request must include a complete
description of the State tax agency's present system of safeguarding
Federal returns or return information received from the Service. The
request must then state the reason or reasons that the State agency
believes that such system, including improvements, if any, to such
system expected to be made in the near future, is or will be adequate to
safeguard Federal returns or return information received from the
Service.
(2) Within 45 days of the receipt of a request made in accordance
with the provisions of subparagraph (1) of this paragraph, the
Commissioner or Deputy Commissioner will personally hold a conference
with representatives of the State tax agency, after which the
Commissioner or Deputy Commissioner will make a final determination with
respect to the appeal.
(Secs. 6103(p)(7) and 7805 of the Internal Revenue Code of 1954 (90
Stat. 1685, 26 U.S.C. 6103(p)(7); 68A Stat. 917; 26 U.S.C. 7805))
[T.D. 7693, 45 FR 26325, Apr. 18, 1980]
Sec. 301.6104(a)-1 Public inspection of material relating to tax-exempt organizations.
(a) Application for tax exemption and supporting documents. If the
Internal Revenue Service determines that an organization described in
section 501 (c) or (d) is exempt from taxation for any taxable year, the
application for tax
[[Page 62]]
exemption upon which the determination is based, together with any
supporting documents, is open to public inspection. Some applications
for tax exemption have been destroyed and therefore are not available
for inspection. For purposes of determining the availability for public
inspection, a claim for tax exemption filed to reestablish exempt status
after denial thereof under the provisions of section 503 or 504 (as in
effect on December 31, 1969), or under the corresponding provisions of
any prior revenue law, is considered an application for tax exemption.
(b) Letters or documents issued by the Internal Revenue Service with
respect to an application for tax exemption. If an application for tax
exemption is filed with the Internal Revenue Service after October 31,
1976, and is open to public inspection under paragraph (a) of this
section, then any letter or document issued to the applicant by the
Internal Revenue Service which relates to the application is also open
to public inspection. For rules relating to when a letter or document is
issued, see Sec. 301.6110-2(h). Letters or documents to which this
paragraph applies include, but are not limited to--
(1) Favorable rulings and determination letters (see
Sec. 601.201(n)(1)) issued in response to applications for tax
exemption,
(2) Technical advice memoranda (see Sec. 601.201(n)(9)) issued with
respect to an approved, or subsequently approved, application for tax
exemption, and
(3) Letters issued in response to an application for tax exemption
that propose a finding that the organization is not entitled to be
exempt from tax, if the organization is subsequently determined, on the
basis of the application, to be exempt from tax.
(c) Requirement of exempt status. An application for tax exemption,
supporting documents, and letters or documents issued by the Internal
Revenue Service that relate to the application will not be open to
public inspection before the organization filing the application is
determined, on the basis of the application, to be exempt from taxation
for any taxable year. On the other hand, if the organization is
determined to be exempt for any taxable year, the material will not be
withheld from public inspection on the ground that the organization is
determined not to be exempt for any other taxable year.
(d) Documents included in the term ``application for tax
exemption''. For purposes of this section--
(1) Prescribed application form. If a form is prescribed for an
organization's application for tax exemption, the application for tax
exemption includes the form and all documents and statements the
Internal Revenue Service requires to be filed with the form.
(2) No prescribed application form. If no form is prescribed for an
organization's application for tax exemption, the application for tax
exemption includes:
(i) The application letter and a copy of the articles of
incorporation, declaration of trust, or other instrument of similar
import that sets forth the permitted powers or activities of the
organization,
(ii) The bylaws or other code of regulations,
(iii) The latest financial statement showing assets, liabilities,
receipts and disbursements,
(iv) Statements showing the character of the organization, the
purpose for which it was organized, and its actual activities,
(v) Statements showing sources of income and receipts and the
disposition thereof, and whether or not any income or receipts is
credited to surplus or may inure to the benefit of any private
shareholder or individual, and
(vi) Any other statements or documents the Internal Revenue Service
requires to be filed with the application lettter.
(3) Prohibited transactions. An application for tax exemption does
not include a request for a ruling as to whether a proposed transaction
is a prohibited transaction under section 503.
(e) Supporting documents defined. For purposes of this section,
``supporting documents'', as used with respect to an application for tax
exemption, means any statement or document not described in paragraph
(d) of this section that is submitted by an organization in support of
its application. For example, a legal brief submitted in support of an
[[Page 63]]
application for tax exemption is a supporting document.
(f) Statement of exempt status. In addition to having the
opportunity to inspect material relating to tax exempt organizations, a
person may request a statement setting forth the following information:
(1) The subsection and paragraph of section 501 (or the
corresponding provision of any prior revenue law) under which an
organization has been determined, on the basis of an application open to
public inspection, to qualify for exemption from taxation, and
(2) Whether the organization is currently held to be exempt.
The request for the statement must be made in the same manner as a
request for inspection (see Sec. 301.6104(a)-6).
(g) Withholding of certain information from public inspection. For
rules relating to certain information contained in an application for
tax exemption and related material which will be withheld from public
inspection, see Sec. 301.6104(a)-5(a).
(h) Procedures for inspection. For rules relating to procedures for
public inspection of applications for tax exemption and related
material, see Sec. 301.6104(a)-6.
(i) Material not open to public inspection under section 6104 or
6110. Under section 6110 certain written determinations issued by the
Internal Revenue Service are made available for public inspection.
Section 6110 does not apply, however, to matters on which the
determination of availability for public inspection is made under
section 6104. Accordingly, Sec. 301.6110-1(a) describes matters which,
for purposes of section 6110, are considered within the ambit of section
6104. Some determination letters and other documents relating to tax
exempt organizations that are not open to public inspection under
section 6104(a)(1)(A) and this section are nevertheless within the ambit
of section 6104 for purposes of section 6110. These determination
letters and other documents are therefore not available for public
inspection under either section 6104 or section 6110. They include but
are not limited to--
(1) Unfavorable rulings or determination letters (see
Sec. 601.201(n)) issued in response to applications for tax exemption,
(2) Rulings or determination letters revoking or modifying a
favorable determination letter (see Sec. 601.201(n)(6)),
(3) Technical advice memoranda (see Sec. 601.201(n)(9)) relating to
a disapproved application for tax exemption or the revocation or
modification of a favorable determination letter,
(4) Any letter or document filed with or issued by the Internal
Revenue Service relating to whether a proposed or accomplished
transaction is a prohibited transaction under section 503,
(5) Any letter or document filed with or issued by the Internal
Revenue Service relating to an organization's status as an organization
described in section 509 (a) or 4942(j)(3), unless the letter or
document relates to the organization's application for tax exemption,
and
(6) Any other letter or document filed with or issued by the
Internal Revenue Service which, although it relates to an organization's
tax exempt status as an organization described in section 501 (c) or
(d), does not relate to that organization's application for tax
exemption, within the meaning of paragraph (d).
(Secs. 6104(a)(1)(A), 6104(a)(1)(B), and 7805 of the Internal Revenue
Code of 1954 (72 Stat. 1660, 88 Stat. 940, 68A Stat. 917; 26 U.S.C.
6104(a)(1)(A), 6104(a)(1)(B), 7805))
[T.D. 7845, 47 FR 50486, Nov. 8, 1982]
Sec. 301.6104(a)-2 Public inspection of material relating to pension and other plans.
(a) Material open to inspection. Except as provided in
Sec. 301.6104(a)-4 with respect to plans having fewer than 26
participants, an application for a determination letter which is filed
with the Internal Revenue Service after September 2, 1974, together with
supporting documents filed by the applicant in support of the
application, will be open to public inspection under section
6104(a)(1)(B) (i) and (ii). An application for a determination letter
and supporting documents will be open to public inspection whether or
not the application is withdrawn by the applicant, and whether or not
the Internal Revenue Service determines that the plan, account, or
annuity to which the application relates is qualified or that
[[Page 64]]
any related trust or custodial account is exempt from tax.
(b) Documents included in the term ``application for a determination
letter''--(1) Employees' plans and individual retirement plans. For
purposes of this section, the term ``application for a determination
letter'' includes the documents that an applicant files with respect to
a request that the Internal Revenue Service determine the qualification
of--
(i) A pension, profit-sharing, or stock bonus plan under section
401(a),
(ii) An annuity plan under section 403(a),
(iii) A bond purchase plan under section 405(a), or
(iv) An individual retirement account or annuity described in
section 408 (a), (b) or (c).
(2) Tax exempt trusts or custodial accounts. The term ``application
for a determination letter'' also includes the documents an applicant
files with respect to a request that the Internal Revenue Service
determine the exemption from tax under section 501(a) of an organization
forming part of a plan or account described in subparagraph (1) of this
paragraph, or a custodial account described in section 401(f).
(3) Master, prototype and pattern plans. The term ``application for
a determination letter'' also includes documents which an applicant
files with respect to a request for approval of a master, prototype,
pattern or other such plan or account.
(4) Prescribed forms and application letters. With respect to an
application for a determination letter described in this paragraph (b)
for which an application form is prescribed, the application for a
determination letter includes the form and all documents and statements
required to be filed in connection with the form. With respect to an
application for a determination letter for which no application form is
prescribed, the application for a determination letter includes the
application letter and all documents and statements the Internal Revenue
Service requires to be submitted with the application letter.
(c) Documents not constituting an ``application for a determination
letter''. The following are not applications for a determination letter
for purposes of this section:
(1) An incomplete application that is returned without action for
proper completion,
(2) An application that is returned without action to the applicant
for failure to notify all interested parties in accordance with the
regulations under section 7476 (relating to declaratory judgments), and
(3) A request for a ruling as to whether a proposed transaction is a
prohibited transaction under section 4975.
(d) Supporting documents. ``Supporting documents'', as used with
respect to an application for a determination letter which is open to
public inspection under this section, means any statement or document
submitted in support of the application which is not specifically
required by the application form or the Internal Revenue Service. For
example, a legal brief submitted in support of an application for a
determination letter is a supporting document.
(e) Applicant. For purposes of this section, Sec. 301.6104(a)-3
(relating to Internal Revenue Service letters and documents open to
public inspection) and Sec. 301.6104(a)-5 (relating to the withholding
of certain information from public inspection), an ``applicant''
includes, but is not limited to, an employer, plan administrator (as
defined in section 414(g)), labor union, bank, or insurance company that
files an application for a determination letter.
(Secs. 6104(a)(1)(A), 6104(a)(1)(B), and 7805 of the Internal Revenue
Code of 1954 (72 Stat. 1660, 88 Stat. 940, 68A Stat. 917; 26 U.S.C.
6104(a)(1)(A), 6104(a)(1)(B), 7805))
[T.D. 7845, 47 FR 50487, Nov. 8, 1982]
Sec. 301.6104(a)-3 Public inspection of Internal Revenue Service letters and documents relating to pension and other plans.
(a) In general. Except as provided in Sec. 301.6104(a)-4 with
respect to plans having fewer than 26 participants, a letter or other
document issued by the Internal Revenue Service after September 2, 1974,
is open to public inspection under section 6104(a)(1)(B)(iv) and this
section, if it is issued with respect to--
(1) The qualification of a pension, profit-sharing or stock bonus
plan
[[Page 65]]
under section 401(a), an annuity plan under section 403(a), a bond
purchase plan under section 405(a), or an individual retirement account
or annuity described in section 408 (a), (b) or (c),
(2) The exemption from tax under section 501(a) of an organization
forming part of such a plan or account, or a custodial account described
in section 401(f), or
(3) The approval of a master, prototype, pattern or other such plan
or account.
(b) Scope. Internal Revenue Service letters and documents open to
public inspection under section 6104(a)(1)(B)(iv) and this section are
not limited to those issued in response to an application for a
determination letter described in Sec. 301.6104(a)-2. They are, however,
limited to those issued by the Internal Revenue Service to the person or
organization which either did or could file an application for a
determination letter for the plan, account or annuity to which the
letter or document relates. If such a person or organization designates
a representative having a power of attorney, however, then the letter or
document will be open to inspection if issued to the representative. For
rules relating to when a letter or document is issued, see
Sec. 301.6110-2(h). Internal Revenue Service letters and documents are
open to public inspection under section 6104(a)(1)(B)(iv) and this
section whether or not the Internal Revenue Service determines that the
plan, account or annuity to which the letter or document relates is
qualified or that any related trust or custodial account is exempt from
tax.
(c) Letters and documents open to public inspection. Internal
Revenue Service letters and documents open to public inspection under
section 6104(a)(1)(B)(iv) and this section include, but are not limited
to:
(1) Determination letters relating to the qualification of a plan,
account or annuity described in paragraph (a)(1) of this section (see
Sec. 601.201 (o)),
(2) Technical advice memoranda (see Sec. 601.201(n)(9)) relating to
the issuance of such determination letters,
(3) Technical advice memoranda relating to the continuing
qualification of a plan, account or annuity previously determined to be
qualified, or to the qualification of a plan, account or annuity for
which no determination letter has been issued,
(4) Letters or documents revoking or modifying any prior favorable
determination letter or denying the qualification of a plan, account or
annuity for which no determination letter has been issued,
(5) Determination letters relating to the exemption from tax of a
trust or custodial account described in paragraph (a)(2) of this section
(see Sec. 601.201 (o)(2)(i)(b)), or
(6) Opinion letters relating to the acceptability of the form of any
master, prototype or other such plan or account (see Sec. 601.201 (p)
and (q)) or notification letters issued with respect to pattern plans.
(d) Extent letter or document open to public inspection. A letter or
document issued by the Internal Revenue Service is open to public
inspection under section 6104(a)(1)(B)(iv) and this section only to the
extent it relates directly to the qualification of a plan, account or
annuity, the exemption from tax of a related organization or custodial
account, or the approval of a master, prototype, pattern or other such
plan. Any part of the letter or document which does not directly relate
to such a qualification, exemption or approval is not open to public
inspection. For example, a letter to an employer which concludes that an
employee's plan is not qualified and the related trust is not tax exempt
will be open to public inspection. However, that same letter may also
assert an income tax deficiency because employer contributions to the
trust are, therefore, not deductible. In such a case, that part of the
letter relating to the tax deficiency will be deleted before the letter
is opened to public inspection.
(e) Letters or documents issued with respect to tax return
examination. In the case of an examination of a taxpayer's return or
consideration of a taxpayer's claim for credit or refund, no letter or
document issued to the taxpayer before the preliminary or ``30-day''
letter described in Sec. 601.105(d)(1) is issued to the taxpayer will be
open to public inspection under section 6104(a)(1)(B)(iv) and this
section. The ``30-day'' letter and
[[Page 66]]
any statutory notice of deficiency subsequently issued to the taxpayer
under section 6212 will be open to public inspection to the extent
provided in paragraph (d) of this section. If any letter or document
other than a statutory notice of deficiency is issued to the taxpayer
after the ``30-day'' letter is issued, such letter or document will be
open to inspection to the extent provided in paragraph (d) of this
section only if it finally resolves or otherwise disposes of a plan
qualification or tax exemption issue raised in the ``30-day'' letter.
(f) Letters or documents issued after September 2, 1974. Section
6104(a)(1)(B)(iv) and this section apply to letters or documents issued
by the Internal Revenue Service after September 2, 1974, even though the
relevant application for a determination letter or other initiating
correspondence from the applicant was filed with the Internal Revenue
Service before September 2, 1974.
(Secs. 6104(a)(1)(A), 6104(a)(1)(B), and 7805 of the Internal Revenue
Code of 1954 (72 Stat. 1660, 88 Stat. 940, 68A Stat. 917; 26 U.S.C.
6104(a)(1)(A), 6104(a)(1)(B), 7805))
[47 FR 7845, 47 FR 50487, Nov. 8, 1982]
Sec. 301.6104(a)-4 Requirement for 26 or more plan participants.
(a) Inspection by plan participants. In the case of a plan, annuity
or account described in Sec. 301.6104(a)-2(b) and Sec. 301.6104(a)-3(a)
that has fewer than 26 participants, material described in
Secs. 301.6104(a)-2 and 301.6104(a)-3 as open to public inspection is
only open to inspection by a plan participant or the participant's
authorized representative. This limitation does not apply, however, with
respect to documents which an applicant files with respect to a request
for approval of a master, prototype, pattern or other such plan (see
Sec. 301.6104 (a)-2 (b)(3)) or to opinion, notification or other such
letters issued by the Internal Revenue Service with respect to such
plans (see Sec. 301.6104 (a)-3 (a)(3)).
(b) Determining number of plan participants--(1) In general. For
purposes of determining whether a plan has fewer than 26 participants,
the number of plan participants will be the number indicated on the most
recent annual return filed for the plan under section 6058. Where an
annual return indicates the number of participants both at the beginning
and end of the plan year, the number indicated on the return means the
number at the end of the plan year. If no annual return has been filed
for the plan, then the number of plan participants will be the number
indicated on the most recent application for a determination letter
filed for the plan. If, however, the number of plan participants is
increased prior to final Internal Revenue Service action on the
application, the number of plan participants will be that increased
number.
(2) Decreasing number of plan participants. If a plan having 26 or
more participants, as indicated on an annual return or application for a
determination letter, subsequently files an annual return indicating
fewer than 26 plan participants, then material relating to the plan
which is issued or received by the Internal Revenue Service after the
date the annual return is filed will be open to inspection only by plan
participants or their authorized representatives. Similarly, if a plan
having 26 or more participants as indicated on an annual return or an
application for a determination letter, subsequently files an
application for a determination letter which indicates fewer than 26
plan participants, then that application and related material, as well
as any other material relating to the plan which is received or issued
by the Internal Revenue Service after the date of receipt of that
application, will be open to inspection only by plan participants or
their authorized representatives. In either case, material open to
public inspection pursuant to the number of plan participants indicated
on previous annual returns or applications for a determination letter
will remain open to public inspection.
(3) Increasing number of plan participants. If a plan having fewer
than 26 plan participants, as indicated on an annual return or
application for a determination letter, files a subsequent return or
application indicating 26 or more plan participants, all the plan's
prior applications and other material received or issued by the Internal
Revenue Service after September 2, 1974,
[[Page 67]]
will be open to public inspection regardless of the number of plan
participants indicated on any prior return or application.
(c) Plan participant. Solely for purposes of determining who is a
plan participant permitted to inspect material relating to a plan having
fewer than 26 participants, the term ``plan participant'' includes, but
is not limited to, former employees (such as certain retired and
terminated employees) who have a nonforfeitable right to benefits under
the plan. An individual who is merely a beneficiary of an employee or
former employee is not a plan participant, unless the individual is a
beneficiary of a deceased former employee and is receiving benefits or
entitled to receive future benefits under the plan. The term ``plan
participant'' also includes the administrator, executor, or trustee of
the estate of a deceased plan participant if such administrator,
executor, or trustee is receiving benefits or entitled to receive future
benefits under the plan in his or her official capacity. That material
may be available for inspection to an individual under this paragraph
does not constitute a determination by the Internal Revenue Service that
the individual is a plan participant for any purpose other than
inspection under section 6104(a)(1)(B).
(d) Authorized representative. ``Authorized representative'' means
the representative of a plan participant designated by the participant
in writing to inspect material described in Secs. 301.6104(a)-2 and
301.6104(a)-3. The document designating the authorized representative
must be signed by the plan participant and must specify that the
representative is authorized to inspect the material. The document, or a
copy, must be filed with the office of the Internal Revenue Service in
which the authorized representative is to inspect the material. A copy
which is reproduced by a photographic process need not be certified as a
true and correct copy of the original.
(Secs. 6104(a)(1)(A), 6104(a)(1)(B), and 7805 of the Internal Revenue
Code of 1954 (72 Stat. 1660, 88 Stat. 940, 68A Stat. 917; 26 U.S.C.
6104(a)(1)(A), 6104(a)(1)(B), 7805))
[T.D. 7845, 47 FR 50488, Nov. 8, 1982]
Sec. 301.6104(a)-5 Withholding of certain information from public inspection.
(a) Tax exempt organizations--(1) Trade secrets, patents, processes,
styles of work, or apparatus. An organization whose application for tax
exemption is open to public inspection under section 6104(a)(1)(A) and
Sec. 301.6104(a)-1 may in writing request the withholding of information
contained in the application or supporting documents which relates to
any trade secret, patent, process, style of work, or apparatus of the
organization. The information will be withheld from public inspection if
the Commissioner determines that the disclosure of such information
would adversely affect the organization. Requests for withholding
information from public inspection should be filed with the office with
which the organization files the documents containing the information.
The request must clearly identify the material desired to be withheld
(the document, page, paragraph, and line) and must state why the
information should not be open to public inspection. The organization
will be notified of the Commissioner's determination as to whether the
information will be withheld from public inspection. If the Commissioner
determines that the information will be disclosed, the organization will
be given 15 days after notification of the Commissioner's decision to
contest that decision before the document is disclosed.
(2) National defense material. The Internal Revenue Service will
withhold from public inspection any information which is submitted by an
organization whose application for tax exemption is open to inspection
under section 6104(a)(1)(A) and Sec. 301.6104(a)-1, if the Commissioner
determines that public disclosure would adversely affect the national
defense.
(b) Pension and other plans--(1) Applicant's exclusion of certain
information. Except as provided in subparagraph (2) of this paragraph,
information that, in the opinion of the applicant, is of the type
described in section 6104(a)(1) (C) or (D) should not be included in an
application for a determination letter, supporting documents, or any
other
[[Page 68]]
document open to inspection under section 6104(a)(1)(B). Accordingly, an
applicant should not include in an application for a determination
letter or supporting documents confidential compensation information as
described in subparagraph (4) of this paragraph. Neither should an
applicant include information relating to any trade secret, patent,
process, style of work or apparatus, the disclosure of which would be
adverse to the applicant.
(2) Exception for separate document. The rule that an applicant
should exclude from an application for a determination letter or other
documents information of the type in section 6104(a)(1) (C) or (D) does
not apply--
(i) In the case of the separate schedule to certain applications for
a determination letter which is provided for the purpose of setting
forth confidential compensation information (as described in
subparagraph (4) of this paragraph) which must be submitted by the
applicant.
(ii) If the applicant determines that it is impossible to provide
the Internal Revenue Service with sufficient information to support an
application for a determination letter without submitting what is
believed to be information of the type described in section 6104(a)(1)
(C) or (D), or
(iii) If the Internal Revenue Service requests that the applicant
submit information of the type described in section 6104(a)(1) (C) and
(D).
In a case described in subdivision (ii) or (iii) of this subparagraph,
the applicant is to set forth the information in a document separate
from the remainder of the application for a determination letter or
other documents. The separate document is to state why the information
is to be witheld from public inspection under section 6104(a)(1) (C) or
(D). If the Internal Revenue Service has not requested the information,
the separate document is to also state why it is impossible to provide
the Internal Revenue Service sufficient information to support the
application for a determination letter without including information
which is to be withheld. The separate document should clearly identify
the relevant portion of the application for a determination letter or
other document (the document, page, paragraph, and line) to which the
information set forth in the separate document relates. The Internal
Revenue Service will withhold from public inspection (including
inspection by a plan participant or authorized representative)
information contained in the separate document if the Commissioner
determines that the information is in fact information of the type
described in section 6104(a)(1) (C) or (D), and, in the case of
information relating to any trade secret, patent, process, style of work
or apparatus, the Commissioner further determines that disclosure would
be adverse to the applicant. If the Commissioner determines that the
information will be disclosed, the organization will be given 15 days
after notification of the Commissioner's decision to contest the
decision before the document is disclosed.
(3) National defense material. The Internal Revenue Service will
withhold from public inspection (including inspection by a plan
participant or authorized representative) any information which is
included in an application for a determination letter or supporting
documents if the Commissioner determines that public disclosure would
adversely affect the national defense. The information will be withheld
whether or not submitted on a separate document pursuant to subparagraph
(2) of this paragraph.
(4) Confidential compensation information. If an application for a
determination letter, supporting document, or related letter or document
referred to in section 6104(a)(1)(B) and Secs. 301.6104(a)-2 and
301.6104(a)-3 contains information (including aggregate figures) from
which an individual's compensation (including deferred compensation) may
be ascertained, that information is not open to public inspection
(including inspection by a plan participant or authorized
representative). Confidential compensation information includes the
amount of benefit a specific plan participant may expect to receive at
normal or early retirement age and the amount of the employer's
contributions under the plan that may be allocated to a specific plan
participant. However, so long as a plan has more than one participant,
the amount of benefit provided under the plan to plan
[[Page 69]]
participants, in general, at normal or early retirement age, or the
amount of the employer's contributions under the plan that are allocable
to plan participants, in general, does not constitute confidential
compensation information. Further, a description of the numbers of
individuals covered and not covered by a plan, listed by compensation
range, does not constitute confidential compensation information.
(Secs. 6104(a)(1)(A), 6104(a)(1)(B), and 7805 of the Internal Revenue
Code of 1954 (72 Stat. 1660, 88 Stat. 940, 68A Stat. 917; 26 U.S.C.
6104(a)(1)(A), 6104(a)(1)(B), 7805))
[T.D. 7845, 47 FR 50489, Nov. 8, 1982]
Sec. 301.6104(a)-6 Procedural rules for inspection.
(a) Place of inspection; tax exempt organizations and pension and
other plans. Material relating either to tax exempt organizations or to
pension and other plans that is open to public inspection under section
6104(a)(1) and Sec. 301.6104(a)-1 through Sec. 301.6104(a)-3 will be
made available for inspection at the Freedom of Information Reading
Room, National Office, Internal Revenue Service, 1111 Constitution
Avenue NW., Washington, D.C. 20224, and in the office of any district
director of internal revenue.
(b) Request for inspection--(1) Tax exempt organizations and pension
and other plans; public inspection. Material relating to either tax
exempt organizations or pension and other plans that is open to public
inspection under section 6104(a)(1) and Secs. 301.6104(a)-1 through
Sec. 301.6104(a)-3 will be available for inspection only upon request.
If inspection at the National Office is desired, a request should be
made in writing to the Commissioner of Internal Revenue, Attention:
Freedom of Information Reading Room, 1111 Constitution Avenue, NW.,
Washington, D.C. 20224. Requests for inspection in the office of a
district director should be made in writing to the district director's
office. The request must describe the material to be inspected in
reasonably sufficient detail so that Internal Revenue Service personnel
can locate the material. If a tax-exempt organization has more than one
application for tax exemption open to public inspection, or if a pension
or other plan has more than one application for a determination letter
open to public inspection, only the most recent application and related
material will be made available for inspection unless the request states
otherwise. Further, in the case of a pension or other plan, only
Internal Revenue Service documents issued or delivered after the date of
the filing of the most recent application for a determination letter
will be made available for inspection, unless the request states
otherwise.
(2) Pension and other plans; inspection by plan participant or
authorized representative. As described in Sec. 301.6104(a)-4, material
relating to plans having fewer than 26 participants is only open to
inspection by a plan participant or authorized representative. In the
case of such a plan, the rules described in subparagraph (1) of this
paragraph apply. The request for inspection must include satisfactory
evidence that the person requesting inspection is a plan participant
(see Sec. 301.6104(a)-4(c)) or an authorized representative of such a
plan participant within the meaning of Sec. 301.6104(a)-4(d).
(c) Time and extent of inspection. A person requesting inspection
will be notified when the material will be made available for
inspection. The material will be made available for inspection at times
that will not interfere with its use by the Internal Revenue Service or
exclude other persons from inspecting it. In addition, the Commissioner
or district director may limit the number of applications for tax
exemption, applications for a determination letter, supporting
documents, or letters and documents issued by the Internal Revenue
Service that will be made available to any person for inspection on a
given date. Inspection will be allowed only in the presence of an
Internal Revenue Service employee and only during regular business
hours.
(d) Copies. Notes may be taken of the material open for inspection.
Copies may be made manually or, if a person provides the equipment,
photographically at the place of inspection. Photographic copying is
subject to reasonable supervision with regard to the facilities and
equipment used. A fee will be charged for copies of the material
furnished by the Internal Revenue
[[Page 70]]
Service. Copies will be certified upon request.
(Secs. 6104(a)(1)(A), 6104(a)(1)(B), and 7805 of the Internal Revenue
Code of 1954 (72 Stat. 1660, 88 Stat. 940, 68A Stat. 917; 26 U.S.C.
6104(a)(1)(A), 6104(a)(1)(B), 7805))
[T.D. 7845, 47 FR 50490, Nov. 8, 1982]
Sec. 301.6104(b)-1 Publicity of information on certain information returns.
(a) In general. The following information, together with the name
and address of the organization or trust furnishing such information,
shall be a matter of public record:
(1) Except as otherwise provided in section 6104 and the regulations
thereunder, the information required by section 6033.
(2) The information furnished pursuant to section 6034 (relating to
returns by certain trusts) on Form 1041-A.
(3) The information required to be furnished by section 6058.
(b) Nondisclosure of certain information--(1) Names and addresses of
contributors. The names and addresses of contributors to an organization
other than a private foundation shall not be made available for public
inspection under section 6104(b).
(2) Amounts of contributions. The amounts of contributions and
bequests to an organization shall be available for public inspection
unless the disclosure of such information can reasonably be expected to
identify any contributor. Notwithstanding the preceding sentence, the
amounts of contributions and bequests to a private foundation shall be
available for public inspection.
(3) Foreign organizations. The names, addresses, and amounts of
contributions or bequests of persons who are not citizens of the United
States to a foreign organization described in section 4948(b) shall not
be made available for public inspection under section 6104(b).
(4) Confidential business information. Confidential business
information of contributors to any trust described in section 501(c)(21)
(black lung trusts) shall not be available for public inspection under
section 6104(b) provided:
(i) A request if filed with the office with which the trustee filed
the documents in which the information to be withheld is contained.
(ii) Such request clearly specifies the information to be withheld
and the reasons supporting the request for withholding, and
(iii) The Commissioner determines that such information is
confidential business information.
Information such as the contributor's estimated total liability for
black lung benefits, the contributor's coal pricing policies, or any
background information necessary to establish estimated total liability
or coal pricing policies are examples of confidential business
information that shall not be disclosed to the public under this
subparagraph.
(c) Place of inspection. Information furnished on the public portion
of returns (as described in paragraph (a) of this section) shall be made
available for public inspection at the Freedom of Information Reading
Room. Internal Revenue Service, 1111 Constitution Avenue, NW.,
Washington, D.C. 20224, and at the office of any district director.
(d) Procedure for public inspection--(1) Requests for inspection.
Information furnished on the public portion of returns (as described in
paragraph (a) of this section) shall be available for public inspection
only upon request. Requests for public inspection must be in writing to
or at any of the offices mentioned in paragraph (c) of this section.
Persons submitting requests for inspection must provide the name and
address of the organization that filed the return, the type of return,
and the year for which the organization filed.
(2) Time and extent of inspection. A person requesting public
inspection in the manner specified in subparagraph (1) of this paragraph
shall be notified by the Internal Revenue Service when the material he
desires to inspect will be made available for his inspection.
Information on returns required by sections 6033, 6034, and 6058 will be
made available for public inspection at such reasonable and proper
times, and under such conditions, that will not interfere with their use
by the Internal Revenue Service and will not exclude other persons from
inspecting them. In addition the Commissioner, Director of the Service
Center, or district director may limit the number of returns to be
[[Page 71]]
made available to any person for inspection on a given date. Inspection
will be allowed only in the presence of an internal revenue officer or
employee and only during the regular hours of business of the Internal
Revenue Service office.
(3) Returns available. Returns filed before January 1, 1970, shall
be available for public inspection only pursuant to the provisions of
section 6104 in effect for such years. The information furnished on all
returns filed after December 31, 1969, purusant to the requirements of
section 6033, 6034, or 6058, shall be available for public inspection in
accordance with the provisions of section 6104.
(4) Copies. Notes may be taken of the material opened for inspection
under this section. Copies may be made manually or, if a person provides
the equipment, photographically at the place of inspection, subject to
reasonable supervision with regard to the facilities and equipment to be
employed. Copies of the material opened for inspection will be furnished
by the Internal Revenue Service to any person making request therefor.
Requests for such copies shall be made in the same manner as requests
for inspection (see subparagraph (1) of this paragraph) to the office of
the Internal Revenue Service in which such material is available for
inspection as provided in paragraph (c) of this section. Copies may also
be obtained by written request to the director of any service center. If
made at the time of inspection, the request for copies need not be in
writing. Any copies furnished will be certified upon request. The
Commissioner may prescribe a reasonable fee for furnishing copies of
information pursuant to this section.
[T.D. 8026, 50 FR 20757, May 20, 1985]
Sec. 301.6104(c)-1 Disclosure of certain information to State officers.
(a) Notification of determinations--(1) Automatic notification. Upon
making a determination described in paragraph (c) of this section, the
Internal Revenue Service will notify the Attorney General and the
principal tax officer of each of the following States of such
determination without application or request by such State officer--
(i) In the case of any organization described in section 501(c)(3),
the State in which the principal office of the organization is located
(as shown on the last-filed return required by section 6033, or on the
application for exemption if no return has been filed), and the State in
which the organization was incorporated, or if a trust, in which it was
created, and
(ii) In the case of a private foundation, each State which the
organization was required to list as an attachment to its last-filed
return pursuant to Sec. 1.6033-2(a)(2)(iv).
(2) Applications for notification by other State officers. Other
officers of States described in subparagraph (1) of this paragraph, and
officers of States not described in such subparagraph, may request that
they be notified (either generally or with respect to a particular
organization or type of organization) of determinations described in
paragraph (c) of this section. In such cases, these State officers must
show that they are appropriate State officers within the meaning of
section 6104(c)(2). The required showing may be made by presenting a
letter from the Attorney General of the State setting forth (i) the
functions and authority of the State officer under State law, and (ii)
sufficient facts for the Internal Revenue Service to determine that such
officer is an appropriate State officer within the meaning of section
6104(c)(2).
(3) Manner of notification. A State officer who is entitled to be
notified of a determination under this paragraph will be notified by
sending him a copy of the communication from the Internal Revenue
Service to the organization which informs such organization of the
determination.
(b) Inspection by State officers--(1) In general. After a
determination described in paragraph (c) of this section has been made,
appropriate State officers within the meaning of section 6104(c)(2) may
inspect the material described in subparagraph (3) of this paragraph.
Such material may be inspected at an office of the Internal Revenue
Service which will be designated upon receipt of a request for
inspection; the location of such office
[[Page 72]]
will be determined with due consideration of the needs of the Internal
Revenue Service and the needs of the State officer entitled to inspect.
(2) State officers who may inspect material. Any State officer
entitled to be notified of a determination without application (under
paragraph (a)(1) of this section) may inspect the material described in
subparagraph (3) of this paragraph upon demonstrating that he is so
entitled. Any State officer who has in fact been notified by the
Internal Revenue Service of a determination may inspect such material
without further demonstration, unless it shall be determined by the
Internal Revenue Service that such officer was not entitled to be so
notified. Other State officers must demonstrate to the satisfaction of
the Internal Revenue Service that they are entitled to be notified under
paragraph (a)(2) of this section before they may inspect such material.
(3) Material which may be inspected. (i) Except as provided in
subdivision (ii) of this subparagraph, a State officer who is so
entitled under subparagraphs (1) and (2) of this paragraph will be
permitted to inspect and copy all returns, filed statements, records,
reports, and other information relating to a determination described in
paragraph (c) of this section which is relevant to a determination under
State law, and which is in the hands of the Internal Revenue Service.
(ii) The following material will not be made available for
inspection by State officers under section 6104(c) and this section--
(a) Interpretations by the Internal Revenue Service or other federal
agency of federal laws (including the Internal Revenue Code of 1954 and
its predecessors) which would not otherwise be made available to State
officers under section 6103(d),
(b) Reports of informers, or any other material which would disclose
the identity, or threaten the safety or anonymity, of an informer,
(c) Returns of persons (other than those exempt from taxation) which
would not be available under section 6103(d) to the State officer
requesting inspection, or
(d) Other material the disclosure of which the Commissioner has
determined would prejudice the proper administration of the internal
revenue laws.
(4) Statement by State officer. Before any State officer will be
permitted to inspect material described in this paragraph, he must
submit a statement to the Internal Revenue Service that he intends to
use such material solely in fulfilling his functions under State law
relating to organizations of the type described in section 501(c)(3);
material is made available to State officers under this section in
reliance on such statements. For provisions relating to penalties for
misuse of information which is made available under section 6104(c) and
this section, see 18 U.S.C. 1001.
(c) Determinations defined. For purposes of this section, a
determination means a final determination by the Internal Revenue
Service that--
(1) An organization is refused recognition as an organization
described in section 501(c)(3), or has been operated in such a manner
that it will not, or will no longer, be recognized as meeting the
requirements for exemption under that section, or
(2) A deficiency of tax exists under section 507 or chapter 41 or
42.
For purposes of this paragraph, a determination by the Internal Revenue
Service is not final until all administrative review with respect to
such determination has been completed. For purposes of this section, a
waiver of restrictions on assessment and collection of deficiency in tax
is treated as a final determination that a deficiency of tax exists when
such waiver has been finally accepted by the Internal Revenue Service.
For example, a final determination that a deficiency of tax exists under
section 507 or chapter 41 or 42 is made when the organization is sent a
notice of deficiency with respect to such tax.
(d) Effective date. The provisions of this section apply with
respect to all
[[Page 73]]
determinations made after December 31, 1969.
(Secs. 6033(a)(1), 6104(b), and 7805 of the Internal Revenue Code of
1954 (83 Stat. 519, 68A Stat. 755 as amended by 83 Stat. 530, and 68A
Stat. 917; 26 U.S.C. 6033(a)(1), 6104(b), and 7805); secs.
6104(a)(1)(A), 6104(a)(1)(B), and 7805 of the Internal Revenue Code of
1954 (72 Stat. 1660, 88 Stat. 940, 68A Stat. 917; 26 U.S.C.
6104(a)(1)(A), 6104(a)(1)(B), 7805))
[T.D. 7122, 36 FR 11031, June 8, 1971, as amended by T.D. 7290, 38 FR
31835, Nov. 19, 1973; T.D. 7785, 46 FR 38508, July 28, 1981.
Redesignated by T.D. 7845, 47 FR 50490, Nov. 8, 1982]
Sec. 301.6104(d)-0 Table of contents.
This section lists the major captions contained in
Secs. 301.6104(d)-1 through 301.6104(d)-3 as follows:
Sec. 301.6104(d)-1 Public inspection and distribution of applications
for tax exemption and annual information returns of tax-exempt
organizations.
(a) In general.
(b) Definitions.
(1) Tax-exempt organization.
(2) Private foundation.
(3) Application for tax exemption.
(i) In general.
(ii) No prescribed application form.
(iii) Exceptions.
(iv) Local or subordinate organizations.
(4) Annual information return.
(i) In general.
(ii) Exceptions.
(iii) Returns more than 3 years old.
(iv) Local or subordinate organizations.
(5) Regional or district offices.
(i) In general.
(ii) Site not considered a regional or district office.
(c) Special rules relating to public inspection.
(1) Permissible conditions on public inspection.
(2) Organizations that do not maintain permanent offices.
(d) Special rules relating to copies.
(1) Time and place for providing copies in response to requests made in
person.
(i) In general.
(ii) Unusual circumstances.
(iii) Agents for providing copies.
(2) Request for copies in writing.
(i) In general.
(ii) Time and manner of fulfilling written requests.
(A) In general.
(B) Request for a copy of parts of document.
(C) Agents for providing copies.
(3) Fees for copies.
(i) In general.
(ii) Form of payment.
(A) Request made in person.
(B) Request made in writing.
(iii) Avoidance of unexpected fees.
(iv) Responding to inquiries of fees charged.
(e) Documents to be provided by regional and district offices.
(f) Documents to be provided by local and subordinate organizations.
(1) Applications for tax exemption.
(2) Annual information returns.
(3) Failure to comply.
(g) Failure to comply with public inspection or copying requirements.
(h) Effective date.
(1) In general.
(2) Private foundation annual information returns.
Sec. 301.6104(d)-2 Making applications and returns widely available.
(a) In general.
(b) Widely available.
(1) In general.
(2) Internet posting.
(i) In general.
(ii) Transition rule.
(iii) Reliability and accuracy.
(c) Discretion to prescribe other methods for making documents widely
available.
(d) Notice requirement.
(e) Effective date.
Sec. 301.6104(d)-3 Tax-exempt organization subject to harassment
campaign.
(a) In general.
(b) Harassment.
(c) Special rule for multiple requests from a single individual or
address.
(d) Harassment determination procedure.
(e) Effect of a harassment determination.
(f) Examples.
(g) Effective date.
[T.D. 8861, 65 FR 2033, Jan. 13, 2000]
Sec. 301.6104(d)-1 Public inspection and distribution of applications for tax exemption and annual information returns of tax-exempt organizations.
(a) In general. Except as otherwise provided in this section, if a
tax-exempt organization (as defined in paragraph (b)(1) of this section)
filed an application for recognition of exemption under section 501, it
shall make its application for tax exemption (as defined in paragraph
(b)(3) of this section) available for public inspection without charge
at its principal, regional and district offices during regular business
hours. Except as otherwise provided in this section, a tax-exempt
organization
[[Page 74]]
shall make its annual information returns (as defined in paragraph
(b)(4) of this section) available for public inspection without charge
in the same offices during regular business hours. Each annual
information return shall be made available for a period of three years
beginning on the date the return is required to be filed (determined
with regard to any extension of time for filing) or is actually filed,
whichever is later. In addition, except as provided in
Secs. 301.6104(d)-2 and 301.6104(d)-3, an organization shall provide a
copy without charge, other than a reasonable fee for reproduction and
actual postage costs, of all or any part of any application or return
required to be made available for public inspection under this paragraph
to any individual who makes a request for such copy in person or in
writing. See paragraph (d)(3) of this section for rules relating to fees
for copies.
(b) Definitions. For purposes of applying the provisions of section
6104(d), this section and Secs. 301.6104(d)-2 and 301.6104(d)-3, the
following definitions apply:
(1) Tax-exempt organization. The term tax-exempt organization means
any organization that is described in section 501(c) or section 501(d)
and is exempt from taxation under section 501(a). The term tax-exempt
organization also includes any nonexempt charitable trust described in
section 4947(a)(1) or nonexempt private foundation that is subject to
the reporting requirements of section 6033 pursuant to section 6033(d).
(2) Private foundation. The term private foundation means a private
foundation as defined in section 509(a) or a nonexempt charitable trust
described in section 4947(a)(1) or a nonexempt private foundation
subject to the information reporting requirements of section 6033
pursuant to section 6033(d).
(3) Application for tax exemption--(i) In general. Except as
described in paragraph (b)(3)(iii) of this section, the term application
for tax exemption includes any prescribed application form (such as Form
1023 or Form 1024), all documents and statements the Internal Revenue
Service requires an applicant to file with the form, any statement or
other supporting document submitted by an organization in support of its
application, and any letter or other document issued by the Internal
Revenue Service concerning the application (such as a favorable
determination letter or a list of questions from the Internal Revenue
Service about the application). For example, a legal brief submitted in
support of an application, or a response to questions from the Internal
Revenue Service during the application process, is part of an
application for tax exemption.
(ii) No prescribed application form. If no form is prescribed for an
organization's application for tax exemption, the application for tax
exemption includes--
(A) The application letter and copy of the articles of
incorporation, declaration of trust, or other similar instrument that
sets forth the permitted powers or activities of the organization;
(B) The organization's bylaws or other code of regulations;
(C) The organization's latest financial statements showing assets,
liabilities, receipts and disbursements;
(D) Statements describing the character of the organization, the
purpose for which it was organized, and its actual activities;
(E) Statements showing the sources of the organization's income and
receipts and their disposition; and
(F) Any other statements or documents the Internal Revenue Service
required the organization to file with, or that the organization
submitted in support of, the application letter.
(iii) Exceptions. The term application for tax exemption does not
include--
(A) Any application for tax exemption filed by an organization that
the Internal Revenue Service has not yet recognized, on the basis of the
application, as exempt from taxation under section 501 for any taxable
year;
(B) Any application for tax exemption filed before July 15, 1987,
unless the organization filing the application had a copy of the
application on July 15, 1987;
(C) In the case of a tax-exempt organization other than a private
foundation, the name and address of any contributor to the organization;
or
[[Page 75]]
(D) Any material, including the material listed in Sec. 301.6104(a)-
1(i) and information that the Secretary would be required to withhold
from public inspection, that is not available for public inspection
under section 6104.
(iv) Local or subordinate organizations. For rules relating to
applications for tax exemption of local or subordinate organizations,
see paragraph (f)(1) of this section.
(4) Annual information return--(i) In general. Except as described
in paragraph (b)(4)(ii) of this section, the term annual information
return includes an exact copy of any return filed by a tax-exempt
organization pursuant to section 6033. It also includes any amended
return the organization files with the Internal Revenue Service after
the date the original return is filed. Returns filed pursuant to section
6033 include Form 990, Return of Organization Exempt From Income Tax,
Form 990-PF, Return of Private Foundation, or any other version of Form
990 (such as Forms 990-EZ or 990-BL, except Form 990-T) and Form 1065.
Each copy of a return must include all information furnished to the
Internal Revenue Service on the return, as well as all schedules,
attachments and supporting documents. For example, in the case of a Form
990, the copy must include Schedule A of Form 990 (containing
supplementary information on section 501(c)(3) organizations), and those
parts of the return that show compensation paid to specific persons
(currently, Part V of Form 990 and Parts I and II of Schedule A of Form
990).
(ii) Exceptions. The term annual information return does not include
Schedule A of Form 990-BL, Form 990-T, Exempt Organization Business
Income Tax Return, Schedule K-1 of Form 1065 or Form 1120-POL, U.S.
Income Tax Return For Certain Political Organizations. In the case of a
tax-exempt organization other than a private foundation, the term annual
information return does not include the name and address of any
contributor to the organization.
(iii) Returns more than 3 years old. The term annual information
return does not include any return after the expiration of 3 years from
the date the return is required to be filed (including any extension of
time that has been granted for filing such return) or is actually filed,
whichever is later. If an organization files an amended return, however,
the amended return must be made available for a period of 3 years
beginning on the date it is filed with the Internal Revenue Service.
(iv) Local or subordinate organizations. For rules relating to
annual information returns of local or subordinate organizations, see
paragraph (f)(2) of this section.
(5) Regional or district offices--(i) In general. A regional or
district office is any office of a tax-exempt organization, other than
its principal office, that has paid employees, whether part-time or
full-time, whose aggregate number of paid hours a week are normally at
least 120.
(ii) Site not considered a regional or district office. A site is
not considered a regional or district office, however, if--
(A) The only services provided at the site further exempt purposes
(such as day care, health care or scientific or medical research); and
(B) The site does not serve as an office for management staff, other
than managers who are involved solely in managing the exempt function
activities at the site.
(c) Special rules relating to public inspection--(1) Permissible
conditions on public inspection. A tax-exempt organization may have an
employee present in the room during an inspection. The organization,
however, must allow the individual conducting the inspection to take
notes freely during the inspection. If the individual provides
photocopying equipment at the place of inspection, the organization must
allow the individual to photocopy the document at no charge.
(2) Organizations that do not maintain permanent offices. If a tax-
exempt organization does not maintain a permanent office, the
organization shall comply with the public inspection requirements of
paragraph (a) of this section by making its application for tax
exemption and its annual information returns, as applicable, available
for inspection at a reasonable location of its choice. Such an
organization shall permit public inspection within a reasonable amount
of time after receiving a request for inspection (normally not
[[Page 76]]
more than 2 weeks) and at a reasonable time of day. At the
organization's option, it may mail, within 2 weeks of receiving the
request, a copy of its application for tax exemption and annual
information returns to the requester in lieu of allowing an inspection.
The organization may charge the requester for copying and actual postage
costs only if the requester consents to the charge. An organization that
has a permanent office, but has no office hours or very limited hours
during certain times of the year, shall make its documents available
during those periods when office hours are limited or not available as
though it were an organization without a permanent office.
(d) Special rules relating to copies--(1) Time and place for
providing copies in response to requests made in-person--(i) In general.
Except as provided in paragraph (d)(1)(iii) of this section, a tax-
exempt organization shall provide copies of the documents it is required
to provide under section 6104(d) in response to a request made in person
at its principal, regional and district offices during regular business
hours. Except as provided in paragraph (d)(1)(ii) of this section, an
organization shall provide such copies to a requester on the day the
request is made.
(ii) Unusual circumstances. In the case of an in-person request,
where unusual circumstances exist such that fulfilling the request on
the same business day places an unreasonable burden on the tax-exempt
organization, the organization must provide the copies no later than the
next business day following the day that the unusual circumstances cease
to exist or the fifth business day after the date of the request,
whichever occurs first. Unusual circumstances include, but are not
limited to, receipt of a volume of requests that exceeds the
organization's daily capacity to make copies; requests received shortly
before the end of regular business hours that require an extensive
amount of copying; or requests received on a day when the organization's
managerial staff capable of fulfilling the request is conducting special
duties, such as student registration or attending an off-site meeting or
convention, rather than its regular administrative duties.
(iii) Agents for providing copies. A principal, regional or district
office of a tax-exempt organization subject to the requirements of this
section may retain a local agent to process requests made in person for
copies of its documents. A local agent must be located within reasonable
proximity of the applicable office. A local agent that receives a
request made in person for copies must provide the copies within the
time limits and under the conditions that apply to the organization
itself. For example, a local agent generally must provide a copy to a
requester on the day the agent receives the request. When a principal,
regional or district office of a tax-exempt organization using a local
agent receives a request made in person for a copy, it must immediately
provide the name, address and telephone number of the local agent to the
requester. An organization that provides this information is not
required to respond further to the requester. However, the penalty
provisions of sections 6652(c)(1)(C), 6652(c)(1)(D), and 6685 continue
to apply to the tax-exempt organization if the organization's local
agent fails to provide the documents as required under section 6104(d).
(2) Request for copies in writing--(i) In general. A tax-exempt
organization must honor a written request for a copy of documents (or
the requested part) that the organization is required to provide under
section 6104(d) if the request--
(A) Is addressed to, and delivered by mail, electronic mail,
facsimile, or a private delivery service as defined in section 7502(f)
to a principal, regional or district office of the organization; and
(B) Sets forth the address to which the copy of the documents should
be sent.
(ii) Time and manner of fulfilling written requests--(A) In general.
A tax-exempt organization receiving a written request for a copy shall
mail the copy of the requested documents (or the requested parts of
documents) within 30 days from the date it receives the request.
However, if a tax-exempt organization requires payment in advance, it is
only required to provide the copies within 30 days from the date it
receives
[[Page 77]]
payment. For rules relating to payment, see paragraph (d)(3) of this
section. In the absence of evidence to the contrary, a request or
payment that is mailed shall be deemed to be received by an organization
7 days after the date of the postmark. A request that is transmitted to
the organization by electronic mail or facsimile shall be deemed
received the day the request is transmitted successfully. If an
organization requiring payment in advance receives a written request
without payment or with an insufficient payment, the organization must,
within 7 days from the date it receives the request, notify the
requester of its prepayment policy and the amount due. A copy is deemed
provided on the date of the postmark or private delivery mark (or if
sent by certified or registered mail, the date of registration or the
date of the postmark on the sender's receipt). If an individual making a
request consents, a tax-exempt organization may provide a copy of the
requested document exclusively by electronic mail. In such case, the
material is provided on the date the organization successfully transmits
the electronic mail.
(B) Request for a copy of parts of document. A tax-exempt
organization must fulfill a request for a copy of the organization's
entire application for tax exemption or annual information return or any
specific part or schedule of its application or return. A request for a
copy of less than the entire application or less than the entire return
must specifically identify the requested part or schedule.
(C) Agents for providing copies. A tax-exempt organization subject
to the requirements of this section may retain an agent to process
written requests for copies of its documents. The agent shall provide
the copies within the time limits and under the conditions that apply to
the organization itself. For example, if the organization received the
request first (e.g., before the agent), the deadline for providing a
copy in response to a request shall be determined by reference to when
the organization received the request, not when the agent received the
request. An organization that transfers a request for a copy to such an
agent is not required to respond further to the request. If the
organization's agent fails to provide the documents as required under
section 6104(d), however, the penalty provisions of sections
6652(c)(1)(C), 6652(c)(1)(D), and 6685 continue to apply to the tax-
exempt organization.
(3) Fees for copies--(i) In general. A tax-exempt organization may
charge a reasonable fee for providing copies. A fee is reasonable only
if it is no more than the per-page copying charge stated in
Sec. 601.702(f)(5)(iv)(B) of this chapter (fee charged by the Internal
Revenue Service for providing copies to a requester), plus no more than
the actual postage costs incurred by the organization to provide the
copies. Before the organization provides the documents, it may require
that the individual requesting copies of the documents pay the fee. If
the organization has provided an individual making a request with notice
of the fee, and the individual does not pay the fee within 30 days, or
if the individual pays the fee by check and the check does not clear
upon deposit, the organization may disregard the request.
(ii) Form of payment--(A) Request made in person. If a tax-exempt
organization charges a fee for copying (as permitted under paragraph
(d)(3)(i) of this section), it shall accept payment by cash and money
order for requests made in person. The organization may accept other
forms of payment, such as credit cards and personal checks.
(B) Request made in writing. If a tax-exempt organization charges a
fee for copying and postage (as permitted under paragraph (d)(3)(i) of
this section), it shall accept payment by certified check, money order,
and either personal check or credit card for requests made in writing.
The organization may accept other forms of payment.
(iii) Avoidance of unexpected fees. Where a tax-exempt organization
does not require prepayment and a requester does not enclose payment
with a request, an organization must receive consent from a requester
before providing copies for which the fee charged for copying and
postage exceeds $20.
(iv) Responding to inquiries of fees charged. In order to facilitate
a requester's ability to receive copies promptly, a tax-exempt
organization
[[Page 78]]
shall respond to any questions from potential requesters concerning its
fees for copying and postage. For example, the organization shall inform
the requester of its charge for copying and mailing its application for
exemption and each annual information return, with and without
attachments, so that a requester may include payment with the request
for copies.
(e) Documents to be provided by regional and district offices.
Except as otherwise provided, a regional or district office of a tax-
exempt organization must satisfy the same rules as the principal office
with respect to allowing public inspection and providing copies of its
application for tax exemption and annual information returns. A regional
or district office is not required, however, to make its annual
information return available for inspection or to provide copies until
30 days after the date the return is required to be filed (including any
extension of time that is granted for filing such return) or is actually
filed, whichever is later.
(f) Documents to be provided by local and subordinate organizations-
-(1) Applications for tax exemption. Except as otherwise provided, a
tax-exempt organization that did not file its own application for tax
exemption (because it is a local or subordinate organization covered by
a group exemption letter referred to in Sec. 1.508-1 of this chapter)
must, upon request, make available for public inspection, or provide
copies of, the application submitted to the Internal Revenue Service by
the central or parent organization to obtain the group exemption letter
and those documents which were submitted by the central or parent
organization to include the local or subordinate organization in the
group exemption letter. However, if the central or parent organization
submits to the Internal Revenue Service a list or directory of local or
subordinate organizations covered by the group exemption letter, the
local or subordinate organization is required to provide only the
application for the group exemption ruling and the pages of the list or
directory that specifically refer to it. The local or subordinate
organization shall permit public inspection, or comply with a request
for copies made in person, within a reasonable amount of time (normally
not more than 2 weeks) after receiving a request made in person for
public inspection or copies and at a reasonable time of day. In a case
where the requester seeks inspection, the local or subordinate
organization may mail a copy of the applicable documents to the
requester within the same time period in lieu of allowing an inspection.
In such a case, the organization may charge the requester for copying
and actual postage costs only if the requester consents to the charge.
If the local or subordinate organization receives a written request for
a copy of its application for tax exemption, it must fulfill the request
in the time and manner specified in paragraph (d)(2) of this section.
The requester has the option of requesting from the central or parent
organization, at its principal office, inspection or copies of the
application for group exemption and the material submitted by the
central or parent organization to include a local or subordinate
organization in the group ruling. If the central or parent organization
submits to the Internal Revenue Service a list or directory of local or
subordinate organizations covered by the group exemption letter, it must
make such list or directory available for public inspection, but it is
required to provide copies only of those pages of the list or directory
that refer to particular local or subordinate organizations specified by
the requester. The central or parent organization must fulfill such
requests in the time and manner specified in paragraphs (c) and (d) of
this section.
(2) Annual information returns. A local or subordinate organization
that does not file its own annual information return (because it is
affiliated with a central or parent organization that files a group
return pursuant to Sec. 1.6033-2(d) of this chapter) must, upon request,
make available for public inspection, or provide copies of, the group
returns filed by the central or parent organization. However, if the
group return includes separate schedules with respect to each local or
subordinate organization included in the group return, the local or
subordinate organization receiving the
[[Page 79]]
request may omit any schedules relating only to other organizations
included in the group return. The local or subordinate organization
shall permit public inspection, or comply with a request for copies made
in person, within a reasonable amount of time (normally not more than 2
weeks) after receiving a request made in person for public inspection or
copies and at a reasonable time of day. In a case where the requester
seeks inspection, the local or subordinate organization may mail a copy
of the applicable documents to the requester within the same time period
in lieu of allowing an inspection. In such a case, the organization may
charge the requester for copying and actual postage costs only if the
requester consents to the charge. If the local or subordinate
organization receives a written request for a copy of its annual
information return, it must fulfill the request by providing a copy of
the group return in the time and manner specified in paragraph (d)(2) of
this section. The requester has the option of requesting from the
central or parent organization, at its principal office, inspection or
copies of group returns filed by the central or parent organization. The
central or parent organization must fulfill such requests in the time
and manner specified in paragraphs (c) and (d) of this section.
(3) Failure to comply. If an organization fails to comply with the
requirements specified in this paragraph, the penalty provisions of
sections 6652(c)(1)(C), 6652(c)(1)(D), and 6685 apply.
(g) Failure to comply with public inspection or copying
requirements. If a tax-exempt organization denies an individual's
request for inspection or a copy of an application for tax exemption or
an annual information return as required under this section, and the
individual wants to alert the Internal Revenue Service to the possible
need for enforcement action, the individual may provide a statement to
the district director for the key district in which the applicable tax-
exempt organization's principal office is located (or such other person
as the Commissioner may designate) that describes the reason why the
individual believes the denial was in violation of the requirements of
section 6104(d).
(h) Effective date--(1) In general. For a tax-exempt organization,
other than a private foundation, this section is applicable June 8,
1999. For a private foundation, this section is applicable (except as
provided in paragraph (h)(2) of this section) beginning March 13, 2000.
(2) Private foundation annual information returns. This section does
not apply to any private foundation return the due date for which
(determined with regard to any extension of time for filing) is before
the applicable date for private foundations specified in paragraph
(h)(1) of this section.
[T.D. 8818, 64 FR 17285, Apr. 9, 1999. Redesignated and amended by T.D.
8861, 65 FR 2033, 2034, Jan. 13, 2000]
Sec. 301.6104(d)-2 Making applications and returns widely available.
(a) In general. A tax-exempt organization is not required to comply
with a request for a copy of its application for tax exemption or an
annual information return pursuant to Sec. 301.6104(d)-1(a) if the
organization has made the requested document widely available in
accordance with paragraph (b) of this section. An organization that
makes its application for tax exemption and/or annual information return
widely available must nevertheless make the document available for
public inspection as required under Sec. 301.6104(d)-1(a), as
applicable.
(b) Widely available--(1) In general. A tax-exempt organization
makes its application for tax exemption and/or an annual information
return widely available if the organization complies with the
requirements specified in paragraph (b)(2) of this section, and if the
organization satisfies the requirements of paragraph (d) of this
section.
(2) Internet posting--(i) In general. A tax-exempt organization can
make its application for tax exemption and/or an annual information
return widely available by posting the document on a World Wide Web page
that the tax-exempt organization establishes and maintains or by having
the document posted, as part of a database of similar
[[Page 80]]
documents of other tax-exempt organizations, on a World Wide Web page
established and maintained by another entity. The document will be
considered widely available only if--
(A) the World Wide Web page through which it is available clearly
informs readers that the document is available and provides instructions
for downloading it;
(B) the document is posted in a format that, when accessed,
downloaded, viewed and printed in hard copy, exactly reproduces the
image of the application for tax exemption or annual information return
as it was originally filed with the Internal Revenue Service, except for
any information permitted by statute to be withheld from public
disclosure. (See section 6104(d)(3) and Sec. 301.6104(d)-3(b)(3) and
(4)); and
(C) any individual with access to the Internet can access, download,
view and print the document without special computer hardware or
software required for that format (other than software that is readily
available to members of the public without payment of any fee) and
without payment of a fee to the tax-exempt organization or to another
entity maintaining the World Wide Web page.
(ii) Transition rule. A tax-exempt organization that posted its
application for tax exemption or its annual information returns on a
World Wide Web page on or before April 9, 1999 in a manner consistent
with regulation project REG-246250-96 (1997 C.B. 627) (See
Sec. 601.601(d)(2) of this chapter.) will be treated as satisfying the
requirements of paragraphs (b)(2)(i)(B) & (C) of this section until June
8, 2000 provided that an individual can access, download, view and print
the document without payment of a fee to the tax-exempt organization or
to another entity maintaining the World Wide Web page.
(iii) Reliability and accuracy. In order for the document to be
widely available through an Internet posting, the entity maintaining the
World Wide Web page must have procedures for ensuring the reliability
and accuracy of the document that it posts on the page and must take
reasonable precautions to prevent alteration, destruction or accidental
loss of the document when posted on its page. In the event that a posted
document is altered, destroyed or lost, the entity must correct or
replace the document.
(c) Discretion to prescribe other methods for making documents
widely available. The Commissioner, from time to time, may prescribe
additional methods, other than an Internet posting meeting the
requirements of paragraph (b)(2) of this section, that a tax-exempt
organization may use to make its documents widely available.
(d) Notice requirement. If a tax-exempt organization has made its
application for tax exemption and/or an annual information return widely
available it must notify any individual requesting a copy where the
documents are available (including the address on the World Wide Web, if
applicable). If the request is made in person, the organization shall
provide such notice to the individual immediately. If the request is
made in writing, the notice shall be provided within 7 days of receiving
the request.
(e) Effective date. For a tax-exempt organization, other than a
private foundation, this section is applicable June 8, 1999. For a
private foundation, this section is applicable beginning March 13, 2000.
[T.D. 8818, 64 FR 17285, Apr. 9, 1999. Redesignated and amended by T.D.
8861, 65 FR 2034, Jan. 13, 2000]
Sec. 301.6104(d)-3 Tax-exempt organization subject to harassment campaign.
(a) In general. If the district director for the key district in
which the organization's principal office is located (or such other
person as the Commissioner may designate) determines that the
organization is the subject of a harassment campaign and compliance with
the requests that are part of the harassment campaign would not be in
the public interest, a tax-exempt organization is not required to
fulfill a request for a copy (as otherwise required by Sec. 301.6104(d)-
1(a)) that it reasonably believes is part of the campaign.
(b) Harassment. A group of requests for an organization's
application for tax exemption or annual information returns is
indicative of a harassment campaign if the requests are part of a single
coordinated effort to disrupt the
[[Page 81]]
operations of a tax-exempt organization, rather than to collect
information about the organization. Whether a group of requests
constitutes such a harassment campaign depends on the relevant facts and
circumstances. Facts and circumstances that indicate the organization is
the subject of a harassment campaign include: a sudden increase in the
number of requests; an extraordinary number of requests made through
form letters or similarly worded correspondence; evidence of a purpose
to deter significantly the organization's employees or volunteers from
pursuing the organization's exempt purpose; requests that contain
language hostile to the organization; direct evidence of bad faith by
organizers of the purported harassment campaign; evidence that the
organization has already provided the requested documents to a member of
the purported harassing group; and a demonstration by the tax-exempt
organization that it routinely provides copies of its documents upon
request.
(c) Special rule for multiple requests from a single individual or
address. A tax-exempt organization may disregard any request for copies
of all or part of any document beyond the first two received within any
30-day period or the first four received within any one-year period from
the same individual or the same address, regardless of whether the
district director for the applicable key district (or such other person
as the Commissioner may designate) has determined that the organization
is subject to a harassment campaign.
(d) Harassment determination procedure. A tax-exempt organization
may apply for a determination that it is the subject of a harassment
campaign and that compliance with requests that are part of the campaign
would not be in the public interest by submitting a signed application
to the district director for the key district where the organization's
principal office is located (or such other person as the Commissioner
may designate). The application shall consist of a written statement
giving the organization's name, address, employer identification number,
and the name, address and telephone number of the person to contact
regarding the application. The application must describe in detail the
facts and circumstances that the organization believes support a
determination that the organization is subject to a harassment campaign.
The organization may suspend compliance with respect to any request for
a copy of its documents based on its reasonable belief that such request
is part of a harassment campaign, provided that the organization files
an application for a determination within 10 business days from the day
the organization first suspends compliance with respect to a request
that is part of the alleged campaign. In addition, the organization may
suspend compliance with any request it reasonably believes to be part of
the harassment campaign until it receives a response to its application
for a harassment campaign determination.
(e) Effect of a harassment determination. If the appropriate
district director (or such other person as the Commissioner may
designate) determines that a tax-exempt organization is the subject of a
harassment campaign and it is not in the public interest to comply with
requests that are part of the campaign, such organization is not
required to comply with any request for copies that it reasonably
believes is part of the campaign. This determination may be subject to
other terms and conditions set forth by the district director (or such
other person as the Commissioner may designate). A person (as defined in
section 6652(c)(4)(C)) shall not be liable for any penalty under
sections 6652(c)(1)(C), 6652(c)(1)(D) or 6685 for failing to timely
provide a copy of documents in response to a request covered in a
request for a harassment determination if the organization fulfills the
request within 30 days of receiving a determination from the district
director (or such other person as the Commissioner may designate) that
the organization is not subject to a harassment campaign.
Notwithstanding the preceding sentence, if the district director (or
such other person as the Commissioner may designate) further determines
that the organization did not have a reasonable basis for requesting a
determination that it was subject to a harassment campaign or reasonable
belief that a request was part of the campaign, the
[[Page 82]]
person (as defined in section 6652(c)(4)(C)) remains liable for any
penalties that result from not providing the copies in a timely fashion.
(f) Examples. The provisions of this section are illustrated by the
following examples:
Example 1. V, a tax-exempt organization, receives an average of 25
requests per month for copies of its three most recent information
returns. In the last week of May, V is mentioned in a national news
magazine story that discusses information contained in V's 1996
information return. From June 1 through June 30, 1997 V receives 200
requests for a copy of its documents. Other than the sudden increase in
the number of requests for copies, there is no other evidence to suggest
that the requests are part of an organized campaign to disrupt V's
operations. Although fulfilling the requests will place a burden on V,
the facts and circumstances do not show that V is subject to a
harassment campaign. Therefore, V must respond timely to each of the 200
requests it receives in June.
Example 2. Y is a tax-exempt organization that receives an average
of 10 requests a month for copies of its annual information returns.
From March 1, 1997 to March 31, 1997, Y receives 25 requests for copies
of its documents. Fifteen of the requests come from individuals Y knows
to be active members of the board of organization X. In the past X has
opposed most of the positions and policies that Y advocates. None of the
requesters have asked for copies of documents from Y during the past
year. Y has no other information about the requesters. Although the
facts and circumstances show that some of the individuals making
requests are hostile to Y, they do not show that the individuals have
organized a campaign that will place enough of a burden on Y to disrupt
its activities. Therefore, Y must respond to each of the 25 requests it
receives in March.
Example 3. The facts are the same as in Example 2, except that
during March 1997, Y receives 100 requests. In addition to the fifteen
requests from members of organization X's board, 75 of the requests are
similarly worded form letters. Y discovers that several individuals
associated with X have urged the X's members and supporters, via the
Internet, to submit as many requests for a copy of Y's annual
information returns as they can. The message circulated on the Internet
provides a form letter that can be used to make the request. Both the
appeal via the Internet and the requests for copies received by Y
contain hostile language. During the same year but before the 100
requests were received, Y provided copies of its annual information
returns to the headquarters of X. The facts and circumstances show that
the 75 form letter requests are coordinated for the purpose of
disrupting Y's operations, and not to collect information that has
already been provided to an association representing the requesters'
interests. Thus, the fact and circumstances show that Y is the subject
of an organized harassment campaign. To confirm that it may disregard
the 90 requests that constitute the harassment campaign, Y must apply to
the applicable district director (or such other person as the
Commissioner may designate) for a determination. Y may disregard the 90
requests while the application is pending and after the determination is
received. However, it must respond within the applicable time limits to
the 10 requests it received in March that were not part of the
harassment campaign.
Example 4. The facts are the same as in Example 3, except that Y
receives 5 additional requests from 5 different representatives of the
news media who in the past have published articles about Y. Some of
these articles were hostile to Y. Normally, the Internal Revenue Service
will not consider a tax-exempt organization to have a reasonable belief
that a request from a member of the news media is part of a harassment
campaign absent additional facts that demonstrate that the organization
could reasonably believe the particular requests from the news media to
be part of a harassment campaign. Thus, absent such additional facts, Y
must respond within the applicable time limits to the 5 requests that it
received from representatives of the news media.
(g) Effective date. For a tax-exempt organization, other than a
private foundation, this section is applicable June 8, 1999. For a
private foundation, this section is applicable beginning March 13, 2000.
[T.D. 8818, 64 FR 17289, Apr. 9, 1999. Redesignated and amended by T.D.
8861, 65 FR 2034, Jan. 13, 2000]
Sec. 301.6105-1 Compilation of relief from excess profits tax cases.
Pursuant to and in accordance with the provisions of section 6105,
the Commissioner shall make and publish in the Federal Register a
compilation, for each fiscal year beginning after June 30, 1941, of all
cases in which relief under the provisions of section 722 of the
Internal Revenue Code of 1939, as amended, has been allowed during such
fiscal year by the Commissioner and by the Tax Court of the United
States.
[[Page 83]]
Sec. 301.6106-1 Publicity of unemployment tax returns.
For provisions relating to publicity of returns made in respect of
unemployment tax imposed by chapter 23 of the Code, see
Secs. 301.6103(a)-1, 301.6103 (b)-1, 301.6103(c)-1, 301.6103 (d)-1, and
301.6103(f)-1.
Sec. 301.6108-1 Publication of statistics of income.
Pursuant to and in accordance with the provisions of section 6108,
statistics reasonably available with respect to the operation of the
income tax laws shall be prepared and published annually by the
Commissioner.
Sec. 301.6109-1 Identifying numbers.
(a) In general--(1) Taxpayer identifying numbers--(i) Principal
types. There are several types of taxpayer identifying numbers that
include the following: social security numbers, Internal Revenue Service
(IRS) individual taxpayer identification numbers, IRS adoption taxpayer
identification numbers, and employer identification numbers. Social
security numbers take the form 000-00-0000. IRS individual taxpayer
identification numbers and IRS adoption taxpayer identification numbers
also take the form 000-00-0000 but include a specific number or numbers
designated by the IRS. Employer identification numbers take the form 00-
0000000.
(ii) Uses. Social security numbers, IRS individual taxpayer
identification numbers, and IRS adoption taxpayer identification numbers
are used to identify individual persons. Employer identification numbers
are used to identify employers. For the definition of social security
number and employer identification number, see Secs. 301.7701-11 and
301.7701-12, respectively. For the definition of IRS individual taxpayer
identification number, see paragraph (d)(3) of this section. For the
definition of IRS adoption taxpayer identification number, see
Sec. 301.6109-3(a). Except as otherwise provided in applicable
regulations under this chapter or on a return, statement, or other
document, and related instructions, taxpayer identifying numbers must be
used as follows:
(A) Except as otherwise provided in paragraph (a)(1)(ii)(B) and (D)
of this section, and Sec. 301.6109-3, an individual required to furnish
a taxpayer identifying number must use a social security number.
(B) Except as otherwise provided in paragraph (a)(1)(ii)(D) of this
section and Sec. 301.6109-3, an individual required to furnish a
taxpayer identifying number but who is not eligible to obtain a social
security number must use an IRS individual taxpayer identification
number.
(C) Any person other than an individual (such as corporations,
partnerships, nonprofit associations, trusts, estates, and similar
nonindividual persons) that is required to furnish a taxpayer
identifying number must use an employer identification number.
(D) An individual, whether U.S. or foreign, who is an employer or
who is engaged in a trade or business as a sole proprietor should use an
employer identification number as required by returns, statements, or
other documents and their related instructions.
(2) A trust all of which is treated as owned by the grantor or
another person pursuant to sections 671 through 678--(i) Obtaining a
taxpayer identification number. If a trust does not have a taxpayer
identification number and the trustee furnishes the name and taxpayer
identification number of the grantor or other person treated as the
owner of the trust and the address of the trust to all payors pursuant
to Sec. 1.671-4(b)(2)(i)(A) of this chapter, the trustee need not obtain
a taxpayer identification number for the trust until either the first
taxable year of the trust in which all of the trust is no longer owned
by the grantor or another person, or until the first taxable year of the
trust for which the trustee no longer reports pursuant to Sec. 1.671-
4(b)(2)(i)(A) of this chapter. If the trustee has not already obtained a
taxpayer identification number for the trust, the trustee must obtain a
taxpayer identification number for the trust as provided in paragraph
(d)(2) of this section in order to report pursuant to Sec. 1.671-4(a),
(b)(2)(i)(B), or (b)(3)(i) of this chapter.
(ii) Obligations of persons who make payments to certain trusts. Any
payor
[[Page 84]]
that is required to file an information return with respect to payments
of income or proceeds to a trust must show the name and taxpayer
identification number that the trustee has furnished to the payor on the
return. Regardless of whether the trustee furnishes to the payor the
name and taxpayer identification number of the grantor or other person
treated as an owner of the trust, or the name and taxpayer
identification number of the trust, the payor must furnish a statement
to recipients to the trustee of the trust, rather than to the grantor or
other person treated as the owner of the trust. Under these
circumstances, the payor satisfies the obligation to show the name and
taxpayer identification number of the payee on the information return
and to furnish a statement to recipients to the person whose taxpayer
identification number is required to be shown on the form.
(3) Obtaining a taxpayer identification number for a trust, or
portion of a trust, following the death of the individual treated as the
owner--(i) In general--(A) A trust all of which was treated as owned by
a decedent. In general, a trust all of which is treated as owned by a
decedent under subpart E (section 671 and following), part I, subchapter
J, chapter 1 of the Internal Revenue Code as of the date of the
decedent's death must obtain a new taxpayer identification number
following the death of the decedent if the trust will continue after the
death of the decedent.
(B) Taxpayer identification number of trust with multiple owners.
With respect to a portion of a trust treated as owned under subpart E
(section 671 and following), part I, subchapter J, chapter 1 (subpart E)
of the Internal Revenue Code by a decedent as of the date of the
decedent's death, if, following the death of the decedent, the portion
treated as owned by the decedent remains part of the original trust and
the other portion (or portions) of the trust continues to be treated as
owned under subpart E by a grantor(s) or other person(s), the trust
reports under the taxpayer identification number assigned to the trust
prior to the decedent's death and the portion of the trust treated as
owned by the decedent prior to the decedent's death (assuming the
decedent's portion of the trust is not treated as terminating upon the
decedent's death) continues to report under the taxpayer identification
number used for reporting by the other portion (or portions) of the
trust. For example, if a trust, reporting under Sec. 1.671-4(a) of this
chapter, is treated as owned by three persons and one of them dies, the
trust, including the portion of the trust no longer treated as owned by
a grantor or other person, continues to report under the tax
identification number assigned to the trust prior to the death of that
person. See Sec. 1.671-4(a) of this chapter regarding rules for filing
the Form 1041, ``U.S. Income Tax Return for Estates and Trusts,'' where
only a portion of the trust is treated as owned by one or more persons
under subpart E.
(ii) Furnishing correct taxpayer identification number to payors
following the death of the decedent. If the trust continues after the
death of the decedent and is required to obtain a new taxpayer
identification number under paragraph (a)(3)(i)(A) of this section, the
trustee must furnish payors with a new Form W-9, ``Request for Taxpayer
Identification Number and Certification,'' or an acceptable substitute
Form W-9, containing the new taxpayer identification number required
under paragraph (a)(3)(i)(A) of this section, the name of the trust, and
the address of the trustee.
(4) Taxpayer identification number to be used by a trust upon
termination of a section 645 election--(i) If there is an executor. Upon
the termination of the section 645 election period, if there is an
executor, the trustee of the former electing trust may need to obtain a
taxpayer identification number. If Sec. 1.645-1(g) of this chapter
regarding the appointment of an executor after a section 645 election is
made applies to the electing trust, the electing trust must obtain a new
TIN upon termination of the election period. See the instructions to the
Form 1041 for whether a new taxpayer identification number is required
for other former electing trusts.
(ii) If there is no executor. Upon termination of the section 645
election period, if there is no executor, the trustee
[[Page 85]]
of the former electing trust must obtain a new taxpayer identification
number.
(iii) Requirement to provide taxpayer identification number to
payors. If the trustee is required to obtain a new taxpayer
identification number for a former electing trust pursuant to this
paragraph (a)(4), or pursuant to the instructions to the Form 1041, the
trustee must furnish all payors of the trust with a completed Form W-9
or acceptable substitute Form W-9 signed under penalties of perjury by
the trustee providing each payor with the name of the trust, the new
taxpayer identification number, and the address of the trustee.
(5) Persons treated as payors. For purposes of paragraphs (a)(2),
(3), and (4) of this section, a payor is a person described in
Secs. 1.671-4(b)(4) of this chapter.
(6) Effective date. Paragraphs (a)(3), (4), and (5) of this section
apply to trusts of decedents dying on or after December 24, 2002.
(b) Requirement to furnish one's own number--(1) U.S. persons. Every
U.S. person who makes under this title a return, statement, or other
document must furnish its own taxpayer identifying number as required by
the forms and the accompanying instructions. A U.S. person whose number
must be included on a document filed by another person must give the
taxpayer identifying number so required to the other person on request.
For penalties for failure to supply taxpayer identifying numbers, see
sections 6721 through 6724. For provisions dealing specifically with the
duty of employees with respect to their social security numbers, see
Sec. 31.6011(b)-2 (a) and (b) of this chapter (Employment Tax
Regulations). For provisions dealing specifically with the duty of
employers with respect to employer identification numbers, see
Sec. 31.6011(b)-1 of this chapter (Employment Tax Regulations).
(2) Foreign persons. The provisions of paragraph (b)(1) of this
section regarding the furnishing of one's own number shall apply to the
following foreign persons--
(i) A foreign person that has income effectively connected with the
conduct of a U.S. trade or business at any time during the taxable year;
(ii) A foreign person that has a U.S. office or place of business or
a U.S. fiscal or paying agent at any time during the taxable year;
(iii) A nonresident alien treated as a resident under section
6013(g) or (h);
(iv) A foreign person that makes a return of tax (including income,
estate, and gift tax returns), an amended return, or a refund claim
under this title but excluding information returns, statements, or
documents;
(v) A foreign person that makes an election under Sec. 301.7701-
3(c); and
(vi) A foreign person that furnishes a withholding certificate
described in Sec. 1.1441-1(e)(2) or (3) of this chapter or Sec. 1.1441-
5(c)(2)(iv) or (3)(iii) of this chapter to the extent required under
Sec. 1.1441-1(e)(4)(vii) of this chapter.
(c) Requirement to furnish another's number. Every person required
under this title to make a return, statement, or other document must
furnish such taxpayer identifying numbers of other U.S. persons and
foreign persons that are described in paragraph (b)(2)(i), (ii), (iii),
or (vi) of this section as required by the forms and the accompanying
instructions. The taxpayer identifying number of any person furnishing a
withholding certificate referred to in paragraph (b)(2)(vi) of this
section shall also be furnished if it is actually known to the person
making a return, statement, or other document described in this
paragraph (c). If the person making the return, statement, or other
document does not know the taxpayer identifying number of the other
person, and such other person is one that is described in paragraph
(b)(2)(i), (ii), (iii), or (vi) of this section, such person must
request the other person's number. The request should state that the
identifying number is required to be furnished under authority of law.
When the person making the return, statement, or other document does not
know the number of the other person, and has complied with the request
provision of this paragraph (c), such person must sign an affidavit on
the transmittal document forwarding such returns, statements, or other
documents to the Internal Revenue Service, so stating. A person required
to file a taxpayer identifying number shall correct
[[Page 86]]
any errors in such filing when such person's attention has been drawn to
them.
(d) Obtaining a taxpayer identifying number--(1) Social security
number. Any individual required to furnish a social security number
pursuant to paragraph (b) of this section shall apply for one, if he has
not done so previously, on Form SS-5, which may be obtained from any
Social Security Administration or Internal Revenue Service office. He
shall make such application far enough in advance of the first required
use of such number to permit issuance of the number in time for
compliance with such requirement. The form, together with any
supplementary statement, shall be prepared and filed in accordance with
the form, instructions, and regulations applicable thereto, and shall
set forth fully and clearly the data therein called for. Individuals who
are ineligible for or do not wish to participate in the benefits of the
social security program shall nevertheless obtain a social security
number if they are required to furnish such a number pursuant to
paragraph (b) of this section.
(2) Employer identification number--(i) In general. Any person
required to furnish an employer identification number must apply for
one, if not done so previously, on Form SS-4. A Form SS-4 may be
obtained from any office of the Internal Revenue Service, U.S. consular
office abroad, or from an acceptance agent described in paragraph
(d)(3)(iv) of this section. The person must make such application far
enough in advance of the first required use of the employer
identification number to permit issuance of the number in time for
compliance with such requirement. The form, together with any
supplementary statement, must be prepared and filed in accordance with
the form, accompanying instructions, and relevant regulations, and must
set forth fully and clearly the requested data.
(ii) [Reserved]
(iii) Special rule for Section 708(b)(1)(B) terminations. A new
partnership that is formed as a result of the termination of a
partnership under section 708(b)(1)(B) will retain the employer
identification number of the terminated partnership. This paragraph
(d)(2)(iii) applies to terminations of partnerships under section
708(b)(1)(B) occurring on or after May 9, 1997; however, this paragraph
(d)(2)(iii) may be applied to terminations occurring on or after May 9,
1996, provided that the partnership and its partners apply this
paragraph (d)(2)(iii) to the termination in a consistent manner.
(3) IRS individual taxpayer identification number--(i) Definition.
The term IRS individual taxpayer identification number means a taxpayer
identifying number issued to an alien individual by the Internal Revenue
Service, upon application, for use in connection with filing
requirements under this title. The term IRS individual taxpayer
identification number does not refer to a social security number or an
account number for use in employment for wages. For purposes of this
section, the term alien individual means an individual who is not a
citizen or national of the United States.
(ii) General rule for obtaining number. Any individual who is not
eligible to obtain a social security number and is required to furnish a
taxpayer identifying number must apply for an IRS individual taxpayer
identification number on Form W-7, Application for IRS Individual
Taxpayer Identification Number, or such other form as may be prescribed
by the Internal Revenue Service. Form W-7 may be obtained from any
office of the Internal Revenue Service, U.S. consular office abroad, or
any acceptance agent described in paragraph (d)(3)(iv) of this section.
The individual shall furnish the information required by the form and
accompanying instructions, including the individual's name, address,
foreign tax identification number (if any), and specific reason for
obtaining an IRS individual taxpayer identification number. The
individual must make such application far enough in advance of the first
required use of the IRS individual taxpayer identification number to
permit issuance of the number in time for compliance with such
requirement. The application form, together with any supplementary
statement and documentation, must be prepared and filed
[[Page 87]]
in accordance with the form, accompanying instructions, and relevant
regulations, and must set forth fully and clearly the requested data.
(iii) General rule for assigning number. Under procedures issued by
the Internal Revenue Service, an IRS individual taxpayer identification
number will be assigned to an individual upon the basis of information
reported on Form W-7 (or such other form as may be prescribed by the
Internal Revenue Service) and any such accompanying documentation that
may be required by the Internal Revenue Service. An applicant for an IRS
individual taxpayer identification number must submit such documentary
evidence as the Internal Revenue Service may prescribe in order to
establish alien status and identity. Examples of acceptable documentary
evidence for this purpose may include items such as an original (or a
certified copy of the original) passport, driver's license, birth
certificate, identity card, or immigration documentation.
(iv) Acceptance agents--(A) Agreements with acceptance agents. A
person described in paragraph (d)(3)(iv)(B) of this section will be
accepted by the Internal Revenue Service to act as an acceptance agent
for purposes of the regulations under this section upon entering into an
agreement with the Internal Revenue Service, under which the acceptance
agent will be authorized to act on behalf of taxpayers seeking to obtain
a taxpayer identifying number from the Internal Revenue Service. The
agreement must contain such terms and conditions as are necessary to
insure proper administration of the process by which the Internal
Revenue Service issues taxpayer identifying numbers to foreign persons,
including proof of their identity and foreign status. In particular, the
agreement may contain--
(1) Procedures for providing Form SS-4 and Form W-7, or such other
necessary form to applicants for obtaining a taxpayer identifying
number;
(2) Procedures for providing assistance to applicants in completing
the application form or completing it for them;
(3) Procedures for collecting, reviewing, and maintaining, in the
normal course of business, a record of the required documentation for
assignment of a taxpayer identifying number;
(4) Procedures for submitting the application form and required
documentation to the Internal Revenue Service, or if permitted under the
agreement, submitting the application form together with a certification
that the acceptance agent has reviewed the required documentation and
that it has no actual knowledge or reason to know that the documentation
is not complete or accurate;
(5) Procedures for assisting taxpayers with notification procedures
described in paragraph (g)(2) of this section in the event of change of
foreign status;
(6) Procedures for making all documentation or other records
furnished by persons applying for a taxpayer identifying number promptly
available for review by the Internal Revenue Service, upon request; and
(7) Provisions that the agreement may be terminated in the event of
a material failure to comply with the agreement, including failure to
exercise due diligence under the agreement.
(B) Persons who may be acceptance agents. An acceptance agent may
include any financial institution as defined in section 265(b)(5) or
Sec. 1.165-12(c)(1)(v) of this chapter, any college or university that
is an educational organization as defined in Sec. 1.501(c)(3)-1(d)(3)(i)
of this chapter, any federal agency as defined in section 6402(f) or any
other person or categories of persons that may be authorized by
regulations or Internal Revenue Service procedures. A person described
in this paragraph (d)(3)(iv)(B) that seeks to qualify as an acceptance
agent must have an employer identification number for use in any
communication with the Internal Revenue Service. In addition, it must
establish to the satisfaction of the Internal Revenue Service that it
has adequate resources and procedures in place to comply with the terms
of the agreement described in paragraph (d)(3)(iv)(A) of this section.
(4) Coordination of taxpayer identifying numbers--(i) Social
security number. Any individual who is duly assigned a social security
number or who is entitled to a social security number will not be issued
an IRS individual taxpayer identification number. The individual can
[[Page 88]]
use the social security number for all tax purposes under this title,
even though the individual is, or later becomes, a nonresident alien
individual. Further, any individual who has an application pending with
the Social Security Administration will be issued an IRS individual
taxpayer identification number only after the Social Security
Administration has notified the individual that a social security number
cannot be issued. Any alien individual duly issued an IRS individual
taxpayer identification number who later becomes a U.S. citizen, or an
alien lawfully permitted to enter the United States either for permanent
residence or under authority of law permitting U.S. employment, will be
required to obtain a social security number. Any individual who has an
IRS individual taxpayer identification number and a social security
number, due to the circumstances described in the preceding sentence,
must notify the Internal Revenue Service of the acquisition of the
social security number and must use the newly-issued social security
number as the taxpayer identifying number on all future returns,
statements, or other documents filed under this title.
(ii) Employer identification number. Any individual with both a
social security number (or an IRS individual taxpayer identification
number) and an employer identification number may use the social
security number (or the IRS individual taxpayer identification number)
for individual taxes, and the employer identification number for
business taxes as required by returns, statements, and other documents
and their related instructions. Any alien individual duly assigned an
IRS individual taxpayer identification number who also is required to
obtain an employer identification number must furnish the previously-
assigned IRS individual taxpayer identification number to the Internal
Revenue Service on Form SS-4 at the time of application for the employer
identification number. Similarly, where an alien individual has an
employer identification number and is required to obtain an IRS
individual taxpayer identification number, the individual must furnish
the previously-assigned employer identification number to the Internal
Revenue Service on Form W-7, or such other form as may be prescribed by
the Internal Revenue Service, at the time of application for the IRS
individual taxpayer identification number.
(e) Banks, and brokers and dealers in securities. For additional
requirements relating to deposits, share accounts, and brokerage
accounts, see 31 CFR 103.34 and 103.35.
(f) Penalty. For penalties for failure to supply taxpayer
identifying numbers, see sections 6721 through 6724.
(g) Special rules for taxpayer identifying numbers issued to foreign
persons--(1) General rule--(i) Social security number. A social security
number is generally identified in the records and database of the
Internal Revenue Service as a number belonging to a U.S. citizen or
resident alien individual. A person may establish a different status for
the number by providing proof of foreign status with the Internal
Revenue Service under such procedures as the Internal Revenue Service
shall prescribe, including the use of a form as the Internal Revenue
Service may specify. Upon accepting an individual as a nonresident alien
individual, the Internal Revenue Service will assign this status to the
individual's social security number.
(ii) Employer identification number. An employer identification
number is generally identified in the records and database of the
Internal Revenue Service as a number belonging to a U.S. person.
However, the Internal Revenue Service may establish a separate class of
employer identification numbers solely dedicated to foreign persons
which will be identified as such in the records and database of the
Internal Revenue Service. A person may establish a different status for
the number either at the time of application or subsequently by
providing proof of U.S. or foreign status with the Internal Revenue
Service under such procedures as the Internal Revenue Service shall
prescribe, including the use of a form as the Internal Revenue Service
may specify. The Internal Revenue Service may require a person to apply
for the type of employer identification number that reflects the status
of that person as a U.S. or foreign person.
[[Page 89]]
(iii) IRS individual taxpayer identification number. An IRS
individual taxpayer identification number is generally identified in the
records and database of the Internal Revenue Service as a number
belonging to a nonresident alien individual. If the Internal Revenue
Service determines at the time of application or subsequently, that an
individual is not a nonresident alien individual, the Internal Revenue
Service may require that the individual apply for a social security
number. If a social security number is not available, the Internal
Revenue Service may accept that the individual use an IRS individual
taxpayer identification number, which the Internal Revenue Service will
identify as a number belonging to a U.S. resident alien.
(2) Change of foreign status. Once a taxpayer identifying number is
identified in the records and database of the Internal Revenue Service
as a number belonging to a U.S. or foreign person, the status of the
number is permanent until the circumstances of the taxpayer change. A
taxpayer whose status changes (for example, a nonresident alien
individual with a social security number becomes a U.S. resident alien)
must notify the Internal Revenue Service of the change of status under
such procedures as the Internal Revenue Service shall prescribe,
including the use of a form as the Internal Revenue Service may specify.
(3) Waiver of prohibition to disclose taxpayer information when
acceptance agent acts. As part of its request for an IRS individual
taxpayer identification number or submission of proof of foreign status
with respect to any taxpayer identifying number, where the foreign
person acts through an acceptance agent, the foreign person will agree
to waive the limitations in section 6103 regarding the disclosure of
certain taxpayer information. However, the waiver will apply only for
purposes of permitting the Internal Revenue Service and the acceptance
agent to communicate with each other regarding matters related to the
assignment of a taxpayer identifying number, including disclosure of any
taxpayer identifying number previously issued to the foreign person, and
change of foreign status. This paragraph (g)(3) applies to payments made
after December 31, 2001.
(h) Special rules for certain entities under Sec. 301.7701-3--(1)
General rule. Any entity that has an employer identification number
(EIN) will retain that EIN if its federal tax classification changes
under Sec. 301.7701-3.
(2) Special rules for entities that are disregarded as entities
separate from their owners--(i) When an entity becomes disregarded as an
entity separate from its owner. Except as otherwise provided in
regulations or other guidance, a single owner entity that is disregarded
as an entity separate from its owner under Sec. 301.7701-3, must use its
owner's taxpayer identifying number (TIN) for federal tax purposes.
(ii) When an entity that was disregarded as an entity separate from
its owner becomes recognized as a separate entity. If a single owner
entity's classification changes so that it is recognized as a separate
entity for federal tax purposes, and that entity had an EIN, then the
entity must use that EIN and not the TIN of the single owner. If the
entity did not already have its own EIN, then the entity must acquire an
EIN and not use the TIN of the single owner.
(3) Effective date. The rules of this paragraph (h) are applicable
as of January 1, 1997.
(i) Special rule for qualified subchapter S subsidiaries (QSubs)--
(1) General rule. Any entity that has an employer identification number
(EIN) will retain that EIN if a QSub election is made for the entity
under Sec. 1.1361-3 or if a QSub election that was in effect for the
entity terminates under Sec. 1.1361-5.
(2) EIN while QSub election in effect. Except as otherwise provided
in regulations or other published guidance, a QSub must use the parent S
corporation's EIN for Federal tax purposes.
(3) EIN when QSub election terminates. If an entity's QSub election
terminates, it may not use the EIN of the parent S corporation after the
termination. If the entity had an EIN prior to becoming a QSub or
obtained an EIN while it was a QSub in accordance with regulations or
other published guidance, the entity must use that EIN. If the entity
had no EIN, it must obtain
[[Page 90]]
an EIN upon termination of the QSub election.
(4) Effective date. The rules of this paragraph (i) apply on January
20, 2000.
(j) Effective date--(1) General rule. Except as otherwise provided
in this paragraph (j), the provisions of this section are generally
effective for information that must be furnished after April 15, 1974.
However, the provisions relating to IRS individual taxpayer
identification numbers apply on and after May 29, 1996. An application
for an IRS individual taxpayer identification number (Form W-7) may be
filed at any time on or after July 1, 1996.
(2) Special rules--(i) Employer identification number of an estate.
The requirement under paragraph (a)(1)(ii)(C) of this section that an
estate obtain an employer identification number applies on and after
January 1, 1984.
(ii) Taxpayer identifying numbers of certain foreign persons. The
requirement under paragraph (b)(2)(iv) of this section that certain
foreign persons furnish a TIN on a return of tax is effective for tax
returns filed after December 31, 1996.
(iii) Paragraphs (a)(1)(i), (a)(1)(ii) introductory text,
(a)(1)(ii)(A), and (a)(1)(ii)(B) of this section apply to income tax
returns due (without regard to extensions) on or after April 15, 1998.
[T.D. 7306, 39 FR 9946, Mar. 15, 1974 as amended by T.D. 7670, 45 FR
6932, Jan. 31, 1980; T.D. 7796, 46 FR 57482, Nov. 24, 1981; T.D. 8633,
60 FR 66090, Dec. 21, 1995; T.D. 8637, 60 FR 66134, Dec. 21, 1995; T.D.
8671, 61 FR 26790, May 29, 1996; 61 FR 33657, June 28, 1996; T.D. 8697,
61 FR 66588, Dec. 18, 1996; T.D. 8717, 62 FR 25502, May 9, 1997; T.D.
8734, 62 FR 53494, Oct. 14, 1997; T.D. 8739, 62 FR 62520, Nov. 24, 1997;
T.D. 8739, 63 FR 13124, Mar. 18, 1998; T.D. 8839, 64 FR 51242, Sept. 22,
1999; T.D. 8844, 64 FR 66583, Nov. 29, 1999; T.D. 8869, 65 FR 3856, Jan.
25, 2000; T.D. 8977, 67 FR 2329, Jan. 17, 2002; T.D. 9023, 67 FR 70313,
Nov. 22, 2002; T.D. 9032, 67 FR 78382, Dec. 24, 2002]
Sec. 301.6109-2 Authority of the Secretary of Agriculture to collect employer identification numbers for purposes of the Food Stamp Act of 1977.
(a) In general. The Secretary of Agriculture may require each
applicant retail food store or wholesale food concern to furnish its
employer identification number in connection with the administration of
section 9 of the Food Stamp Act of 1977 (7 U.S.C. 2018) (relating to the
determination of the qualifications of applicants under the Food Stamp
Act).
(b) Limited purpose. The Secretary of Agriculture may have access to
the employer identification numbers obtained pursuant to paragraph (a)
of this section, but only for the purpose of establishing and
maintaining a list of the names and employer identification numbers of
the stores and concerns for use in determining those applicants who have
been previously sanctioned or convicted under section 12 or 15 of the
Food Stamp Act of 1977 (7 U.S.C. 2021 or 2024). The Secretary of
Agriculture may use this determination of sanctions and convictions in
administering section 9 of the Food Stamp Act of 1977.
(c) Sharing of information--(1) Sharing permitted with certain
United States agencies and instrumentalities. The Secretary of
Agriculture may share the information contained in the list described in
paragraph (b) of this section with any other agency or instrumentality
of the United States that otherwise has access to employer
identification numbers, but only to the extent the Secretary of
Agriculture determines sharing such information will assist in verifying
and matching that information against information maintained by the
other agency or instrumentality.
(2) Restrictions on the use of shared information. The information
shared by the Secretary of Agriculture pursuant to this section may be
used by any other agency or instrumentality of the United States only
for the purpose of effective administration and enforcement of the Food
Stamp Act of 1977 or for the purpose of investigation of violations of
other Federal laws or enforcement of those laws.
(d) Safeguards--(1) Restrictions on access to employer
identification numbers by individuals--(i) Numbers maintained by the
Secretary of Agriculture. The individuals who are permitted access to
employer identification numbers obtained pursuant to paragraph (a) of
this section and maintained by the Secretary of Agriculture are officers
and employees of the United States whose duties or responsibilities
require access to such employer identification numbers
[[Page 91]]
for the purpose of effective administration or enforcement of the Food
Stamp Act of 1977 or for the purpose of sharing the information in
accordance with paragraph (c) of this section.
(ii) Numbers maintained by any other agency or instrumentality. The
individuals who are permitted access to employer identification numbers
obtained pursuant to paragraph (c) of this section and maintained by any
agency or instrumentality of the United States other than the Department
of Agriculture are officers and employees of the United States whose
duties or responsibilities require access to such employer
identification numbers for the purpose of effective administration and
enforcement of the Food Stamp Act of 1977 or for the purpose of
investigation of violations of other Federal laws or enforcement of
those laws.
(2) Other safeguards. The Secretary of Agriculture, and the head of
any other agency or instrumentality referred to in paragraph (c) of this
section, must provide for any additional safeguards that the Secretary
of the Treasury determines to be necessary or appropriate to protect the
confidentiality of the employer identification numbers. The Secretary of
Agriculture, and the head of any other agency or instrumentality
referred to in paragraph (c) of this section, may also provide for any
additional safeguards to protect the confidentiality of employer
identification numbers, provided these safeguards are consistent with
safeguards determined by the Secretary of the Treasury to be necessary
or appropriate.
(e) Confidentiality and disclosure of employer identification
numbers. Employer identification numbers obtained pursuant to paragraph
(a) or (c) of this section are confidential. No officer or employee of
the United States who has or had access to any such employer
identification number may disclose that number in any manner to an
individual not described in paragraph (d) of this section. For purposes
of this paragraph (e), officer or employee includes a former officer or
employee.
(f) Sanctions--(1) Unauthorized, willful disclosure of employer
identification numbers. Sections 7213(a) (1), (2), and (3) apply with
respect to the unauthorized, willful disclosure to any person of
employer identification numbers that are maintained pursuant to this
section by the Secretary of Agriculture, or any other agency or
instrumentality with which information is shared pursuant to paragraph
(c) of this section, in the same manner and to the same extent as
sections 7213(a) (1), (2), and (3) apply with respect to unauthorized
disclosures of returns and return information described in those
sections.
(2) Willful solicitation of employer identification numbers. Section
7213(a)(4) applies with respect to the willful offer of any item of
material value in exchange for any employer identification number
maintained pursuant to this section by the Secretary of Agriculture, or
any other agency or instrumentality with which information is shared
pursuant to paragraph (c) of this section, in the same manner and to the
same extent as section 7213(a)(4) applies with respect to offers (in
exchange for any return or return information) described in that
section.
(g) Delegation. All references in this section to the Secretary of
Agriculture are references to the Secretary of Agriculture or his or her
delegate.
(h) Effective date. Except as provided in the following sentence,
this section is effective on February 1, 1992. Any provisions relating
to the sharing of information by the Secretary of Agriculture with any
other agency or instrumentality of the United States are effective on
August 15, 1994.
[T.D. 8369, 56 FR 49685, Oct. 1, 1991, as amended by T.D. 8621, 60 FR
51725, Oct. 3, 1995; 61 FR 1035, Jan. 11, 1996]
Sec. 301.6109-3 IRS adoption taxpayer identification numbers.
(a) In general--(1) Definition. An IRS adoption taxpayer
identification number (ATIN) is a temporary taxpayer identifying number
assigned by the Internal Revenue Service (IRS) to a child (other than an
alien individual as defined in Sec. 301.6109-1(d)(3)(i)) who has been
placed, by an authorized placement agency, in the household of a
prospective adoptive parent for legal adoption. An ATIN is assigned to
the child upon application for use in connection with filing
requirements under the Internal Revenue Code and the regulations
[[Page 92]]
thereunder. When an adoption becomes final, the adoptive parent must
apply for a social security number for the child. After the social
security number is assigned, that number, rather than the ATIN, must be
used as the child's taxpayer identification number on all returns,
statements, or other documents required under the Internal Revenue Code
and the regulations thereunder.
(2) Expiration and extension. An ATIN automatically expires two
years after the number is assigned. However, upon request, the IRS may
grant an extension if the IRS determines the extension is warranted.
(b) Definitions. For purposes of this section--
(1) Authorized placement agency has the same meaning as in
Sec. 1.152-2(c) of this chapter;
(2) Prospective adoptive child or child means a child who has not
been adopted, but who has been placed in the household of a prospective
adoptive parent for legal adoption by an authorized placement agency;
and
(3) Prospective adoptive parent or parent means an individual in
whose household a prospective adoptive child is placed by an authorized
placement agency for legal adoption.
(c) General rule for obtaining a number--(1) Who may apply. A
prospective adoptive parent may apply for an ATIN for a child if--
(i) The prospective adoptive parent is eligible to claim a personal
exemption under section 151 with respect to the child;
(ii) An authorized placement agency places the child with the
prospective adoptive parent for legal adoption;
(iii) The Social Security Administration will not process an
application for an SSN by the prospective adoptive parent on behalf of
the child (for example, because the adoption is not final); and
(iv) The prospective adoptive parent has used all reasonable means
to obtain the child's assigned social security number, if any, but has
been unsuccessful in obtaining this number (for example, because the
biological parent who obtained the number is not legally required to
disclose the number to the prospective adoptive parent).
(2) Procedure for obtaining an ATIN. If the requirements of
paragraph (c)(1) of this section are satisfied, the prospective adoptive
parent may apply for an ATIN for a child on Form W-7A, Application for
Taxpayer Identification Number for Pending Adoptions (or such other form
as may be prescribed by the IRS). An application for an ATIN should be
made far enough in advance of the first intended use of the ATIN to
permit issuance of the ATIN in time for such use. An application for an
ATIN must include the information required by the form and accompanying
instructions, including the name and address of each prospective
adoptive parent and the child's name and date of birth. In addition, the
application must include such documentary evidence as the IRS may
prescribe to establish that a child was placed in the prospective
adoptive parent's household by an authorized placement agency for legal
adoption. Examples of acceptable documentary evidence establishing
placement for legal adoption by an authorized placement agency may
include--
(i) A copy of a placement agreement entered into between the
prospective adoptive parent and an authorized placement agency;
(ii) An affidavit or letter signed by the adoption attorney or
government official who placed the child for legal adoption pursuant to
state law;
(iii) A document authorizing the release of a newborn child from a
hospital to a prospective adoptive parent for adoption; and
(iv) A court document ordering or approving the placement of a child
for adoption.
(d) Effective date. The provisions of this section apply to income
tax returns due (without regard to extension) on or after April 15,
1998.
[T.D. 8839, 64 FR 51242, Sept. 22, 1999]
Sec. 301.6110-1 Public inspection of written determinations and background file documents.
(a) General rule. Except as provided in Sec. 301.6110-3, relating to
deletion of certain information, Sec. 301.6110-5(b), relating to actions
to restrain disclosure,
[[Page 93]]
paragraph (b)(2) of this section, relating to technical advice memoranda
involving civil fraud and criminal investigations, and jeopardy and
termination assessments, and paragraph (b)(3) of this section, relating
to general written determinations relating to accounting or funding
periods and methods, the text of any written determination (as defined
in Sec. 301.6110-2(a)) issued pursuant to a request postmarked or hand
delivered after October 31, 1976, shall be open to public inspection in
the places provided in paragraph (c)(1) of this section. The text of any
written determination issued pursuant to a request postmarked or hand
delivered before November 1, 1976, shall be open to public inspection
pursuant to section 6110(h) and Sec. 301.6110-6, when funds are
appropriated by Congress for such purpose. The procedures and rules set
forth in Secs. 301.6110-1 through 301.6110-5 and 301.6110-7 do not apply
to written determinations issued pursuant to requests postmarked or hand
delivered before November 1, 1976, unless Sec. 301.6110-6 states
otherwise. There shall also be open to public inspection in each place
of public inspection an index to the written determinations open or
subject to inspection at such place. Each such index shall be arranged
by section of the Internal Revenue Code, related statute, or tax treaty
and by subject matter description with such section in such manner as
the Commissioner may from time to time provide. The Commissioner shall
not be required to make any written determination or background file
document open to public inspection pursuant to section 6110 or refrain
from disclosure of any such documents or any information therein, except
as provided by section 6110 or with respect to a discovery order made in
connection with a judicial proceeding. The provisions of section 6110
shall not apply to matters for which the determination of whether public
inspection should occur is made pursuant to section 6104. Matters within
the ambit of section 6104 include: Any application filed with the
Internal Revenue Service with respect to the qualification or exempt
status of an organization, plan, or account described in section
6104(a)(1), whether the plan or account has more than 25 or less than 26
participants; any document issued by the Internal Revenue Service in
which the qualification or exempt status of an organization, plan, or
account described in section 6104 (a)(1) is granted, denied or revoked
or the portion of any document in which technical advice with respect
thereto is given to a district director; any application filed, and any
document issued by the Internal Revenue Service, with respect to the
qualification or status of master, prototype, and pattern employee
plans; the portion of any document issued by the Internal Revenue
Service in which is discussed the effect on the qualification or exempt
status of an organization, plan, or account described in section
6104(a)(1) of proposed transactions by such organization, plan, or
account; and any document issued by the Internal Revenue Service in
which is discussed the qualification or status of an organization
described in section 509(a) or 4942(j)(3), but not including any
document issued to nonexempt charitable trusts described in section
4947(a)(1).
(b) Items that may be inspected only under certain circumstances--
(1) Background file documents. A background file document (as such term
is defined in Sec. 301.6110-2(g)) relating to a particular written
determination issued pursuant to a request postmarked or hand delivered
after October 31, 1976, shall not be subject to inspection until such
written determination is open to public inspection or available for
inspection pursuant to paragraph (b) (2) or (3) of this section, and
then only if a written request pursuant to paragraph (c)(4) of this
section is made for inspection of such background file document.
Background file documents relating to written determinations issued
pursuant to requests postmarked or hand delivered before November 1,
1976, shall be subject to inspection pursuant to section 6110 (h) and
Sec. 301.6110-6, when funds are appropriated by Congress for such
purpose. The version of the background file document which is available
for inspection shall be the version originally made available for
inspection, as modified by any additional disclosure pursuant to section
6110(d)(3) and (f)(4).
[[Page 94]]
(2) Technical advice memoranda involving civil fraud and criminal
investigations, jeopardy and termination assessments. Any technical
advice memorandum (as such term is defined in Sec. 301.6110-2(f)
involving any matter that is the subject of a civil fraud or criminal
investigation, a jeopardy assessment (as such term is defined in section
6861), or a termination assessment (as such term is defined in section
6851) shall not be subject to inspection until all actions relating to
such investigation or assessment are completed and then only if a
written request pursuant to paragraph (c)(4) of this section is made for
inspection of such technical advice memorandum. A ``civil fraud
investigation'' is any administrative step or judicial proceeding in
which an issue for determination is whether the Commissioner should
impose additional tax pursuant to section 6653(b). A ``criminal
investigation'' is any administrative step or judicial proceeding in
which an issue for determination is whether a taxpayer should be charged
with or is guility of criminal conduct. An action relating to a civil
fraud or criminal investigation includes any such administrative step or
judicial proceeding, the review of subsequent related activities and
related returns of the taxpayer or related taxpayers, and any other
administrative step or judicial procedure or proceeding or appellate
process that is initiated as a consequence of the facts and
circumstances disclosed by such investigation. An action relating to a
jeopardy or termination assessment includes any administrative step or
judicial proceeding that is initiated to determine whether to make such
assessment, that is brought pursuant to section 7429 to determine the
appropriateness or reasonableness of such assessment, or that is brought
to resolve the legal consequences of the tax status or liability issue
underlying the making of such assessment. Any action relating to a civil
fraud or criminal investigation, a jeopardy assessment, or a termination
assessment is not completed until all available administrative steps and
judicial proceedings and remedies, including appeals, have been
completed.
(3) Written determinations with respect to adoption of or change in
certain accounting or funding periods and methods. Any general written
determination (as defined in Sec. 301.6110-2(c) that relates solely to
approval of any adoption of or change in--
(i) The funding method or plan year of a plan under section 412.
(ii) A taxpayer's annual accounting period under section 442.
(iii) A taxpayer's method of accounting under section 446(e), or
(iv) A partnership's or partner's taxable year under section 706
shall not be subject to inspection until such written determination
would, but for this paragraph (b)(3), be open to public inspection
pursuant to Sec. 301.6110-5(c) and then only if a written request
pursuant to paragraph (c)(4) of this section is made for inspection of
such written determination.
(c) Procecure for public inspection-- (1) Place of public
inspection. The text of any ruling (as such term is defined in
Sec. 301.6110-2(d) or technical advice memorandum that is open to public
inspection pursuant to section 6110 shall be located in the National
Office Reading Room. The text of any determination letter (as such term
is defined in Sec. 301.6110-2(e)) that is open to public inspection
pursuant to section 6110 shall be located in the Reading Room of the
Regional Office in which is located the district office that issued such
determination letter. Inspection of any written determination subject to
inspection only upon written request shall be requested from the
National Office Reading Room. Inspection of any background file document
shall be requested only from the reading room in which the related
written determination is either open to public inspection or subject to
inspection upon written request. The locations and mailing addresses of
the reading rooms are set forth in Sec. 601.702(b)(3)(ii) of this
chapter.
(2) Time and manner of public inspection. The inspection authorized
by section 6110 will be allowed only in the place provided for such
inspection in the presence of an Internal Revenue officer or employee
and only during the regular hours of business of the Internal Revenue
Service office in which the
[[Page 95]]
reading room is located. The public will not be allowed to remove any
record from a reading room. A person who wishes to inspect reading room
material without visiting a reading room may submit a written request
pursuant to paragraph (c)(4) of this section for copies of any such
material to the Internal Revenue Service reading room in which is
located such material.
(3) Copies. Notes may be taken of any material open to public
inspection under section 6110, and copies may be made manually. Copies
of any material open to public inspection or subject to inspection upon
written request will be furnished by the Internal Revenue Service to any
person making requests therefor pursuant to paragraph (c)(4) of this
section. If made at the time of inspection the request for copies need
not be in writing, unless the material is not immediately available for
copying. The Commissioner may prescribe fees pursuant to section 6110(j)
for furnishing copies of material open or subject to inspection.
(4) Requests. Any request for copies of written determinations, for
inspection of general written determinations relating to accounting or
funding periods and methods or technical advice memoranda involving
civil fraud and criminal investigations, and jeopardy and termination
assessments, for inspection or copies of background file documents, and
for copies of the index shall be submitted to the reading room in which
is located the requested material. If made in person, the request may be
submitted to the internal revenue employee supervising the reading room.
The request shall contain:
(i) Authorization for the Internal Revenue Service to charge the
person making such request for making copies, searching for material,
and making deletions therefrom;
(ii) The maximum amount of charges which the Internal Revenue
Service may incur without further authorization from the person making
such request;
(iii) With respect to requests for inspection and copies of
background file documents, the file number of the written determination
to which such background file document relates and a specific
identification of the nature or type of the background file document
requested;
(iv) With respect to requests for inspections of general written
determinations relating to accounting or funding periods and methods,
the day, week, or month of issuance of such written determination, and
the applicable category as selected from a special summary listing of
categories prepared by the Internal Revenue Service;
(v) With respect to requests for copies of written determinations,
the file number of the written determination to be copied, which can be
ascertained in the reading room or from the index;
(vi) With respect to requests for copies of portions of the index,
the section of the Internal Revenue Code, related statute or tax treaty
in which the person making such request is interested;
(vii) With respect to material which is to be mailed, the name,
address, and telephone number of the person making such request and the
address to which copies of the requested material should be sent; and
(viii) Such other information as the Internal Revenue Service may
from time to time require in its operation of reading rooms.
[T.D. 7524, 42 FR 63412, Dec. 16, 1977]
Sec. 301.6110-2 Meaning of terms.
(a) Written determination. A ``written determination'' is a ruling,
a determination letter, or a technical advice memorandum, as such terms
are defined in paragraphs (d), (e), and (f) of this section,
respectively. Notwithstanding paragraphs (d) through (f) of this
section, a written determination does not include for example, opinion
letters (as defined in Sec. 601.201(a)(4) of this chapter), information
letters (as defined in Sec. 601.201(a)(5) of this chapter), technical
information responses, technical assistance memoranda, notices of
deficiency, reports on claims for refund, Internal Revenue Service
decisions to accept taxpayers' offers in compromise, earnings and
profits determinations, or documents issued by the Internal Revenue
Service in the course of tax administration that are not disclosed to
the persons to whose tax returns or tax liability the documents relate.
[[Page 96]]
(b) Reference written determination. A ``reference written
determination'' is any written determination that the Commissioner
determines to have significant reference value. Any written
determination that the Commissioner determines to be the basis for a
published revenue ruling is a reference written determination until such
revenue ruling is obsoleted, revoked, superseded or otherwise held to
have no effect.
(c) General written determination. A ``general written
determination'' is any written determination that is not a reference
written determination.
(d) Ruling. A ``ruling'' is a written statement issued by the
National Office to a taxpayer or to the taxpayer's authorized
representative (as such term is defined in Sec. 601.201(e)(7) of this
chapter) on behalf of the taxpayer, that interprets and applies tax laws
to a specific set of facts. A ruling generally recites the relevant
facts, sets forth the applicable provisions of law, and shows the
application of the law to the facts.
(e) Determination letter. A ``determination letter'' is a written
statement issued by a district director in response to a written inquiry
by an individual or an organization that applies principles and
precedents previously announced by the National Office to the particular
facts involved.
(f) Technical advice memorandum. A ``technical advice memorandum''
is a written statement issued by the National Office to, and adopted by,
a district director in connection with the examination of a taxpayer's
return or consideration of a taxpayer's claim for refund or credit. A
technical advice memorandum generally recites the relevant facts, sets
forth the applicable law, and states a legal conclusion.
(g) Background file document--(1) General rule. A ``background file
document'' is--(i) The request for a written determination.
(ii) Any written material submitted in support of such request by
the person by whom or on whose behalf the request for a written
determination is made,
(iii) Any written communication, or memorandum of a meeting,
telephone communication, or other contact, between employees of the
Internal Revenue Service or Office of its Chief Counsel and persons
outside the Internal Revenue Service in connection with such request or
written determination which is received prior to the issuance (as such
term is defined in paragraph (h) of this section) of the written
determination, but not including communications described in paragraph
(g)(2) of this section, and
(iv) Any subsequent communication between the National Office and a
district director concerning the factual circumstances underlying the
request for a technical advice memorandum, or concerning a request by
the district director for reconsideration by the National Office of a
proposed technical advice memorandum.
(2) Limitations. Notwithstanding paragraph (g)(1) of this section, a
``background file document'' shall not include any--
(i) Communication between the Department of Justice and the Internal
Revenue Service or the Office of its Chief Counsel relating to any
pending civil or criminal case or investigation,
(ii) Communication between Internal Revenue Service employees and
employees of the Office of its Chief Counsel,
(iii) Internal memorandum or attorney work product prepared by the
Internal Revenue Service or Office of its Chief Counsel which relates to
the development of the conclusion of the Internal Revenue Service in a
written determination, including, with respect to a technical advice
memorandum, the Transmittal Memorandum, as defined in
Sec. 601.105(b)(5)(vi)(c) of this chapter,
(iv) Correspondence or any portion of correspondence between the
Internal Revenue Service and any person relating solely to the making of
or extent of deletions pursuant to section 6110(c), or a request
pursuant to section 6110(g) (3) and (4) for postponement of the time at
which a written determination is made open or subject to inspection,
(v) Material relating to (A) a request for a ruling or determination
letter that is withdrawn prior to issuance thereof or that the Internal
Revenue Service declines to answer, (B) a request for technical advice
that the National Office declines to answer, or (C)
[[Page 97]]
the appeal of a taxpayer from the decision of a district director not to
seek technical advice, or
(vi) Response to a request for technical advice which the district
director declines to adopt, and the district director's request for
reconsideration thereof.
(h) Issuance. ``Issuance'' of a written determination occurs, with
respect to rulings and determination letters, upon the mailing of the
ruling or determination letter to the person to whom it pertains.
Issuance of a technical advice memorandum occurs upon the adoption of
the technical advice memorandum by the district director.
(i) Person to whom written determination pertains. A ``person to
whom a written determination pertains'' is the person by whom a ruling
or determination letter is requested, but if requested by an authorized
representative, the person on whose behalf the request is made. With
respect to a technical advice memorandum, a ``person to whom a written
determination pertains'' is the taxpayer whose return is being examined
or whose claim for refund or credit is being considered.
(j) Person to whom a background file document relates. A ``person to
whom a background file document relates'' is the person to whom the
related written determination pertains, as such term is defined in
paragraph (i) of this section.
(k) Person who has a direct interest in maintaining confidentiality.
A ``person who has a direct interest in maintaining the confidentiality
of a written determination'' is any person whose name and address is
listed in the request for such written determination, as required by
Sec. 601.201(e)(2) of this chapter. A ``person who has a direct interest
in maintaining the confidentiality of a background file document'' is
any person whose name and address is in such background file document,
or who has a direct interest in maintaining the confidentiality of the
written determination to which such background file document relates.
(l) Successor in interest. A ``successor in interest'' to any person
to whom a written determination pertains or background file document
relates is any person who acquires the rights and assumes the
liabilities of such person with respect to the transaction which was the
subject matter of the written determination, provided that the successor
in interest notifies the Commissioner with respect to the succession in
interest.
[T.D. 7524, 42 FR 63413, Dec. 16, 1977]
Sec. 301.6110-3 Deletion of certain information in written determinations open to public inspection.
(a) Information subject to deletion. There shall be deleted from the
text of any written determination open to public inspection or subject
to inspection upon written request and background file document subject
to inspection upon written request pursuant to section 6110 the
following types of information:
(1) Identifying details. (i) The names, addresses, and identifying
numbers (including telephone, license, social security, employer
identification, credit card, and selective service numbers) of any
person, other than the identifying details of a person who makes a
third-party communication described in Sec. 301.6110-4(a), and
(ii) Any other information that would permit a person generally
knowledgeable with respect to the appropriate community to identify any
person. The determination of whether information would permit
identification of a particular person will be made in view of
information available to the public at the time the written
determination or background file document is made open or subject to
inspection and in view of information that will subsequently become
available, provided the Internal Revenue Service is made aware of such
information and the potential that such information may identify any
person. The ``appropriate community'' is that group of persons who would
be able to associate a particular person with a category of transactions
one of which is described in the written determination or background
file document. The appropriate community may vary according to the
nature of the transaction which is the subject of the written
determination. For example, if a steel company proposes to enter a
transaction involving the purchase and installation of blast
[[Page 98]]
furnaces, the ``appropriate community'' may include all steel producers
and blast furnace manufacturers, but if the installation process is a
unique process of which everyone in national industry is aware, the
``appropriate community'' might also include the national industrial
community. On the other hand, if the steel company proposes to enter a
transaction involving the purchase of land on which to construct a
building to house the blast furnaces, the ``appropriate community'' may
also include those residing or doing business within the geographical
locale of the land to be purchased.
(2) Information concerning national defense and foreign policy.
Information specifically authorized under criteria established by an
Executive order to be kept secret in the interest of national defense or
foreign policy and which is in fact properly classified pursuant to such
order.
(3) Information exempted by other statutes and agency rules.
Information specifically exempted from disclosure by any statute other
than the Internal Revenue Code of 1954 and 5 U.S.C. 552 which is
applicable to the Internal Revenue Service, and any information obtained
by the Internal Revenue Service solely and directly from another Federal
agency subject to a nondisclosure rule of such agency. Deletion of
information shall not be made solely because the same information was
submitted to another Federal agency subject to a nondisclosure rule
applicable only to such agency.
(4) Trade secrets and privileged or confidential commercial or
financial information--(i) Deletions to be made. Any--
(A) Trade secrets, and
(B) Commercial or financial information obtained from any person
which, despite the fact that identifying details are deleted pursuant to
paragraph (a)(1) of this section, nonetheless remains privileged or
confidential.
(ii) Trade secret. For purposes of paragraph (a)(4)(i)(A) of this
section, a trade secret may consist of any formula, pattern, device or
compilation of information that is used in one's business, and that
gives one an opportunity to obtain an advantage over competitors who do
not know or use it. It may be a formula for a chemical compound, a
process of manufacturing, treating or preserving materials, a pattern
for a machine or other device, or a list of customers. The subject of a
trade secret must be secret, that is, it must not be of public knowledge
or of a general knowledge in the trade or business. Novelty, in the
patent law sense, is not required for a trade secret.
(iii) Privileged or confidential. For purposes of paragraph
(a)(4)(i)(B) of this section, information is privileged or confidential
if from examination of the request and supporting documents relating to
a written determination, and in consideration of the fact that
identifying details are deleted pursuant to paragraph (a)(1) of this
section, it is determined that disclosure of such information would
cause substantial harm to the competitive position of any person. For
example, while determining whether disclosure of certain information
would cause substantial harm to X's competitive position, the Internal
Revenue Service becomes aware that his information has previously been
disclosed to the public. In this situation, the Internal Revenue Service
will not agree with X's argument that disclosure of the information
would cause substantial harm to X's competitive position. An example of
information previously disclosed to the public is financial information
contained in the published annual reports of widely held public
corporations.
(5) Information within the ambit of personal privacy. Information
the disclosure of which would constitute a clearly unwarranted invasion
of personal privacy, despite the fact that identifying details are
deleted pursuant to paragraph (a)(1) of this section. Personal privacy
information encompasses embarrassing or sensitive information that a
reasonable person would not reveal to the public under ordinary
circumstances. Matters of personal privacy include, but are not limited
to, details not yet public of a pending divorce, medical treatment for
physical or mental disease or injury, adoption of a child, the amount of
a gift, and political preferences. A clearly unwarranted invasion of
personal privacy exists if from analysis of information submitted in
support of the request for a written
[[Page 99]]
determination it is determined that the public interest purpose for
requiring disclosure is outweighed by the potential harm attributable to
such invasion of personal privacy.
(6) Information concerning agency regulation of financial
institutions. Information contained in or related to reports prepared
by, on behalf of, or for the use of an agency responsible for the
regulation or supervision of financial institutions concerning
examination, operation or condition of a financial institution,
disclosure of which would damage the standing of such financial
institution.
(7) Information concerning wells. Geological or geophysical
information and data, including maps, concerning wells.
(b) Manner of deletions. Whenever information, which is not to be
disclosed pursuant to section 6110(c), is deleted from the text of a
written determination or background file document, substitutions
therefore shall be made to the extent feasible if necessary for an
understanding of the legal analysis developed in such written
determination or to make the disclosed text of a background file
document comprehensible. Wherever any material is deleted, an indication
of such deletion, and of any substitution therefor, shall be made in
such manner as the Commissioner deems appropriate.
(c) Limitations on the making of deletions. Any portion of a written
determination or background file document that has been deleted will be
restored to the text thereof--
(1) If pursuant to section 6110(d)(3) or (f)(4)(A) a court orders
disclosure of such portion, or
(2) If pursuant, to Sec. 301.6110-5(d)(1) an agreement is reached to
disclose information.
[T.D. 7524, 42 FR 63414, Dec. 16, 1977]
Sec. 301.6110-4 Communications from third parties.
(a) General rule. Except as provided in paragraph (b) of this
section a record will be made of any communication, whether written, by
telephone, at a meeting, or otherwise, received by the Internal Revenue
Service or Office of its Chief Counsel prior to the issuance of written
determination from any person other than a person to whom the written
determination pertains or the authorized representative of such person.
This rule applies to any communication concerning such written
determination, any communication concerning the request for such written
determination, or any communication concerning other matters involving
such written determination. A notation that such communication has been
made shall be placed on such written determination when it is made open
to public inspection or available for inspection upon written request
pursuant to Sec. 301.6110-5. The notation to be placed on a written
determination shall consist of the date on which the communication was
received and the category of the person making such communication, for
example, Congressional, Department of Commerce, Treasury, trade
association, White House, educational institution. Any person may
request the Internal Revenue Service to disclose the name of any person
about whom a notation has been made pursuant to this paragraph.
(b) Limitations. The provisions of paragraph (a) of this section
shall not apply to communications received by the Internal Revenue
Service from employee of the Internal Revenue Service or Office of its
Chief Counsel, from the Chief of Staff of the Joint Committee on
Internal Revenue Taxation, from the Department of Justice with respect
to any pending civil or criminal case or investigation, or from another
government agency in response to a request made by the Internal Revenue
Service to such agency for assistance involving the expertise of such
agency.
(c) Action to obtain disclosure of identity of person to whom
written determination pertains--(1) Creation of remedy. With respect to
any written determination on which a notation has been placed pursuant
to paragraph (a) of this section, any person may file a petition in the
United States Tax Court or file a complaint in the United States
District Court for the District of Columbia for an order requiring that
the identity of any person to whom such written determination pertains
be disclosed, but such petition or complaint must be filed within 36
months of the date such written determination is made open or subject to
inspection.
[[Page 100]]
(2) Necessary disclosure. Whenever an action is brought pursuant to
section 6110(d)(3), the court may order that the identity of any person
to whom the written determination pertains be disclosed. Such disclosure
may be ordered if the court determines that there is evidence in the
record from which it could reasonably be concluded that an impropriety
occurred or undue influence was exercised with respect to such written
determination by or on behalf of the person to whom the written
determination pertains. The court may, pursuant to section 6110(d)(3),
also order the disclosure of any material deleted pursuant to section
6110(c) if such disclosure is in the public interest. The written
determination or background file document with respect to which the
disclosure was sought shall be revised to disclose the information which
the court orders to be disclosed.
(3) Required notice. If a proceeding is commenced pursuant to
section 6110(d)(3) and paragraph (c)(1) of this section with respect to
any written determination, the Secretary shall send notice of the
commencement of such proceeding to any person whose identity is subject
to being disclosed and to the person about whom a third-party
communication notation has been made pursuant to section 6110(d)(1).
Such notice shall be sent, by registered or certified mail, to the last
known address of the persons described in this paragraph (c)(3) within
15 days after notice of the petition or complaint filed pursuant to
section 6110(d)(3) is served on the Secretary. For further guidance
regarding the definition of last known address, see Sec. 301.6212-2.
(4) Intervention. Any person who is entitled to receive notice
pursuant to paragraph (c)(3) of this section shall have the right to
intervene in any action brought pursuant to section 6110(d)(3). If
appropriate such person shall be permitted to intervene anonymously.
[T.D. 7524, 42 FR 63415, Dec. 16, 1977, as amended by T.D. 8939, 66 FR
2819, Jan. 12, 2001]
Sec. 301.6110-5 Notice and time requirements; actions to restrain disclosure; actions to obtain additional disclosure.
(a) Notice--(1) General rule. Before a written determination is made
open to public inspection or subject to inspection upon written request,
or before a background file document is subject to inspection upon
written request, the person to whom the written determination pertains
or background file document relates shall be notified by the
Commissioner of intention to disclose such written determination or
background file document. The notice with respect to a written
determination, other than a written determination described in
Sec. 301.6110-1(b) (2) or (3) shall be mailed when such written
determination is issued. The notice with respect to any written
determination relating to accounting or funding periods and methods, any
technical advice memoranda involving civil fraud and criminal
investigations, and jeopardy and termination assessments, and any
background file document shall be mailed within a reasonable time after
the receipt of the first written request for inspection thereof.
(2) Contents of notice. The notice required by paragraph (a)(1) of
this section shall--
(i) Include a copy of the text of the written determination or
background file document, which the Commissioner proposes to make open
to public inspection or subject to inspection pursuant to a written
request, on which is indicated (A) the material that the Commissioner
proposes to delete pursuant to section 6110(c), (B) any substitutions
proposed to be made therefor, and (C) any third-party communication
notations required to be placed pursuant to Sec. 301.6110-4(a) on the
face of the written determination.
(ii) State that the written determination or background file
document is to be open to public inspection or subject to inspection
pursuant to a written request pursuant to section 6110.
(iii) State that the recipient of the notice has the right to seek
administrative remedies pursuant to paragraph (b)(1) of this section and
to commence
[[Page 101]]
judicial proceedings pursuant to section 6110(f)(3) within indicated
time periods, and
(iv) Prominently indicate the date on which the notice is mailed.
(b) Actions to restrain disclosure--(1) Administrative remedies. Any
person to whom a written determination pertains or background file
document relates, and any successor in interest, executor or authorized
representative of such person may pursue the administrative remedies
described in Sec. 601.105(b)(5) (iii)(i) and (vi)(f) and Sec. 601.201(e)
(11) and (16) of this chapter. Any person who has a direct interest in
maintaining the confidentiality of any written determination or
background file document or portion thereof may pursue the
administrative remedies described in Sec. 601.105(b)(5)(vi)(f) and
Sec. 601.201(e)(16) of this chapter. No person about whom a third-party
communication notation has been made pursuant to Sec. 301.6110-4(a) may
pursue any administrative remedy for the purpose of restraining
disclosure of the identity of such person where such identity appears
with respect to the making of such third-party communication.
(2) Judicial remedy. Except as provided in paragraph (b)(3) of this
section, any person permitted to resort to administrative remedies
pursuant to paragraph (b)(1) of this section may, if such person
proposes any deletion not made pursuant to Sec. 301.6110-3 by the
Commissioner, file a petition in the United States Tax Court pursuant to
section 6110(f)(3) for a determination with respect to such proposed
deletion. If appropriate, such petition may be filed anonymously. Any
petition filed pursuant to section 6110(f)(3) must be filed within 60
days after the date on which the Commissioner mails the notice of
intention to disclose required by section 6110(f)(1).
(3) Limitations on right to bring judicial actions. No petition
shall be filed pursuant to section 6110(f)(3) unless the administrative
remedies provided by paragraph (b)(1) of this section have been
exhausted. However, if the petitioner has responded within the
prescribed time period to the notice pursuant to section 6110(f)(1) of
intention to disclose, but has not received the final administrative
conclusion of the Internal Revenue Service within 50 days after the date
on which the Commissioner mails the notice of intention to disclose
required by section 6110(f)(1), the petitioner may file a petition
pursuant to section 6110(f)(3). No judicial action with respect to any
written determination or background file document shall be commenced
pursuant to section 6110(f)(3) by any person who has received a notice
with respect to such written determination or background file document
pursuant to paragraph (b)(4) of this section.
(4) Required notice. If a proceeding is commenced pursuant to
section 6110(f)(3) with respect to any written determination or
background file document, the Secretary shall send notice of the
commencement of such proceeding to any person to whom such written
determination pertains or to whom such background file document relates.
No notice is required to be sent to persons who have filed the petition
that commenced the proceeding pursuant to section 6110(f)(3) with
respect to such written determination or background file document. The
notice shall be sent, by registered or certified mail, to the last known
address of the persons described in this paragraph (b)(4) within 15 days
after notice of the petition filed pursuant to section 6110(f)(3) is
served on the Secretary. For further guidance regarding the definition
of last known address, see Sec. 301.6212-2.
(5) Intervention. Any person who is entitled to receive notice
pursuant to paragraph (b)(4) of this section shall have the right to
intervene in any action brought pursuant to this section. If
appropriate, such person shall be permitted to intervene anonymously.
(c) Time at which open to public inspection--(1) General rule.
Except as otherwise provided in paragraph (c)(2) of this section, the
text of any written determination or background file document open to
public inspection or available for inspection upon written request
pursuant to section 6110 shall be made open to or available for
inspection no earlier than 75 days and no later than 90 days after the
date on which the Commissioner mails the notice required by paragraph
(a)(1) of this section. However, if an action is brought pursuant to
section 6110(f)(3)
[[Page 102]]
to restrain disclosure of any portion of such written determination or
background file document the disputed portion of such written
determination or background file document shall be made open to or
available for inspection pursuant to paragraph (c)(2)(i) of this
section.
(2) Limitations--(i) Court order. The portion of the text of any
written determination or background file document that was subject to an
action pursuant to section 6110(f)(3) to restrain disclosure in which
the court determined that such disclosure should not be restrained shall
be made open to or available for inspection within 30 days of the date
that the court order becomes final. However, in no event shall such
portion of the text of such written determination or background file
document be made open to or available for inspection earlier than 75
days after the date on which the Commissioner mails the notice of
intention to disclose required by section 6110(f)(1) and paragraph
(a)(1) of this section. Such 30-day period may be extended for such time
as the court finds necessary to allow the Commissioner to comply with
its decision. Any portion of a written determination or background file
document which a court orders open to public inspection or subject to
inspection upon written request pursuant to section 6110(f)(4) or
disclosed pursuant to section 6110(d)(3) shall be made open or subject
to inspection or disclosed within such time as the court provides.
(ii) Postponement based on incomplete status of underlying
transaction--(A) Initial period not to exceed 90 days. The time period
set forth in paragraph (c)(1) of this section within which a written
determination shall be made open to public inspection or available for
inspection upon written request shall be extended, upon the written
request of the person to whom such written determination pertains or the
authorized representative of such person, until 15 days after the date
on which the transaction set forth in the written determination is
scheduled to be completed, but such day shall be no later than 180 days
after the date on which the Commissioner mails the notice of intention
to disclose.
(B) Additional period. The time period determined pursuant to
paragraph (c)(2)(ii)(A) of this section shall be further extended upon
an additional written request, if the Commissioner determines from the
information contained in such request that good cause exists to warrant
such extension. This further extension shall be until 15 days after the
date on which the transaction set forth in the written determination is
expected to be completed, but such day shall be no later than 360 days
after the date on which the Commissioner mails the notice of intention
to disclose. The good cause required by this paragraph (B) exists if the
person requesting the delay in inspection demonstrates to the
satisfaction of the Commissioner that it is likely that the lack of such
extension will cause interference with consummation of the pending
transaction.
(C) Written request for extension. The written request for extension
of the time when a written determination is to be made open to public
inspection or available for inspection upon written request shall set
forth the date on which it is expected that the underlying transaction
will be completed, and, with respect to the additional extension
described in paragraph (c)(2)(ii)(B) of this section, set forth the
reason for requesting such extension. A request for extension of time
may not be submitted until the notice of intention to disclose is mailed
and must be received by the Internal Revenue Service office which issued
such written determination no later than--
(1) In the case of the initial extension, 60 days after the date on
which the Commissioner mails the notice of intention to disclose, or
(2) In the case of the additional extension, 15 days before the day
on which, for purposes of paragraph (c)(2)(ii)(A) of this section, the
transaction set forth in the written determination was expected to have
been completed.
(D) Notice and determination of actual completion. If an extension
of time for inspection has been granted, and the transaction is
completed prior to the day on which it was expected to have been
completed, the Internal Revenue
[[Page 103]]
Service office which issued such written determination shall be so
notified by the person who requested such extension. In such event, the
written determination shall be made open to public inspection or
available for inspection upon written request on the earlier of (1) 30
days after the day on which the Commissioner is notified that the
transaction is completed, or (2) the day on which the written
determination was scheduled to be made open to public inspection or
available for inspection upon written request pursuant to paragraph
(c)(2)(ii) of this section. Similarly, if the Commissioner determines
that the transaction was completed prior to the day on which it was
expected to have been completed, even if the person requesting such
extension has not so notified the Internal Revenue Service, the written
determination shall be made open to public inspection or available for
inspection upon written request on the earlier of (1) the day which is
30 days after the Commissioner ascertains that the transaction is
completed sooner than has been expected, or (2) the day on which the
written determination was scheduled to be made open to public inspection
or available for inspection upon written request pursuant to paragraph
(c)(2)(ii) of this section.
(d) Actions to obtain additional disclosure--(1) Administrative
remedies. Under section 6110(f)(4) any person may seek to obtain
additional disclosure of information contained in any written
determination or background file document that has been made open or
subject to inspection. A request for such additional disclosure shall be
submitted to the Internal Revenue Service office which issued such
written determination, or to which the request for inspection of such
background file document has been submitted pursuant to Sec. 301.6110-
1(c)(4), and must contain the file number of the written determination
or a description of the background file document (including the file
number of the related written determination), the deleted information
which in the opinion of such person should be open or subject to
inspection, and the basis for such opinion. If the Internal Revenue
Service determines that the request constitutes a request for disclosure
of the name, address, or the identifying numbers described in
Sec. 301.6110-3(a)(1)(i) of any person, it shall within a reasonable
time notify the person requesting such disclosure that disclosure will
not be made. If the Internal Revenue Service determines that the request
or any portion thereof constitutes a request for disclosure of
information other than the name, address, or the identifying numbers
described in Sec. 301.6110-3(a)(1)(i) of any person, it shall send a
notice that such additional disclosure has been requested to any person
to whom the written determination pertains or background file document
relates, and to all persons who are identified by name and address in
the written determination or background file document. Notice that such
persons have been contacted shall be sent to the person requesting the
additional disclosure. The notice that additional disclosure has been
requested shall state that the Internal Revenue Service has determined
that additional disclosure of information other than the name, address,
or the identifying numbers described in Sec. 301.6110-3(a)(1)(i) of any
person has been requested, inform the recipient of the notice that the
person seeking the additional disclosure has the right under section
6110(f)(4) to bring a judicial action to attempt to compel such
disclosure, and request the recipient of the notice to reply within 20
days by submitting a statement of whether or not the recipient of the
notice agrees to the requested disclosure or portion thereof. If all
persons to whom a notice is sent pursuant to this paragraph (d)(1) of
this section agree to disclose the requested information or any portion
thereof, the person seeking such disclosure will be so informed; the
written determination or background file document shall be accordingly
revised to disclose the information with respect to which an agreement
to disclose has been reached. If any of the persons to whom a notice is
sent pursuant to this paragraph (d)(1) of this section do not agree to
the additional disclosure or do not respond to such notice, the Internal
Revenue Service
[[Page 104]]
shall within a reasonable time so notify the person requesting such
disclosure, and deny the request for additional disclosure.
(2) Judicial remedy. Except as provided in paragraph (d)(3) of this
section, any person who seeks to obtain additional disclosure of
information contained in any written determination or background file
document may file a petition pursuant to section 6110(f)(4) in the
United States Tax Court or a complaint in the United States District
Court for the District of Columbia for an order requiring that such
information be made open or subject to inspection. Nothing in this
paragraph shall prevent the Commissioner from disposing of written
determinations and related background file documents pursuant to
Sec. 301.6110-7(a).
(3) Limitations on right to bring judicial action--(i) Exhaustion of
administrative remedies. No petition or complaint shall be filed
pursuant to section 6110(f)(4) unless the administrative remedies
provided by paragraph (d)(1) of this section have been exhausted.
However, if the Internal Revenue Service does not approve or deny the
request for additional disclosure within 180 days after the request is
submitted, the person making the request may file a petition pursuant to
section 6110(f)(4).
(ii) Actions to obtain identity. No petition or complaint shall be
filed pursuant to section 6110(f)(4) to obtain disclosure of the
identity of any person to whom a written determination on which a third-
party communication notation has been placed pursuant to Sec. 301.6110-
4(a) pertains. Such actions shall be brought pursuant to section
6110(d)(3).
(4) Required notice. If a proceeding is commenced pursuant to
section 6110(f)(4) with respect to any written determination or
background file document, the Secretary shall send notice of the
commencement of such proceeding to any person to whom the written
determination pertains or background file document relates, and to all
persons who are identified by name and address in the written
determination or background file document. The notice shall be sent, by
registered or certified mail, to the last known address of the persons
described in this paragraph (d)(4) within 15 days after notice of the
petition or complaint filed pursuant to section 6110(f)(4) is served on
the Secretary.
(5) Intervention. Any person who is entitled to receive notice
pursuant to paragraph (d)(4) of this section shall have the right to
intervene in any action brought pursuant to this section. If
appropriate, such person shall be permitted to intervene anonymously.
[T.D. 7524, 42 FR 63415, Dec. 16, 1977, as amended by T.D. 8939, 66 FR
2819, Jan. 12, 2001]
Sec. 301.6110-6 Written determinations issued in response to requests submitted before November 1, 1976.
(a) Inspection of written determinations and background file
documents--(1) General rule. Except as provided in this section, the
text of any written determination issued in response to a request
postmarked or hand delivered before November 1, 1976 and any related
background file document shall be open or subject to inspection in
accordance with the rules in Secs. 301.6110-1 through 301.6110-5 and
301.6110-7. However, the rules in Sec. 301.6110-4 do not apply to
inspection under this section. The rules in Sec. 301.6110-5 (a), (b) and
(c) also do not apply, except with respect to background file documents.
(2) Exclusions. The following written determinations are not open or
subject to inspection under this section.
(i) Written determinations with respect to matters for which the
determination of whether public inspection should occur is made under
section 6104. Some of these matters are listed in Sec. 301.6110-1(a).
(ii) Written determinations issued before September 2, 1974, dealing
with the qualification of a plan described in section 6104(a)(1)(B)(i)
or the exemption from tax under section 501(a) of an organization
forming part of such a plan.
(iii) Written determination issued pursuant to requests submitted
before November 1, 1976 with respect to the exempt staus under section
501(a) of organizations described in section 501 (c) or (d), the status
of organizations as private foundations under section 509(a), or the
status of organizations as operating foundations under section
4942(j)(3).
[[Page 105]]
(iv) General written determinations that relate solely to accounting
or funding periods and methods, as defined in Sec. 301.6110-1(b)(3).
(v) Determination letters.
(3) Items that may be inspected only under certain circumstances--
(i) Background file documents. A background file document relating to a
particular written determination issued in response to a request
submitted before November 1, 1976 shall not be subject to inspection
until the related written determination is open to public inspection or
available for inspection, and then only if a written request pursuant to
Sec. 301.6110-1(c)(4) is made for inspection of the background file
document. However, the following background file documents are not open
or subject to inspection:
(A) Background file documents relating to general written
determinations issued before July 5, 1967.
(B) Background file documents relating to written determinations
described in paragraph (a)(2) of this section.
(ii) General written determinations issued before July 5, 1967.
General written determinations issued before July 5, 1967 shall not be
subject to inspection until all other written determinations issued in
response to requests postmarked or hand delivered before November 1,
1976 that are open to inspection under this section have been made open
to public inspection, and then only if a written request pursuant to
Sec. 301.6110-1(c)(4) is made for inspection of the written
determination. In this regard, the request for inspection must also
contain the section of the Internal Revenue Code in which the requester
is interested and the dates of issuance of the written determinations.
(b) Notice and time requirements, and actions to restrain
disclosure--(1) Notice-- (i) General rule. Before a written
determination is made open to public inspection and before a particular
written determination is subject to inspection in response to the first
written request therefor, the Commissioner shall publish in the Federal
Register a notice that the written determination is to be made open or
subject to inspection. Notices with respect to written determinations,
other than those described in paragraph (a)(3)(ii) of this section,
shall be published at the earliest practicable time after this
regulation is adopted as a Treasury decision. Notices with respect to
written determinations subject to inspection upon written request shall
be published within a reasonable time after the receipt of the first
written request for inspection thereof, but no sooner than the day as of
which all other written determinations open to public inspection under
this section have been made open to public inspection. Notices with
respect to background file documents shall be sent in accordance with
the rules in Sec. 301.6110-5(a) and will be mailed by the Internal
Revenue Service to the most recent addresses of the persons to whom the
background file document relates that are in the written determination
file.
(ii) Sequence of notices. Notices with respect to written
determinations, other than general written determinations issued before
July 5, 1967, shall be published in the following order. The first
category is notices with respect to reference written determinations
issued under the Internal Revenue Code of 1954. The second category is
notices with respect to general written determinations issued after July
4, 1967. The third category is notices with respect to reference written
determinations issued under the Internal Revenue Code of 1939 or
corresponding provisions of prior law. Within a category, the
Commissioner may publish notices individually or for groups of written
determinations arranged according to the jurisdictions of the ruling
branches in the Office of the Assistant Commissioner (Technical) and the
Assistant Commissioner (Employee Plans and Exempt Organizations), as the
Commissioner may find reasonable. To the extent practicable, notices
published individually shall be published in the reverse order of the
issuance of the written determinations for which they are published,
starting with the most recent written determination issued. To the
extent practicable, each group shall consist of consecutively issued
written determinations. Notices for groups shall be published, to the
extent practicable, in the reverse order of the time period of issuance
of the written
[[Page 106]]
determinations in each group, starting with the most recent time period.
(iii) Contents of notice. The notice required by paragraph (b)(1)(i)
of this section shall:
(A) Identify by subject matter description and dates of issuance the
written determinations that the Commissioner proposes to make open or
subject to inspection.
(B) State that the written determinations will be made open or
subject to inspection pursuant to section 6110(h),
(C) State that the persons to whom the written determinations
pertain have the right to seek administrative remedies under paragraph
(b)(2)(ii) of this section and to commence judicial proceedings under
section 6110(h)(4) within indicated time periods,
(D) State that there exist the possibilities that someone might
request additional disclosure under section 6110(f)(4) and that someone
might request inspection of a related background file document, and
(E) State that any notice that must be mailed by the Internal
Revenue Service will be sent to the most recent address of the person to
whom the notice must be sent that is in the relevent written
determination file.
(2) Actions to restrain disclosure--(i) Information on written
determinations described by notice. Any person may, within 15 days after
the Commissioner publishes in the Federal Register a notice of intention
to disclose a written determination under section 6110(h), request the
Internal Revenue Service to provide certain information. This
information includes whether any of the written determinations described
by the notice is one that was issued to the person requesting this
information. The Internal Revenue Service will also inform the person
whether any of the written determinations described by the notice is one
that was issued to a person with respect to whom the person requesting
this information is a successor in interest executor or authorized
representative. However, in order to do so, the Internal Revenue Service
must be given the name and taxpayer identifying number of this other
person and documentation of the relationship between that person and the
person requesting the information. If the person requesting this
information is a person to whom a written determination described by the
notice pertains, or a successor in interest, executor, or authorized
representative of that person, the Internal Revenue Service will also
provide the person with a copy of the written determination on which is
indicated the material that the Commissioner proposes to delete under
section 6110(c) and any substitution proposed to be made therefor.
(ii) Administrative remedies. Any person to whom a written
determination described by the notice in the Federal Register pertains,
and any successor in interest, executor or authorized representative of
that person may pursue the administrative remedies described in this
paragraph (b)(2)(ii). If after receiving the information described in
paragraph (b)(2)(i) of this section, the person pursuing these
administrative remedies desires to protest the disclosure of certain
information in the written determination, that person must within 35
days after the notice is published submit a written statement
identifying those deletions not made by the Internal Revenue Service
which the person believes should have been made. The person pursuing
these administrative remedies must also submit a copy of the version of
the written determination proposed to be open or subject to inspection
on which that person indicates, by the use of brackets, the deletions
which the person believes should have been made. The Internal Revenue
Service shall, within 20 days after receipt of the response by the
person pursuing these administrative remedies, mail to that person its
final administrative conclusion with respect to the deletions to be
made.
(iii) Judicial remedy. Except as provided in paragraph (b)(2)(iv) of
this section, any person permitted to resort to administrative remedies
under paragraph (b)(2)(ii) of this section may, if that person proposed
any deletion not made under section 6110(c) by the Commissioner, file a
petition in the United States Tax Court under section 6110(h)(4) for a
determination with respect to the proposed deletion. If appropriate, the
petition may be filed anonymously. Any petition filed under section
6110(h)(4) must be filed within
[[Page 107]]
75 days after the date on which the Commissioner publishes in the
Federal Register the notice of intention to disclose required under
section 6110(h)(4).
(iv) Limitations on right to bring judicial actions. No petition
shall be filed under section 6110(h)(4) unless the administrative
remedies provided by paragraph (b)(2)(ii) of this section have been
exhausted. However, under two circumstances the petition may be filed
even though the administrative remedies have not been exhausted. The
first circumstance is if the petitioner requests the information
described in paragraph (b)(2)(i) of this section within 15 days after
the notice of intention to disclose is published in the Federal
Register, but does not receive it within 30 days after the notice is
published. The other circumstance is if the petitioner submits the
statement of deletions within 35 days after the notice is published, but
does not receive the final administrative conclusion of the Internal
Revenue Service within 65 days after the notice is published. No
judicial action with respect to any written determination shall be
commenced under section 6110(h)(4) by any person who has received a
notice with respect to the written determination under paragraph
(b)(2)(v) of this section.
(v) Required notice. If a proceeding is commenced under section
6110(h)(4) with respect to any written determination, the Secretary
shall send notice of the commencement of the proceeding to any person to
whom the written determination pertains. No notice is required to be
sent to persons who have filed the petition that commenced the
proceeding under section 6110(h)(4) with respect to the written
determination. The notice shall be sent, by registered or certified
mail, to the last known address of the persons described in this
paragraph (b)(2)(v) within 15 days after notice of the petition filed
under section 6110(h)(4) is served on the Secretary. For further
guidance regarding the definition of last known address, see
Sec. 301.6212-2.
(vi) Intervention. Any person who is entitled to receive notice
under paragraph (b)(2)(v) of this section has the right to intervene in
any action brought under this paragraph (b)(2). If appropriate, this
person shall be permitted to intervene anonymously.
(vii) Background file documents. The following qualifications of the
rules in Sec. 301.6110-5(b) apply with respect to the restraint of
disclosure of background file documents related to written
determinations to which this section applies. First, the administrative
remedies described in Secs. 601.105 (b)(5)(iii)(i) and 601.201(e)(11) of
this chapter do not apply. Second, the rule in
Secs. 601.105(b)(5)(vi)(f) and 601.201(e)(16) that the Internal Revenue
Service will not consider the deletion of material not proposed for
deletion prior to the issuance of the written determination does not
apply.
(3) Time at which open to public inspection--(i) General rule.
Except as otherwise provided in paragraph (b)(3)(ii) of this section,
the text of any written determination open to public inspection or
available for inspection upon written request under section 6110(h)
shall be made open to or available for inspection no earlier than 90
days and no later than 120 days after the date on which the Commissioner
publishes in the Federal Register the notice of intention to disclose
required under section 6110(h)(4). However, if an action is brought
under section 6110(h)(4) to restrain disclosure of any portion of a
written determination, the disputed portion of that written
determination shall be made open to or available for inspection under
paragraph (b)(3)(ii) of this section.
(ii) Limitation on account of court order. The portion of the text
of any written determination that was subject to an action under section
6110(h)(4) to restrain disclosure in which the court determined that the
disclosure should not be restrained shall be made open to or available
for inspection within 30 days of the date that the court order becomes
final. However, in no event shall that portion of the text of that
written determination be made open to or available for inspection
earlier than 90 days after the date on which the Commissioner publishes
in the Federal Register the notice of intention to disclose required by
section 6110(h)(4) and paragraph (b)(1) of this
[[Page 108]]
section. This 30-day period may be extended for such time as the court
finds necessary to allow the Commissioner to comply with its decision.
Any portion of a written determination which a court orders open to
public inspection or subject to inspection upon written request under
section 6110(f)(4) shall be open or subject to inspection within such
time as the court provides.
(iii) Background file documents. The rules in Sec. 301.6110-
5(c)(2)(ii) do not apply with respect to the time at which background
file documents related to written determinations to which this section
applies are subject to inspection.
[T.D. 7548, 43 FR 20791, May 15, 1978, as amended by T.D. 8939, 66 FR
2819, Jan. 12, 2001]
Sec. 301.6110-7 Miscellaneous provisions.
(a) Disposition of written determinations and background file
documents--(1) Reference written determinations. The Internal Revenue
Service shall not dispose of any reference written determinations or
related background file documents. The Commissioner may reclassify
reference written determinations as general written determinations if
the classification as reference was erroneous or if the Commissioner
determines that such written determination no longer has any significant
reference value. Notwithstanding the preceding sentence, the
Commissioner shall not classify as a general written determination any
written determination which is determined to be the basis for a
published revenue ruling unless such revenue ruling is obsoleted,
revoked, superseded or otherwise held to have no effect.
(2) General written determinations. The Internal Revenue Service may
dispose of general written determinations and any background file
document relating to such written determination pursuant to its
established records disposition procedures. Disposition of a written
determination shall not occur earlier than 3 years after the date on
which such written determination is made open to public inspection or
available for inspection upon written request. Disposition of a
background file document shall not occur earlier than 3 years after the
date on which the related written determination is made open to public
inspection or available for inspection upon written request.
(b) Precedential status of written determinations open to public
inspection. A written determination may not be used or cited as
precedent, but the rule set forth in this paragraph shall not apply to
change the precedential status, if any, of written determinations issued
with respect to taxes imposed by subtitle D of the Internal Revenue Code
of 1954.
(c) Civil remedies--(1) Liability for failure to make deletions or
to conform to time limitations--(i) Creation of remedy. An exclusive
remedy against the Commissioner shall exist in the Court of Claims for--
(A) The person to whom the written determination pertains whenever
the Commissioner fails to act in accordance with the time requirements
of section 6110(g), and
(B) The person to whom the written determination pertains and any
person identified in such written determination whenever the
Commissioner fails to make deletions required by section 6110(c) if as a
consequence of such failure there is disclosed the identity of such
person or other information with respect to such person that is required
to be deleted pursuant to section 6110(c).
(ii) Limitations. The remedy provided in paragraph (c)(1)(i) of this
section for failure to make deletions shall be available only if--
(A) The failure of the Commissioner to make the deletions required
by section 6110(c) is intentional or willful,
(B) The Commissioner fails to make any deletion required by section
6110(c) which the Commissioner has agreed to make, or
(C) The Commissioner fails to make any deletion which a court has
ordered to be made pursuant to section 6110(f)(3).
(iii) Damages. In any suit brought pursuant to paragraph (c)(1)(i)
of this section in which the court determines that an employee of the
Internal Revenue Service intentionally or willfully failed to make a
deletion required by section 6110(c), or intentionally or willfully
failed to act in accordance with the time requirements of section
[[Page 109]]
6110(g), the United States shall be liable, to the person described in
paragraph (c)(1)(i) of this section who brought the action, in an amount
equal to the sum of--
(A) Actual damages sustained by such person but in no case shall
such person be entitled to receive less than the sum of $1,000.
(B) The costs of the action, and
(C) Reasonable attorney's fees as determined by the court.
(2) Liability for making additional disclosure of information. The
Commissioner shall not be liable for making any additional disclosure
ordered pursuant to an action described in Sec. 301.6110-5(d)(2) if the
notice required by Sec. 301.6110-5(d)(4) is sent.
(3) Obligation to defend action for additional disclosure. The
Commissioner shall not be required to defend any action brought to
obtain additional disclosure pursuant to section 6110(f)(4) if the
notice required by Sec. 301.6110-5(d)(4) is sent.
(4) Obligation to make deletions. The Commissioner shall be
obligated to make only those deletions required by section 6110(c) which
he has agreed to make, those which a court has ordered to be made
pursuant to Sec. 301.6110-5(b)(2) and those the omission of which would
be intentional or willful.
(d) Fees--(1) General rule--(i) Copies. The Commissioner may
prescribe fees pursuant to Sec. 607.702(f)(4) of this chapter for the
costs of furnishing copies of material open to public inspection or
subject to inspection upon written request pursuant to section 6110.
(ii) Preparation of information available upon request. The
Commissioner may prescribe fees pursuant to Sec. 601.702(f) of this
chapter for the costs of searching for and making deletions from any
written determinations and background if documents that are subject to
inspection only upon written request pursuant to Sec. 301.6110-1(b).
(2) Reduction or waiver of fees--(i) Public interest. The
Commissioner shall reduce or waive the fees described in paragraph
(d)(1) of this section if the Commissioner determines that furnishing
copies of, searching for, or making deletions from any written
determination or background file document primarily benefits the general
public, as described in Sec. 601.702(f)(2)(ii)(B) of this chapter.
(ii) Previous requests. The Commissioner may waive the fees
described in paragraph (d)(1) of this section for searching for any
written determination or background file document if the search for such
written determination or background file document was made pursuant to a
previous request for inspection thereof. The Commissioner shall waive
the fees described in paragraph (d)(1) of this section for making
deletions from any written determination or background file document if
the making of such deletions from such written determination or
background file document was made pursuant to a previous request for
inspection thereof. Nothing in this (d)(2)(ii) shall prevent the
Commissioner from prescribing fees for making additional deletions from
such written determination or background file document pursuant to
Sec. 301.6110-5(b).
[T.D. 7524, 42 FR 63417, Dec. 16, 1977]
Sec. 301.6111-1T Questions and answers relating to tax shelter registration.
The following questions and answers relate to the tax shelter
registration requirements of section 6111 of the Internal Revenue Code
of 1954, as added by section 141(a) of the Tax Reform Act of 1984 (Pub.
L. 98-369, 98 Stat. 678).
TABLE OF CONTENTS
The following table of contents is provided as part of these
temporary regulations to help the reader locate relevant provisions. The
headings are to be used only as a matter of convenience and have no
substantive effect.
In General
Overview of tax shelter registration, A-1
Overview of applicable penalties, A-2
Effect of registration, A-3
Tax Shelter Defined
Definition of tax shelter, A-4
Tax Shelter Ratio
Definition of tax shelter ratio, A-5
Deductions and Credits Represented as Potentially Allowable
Definition of amount of deductions and credits, A-6
Definition of year, A-7
Definition of explicit representation, A-8
[[Page 110]]
Definition of inferred representation, A-9
Effect of qualified representation, A-10
Representation regarding interest deduction, A-11
Representation regarding unintended events, A-12
Investment Base
Definition of investment base, A-13
Amounts eliminated from investment base, A-14
Tax Shelter Ratio--Miscellaneous
Effect of different ratios for different investors, A-15
Effect of alternate financing arrangements, A-16
Investments Subject to Securities Regulation
Federal law regulating securities, A-17
State law regulating securities, A-18
Exemptions from federal securities registration, A-19
Exemptions from state securities registration, A-20
Substantial Investment
Definition of substantial investment, A-21
Aggregation rules, A-22 and A-23
Exceptions From Tax Shelter Registration
Investments excepted from tax shelter registration, A-24
Certain persons not treated as investors, A-24A
Persons Required To Register a Tax Shelter
Tax shelter organizer, A-25 and A-26
Principal organizer, A-27
Participant in the organization, A-28 Manager, A-29
Exception for certain unrelated persons, A-30
Sellers, A-31
Absence of representations by organizer, A-32
Exception for suport services, A-33
Circumstances Under Which Tax Shelter Organizers Are Required To
Register a Tax Shelter
Principal organizer and a participant in the organization, A-34
Manager who has not signed designation agreement, A-35
Seller who has not signed designation agreement, A-36
Person acting in multiple capacities, A-37
Designation agreement (designated organizer), A-38
Person who has signed designation agreement, A-39
Registration--General Rules
Date registration is required, A-40
Requirement to provide registration notice to sellers and others, A-41
Definition of sale of an interest, A-42
Definition of offering for sale, A-43
No requirement to submit revised registration form A-44--A-45
Information reported on an amended application, 45A
Effect of resale of an asset, A-46
When registration is complete, A-47
Separate forms required for certain aggregated investments, A-48
Applicability of section 7502, A-49
Required investor disclaimer, A-50
Furnishing Tax Shelter Registration Numbers to Investors
Who must furnish number, A-51
When number must be furnished, A-52
Form required to furnish number, A-53 and A-54
Including the Registration Number on Tax Returns
Requirement to include registration number on investor's return, A-55
and A-57
Projected Income Investments
Special rules for projected income investments, A-57A
Definitions relating to projected income, investments A57B--A-57D
Tax shelters ineligible for the special rules, A-57E
Consequences of bad faith or unreasonable projections, A-57F
When a tax shelter ceases to be a projected income investment, A-57G
Special rule for registration, A-57H
Special rule for furnishing registration number, A-57I
Special rule for including registration number on tax return, A-57J
Effective Dates
Effective dates, A-58 and A-60
In General
Q-1. What is tax shelter registration?
A-1. Tax shelter registration is a new provision of the Internal
Revenue Code that affects organizers, sellers, investors, and certain
other persons associated with investments that are considered tax
shelters. The new provision imposes the following three requirements.
First, a tax shelter must be registered by the tax shelter organizer.
(See A-4 of this section for the definition of a tax shelter. See A-25
through A-39 of this section for rules relating
[[Page 111]]
to tax shelter organizers. See A-26 of this section for rules regarding
when the seller of an interest in a tax shelter is treated as the tax
shelter organizer.) Registration is accomplished by filing a properly
completed Form 8264 with the Internal Revenue Service. The Internal
Revenue Service will assign a registration number to each tax shelter
that is registered. Second, any person who sells or otherwise transfers
an interest in a tax shelter must furnish the registration number of the
tax shelter to the purchaser or transferee of the interest. (See A-51
through A-54 of this section for the time and manner in which the number
must be furnished.) Third, any person who claims a deduction, loss,
credit, or other tax benefit or reports any income from the tax shelter
must report the registration number of the tax shelter on any return on
which the deduction, loss, credit, benefit, or income in included. (See
A-55 through A-57 of this section for rules relating to the reporting of
tax shelter registration numbers.)
Q-2. Are penalties provided for failure to comply with the
requirements of tax shelter registration?
A-2. Yes. Separate penalties are provided for failure to satisfy any
of the requirements set forth in A-1 of this section. See A-1 of
Sec. 301.6707-1T for the penalty for failure to register a tax shelter
and A-8 of Sec. 301.6707-1T for the penalty for filing false or
incomplete information will respect to the registration of a tax
shelter. See A-12 of Sec. 301.6707-1T for the penalty for failure to
furnish the tax shelter registration number to purchasers or
transferees. See A-13 of 301.6707-1T for the penalty for failure to
report the tax shelter registration number on a tax return on which a
deduction, loss, credit, income, or other tax benefit is included. In
addition, criminal penalties may be imposed for willful noncompliance
with the requirements of tax shelter registration. See, for example,
section 7203, relating to willful failure to supply information, and
section 7206, relating to fraudulent and false statements.
Q-3. Does registration of a tax shelter with the Internal Revenue
Service indicate that the Internal Revenue Service has reviewed,
examined, or approved the tax shelter or the claimed tax benefits?
A-3. No. Moreover, any representation to prospective investors that
states that a tax shelter is registered with the Internal Revenue
Service (or that registration is being sought) must include a legend
stating that registration does not indicate that the Internal Revenue
Service has reviewed, examined or approved the tax shelter or any of the
claimed tax benefits. (See A-50 of this section for the form and content
of the legend.)
Tax Shelter Defined
Q-4. What investments are tax shelters that are required to be
registered with the Internal Revenue Service?
A-4. A tax shelter is any investment that meets the following two
requirements:
(I) The investment must be one with respect to which a person could
reasonably infer, from the representations made or to be made in
connection with any offer for sale of any interest in the investment,
that the tax shelter ratio for any investor may be greater than 2 to 1
as of the close of any of the first 5 years ending after the date on
which the investment is offered for sale.
(II) The investment must be (i) required to be registered under a
federal or state law regulating securities, (ii) sold pursuant to an
exemption from registration requiring the filing of a notice with a
federal or state agency regulating the offering or sale of securities,
or (iii) a substantial investment.
An investment that satisfies these two requirements is considered a
tax shelter for registration purposes regardless of whether it is
marketed or customarily designated as a tax shelter. See A-5 of this
section for the definition of tax shelter ratio. See A-17 and A-18 of
this section for the definition of an investment required to be
registered under a federal or state law regulating securities. See A-19
and A-20 of this section for the definition of an investment sold
pursuant to an exemption from registration requiring the filing of a
notice. See A-21 of this section for the definition of a substantial
investment.
[[Page 112]]
Tax Shelter Ratio
Q-5. What does the term ``tax shelter ratio'' mean?
A-5. The term ``tax shelter ratio'' means, with respect to any year,
the ratio that the aggregate amount of deductions and 200 percent of the
credits that are or will be represented as potentially allowable to an
investor under subtitle A of the Internal Revenue Code for all periods
up to (and including) the close of such year, bears to the investment
base for such investor as of the close of such year.
Deductions and Credits Represented as Potentially Allowable
Q-6. What do the terms ``amount of deductions'' and ``credits''
mean?
A-6. The term ``amount of deductions'' means the amount of gross
deductions and other similar tax benefits potentially allowable with
respect to the investment. The gross deductions are not to be offset by
any gross income to be derived or potentially derived from the
investment. Thus, the term ``amount of deductions'' is not equivalent to
the net loss, if any, attributable to the investment. The term
``credits'' means the gross amount of credits potentially allowable with
respect to the investment without regard to any possible tax liability
resulting from the investment or any potential recapture of the credits.
Q-7. What does the term ``year'' mean for purposes of determining
the tax shelter ratio?
A-7. The term ``year'' means the taxable year of a tax shelter, or
if the tax shelter has no taxable year, the calendar year.
Q-8. Under what circumstances is a deduction or credit considered to
be represented as being potentially allowable to an investor?
A-8. A deduction or credit is considered to be represented as being
potentially allowable to an investor if any statement is made (or will
be made) in connection with the offering for sale of an interest in an
investment indicating that a tax deduction or credit is available or may
be used to reduce federal income tax or federal taxable income.
Representations of tax benefits may be oral or written and include those
made at the time of the initial offering for sale of interests in the
investment, such as advertisements, written offering materials,
prospectuses, or tax opinions, and those that are expected to be made
subsequent to the initial offering. Representations are not confined
solely to statements regarding actual dollar amounts of tax benefits,
but also include general representations that tax benefits are available
with respect to an investment. Thus, for example, an advertisement
stating that ``purchase of restaurant includes trade fixtures (5-year
write-off and investment tax credit)'' constitutes an explicit
representation of tax benefits.
Q-9. If a deduction or credit is not explicitly represented as being
potentially allowable to an investor may it be inferred as a represented
tax benefit that is includible in the tax shelter ratio?
A-9. Yes. Although some explicit representation concerning tax
benefits is necessary before an investment may be considered a tax
shelter, once an explicit representation is made (or will be made)
regarding any tax benefit, all deductions or credits typically
associated with the investment will be inferred to have been represented
as potentially allowable. Thus, the tax shelter ratio will be determined
with reference to those tax benefits that are explicitly represented as
being potentially allowable as well as all other tax benefits that are
typically associated with the investment. The amount of each deduction
or credit that is includible in the tax shelter ratio, if not
specifically represented as to amount, should be reasonably estimated
based on representations of economic value or economic projections, if
any, or on any other information available to the tax shelter organizer.
Reasonable estimates of deductions or credits may take into account past
experience with similar investments. Reasonable estimates must assume
use of the most accelerated allowable basis for cost recovery
deductions.
As an example of the application of this A-9, assume that an
advertisement explicitly states that a building is eligible for the
investment tax credit for rehabilitation of a certified historic
structure, but makes no mention of
[[Page 113]]
cost recovery deductions, amortization deductions for construction
period interest and taxes, real estate taxes after construction, ongoing
maintenance expenses, or other deductions or credits typically
associated with a building. Reasonable estimates of all such deductions
and credits must be included with the investment tax credit explicitly
represented in determining the tax shelter ratio associated with any
investor's acquisition of an interest in the building.
Q-10. Does the fact that representations are made (or to be made)
indicating that a deduction may be offset by income from the investment
or that a deduction or credit may be subject to recapture or may be
disallowed on audit affect the computation of the tax shelter ratio?
A-10. No. Deductions and credits represented as being potentially
allowable are taken into account in computing the tax shelter ratio
regardless of whether any qualifying statements are made.
Q-11. Is interest to be paid by an investor with respect to a debt
obligation incurred in connection with the acquisition of an interest in
the tax shelter included in the aggregate amount of deductions?
A-11. If a deduction for such interest is explicitly represented (or
will be represented) as being potentially allowable, the interest is
includible in the aggregate amount of the deductions. In addition, any
interest to be paid with respect to a debt obligation the proceeds of
which reduce the investment base (see A-14 of this section), regardless
of whether a deduction for such interest is explicitly represented as
being allowable, will be considered a deduction typically associated
with the investment (see A-9 of this section). Accordingly, such
interest will be considered to be represented as being potentially
allowable and must be taken into account in computing the tax shelter
ratio. If interest to be paid with respect to a debt obligation the
proceeds of which do not reduce the investment base (see A-14 of this
section) is not explicitly represented as being potentially allowable,
however, such interest will not be considered typically associated with
the investment and will not be taken into account in computing the tax
shelter ratio.
Q-12. If representations are made that part or all of an amount
invested in a tax shelter will be deductible upon the occurrence of an
unintended event, will the deduction be included in the aggregate amount
of deductions?
A-12. No. Thus, for example, if representations are made that a
person's investment in a tax shelter may give rise to a loss deduction
if the investment becomes worthless, the amount of the loss deduction
will not be included in the aggregate amount of deductions and will not
be taken into account in computing the tax shelter ratio. Similarly, if
representations are made that the costs of acquiring oil and gas lease
interests may be deductible if the lease is proved worthless by
abandonment, the amount of any loss deduction will not be included in
the aggregate amount of deductions.
Investment Base
Q-13. What does the term ``investment base'' mean?
A-13. The term ``investment base'' means, with respect to any year
(as defined in A-7 of this section), means the cumulative amount of
money and the adjusted basis of other property (reduced by any liability
to which such other property is subject) that is unconditionally
required to be contributed or paid directly to the tax shelter on or
before the close of such year by an investor.
Q-14. What amounts must be eliminated from the investment base?
A-14. The investment base must be reduced by the following amounts:
(1) Any amount borrowed by the investor, even if borrowed on a
recourse basis, from any person who participated in the organization,
sale, or management of the investment or who has an interest (other than
an interest as a creditor) in the investment (``a participating
person'') or from any person who is related (as defined in section 168
(e)(4)) to a participating person, unless the amount is unconditionally
required to be repaid by the investor before the close of the year for
which the determination is being made. An amount will be considered
unconditionally required to be repaid by the investor only
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if any offering material in which the borrowed amount is described and
any agreement to be entered into between a participating (or related)
person and the investor provide that the amount must be repaid (without
exception) by the end of the year for which the determination is being
made. An amount that is to be repaid only from earnings of the
investment is not an amount that is unconditionally required to be
repaid and is thus excluded from the investment base. In addition, an
amount is not unconditionally required to be repaid if the amount will
be (or is expected to be) reloaned to the investor during the 5-year
period ending after the date the investment is offered for sale.
(2) Any amount borrowed by the investor, even if borrowed on a
recourse basis, from a person, if the loan is arranged by a
participating (or related) person, unless the amount is unconditionally
required to be repaid by the investor before the close of the year for
which the determination is being made. Any borrowing that is represented
(orally or in writing) as being available from a specific source will be
treated as arranged by a participating (or related) person, if the
participating (or related) person provides a list of investors, or
information relating to the investment, to the lender or otherwise
informs the lender about the investment. However, in the case of an
amount borrowed on a recourse basis, the mere fact that a lender who is
actively and regularly engaged in the business of lending money obtained
information relating to the investment, from a participating (or
related) person, solely in response to a lender's request made in
connection with such borrowing or a prior loan to the investment, a
participating (or related) person, or an investor, will not, by itself,
result in a determination that the loans are arranged by a participating
(or related) person. Financing may be treated as arranged by a
participating (or related) person regardless of whether a commitment to
provide the financing is made by the lender to the participating or
related person.
For example, assume that a tax shelter organizer represents that the
purchase of an interest in a tax shelter may be financed with the
proceeds of a revolving loan, and the tax shelter organizer provides
investors with the names of several banks or other lending institutions
to which the tax shelter organizer has provided information about the
investment. Assume further that the information was not provided in
response to requests from such lending institutions made in connection
with prior loans. The proceeds of the revolving loan will be excluded
from the investment base because the loan is not unconditionally
required to be repaid and it is treated as having been arranged by the
tax shelter organizer.
(3) Any amount borrowed, directly or indirectly, from a lender
located outside the United States (``foreign-connected financing''), of
which a participating (or related) person knows or has reason to know.
(4) Any amounts to be held for the benefit of investors in cash,
cash equivalents, or marketable securities. An amount is to be held in
cash equivalents if the amount is to be held in a checking account,
savings account, mutual fund, certificate of deposit, book entry
government obligation, or any other similar account or arrangement.
Marketable securities are any securities that are part of an issue any
portion of which is traded on an established securities market and any
securities that are regularly quoted by brokers or dealers making a
market.
(5) Any distributions (whether of cash or property) that will be
made without regard to the income of the tax shelter, but only to the
extent such distributions exceed the amount to be held as of the close
of the year in cash, cash equivalents, or marketable securities.
Tax Shelter Ratio--Miscellaneous
Q-15. Does an investment satisfy the requirement in A-4 (I) of this
section (``the tax shelter ratio requirement'') if it may be inferred
from the representations made or to be made to investors that the tax
shelter ratio for some, but not all, of the investors may be greater
than 2 to 1 as of the close of any one of the first five years?
A-15. Yes. If the tax shelter ratio for any one investor may be
greater that 2 to 1, the investment satisfies the tax
[[Page 115]]
shelter ratio requirement and is a tax shelter if it also meets the
requirement in A-4(II) of this section. Moreover, an investment will
satisfy the tax shelter ratio requirement even if the tax shelter ratio
for a single investor exceeds 2 to 1 as of the close of only one of the
first five years.
For purposes of computing the tax shelter ratio for a year, all
persons with interests in the investment are considered investors,
except that general partners in a limited partnership will not be
treated as investors in the partnership if the general partners'
aggregate interest in each item of partnership income, gain, loss,
deduction, and credit for such year is not expected to exceed 2 percent.
In determining the general partners' interest in such items, limited
partnership interests owned by general partners shall not be taken into
account. For purposes other than the computation of the tax shelter
ratio, however, all general partners will be treated as investors. Thus,
for example, a general partner with a 1 percent interest in a limited
partnership will be treated as an investor for the purpose of
determining whether the partnership is a substantial investment.
Q-16. If a person could reasonably infer from the representations
made or to be made about an investment that the tax shelter ratio for
the investment may be greater than 2 to 1 under one arrangement for
financing the purchase of an interest by an investor, but would be 2 to
1 or less under an alternative financing arrangement, does the
investment satisfy the tax shelter ratio requirement of A-4 (I) of this
section.
A-16. Yes. An investment satisfies the tax shelter ratio requirement
of A-4 (I) of this section if a person could reasonably infer from the
representations made or to be made that the tax shelter ratio for any
person may be greater than 2 to 1 as of the close of any one of the
first five years. The tax shelter ratio requirement is met if the tax
shelter ratio may exceed 2 to 1 under any type of financing arrangement
that is or will be represented as being available to investors.
Investments Subject to Securities Regulation
Q-17. What is an investment that is required to be registered under
a federal law regulating securities?
A-17. An investment required to be registered under a federal law
regulating securities is any public offering of an investment that is
required to be registered under the Securities Act of 1933 (1933 Act),
the Investment Company Act of 1940, or any other federal law regulating
securities. An investment is required to be registered under the 1933
Act, the Investment Company Act, or any other federal law regulating
securities, if failure to register the investment would result in a
violations of the applicable federal law, whether or not the investment
has in fact been registered and, if proper notice has not been filed,
whether or not the investment could have been sold pursuant to an
exemption listed in A-19 of this section if such notice had been filed.
Q-18. What is an investment required to be registered under a state
law regulating securities?
A-18. An investment required to be registered under a state law
regulating securities is any investment required to be registered under
a blue sky law or other similar state statute regulating securities. The
term ``state'' includes the 50 states, the District of Columbia, and
possessions of the United States.
Q-19. What is an investment sold pursuant to an exemption from
registration requiring the filing of a notice with a federal agency
regulating the offering or sale of securities?
A-19. An investment sold pursuant to an exemption from registration
requiring the filing of a notice with such a federal agency is any
investment that is sold pursuant to an exemption from registration
requiring the filing or submission of a notice or other document with
the Securities and Exchange Commission or any other federal agency
regulating the offering or sale of securities, including the following
exemptions (and applicable filing):
(1) Regulation A, as promulgated under section (3)(b) of the 1933
Act (Form 1(A)),
[[Page 116]]
(2) Regulation B, as promulgated under section 3(b) of the 1933 Act
(Schedules A through F),
(3) Regulation D, as promulgated under sections (3)(b) and 4(2) of
the 1933 Act (Form D), and
(4) Any other statutory or regulatory exemption from registration
requiring the filing or submission of a notice or other document.
Q-20. What is an investment sold pursuant to an exemption from
registration requiring the filing of a notice with a state agency
regulating the offering or sale of securities?
A-20. An investment sold pursuant to an exemption from registration
requiring the filing of a notice with such a state agency is any
investment sold pursuant to an exemption under a blue sky law or other
similar state statutory or regulatory scheme that requires the filing or
submission of a notice or other document with such a state agency. See
A-18 of this section for the definition of state.
Substantial Investment
Q-21. What is a substantial investment?
A-21. An investment is a substantial investment if the aggregate
amount that may be offered for sale to all investors exceeds $250,000
and 5 or more investors are expected. The aggregate amount offered for
sale is the aggregate amount to be received from the sale of interests
in the investment and includes all cash, the fair market value of all
property contributed, and the principal amount of all indebtedness
received in exchange for interests in the investment, regardless of
whether the proceeds of the indebtedness are included in the investment
base under A-14 of this section. For purposes of determining whether 5
or more investors are expected in an investment involving real property
(and related personal property) that is used as a farm (as defined in
section 2032A(e)(4)) for farming purposes (as defined in section
2032A(e)(5)), interests in the investment expected to be held by a
husband and wife, their children and parents, and the spouses of their
children (or any of them) will be treated as if the interests were to be
held by one investor. Thus, for example, interests in a farm that are
offered to two brothers and their wives would be treated as interests
offered to one investor. Such an investment could be a substantial
investment only if four or more persons who were not members of the
family were expected to be investors in the farm.
Q-22. Will an investment be considered a substantial investment if
the investment involves a number of parts each including fewer than 5
investors or an aggregate amount of $250,000 or less?
A-22. Yes, under the circumstances described in this A-22. For
purposes of determining whether investments are parts of a substantial
investment, similar investments offered by the same person or related
persons (as defined in section 168(e)(4)) are aggregated together.
Investments are considered similar if they involve similar principal
business assets and similar plans or arrangements. Investments that
include no business assets will be considered similar if they involve
similar plans or arrangements.
Similar investments are aggregated solely for the purpose of
determining whether investments involving fewer than 5 investors or an
aggregate amount of $250,000 or less are substantial investments. For
this purpose, similar investments are aggregated even though some, but
not all, of the investments are (i) required to be registered under a
Federal or State law regulating securities or are sold pursuant to an
exemption from securities registration requiring the filing of a notice
with a Federal or State agency regulating the offering or sale of
securities (i.e., required to be registered as tax shelters whether or
not a substantial investment) or (ii) substantial investments without
regard to aggregation.
Assume, for example, that a person develops similar arrangements
involving 8 different partnerships, each investing in a separate but
similar asset (such as a separate master recording or separate piece of
similar real estate), each with a different general partner and each
with 3 different limited partners. Assume further that the arrangements
of all the partnerships are similar. These partnerships involving
similar arrangements and similar assets
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would be aggregated together. Thus, if each partner is expected to
invest $11,000, there will be 32 investors (1 general partner plus 3
limited partners times 8 partnerships) and an aggregate investment of
$352,000 (32 partners times $11,000). Accordingly, each partnership will
constitute part of a substantial investment. If representations are made
that $1,000 in tax credits and $3,000 in deductions are available to
each limited partner in the first year and $10,000 of the cash invested
was expected to be the proceeds of a loan arranged by the organizer, the
tax shelter ratio as of the close of the first year (assuming there are
no deductions or credits typically associated with such investment, as
described in A-9 of this section) would be 5 to 1 ($5,000 in total tax
benefits and $1,000 investment base). Accordingly, the organizer would
be required to register the partnerships with the Internal Revenue
Service.
Q-23. If an investment involving fewer than 5 investors or an
aggregate amount of $250,000 or less is offered for sale and, at the
time of the offering, it is not known (and there is no reason to know)
that subsequent similar investments will be offered by the person who
made the first offering (or a related person), will subsequent similar
investments offered by that person (or a related person) be aggregated
with the first investment for purposes of determining whether the
investments constitute a substantial investment?
A-23. No. However, a tax shelter organizer will be presumed to have
known of any similar investments (as defined in A-22 of this section)
offered during the 12 months following the first offering of an
investment.
Exceptions From Tax Shelter Registration
Q-24. Are there any investments that will not be subject to tax
shelter registration even if they satisfy the requirements of a tax
shelter (as defined in A-4 of this section)?
A-24. Yes. The following investments are not subject to tax shelter
registration:
(1) Sales of residences primarily to persons who are expected to use
the residences as their principal place of residence,
(2) Sales or leases or tangible personal property (other than master
sound recordings, motion picture or television films, videotapes,
lithograph plates, or other property relating to a literary, musical, or
artistic composition) by the manufacturer (or a member of an affiliated
group, within the meaning of section 1502, including the manufacturer)
of the property primarily to persons who are expected to use the
property in their principal active trade or business (see, however, A-32
and A-46 of this section for the additional rules applicable to a
purchaser of property described in this A-24 who organizes an investment
involving the property),
(3) Any other investment as specified by the Secretary in a rule-
related notice published in the Federal Register.
Q-24A. Under what other circumstances are particular sales or leases
of tangible personal property to certain persons or the performance of
particular services for certain persons exempt from tax shelter
registration?
A-24A. A person who, in the ordinary course of a trade or business,
sells or leases tangible personal property (other than collectibles (as
defined in section 408(m)(2)), master sound recordings, motion picture
or television films, videotapes, lithograph plates, or other property
that includes or relates to a literary, musical or artistic composition)
to a purchaser or lessee who is reasonably expected to use the property
either for a personal use or in the purchaser's or lessee's principal
active trade or business is not required for any purpose to treat such a
purchaser or lessee as an investor in a tax shelter. Property may be
reasonably expected to be used by a purchaser or lessee for personal use
only if sold or leased to the purchaser or lessee in a quantity that is
customary for such use. Similarly, a person who performs services for
another person in connection with the principal active trade or business
of the recipient of the services or for the recipient's personal use is
not required to treat the recipient as an investor in a tax shelter.
Persons who are not reasonably expected to use property or services
either in their principal active trade or business or for
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personal use must be treated as tax shelter investors in the event the
sales, leases, or performance of services otherwise constitute a tax
shelter.
Assume, for example, that an organizer forms Z corporation to feed
cattle and to provide services in connection with the cattle feeding
operations. Z will agree to serve customers with a minimum of 200 head
of cattle. The fee for the services is $20 per head. Feed for cattle
will cost $280 per head. Z represents that the service fee and the cost
of the feed may be financed by $5,000 of cash and $55,000 of proceeds of
a revolving recourse note that Z has arranged be available. Z provides
its services to 100 customers. Ninety-five of the customers are persons
whose principal active trade or business is reasonably expected to be
farming (as defined in section 464(e)(1)). Five of the customers are not
reasonably expected to engage in farming as their principal active trade
or business. Although all the individual investments involve similar
principal business assets and similar plans or arrangements, only the 5
customers who are not reasonably expected to be in the principal active
trade or business of farming will be treated as investors in a tax
shelter and aggregated to determine whether a substantial investment
exists. Thus, there will be 5 investors and an aggregate investment of
$300,000. If representations are made that the service fee and the cost
of the feed are tax deductible, the tax shelter ratio (assuming there
are no deductions or credits typically associated with such an
investment, as described in A-9 of this section) would be 12 to 1
($60,000 in total tax benefits and $5,000 investment base) and the
organizer would be required to register the five aggregated feeding
arrangements as a tax shelter. The registration number of the tax
shelter must be provided to the five customers treated as investors in
the tax shelter, but would not be required to be furnished to the
customers whose principal active trade or business is reasonably
expected to be farming.
Persons Required To Register a Tax Shelter
Q-25. Who has the legal obligation to register a tax shelter?
A-25. A tax shelter organizer is obligated to register the tax
shelter.
Q-26. What is the definition of tax shelter organizer?
A-26. Several categories of persons may be tax shelter organizers.
In general, the term tax shelter organizer means a person principally
responsible for organizing a tax shelter. If a person principally
responsible for organizing a tax shelter has not registered the tax
shelter by the day on which interests in the shelter are first offered
for sale, any other person who participated in the organization of the
tax shelter will be treated as a tax shelter organizer. If neither a
person principally responsible for organizing the tax shelter nor any
other person who participated in the organization of a tax shelter has
registered the tax shelter by the day on which interests in the tax
shelter are first offered for sale, then any person who participates in
the management of the tax shelter at a time when the tax shelter is not
registered will be treated as a tax shelter organizer. Finally, if a
person participates in the sale of a tax shelter at a time when the
person knows or has reason to know that a tax shelter has not been
registered, that person will be treated as a tax shelter organizer. See
A-38 of this section for rules relating to the execution of an agreement
among persons who may be treated as tax shelter organizers to designate
one person to register a tax shelter.
Q-27. Who is a person principally responsible for organizing a tax
shelter?
A-27. A person principally responsible for organizing a tax shelter
(``principal organizer'') is any person who discovers, creates,
investigates, or initiates the investment, devises the business or
financial plans for the investment, or carries out those plans through
negotiations or transactions with others.
Q-28. What constitutes participation in the organization of a tax
shelter?
A-28. Participation in the organization of a tax shelter includes
the performance of any act (directly or through an agent) related to the
establishment of the tax shelter, including the following:
(1) Preparation of any document establishing the tax shelter (for
example,
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articles of incorporation, a trust instrument, or a partnership
agreement);
(2) Preparation of any document in connection with the registration
(or exemption from registration) of the tax shelter with any federal,
state, or local government body;
(3) Preparation of a prospectus, offering memorandum, financial
statement, or other statement describing the tax shelter;
(4) Preparation of a tax or other legal opinion relating to the tax
shelter;
(5) Preparation of an appraisal relating to the tax shelter;
(6) Negotiation or other participation on behalf of the tax shelter
in the purchase of any property relating to the tax shelter.
Q-29. What constitutes participation in the management of a tax
shelter?
A-29. Participation in the management of a tax shelter includes
managing the assets of the tax shelter, directing the business activity
of the tax shelter, or, depending on the form of the tax shelter, acting
as a general partner who actively participates in the management of a
partnership, a trustee of a trust, a director or an officer of a
corporation (including a corporate general partner of a partnership), or
performing activities similar to those performed by such a general
partner, a trustee, a director, or an officer.
Q-30. Will the performance of any act described in A-27 through A-29
of this section constitute participation in the organization or
management of a tax shelter if the person performing the act is
unrelated to the tax shelter (or any principal organizer of the tax
shelter) and does not participate in the entrepreneurial risks or
benefits of the tax shelter?
A-30. No. The performance of an act described in A-27 through A-29
of this section will not constitute participation in the organization or
management of a tax shelter unless the person performing the act is
unrelated to the tax shelter (or any principal organizer of the tax
shelter) or the person participates in the entrepreneurial risks or
benefits of the tax shelter. A person will be considered related to a
tax shelter if the person is related to the tax shelter or a principal
organizer of the tax shelter within the meaning of section 168(e)(4) or
is employed by the tax shelter or a principal organizer of the tax
shelter or has an interest (other than an interest as a creditor) in the
tax shelter. A person will be considered a participant in the
entrepreneurial risks or benefits of a tax shelter if the person's
compensation for performing an act described in A-27 through A-29 of
this section is contingent on any matter relating to the tax shelter
(e.g., the compensation is based in whole or in part upon (i) whether
interests in the tax shelter are actually sold or (ii) the number or
value of the units in the tax shelter that are sold), or if the person
will receive an interest in the tax shelter as part or all of the
person's compensation.
For example, assume that A forms Z partnership, a tax shelter for
which registration is required. Z hires the X law firm, none of the
partners of which is related to the tax shelter, to prepare the
documents necessary to register the offering of Z securities with the
Securities and Exchange Commission. X charges $100 an hour for its
services in connection with the preparation of the necessary documents,
and payment of the fee is not contingent. X will not be treated as a
participant in the organization of the tax shelter. If, however, X were
to charge a fee equal to 1 percent of the value of the units in the tax
shelter that are sold, X would be considered a participant in the
organization of the shelter.
As another example, assume that individual C is an attorney employed
by W corporation, the corporate general partner and principal organizer
of Z, and that C prepares the documents necessary to register the tax
shelter with the Securities and Exchange Commission. C will be treated
as having participated in the organization of the tax shelter regardless
of the way in which C's compensation is structured, because C, as an
employee, is related to the principal organizer of the tax shelter.
Q-31. What constitutes participation in the sale of a tax shelter?
A-31. Participation in the sale of a tax shelter includes any
marketing activities (directly or through an agent)
[[Page 120]]
with respect to an investment, including the following:
(1) Direct contact with a prospective purchaser of an interest, or
with a representative or agent of a prospective purchaser, but only if
the contract relates to the possible purchase of an interest in the tax
shelter;
(2) Solicitation of investors using the mail, telephone, or other
means, or by placing an advertisement for the tax shelter in a
newspaper, magazine, or other publication or medium;
(3) Instructing or advising salespersons regarding the tax shelter
or sales presentations.
Q-32. May persons be treated as tax shelter organizers if such
persons do not make any representations of tax benefits to investors?
A-32. Yes. If a person described in A-26 of this section knows or
has reason to know that representations of tax benefits have been made,
that person may be treated as a tax shelter organizer. For example, a
participant in the sale of a tax shelter may know or have reason to know
that representations of tax benefits have been made by the principal
organizer or others who participate in the organization of the tax
shelter. In addition, a person who acquires property from a manufacturer
in a transaction exempt from tax shelter registration under A-24 of this
section and who organizes an investment involving the property may know
or have reason to know of any representation of tax benefits made by the
manufacturer.
Q-33. If a person performs support services such as typing,
photocopying, or printing for a tax shelter (or a tax shelter organizer)
or performs other ministerial functions for the tax shelter (or a tax
shelter organizer), may the person be considered to have participated in
the organization, management, or sale of the tax shelter?
A-33. No. Merely performing support services or ministerial
functions will not be considered participation in the organization,
management, or sale of a tax shelter.
Circumstances Under Which Tax Shelter Organizers Are Required To
Register a Tax Shelter
Q-34. When is a principal organizer or a person who participates in
the organization of a tax shelter required to register a tax shelter?
A-34. A principal organizer or a person who participates in the
organization of a tax shelter (i.e., a person who could be treated as a
tax shelter organizer within the meaning of A-26 of this section) is
required to register the tax shelter by the day on which the first
offering for sale of interests in the tax shelter occurs, unless the
person has signed a designation agreement pursuant to A-38 of this
section. If a group of persons who could be treated as tax shelter
organizers has signed a designation agreement pursuant to A-38 of this
section, the designated organizer is required to register the tax
shelter by the day on which the first offering for sale of interests in
the tax shelter occurs. See A-39 of this section for additional rules
applicable to tax shelter organizers (other than a designated organizer)
who have signed a designation agreement.
Q-35. When is a person who participates in the management of a tax
shelter (``manager'') required to register a tax shelter?
A-35. A manager who has not signed a designation agreement pursuant
to A-38 of this section must register the tax shelter if the manager
participates in the management of the tax shelter on or after the first
offering for sale of interests in the tax shelter at a time when the tax
shelter has not been properly registered (i.e., the manager is treated
as a tax shelter organizer within the meaning of A-26 of this section).
Such a manager must register the tax shelter by the day on which the
first offering for sale of interests in the tax shelter occurs, or by
the day on which the manager's participation in the management of the
tax shelter commences, whichever is later. See A-39 of this section for
rules applicable to a manager who has signed a designation agreement.
[[Page 121]]
Q-36. When is a person who participates in the sale of a tax shelter
(``seller'') required to register the tax shelter?
A-36. A seller who has not signed a designation agreement pursuant
to A-38 of this section must register the tax shelter if the seller
participates in the sale of the tax shelter at a time when the seller
knows or has reason to know that the tax shelter has not been properly
registered (i.e., the seller is treated as a tax shelter organizer
within the meaning of A-26 of this section). A seller who has not signed
a designation agreement will be deemed to have reason to know that the
tax shelter has not been properly registered if the seller does not
receive a copy of the Internal Revenue Service tax shelter registration
notice containing the registration number within the 30-day period after
the seller first offers interests in the tax shelter for sale. A seller
must register the tax shelter as soon as practicable after the seller
first knows or has reason to know that the tax shelter has not been
properly registered. See A-39 of this section for rules applicable to a
seller who has signed a designation agreement.
Q-37. When is a person who acts in more than one capacity with
respect to a tax shelter required to register the shelter?
A-37. A person who acts in more than one capacity with respect to a
tax shelter (i.e., as two or more of the following: principal organizer,
participant in the organization, manager, or seller) must register the
tax shelter by the earliest day on which a tax shelter organizer acting
in any of the person's several capacities would be required to register
the tax shelter.
Q-38. May a group of persons who could be treated as tax shelter
organizers under A-26 of this section designate one person to register
the tax shelter?
A-38. Yes. A group of persons who could be treated as tax shelter
organizers under A-26 of this section may enter into a written agreement
designating one person as the tax shelter organizer responsible for
registering the tax shelter (``designated organizer''). The designated
organizer should ordinarily be a person principally responsible for
organizing the tax shelter, but may be any person who participates in
the organization of the tax shelter. Although persons who participate
only in the sale or management of a tax shelter may sign a designation
agreement, they may not be the designated organizer. In addition, the
designated organizer may not be a person who is a resident in a country
other than the United States. Any person who signs a designation
agreement, other than the designated organizer, will not be liable for
failing to register the tax shelter and will not be subject to a
penalty, even if the designated organizer fails to register the tax
shelter, unless the person fails to register the tax shelter when such
registration is required under A-39 of this section. See A-7 of
Sec. 301.6707-1T for additional rules relating to the reasonable cause
exception applicable to persons who sign a designation agreement.
Q-39. Is a tax shelter organizer who has signed a designation
agreement and who is not the designated organizer required to register
the tax shelter under any circumstances?
A-39. Yes. If a tax shelter organizer who has signed a designation
agreement pursuant to A-38 of this section knows or has reason to know
on or after the day on which the first offering for sale of interests in
a tax shelter occurs that the designated organizer failed to register
the tax shelter, such tax shelter organizer must register the tax
shelter as soon as practicable after he first knows or has reason to
know of the failure. A tax shelter organizer who has signed a
designation agreement is deemed to have reason to know that the
designated organizer has failed to register the tax shelter if the tax
shelter organizer does not receive a copy of the Internal Revenue
Service registration notice containing the registration number from the
designated organizer within the 60-day period after the day on which the
first offering for sale of interests in the tax shelter occurs (or the
person signs the designation agreement, if later). See A-41 of this
section for the requirement that the designated organizer provide a copy
of the registration notice and number to persons who have signed the
designation agreement.
[[Page 122]]
Registration--General Rules
Q-40. By what date must a tax shelter be registered?
A-40. A tax shelter must be registered not later than the day on
which the first offering for sale of an interest in the tax shelter
occurs.
Q-41. Is a tax shelter organizer (including a designated organizer)
who registers a tax shelter responsible for performing any act with
respect to tax shelter registration other than registering the tax
shelter?
A-41. Yes. A tax shelter organizer (including a designated
organizer) who registers a tax shelter must provide a copy of the
Internal Revenue Service registration notice containing the registration
number within 7 days after the notice is received from the Internal
Revenue Service to the principal organizer (if a different person) and
to any persons who the tax shelter organizer knows or has reason to know
are participating in the sale of interests in the tax shelter (if such
persons begin to participate after the registration number is received,
they must be provided the notice within 7 days after they commence their
participation). In addition, a designated organizer must provide a copy
of the notice within 7 days after it is received to all persons who have
signed the designation agreement.
Q-42. What is the sale of an interest in a tax shelter?
A-42. The sale of an interest in a tax shelter includes the sale of
property, or any interest in property, the entry into a leasing
arrangement, a consulting, management or other agreement for the
performance of services, or the sale or entry into any other plan,
investment, or arrangement.
Q-43. What does the term ``offering for sale'' mean?
A-43. The term ``offering for sale'' means making any
representation, whether oral or written, relating to participation in a
tax shelter as an investor. The term includes any advertisement relating
to the tax shelter and any mail, telephonic, or other contact with
prospective investors. A representation relating to participation in a
tax shelter will be considered an offering for sale of an interest in
the tax shelter even though there is included in the representation an
explicit statement that the representation does not constitute an offer
to sell or a solicitation of an offer to buy an interest in the tax
shelter. In determining whether an offering for sale of an interest has
occurred, federal and state laws regulating securities are not
controlling.
Q-44. After a tax shelter has been registered, must it be registered
again each year that it continues to be offered for sale?
A-44. No. Registration is effective for the year in which first
accomplished and all subsequent years.
Q-45. If the facts relating to a tax shelter change after the tax
shelter has been registered, must the tax shelter be registered again or
must an amended application for registration be filed by the tax shelter
organizer?
A-45. No. The tax shelter organizer, however, is permitted to file
an amended application if a material change in facts occurs after the
initial registration. A material change in facts is--
(1) A change in the identifying information relating to the tax
shelter or tax shelter organizer,
(2) The acquisition or construction of a principal asset not
reported on the initial application for registration,
(3) A change in the method of financing a minimum investment unit,
or
(4) A change in the principal business activity.
In addition, a change in any tax shelter ratio reported on the
initial application for registration that increases or decreases the
reciprocal of the tax shelter ratio (i.e., the fraction in which the
amount of the applicable investment base is the numerator and the amount
of the applicable deductions and credits is the denominator) by 50
percent or more is a material change in facts. For example, if the tax
shelter ratio increases from 2 to 1 to 4 to 1, the reciprocal of the tax
shelter ratio decreases from \1/2\ to \1/4\, a 50-percent decrease.
Similarly, if the tax shelter ratio decreases from 6 to 1 to 4 to 1, the
reciprocal of the tax shelter ratio increases from \1/6\ to \1/4\, a 50-
percent increase. In either case, there is a material change in facts
and an amended application could be filed.
Q-45A. What information should be included on an amended application
for registration?
[[Page 123]]
A-45A. The tax shelter organizer must include the identifying
information requested on Form 8264, Application for Registration of a
Tax Shelter, and the tax shelter registration number that has been
assigned to the tax shelter. In addition, the tax shelter organizer
should include any other information requested on Form 8364(1) that has
changed since the tax shelter was registered, or (2) that the tax
shelter organizer did not know at the time the tax shelter was
registered but has learned of since the registration.
For example, assume that A organizes partnership L, a blind pool
that will invest in real estate. Before the real estate is identified or
acquired, interests in L will be offered to the public in an offering
that must be registered with the Securities and Exchange Commission.
Although A does not know what real estate L will acquire and therefore
is unable to calculate the tax shelter ratio with certainty, A concludes
(based on representations made or to be made) that the tax shelter ratio
will exceed 2 to 1 as to some of the investors. Accordingly, A registers
L as a tax shelter. A attaches a statement to the application for
registration, explaining that L is a blind pool organized to invest in
real estate, but that L has not yet acquired any real estate. In
addition, A attaches a statement explaining that although the tax
shelter ratio is expected to exceed 2 to 1, A cannot compute the tax
shelter ratio with certainty because L has not yet acquired any real
estate. Several months after L is registered, L acquires a shopping
center. A may file an amended application for registration. In addition
to reporting the identifying information and the tax shelter
registration number on the amended application, A should report the
shopping center as the principal asset and the recomputed tax shelter
ratio.
As another example, assume that C organizes a limited partnership
that is a tax shelter. On the application for registration, C reports
that the tax shelter ratio is 2.2 to 1. After the partnership has been
registered, C finds that the partnership is unable to attract sufficient
investors. To make investing in the partnership more attractive, C
decides to offer financing for the purchase or interests in the
partnership. As a result of the change in financing, the tax shelter
ratio will be 5 to 1. Because there is a change in financing and a
change in the tax shelter ratio that decreases the reciprocal of the tax
shelter ratio by 50 percent or more, C may file an amended application
for registration. In addition to reporting the identifying information
and the tax shelter registration number on the amended application, C
should report the recomputed tax shelter ratio and information relating
to the change in financing.
Q-46. If assets constituting a tax shelter are sold (``original
sale'') and, subsequently, either the assets or interests in the assets
are offered for sale by the purchaser (``resale''), must the purchaser
file a new application for registration if the resale is an offering or
sale of interests in a tax shelter?
A-46. If the resale constitutes a tax shelter, the purchaser must
file a new application for registration, unless the tax shelter
organizer with respect to the original sale is also the tax shelter
organizer with respect to the resale and the facts pertaining to the
resale were reflected in the application for registration filed with
respect to the original sale. For example, assume that A intends to sell
a building with an estimated fair market value of $2.5 million to a
group of 5 investors (i.e., a substantial investment, as defined in A-21
of this section). A also intends to make representations of tax benefits
attributable to an investment in the building. Based on these
representations and the investment base, the tax shelter ratio
attributable to an investment in the building may be greater than 2 to
1. A therefore files an application for registration relating to the
building with the Internal Revenue Service. The Internal Revenue Service
issues a registration number for the investment, and A furnishes the
registration number to each of the 5 investors in accordance with A-53
of this section. In an unrelated transaction, the 5 investors decide to
syndicate the building and to offer interests in the syndicate to
approximately 500 investors. In connection with this offer, the
investors expect to make representations concerning tax benefits with
respect to
[[Page 124]]
the syndication. If based on these representations and the investment
base, the tax shelter ratio may be greater than 2 to 1 for an investor
in the syndicate, the 5 investors must file an application for
registration for the syndicate before interests in the syndicate may be
offered for sale. The investors in the syndicate must be furnished with
the new registration number and not the registration number issued with
respect to A. On the other hand, if the original sale and the
syndication were part of A's plan to sell interests in the building, A
is a tax shelter organizer with respect to the syndication. If the facts
pertaining to the syndication were reflected on A's application for
registration with respect to the original sale, a second application for
registration would not be required with respect to the syndication.
However, the investors in the syndicate would have to be furnished with
the tax shelter registration number issued to A.
Q-47. When is a tax shelter considered registered?
A-47. A tax shelter is considered registered when a properly
completed Form 8264, Application for Registration of a Tax Shelter, is
filed with the appropriate Internal Revenue Service Center. See A-7 of
Sec. 301.6111-2T for rules relating to the information required to be
included on the form, and A-8 of Sec. 301.6707-1T for rules relating to
the penalty for filing incomplete information.
Q-48. Must a person registering a tax shelter that is a substantial
investment only by reason of an aggregation of multiple investments
under A-22 of this section complete a separate Form 8264 for each
investment constituting part of the substantial investment?
A-48. A separate Form 8264 must be completed for each investment
that differs from the other investments in a substantial investment with
respect to any of the following:
(1) Principal asset,
(2) Accounting methods,
(3) Federal or state agencies with which the investment is
registered or with which an exemption notice is filed,
(4) Methods of financing the purchase of an interest in the
investment,
(5) Tax shelter ratio.
Such aggregated investments, however, are part of a single tax
shelter.
Q-49. Do the rules of section 7502 of the Internal Revenue Code,
regarding timely mailing, apply to the filing of registration forms?
A-49. Yes.
Q-50. After a tax shelter has been registered, may representations
that the investment has been registered with the Internal Revenue
Service be made to potential investors?
A-50. Investors may be informed that the investment has been
registered with the Internal Revenue Service. Investors also must be
informed, however, that registration does not imply that the Internal
Revenue Service has reviewed, examined, or approved the investment or
the claimed tax benefits. The disclaimer must be substantially in the
form provided below:
ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE THAT THIS
INVESTMENT OR THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED, OR
APPROVED BY THE INTERNAL REVENUE SERVICE.
See A-53 of this section for rules relating to the legend that must
be included on any statement on which the tax shelter registration
number is furnished to investors.
Furnishing Tax Shelter Registration Numbers to Investors
Q-51. Who must furnish investors in a tax shelter with the
registration number of the tax shelter?
A-51. Any person who sells (or otherwise transfers) an interest in a
tax shelter is required to furnish the registration number assigned to
that tax shelter to each person who purchases (or otherwise acquires) an
interest in that tax shelter from the seller or transferor. For example,
X, a tax shelter organizer, sells an interest in a tax shelter to A. One
year later A sells A's interest in the shelter to B. X must furnish the
tax shelter registration number to A, and A must furnish the number to
B. If B sells or otherwise transfers the interest (by gift, for
example), B must furnish the number to the purchaser or transferee of
B's interest in the tax shelter.
[[Page 125]]
Q-52. When must the registration number be furnished to purchasers
of interests in the tax shelter?
A-52. The person who sells (or otherwise transfers) an interest in a
tax shelter must furnish the registration number to the purchaser (or
transferee) at the time of sale (or transfer) of the interest (or, if
later, within 20 days after the seller or transferor receives the
registration number). If the registration number is not furnished at the
time of the sale (or other transfer), the seller (or transferor) must
furnish the statement described in A-54 to the purchaser (or transferee)
at the time of the sale (or other transfer). If interests in a tax
shelter were sold before September 1, 1984, all investors who acquired
their interests in the tax shelter before September 1, 1984, must be
furnished with the registration number of the tax shelter by December
31, 1984. The registration number will be considered furnished to the
investor if it is mailed to the investor at the last address of the
investor known to the person required to furnish the number.
Q-53. How is a seller or transferor of an interest in a tax shelter
required to furnish the registration number to investors?
A-53. The person who sells (or otherwise transfers) an interest in a
tax shelter must furnish the registration number of the tax shelter to
the tax shelter to the purchaser (or transferee) on a written statement.
The written statement shall show the name, registration number, and
taxpayer identification number of the tax shelter, and include a
prominent legend in bold and conspicuous type stating that the
registration number must be included on any return on which the investor
claims any deduction, loss, credit, or other tax benefit, or reports any
income, by reason of the tax shelter. The statment must also include a
prominent legend in bold and conspicuous type stating that the issuance
of the registration number does not indicate that the Internal Revenue
Service has reviewed, examined, or approved the investment or the
claimed tax benefits. The statement shall be substantially in the form
provided below:
You have acquired an interest in [name and address of tax shelter]
whose taxpayer identification number is [if any]. The Internal Revenue
Service has issued [name of tax shelter] the following tax shelter
registration number: [Number]
YOU MUST REPORT THIS REGISTRATION NUMBER TO THE INTERNAL REVENUE
SERVICE, IF YOU CLAIM ANY DEDUCTION, LOSS, CREDIT, OR OTHER TAX BENEFIT
OR REPORT ANY INCOME BY REASON OR YOUR INVESTMENT IN [NAME OF TAX
SHELTER].
You must report the registration number (as well as the name, and
taxpayer identification number of [name of tax shelter]) on Form 8271.
FORM 8271 MUST BE ATTACHED TO THE RETURN ON WHICH YOU CLAIM THE
DEDUCTION, LOSS, CREDIT, OR OTHER TAX BENEFIT OR REPORT ANY INCOME.
ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE THAT THIS
INVESTMENT OR THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED, OR
APPROVED BY THE INTERNAL REVENUE SERVICE.
This statement may be modified as necessary if the tax shelter is
not a separate entity (e.g., certain Schedule F or Schedule C
activities) or has no name or taxpayer identification number.
Q-54. If a registration number has not been received by a seller (or
transferor) from the person who registered the tax shelter by the time
interests in the tax shelter are sold (or otherwise transferred), must
the seller (or transferor) of the interests furnish the purchaser (or
transferee) with any information regarding the registration?
A-54. Yes. At the time of the sale (or other transfer) the seller
(or other transferor) must furnish the purchaser (or transferee) with a
written statement in substantially the form prescribed in A-53 of this
section, except that the second sentence of the form prescribed in A-53
shall be replaced by a statement in the form provided below:
On behalf of [name of tax shelter], [name of tax shelter organizer
who has applied for registration] has applied to the Internal Revenue
Service for a tax
[[Page 126]]
shelter registration number. The number will be furnished to you when it
is received.
Including the Registration Number on Tax Returns
Q-55. Is an investor required to report the registration number of a
tax shelter in which the investor has acquired an interest to the
Internal Revenue Service?
A-55. Yes. Any person claiming any deduction, loss, credit, or other
tax benefit by reason of a tax shelter must report the registration
number of the tax shelter on Form 8271, Investor Reporting of Tax
Shelter Registration Number, which must be attached to the return on
which any deduction, loss credit, or other tax benefit attributable to
the tax shelter is claimed. For purposes of determining whether the tax
shelter registration number must be reported by an investor, income
attributable to an investment, such as a partner's distributive share of
income, constitutes a deduction or tax benefit that is claimed, because
gross deductions and other tax benefits are included in the net income
reported by the investor. Thus, the registration number also must be
reported on any return on which an investor reports any income
attributable to a tax shelter.
Q-56. What should the investor do if the investor has received a
notice that a registration number for the tax shelter has been applied
for, but the investor has not received the registration number by the
time the investor files a return on which a deduction, loss credit,
other tax benefit, or income attributable to the tax shelter is
included?
A-56. The investor must attach to the return a Form 8271 with the
words ``Applied For'' written in the space for the registration number
and must include on the Form 8271 the name and taxpayer identification
number (if any) of the tax shelter and the name of the person who has
applied for registration of the tax shelter.
Q-57. Does the requirement to include the tax shelter registration
number on a return apply to applications for tentative refund (Form 1045
and Form 1139) and amended returns (Form 1040X, Form 1120X)?
A-57. Yes. A completed Form 8271 must be attached to any such return
on which any deduction, loss, credit, other tax benefit, or income
relating to a tax shelter is included.
Projected Income Investments
Q-57A. Are the registration requirements suspended with respect to
any tax shelters?
A-57A. Yes. If a tax shelter is a projected income investment, it is
not required to be registered before the first offering for sale of an
interest in the tax shelters occurs, but is subject only to the
registration requirements set forth in A-57H through A-57J of this
section. A tax shelter is a projected income investment if--
(a) The tax shelter is not expected to reduce the cumulative tax
liability of any investor for any year during the 5-year period
described in A-4 (I) of this section; and
(b) The assets of the tax shelter do not include or relate to any
property described in A-57E of this section.
Q-57B. Under what circumstances does a tax shelter satisfy the
requirement of paragraph (a) of A-57A of this section?
A-57B. A tax shelter is not expected to reduce the cumulative tax
liability of any investor for any year during the 5-year period
described in A-4 (I) of this section only if--
(a) A written financial projection or other written representation
that is provided to investors before the sale of interests in the
investment states (or leads a reasonable investor to believe) that the
investment will not reduce the cumulative tax liability of any investor
with respect to any year (within the meaning of A-7 of this section) in
such 5-year period; and
(b) No written or oral projections or representations, other than
those related to circumstances that are highly unlikely to occur, state
(or lead a reasonable investor to believe) that the investment may
reduce the cumulative tax liability of any investor with respect to any
such year.
Thus, a tax shelter for which there are multiple written or oral
financial projections or other representations is not a projected income
investment if any such projection or representation that
[[Page 127]]
relates to circumstances that are not highly unlikely to occur states
(or leads a reasonable investor to believe) that the investment may
reduce the cumulative tax liability of any investor. See A-57D and A-57F
of this section for rules relating to financial projections or other
representations that are not made in good faith, that are not based on
reasonable economic and business assumptions, or that relate to
circumstances that are highly unlikely.
Q-57C. When does an investment reduce the cumulative tax liability
of an investor?
A-57C. (a) An investment reduces the cumulative tax liability of an
investor with respect to a year during the 5-year period described in A-
4 (I) of this section if, as of the close of such year, (i) cumulative
projected deductions for the investor exceed cumulative projected income
for the investor, or (ii) cumulative projected credits for the investor
exceed cumulative projected tax liability (without regard to credits)
for the investor.
(b) The cumulative projected deductions for an investor as of the
close of a year are the gross deductions of the investor with respect to
the investment, for all periods up to (and including) the end of such
year, that are included in the financial projection or upon which the
representation is based. The deductions with respect to an investment
include all deductions explicitly represented as being allowable and all
deductions typically associated (within the meaning of A-9 of this
section) with the investment. Therefore, interest to be paid by the
investor that is taken into account in determining the tax shelter ratio
of the investment (see A-11 of this section) is treated as a deduction
with respect to the investment.
(c) The cumulative projected income for an investor as of the close
of a year is the gross income of the investor with respect to the
investment, for all periods up to (and including) the end of such year,
that is included in the financial projection or upon which the
representation is based. For this purpose, income attributable to cash,
cash equivalents, or marketable securities (within the meaning of A-14
(4) of this section) may not be treated as income from the investment.
(d) The cumulative projected credits for an investor as of the close
of a year are the gross credits of the investor with respect to the
investment, for all periods up to (and including) the close of such
year, that are included in the financial projection or upon which the
representation is based. The credits with respect to an investment
include all credits explicitly represented as being allowable and all
credits typically associated (within the meaning of A-9 of this section)
with the investment.
(e) The cumulative projected tax liability (without regard to
credits) for an investor as of the close of a year is 50 percent of the
excess of cumulative projected income for the investor over cumulative
projected deductions for the investor with respect to the investment as
of the close of such year.
(f) The following examples illustrate the application of the
principles of this A-57C:
Example 1. The promotional material with respect to a tax shelter
includes a written financial projection indicating that the expected
income of the investment in each of its first 5 years is $800,000. In
subsequent oral discussions, investors are advised that, in certain
circumstances that are not highly unlikely, the income expected from the
investment may be as little as $500,000 per year. The subsequent oral
discussions are taken into account in determining whether any
projections or representations state or lead a reasonable investor to
believe that the investment may reduce the cumulative tax liability of
any investor. Thus, if the written financial projections indicate that
the gross deductions attributable to the investment in each of its first
5 years are expected to be $600,000 and the subsequent oral discussions
do not indicate that the amount of those deductions will change under
the circumstances in which the income expected may be as little as
$500,000, the subsequent oral discussions taken together with the
written financial projections state (or lead a reasonable investor to
believe) that the cumulative tax liability of an investor may be reduced
(i.e., the subsequent oral discussions (taken together with the
projections) state or lead a reasonable investor to believe that
cumulative projected deductions may exceed cumulative projected income
under circumstances that are not highly unlikely). Accordingly, under
paragraph (b) of A-57B of this section, the tax shelter would not
qualify as a projected income investment.
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Example 2. The written promotional material with respect to a tax
shelter states that certain deductions are allowable to an investor
(without specifying their amount), but there is no written statement
relating to the amount of income expected from the investment. Because
there is no written financial projection or other written representation
that states or leads a reasonable investor to believe that the
investment will not reduce the investor's cumulative tax liability
(i.e., the cumulative projected deductions, although not specified in
the projections, may exceed the cumulative projected income (0)), the
requirement of paragraph (a) of A-57B of this section would not be
satisifed. The result in this example would be the same if there were
only oral representations that the income to be derived from the
investment would exceed the deductions with respect to the investment,
because there would be no written statement as required by paragraph (a)
of A-57B of this section. The tax shelter in this case would qualify as
a projected income investment, however, if the written promotional
material contains good-faith representations based on reasonable
economic and business assumptions that state or lead reasonable
investors to believe that the cumulative projected income from the
investment will exceed the cumulative projected deductions allowable
with respect to the investment for each year in the 5-year period, even
though the amounts of income and deductions are not specified.
Example 3. The written promotional material with respect to a tax
shelter includes a good-faith financial projection for the first 5 years
of the investment. Based on reasonable economic and business
assumptions, the projection indicates that the expected net income of
the investment in each of its first 4 years is $100,000 ($500,000 of
gross income and $400,000 of gross deductions), but as a result of the
anticipated acquisition of new business assets a loss of $20,000 is
expected in the fifth year of the investment ($500,000 of gross income
and $520,000 of gross deductions). The projection also indicates that a
credit of $50,000 is expected in the fifth year of the investment. Such
a written financial projection would be considered to state that the
investment will not reduce the cumulative tax liability of any investor
with respect to any year in the 5-year period described in A-4 (I) of
this section. Although a loss and a credit are projected in the fifth
year of the investment, as of the close of such year, cumulative
projected income ($2,500,000) exceeds cumulative projected deductions
($2,120,000), and cumulative projected tax liability (without regard to
credits) ($380,000 x 50 percent =$190,000) exceeds cumulative projected
credits ($50,000). Assuming no contrary oral or written projections or
representations are made, the tax shelter would thus be a projected
income investment.
Example 4. The written promotional material with respect to a tax
shelter states that an investor will be entitled to a ``1.5 to 1 write-
off'' in the year of investment. This statement is a representation that
the investment will reduce the cumulative tax liability of an investor
with respect to the first year of the investment and, accordingly, the
investment is not a projected income investment. The result in this
example would be the same if any ``write-off'' were represented, even if
the write-off were less than 1.5 to 1.
Q-57D. Are all financial projections and representations relating to
the cumulative tax liability of an investor taken into account for
purposes of A-57B of this section?
A-57D. (a) No. A financial projection or other representation
relating to the cumulative tax liability of an investor is not taken
into account for purposes of A-57B of this section unless it is made in
good faith and is based on reasonable economic and business assumptions.
In addition, a financial projection or other representation is not taken
into account if it relates to circumstances that are highly unlikely.
Moreover, a general statement or disclaimer indicating that projected
income is not guaranteed or otherwise assured, standing alone, is not a
projection or representation for purposes of paragraph (b) of A-57B of
this section.
(b) The following example illustrates the application of the
principles of this A-57D:
Example. The written promotional material with respect to a tax
shelter contains a representation stating that the investment is
projected to produce net income for all investors in each of its first
five years and there are no credits potentially allowable with respect
to the investment. This statement is based on reasonable economic and
business assumptions. Such a written representation, if made in good
faith, would be considered under paragraph (a) of A-57B of this section
to state that the investment will not reduce the cumulative tax
liability of any investor with respect to any year in the 5-year period
described in A-4(I) of this section. In addition, no oral or written
statements or representations are communicated to investors that would
indicate under paragraph (b) of A-57B of this section that the
investment might reduce the cumulative tax liability of any investor
with respect to any year in the 5-year period.
Assume the tax shelter organizer has knowledge of certain other
facts that lead
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the tax shelter organizer to believe that it is more likely than not
that the investment will produce a net loss in the first year. The
representation projecting net income is thus contrary to the tax shelter
organizer's belief that it is more likely than not that the investment
will produce a net loss in the first year. Therefore, the representation
is not made in good faith. Since representations not made in good faith
are ignored under A-57D, the tax shelter would not be a projected income
investment. If, on the other hand, the tax shelter organizer did not
know of the other facts so that the tax shelter organizer did not
believe that the investment would produce a net loss in the first year,
the representation projecting income is made in good faith. In that
case, the tax shelter would be a projected income investment.
Q-57E. What assets may not be held by a projected income investment?
A-57E. A tax shelter is not a projected income investment if more
than an incidental amount of its assets include or relate to any
interest in a collectible (as defined in section 408(m)(2)), a master
sound recording, motion picture or television film, videotape,
lithograph plate, copyright, or a literary, musical, or artistic
composition.
Q-57F. What are the consequences if financial projections or other
representations are not made in good faith or are not based on
reasonable economic and business assumptions?
A-57F. If a tax shelter is not a projected income investment because
the financial projections or other representations are not made in good
faith or are not based on reasonable economic and business assumptions,
it must be registered not later than the day on which the first offering
for sale of an interest in the tax shelter occurs. If the tax shelter is
not registered timely, the tax shelter organizer may be subject to a
penalty. (See A-1 of Sec. 301.6707-1T.)
Q-57G. When does a tax shelter cease to be a projected income
investment?
A-57G. A tax shelter ceases to be a projected income investment on
the last day of the first year (as defined in A-7 of this section) in
the 5-year period described in A-4 (I) of this section for which, for
any investor, (i) the gross deductions allocable to the investor for
that year and prior years exceed the gross income allocable to the
investor for such years, or (ii) the credit allocable to the investor
for that year and prior years exceed 50 percent of the amount by which
gross income allocable to the investor exceeds gross deductions
allocable to the investor for such years. For purposes of determining
when a tax shelter ceases to be a projected income investment, the tax
shelter organizer is not required to take into account interest that may
be incurred by an investor with respect to debt described in A-14 (2) or
(3) of this section, but is required to take into account interest
incurred by an investor with respect to debt described in A-14 (1) of
this section. In addition, the tax shelter organizer may not take into
account income attributable to cash, cash equivalents, or marketable
securities (within the meaning of A-14 (4) of this section).
Q-57H. How does the requirement to register apply with respect to a
tax shelter that is a projected income investment?
A-57H. In the case of a tax shelter that is a projected income
investment, registration is not required unless the tax shelter ceases
to be a projected income investment under A-57G of this section. If the
tax shelter ceases to be a projected income investment, the tax shelter
organizer must register the tax shelter in accordance with the rules set
forth in A-1 through A-39 and A-41 through A-50 of this section. The tax
shelter must be registered--
(a) Within 30 days after the date on which the tax shelter ceases to
be a projected income investment, and
(b) Before the date on which the tax shelter or a tax shelter
organizer sends the investor any schedule of profit or loss, or income,
deduction, or credit that may be used in preparing the investor's income
tax return for the taxable year that includes the date on which the tax
shelter ceases to be a projected income investment. If a tax shelter
organizer fails to register timely as required by this A-57H, the tax
shelter organizer may be subject to a penalty. (See A-1 of
Sec. 301.6707-1T.) For example, assume that C is the principal organizer
and general partner of a limited partnership. Interests in the
partnership will be offered for sale in a public offering required to be
registered
[[Page 130]]
with the Securities and Exchange Commission. C knows that the tax
shelter ratio (as defined in A-5 of this section) for the limited
partners will be 5 to 1. Although C knows the partnership is a tax
shelter, C does not register the partnership by the day on which the
first offering for sale of an interest occurs because C believes the
partnership is a projected income investment. In the second year of the
partnership, the gross deductions allocable to each of the limited
partners for the first two years of the partnership exceed the gross
income allocable to the limited partners in such years. Thus, the
partnership ceases to be a projected income investment under A-57G of
this section. Assuming further that C continues as the general partner
and knowingly fails to register the partnership as a tax shelter within
the time prescribed in this A-57H, C will be subject to a penalty of 1
percent of the aggregate amount invested in the partnership. Because
there is an intentional disregard of the registration requirements, the
$10,000 limitation will not apply.
Q-57I. How does the requirement to furnish registration numbers (A-
51 through A-54 of this section) apply in the case of a tax shelter that
is a projected income investment?
A-57I. In the case of a tax shelter that is a projected income
investment, a person who sells or transfers an interest in the tax
shelter is not required to furnish a registration number under A-51 of
this section or a notice under A-54 of this section unless the tax
shelter ceases to be a projected income investment. If the tax shelter
ceases to be a projected income investment, the tax shelter organizer
who registers the tax shelter is required to furnish the registration
number to all persons who the tax shelter organizer knows or has reason
to know are participating in the sale of interests in the tax shelter
and to all persons who the tax shelter organizer knows or has reason to
know have acquired interests in the tax shelter. A person who sold (or
otherwise transferred) an interest in the tax shelter before the date on
which the tax shelter ceased to be a projected income investment is
required to furnish the registration number to the purchaser or
transferee as provided in A-51 of this section only if the seller or
transferor knows or has reason to know that the tax shelter has ceased
to be a projected income investment and that the tax shelter organizer
who registered the tax shelter has not provided a registration number to
such purchaser or transferee. In the case of persons who acquired
interests in the tax shelter before the date on which the tax shelter
ceased to be a projected income investment, the registration number must
be provided not later than the date described in paragraph (b) of A-57H
of this section or, if the tax shelter does not provide any schedule
described in paragraph (b) of A-57H of this section, within 60 days
after the date on which the tax shelter ceases to be a projected income
investment. Thus, for example, if a tax shelter that ceases to be a
projected income investment is a partnership, the tax shelter organizer
would be required to provide the registration number to each partner not
later than the date the Schedule K-1 for the year in which the tax
shelter ceases to be a projected income investment is provided to each
partner.
The registration number must be provided in accordance with A-51 and
A-52 of this section and must be accompanied by a statement explaining
that the tax shelter has ceases to be a projected income investment and
instructing the recipient to furnish the registration number to any
persons to whom the recipient has sold or otherwise transferred
interests in the tax shelter. A tax shelter organizer who fails to
provide the registration number as provided in this A-57I may be subject
to penalties. (See A-12 of Sec. 301.6707-1T.)
Q-57J. How does the requirement to include the registration number
on tax returns (A-55 through A-57 of this section) apply in the case of
a tax shelter that is a projected income investment?
A-57J. In the case of a tax shelter that is a projected income
investment, an investor is not required to report a registration number
on the investor's tax return unless the tax shelter ceases to be a
projected income investment. If the tax shelter ceases to be a projected
income investment, the requirements of A-55 through A-57 apply with
respect
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to returns for taxable years ending on or after the date on which the
tax shelter ceases to be a projected income investment.
Effective Dates
Q-58. On what date does the requirement to register a tax shelter
become effective?
A-58. In general, a tax shelter must be registered if any interest
in the tax shelter (other than an interest previously sold to an
investor) is sold on or after September 1, 1984 (whether or not
interests in the tax shelter were sold or offered for sale before
September 1, 1984). The tax shelter must be registered with the Internal
Revenue Service not later than the first day after August 31, 1984 on
which an interest in the tax shelter is offered for sale.
Q-59. By what date must the tax shelter registration number be
furnished to investors who acquired interests before September 1, 1984
in a tax shelter that is required to be registered.
A-59. All investors who acquired their interests in a tax shelter
before September 1, 1984 must be supplied with the tax shelter
registration number by December 31, 1984. See A-52 of this section for
the date by which registration numbers must be furnished to investors
who acquire their interests on or after September 1, 1984.
Q-60. What interests will be taken into account in determining
whether an investment in which interests were sold before September 1,
1984, is a substantial investment?
A-60. The determination of whether an investment is a substantial
investment will be made by taking into account only the interests that
are offered for sale on or after September 1, 1984. An investment will
be considered a substantial investment if there are expected to be 5 or
more investors on or after September 1, 1984, and the aggregate amount
offered for sale on or after September 1, 1984 is expected to exceed
$250,000. Amounts received from the sale of interests before September
1, 1984, however, are taken into account in computing the amount of the
penalty for failure to register.
(Secs. 6111 and 7805, Internal Revenue Code of 1954 (98 Stat. 678, 26
U.S.C. 6111; 68A Stat. 917, 26 U.S.C. 7805); secs. 6111, 6112 and 7805,
Internal Revenue Code of 1954 (98 Stat. 678, 98 Stat. 681, 68A Stat.
917; 26 U.S.C. 6111, 6112 and 7805))
[T.D. 7964, 49 FR 32713, Aug. 15, 1984, as amended by T.D. 7990, 49 FR
43641, Oct. 31, 1984; T.D. 7964, 49 FR 44461, Nov. 7, 1984; T.D. 8078,
51 FR 7440, Mar. 25, 1986]
Sec. 301.6111-2 Confidential corporate tax shelters.
(a) In general.--(1) Under section 6111(d) and this section, a
confidential corporate tax shelter is treated as a tax shelter subject
to the requirements of sections 6111 (a) and (b).
(2) A confidential corporate tax shelter is any transaction--
(i) A significant purpose of the structure of which is the avoidance
or evasion of Federal income tax, as described in paragraph (b) of this
section, for a direct or indirect corporate participant;
(ii) That is offered to any potential participant under conditions
of confidentiality, as described in paragraph (c) of this section; and
(iii) For which the tax shelter promoters may receive fees in excess
of $100,000 in the aggregate, as described in paragraph (d) of this
section.
(3) For purposes of this section, references to the term transaction
include all of the factual elements relevant to the expected tax
treatment of any investment, entity, plan, or arrangement, and include
any series of steps carried out as part of a plan. For purposes of this
section, the term substantially similar includes any transaction that is
expected to obtain the same or similar types of tax consequences and
that is either factually similar or based on the same or similar tax
strategy. Receipt of an opinion regarding the tax consequences of the
transaction is not relevant to the determination of whether the
transaction is the same as or substantially similar to another
transaction. Further, the term substantially similar must be broadly
construed
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in favor of registration. For examples, see Sec. 1.6011-4(c)(4) of this
chapter.
(4) A transaction described in paragraph (b) of this section is for
a direct or an indirect corporate participant if it is expected to
provide Federal income tax benefits to any corporation (U.S. or foreign)
whether or not that corporation participates directly in the
transaction.
(b) Transactions structured for avoidance or evasion of Federal
income tax--(1) In general. The avoidance or evasion of Federal income
tax will be considered a significant purpose of the structure of a
transaction if the transaction is described in paragraph (b)(2) or (3)
of this section. However, a transaction described in paragraph (b)(3) of
this section need not be registered if the transaction is described in
paragraph (b)(4) of this section. For purposes of this section, Federal
income tax benefits include deductions, exclusions from gross income,
nonrecognition of gain, tax credits, adjustments (or the absence of
adjustments) to the basis of property, status as an entity exempt from
Federal income taxation, and any other tax consequences that may reduce
a taxpayer's Federal income tax liability by affecting the amount,
timing, character, or source of any item of income, gain, expense, loss,
or credit.
(2) Listed transactions. A transaction is described in this
paragraph (b)(2) if the transaction is the same as or substantially
similar to one of the types of transactions that the Internal Revenue
Service (IRS) has determined to be a tax avoidance transaction and
identified by notice, regulation, or other form of published guidance as
a listed transaction. If a transaction becomes a listed transaction
after the date on which registration would otherwise be required under
this section, and if the transaction otherwise satisfies the
confidentiality and fee requirements of paragraphs (a)(2)(ii) and (iii)
of this section, registration shall in all events be required with
respect to any interests in the transaction that are offered for sale
after the transaction becomes a listed transaction. However, because a
transaction identified as a listed transaction is generally considered
to have been structured for a significant tax avoidance purpose, such a
transaction ordinarily will have been subject to registration under this
section before becoming a listed transaction if the transaction
previously satisfied the confidentiality and fee requirements of
paragraphs (a)(2)(ii) and (iii) of this section.
(3) Other tax-structured transactions. A transaction is described in
this paragraph (b)(3) if it has been structured to produce Federal
income tax benefits that constitute an important part of the intended
results of the transaction and the tax shelter promoter (or other person
who would be responsible for registration under this section) reasonably
expects the transaction to be presented in the same or substantially
similar form to more than one potential participant, unless the promoter
reasonably determines that--
(i) The potential participant is expected to participate in the
transaction in the ordinary course of its business in a form consistent
with customary commercial practice (a transaction involving the
acquisition, disposition, or restructuring of a business, including the
acquisition, disposition, or other change in the ownership or control of
an entity that is engaged in a business, or a transaction involving a
recapitalization or an acquisition of capital for use in the taxpayer's
business, shall be considered a transaction carried out in the ordinary
course of a taxpayer's business); and
(ii) There is a generally accepted understanding that the expected
Federal income tax benefits from the transaction (taking into account
any combination of intended tax consequences) are properly allowable
under the Internal Revenue Code for substantially similar transactions.
There is no minimum period of time for which such a generally accepted
understanding must exist. In general, however, a tax shelter promoter
(or other person who would be responsible for registration under this
section) cannot reasonably determine whether the intended tax treatment
of a transaction has become generally accepted unless information
relating to the tax treatment and tax structure of such transactions has
been in the public domain (e.g., rulings, published articles, etc.) and
widely known
[[Page 133]]
for a sufficient period of time (ordinarily a period of years) to
provide knowledgeable tax practitioners and the IRS reasonable
opportunity to evaluate the intended tax treatment. The mere fact that
one or more knowledgeable tax practitioners have provided an opinion or
advice to the effect that the intended tax treatment of the transaction
should or will be sustained, if challenged by the IRS, is not sufficient
to satisfy the requirements of this paragraph (b)(3)(ii).
(4) Excepted transactions. The avoidance or evasion of Federal
income tax will not be considered a significant purpose of the structure
of a transaction if the transaction is described in either paragraph
(b)(4)(i), (ii), or (iii) of this section.
(i) In the case of a transaction other than a transaction described
in paragraph (b)(2) of this section, the tax shelter promoter (or other
person who would be responsible for registration under this section)
reasonably determines that there is no reasonable basis under Federal
tax law for denial of any significant portion of the expected Federal
income tax benefits from the transaction. This paragraph (b)(4)(i)
applies only if the tax shelter promoter (or other person who would be
responsible for registration under this section) reasonably determines
that there is no basis that would meet the standard applicable to
taxpayers under Sec. 1.6662-3(b)(3) of this chapter under which the IRS
could disallow any significant portion of the expected Federal income
tax benefits of the transaction. Thus, the reasonable basis standard is
not satisfied by an IRS position that would be merely arguable or that
would constitute merely a colorable claim. However, the determination of
whether the IRS would or would not have a reasonable basis for such a
position must take into account the entirety of the transaction and any
combination of tax consequences that are expected to result from any
component steps of the transaction, must not be based on any
unreasonable or unrealistic factual assumptions, and must take into
account all relevant aspects of Federal tax law, including the statute
and legislative history, treaties, administrative guidance, and judicial
decisions that establish principles of general application in the tax
law (e.g., Gregory v. Helvering, 293 U.S. 465 (1935)). The determination
of whether the IRS would or would not have such a reasonable basis is
qualitative in nature and does not depend on any percentage or other
quantitative assessment of the likelihood that the taxpayer would
ultimately prevail if a significant portion of the expected tax benefits
were disallowed by the IRS.
(ii) The IRS makes a determination by published guidance that the
transaction is not subject to the registration requirements of this
section.
(iii) The IRS makes a determination by individual ruling under
paragraph (b)(5) of this section that a specific transaction is not
subject to the registration requirements of this section for the
taxpayer requesting the ruling.
(5) Requests for ruling. If a tax shelter promoter (or other person
who would be responsible for registration under this section) is
uncertain whether a transaction is properly classified as a confidential
corporate tax shelter or is otherwise uncertain whether registration is
required under this section, that person may, on or before the date that
registration would otherwise be required under this section, submit a
request to the IRS for a ruling as to whether the transaction is subject
to the registration requirements of this section. If the request fully
discloses all relevant facts relating to the transaction, that person's
potential obligation to register the transaction will be suspended
during the period that the ruling request is pending and, if the IRS
subsequently concludes that the transaction is a confidential corporate
tax shelter subject to registration under this section, until the
sixtieth day after the issuance of the ruling (or, if the request is
withdrawn, sixty days from the date that the request is withdrawn). In
the alternative, that person may register the transaction in accordance
with the requirements of this section and append a statement to the Form
8264, ``Application for Registration of a Tax Shelter'', which states
that the person is uncertain whether the transaction is required to be
registered as a confidential corporate tax
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shelter, and that the Form 8264 is being filed on a protective basis.
(6) Example. The following example illustrates the application of
paragraphs (b)(1) through (4) of this section. Assume, for purposes of
the example, that the transaction is not the same as or substantially
similar to any of the types of transactions that the IRS has identified
as listed transactions under section 6111 and, thus, is not described in
paragraph (b)(2) of this section. The example is as follows:
Example. (i) Facts. Y has designed a combination of financial
instruments to be issued as a package by corporations. The financial
instruments are expected to be treated as equity for financial
accounting purposes and as debt giving rise to allowable interest
deductions for Federal income tax purposes. Y reasonably expects to
present this method of raising capital to more than one potential
corporate participant. Assume that, because of the unusual nature of the
combination of financial instruments, Y cannot conclude either that the
transaction represented by the financial instruments is in customary
commercial form or that there is a generally accepted understanding that
interest deductions are available to issuers of substantially similar
combinations of financial instruments. Further, assume that Y cannot
reasonably determine that the IRS would have no reasonable basis to deny
the deductions.
(ii) Analysis. The transaction represented by this combination of
financial instruments is a transaction described in paragraph (b)(3) of
this section. However, if Y is uncertain whether this transaction is
described in paragraph (b)(3) of this section, or is otherwise uncertain
whether registration is required, Y may apply for a ruling under
paragraph (b)(5) of this section, and Y will not be required to register
the transaction while the ruling is pending or for sixty days
thereafter.
(c) Conditions of confidentiality--(1) In general. All the facts and
circumstances relating to the transaction will be considered when
determining whether an offer is made under conditions of confidentiality
as described in section 6111(d)(2), including prior conduct of the
parties. Pursuant to section 6111(d)(2)(A), if an offeree's disclosure
of the tax treatment or tax structure of the transaction is limited in
any manner by an express or implied understanding or agreement with or
for the benefit of any tax shelter promoter, an offer is considered made
under conditions of confidentiality, whether or not such understanding
or agreement is legally binding. The tax treatment of a transaction is
the purported or claimed Federal income tax treatment of the
transaction. The tax structure of a transaction is any fact that may be
relevant to understanding the purported or claimed Federal income tax
treatment of the transaction. Pursuant to section 6111(d)(2)(B), an
offer will also be considered made under conditions of confidentiality
in the absence of any such understanding or agreement if any tax shelter
promoter knows or has reason to know that the offeree's use or
disclosure of information relating to the tax treatment or tax structure
of the transaction is limited for the benefit of any person other than
the offeree in any other manner, such as where the transaction is
claimed to be proprietary or exclusive to the tax shelter promoter or
any party other than the offeree.
(2) Exceptions--(i) Securities law. An offer is not considered made
under conditions of confidentiality if disclosure of the tax treatment
or tax structure of the transaction is subject to restrictions
reasonably necessary to comply with securities laws and such disclosure
is not otherwise limited.
(ii) Mergers and acquisitions. In the case of a proposed taxable or
tax-free acquisition of historic assets of a corporation (other than an
investment company, as defined in section 351(e), that is not publicly
traded) that constitute an active trade or business the acquirer intends
to continue, or a proposed taxable or tax-free acquisition of more than
50 percent of the stock of a corporation (other than an investment
company, as defined in section 351(e), that is not publicly traded) that
owns historic assets used in an active trade or business the acquirer
intends to continue, the transaction is not considered offered under
conditions of confidentiality under paragraph (c)(1) of this section if
the offeree is permitted to disclose the tax treatment and tax structure
of the transaction no later than the earlier of the date of the public
announcement of discussions relating to the transaction, the date of the
public announcement of the transaction, or the date of the execution of
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an agreement (with or without conditions) to enter into the transaction.
However, this exception is not available where the offeree's ability to
consult any tax advisor (including a tax advisor independent from all
other entities involved in the transaction) regarding the tax treatment
or tax structure of the transaction is limited in any way.
(3) Presumption. Unless facts and circumstances indicate otherwise,
an offer is not considered made under conditions of confidentiality if
the tax shelter promoter provides express written authorization to each
offeree permitting the offeree (and each employee, representative, or
other agent of such offeree) to disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the
transaction, and all materials of any kind (including opinions or other
tax analyses) that are provided to the offeree related to such tax
treatment and tax structure. Except as provided in paragraph (c)(2) of
this section, this presumption is available only in cases in which each
written authorization permits the offeree to disclose the tax treatment
and tax structure of the transaction immediately upon commencement of
discussions with the tax shelter promoter providing the authorization
and each written authorization is given no later than 30 days from the
day the tax shelter promoter commenced discussions with the offeree. A
transaction that is exclusive or proprietary to any party other than the
offeree will not be considered offered under conditions of
confidentiality if written authorization to disclose is provided to the
offeree in accordance with this paragraph (c)(3) and the transaction is
not otherwise confidential.
(d) Determination of fees. All the facts and circumstances relating
to the transaction will be considered when determining the amount of
fees, in the aggregate, that the tax shelter promoters may receive. For
purposes of this paragraph (d), all consideration that tax shelter
promoters may receive is taken into account, including contingent fees,
fees in the form of equity interests, and fees the promoters may receive
for other transactions as consideration for promoting the tax shelter.
For example, if a tax shelter promoter may receive a fee for arranging a
transaction that is a confidential corporate tax shelter and a separate
fee for another transaction that is not a confidential corporate tax
shelter, part or all of the fee paid with respect to the other
transaction may be treated as a fee paid with respect to the
confidential corporate tax shelter if the facts and circumstances
indicate that the fee paid for the other transaction is in consideration
for the confidential corporate tax shelter. For purposes of determining
whether the tax shelter promoters may receive fees in excess of
$100,000, the fees from all substantially similar transactions are
considered part of the same tax shelter and must be aggregated.
(e) Registration--(1) Time for registering--(i) In general. A tax
shelter must be registered not later than the day on which the first
offering for sale of interests in the shelter occurs. An offer to
participate in a confidential corporate tax shelter shall be treated as
an offer for sale. If interests in a confidential corporate tax shelter
were first offered for sale on or before February 28, 2000, the first
offer for sale of interests in the shelter that occurs after February
28, 2000 shall be considered the first offer for sale under this
section.
(ii) Special rule. If a transaction becomes a confidential corporate
tax shelter (e.g., because of a change in the law or factual
circumstances, or because the transaction becomes a listed transaction)
subsequent to the first offering for sale after February 28, 2000, and
the transaction was not previously required to be registered as a
confidential corporate tax shelter under this section, the transaction
must be registered under this section if interests are offered for sale
after the transaction becomes a confidential corporate tax shelter. The
transaction must be registered by the next offering for sale of
interests in the shelter. If, subsequent to the first offering for sale,
a transaction becomes a confidential corporate tax shelter because the
transaction becomes a listed transaction on or after February 28, 2003,
and the transaction was not previously
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required to be registered as a confidential corporate tax shelter under
this section, the transaction must be registered under this section
within 60 days after the transaction becomes a listed transaction/
confidential corporate tax shelter if any interests were offered for
sale within the previous six years.
(2) Procedures for registering. To register a confidential corporate
tax shelter, the person responsible for registering the tax shelter must
file Form 8264, ``Application for Registration of a Tax Shelter''. (Form
8264 is also used to register tax shelters defined in section 6111(c).)
Similar to the treatment provided under Q&A-22 and Q&A-48 of
Sec. 301.6111-1T, transactions involving similar business assets and
similar plans or arrangements that are offered to corporate taxpayers by
the same person or related persons are aggregated and considered part of
a single tax shelter. However, in contrast with the requirement of Q&A-
48 of Sec. 301.6111-1T, the tax shelter promoter may file a single Form
8264 with respect to any such aggregated tax shelter, provided an
amended Form 8264 is filed to reflect any material changes and to
include any additional or revised written materials presented in
connection with an offer to participate in the shelter. Furthermore, all
transactions that are part of the same tax shelter and that are to be
carried out by the same corporate participant (or one or more other
members of the same affiliated group within the meaning of section 1504)
must be registered on the same Form 8264.
(f) Definition of tax shelter promoter. For purposes of section
6111(d)(2) and this section, the term tax shelter promoter includes a
tax shelter organizer and any other person who participates in the
organization, management or sale of a tax shelter (as those persons are
described in section 6111(e)(1) and Sec. 301.6111-1T (Q&A-26 through
Q&A-33) or any person related (within the meaning of section 267 or 707)
to such tax shelter organizer or such other person.
(g) Person required to register--(1) Tax shelter promoters. The
rules in section 6111 (a) and (e) and Sec. 301.6111-1T (Q&A-34 through
Q&A-39) determine who is required to register a confidential corporate
tax shelter. A promoter of a confidential corporate tax shelter must
register the tax shelter only if it is a person required to register
under the rules in section 6111(a) and (e) and Sec. 301.6111-1T (Q&A-34
through Q&A-39).
(2) Persons who discuss the transaction; all promoters are foreign
persons--(i) In general. If all of the tax shelter promoters of a
confidential corporate tax shelter are foreign persons, any person who
discusses participation in the transaction must register the shelter
under this section within 90 days after beginning such discussions.
(ii) Exceptions. Registration by a person discussing participation
in a transaction is not required if either--
(A) The person does not participate, directly or indirectly, in the
shelter and notifies the tax shelter promoter in writing, within 90 days
of beginning such discussions, that the person will not participate; or
(B) Within 90 days after beginning such discussions, the person
obtains and reasonably relies on both--
(1) A written statement from one of the tax shelter promoters that
such promoter has registered the tax shelter under this section; and
(2) A copy of the registration.
(iii) Determination of foreign status. For purposes of this
paragraph (g)(2), a person must presume that all tax shelter promoters
are foreign persons unless the person either--
(A) Discusses participation in the tax shelter with a promoter that
is a United States person; or
(B) Obtains and reasonably relies on a written statement from one of
the promoters that at least one of the promoters is a United States
person.
(iv) Discussion. Discussing participation in a transaction includes
discussing such participation with any person that conveys the tax
shelter promoter's proposal. For purposes of this paragraph (g)(2), any
person that participates directly or indirectly in a transaction will be
treated as having discussed participation in the transaction not later
than the date of the agreement to participate. Thus, a tax shelter
participant will be treated as having discussed participation in the
transaction even if all discussions were
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conducted by an intermediary and the agreement to participate was made
indirectly through another person acting on the participant's behalf
(for example, through an intermediary empowered to commit the
participant to participate in the shelter).
(v) Special rule for controlled entities. A person (first person)
will be treated as participating indirectly in a confidential corporate
tax shelter if a foreign person controlled by the first person
participates in the shelter, and a significant purpose of the shelter is
the avoidance or evasion of the first person's Federal income tax. For
purposes of this paragraph (g)(2)(v), control of a foreign corporation
or partnership will be determined under the rules of section 6038(e)(2)
and (3), except that such section shall be applied by substituting
``10'' for ``50'' each place it appears and ``at least'' for ``more
than'' each place it appears. In addition, section 6038(e)(2) shall be
applied for these purposes without regard to the constructive ownership
rules of section 318 and by treating stock as owned if it is owned
directly or indirectly. Section 6038(e)(3) shall be applied for these
purposes without regard to the last sentence of section 6038(e)(3)(B).
Any beneficiary with a 10 percent or more interest in a foreign trust or
estate shall be treated as controlling that trust or estate for purposes
of this paragraph (g)(2)(v).
(vi) Other rules. (A) For purposes of the registration requirements
under section 6111(d)(3), it is presumed that the tax shelter promoters
will receive fees in excess of $100,000 in the aggregate unless the
person responsible for registering the tax shelter can show otherwise.
(B) Any person treated as a tax shelter promoter under section
6111(d) solely by reason of being related (within the meaning of section
267 or 707) to a foreign promoter will be treated as a foreign promoter
for purposes of this paragraph (g)(2).
(h) Effective dates. This section applies to confidential corporate
tax shelters in which any interests are offered for sale after February
28, 2000. If an interest is sold after February 28, 2000, it is treated
as offered for sale after February 28, 2000, unless the sale was
pursuant to a written binding contract entered into on or before
February 28, 2000. However, paragraphs (a) through (g) of this section
apply to confidential corporate tax shelters in which any interests are
offered for sale on or after February 28, 2003, and to transactions
described in paragraph (e)(1)(ii) of this section. The rules that apply
to confidential corporate tax shelters in which any interests are
offered for sale after February 28, 2000, and before February 28, 2003,
are contained in Sec. 301.6111-2T in effect prior to February 28, 2003
(see 26 CFR part 301 revised as of April 1, 2002, 2002-28 I.R.B 91, and
2002-45 I.R.B. 823 (see Sec. 601.601(d)(2) of this chapter)).
[T.D. 9046, 68 FR 10170, Mar. 4, 2003]
Sec. 301.6112-1 Requirement to prepare, maintain, and furnish lists with respect to potentially abusive tax shelters.
(a) In general. Each organizer and seller, as described in paragraph
(c) of this section, of a transaction that is a potentially abusive tax
shelter, as described in paragraph (b) of this section, shall prepare
and maintain a list of persons in accordance with paragraph (e) of this
section and upon request shall furnish such list to the Internal Revenue
Service (IRS) in accordance with paragraph (g) of this section.
(b) Potentially abusive tax shelters. For purposes of this section,
a potentially abusive tax shelter is any transaction that is a section
6111 tax shelter, as described in paragraph (b)(1) of this section, or
that has a potential for tax avoidance or evasion, as described in
paragraph (b)(2) of this section. The term transaction includes all of
the factual elements relevant to the expected tax treatment of any
investment, entity, plan, or arrangement, and includes any series of
steps carried out as part of a plan.
(1) Transaction that is a section 6111 tax shelter. A section 6111
tax shelter is any transaction that is required to be registered with
the IRS under section 6111, regardless of whether that tax shelter is
properly registered pursuant to section 6111.
(2) Transaction that has a potential for tax avoidance or evasion--
(i) In general.
[[Page 138]]
A transaction that has a potential for tax avoidance or evasion
includes--
(A) Any listed transaction as defined in Sec. 1.6011-4(b)(2) of this
chapter that is subject to disclosure under Secs. 1.6011-4, 20.6011-4,
25.6011-4, 31.6011-4, 53.6011-4, 54.6011-4, or 56.6011-4 of this
chapter;
(B) Any transaction that a potential material advisor (at the time
the transaction is entered into or an interest is acquired) knows is or
reasonably expects will become a reportable transaction under
Sec. 1.6011-4(b)(3) through (7) of this chapter; and
(C) Any interest in a type of transaction that is transferred if the
transferor knows or reasonably expects that the transferee will sell or
transfer an interest in that type of transaction to another transferee
(subsequent participant), and the type of transaction would be a listed
transaction under Secs. 1.6011-4, 20.6011-4, 25.6011-4, 31.6011-4,
53.6011-4, 54.6011-4, or 56.6011-4 of this chapter, or a transaction
described in Sec. 1.6011-4(b)(3) through (7) of this chapter assuming
that the relevant thresholds are met.
(ii) The determination of whether a transaction has the potential
for tax avoidance or evasion does not depend upon whether the
transaction is properly disclosed pursuant to Secs. 1.6011-4, 20.6011-4,
25.6011-4, 31.6011-4, 53.6011-4, 54.6011-4, or 56.6011-4 of this
chapter.
(iii) If a transaction becomes a potentially abusive tax shelter on
or after February 28, 2003, because it is a listed transaction as
defined in Sec. 1.6011-4 of this chapter and is subject to disclosure
under Sec. 1.6011-4 of this chapter this section shall apply with
respect to any such transaction entered into or any interest acquired
therein after February 28, 2000 (including interests acquired before the
transaction becomes a listed transaction). If a transaction becomes a
listed transaction as defined in Sec. 1.6011-4 of this chapter and is
subject to disclosure under Secs. 20.6011-4, 25.6011-4, 31.6011-4,
53.6011-4, 54.6011-4, or 56.6011-4 of this chapter, this section shall
apply with respect to any such transaction entered into or any interest
acquired therein on or after January 1, 2003 (including interests
acquired before the transaction becomes a listed transaction).
(c) Organizer and seller--(1) In general. A person is an organizer
of, or a seller of an interest in, a transaction that is a potentially
abusive tax shelter if that person is a material advisor, as described
in paragraph (c)(2) of this section, with respect to that transaction.
(2) Material advisor--(i) In general. A person is a material advisor
with respect to a transaction that is a potentially abusive tax shelter
if the person is required to register the transaction under section
6111; or the person receives or expects to receive at least a minimum
fee (as defined in paragraph (c)(3) of this section) with respect to the
transaction, and the person makes a tax statement (as defined in
paragraph (c)(2)(iii) of this section) to or for the benefit of--
(A) A taxpayer who is required to disclose the transaction under
Secs. 1.6011-4, 20.6011-4, 25.6011-4, 31.6011-4, 53.6011-4, 54.6011-4,
or 56.6011-4 of this chapter because the transaction is a listed
transaction or who would have been required to disclose a listed
transaction under Secs. 1.6011-4, 20.6011-4, 25.6011-4, 31.6011-4,
53.6011-4, 54.6011-4, or 56.6011-4 of this chapter if the transaction
had become a listed transaction within the statute of limitations period
in Sec. 1.6011-4(e)(2);
(B) A taxpayer who the potential material advisor (at the time the
transaction is entered into) knows is or reasonably expects to be
required to disclose the transaction under Sec. 1.6011-4 because the
transaction is or is reasonably expected to become a transaction
described in Sec. 1.6011-4(b)(3) through (7);
(C) A person who is required to register the transaction under
section 6111;
(D) A person who purchases (or otherwise acquires) an interest in a
section 6111 tax shelter; or
(E) A transferee of an interest if the interest is described in
paragraph (b)(2)(i)(C) of this section.
(ii) Special rules. A material advisor generally does not include a
person who makes a tax statement solely in the person's capacity as an
employee, shareholder, partner or agent of another person. Any tax
statement made by that person will be attributed to that person's
employer, corporation, partnership or principal. However, a person shall
be treated as a material
[[Page 139]]
advisor if that person forms or avails of an entity with the purpose of
avoiding the rules of section 6111 or 6112 or the penalties under
section 6707 or 6708.
(iii) Tax statement--(A) In general. A tax statement means any
statement, oral or written, that relates to a tax aspect of a
transaction that causes the transaction to be a reportable transaction
as defined in Sec. 1.6011-4(b)(2) through (7) or a tax shelter as
described in section 6111.
(B) Confidential transactions. A tax statement relates to an aspect
of a transaction that causes it to be a confidential transaction if the
statement concerns a tax benefit related to the transaction and either
the taxpayer's disclosure of the tax treatment or tax structure of the
transaction is limited in the manner described in Sec. 1.6011-4(b)(3) of
this chapter by or for the benefit of the person making the statement,
or the person making the statement knows the taxpayer's disclosure of
the tax structure or tax aspects of the transaction is limited in the
manner described in Sec. 1.6011-4(b)(3) of this chapter.
(C) Transactions with contractual protection. A tax statement
relates to an aspect of a transaction that causes it to be a transaction
with contractual protection if the statement concerns a tax benefit
related to the transaction and either--
(1) The taxpayer has the right to a full or partial refund of fees
paid to the person making the statement or if these fees are contingent
in the manner described in Sec. 1.6011-4(b)(4) of this chapter; or
(2) The person making the statement knows that the taxpayer has the
right to a full or partial refund of fees (as described in Sec. 1.6011-
4(b)(4)(ii)) paid to another if all or part of the intended tax
consequences from the transaction are not sustained or that fees (as
described in Sec. 1.6011-4(b)(4)(ii)) paid by the taxpayer to another
are contingent on the taxpayer's realization of tax benefits from the
transaction in the manner described in Sec. 1.6011-4(b)(4) of this
chapter.
(D) Loss transactions. A tax statement relates to an aspect of a
transaction that causes it to be a loss transaction if the statement
concerns an item that gives rise to a loss described in Sec. 1.6011-
4(b)(5) of this chapter.
(E) Transactions with a significant book-tax difference. A tax
statement relates to an aspect of a transaction that causes it to be a
transaction with a significant book-tax difference if the statement
concerns an item that gives rise to a book-tax difference described in
Sec. 1.6011-4(b)(6) of this chapter.
(F) Transactions involving a brief asset holding period. A tax
statement relates to an aspect of a transaction involving a brief asset
holding period if the statement concerns an item that gives rise to a
tax credit described in Sec. 1.6011-4(b)(7) of this chapter.
(iv) Exceptions--(A) Post-filing advice. A person will not be
considered to be a material advisor with respect to a transaction if
that person does not make or provide a tax statement regarding the
transaction until after the first tax return reflecting tax benefit(s)
of the transaction is filed with the IRS.
(B) Publicly-filed statements. A tax statement with respect to a
transaction that includes only information about the transaction
contained in publicly-available documents filed with the Securities and
Exchange Commission no later than the close of the transaction will not
be considered a tax statement to or for the benefit of a person
described in paragraph (c)(2)(i)(A) through (E) of this section.
(3) Minimum fee--(i) In general. The minimum fee is $250,000 for a
transaction if every person to whom or for whose benefit the potential
material advisor makes or provides a tax statement with respect to the
transaction is a corporation. The minimum fee is $50,000 for a
transaction if any person to whom or for whose benefit a potential
material advisor makes or provides a tax statement with respect to the
transaction is a partnership or trust, unless all owners or
beneficiaries are corporations (looking through any partners or
beneficiaries that are themselves partnerships or trusts), in which case
the minimum fee is $250,000. For all other transactions, the minimum fee
is $50,000. For purposes of this paragraph (c)(3)(i) a corporation means
a corporation other than an S corporation.
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(ii) Listed transactions. For listed transactions described in
Secs. 1.6011-4(b)(2), 20.6011-4(a), 25.6011-4(a), 31.6011-4(a), 53.6011-
4(a), 54.6011-4(a), or 56.6011-4(a) of this chapter, the minimum fees in
paragraph (c)(3)(i) of this section are reduced from $250,000 to $25,000
and from $50,000 to $10,000.
(iii) Determination of fees. In determining whether the minimum fee
threshold is satisfied, all fees for services for advice (whether or not
tax advice) or for the implementation of a transaction that is a
potentially abusive tax shelter are taken into account. For purposes of
this section, the minimum fee threshold must be met independently for
each transaction that is a potentially abusive tax shelter and
aggregation of fees among transactions is not required. Fees for advice
or implementation include consideration in whatever form paid, whether
in cash or in kind, for services to analyze the transaction (whether or
not related to the tax consequences of the transaction), for services to
implement the transaction, for services to document the transaction, and
for services to prepare tax returns to the extent return preparation
fees are unreasonable in light of all of the facts and circumstances.
The IRS will scrutinize carefully all of the facts and circumstances in
determining whether consideration received in connection with a
transaction that is a potentially abusive tax shelter constitutes fees
for purposes of this section.
(d) Definitions. For purposes of this section, the following terms
are defined as follows:
(1) Interest. The term interest includes, but is not limited to, any
right to participate in a transaction by reason of a partnership
interest, a shareholder interest, or a beneficial interest in a trust;
any interest in property (including a leasehold interest); the entry
into a leasing arrangement or a consulting, management or other
agreement for the performance of services; or any interest in any other
investment, entity, plan, or arrangement. The term interest includes any
interest that purportedly entitles the direct or indirect holder of the
interest to any tax consequence (including, but not limited to, a
deduction, loss, or adjustment to tax basis in an asset) arising from
the transaction. An interest also includes information or services
regarding the organization or structure of the transaction if the
information or services are relevant to the potential tax consequences
of the transaction.
(2) Substantially similar. The term substantially similar includes
any transaction that is expected to obtain the same or similar types of
tax consequences and that is either factually similar or based on the
same or similar tax strategy. Receipt of an opinion regarding the tax
consequences of the transaction is not relevant to the determination of
whether the transaction is the same as or substantially similar to
another transaction. Further, the term substantially similar must be
broadly construed in favor of list maintenance.
(3) Person. The term person means any person described in section
7701(a)(1), including an affiliated group of corporations that join in
the filing of a consolidated return under section 1501.
(4) Related party. A person is a related party with respect to
another person if such person bears a relationship to such other person
described in section 267 or 707.
(5) Tax. For purposes of this section, the term tax means Federal
tax.
(6) Tax benefit. A tax benefit includes deductions, exclusions from
gross income, nonrecognition of gain, tax credits, adjustments (or the
absence of adjustments) to the basis of property, status as an entity
exempt from Federal income taxation, and any other tax consequences that
may reduce a taxpayer's Federal tax liability by affecting the amount,
timing, character, or source of any item of income, gain, expense, loss,
or credit.
(7) Tax return. For purposes of this section, the term tax return
means a Federal tax return and a Federal information return.
(8) Tax treatment. The tax treatment of a transaction is the
purported or claimed Federal tax treatment of the transaction.
(9) Tax structure. The tax structure of a transaction is any fact
that may be
[[Page 141]]
relevant to understanding the purported or claimed Federal tax treatment
of the transaction.
(e) Preparation and maintenance of lists--(1) In general. A separate
list of persons must be prepared and maintained for each transaction
that is a potentially abusive tax shelter. However, one list must be
maintained for substantially similar transactions that are potentially
abusive tax shelters. A list may be maintained on paper, card file,
magnetic media, or in any other form, provided the method of maintaining
the list enables the IRS to determine without undue delay or difficulty
the information required in paragraph (e)(3) of this section.
(2) Persons required to be included on lists--(i) In general. A
material advisor is required to list each person described in paragraphs
(c)(2)(i)(A) through (D) of this section to whom (or for whose benefit)
the material advisor makes or provides a tax statement with respect to a
transaction that is a potentially abusive tax shelter. However, a
material advisor is not required to list a person described in paragraph
(c)(2)(i)(A) of this section if that person entered into, or acquired an
interest in, a listed transaction more than 6 years before the
transaction was listed.
(ii) Subsequent participant. A material advisor must list any
subsequent participant if the material advisor knows the identity of
that subsequent participant, and the material advisor knows that the
subsequent participant either entered into a transaction that must be
disclosed under Sec. 1.6011-4(b) of this chapter or sold or transferred
to another subsequent participant an interest in that type of
transaction.
(iii) Section 6111 registrant. A material advisor required to
register a transaction under section 6111 also must list each person who
purchases (or otherwise acquires) an interest in the transaction.
(iv) Examples. The following examples illustrate the provisions of
this section:
Example 1. An investment firm provides a tax statement as to a type
of transaction to three taxpayers: Corporation X, Corporation Y, and
Corporation Z (all of which are C corporations). Each taxpayer agrees to
pay the investment firm $300,000 in connection with the transaction, and
each taxpayer engages in a separate transaction (transaction X,
transaction Y, and transaction Z, respectively). At the time the
transactions are entered into, the investment firm knows or reasonably
expects that the transactions will result in a single taxable year loss
of $9 million for Corporation X, $15 million for Corporation Y, and $12
million for Corporation Z. The transactions do not satisfy the
definitions of a reportable transaction under Sec. 1.6011-4(b)(2), (3),
(4), (6) or (7) of this chapter.
(i) Transaction X. At the time transaction X is entered into, the
investment firm does not know or reasonably expect that the transaction
is a reportable transaction, because the $9 million loss associated
solely with transaction X does not satisfy the $10 million threshold
under Sec. 1.6011-4(b)(5) of this chapter (relating to loss
transactions). Accordingly, transaction X is not a potentially abusive
tax shelter. The investment firm is not required to maintain a list with
respect to transaction X.
(ii) Transactions Y and Z. The investment firm satisfies the
requirements for being a material advisor with respect to transaction Y
and transaction Z. First, both of the transactions are potentially
abusive tax shelters with respect to the investment firm because the
investment firm knows, or reasonably expects, at the time the
transactions are entered into, that the losses for each of Corporation Y
and Z will exceed the $10 million threshold and, thus, the investment
firm knows or reasonably expects that the transactions are or will
become reportable transactions under Sec. 1.6011-4(b)(5) of this chapter
(relating to loss transactions). Second, the investment firm provides a
tax statement to Corporation Y and Corporation Z as to the transactions.
Third, the investment firm receives $300,000 in connection with each
transaction (viewed independently of each other and without regard to
any other transaction), which exceeds the minimum fee with respect to
each transaction ($250,000). Accordingly, the investment firm must
maintain a list with respect to transactions Y and Z. Because
transactions Y and Z are based on the same or similar tax strategy,
transactions Y and Z are substantially similar transactions, and the
investment firm must keep one list with respect to both transactions.
The list must contain information about Corporation Y and Corporation Z
(see paragraph (e)(2)(i) of this section).
Example 2. (i) Corporation M provides a tax statement to Corporation
N (a C corporation) describing the potential loss from a type of
transaction. Corporation N pays Corporation M $300,000 for the
information about that type of transaction. Corporation M knows that
Corporation N will sell the information to Taxpayer O (a C corporation)
and
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Taxpayer P (an individual), and that Taxpayer O and Taxpayer P will
participate in transactions of the type that Corporation M described to
Corporation N. Corporation N, in turn, provides a tax statement as to
that type of transaction to Taxpayer O and Taxpayer P. Each taxpayer
agrees to pay Corporation N $250,000 in connection with its transaction,
and each taxpayer engages in a separate transaction (transaction O and
transaction P, respectively). At the time the transactions are entered
into, both Corporation M and Corporation N know that the transactions
are or will become reportable transactions under Sec. 1.6011-4(b)(5) of
this chapter.
(ii) Corporation N is a material advisor with respect to transaction
O and transaction P. First, at the time the transactions are entered
into, Corporation N knows that the transactions are reportable
transactions. Thus, the transactions are potentially abusive tax
shelters. Second, Corporation N provides a tax statement to Taxpayer O
and Taxpayer P as to the transactions. Third, Corporation N receives
$250,000 in connection with transaction O and transaction P (each viewed
independently of any other transaction), which equals or exceeds the
minimum fee for those transactions ($50,000 and $250,000, respectively).
Accordingly, Corporation N must keep a list with respect to transaction
O and transaction P. The list must contain information about Taxpayer P
(see paragraph (e)(2)(i) of this section). Because transactions O and P
are based on the same or similar tax strategy, transactions O and P are
substantially similar transactions, and Corporation N must keep one list
with respect to both transactions. The list must contain information
about Taxpayer O and Taxpayer P (see (e)(2)(i) of this section).
(iii) Corporation M's tax statement to Corporation N constitutes a
potentially abusive tax shelter under paragraph (b)(2)(C) of this
section. Corporation M transferred information to Corporation N
regarding the potential tax consequences of a type of transaction that,
if entered into and if the relevant thresholds are met, would be a
reportable transaction described in Sec. 1.6011-4(b)(5). In addition,
Corporation M knew that Corporation N would transfer that information to
another person. Corporation M is a material advisor with respect to that
potentially abusive tax shelter. Corporation M made a tax statement to
Corporation N and Corporation M received $300,000 in connection with the
potentially abusive tax shelter, which exceeds the minimum fee for that
transaction ($250,000). Accordingly, Corporation M must keep a list with
respect to that potentially abusive tax shelter. The list must contain
information with respect to Corporation N (see paragraph (e)(2)(i) of
this section). The list must also contain information about Taxpayer O
and Taxpayer P because Corporation M knows the identity of Taxpayer O
and Taxpayer P, and Corporation M knows that Taxpayer O and Taxpayer P
entered into transaction O and transaction P, respectively (see
paragraph (e)(2)(ii) of this section).
(3) Contents--(i) In general. Each list must contain the following
information--
(A) The name of each transaction that is a potentially abusive tax
shelter and the registration number, if any, obtained under section
6111;
(B) The TIN (as defined in section 7701(a)(41)), if any, of each
transaction;
(C) The name, address, and TIN of each person required to be on the
list;
(D) If applicable, the number of units (i.e., percentage of profits,
number of shares, etc.) acquired by each person required to be included
on the list, if known by the material advisor;
(E) The date on which each person required to be included on the
list entered into each transaction, if known by the material advisor;
(F) The amount invested in each transaction by each person required
to be included on the list, if known by the material advisor;
(G) A detailed description of each transaction that describes both
the tax structure and its expected tax treatment;
(H) A summary or schedule of the tax treatment that each person is
intended or expected to derive from participation in each transaction,
if known by the material advisor;
(I) Copies of any additional written materials, including tax
analyses or opinions, relating to each transaction that are material to
an understanding of the purported tax treatment or tax structure of the
transaction that have been shown or provided to any person who acquired
or may acquire an interest in the transactions, or to their
representatives, tax advisors, or agents, by the material advisor or any
related party or agent of the material advisor. However, a material
advisor is not required to retain earlier drafts of a document provided
the material advisor retains a copy of the final document (or, if there
is no final document, the most recent draft of the document) and the
final document (or most recent draft) contains all the information in
[[Page 143]]
the earlier drafts of such document that is material to an understanding
of the purported tax treatment or the tax structure of the transaction;
and
(J) For each person required to be on the list, if the interest in
the transaction was not acquired from the material advisor maintaining
the list, the name of the person from whom the interest was acquired.
(ii) [Reserved]
(f) Retention of lists. Each material advisor must maintain the list
described in paragraph (e) of this section for seven years following the
earlier of the date on which the material advisor last made a tax
statement relating to the transaction, or the date the transaction was
entered into, if known. If the material advisor required to prepare,
maintain, and furnish the list is a corporation, partnership, or other
entity (entity) that has dissolved or liquidated before completion of
the seven-year period, the person responsible under state law for
winding up the affairs of the entity must prepare, maintain and furnish
the list on behalf of the entity, unless the entity submits the list to
the Office of Tax Shelter Analysis (OTSA) within 60 days after the
dissolution or liquidation. If state law does not specify any person as
responsible for winding up the affairs, then each of the directors of
the corporation, the general partners of the partnership, or the
trustees, owners, or members of the entity are responsible for
preparing, maintaining and furnishing the list on behalf of the entity,
unless the entity submits the list to the Office of Tax Shelter Analysis
(OTSA) within 60 days after the dissolution or liquidation. The
responsible person must also provide notice to OTSA of such dissolution
or liquidation within 60 days after the dissolution or liquidation. The
list and the notice provided to OTSA may be sent to: IRS LM:PFTG:OTSA,
Large & Mid-Size Business Division, 1111 Constitution Ave., NW.,
Washington, DC 20224, or to such other address as provided by the
Commissioner.
(g) Furnishing of lists--(1) In general. Each material advisor and
person responsible for maintaining a list of persons must, upon written
request by the IRS, furnish the list to the IRS within 20 days from the
day on which the request is provided. The request is not required to be
in the form of an administrative summons. The list may be furnished to
the IRS on paper, card file, magnetic media, or in any other form,
provided the method of furnishing the list enables the IRS to determine
without undue delay or difficulty the information required in paragraph
(e)(3) of this section.
(2) Claims of privilege--(i) In any case in which an attorney or
federally authorized tax practitioner within the meaning of section 7525
is required to maintain a list with respect to a transaction that is a
potentially abusive tax shelter, and that person has a reasonable belief
that information specified in paragraph (e)(3)(i)(I) required to be
furnished under this paragraph (g) is protected by the attorney-client
privilege or by the confidentiality privilege of section 7525(a), the
attorney or federally authorized tax practitioner must still maintain
the list of persons pursuant to the requirements of this section. When
the list is requested by the IRS, as provided in paragraph (g)(1) of
this section, the material advisor may assert a privilege claim as to
the information specified in paragraph (e)(3)(i)(I) subject to the
requirements of this paragraph (g)(2).
(ii) The claimed privilege must be supported by a statement that is
signed by the attorney or federally authorized tax practitioner under
penalties of perjury, must identify and describe (as set forth in this
paragraph (g)(2)) the nature of each document that is not produced which
will allow the IRS to determine the applicability of the privilege or
protection claimed, without revealing the privileged information itself,
and must include the following representations with respect to each
document for which the privilege is claimed--
(A) Specifically represent that the information was a confidential
practitioner-client communication and, in the case of information which
a federally authorized tax practitioner claims is privileged under
section 7525, that the omitted information was not part
[[Page 144]]
of tax advice that constituted the promotion of the direct or indirect
participation of a corporation in any tax shelter (as defined in section
6662(d)(2)(C)(iii)); and
(B) Specifically represent that to the best of such person's
knowledge and belief, that the person and all others in possession of
the omitted information did not disclose the omitted information to any
person whose receipt of such information would result in a waiver of the
privilege.
(iii) Identification and description of a document includes, but is
not limited to--
(A) The date appearing on such document or, if it has no date, the
date or approximate date that such document was created;
(B) The general nature, description and purpose of such document and
the identity of the person who signed such document, and, if it was not
signed, the identity of each person who prepared it; and
(C) The identity of each person to whom such document was addressed
and the identity of each person, other than such addressee, to whom such
document, or a copy thereof, was given or sent.
(h) Designation agreements. If more than one material advisor is
required to maintain a list of persons, in accordance with paragraph (e)
of this section, for a potentially abusive tax shelter, the material
advisors may designate by written agreement a single material advisor to
maintain the list or a portion of the list. The designation of one
material advisor to maintain the list does not relieve the other
material advisors from their obligation to furnish the list to the IRS
in accordance with paragraph (g)(1) of this section, if the designated
material advisor fails to furnish the list to the IRS in a timely
manner. A material advisor is not relieved from the requirement of this
section because a material advisor is unable to obtain the list from any
designated material advisor, any designated material advisor did not
maintain a list, or the list maintained by any designated material
advisor is not complete.
(i) Procedure for obtaining rulings. A person may submit a request
to the IRS for a ruling as to whether a specific transaction will be
considered a potentially abusive tax shelter for purposes of this
section and whether that person is a material advisor with respect to
that transaction. If the request fully discloses all relevant facts
relating to the transaction (including all facts relevant to the
person's relationship to such transaction), then the requirement to
maintain a list shall be suspended for that person during the period
that the ruling request is pending and for 60 days thereafter; however,
if it is ultimately determined that the transaction is a potentially
abusive tax shelter and that the person is a material advisor with
respect to that transaction, the pendency of such a ruling request shall
not affect the requirement to maintain the list, nor shall it affect the
persons required to be included on the list (including persons who
acquired interests in the potentially abusive tax shelter prior to and
during the pendency of the ruling request), or the other information
required to be included as part of the list.
(j) Effective date. This section applies to any transaction that is
a potentially abusive tax shelter entered into, or any interest acquired
therein, on or after February 28, 2003. However, this section shall
apply to any transaction that was entered into, or in which an interest
was acquired, after February 28, 2000, if the transaction becomes a
potentially abusive tax shelter on or after February 28, 2003 because it
is a listed transaction as defined in Sec. 1.6011-4 of this chapter, and
is subject to disclosure under Sec. 1.6011-4 of this chapter. This
section also shall apply to any transaction that was entered into, or in
which an interest was acquired, after January 1, 2003, if the
transaction becomes a listed transaction as defined in Sec. 1.6011-4 of
this chapter and is subject to disclosure under Secs. 20.6011-4,
25.6011-4, 31.6011-4, 53.6011-4, 54.6011-4 or 56.6011-4 of this chapter.
The rules in Sec. 301.6112-1T as contained in 2002-45 I.R.B. 826 (see
Sec. 601.601(d)(2) of this chapter) apply only to a transaction entered
into, or an interest acquired therein, on or after January 1, 2003, and
before February 28, 2003, if the transaction is a listed transaction as
defined in Sec. 1.6011-4 of this chapter or a section
[[Page 145]]
6111 tax shelter. Otherwise, the rules that apply with respect to any
transaction that is a potentially abusive tax shelter entered into, or
any interest acquired therein, before January 1, 2003, are contained in
Sec. 301.6112-1T in effect prior to January 1, 2003 (see 26 CFR part 301
revised as of April 1, 2002). Additionally, the IRS will not ask to
inspect any list for a potentially abusive tax shelter that is entered
into, or any interest acquired therein, on or after January 1, 2003,
until June 1, 2003, unless the potentially abusive tax shelter is a
listed transaction as defined in Sec. 1.6011-4 of this chapter or a
transaction that is a section 6111 tax shelter.
[T.D. 9046, 68 FR 10173, Mar. 4, 2003]
Sec. 301.6114-1 Treaty-based return positions.
(a) Reporting requirement--(1) General rule. (i) Except as provided
in paragraph (c) of this section, if a taxpayer takes a return position
that any treaty of the United States (including, but not limited to, an
income tax treaty, estate and gift tax treaty, or friendship, commerce
and navigation treaty) overrules or modifies any provision of the
Internal Revenue Code and thereby effects (or potentially effects) a
reduction of any tax incurred as any time, the taxpayer shall disclose
such return position on a statement (in the form required in paragraph
(d) of this section) attached to such return.
(ii) If a return of tax would not otherwise be required to be filed,
a return must nevertheless be filed for purposes of making the
disclosure required by this section. For this purpose, such return need
include only the taxpayer's name, address, taxpayer identifying number,
and be signed under penalties of perjury (as well as the subject
disclosure). Also, the taxpayer's taxable year shall be deemed to be the
calendar year (unless the taxpayer has previously established, or timely
chooses for this purpose to establish, a different taxable year). In the
case of a disclosable return position relating solely to income subject
to withholding (as defined in Sec. 1.1441-2(a) of this chapter),
however, the statement required to be filed in paragraph (d) of this
section must instead be filed at times and in accordance with procedures
published by the Internal Revenue Service.
(2) Application. (i) A taxpayer is considered to adopt a ``return
position'' when the taxpayer determines its tax liability with respect
to a particular item of income, deduction or credit. A taxpayer may be
considered to adopt a return position whether or not a return is
actually filed. To determine whether a return position is a ``treaty-
based return position'' so that reporting is required under this
paragraph (a), the taxpayer must compare:
(A) The tax liability (including credits, carrybacks, carryovers,
and other tax consequences or attributes for the current year as well as
for any other affected tax years) to be reported on a return of the
taxpayer, and
(B) The tax liability (including such credits, carrybacks,
carryovers, and other tax consequences or attributes) that would be
reported if the relevant treaty provision did not exist.
If there is a difference (or potential difference) in these two amounts,
the position taken on a return is a treaty-based return position that
must be reported.
(ii) In the event a taxpayer's return position is based on a
conclusion that a treaty provision is consistent with a Code provision,
but the effect of the treaty provision is to alter the scope of the Code
provision from the scope that it would have in the absence of the
treaty, then the return position is a treaty-based return position that
must be reported.
(iii) A return position is a treaty-based return position unless the
taxpayer's conclusion that no reporting is required under paragraphs
(a)(2) (i) and (ii) of this section has a substantial probability of
successful defense if challenged.
(3) Examples. The application of section 6114 and paragraph (a)(2)
of this section may be illustrated by the following examples:
Example 1: X, a Country A corporation, claims the benefit of a
provision of the income tax treaty between the United States and Country
A that modifies a provision of the Code. This position does not result
in a change of X's U.S. tax liability for the current tax year but does
give rise to, or increases, a net operating loss which may be
[[Page 146]]
carried back (or forward) such that X's tax liability in the carryback
(or forward) year may be affected by the position taken by X in the
current year. X must disclose this treaty-based return position with its
tax return for the current tax year.
Example 2: Z, a domestic corporation, is engaged in a trade or
business in Country B. Country B imposes a tax on the income from
certain of Z's petroleum activities at a rate significantly greater than
the rate applicable to income from other activities. Z claims a foreign
tax credit for this tax on its tax return. The tax imposed on Z is
specifically listed as a creditable tax in the income tax treaty between
the United States and Country B; however, there is no specific authority
that such tax would otherwise be a creditable tax for U.S. purposes
under sections 901 or 903 of the Code. Therefore, in the absence of the
treaty, the creditability of this petroleum tax would lack a substantial
probability of successful defense if challenged, and Z must disclose
this treaty-based return position (see also paragraph (b)(7) of this
section).
(b) Reporting specifically required. Reporting is required under
this section except as expressly waived under paragraph (c) of this
section. The following list is not a list of all positions for which
reporting is required under this section but is a list of particular
positions for which reporting is specifically required. These positions
are as follows:
(1) That a nondiscrimination provision of a treaty precludes the
application of any otherwise applicable Code provision, other than with
respect to the making of or the effect of an election under section
897(i);
(2) That a treaty reduces or modifies the taxation of gain or loss
from the disposition of a United States real property interest;
(3) That a treaty exempts a foreign corporation from (or reduces the
amount of tax with respect to) the branch profits tax (section 884(a))
or the tax on excess interest (section 884(f)(1)(B));
(4) That, notwithstanding paragraph (c)(1)(i) of this section,
(i) A treaty exempts from tax, or reduces the rate of tax on,
interest or dividends paid by a foreign corporation that are from
sources within the United States by reason of section 861(a)(2)(B) or
section 884(f)(1)(A); or
(ii) A treaty exempts from tax, or reduces the rate of tax on, fixed
or determinable annual or periodical income subject to withholding under
section 1441 or 1442 that a foreign person receives from a U.S. person,
but only if described in paragraphs (b)(4)(ii)(A) and (B) of this
section, or in paragraph (b)(4)(ii)(C) or (D) of this section as
follows--
(A) the payment is not properly reported to the Service on a Form
1042S; and
(B) The foreign person is any of the following:
(1) A controlled foreign corporation (as defined in section 957) in
which the U.S. person is a U.S. shareholder within the meaning of
section 951(b);
(2) A foreign corporation that is controlled within the meaning of
section 6038 by the U.S. person;
(3) A foreign shareholder of the U.S. person that, in the case of
tax years beginning on or before July 10, 1989, is controlled within the
meaning of section 6038A by the foreign shareholder, or, in the case of
tax years beginning after July 10, 1989, is 25-percent owned within the
meaning of section 6038A by the foreign shareholder; or
(4) With respect to payments made after October 10, 1990, a foreign
related party, as defined in section 6038A (c)(2)(B), the the U.S.
person; or
(C) For payments made after December 31, 2000, with respect to a
treaty that contains a limitation on benefits article, that--
(1) The treaty exempts from tax, or reduces the rate of tax on
income subject to withholding (as defined in Sec. 1.1441-2(a) of this
chapter) that is received by a foreign person (other than a State,
including a political subdivision or local authority) that is the
beneficial owner of the income and the beneficial owner is related to
the person obligated to pay the income within the meaning of sections
267(b) and 707(b), and the income exceeds $500,000; and
(2) A foreign person (other than an individual or a State, including
a political subdivision or local authority) meets the requirements of
the limitation on benefits article of the treaty; or
(D) For payments made after December 31, 2000, with respect to a
treaty that imposes any other conditions for
[[Page 147]]
the entitlement of treaty benefits, for example as a part of the
interest, dividends, or royalty article, that such conditions are met;
(5) That, notwithstanding paragraph (c)(1)(i) of this section, under
a treaty--
(i) Income that is effectively connected with a U.S. trade or
business of a foreign corporation or a nonresident alien is not
attributable to a permanent establishment or a fixed base of operations
in the United States and, thus, is not subject to taxation on a net
basis, or that
(ii) Expenses are allowable in determining net business income so
attributable, notwithstanding an inconsistent provision of the Code;
(6) Except as provided in paragraph (c)(1)(iv) of this section, that
a treaty alters the source of any item of income or deduction;
(7) That a treaty grants a credit for a specific foreign tax for
which a foreign tax credit would not be allowed by the Code; or
(8) For returns relating to taxable years for which the due date for
filing returns (without extensions) is after December 15, 1997, that
residency of an individual is determined under a treaty and apart from
the Internal Revenue Code.
(c) Reporting requirement waived. (1) Pursuant to the authority
contained in section 6114 (b), reporting is waived under this section
with respect to any of the following return positions taken by the
taxpayer:
(i) Notwithstanding paragraph (b)(4) or (5) of this section, that a
treaty has reduced the rate of withholding tax otherwise applicable to a
particular type of fixed or determinable annual or periodical income
subject to withholding under section 1441 or 1442, such as dividends,
interest, rents, or royalties to the extent such income is beneficially
owned by an individual or a State (including a political subdivision or
local authority);
(ii) For returns relating to taxable years for which the due date
for filing returns (without extensions) is on or before December 15,
1997, that residency of an individual is determined under a treaty and
apart from the Internal Revenue Code.
(iii) That a treaty reduces or modifies the taxation of income
derived from dependent personal services, pensions, annuities, social
security and other public pensions, or income derived by artistes,
athletes, students, trainees or teachers;
(iv) That income of an individual is resourced (for purposes of
applying the foreign tax credit limitation) under a treaty provision
relating to elimination of double taxation;
(v) That a nondiscrimination provision of a treaty allows the making
of an election under section 897(i);
(vi) That a Social Security Totalization Agreement or a Diplomatic
or Consular Agreement reduces or modifies the taxation of income derived
by the taxpayer; or
(vii) That a treaty exempts the taxpayer from the excise tax imposed
by section 4371, but only if:
(A) The person claiming such treaty-based return position is an
insured, as defined in section 4372(d) (without the limitation therein
referring to section 4371(1)), or a U.S. or foreign broker of insurance
risks,
(B) Reporting under this section that would otherwise be required to
be made by foreign insurers or reinsurers on a Form 720 on a quarterly
basis is made on an annual basis on a Form 720 by a date no later than
the date on which the return is due for the first quarter after the end
of the calendar year, or
(C) A closing agreement relating to entitlement to the exemption
from the excise tax has been entered into with the Service by the
foreign insurance company that is the beneficial recipient of the
premium that is subject to the excise tax.
(2) Reporting is waived for an individual if payments or income
items otherwise reportable under this section (other than by reason of
paragraph (b)(8) of this section), received by the individual during the
course of the taxable year do not exceed $10,000 in the aggregate or, in
the case of payments or income items reportable only by reason of
paragraph (b)(8) of this section, do not exceed $100,000 in the
aggregate.
(3) Reporting with respect to payments or income items the treatment
of which is mandated by the terms of a
[[Page 148]]
closing agreement with the Internal Revenue Service, and that would
otherwise be subject to the reporting requirements of this section, is
also waived.
(4) If a partnership, trust, or estate that has the taxpayer as a
partner or beneficiary discloses on its information return a position
for which reporting is otherwise required by the taxpayer, the taxpayer
(partner or beneficiary) is then excused from disclosing that position
on a return.
(5) This section does not apply to a withholding agent with respect
to the performance of its withholding functions.
(6) This section does not apply to amounts required to be reported
under section 6038A on a Form 5472 (or successor form) to the extent
permitted under the form or accompanying instructions.
(d) Information to be reported--(1) Returns due after December 15,
1997. When reporting is required under this section for a return
relating to a taxable year for which the due date (without extensions)
is after December 15, 1997, the taxpayer must furnish, in accordance
with paragraph (a) of this section, as an attachment to the return, a
fully completed Form 8833 (Treaty-Based Return Position Disclosure Under
Section 6114 or 7701(b)) or appropriate successor form.
(2) Earlier returns. For returns relating to taxable years for which
the due date for filing returns (without extensions) is on or before
December 15, 1997, the taxpayer must furnish information in accordance
with paragraph (d) of this section in effect prior to December 15, 1997
(see Sec. 301.6114-1(d) as contained in 26 CFR part 301, revised April
1, 1997).
(3) In general--(i) Permanent establishment. For purposes of
determining the nature and amount (or reasonable estimate thereof) of
gross receipts, if a taxpayer takes a position that it does not have a
permanent establishment or a fixed base in the United States and
properly discloses that position, it need not separately report its
payment of actual or deemed dividends or interest exempt from tax by
reason of a treaty (or any liability for tax imposed by reason of
section 884).
(ii) Single income item. For purposes of the statement of facts
relied upon to support each separate Treaty-Based Return Position taken,
a taxpayer may treat payments or income items of the same type (e.g.,
interest items) received from the same ultimate payor (e.g., the obligor
on a note) as a single separate payment or income item.
(iii) Foreign source effectively connected income. If a taxpayer
takes the return position that, under the treaty, income that would be
income effectively connected with a U.S. trade or business is not
subject to U.S. taxation because it is income treated as derived from
sources outside the United States, the taxpayer may treat payments or
income items of the same type (e.g., interest items) as a single
separate payment or income item.
(iv) Sales or services income. Income from separate sales or
services, whether or not made or performed by an agent (independent or
dependent), to different U.S. customers on behalf of a foreign
corporation not having a permanent establishment in the United States
may be treated as a single payment or income item.
(v) Foreign insurers or reinsurers. For purposes of reporting by
foreign insurers or reinsurers, as described in paragraph (c)(1)(vii)(B)
of this section, such reporting must separately set forth premiums paid
with respect to casualty insurance and indemnity bonds (subject to
section 4371(1)); life insurance, sickness and accident policies, and
annuity contracts (subject to section 4371(2)); and reinsurance (subject
to section 4371(3)). All premiums paid with respect to each of these
three categories may be treated as a single payment or income item
within that category. For reports first due before May 1, 1991, the
report may disclose, for each of the three categories, the total amount
of premiums derived by the foreign insurer or reinsurer in U.S. dollars
(even if a portion of these premiums relate to risks that are not U.S.
situs). Reasonable estimates of the amounts required to be disclosed
will satisfy these reporting requirements.
(e) Effective date. This section is effective for taxable years of
the taxpayer for which the due date for filing
[[Page 149]]
returns (without extensions) occurs after December 31, 1988. However,
if--
(1) A taxpayer has filed a return for such a taxable year, without
complying with the reporting requirement of this section, before
November 13, 1989, or
(2) A taxpayer is not otherwise than by paragraph (a) of this
section required to file a return for a taxable year before November 13,
1989,
Such taxpayer must file (apart from any earlier filed return) the
statement required by paragraph (d) of this section before June 12,
1990, by mailing the required statement to the Internal Revenue Service,
P.O. Box 21086, Philadelphia, PA 19114. Any such statement filed apart
from a return must be dated, signed and sworn to by the taxpayer under
the penalties of perjury. In addition, with respect to any return due
(without extensions) on or before March 10, 1990, the reporting required
by paragraph (a) of this section must be made no later than June 12,
1990. If a taxpayer files or has filed a return on or before November
13, 1989, that provides substantially the same information required by
paragraph (d) of this section, no additional submission will be
required. Foreign insurers and reinsurers subject to reporting described
in paragraph (c)(7)(ii) of this section must so report for calendar
years 1988 and 1989 no later than August 15, 1990.
(f) Cross reference. For the provisions concerning penalties for
failure to disclose a treaty-based return position, see section 6712 and
Sec. 301.6712-1.
[T.D. 8292, 55 FR 9440, Mar. 14, 1990; 55 FR 10237, Mar. 20, 1990, as
amended by T.D. 8305, 55 FR 28609, July 12, 1990; T.D. 8733, 62 FR
53385, Oct. 14, 1997; T.D. 8734, 62 FR 53495, Oct. 14, 1997; T.D. 8804,
63 FR 72189, Dec. 31, 1998; T.D. 8856, 64 FR 73413, Dec. 30, 1999]
Time and Place for Paying Tax
Place and Due Date for Payment of Tax--Table of Contents
Sec. 301.6151-1 Time and place for paying tax shown on returns.
For provisions concerning the time and place for paying tax shown on
returns with respect to a particular tax, see the regulations relating
to such tax.
Sec. 301.6152-1 Installment payments.
For provisions relating to the installment payments of income taxes,
see Sec. 1.6152-1 of this chapter (Income Tax Regulations).
Sec. 301.6153-1 Installment payments of estimated income tax by individuals.
For provisions relating to installment payments of estimated income
tax by individuals, see Secs. 1.6153-1 to 1.6153-4, inclusive, of this
chapter (Income Tax Regulations).
Sec. 301.6154-1 Installment payments of estimated income tax by corporations.
For provisions relating to installment payments of estimated income
tax by corporations, see Secs. 1.6154-1 to 1.6154-3, inclusive, of this
chapter (Income Tax Regulations).
Sec. 301.6155-1 Payment on notice and demand.
Upon receipt of notice and demand from the district director
(including the Director of International Operations) or the director of
the regional service center, there shall be paid at the place and time
stated in such notice the amount of any tax (including any interest,
additional amounts, additions to the tax, and assessable penalties)
stated in such notice and demand.
Sec. 301.6159-1 Agreements for payment of tax liability in installments.
(a) Authority and definition. A district director, a director of a
service center, or a director of a compliance center (the director) is
authorized to enter into a written agreement with a taxpayer that allows
the taxpayer to satisfy a tax liability by making scheduled periodic
payments until the liability is fully paid if the director determines
that such an installment agreement will facilitate the collection of the
tax liability.
(b) Acceptance, form, and term of installment agreement--(1)(i)
Acceptance or rejection of installment agreement. The director has the
discretion to accept or reject any proposed installment agreement. As a
condition to entering into
[[Page 150]]
an installment agreement with a taxpayer, the director may require that-
-
(A) The taxpayer agree to a reasonable extension of the period of
limitations on collection; and
(B) The agreement contain terms and conditions that protect the
interests of the government.
(ii) Example. The director may require that a taxpayer authorize
direct debit bank transfers as the method of making installment payments
under the agreement.
(2) Form of installment agreement. A written installment agreement
may take the form of a document signed by the taxpayer and the director
or a written confirmation of an agreement entered into by the taxpayer
and the director that is mailed or personally delivered to the taxpayer.
(3) Term of accepted installment agreement. Except as otherwise
provided in this section, an installment agreement is effective from the
day the director signs the agreement to the day the agreement ends by
its terms.
(c) Alteration, modification, or termination of installment
agreements by the Internal Revenue Service--(1) Inadequate information
or jeopardy. The director may terminate an installment agreement if--
(i) The director determines that the taxpayer or the taxpayer's
representative has provided to the Internal Revenue Service information
that is inaccurate or incomplete in any material respect in connection
with the granting of the installment agreement; or
(ii) The director determines that collection of any tax liability to
which the installment agreement applies is in jeopardy.
(2) Subsequent change in financial condition, failure to timely pay
an installment or another Federal tax liability, or failure to provide
requested financial information. The director may alter, modify, or
terminate the terms of an installment agreement if--
(i) The director determines that the financial condition of a
taxpayer that is a party to the installment agreement has significantly
improved; or
(ii) The taxpayer that is a party to the installment agreement
fails--
(A) To timely pay any installment in accordance with the terms of
the installment agreement;
(B) To pay any other Federal tax liability when the liability
becomes due; or
(C) To provide updated financial information requested by the
director.
(3) Request by taxpayer. Upon request by a taxpayer that is a party
to the installment agreement, the director may alter, modify, or
terminate the terms of an installment agreement if the director
determines that the financial condition of the taxpayer has
significantly changed.
(4) Notice. Unless the director determines that collection of the
tax is in jeopardy, the director will notify the taxpayer in writing at
least 30 days before altering, modifying, or terminating an installment
agreement pursuant to paragraph (c)(1) or (2) of this section. A notice
provided pursuant to this paragraph must briefly describe the reason for
the intended alteration, modification, or termination. Upon receiving
notice, the taxpayer may provide information showing that the reason for
the intended alteration, modification, or termination is incorrect.
(d) Actions by the Internal Revenue Service during the term of the
installment agreement. Except as otherwise provided by the installment
agreement, during the term of the agreement the director may take
actions to protect the interests of the government with regard to the
unpaid balance of the tax liability to which the installment agreement
applies (other than actions pursuant to subchapter D of chapter 64 of
subtitle F of the Internal Revenue Code against a person that is a party
to the agreement), including any actions enumerated in the agreement.
The actions include, for example--
(1) Requesting updated financial information from any party to the
agreement;
(2) Conducting further investigations (including the issuance and
enforcement of summonses) in connection with the tax liability to which
the installment agreement applies;
(3) Filing or refiling notices of federal tax lien; and
(4) Taking collection action against any person who is not a party
to the
[[Page 151]]
agreement but who is liable for the tax to which the agreement applies.
(e) Termination. If an installment agreement is terminated by the
director, the director may pursue collection of the unpaid balance of
the tax liability.
(f) Cross-reference. Pursuant to section 6601(b)(1), the last day
prescribed for payment is determined without regard to any installment
agreement, including for purposes of computing penalties and interest
provided by the Internal Revenue Code.
(g) Effective date. This section is effective December 23, 1994.
[T.D. 8583, 59 FR 66193, Dec. 23, 1994]
Extension of Time for Payment
Sec. 301.6161-1 Extension of time for paying tax.
For provisions concerning the extension of time for paying a
particular tax or for paying an amount determined as a deficiency, see
the regulations relating to such tax.
Sec. 301.6162-1 Extension of time for payment of tax on gain attributable to liquidation of personal holding companies.
For provisions relating to the extension of time for payment of tax
on gain attributable to liquidation of personal holding companies, see
Sec. 1.6162-1 of this chapter (Income Tax Regulations).
Sec. 301.6163-1 Extension of time for payment of estate tax on value of reversionary or remainder interest in property.
For provisions relating to the extension of time for payment of
estate tax on value of reversionary or remainder interest in property,
see Sec. 20.6163-1 of this chapter (Estate Tax Regulations).
Sec. 301.6164-1 Extension of time for payment of taxes by corporations expecting carrybacks.
For provisions relating to the extension of time for payment of
taxes by corporations expecting carrybacks, see Secs. 1.6164-1 to
1.6164-9, inclusive, of this chapter (Income Tax Regulations).
Sec. 301.6165-1 Bonds where time to pay the tax or deficiency has been extended.
For provisions concerning bonds where time to pay a tax or
deficiency has been extended, see the regulations relating to the
particular tax.
Sec. 301.6166-1 Extension of time for payment of estate tax where estate consists largely of interest in closely held business.
For provisions relating to the extension of time for payment of
estate tax where estate consists largely of interest in closely held
business, see Secs. 20.6166-1 to 20.6166-4, inclusive, of this chapter
(Estate Tax Regulations).
Assessment
In General--Table of Contents
Sec. 301.6201-1 Assessment authority.
(a) In general. The district director is authorized and required to
make all inquiries necessary to the determination and assessment of all
taxes imposed by the Internal Revenue Code of 1954 or any prior internal
revenue law. The district director is further authorized and required,
and the director of the regional service center is authorized, to make
the determinations and the assessments of such taxes. However, certain
inquiries and determinations are, by direction of the Commissioner, made
by other officials, such as assistant regional commissioners. The term
``taxes'' includes interest, additional amounts, additions to the taxes,
and assessable penalties. The authority of the district director and the
director of the regional service center to make assessments includes the
following:
(1) Taxes shown on return. The district director or the director of
the regional service center shall assess all taxes determined by the
taxpayer or by the district director or the director of the regional
service center and disclosed on a return or list.
(2) Unpaid taxes payable by stamp. (i) If without the use of the
proper stamp:
(a) Any article upon which a tax is required to be paid by means of
a stamp is sold or removed for sale or use by the manufacturer thereof,
or
[[Page 152]]
(b) Any transaction or act upon which a tax is required to be paid
by means of a stamp occurs;
The district director, upon such information as he can obtain, must
estimate the amount of the tax which has not been paid and the district
director or the director of the regional service center must make
assessment therefor upon the person the district director determines to
be liable for the tax. However, the district director or the director of
the regional service center may not assess any tax which is payable by
stamp unless the taxpayer fails to pay such tax at the time and in the
manner provided by law or regulations.
(ii) If a taxpayer gives a check or money order as a payment for
stamps but the check or money order is not paid upon presentment, then
the district director or the director of the regional service center
shall assess the amount of the check or money order against the taxpayer
as if it were a tax due at the time the check or money order was
received by the district director.
(3) Erroneous income tax prepayment credits. If the amount of income
tax withheld or the amount of estimated income tax paid is overstated by
a taxpayer on a return or on a claim for refund, the amount so
overstated which is allowed against the tax shown on the return or which
is allowed as a credit or refund shall be assessed by the district
director or the director of the regional service center in the same
manner as in the case of a mathematical error on the return. See section
6213 (b)(1), relating to exceptions to restrictions on assessment.
(b) Estimated income tax. Neither the district director nor the
director of the regional service center shall assess any amount of
estimated income tax required to be paid under section 6153 or 6154
which is unpaid.
(c) Compensation of child. Any income tax assessed against a child,
to the extent of the amount attributable to income included in the gross
income of the child solely by reason of section 73(a) or the
corresponding provision of prior law, if not paid by the child, shall,
for the purposes of the income tax imposed by chapter 1 of the Code (or
the corresponding provisions of prior law), be considered as having also
been properly assessed against the parent. In any case in which the
earnings of the child are included in the gross income of the child
solely by reason of section 73(a) or the corresponding provision of
prior law, the parent's liability is an amount equal to the amount by
which the tax assessed against the child (and not paid by him) has been
increased by reason of the inclusion of such earnings in the gross
income of the child. Thus, if for the calendar year 1954 the child has
income of $1,000 from investments and of $3,000 for services rendered,
and the latter amount is includible in the gross income of the child
under section 73(a) and the child has no wife or dependents, the tax
liability determined under section 3 is $625. If the child had only the
investment income of $1,000, his tax liability would be $62. If the tax
of $625 is assessed against the child, the difference between $625 and
$62, or $563, is the amount of such tax which is considered to have been
properly assessed against the parent, if not paid by the child.
Sec. 301.6203-1 Method of assessment.
The district director and the director of the regional service
center shall appoint one or more assessment officers. The district
director shall also appoint assessment officers in a Service Center
servicing his district. The assessment shall be made by an assessment
officer signing the summary record of assessment. The summary record,
through supporting records, shall provide identification of the
taxpayer, the character of the liability assessed, the taxable period,
if applicable, and the amount of the assessment. The amount of the
assessment shall, in the case of tax shown on a return by the taxpayer,
be the amount so shown, and in all other cases the amount of the
assessment shall be the amount shown on the supporting list or record.
The date of the assessment is the date the summary record is signed by
an assessment officer. If the taxpayer requests a copy of the record of
assessment, he shall be furnished a copy of the pertinent parts of the
assessment which set forth the name of the taxpayer, the date of
assessment, the character of the liability
[[Page 153]]
assessed, the taxable period, if applicable, and the amounts assessed.
Sec. 301.6204-1 Supplemental assessments.
If any assessment is incomplete or incorrect in any material
respect, the district director or the director of the regional service
center, subject to the restrictions with respect to the assessment of
deficiencies in income, estate, gift, chapter 41, 42, 43, and 44 taxes,
and subject to the applicable period of limitation, may make a
supplemental assessment for the purpose of correcting or completing the
original assessment.
[T.D. 7838, 47 FR 44249, Oct. 7, 1982]
Sec. 301.6205-1 Special rules applicable to certain employment taxes.
For regulations under section 6205, see Sec. 31.6205-1 of this
chapter (Employment Tax Regulations).
Deficiency Procedures
Sec. 301.6211-1 Deficiency defined.
(a) In the case of the income tax imposed by subtitle A of the Code,
the estate tax imposed by chapter 11, subtitle B, of the Code, the gift
tax imposed by chapter 12, subtitle B, of the Code, and any excise tax
imposed by chapter 41, 42, 43, or 44 of the Code, the term
``deficiency'' means the excess of the tax, (income, estate, gift, or
excise tax as the case may be) over the sum of the amount shown as such
tax by the taxpayer upon his return and the amounts previously assessed
(or collected without assessment) as a deficiency; but such sum shall
first be reduced by the amount of rebates made. If no return is made, or
if the return (except a return of income tax pursuant to sec. 6014) does
not show any tax, for the purpose of the definition ``the amount shown
as the tax by the taxpayer upon his return'' shall be considered as
zero. Accordingly, in any such case, if no deficiencies with respect to
the tax have been assessed, or collected without assessment, and no
rebates with respect to the tax have been made, the deficiency is the
amount of the income tax imposed by subtitle A, the estate tax imposed
by chapter 11, the gift tax imposed by chapter 12, or any excise tax
imposed by chapter 41, 42, 43, or 44. Any amount shown as additional tax
on an ``amended return,'' so-called (other than amounts of additional
tax which such return clearly indicates the taxpayer is protesting
rather than admitting) filed after the due date of the return, shall be
treated as an amount shown by the taxpayer ``upon his return'' for
purposes of computing the amount of a deficiency.
(b) For purposes of the definition, the income tax imposed by
subtitle A and the income tax shown on the return shall both be
determined without regard to the credit provided in section 31 for
income tax withheld at the source and without regard to so much of the
credit provided in section 32 for income taxes withheld at the source as
exceeds 2 percent of the interest on tax-free covenant bonds described
in section 1451. Payments on account of estimated income tax, like other
payments of tax by the taxpayer, shall likewise be disregarded in the
determination of a deficiency. Any credit resulting from the collection
of amounts assessed under section 6851 or 6852 as the result of a
termination assessment shall not be taken into account in determining a
deficiency.
(c) The computation by the Internal Revenue Service, pursuant to
section 6014, of the income tax imposed by subtitle A shall be
considered as having been made by the taxpayer and the tax so computed
shall be considered as the tax shown by the taxpayer upon his return.
(d) If so much of the credit claimed on the return for income taxes
withheld at the source as exceeds 2 percent of the interest on tax-free
convenant bonds is greater than the amount of such credit allowable, the
unpaid portion of the tax attributable to such difference will be
collected not as a deficiency but as an underpayment of the tax shown on
the return.
(e) This section may be illustrated by the following examples:
Example 1. The amount of income tax shown by the taxpayer upon his
return for the calendar year 1954 was $1,600. The taxpayer had no
amounts previously assessed (or collected without assessment) as a
deficiency. He claimed a credit in the amount of $2,050 for tax withheld
at source on wages under section 3402, and a refund of $450 (not a
rebate under section 6211) was made to him
[[Page 154]]
as an overpayment of tax for the taxable year. It is later determined
that the correct tax for the taxable year is $1,850. A deficiency of
$250 is determined as follows:
Tax imposed by subtitle A............................. $1,850
Tax shown on return................................... $1,600
Tax previously assessed (or collected without None
assessment) as a deficiency..........................
---------
Total............................................. 1,600
Amount of rebates made................................ None
---------
Balance............................................... ....... 51,600
--------
Deficiency............................................ ....... 250
Example 2. The taxpayer made a return for the calendar year 1954
showing a tax of $1,250 before any credits for tax withheld at the
source. He claimed a credit in the amount of $800 for tax withheld at
source on wages under section 3402 and $60 for tax paid at source under
section 1451 upon interest on bonds containing a tax-free covenant. The
taxpayer had no amounts previously assessed (or collected without
assessment) as a deficiency. The district director determines that the 2
percent tax paid at the source on tax-free covenant bonds is $40 instead
of $60 as claimed by the taxpayer and that the tax imposed by subtitle A
is $1,360 (total tax $1,400 less $40 paid at source on tax-free covenant
bonds). A deficiency in the amount of $170 is determined as follows:
Tax imposed by subtitle A ($1,400 minus $40)................... $1,360
Tax shown on return ($1,250 minus $60)................ $1,190
Tax previously assessed (or collected without None
assessment) as a deficiency..........................
---------
Total............................................. 1,190
Amount of rebates made................................ None
---------
Balance............................................... ....... 1,190
--------
Deficiency............................................ ....... 170
(f) As used in section 6211, the term rebate means so much of an
abatement, credit, refund, or other repayment as is made on the ground
that the income tax imposed by subtitle A, the estate tax imposed by
chapter 11, the gift tax imposed by chapter 12, or the excise tax
imposed by chapter 41, 42, 43, or 44, is less than the excess of (1) the
amount shown as the tax by the taxpayer upon the return increased by the
amount previously assessed (or collected without assessment) as a
deficiency over (2) the amount of rebates previously made. For example,
assume that the amount of income tax shown by the taxpayer upon his
return for the taxable year is $600 and the amount claimed as a credit
under section 31 for income tax withheld at the source is $900. If the
district director determines that the tax imposed by subtitle A is $600
and makes a refund of $300, no part of such refund constitutes a
``rebate'' since the refund is not made on the ground that the tax
imposed by subtitle A is less than the tax shown on the return. If,
however, the district director determines that the tax imposed by
subtitle A is $500 and refunds $400, the amount of $100 of such refund
would constitute a rebate since it is made on the ground that the tax
imposed by subtitle A ($500) is less than the tax shown on the return
($600). The amount of such rebate ($100) would be taken into account in
arriving at the amount of any deficiency subsequently determined.
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7102, 36 FR 5498, Mar.
24, 1971; T.D. 7575, 43 FR 58817, Dec. 18, 1978; T.D. 7838, 47 FR 44249,
Oct. 7, 1982; T.D. 8628, 60 FR 62212, Dec. 5, 1995]
Sec. 301.6212-1 Notice of deficiency.
(a) General rule. If a district director or director of a service
center (or regional director of appeals), determines that there is a
deficiency in respect of income, estate, or gift tax imposed by subtitle
A or B, or excise tax imposed by chapter 41, 42, 43, or 44, of the Code,
such official is authorized to notify the taxpayer of the deficiency by
either registered or certified mail.
(b) Address for notice of deficiency--(1) Income, gift, and chapter
41, 42, 43, and 44 taxes. Unless the district director for the district
in which the return in question was filed has been notified under the
provisions of section 6903 as to the existence of a fiduciary
relationship, notice of a deficiency in respect of income tax, gift tax,
or tax imposed by chapter 41, 42, 43, or 44 shall be sufficient if
mailed to the taxpayer at his last known address, even though such
taxpayer is deceased, or is under a legal disability, or, in the case of
a corporation, has terminated its existence.
(2) Joint income tax returns. If a joint income tax return has been
filed by husband and wife, the district director (or assistant regional
commissioner, appellate) may, unless the district director for the
district in which such joint return was filed has been notified by
either spouse that a separate residence has been established, send
either a joint or separate notice of deficiency to the taxpayers at
their last known
[[Page 155]]
address. If, however, the proper district director has been so notified,
a separate notice of deficiency that is a duplicate original of the
joint notice, must be sent by registered mail prior to September 3,
1958, and by either registered or certified mail on and after September
3, 1958, to each spouse at his or her last known address. The notice of
separate residences should be addressed to the district director for the
district in which the joint return was filed.
(3) Estate tax. In the absence of notice, under the provisions of
section 6903 as to the existence of a fiduciary relationship, to the
district director for the district in which the estate tax return was
filed, notice of a deficiency in respect of the estate tax imposed by
chapter 11, subtitle B, of the Code shall be sufficient if addressed in
the name of the decedent or other person subject to liability and mailed
to his last known address.
(c) Further deficiency letters restricted. If the district director
or director of a service center (or regional director of appeals) mails
to the taxpayer notice of a deficiency, and the taxpayer files a
petition with the Tax Court within the prescribed period, no additional
deficiency may be determined with respect to income tax for the same
taxable year, gift tax for the same ``calendar period'' (as defined in
Sec. 25.2502-1(c)(1)), estate tax with respect to the taxable estate of
the same decedent, chapter 41, 43, or 44 tax of the taxpayer for the
same taxable year, section 4940 tax for the same taxable year, or
chapter 42 tax of the taxpayer (other than under section 4940) with
respect to the same act (or failure to act) to which such petition
relates. This restriction shall not apply in the case of fraud,
assertion of deficiencies with respect to any qualified tax (as defined
in paragraph (b) of Sec. 301.6361-4) in respect of which no deficiency
was asserted for the taxable year in the notice, assertion of
deficiencies with respect to the Federal tax when deficiencies with
respect to only a qualified tax (and not the Federal tax) were asserted
for the taxable year in the notice, assertion of greater deficiencies
before the Tax Court as provided in section 6214(a), mathematical errors
as provided in section 6213(b)(1), termination assessments in section
6851 or 6852, or jeopardy assessments as provided in section 6861(c).
Solely for purposes of applying the restriction of section 6212(c), a
notice of deficiency with respect to second tier tax under chapter 43
shall be deemed to be a notice of deficiency for the taxable year in
which the taxable event occurs. See Sec. 53.4963-1(e)(7)(iii) or (iv)
for the date on which the taxable event occurs.
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7238, 37 FR 28739, Dec.
29, 1972; T.D. 7579, 43 FR 59360, Dec. 20, l978; T.D. 7838, 47 FR 44249,
Oct. 7, 1982; T.D. 7910, 48 FR 40376, Sept. 7, 1983; T.D. 8084, 51 FR
16305, May 2, 1986; T.D. 8628, 60 FR 62212, Dec. 5, 1995]
Sec. 301.6212-2 Definition of last known address.
(a) General rule. Except as provided in paragraph (b)(2) of this
section, a taxpayer's last known address is the address that appears on
the taxpayer's most recently filed and properly processed Federal tax
return, unless the Internal Revenue Service (IRS) is given clear and
concise notification of a different address. Further information on what
constitutes clear and concise notification of a different address and a
properly processed Federal tax return can be found in Rev. Proc. 90-18
(1990-1 C.B. 491) or in procedures subsequently prescribed by the
Commissioner.
(b) Address obtained from third party--(1) In general. Except as
provided in paragraph (b)(2) of this section, change of address
information that a taxpayer provides to a third party, such as a payor
or another government agency, is not clear and concise notification of a
different address for purposes of determining a last known address under
this section.
(2) Exception for address obtained from the United States Postal
Service--(i) Updating taxpayer addresses. The IRS will update taxpayer
addresses maintained in IRS records by referring to data accumulated and
maintained in the United States Postal Service (USPS) National Change of
Address database that retains change of address information for thirty-
six months (NCOA database). Except as provided in paragraph (b)(2)(ii)
of this section, if the taxpayer's name and last known address
[[Page 156]]
in IRS records match the taxpayer's name and old mailing address
contained in the NCOA database, the new address in the NCOA database is
the taxpayer's last known address, unless the IRS is given clear and
concise notification of a different address.
(ii) Duration of address obtained from NCOA database. The address
obtained from the NCOA database under paragraph (b)(2)(i) of this
section is the taxpayer's last known address until one of the following
events occurs--
(A) The taxpayer files and the IRS properly processes a Federal tax
return with an address different from the address obtained from the NCOA
database; or
(B) The taxpayer provides the Internal Revenue Service with clear
and concise notification of a change of address, as defined in
procedures prescribed by the Commissioner, that is different from the
address obtained from the NCOA database.
(3) Examples. The following examples illustrate the rules of
paragraph (b)(2) of this section:
Example 1. (i) A is an unmarried taxpayer. The address on A's 1999
Form 1040, U.S. Individual Income Tax Return, filed on April 14, 2000,
and 2000 Form 1040 filed on April 13, 2001, is 1234 Anyplace Street,
Anytown, USA 43210. On May 15, 2001, A informs the USPS of a new
permanent address (9876 Newplace Street, Newtown, USA 12345) using the
USPS Form 3575, ``Official Mail Forwarding Change of Address Form.'' The
change of address is included in the weekly update of the USPS NCOA
database. On May 29, 2001, A's address maintained in IRS records is
changed to 9876 Newplace Street, Newtown, USA 12345.
(ii) In June 2001 the IRS determines a deficiency for A's 1999 tax
year and prepares to issue a notice of deficiency. The IRS obtains A's
address for the notice of deficiency from IRS records. On June 15, 2001,
the Internal Revenue Service mails the notice of deficiency to A at 9876
Newplace Street, Newtown, USA 12345. For purposes of section 6212(b),
the notice of deficiency mailed on June 15, 2001, is mailed to A's last
known address.
Example 2. (i) The facts are the same as in Example 1, except that
instead of determining a deficiency for A's 1999 tax year in June 2001,
the IRS determines a deficiency for A's 1999 tax year in May 2001.
(ii) On May 21, 2001, the IRS prepares a notice of deficiency for A
and obtains A's address from IRS records. Because A did not inform the
USPS of the change of address in sufficient time for the IRS to process
and post the new address in Internal Revenue Service's records by May
21, 2001, the notice of deficiency is mailed to 1234 Anyplace Street,
Anytown, USA 43210. For purposes of section 6212(b), the notice of
deficiency mailed on May 21, 2001, is mailed to A's last known address.
Example 3. (i) C and D are married taxpayers. The address on C and
D's 2000 Form 1040, U.S. Individual Income Tax Return, filed on April
13, 2001, and 2001 Form 1040 filed on April 15, 2002, is 2468 Spring
Street, Little City, USA 97531. On August 15, 2002, D informs the USPS
of a new permanent address (8642 Peachtree Street, Big City, USA 13579)
using the USPS Form 3575, ``Official Mail Forwarding Change of Address
Form.'' The change of address is included in the weekly update of the
USPS NCOA database. On August 29, 2002, D's address maintained in IRS
records is changed to 8642 Peachtree Street, Big City, USA 13579.
(ii) In October 2002 the IRS determines a deficiency for C and D's
2000 tax year and prepares to issue a notice of deficiency. The Internal
Revenue Service obtains C's address and D's address for the notice of
deficiency from IRS records. On October 15, 2002, the IRS mails a copy
of the notice of deficiency to C at 2468 Spring Street, Little City, USA
97531, and to D at 8642 Peachtree Street, Big City, USA 13579. For
purposes of section 6212(b), the notices of deficiency mailed on October
15, 2002, are mailed to C and D's respective last known addresses.
(c) Last known address for all notices, statements, and documents.
The rules in paragraphs (a) and (b) of this section apply for purposes
of determining whether all notices, statements, or other documents are
mailed to a taxpayer's last known address whenever the term last known
address is used in the Internal Revenue Code or the regulations
thereunder.
(d) Effective Date--(1) In general. Except as provided in paragraph
(d)(2) of this section, this section is effective on January 29, 2001.
(2) Individual moves in the case of joint filers. In the case of
taxpayers who file joint returns under section 6013, if the NCOA
database contains change of address information for only one spouse,
paragraphs (b)(2) and (3) of this section will not apply to notices,
statements, and other documents mailed before the processing of the
taxpayers' 2000 joint return.
[T.D. 8939, 66 FR 2820, Jan. 12, 2001]
[[Page 157]]
Sec. 301.6213-1 Restrictions applicable to deficiencies; petition to Tax Court.
(a) Time for filing petition and restrictions on assessment--(1)
Time for filing petition. Within 90 days after notice of the deficiency
is mailed (or within 150 days after mailing in the case of such notice
addressed to a person outside the States of the Union and the District
of Columbia), as provided in section 6212, a petition may be filed with
the Tax Court of the United States for a redetermination of the
deficiency. In determining such 90-day or 150-day period, Saturday,
Sunday, or a legal holiday in the District of Columbia is not counted as
the 90th or 150th day. In determining the time for filing a petition
with the Tax Court in the case of a notice of deficiency mailed to a
resident of Alaska prior to 12:01 p.m., e.s.t., January 3, 1959, and in
the case of a notice of deficiency mailed to a resident of Hawaii prior
to 4 p.m., e.d.s.t., August 21, 1959, the term ``States of the Union''
does not include Alaska or Hawaii, respectively, and the 150-day period
applies. In determining the time within which a petition to the Tax
Court may be filed in the case of a notice of deficiency mailed to a
resident of Alaska after 12:01 p.m., e.s.t., January 3, 1959, and in the
case of a notice of deficiency mailed to a resident of Hawaii after 4
p.m., e.d.s.t., August 21, 1959, the term ``States of the Union''
includes Alaska and Hawaii, respectively, and the 90-day period applies.
(2) Restrictions on assessment. Except as otherwise provided by this
section, by sections 6851, 6852, and 6861(a) (relating to termination
and jeopardy assessments), by section 6871(a) (relating to immediate
assessment of claims for income, estate, and gift taxes in bankruptcy
and receivership cases), or by section 7485 (in case taxpayer petitions
for a review of a Tax Court decision without filing bond), no assessment
of a deficiency in respect of a tax imposed by subtitle A or B or
chapter 41, 42, 43, or 44 of the Code and no levy or proceeding in court
for its collection shall be made until notice of deficiency has been
mailed to the taxpayer, nor until the expiration of the 90-day or 150-
day period within which a petition may be filed with the Tax Court, nor,
if a petition has been filed with the Tax Court, until the decision of
the Tax Court has become final. As to the date on which a decision of
the Tax court becomes final, see section 7481. Notwithstanding the
provisions of section 7421(a), the making of an assessment or the
beginning of a proceeding or levy which is forbidden by this paragraph
may be enjoined by a proceeding in the proper court. In any case where
the running of the time prescribed for filing a petition in the Tax
Court with respect to a tax imposed by chapter 42 or 43 is suspended
under section 6213(e), no assessment of a deficiency in respect of such
tax shall be made until expiration of the entire period for filing the
petition.
(b) Exceptions to restrictions on assessment of deficiencies--(1)
Mathematical errors. If a taxpayer is notified of an additional amount
of tax due on account of a mathematical error appearing upon the return,
such notice is not deemed a notice of deficiency, and the taxpayer has
no right to file a petition with the Tax Court upon the basis of such
notice, nor is the assessment of such additional amount prohibited by
section 6213(a).
(2) Tentative carryback adjustments. (i) If the district director or
the director of the regional service center determines that any amount
applied, credited, or refunded under section 6411(b) with respect to an
application for a tentative carryback adjustment is in excess of the
overassessment properly attributable to the carryback upon which such
application was based, the district director or the director of the
regional service center may assess the amount of the excess as a
deficiency as if such deficiency were due to a mathematical error
appearing on the return. That is, the district director or the director
of the regional service center may assess an amount equal to the excess,
and such amount may be collected, without regard to the restrictions on
assessment and collection imposed by section 6213(a). Thus, the district
director or the director of the regional service center may assess such
amount without regard to whether the taxpayer has been mailed a prior
notice of deficiency. Either before or after assessing such an amount,
the district director or the director of the regional service center
will notify the taxpayer
[[Page 158]]
that such assessment has been or will be made. Such notice will not
constitute a notice of deficiency, and the taxpayer may not file a
petition with the Tax Court of the United States based on such notice.
However, the taxpayer, within the applicable period of limitation, may
file a regular claim for credit or refund based on the carryback, if he
has not already filed such a claim, and may maintain a suit based on
such claim if it is disallowed or if it is not acted upon by the
Internal Revenue Service within 6 months from the date the claim was
filed.
(ii) The method provided in subdivision (i) of this subparagraph to
recover any amount applied, credited, or refunded in respect of an
application for a tentative carryback adjustment which should not have
been so applied, credited, or refunded is not an exclusive method. Two
other methods are available to recover such amount: (a) By way of a
deficiency notice under section 6212; or (b) by a suit to recover an
erroneous refund under section 7405. Any one or more of the three
available methods may be used to recover any amount which was improperly
applied, credited, or refunded in respect of an application for a
tentative carryback adjustment.
(3) Assessment of amount paid. Any payment made after the mailing of
a notice of deficiency which is made by the taxpayer as a payment with
respect to the proposed deficiency may be assessed without regard to the
restrictions on assessment and collection imposed by section 6213(a)
even though the taxpayer has not filed a waiver of restrictions on
assessment as provided in section 6213(d). A payment of all or part of
the deficiency asserted in the notice together with the assessment of
the amount so paid will not affect the jurisdiction of the Tax Court. If
any payment is made before the mailing of a notice of deficiency, the
district director or the director of the regional service center is not
prohibited by section 6213(a) from assessing such amount, and such
amount may be assessed if such action is deemed to be proper. If such
amount is assessed, the assessment is taken into account in determining
whether or not there is a deficiency for which a notice of deficiency
must be issued. Thus, if such a payment satisfies the taxpayer's tax
liability, no notice of deficiency will be mailed and the Tax Court will
have no jurisdiction over the matter. In any case in which there is a
controversy as to the correct amount of the tax liability, the
assessment of any amount pursuant to the provisions of section
6213(b)(3) shall in no way be considered to be the acceptance of an
offer by the taxpayer to settle such controversy.
(4) Jeopardy. If the district director believes that the assessment
or collection of a deficiency will be jeopardized by delay, such
deficiency shall be assessed immediately, as provided in section
6861(a).
(c) Failure to file petition. If no petition is filed with the Tax
Court within the period prescribed in section 6213(a), the district
director or the director of the regional service center shall assess the
amount determined as the deficiency and of which the taxpayer was
notified by registered or certified mail and the taxpayer shall pay the
same upon notice and demand therefor. In such case the district director
will not be precluded from determining a further deficiency and
notifying the taxpayer thereof by registered or certified mail. If a
petition is filed with the Tax Court the taxpayer should notify the
district director who issued the notice of deficiency that the petition
has been filed in order to prevent an assessment of the amount
determined to be the deficiency.
(d) Waiver of restrictions. The taxpayer may at any time by a signed
notice in writing filed with the district director waive the
restrictions on the assessment and collection of the whole or any part
of the deficiency. The notice must in all cases be filed with the
district director or other authorized official under whose jurisdiction
the audit or other consideration of the return in question is being
conducted. The filing of such notice with the Tax Court does not
constitute filing with the district director within the meaning of the
Code. After such waiver has been acted upon by the district director and
the assessment has been made in accordance with its terms, the waiver
cannot be withdrawn.
[[Page 159]]
(e) Suspension of filing period for certain chapter 42 and chapter
43 taxes. The period prescribed by section 6213(a) for filing a petition
in the Tax Court with respect to the taxes imposed by section 4941,4942,
4943, 4944, 4945, 4951, 4952, 4955, 4958, 4971, or 4975, shall be
suspended for any other period which the Commissioner has allowed for
making correction under Sec. 53.4963-1(e)(3). Where the time for filing
a petition with the Tax Court has been suspended under the authority of
this paragraph (e), the extension shall not be reduced as a result of
the correction being made prior to expiration of the period allowed for
making correction.
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7838, 47 FR 44250, Oct.
7, 1982; T.D. 8084, 51 FR 16035, May 2, 1986; T.D. 8628, 60 FR 62212,
Dec. 5, 1995; T.D. 8920, 66 FR 2171, Jan. 10, 2001]
Sec. 301.6215-1 Assessment of deficiency found by Tax Court.
Where a petition has been filed with the Tax Court, the entire
amount redetermined as the deficiency by the decision of the Tax Court
which has become final shall be assessed by the district director or the
director of the regional service center and the unpaid portion of the
amount so assessed shall be paid by the taxpayer upon notice and demand
therefor.
Sec. 301.6221-1 Tax treatment determined at partnership level.
(a) In general. A partner's treatment of partnership items on the
partner's return may not be changed except as provided in sections 6222
through 6231 and the regulations thereunder. Thus, for example, if a
partner treats an item on the partner's return consistently with the
treatment of the item on the partnership return, the IRS generally
cannot adjust the treatment of that item on the partner's return except
through a partnership-level proceeding. Similarly, the taxpayer may not
put partnership items in issue in a proceeding relating to
nonpartnership items. For example, the taxpayer may not offset a
potential increase in taxable income based on changes to nonpartnership
items by a potential decrease based on partnership items.
(b) Restrictions inapplicable after items become nonpartnership
items. Section 6221 and paragraph (a) of this section cease to apply to
items arising from a partnership with respect to a partner when those
items cease to be partnership items with respect to that partner under
section 6231(b).
(c) Penalties determined at partnership level. Any penalty, addition
to tax, or additional amount that relates to an adjustment to a
partnership item shall be determined at the partnership level. Partner-
level defenses to such items can only be asserted through refund actions
following assessment and payment. Assessment of any penalty, addition to
tax, or additional amount that relates to an adjustment to a partnership
item shall be made based on partnership-level determinations.
Partnership-level determinations include all the legal and factual
determinations that underlie the determination of any penalty, addition
to tax, or additional amount, other than partner-level defenses
specified in paragraph (d) of this section.
(d) Partner-level defenses. Partner-level defenses to any penalty,
addition to tax, or additional amount that relates to an adjustment to a
partnership item may not be asserted in the partnership-level
proceeding, but may be asserted through separate refund actions
following assessment and payment. See section 6230(c)(4). Partner-level
defenses are limited to those that are personal to the partner or are
dependent upon the partner's separate return and cannot be determined at
the partnership level. Examples of these determinations are whether any
applicable threshold underpayment of tax has been met with respect to
the partner or whether the partner has met the criteria of section
6664(b) (penalties applicable only where return is filed), or section
6664(c)(1) (reasonable cause exception) subject to partnership-level
determinations as to the applicability of section 6664(c)(2).
(e) Cross-references. See Secs. 301.6231(c)-1 and 301.6231(c)-2 for
special rules relating to certain applications and claims for refund
based on losses, deductions, or credits from abusive tax shelter
partnerships.
(f) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001.
[[Page 160]]
For years beginning prior to October 4, 2001, see Sec. 301.6221-1T
contained in 26 CFR part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50544, Oct. 4, 2001]
Sec. 301.6222(a)-1 Consistent treatment of partnership items.
(a) In general. The treatment of a partnership item on the partner's
return must be consistent with the treatment of that item by the
partnership on the partnership return in all respects including the
amount, timing, and characterization of the item.
(b) Treatment must be consistent with partnership return. The
treatment of a partnership item on the partner's return must be
consistent with the treatment of that item on the partnership return.
Thus, a partner who treats an item consistently with a schedule or other
information furnished to the partner by the partnership has not
satisfied the requirement of paragraph (a) of this section if the
treatment of that item is inconsistent with the treatment of the item on
the partnership return actually filed. For rules relating to the
election to be treated as having reported the inconsistency where the
partner treats an item consistently with an incorrect schedule, see
Sec. 301.6222(b)-3.
(c) Examples. The following examples illustrate the principles of
this section:
Example 1. B is a partner of Partnership P. Both B and P use the
calendar year as the taxable year. In December 2001, P receives an
advance payment for services to be performed in 2002 and reports this
amount as income for calendar year 2001. However, B reports B's
distributive share of this amount on B's income tax return for 2002 and
not on B's return for 2001. B's treatment of this partnership item is
inconsistent with the treatment of the item by P.
Example 2. Partnership P incurred certain start-up costs before P
was actively engaged in its business. P capitalized these costs. C, a
partner in P, deducted C's proportionate share of these start-up costs.
C's treatment of the partnership expenditure is inconsistent with the
treatment of that item by P.
Example 3. D is a partner in partnership P. P reports a loss of
$100,000 on its return, $5,000 of which it reports on the Schedule K-1
attached to its return as D's distributive share. However, P reports
$15,000 as D's distributive share of P's loss on the Schedule K-1
furnished to D. D reports the $15,000 loss on D's income tax return. D
has not satisfied the consistent reporting requirement. See, however,
Sec. 301.6222(b)-3 for an election to be treated as having reported the
inconsistency.
(d) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001.
For years beginning prior to October 4, 2001, see Sec. 301.6222(a)-
1T contained in 26 CFR part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50545, Oct. 4, 2001]
Sec. 301.6222(a)-2 Application of consistent reporting and notification rules to indirect partners.
(a) In general. The consistent reporting requirement of
Sec. 301.6222(a)-1 is generally applied with respect to the source
partnership. For purposes of this section, the term source partnership
means the partnership (within the meaning of section 6231(a)(1)) from
which the partnership item originates.
(b) Indirect partner files consistently with source partnership. An
indirect partner who treats an item from a source partnership in a
manner consistent with the treatment of that item on the source
partnership's return satisfies the consistency requirement of section
6222(a) regardless of whether the indirect partner treats that item in a
manner consistent with the treatment of that item by the pass-thru
partner through which the indirect partner holds the interest in the
source partnership. Under these circumstances, therefore, the Internal
Revenue Service shall not send to the indirect partner the notice
described in section 6231(b)(1)(A).
(c) Indirect partner files inconsistently with source partnership--
(1) Indirect partner notifies the Internal Revenue Service of
inconsistency. An indirect partner who--
(i) Treats an item from a source partnership in a manner
inconsistent with the treatment of that item on the source partnership's
return; and
(ii) Files a statement identifying the inconsistency with the source
partnership in accordance with Sec. 301.6222(c)-1, shall not be subject
to a computational adjustment to conform the treatment of that item to
the treatment of that item on the return of the source partnership.
(2) Indirect partner does not notify the Internal Revenue Service of
inconsistency.
[[Page 161]]
Except as provided in paragraph (b)(3) of this section, an indirect
partner who--
(i) Treats an item from a source partnership in a manner
inconsistent with the treatment of that item on the source partnership's
return; and
(ii) Fails to file a statement identifying the inconsistency with
the source partnership in accordance with Sec. 301.6222(b)-1, is subject
to a computational adjustment to conform the treatment of that item to
the treatment of that item on the return of the source partnership.
(3) Indirect partner files consistently with a pass-thru partner
that notifies the Internal Revenue Service of the inconsistency. If an
indirect partner treats an item from a source partnership in a manner
consistent with the treatment of that item by a pass-thru partner
through which the indirect partner holds the interest in the source
partnership and that pass-thru partner--
(i) Treats that item in a manner inconsistent with the treatment of
that item on the source partnership's return; and
(ii) Files a statement identifying the inconsistency with the source
partnership in accordance with Sec. 301.6222(b)-1, the indirect partner
is not subject to a computational adjustment to conform to the treatment
of that item on the return of the source partnership.
(d) Examples. The following examples illustrate the principles of
this section:
Example 1. One of the partners in Partnership A is Partnership B,
which has four equal partners C, D, E, and F. Both A and B are
partnerships within the meaning of section 6231(a)(1). On its return, A
reports $100,000 as B's distributive share of A's ordinary income. B,
however, reports only $80,000 as its distributive share of the income
and does not notify the Internal Revenue Service of this inconsistent
treatment with respect to A. C reports $20,000 as its distributive share
of the item. Although C reports the item consistently with B, C is
subject to a computational adjustment to conform the treatment of that
item on C's return to the treatment of that item on A's return.
Example 2. Assume the same facts as in Example 1, except that B
notified the Internal Revenue Service of its inconsistent treatment with
respect to source partnership A. C is not subject to a computational
adjustment.
Example 3. Assume the same facts as in Example 1. D reports only
$15,000 as D's distributive share of the income and does not report the
inconsistency. F reports only $9,000 as its distributive share of the
item but reports this inconsistency with respect to source partnership
A. D is subject to a computational adjustment to conform the treatment
of that item on D's return to the treatment of that item on A's return.
F is not subject to a computational adjustment.
Example 4. Assume the same facts as in Example 3, except that F
reported the inconsistency with respect to B and did not report the
inconsistency with respect to source partnership A. F is subject to a
computational adjustment to conform the treatment of that item on F's
return to the treatment of that item on A's return.
Example 5. Assume the same facts as in Example 1. E reports $25,000
as its distributive share of the item. Regardless of whether E reports
the inconsistency between its treatment of the item and that by B, E is
neither subject to a computational adjustment to conform E's treatment
of that item to that of B nor subject to the notice described in section
6231(b)(1)(A) with respect to any such notification of inconsistent
treatment.
(e) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6222(a)-2T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50545, Oct. 4, 2001]
Sec. 301.6222(b)-1 Notification to the Internal Revenue Service when partnership items are treated inconsistently.
(a) In general. The statement identifying an inconsistency described
in section 6222(b)(1)(B) shall be filed by filing the form prescribed
for that purpose in accordance with the instructions accompanying that
form.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6222(b)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50546, Oct. 4, 2001]
Sec. 301.6222(b)-2 Effect of notification of inconsistent treatment.
(a) In general. Generally, if a partner treats a partnership item on
the partner's return in a manner inconsistent with the treatment of that
item on the
[[Page 162]]
partnership return, the Internal Revenue Service may make a
computational adjustment to conform the treatment of the item by the
partner with the treatment of that item on the partnership return. Any
additional tax resulting from that computational adjustment may be
assessed without either the commencement of a partnership proceeding or
notification to the partner that all partnership items arising from that
partnership will be treated as nonpartnership items. However, if a
partner notifies the Internal Revenue Service of the inconsistent
treatment of a partnership item in the manner prescribed in
Sec. 301.6222(b)-1, the Internal Revenue Service generally may not make
an adjustment with respect to that partnership item unless the Internal
Revenue Service--
(1) Conducts a partnership-level proceeding; or
(2) Notifies the partner under section 6231(b)(1)(A) that all
partnership items arising from that partnership will be treated as
nonpartnership items. See, however, Secs. 301.6231(c)-1 and 301.6231(c)-
2 for special rules relating to certain applications and claims for
refund based on losses, deductions, or credits from abusive tax shelter
partnerships.
(b) Partner protected only to extent of notification. (1) A partner
who reports the inconsistent treatment of partnership items on the
partner's return is protected from computational adjustments under
section 6222(c) only with respect to those partnership items the
inconsistent treatment of which is reported. Thus, if a partner
notifying the Internal Revenue Service with respect to one item fails to
report the inconsistent treatment of another item, the partner is
subject to a computational adjustment with respect to that other item.
(2) The following example illustrates the principles of this
paragraph (b):
Example. Partner A of Partnership P treats a deduction and a capital
gain arising from P on A's return in a manner that is inconsistent with
the treatment of those items by P. A reports the inconsistent treatment
of the deduction but not of the gain. A is subject to a computational
adjustment under section 6222(c) with respect to the gain.
(c) Adjustments in a separate proceeding not limited to conforming
adjustments. (1) If the Internal Revenue Service conducts a separate
proceeding with a partner whose partnership items are treated as
nonpartnership items under section 6231(b), the Internal Revenue Service
is not limited to making adjustments that merely conform the partner's
return to the partnership return.
(2) Example. The following example illustrates the principles of
this paragraph (c):
Example. Partnership P allocates to E, one of its partners, a loss
of $8,000. E, however, claims a loss of $9,000 and reports the
inconsistent treatment. The Internal Revenue Service notifies E that it
will treat all of E's partnership items arising from P as nonpartnership
items. As a result of a separate proceeding with E, the Internal Revenue
Service may issue a deficiency notice which could include reducing the
loss to $3,000.
(d) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6222(b)-2T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50546, Oct. 4, 2001]
Sec. 301.6222(b)-3 Partner receiving incorrect schedule.
(a) In general. A partner shall be treated as having complied with
section 6222(b)(1)(B) and Sec. 301.6222(b)-1 with respect to a
partnership item if the partner--
(1) Demonstrates that the treatment of the partnership item on the
partner's return is consistent with the treatment of that item on the
schedule prescribed by the Internal Revenue Service and furnished to the
partner by the partnership showing the partner's share of income,
credits, deductions, etc.; and
(2) Elects in accordance with the rules prescribed in paragraph (b)
of this section to have this section apply with respect to that item.
(b) Election provisions--(1) Time and manner of making election. The
election described in paragraph (a) of this section shall be made by
filing a statement with the Internal Revenue Service office issuing the
notice of computational adjustment within 30 days after the notice is
mailed to the partner.
[[Page 163]]
(2) Contents of statement. The statement described in paragraph
(b)(1) of this section shall be--
(i) Clearly identified as an election under section 6222(b)(2);
(ii) Signed by the partner making the election; and
(iii) Accompanied by copies of the schedule furnished to the partner
by the partnership and of the notice of computational adjustment. The
partner need not enclose a copy of the notice of computational
adjustment, however, if the partner clearly identifies the notice of
computational adjustment. Generally, the requirement described in
paragraph (a)(1) of this section will be satisfied by attaching to the
statement a copy of the schedule furnished to the partner by the
partnership. However, if it is not clear from the information contained
on the schedule that the treatment of the partnership item on the
schedule is consistent with the partner's treatment of such item on the
partner's return the statement shall also include an explanation of how
the treatment of such item on the schedule is consistent with the
treatment on the partner's return with respect to the characterization,
timing, and amount of such item.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6222(b)-3T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50546, Oct. 4, 2001]
Sec. 301.6223(a)-1 Notice sent to tax matters partner.
(a) In general. For purposes of subchapter C of chapter 63 of the
Internal Revenue Code, a notice is treated as mailed to the tax matters
partner on the earlier of--
(1) The date on which the notice is mailed to ``THE TAX MATTERS
PARTNER'' at the address of the partnership (as provided on the
partnership return, except as updated under Sec. 301.6223(c)-1); or
(2) The date on which the notice is mailed to the person who is the
tax matters partner at the address of that person (as provided on the
partner's return, except as updated under Sec. 301.6223(c)-1) or the
partnership. See Sec. 301.6223(c)-1 for rules relating to the
information used by the Internal Revenue Service in providing notices,
etc.
(b) Example. The provisions of this section may be illustrated by
the following example:
Example. Partnership P designates B as its tax matters partner in
accordance with Sec. 301.6231(a)(7)-1(b). On December 1 a notice of the
beginning of an administrative proceeding is mailed to ``THE TAX MATTERS
PARTNER'' at the address of P. On January 10, a copy of the notice is
mailed to B at B's address. December 1 is treated as the date that the
notice was mailed to the tax matters partner.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6223(a)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50547, Oct. 4, 2001]
Sec. 301.6223(a)-2 Withdrawal of notice of the beginning of an administrative proceeding.
(a) In general. If the Internal Revenue Service, within 45 days
after the day on which the notice specified in section 6223(a)(1) is
mailed to the tax matters partner, decides not to propose any
adjustments to the partnership return as filed, the Internal Revenue
Service may withdraw the notice specified in section 6223(a)(1) by
mailing a letter to that effect to the tax matters partner within that
45-day period. Even if the Internal Revenue Service does not withdraw
the notice specified in section 6223(a)(1), the Internal Revenue Service
is not required to issue a notice of final partnership administrative
adjustment. If the Internal Revenue Service withdraws the notice
specified in section 6223(a)(1), neither the Internal Revenue Service
nor the tax matters partner is required to furnish any notice with
respect to that proceeding to any other partner. Except as provided in
paragraph (b) of this section, a notice specified in section 6223(a)(1)
which has been withdrawn shall be treated for purposes of subchapter C
of chapter 63 of the Internal Revenue Code as if that notice had never
been mailed to the tax matters partner.
[[Page 164]]
(b) Internal Revenue Service may not reissue notice except under
certain circumstances. If the notice specified in section 6223(a)(1) was
mailed to the tax matters partner with respect to a partnership taxable
year and that notice was later withdrawn as provided in paragraph (a) of
this section, the Internal Revenue Service shall not mail a second
notice specified in section 6223(a)(1) with respect to that taxable year
unless--
(1) There is evidence of fraud, malfeasance, collusion, concealment,
or misrepresentation of a material fact;
(2) The prior proceeding involved the misapplication or erroneous
interpretation of an established Internal Revenue Service position
existing at the time of the previous examination, or the failure to make
an adjustment based on such a position; or
(3) Other circumstances exist which indicate that failure to reissue
the notice would be a serious administrative omission.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6223(a)-2T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50547, Oct. 4, 2001]
Sec. 301.6223(b)-1 Notice group.
(a) In general. If a group of partners having in the aggregate a 5
percent or more interest in the profits of a partnership requests and
designates one of their members to receive the notices described in
section 6223(a)(1) and (2), the member so designated shall be treated as
a partner to whom section 6223(a) applies. Thus, the designated
representative is entitled to receive any notice described in section
6223(a) that is mailed to the tax matters partner 30 days or more after
the day on which the Internal Revenue Service receives the request from
the group.
(b) Request for notice--(1) In general. The Internal Revenue Service
shall mail to the member of the notice group designated to receive such
notice any notice described in section 6223(a) that is mailed to the tax
matters partner 30 days or more after the day on which the Internal
Revenue Service receives the request for notice from the group if such
request for notice is made in accordance with the rules prescribed in
this paragraph (b).
(2) Content of request. The request for notice from a notice group
shall--
(i) Identify the partnership by name, address, and taxpayer
identification number;
(ii) Specify the taxable year or years for which the notice group is
formed;
(iii) Designate the member of the group to receive the notices;
(iv) Set out the name, address, taxpayer identification number, and
profits interest of each member of the group; and
(v) Be signed by all partners comprising the notice group.
(3) Place for filing. The request for notice from a notice group
generally must be filed with the service center where the partnership
return is filed. However, if the notice group representative knows that
the notice described in section 6223(a)(1) (beginning of an
administrative proceeding) has already been mailed to the tax matters
partner, the statement should be filed with the Internal Revenue Service
office that mailed that notice.
(4) Copy to be sent to the tax matters partner. A copy of the
request for notice from a notice group shall be provided to the tax
matters partner by the notice group representative within 30 days after
the request is filed with the Internal Revenue Service.
(5) Years covered by request. A request for notice by a notice group
may relate only to partnership taxable years that have ended before the
request is filed. A request, however, may relate to more than one
partnership taxable year if the 5 percent or more profits interest
requirement of section 6223(b)(2) is satisfied for each year to which
the request relates.
(c) Composition of notice group--(1) In general. A notice group
shall be comprised only of persons who were partners at some time during
the partnership taxable year for which the group is formed. If a notice
group is formed for more than one taxable year, each member of the group
must have been a partner at some time during at least one of the taxable
years for which the group is formed. A notice group may include a
partner entitled to separate
[[Page 165]]
notice. See section 6231(d) and Sec. 301.6231(d)-1 for rules relating to
determining the interest of a partner in the profits of a partnership
for a partnership taxable year for purposes of section 6223(b). See
paragraph (c)(6) of this section for rules relating to indirect and
pass-thru partners.
(2) Partner may be a member of only one group. A partner cannot be a
member of more than one notice group with respect to the same
partnership for the same partnership taxable year. See paragraph (c)(6)
of this section for rules relating to indirect and pass-thru partners.
(3) Partner may join group after formation. A partner may join a
notice group at any time after the formation of that group by filing
with the Internal Revenue Service office where the notice group filed
its request a statement that it is joining the notice group. The
statement shall identify the partner joining the notice group, the
partnership, and the members of the notice group by name, address, and
taxpayer identification number and shall be signed by the joining
partner. A copy of the statement shall be provided by the joining
partner to both the tax matters partner and the notice group
representative within 30 days after the request is filed with the
Internal Revenue Service. The partner shall become a member of the
notice group for each partnership taxable year for which the group was
formed and for which the partner was a partner at any time during such
partnership taxable year.
(4) Date on which a partner becomes a member of notice group. A
partner shall become a member of a notice group on the 30th day after
the day on which the Internal Revenue Service receives--
(i) A request for notice from a notice group that identifies that
partner as a member of that notice group; or
(ii) A statement filed in accordance with paragraph (c)(3) of this
section that states that the partner is joining the notice group.
(5) No withdrawal from notice group. A partner who has signed a
notice group request filed with the Internal Revenue Service remains a
member of that notice group until the group terminates. A partner cannot
withdraw from the notice group.
(6) Indirect and pass-thru partners--(i) Pass-thru partners and
unidentified indirect partners. A pass-thru partner may become a member
of a notice group as provided in this section. For purposes of applying
the aggregate interest requirement specified in paragraph (a) of this
section to a pass-thru partner, the partnership interest held by the
pass-thru partner shall not include any interest held through the pass-
thru partner by an indirect partner that has been identified as provided
in section 6223(c)(3) and Sec. 301.6223(c)-1 before the date on which
the pass-thru partner becomes a member of the notice group.
(ii) Indirect partners identified before the pass-thru partner joins
a notice group. An indirect partner may become a member of a notice
group with respect to a partnership taxable year only if--
(A) The indirect partner held an interest in the partnership (either
directly or through one or more pass-thru partners) at some time during
that taxable year; and
(B) The indirect partner was identified as provided in section
6223(c)(3) and Sec. 301.6223(c)-1 on or before the date on which the
pass-thru partner became a member of a notice group.
(d) Termination of notice group. Unless the original request for
notice from the notice group or a subsequent statement filed by the
representative (in accordance with paragraphs (b)(3) and (4) of this
section) designates a successor to the designated group representative,
the group terminates if the representative dies (or, in the case of an
entity, if the entity is dissolved), resigns, or is adjudicated
incompetent.
(e) Notice group is not a 5-percent group. The forming of a notice
group under this section does not constitute the forming of a 5-percent
group for purposes of litigation. A notice group is formed solely for
the purpose of receiving notices. A 5-percent group is formed solely for
the purpose of filing a petition for judicial review or appealing a
judicial determination. See Sec. 301.6226(b)-1. Thus, a member of a
notice group may choose not to join a 5-percent group formed by other
members of the notice group.
(f) Effective date. This section is applicable to partnership
taxable years
[[Page 166]]
beginning on or after October 4, 2001. For years beginning prior to
October 4, 2001, see Sec. 301.6223(b)-1T contained in 26 CFR part 1,
revised April 1, 2001.
[T.D. 8965, 66 FR 50547, Oct. 4, 2001]
Sec. 301.6223(c)-1 Additional information regarding partners furnished to the Internal Revenue Service.
(a) In general. In addition to the names, addresses, and profits
interests as shown on the partnership return, the Internal Revenue
Service will use additional information as provided in this section for
purposes of administering subchapter C of chapter 63 of the Internal
Revenue Code.
(b) Procedure for furnishing additional information--(1) In general.
Any person may furnish additional information at any time by filing a
written statement with the Internal Revenue Service. However, the
information contained in the statement will be considered for purposes
of determining whether a partner is entitled to a notice described in
section 6223(a) only if the Internal Revenue Service receives the
statement at least 30 days before the date on which the Internal Revenue
Service mails the notice to the tax matters partner. Similarly,
information contained in the statement generally will not be taken into
account for other purposes by the Internal Revenue Service until 30 days
after the statement is received.
(2) Where statement must be filed. A statement furnished under this
section generally must be filed with the service center where the
partnership return is filed. However, if the person filing the statement
knows that the notice described in section 6223(a)(1) (beginning of an
administrative proceeding) has already been mailed to the tax matters
partner, the statement should be filed with the Internal Revenue Service
office that mailed such notice.
(3) Contents of statement. The statement shall--
(i) Identify the partnership, each partner for whom information is
supplied, and the person supplying the information by name, address, and
taxpayer identification number;
(ii) Explain that the statement is furnished to correct or
supplement earlier information with respect to the partners in the
partnership;
(iii) Specify the taxable year to which the information relates;
(iv) Set out the corrected or additional information; and
(v) Be signed by the person supplying the information.
(c) No incorporation by reference to previously furnished documents.
Incorporation by reference of information contained in another document
previously furnished to the Internal Revenue Service will not be given
effect for purposes of section 6223(c) or 6229(e). For example,
reference to a return filed by a pass-thru partner which contains
identifying information with respect to the indirect partners of that
pass-thru partner is not sufficient to identify the indirect partners
unless a copy of the document referred to is attached to the statement.
Furthermore, reference to a prior general notification to the Internal
Revenue Service that a partner who would otherwise be the tax matters
partner is a debtor in a bankruptcy proceeding or has had a receiver
appointed for the partner in a receivership proceeding is not sufficient
unless a copy of the notification document referred to is attached to
the statement.
(d) Information supplied by a person other than the tax matters
partner. The Internal Revenue Service may require appropriate
verification in the case of information furnished by a person other than
the tax matters partner. The 30-day period referred to in paragraph
(b)(1) of this section shall not begin until that verification is
supplied.
(e) Power of attorney--(1) In general. This paragraph (e) applies to
powers of attorney with respect to proceedings under subchapter C of
chapter 63 of the Internal Revenue Code (chapter 63C) that begin on or
after January 2, 2002.
(2) Specifically for purposes of subchapter C of chapter 63 of the
Internal Revenue Code. A power of attorney specifically for purposes of
subchapter C of chapter 63 of the Internal Revenue Code shall be
furnished in accordance with paragraph (b)(2) of this section.
(3) Existing power of attorney. A power of attorney granted to
another person by a partner for other tax purposes shall not be given
effect for purposes of
[[Page 167]]
subchapter C of chapter 63 unless the partner specifically requests that
the power be given such effect in a statement furnished to the Internal
Revenue Service in accordance with paragraph (b) of this section.
(f) Internal Revenue Service may use other information. In addition
to the information on the partnership return and that supplied on
statements filed under this section, the Internal Revenue Service may
use other information in its possession (for example, a change in
address reflected on a partner's return) in administering subchapter C
of chapter 63 of the Internal Revenue Code. However, the Internal
Revenue Service is not obligated to search its records for information
not expressly furnished under this section.
(g) Effective date. Except as provided in paragraph (e)(1) of this
section, this section is applicable to partnership taxable years
beginning on or after October 4, 2001. For years beginning prior to
October 4, 2001, see Sec. 301.6223(c)-1T contained in 26 CFR part 1,
revised April 1, 2001.
[T.D. 8965, 66 FR 50548, Oct. 4, 2001]
Sec. 301.6223(e)-1 Effect of Internal Revenue Service's failure to provide notice.
(a) Notice group. Section 6223(e)(1)(B)(ii) applies with respect to
a notice group only if the request for notice described in
Sec. 301.6223(b)-1 is received by the Internal Revenue Service at least
30 days before the notice is mailed to the tax matters partner.
(b) Indirect partners--(1) In general. For purposes of section
6223(e), the Internal Revenue Service's failure to provide notice to a
pass-thru partner entitled to notice under section 6223(b) is deemed a
failure to provide notice to indirect partners holding an interest in
the partnership through the pass-thru partner. However, this rule does
not apply if the indirect partner--
(i) Receives notice from the Internal Revenue Service;
(ii) Is identified as provided in section 6223(c)(3) and
Sec. 301.6223(c)-1 at least 30 days before the notice is mailed to the
tax matters partner; or
(iii) Is a member of a notice group entitled to notice under
paragraph (a) of this section.
(2) Examples. The provisions of paragraph (b)(1) of this section may
be illustrated by the following examples:
Example 1. Partnership ABC has as one of its partners, A, a
partnership with three partners, X, Y, and Z. ABC does not have more
than 100 partners, and partnership A is entitled to notice under section
6223(a). In addition, Z was identified as provided in section 6223(c)(3)
and Sec. 301.6223(c)-1 on May 1, 2002. The Internal Revenue Service
mailed a notice to the tax matters partner of ABC on July 1, 2002, but
failed to provide notice to partnership A. Notwithstanding the Internal
Revenue Service's notice to the tax matters partner, the Internal
Revenue Service is deemed to have failed to provide notice to X and Y.
The Internal Revenue Service's failure to provide notice to A, however,
has no effect on Z; whether notice was provided to Z is determined
independently.
Example 2. Assume the same facts as in Example 1, except that the
Internal Revenue Service provided notice to partnership A but did not
provide separate notice to Z. Notwithstanding the Internal Revenue
Service's notice to partnership A, the Internal Revenue Service is
deemed to have failed to provide notice to Z.
Example 3. Assume the same facts as in Example 1, except that
partnership ABC has more than 100 partners and partnership A is entitled
to notice under section 6223(b) because it had at least a 1 percent
profits interest in partnership ABC. In addition, X became a member of a
notice group on June 1, 2002, and the Internal Revenue Service mailed a
notice to the designated member of that notice group. The Internal
Revenue Service also mailed a separate notice to Z. The Internal Revenue
Service's failure to provide notice to partnership A only affects Y, who
is deemed not to have been provided notice by the Internal Revenue
Service.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6223(e)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50549, Oct. 4, 2001]
Sec. 301.6223(e)-2 Elections if Internal Revenue Service fails to provide timely notice.
(a) In general. This section applies in any case in which the
Internal Revenue Service fails to timely mail any notice described in
section 6223(a) of the Internal Revenue Code to a partner entitled to
such notice within the period specified in section 6223(d). The failure
to
[[Page 168]]
issue any notice within the period specified in section 6223(d) does not
invalidate the notice of the beginning of an administrative proceeding
or final partnership administrative adjustment (FPAA). An untimely FPAA
enables the recipient of the untimely notice to make the elections
described in paragraphs (b), (c), and (d) of this section. The period
within which to make the elections described in paragraphs (b), (c), and
(d) of this section commences with the mailing of an FPAA to the
partner. In the absence of an election, paragraphs (b) and (c) of this
section provide for the treatment of a partner's partnership items.
(b) Proceeding finished. If at the time the Internal Revenue Service
mails the partner an FPAA--
(1) The period within which a petition for review of the FPAA under
section 6226 may be filed has expired and no petition has been filed; or
(2) The decision of a court in an action begun by such a petition
has become final, the partner may elect in accordance with paragraph (d)
of this section to have that adjustment, that decision, or a settlement
agreement described in section 6224(c)(2) with respect to the
partnership taxable year to which the adjustment relates apply to that
partner. If the partner does not make an election in accordance with
paragraph (d) of this section, the partnership items of the partner for
the partnership taxable year to which the proceeding relates shall be
treated as having become nonpartnership items as of the day on which the
Internal Revenue Service mails the partner the FPAA.
(c) Proceeding still going on. If at the time the Internal Revenue
Service mails the partner an FPAA, paragraphs (b)(1) and (2) of this
section do not apply, the partner shall be a party to the proceeding
unless the partner elects, in accordance with paragraph (d) of this
section, to have--
(1) A settlement agreement described in section 6224(c)(2) with
respect to the partnership taxable year to which the proceeding relates
apply to the partner; or
(2) The partnership items of the partner for the partnership taxable
year to which the proceeding relates treated as having become
nonpartnership items as of the day on which the Internal Revenue Service
mails the partner the FPAA.
(d) Election--(1) In general. The election described in paragraph
(b) or (c) of this section shall be made in the manner prescribed in
this paragraph (d). The election shall apply to all partnership items
for the partnership taxable year to which the election relates.
(2) Time and manner of making election. The election shall be made
by filing a statement with the Internal Revenue Service office mailing
the FPAA within 45 days after the date on which the FPAA was mailed to
the partner making the election.
(3) Contents of statement. The statement shall--
(i) Be clearly identified as an election under section 6223(e)(2) or
(3);
(ii) Specify the election being made (that is, application of final
partnership administrative adjustment, court decision, consistent
settlement agreement, or nonpartnership item treatment);
(iii) Identify the partner making the election and the partnership
by name, address, and taxpayer identification number;
(iv) Specify the partnership taxable year to which the election
relates; and
(v) Be signed by the partner making the election.
(e) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6223(e)-2T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50550, Oct. 4, 2001]
Sec. 301.6223(f)-1 Duplicate copy of final partnership administrative adjustment.
(a) In general. Section 6223(f) does not prohibit the Internal
Revenue Service from issuing a duplicate copy of the notice of final
partnership administrative adjustment (for example, in the event the
original notice is lost).
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4,
[[Page 169]]
2001, see Sec. 301.6223(f)-1T contained in 26 CFR part 1, revised April
1, 2001.
[T.D. 8965, 66 FR 50550, Oct. 4, 2001]
Sec. 301.6223(g)-1 Responsibilities of the tax matters partner.
(a) Notices described in section 6223(a)--(1) Notice of beginning of
proceeding. Except as otherwise provided in Sec. 301.6223(a)-2, the tax
matters partner shall, within 75 days after the Internal Revenue Service
mails the notice specified in section 6223(a)(1), forward a copy of that
notice to each partner not entitled to notice from the Internal Revenue
Service under section 6223. See Sec. 301.6230(e)-1 for information to be
furnished to the Internal Revenue Service.
(2) Notice of final partnership administrative adjustment. The tax
matters partner shall, within 60 days after the Internal Revenue Service
mails the notice specified in section 6223(a)(2), forward a copy of that
notice to each partner not entitled to notice from the Internal Revenue
Service under section 6223.
(3) Requirement inapplicable in certain cases. The tax matters
partner is not required to send notice to a partner if--
(i) Before the expiration of the applicable 75-day or 60-day period
the partnership items of that partner have become nonpartnership items
(for example, by settlement);
(ii) That partner is an indirect partner and has not been identified
to the tax matters partner at least 30 days before the tax matters
partner is required to send such notice;
(iii) That partner is treated as a partner solely by virtue of
Sec. 301.6231(a)(2)-1;
(iv) That partner was a member of a notice group as of the date on
which the notice was mailed to the tax matters partner (see
Sec. 301.6223(b)-1(c)(4) for the date on which a partner becomes a
member of a notice group);
(v) The notice has already been provided to that partner by another
person; or
(vi) The notice is withdrawn by the Internal Revenue Service under
Sec. 301.6223(a)-2.
(b) Other notices or information--(1) In general. The tax matters
partner shall furnish to the partners specified in paragraph (b)(2) of
this section information with respect to the following--
(i) Closing conference with the examining agent;
(ii) Proposed adjustments, rights of appeal, and requirements for
filing of a protest;
(iii) Time and place of any Appeals conference;
(iv) Acceptance by the Internal Revenue Service of any settlement
offer;
(v) Consent to the extension of the period of limitations with
respect to all partners;
(vi) Filing of a request for administrative adjustment (including a
request for substituted return treatment under Sec. 301.6227(c)-1) on
behalf of the partnership;
(vii) Filing by the tax matters partner or any other partner of any
petition for judicial review under sections 6226 or 6228(a);
(viii) Filing of any appeal with respect to any judicial
determination provided for in sections 6226 or 6228(a); and
(ix) Final judicial redetermination.
(2) Partners to be notified. The tax matters partner shall provide
information with respect to any action or other matter specified in
paragraph (b)(1) of this section to all notice group representatives and
all other partners except partners--
(i) Whose partnership items become nonpartnership items before the
expiration of the period specified in paragraph (b)(3) of this section
for furnishing that information;
(ii) Who are indirect partners and who are not identified to the tax
matters partner at least 30 days before the tax matters partner is
required to provide the information;
(iii) Who are treated as partners solely by virtue of
Sec. 301.6231(a)(2)-1;
(iv) Who are members of a notice group as of the date on which the
tax matters partner takes that action or receives information with
respect to that matter (see Sec. 301.6223(b)-1(c)(4) for the date on
which a partner becomes a member of a notice group); or
(v) Who have already received information with respect to the action
or matter from any other person.
(3) Time for furnishing information. The tax matters partner shall
furnish
[[Page 170]]
information with respect to an action or other matter described in
paragraph (b)(1) of this section within 30 days of taking the action or
receiving information with respect to that matter.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6223(g)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50550, Oct. 4, 2001]
Sec. 301.6223(h)-1 Responsibilities of pass-thru partner.
(a) In general. The pass-thru partner shall, within 30 days of
receiving notice or any other information regarding a partnership
proceeding from the Internal Revenue Service, the tax matters partner,
or another pass-thru partner, forward a copy of that notice or
information to the person or persons holding an interest through the
pass-thru partner in the profits or losses of the partnership for the
partnership taxable year to which the notice or information relates. In
the case of a pass-thru partner that is a partnership within the meaning
of section 6231(a)(1), the tax matters partner of such partnership shall
forward copies of the notice or information to the partners of such
partnership.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6223(h)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50551, Oct. 4, 2001]
Sec. 301.6224(a)-1 Participation in administrative proceedings.
(a) In general. Every partner in the partnership, including an
indirect partner, has the right to participate in any phase of
administrative proceedings. However, except as provided in section 6223
and the regulations thereunder, neither the Internal Revenue Service nor
the tax matters partner is required to provide notice of any proceeding
to the partners. Consequently, a partner who wishes, for example, to be
present during a preliminary discussion between an examining agent and
the tax matters partner should make special arrangements with the tax
matters partner to obtain information as to the time and place of the
discussion. The Internal Revenue Service and the tax matters partner
will determine the time and place for all administrative proceedings.
Arrangements will generally not be changed merely for the convenience of
another partner.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6224(a)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50551, Oct. 4, 2001]
Sec. 301.6224(b)-1 Partner may waive rights.
(a) In general. A partner may at any time waive any right that the
partner has or any restriction on action by the Internal Revenue Service
under subchapter C of chapter 63 of the Internal Revenue Code.
(b) Form and manner of making waiver. The waiver described in
paragraph (a) of this section shall be made by a written statement. If
the Internal Revenue Service furnishes a form to be used for this
purpose, the partner may make the waiver by completing the form in
accordance with the form's instructions. If such a form is not
furnished, the statement shall--
(1) Be clearly identified as a waiver under section 6224(b);
(2) Identify the partner and the partnership by name, address, and
taxpayer identification number;
(3) Specify the right or restriction being waived and the taxable
year(s) to which the waiver applies;
(4) Be signed by the partner making the waiver; and
(5) Be filed with the service center where the partnership return is
filed. However, if the person filing the statement knows that the notice
described in section 6223(a)(1) (beginning of an administrative
proceeding) has already been mailed to the tax matters partner, the
statement shall be filed with the Internal Revenue Service office that
mailed such notice.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4,
[[Page 171]]
2001, see Sec. 301.6224(b)-1T contained in 26 CFR part 1, revised April
1, 2001.
[T.D. 8965, 66 FR 50551, Oct. 4, 2001]
Sec. 301.6224(c)-1 Tax matters partner may bind nonnotice partners.
(a) In general. In the absence of a showing of fraud, malfeasance,
or misrepresentation of fact, if the tax matters partner enters into a
settlement agreement with the Internal Revenue Service with respect to
partnership items, including partnership-level determinations relating
to any penalty, addition to tax, or additional amounts that relate to
adjustments to partnership items, and expressly states that the
agreement shall be binding on the other partners, then that agreement
shall be binding on all partners except those who--
(1) Are, as of the day on which the agreement is entered into,
either notice partners or members of a notice group (see
Sec. 301.6223(b)-1(c)(4) for the date on which a partner becomes a
member of a notice group); or
(2) Have, at least 30 days before the day on which the agreement is
entered into, filed with the Internal Revenue Service the statement
described in paragraph (c) of this section.
(b) Indirect partners--(1) In general. If, under paragraph (a) of
this section, a pass-thru partner is not bound by an agreement entered
into by the tax matters partner, all indirect partners holding an
interest in the partnership through that pass-thru partner shall not be
bound by that agreement. If, however, the pass-thru partner is bound by
an agreement entered into by the tax matters partner, paragraph (a) of
this section shall be applied separately to each indirect partner
holding an interest in the partnership through the pass-thru partner to
determine whether the indirect partner is also bound by the agreement.
(2) Example. The following example illustrates the principles of
this section:
Example. Partnership P has over 100 partners. Partnership J is a
partner in partnership P with a profits interest of less than 1 percent.
Partnership J has three partners, A, B, and C. A is a member of a notice
group with respect to partnership P, but B and C are not. On July 1,
2002, B filed the statement described in paragraph (c) of this section
not to be bound by any settlement agreement entered into by the tax
matters partner of partnership P. On August 1, 2002, the tax matters
partner of partnership P enters into a settlement agreement with the
Internal Revenue Service and states that the agreement is binding on
other partners as provided in section 6224(c)(3). Because partnership J
is bound by the settlement agreement, paragraph (a) of this section is
applied separately to each of the indirect partners to determine whether
they are bound. A is not bound by the agreement because A was a member
of a notice group on the day the agreement was entered into and B is not
bound because B filed the statement not to be bound at least 30 days
before the agreement was entered into. C is bound by the settlement
agreement.
(c) Statement not to be bound--(1) Contents of statement. The
statement referred to in paragraph (a)(2) of this section shall--
(i) Be clearly identified as a statement to deny settlement
authority to the tax matters partner under section 6224(c)(3)(B);
(ii) Identify the partner and partnership by name, address, and
taxpayer identification number;
(iii) Specify the taxable year or years to which the statement
applies; and
(iv) Be signed by the partner filing the statement.
(2) Place where statement is to be filed. The statement described in
paragraph (c)(1) of this section generally shall be filed with the
Internal Revenue Service service center where the partnership return is
filed. However, if the partner knows that the notice described in
section 6223(a)(1) (beginning of an administrative proceeding) has
already been mailed to the tax matters partner, the statement shall be
filed with the Internal Revenue Service office that mailed that notice.
(3) Consolidated statements. The statement described in paragraph
(c)(1) of this section may be filed with respect to more than one
partner if the requirements of that paragraph (c)(1) (including
signatures) are satisfied with respect to each partner.
(d) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4,
[[Page 172]]
2001, see Sec. 301.6224(c)-1T contained in 26 CFR part 1, revised April
1, 2001.
[T.D. 8965, 66 FR 50551, Oct. 4, 2001]
Sec. 301.6224(c)-2 Pass-thru partner binds indirect partners.
(a) Pass-thru partner binds unidentified indirect partners--(1) In
general. If a pass-thru partner enters into a settlement agreement with
the Internal Revenue Service with respect to partnership items, that
agreement binds all indirect partners holding an interest in that
partnership through the pass-thru partner except those indirect partners
who have been identified as provided in section 6223(c)(3) and
Sec. 301.6223(c)-1 at least 30 days before the date on which the
agreement is entered into. A settlement with respect to partnership
items includes partnership-level determinations relating to any penalty,
addition to tax, and additional amounts that relate to adjustments to
partnership items. However, if, in addition to the interest in the
partnership held through the pass-thru partner entering into a
settlement agreement, an indirect partner holds a separate interest in
that partnership, either directly or indirectly through a different
pass-thru partner, then the indirect partner shall not be bound by that
settlement agreement with respect to the interests held directly or
indirectly through a pass-thru partner other than the pass-thru partner
entering into the settlement agreement.
(2) Example. The provisions of paragraph (a)(1) of this section may
be illustrated by the following example:
Example. Partnership J is a partner in partnership P. C is a partner
in J but has not been identified as provided in section 6223(c)(3) and
Sec. 301.6223(c)-1. The only interest that C holds in P is through J.
The tax matters partner of J enters into a settlement agreement with the
Internal Revenue Service with respect to partnership items arising from
P. C is bound by the settlement agreement entered into by the tax
matters partner of J.
(b) Person in pass-thru partner authorized to enter into settlement
agreement that binds indirect partners. In the case of a pass-thru
partner that is--
(1) A partnership within the meaning of section 6231(a)(1), the tax
matters partner of that partnership;
(2) A partnership other than a partnership described in paragraph
(b)(1) of this section, any general partner of that partnership;
(3) An S corporation, any officer of that S corporation; or
(4) A trust, estate, or nominee, any person authorized in writing to
act on behalf of that trust, estate, or nominee, may enter into a
settlement agreement with the Internal Revenue Service on behalf of its
respective entity that would bind the unidentified indirect partners
that hold a partnership interest through the pass-thru partner.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6224(c)-2T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50552, Oct. 4, 2001]
Sec. 301.6224(c)-3 Consistent settlements.
(a) In general. If the Internal Revenue Service enters into a
settlement agreement with any partner with respect to partnership items,
whether comprehensive or partial, the Internal Revenue Service shall
offer to any other partner who so requests in accordance with paragraph
(c) of this section, settlement terms consistent with those contained in
the settlement agreement entered into.
(b) Requirements for consistent settlement terms--(1) In general.
Consistent settlement terms are those based on the same determinations
with respect to partnership items. However, consistent settlement terms
also may include partnership-level determinations of any penalty,
addition to tax, or additional amount that relates to partnership items.
Settlements with respect to partnership items shall be self-contained;
thus, a concession by one party with respect to a partnership item may
not be based upon a concession by another party with respect to any item
that is not a partnership item other than a partnership-level
determination of any penalty, addition to tax, or additional amount that
relates to an adjustment to a partnership item. Consistent agreements
must be identical to the original settlement (that is, the settlement
upon which the offered settlement terms are based). A consistent
[[Page 173]]
agreement must mirror the original settlement and may not be limited to
selected items from the original settlement. Once a partner has settled
a partnership item, or a partnership-level determination of any penalty,
addition to tax, or additional amount that relates to an adjustment to a
partnership item, that partner may not subsequently request settlement
terms consistent with a settlement that contains the previously settled
item. The requirement for consistent settlement terms applies only if--
(i) The items were partnership items (or a partnership-level
determination of any related penalty, addition to tax, or additional
amount) for the partner entering into the original settlement
immediately before the original settlement; and
(ii) The items are partnership items (or a partnership-level
determination of any related penalty, addition to tax, or additional
amount) for the partner requesting the consistent settlement at the time
the partner files the request.
(2) Effect of consistent agreement. Consistent settlement terms are
reflected in a consistent agreement. A consistent agreement is not a
settlement agreement that gives rise to further consistent settlement
rights because it is required to be given without volitional agreement
of the Secretary. Therefore, a consistent agreement required to be
offered to a requesting taxpayer is not a settlement agreement under
section 6224(c)(2) or paragraph (c)(3) of this section which starts a
new period for requesting consistent settlement terms. For all other
purposes of the Internal Revenue Code, however, (e.g., binding effect
under section 6224(c)(1) and conversion to nonpartnership items under
section 6231(b)(1)(C)), a consistent agreement is treated as a
settlement agreement.
(c) Time and manner of requesting consistent settlements--(1) In
general. A partner desiring settlement terms consistent with the terms
of any settlement agreement entered into between any other partner and
the Internal Revenue Service shall submit a written statement to the
Internal Revenue Service office that entered into the settlement.
(2) Contents of statement. Except as otherwise provided in
instructions to the taxpayer from the Internal Revenue Service, the
written statement described in paragraph (c)(1) of this section shall--
(i) Identify the statement as a request for consistent settlement
terms under section 6224(c)(2);
(ii) Contain the name, address, and taxpayer identification number
of the partnership and of the partner requesting the settlement offer
(and, in the case of an indirect partner, of the pass-thru partner
through which the indirect partner holds an interest);
(iii) Identify the earlier agreement to which the request refers;
and
(iv) Be signed by the partner making the request.
(3) Time for filing request. The statement shall be filed not later
than the later of--
(i) The 150th day after the day on which the notice of final
partnership administrative adjustment is mailed to the tax matters
partner; or
(ii) The 60th day after the day on which the settlement agreement
was entered into.
(d) Examples. The following examples illustrate the principles of
this section:
Example 1. The Internal Revenue Service seeks to disallow a $100,000
loss reported by Partnership P $20,000 of which was allocated to partner
X, and $10,000 of which was allocated to partner Y. The Internal Revenue
Service agrees to a settlement with X in which the Internal Revenue
Service allows $12,000 of the loss, accepts the treatment of all other
partnership items on the partnership return, and imposes a penalty for
negligence related to the $8,000 loss disallowance. Partner Y requests
settlement terms consistent with the settlement made between X and the
Internal Revenue Service. The items are partnership items (or a related
penalty) for X immediately before X enters into the settlement agreement
and are partnership items (or a related penalty) for Y at the time of
the request. The Internal Revenue Service must offer Y settlement terms
allowing a $6,000 loss, a negligence penalty on the $4,000 disallowance,
and otherwise reflecting the treatment of partnership items on the
partnership return.
Example 2. F files inconsistently with Partnership P and reports the
inconsistency. The Internal Revenue Service notifies F that it will
treat all partnership items arising from P as nonpartnership items with
respect to F. Later, the Internal Revenue Service enters
[[Page 174]]
into a settlement with F on these items. The Internal Revenue Service is
not required to offer the other partners of P settlement terms
consistent with the settlement reached between F and the Internal
Revenue Service because the items arising from P are not partnership
items with respect to F.
Example 3. G, a partner in Partnership P, filed suit under section
6228(b) after the Internal Revenue Service failed to allow an
administrative adjustment request with respect to a partnership item
arising from P for a taxable year. Under section 6231(b)(1)(B), the
partnership items of G for the partnership taxable year became
nonpartnership items as of the date G filed suit. After G filed suit,
another partner and the Internal Revenue Service entered into a
settlement agreement with respect to items arising from P in that year.
G is not entitled to consistent settlement terms because, at the time of
the settlement, the items arising from P are no longer partnership items
with respect to G.
(e) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6224(c)-3T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50552, Oct. 4, 2001]
Sec. 301.6226(a)-1 Principal place of business of partnership.
(a) In general. The principal place of a partnership's business for
purposes of determining the appropriate district court in which a
petition for a readjustment of partnership items may be filed is its
principal place of business as of the date the petition is filed.
(b) Example. The provisions of paragraph (a) of this section may be
illustrated by the following example:
Example. The principal place of Partnership A's business on the day
that the notice of the final partnership administrative adjustment was
mailed to A's tax matters partner was Cincinnati, Ohio. However, by the
day on which a petition seeking judicial review of that adjustment was
filed, A had moved its principal place of business to Louisville,
Kentucky. For purposes of section 6226(a)(2), A's principal place of
business is Louisville.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6226(a)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50553, Oct. 4, 2001]
Sec. 301.6226(b)-1 5-percent group.
(a) In general. All members of a 5-percent group shall join in
filing any petition for judicial review. The designation of a partner as
a representative of a notice group does not authorize that partner to
file a petition for a readjustment of partnership items on behalf of the
notice group.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6226(b)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50553, Oct. 4, 2001]
Sec. 301.6226(e)-1 Jurisdictional requirement for bringing an action in District Court or United States Court of Federal Claims.
(a) Amount to be deposited--(1) In general. The jurisdictional
amount that the filing partner (or, in the case of a petition filed by a
5-percent group, each member of the group, or, for civil actions
beginning on or after April 2, 2002, in the case of a petition filed by
a pass-thru partner, each indirect partner holding an interest through
the pass-thru partner) shall deposit is the amount by which the tax
liability of the partner would be increased if the treatment of the
partnership items on the partner's return were made consistent with the
treatment of partnership items on the partnership return, as adjusted by
the notice of final partnership administrative adjustment. The partner
is not required to pay other outstanding liabilities in order to deposit
a jurisdictional amount.
(2) Example. The provisions of paragraph (a)(1) of this section may
be illustrated by the following example:
Example. A files a petition for readjustment of partnership items in
the United States Court of Federal Claims. A's tax liability would be
increased by $4,000 if partnership items on A's return were conformed to
the partnership return, as adjusted by the notice of final partnership
administrative adjustment. A has an unpaid liability of $10,000
attributable to nonpartnership items. A is required to deposit $4,000 in
order to satisfy the jurisdictional requirement.
(b) Deposit taken into account in computing interest. The amount
deposited is
[[Page 175]]
treated as a payment of tax for purposes of chapter 67 of the Internal
Revenue Code (relating to interest).
(c) Deposit generally not treated as payment of tax. Except as
provided in paragraph (b) of this section, an amount deposited under
section 6226(e) shall not be treated as a payment of tax. Thus, the
Internal Revenue Service may proceed against the depositor for a
deficiency based on nonpartnership items without regard to this deposit.
(d) Amount deposited may be applied against assessment. If the
restriction on assessment provided under section 6225(a) lapses with
respect to a deficiency attributable to partnership items for a
partnership taxable year while an amount is on deposit under section
6226(e) in connection with a petition relating to those items, the
Internal Revenue Service may apply the amount deposited against any such
deficiency that is assessed.
(e) Effective date. Except as otherwise provided in paragraph (a)(1)
of this section, this section is applicable to civil actions beginning
on or after October 4, 2001. For civil actions beginning prior to
October 4, 2001, see Sec. 301.6226(e)-1T contained in 26 CFR part 1,
revised April 1, 2001.
[T.D. 8965, 66 FR 50554, Oct. 4, 2001]
Sec. 301.6226(f)-1 Scope of judicial review.
(a) In general. A court reviewing a notice of final partnership
administrative adjustment has jurisdiction to determine all partnership
items for the taxable year to which the notice relates and the proper
allocation of such items among the partners. Thus, the review is not
limited to the items adjusted in the notice. In addition, the court has
jurisdiction in the partnership-level proceeding to determine any
penalty, addition to tax, or additional amount that relates to an
adjustment to a partnership item. However, the court does not have
jurisdiction in the partnership-level proceeding to consider any
partner-level defenses to any penalty, addition to tax, or additional
amount that relates to an adjustment to a partnership item. See section
6230(c)(4) and Sec. 301.6221-1(c) and (d).
(b) Example. The provisions of paragraph (a) of this section may be
illustrated by the following example:
Example. The Internal Revenue Service issues a notice of final
partnership administrative adjustment with respect to Partnership ABC in
which the only item adjusted is depreciation. A petition for judicial
review of that notice is filed. During the judicial proceeding, a
partner of ABC, in accordance with the applicable court rules, raises an
issue relating to the treatment of intangible drilling costs. The court
reviewing the notice has jurisdiction to determine the intangible
drilling cost issue in addition to the depreciation issue.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6226(f)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50554, Oct. 4, 2001]
Sec. 301.6227(c)-1 Administrative adjustment request by the tax matters partner on behalf of the partnership.
(a) In general. A request for an administrative adjustment filed by
the tax matters partner on behalf of the partnership shall be filed on
the form prescribed by the Internal Revenue Service for that purpose in
accordance with that form's instructions. Except as otherwise provided
in that form's instructions, the request shall be--
(1) Filed with the service center where the original partnership
return was filed (but, if the notice described in section 6223(a)(1)
(beginning of an administrative proceeding) has already been mailed to
the tax matters partner, the statement should be filed with the Internal
Revenue Service office that mailed such notice);
(2) Signed by the tax matters partner; and
(3) Accompanied by revised schedules showing the effects of the
proposed changes on each partner and an explanation of the changes.
(b) Denied request for treatment as a substituted return remains
administrative adjustment request. An administrative adjustment request
filed by the tax matters partner on behalf of the partnership for which
substituted return treatment is requested but not granted
[[Page 176]]
remains an administrative adjustment request. Thus, for example, the tax
matters partner may file suit under section 6228(a) if the Internal
Revenue Service fails to take timely action on the request.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6227(b)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50554, Oct. 4, 2001]
Sec. 301.6227(d)-1 Administrative adjustment request filed on behalf of a partner.
(a) In general. A request for an administrative adjustment on behalf
of a partner shall be filed on the form prescribed by the Internal
Revenue Service for that purpose in accordance with that form's
instructions. Except as otherwise provided in that form's instructions,
the request shall--
(1) Be filed in duplicate, the original copy filed with the
partner's amended income tax return (on which the partner computes the
amount by which the partner's tax liability should be adjusted if the
request is granted) and the other copy filed with the service center
where the partnership return is filed (but, if the notice described in
section 6223(a)(1) (beginning of an administrative proceeding) has
already been mailed to the tax matters partner, the statement should be
filed with the Internal Revenue Service office that mailed such notice);
(2) Identify the partner and the partnership by name, address, and
taxpayer identification number;
(3) Specify the partnership taxable year to which the administrative
adjustment request applies;
(4) Relate only to partnership items; and
(5) Relate only to one partnership and one partnership taxable year.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6227(c)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50555, Oct. 4, 2001]
Sec. 301.6229(b)-1 Extension by agreement.
(a) In general. Any partnership may authorize any person to extend
the period described in section 6229(a) with respect to all partners by
filing a statement to that effect with the service center where the
partnership return is filed (but, if the notice described in section
6223(a)(1) (beginning of an administrative proceeding) has already been
mailed to the tax matters partner, the statement should be filed with
the Internal Revenue Service office that mailed such notice). The
statement shall--
(1) Provide that it is an authorization for a person other than the
tax matters partner to extend the assessment period with respect to all
partners;
(2) Identify the partnership and the person being authorized by
name, address, and taxpayer identification number;
(3) Specify the partnership taxable year or years for which the
authorization is effective; and
(4) Be signed by all persons who were general partners (or, in the
case of an LLC, member-managers, as those terms are defined in
Sec. 301.6231(a)(7)-2(b)) at any time during the year or years for which
the authorization is effective.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6229(b)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50555, Oct. 4, 2001]
Sec. 301.6229(b)-2 Special rule with respect to debtors in Title 11 cases.
(a) In general. Notwithstanding any other law or rule of law, if an
agreement is entered into under section 6229(b)(1)(B), and the agreement
is signed by a person who would be the tax matters partner but for the
fact that, at the time that the agreement is executed, the person is a
debtor in a bankruptcy proceeding under Title 11 of the United States
Code, such agreement shall be binding on all partners in the partnership
unless the Internal Revenue Service has been notified of
[[Page 177]]
the bankruptcy proceeding in accordance with paragraph (b) of this
section.
(b) Procedures for notifying the Internal Revenue Service of a
partner's bankruptcy proceeding. (1) The Internal Revenue Service shall
be notified of the bankruptcy proceeding of the tax matters partner in
accordance with the procedures set forth in Sec. 301.6223(c)-1.
(2) In addition to the information specified in Sec. 301.6223(c)-1,
notification that a person is (or was) a debtor in a bankruptcy
proceeding shall include the date the bankruptcy proceeding was filed,
the name and address of the court in which the bankruptcy proceeding
exists (or took place), the caption of the bankruptcy proceeding
(including the docket number or other identification number used by the
court), and the status of the proceeding as of the date of notification.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6229(b)-2T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50555, Oct. 4, 2001]
Sec. 301.6229(e)-1 Information with respect to unidentified partner.
(a) In general. A partner who is not properly identified on the
partnership return (including an indirect partner) remains an
unidentified partner for purposes of section 6229(e) until identifying
information is furnished as provided in Sec. 301.6223(c)-1.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6229(e)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50555, Oct. 4, 2001]
Sec. 301.6229(f)-1 Special rule for partial settlement agreements.
(a) In general. If a partner enters into a settlement agreement with
the Internal Revenue Service with respect to the treatment of some of
the partnership items or partnership-level determinations of any
penalty, addition to tax, or additional amount in dispute for a
partnership taxable year, but one or more other partnership items or
determinations remain in dispute, the period of limitations for
assessing any tax attributable to the settled items shall be determined
as if such agreement had not been entered into.
(b) Other items remaining in dispute. Pursuant to section 6226(c), a
partner is a party to a partnership-level judicial proceeding with
respect to partnership items and partnership-level determinations of
penalties, additions to tax or additional amounts. When a partner
settles partnership items, the settled partnership items convert to
nonpartnership items under section 6231(b)(1)(C) and will not be subject
to any future or pending partnership-level proceeding pursuant to
section 6226(d)(1). The remaining unsettled partnership items, as well
as any unsettled penalty, addition to tax, or additional amount that
relates to an adjustment to a partnership item (regardless of whether
the partnership item to which it relates has been settled), however,
will remain subject to determination under partnership-level
administrative and judicial procedures. Consequently, any remaining
unsettled items, including any unsettled penalty, addition to tax, or
additional amount that relates to an adjustment to a partnership item,
will be deemed to remain in dispute. Thus, the period for assessing any
tax attributable to the settled items will be governed by the period for
assessing any tax attributable to the remaining unsettled items.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6229(f)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50555, Oct. 4, 2001]
Sec. 301.6230(b)-1 Request that correction not be made.
(a) In general. The request that a correction not be made under
section 6230(b)(2) shall be in writing and shall--
(1) State that it is a request that a correction not be made under
section 6230(b);
(2) Identify the partnership and the partner filing the request by
name, address, and taxpayer identification number;
[[Page 178]]
(3) Be signed by the partner filing the request; and
(4) Be filed with the Internal Revenue Service office that provided
the notice of the correction of the error.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6230(b)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50556, Oct. 4, 2001]
Sec. 301.6230(c)-1 Claim arising out of erroneous computation, etc.
(a) In general. A claim for refund under section 6230(c) shall state
the grounds for the claim and shall be filed with the service center
where the partner's return is filed.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6230(c)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50556, Oct. 4, 2001]
Sec. 301.6230(e)-1 Tax matters partner required to furnish names.
(a) In general. If a notice of the beginning of an administrative
proceeding is mailed to the tax matters partner with respect to any
partnership taxable year, the tax matters partner shall furnish to the
Internal Revenue Service office that issued the notice the name,
address, profits interest, and taxpayer identification number of each
person who was a partner in the partnership at any time during that
taxable year if that information was not provided on the partnership
return filed for that year.
(b) Revised or additional information. If the tax matters partner
discovers that any information furnished to the Internal Revenue Service
on the partnership return or under paragraph (a) of this section was
incorrect or incomplete, the tax matters partner shall furnish revised
or additional information to the Internal Revenue Service within 15 days
of discovering that the information furnished to the Internal Revenue
Service was incorrect or incomplete.
(c) Information required with respect to indirect partners. The
requirements of this section for identifying information apply with
respect to indirect partners to the extent that the tax matters partner
has such information.
(d) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6230(e)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50556, Oct. 4, 2001]
Sec. 301.6231(a)(1)-1 Exception for small partnerships.
(a) In general. For purposes of the exception for small partnerships
under section 6231(a)(1)(B), the rules contained in this section shall
apply.
(1) 10 or fewer. The 10 or fewer limitation described in section
6231(a)(1)(B)(i) is applied to the number of natural persons, C
corporations, and estates of deceased partners that were partners at any
one time during the partnership taxable year. Thus, for example, a
partnership that at no time during the taxable year had more than 10
partners may be treated as a small partnership even if, because of
transfers of interests in the partnership, 11 or more natural persons, C
corporations, or estates of deceased partners owned interests in the
partnership for some portion of the taxable year. See section 1361(a)(2)
for the definition of a C corporation. For purposes of section
6231(a)(1)(B) and this section, a husband and wife (and their estates)
are treated as one person.
(2) Pass-thru partner. The exception provided in section
6231(a)(1)(B) does not apply to a partnership for a taxable year if any
partner in the partnership during that taxable year is a pass-thru
partner as defined in section 6231(a)(9). For purposes of this paragraph
(a)(2), an estate shall not be treated as a pass-thru partner.
(3) Determination made annually. The determination of whether a
partnership meets the requirements for the exception for small
partnerships under section 6231(a)(1)(B) and this paragraph (a) shall be
made with respect to each partnership taxable year. Thus, a partnership
that does not qualify as a small partnership in one taxable year may
qualify as a small partnership in another taxable year if the
requirements
[[Page 179]]
for the exception under section 6231(a)(1)(B) and this paragraph (a) are
met with respect to that other taxable year.
(b) Election to have subchapter C of chapter 63 apply--(1) In
general. Any partnership that meets the requirements set forth in
section 6231(a)(1)(B) and paragraph (a) of this section (relating to the
exception for small partnerships) may elect under paragraph (b)(2) of
this section to have the provisions of subchapter C of chapter 63 of the
Internal Revenue Code apply with respect to that partnership.
(2) Method of election. A partnership shall make the election
described in paragraph (b)(1) of this section by attaching a statement
to the partnership return for the first taxable year for which the
election is to be effective. The statement shall be identified as an
election under section 6231(a)(1)(B)(ii), shall be signed by all persons
who were partners of that partnership at any time during the partnership
taxable year to which the return relates, and shall be filed at the time
(determined with regard to any extension of time for filing) and place
prescribed for filing the partnership return. However, for any
partnership taxable year for which the due date of the return
(determined without regard to extensions) is before January 2, 2002, the
partnership may file the statement described in the preceding sentence
on or before the date which is one year before the date specified in
section 6229(a) for the expiration of the period of limitations with
respect to that partnership (determined with regard to extensions of
that period under section 6229(b)).
(3) Years covered by election. The election shall be effective for
the partnership taxable year to which the return relates and all
subsequent partnership taxable years unless revoked with the consent of
the Commissioner.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(a)(1)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50556, Oct. 4, 2001]
Sec. 301.6231(a)(2)-1 Persons whose tax liability is determined indirectly by partnership items.
(a) Spouse filing joint return with individual holding a separate
interest--(1) In general. Except as otherwise provided in this paragraph
(a), a spouse who files a joint return with an individual holding a
separate interest in the partnership shall be treated as a partner for
purposes of subchapter C of chapter 63 of the Internal Revenue Code.
Thus, the spouse who files a joint return with a partner will be
permitted to participate in administrative and judicial proceedings.
(2) Counting rules. A spouse who files a joint return with an
individual holding a separate interest in the partnership shall not be
counted as a partner for purposes of applying section 6223(b) (relating
to special rules for partnerships with more than 100 partners) and
section 6231(a)(1)(B) (relating to the exception for small
partnerships).
(3) Notice rules--(i) In general. Except as provided in paragraph
(a)(3)(ii) of this section, for purposes of subchapter C of chapter 63
of the Internal Revenue Code, a spouse who files a joint return with an
individual holding a separate interest in the partnership shall be
treated as receiving any notice received by the individual holding the
separate interest.
(ii) Spouse identified on partnership return or by statement.
Paragraph (a)(3)(i) of this section shall not apply to a spouse who
files a joint return with an individual holding a separate interest in
the partnership if that spouse--
(A) Is identified on the partnership return; or
(B) Is identified as a partner entitled to notice as provided in
Sec. 301.6223(c)-1(b).
(4) Conversion of partnership items--(i) Individual holding a
separate interest. A spouse who files a joint return with an individual
holding a separate interest in the partnership shall cease to be treated
as a partner in the partnership under paragraph (a)(1) of this section
upon the conversion of the partnership items of the individual holding
the separate interest in the partnership to nonpartnership items
pursuant to section 6231(b). If each spouse holds a separate interest in
the partnership, the
[[Page 180]]
previous sentence shall be applied separately with respect to each
partnership interest.
(ii) Spouse who files a joint return with an individual holding a
separate interest in the partnership. A spouse who files a joint return
with an individual holding a separate interest in the partnership shall
cease to be treated as a partner in the partnership under paragraph
(a)(1) of this section upon the occurrence of an event that would
convert the partnership items of the spouse to nonpartnership items if
the spouse were the owner of a separate interest.
(iii) Examples. The following examples illustrate the application of
paragraph (a)(4) of this section:
Example 1. Husband owns a separate interest in ABC partnership and
files a joint return with Wife. Husband files for bankruptcy. Pursuant
to Sec. 301.6231(c)-7, upon filing for bankruptcy, the partnership items
of the debtor convert to nonpartnership items. Thus, Husband's
partnership items converted to nonpartnership items upon the filing of
Husband's bankruptcy petition. Pursuant to paragraph (a)(4)(i) of this
section, Wife is no longer treated as a partner of ABC partnership as of
the date the partnership items of Husband converted to nonpartnership
items.
Example 2. Wife owns a separate interest in XYZ partnership and
files a joint return with Husband. Husband files for bankruptcy. Because
the filing of the bankruptcy petition by Husband is an event that would
convert Husband's partnership items to nonpartnership items if Husband
were the owner of a separate interest, Husband shall no longer be
treated as a partner as of the filing of the bankruptcy petition.
Pursuant to paragraph (a)(4)(ii) of this section, the partnership items
of Wife are not affected by Husband's bankruptcy.
(5) Cross-reference. See Sec. 301.6231(a)(12)-1 for special rules
relating to spouses holding a joint interest in a partnership.
(b) Shareholder of C corporation. A shareholder of a C corporation
(as defined in section 1361(a)(2)) is not a partner in a partnership
merely because the C corporation is a partner in that partnership.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(a)(2)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50557, Oct. 4, 2001]
Sec. 301.6231(a)(3)-1 Partnership items.
(a) In general. For purposes of subtitle F of the Internal Revenue
Code of 1954, the following items which are required to be taken into
account for the taxable year of a partnership under subtitle A of the
Code are more appropriately determined at the partnership level than at
the partner level and, therefore, are partnership items:
(1) The partnership aggregate and each partner's share of each of
the following:
(i) Items of income, gain loss, deduction, or credit of the
partnership;
(ii) Expenditures by the partnership not deductible in computing its
taxable income (for example, charitable contributions);
(iii) Items of the partnership which may be tax preference items
under section 57(a) for any partner;
(iv) Income of the partnership exempt from tax;
(v) Partnership liabilities (including determinations with respect
to the amount of the liabilities, whether the liabilities are
nonrecourse, and changes from the preceding taxable year); and
(vi) Other amounts determinable at the partnership level with
respect to partnership assets, investments, transactions and operations
necessary to enable the partnership or the partners to determine--
(A) The investment credit determined under section 46(a);
(B) Recapture under section 47 of the investment credit;
(C) Amounts at risk in any activity to which section 465 applies;
(D) The depletion allowance under section 613A with respect to oil
and gas wells; and
(E) The application of section 751 (a) and (b);
(2) Guaranteed payments;
(3) Optional adjustments to the basis of partnership property
pursuant to an election under section 754 (including necessary
preliminary determinations, such as the determination of a transferee
partner's basis in a partnership interest); and
(4) Items relating to the following transactions, to the extent that
a determination of such items can be made
[[Page 181]]
from determinations that the partnership is required to make with
respect to an amount, the character of an amount, or the percentage
interest of a partner in the partnership, for purposes of the
partnership books and records or for purposes of furnishing information
to a partner:
(i) Contributions to the partnership;
(ii) Distributions from the partnership; and
(iii) Transactions to which section 707(a) applies (including the
application of section 707(b)).
(b) Factors that affect the determination of partnership items. The
term ``partnership item'' includes the accounting practices and the
legal and factual determinations that underlie the determination of the
amount, timing, and characterization of items of income, credit, gain,
loss, deduction, etc. Examples of these determinations are: The
partnership's method of accounting, taxable year, and inventory method;
whether an election was made by the partnership; whether partnership
property is a capital asset, section 1231 property, or inventory;
whether an item is currently deductible or must be capitalized; whether
partnership activities have been engaged in with the intent to make a
profit for purposes of section 183; and whether the partnership
qualifies for the research and development credit under section 30.
(c) Illustrations--(1) In general. This paragraph (c) illustrates
the provisions of paragraph (a)(4) of this section. The determinations
illustrated in this paragraph (c) that the partnership is required to
make are not exhaustive; there may be additional determinations that the
partnership is required to make which relate to a transaction listed in
paragraph (a)(4) of this section. The critical element is that the
partnership needs to make a determination with respect to a matter for
the purposes stated; failure by the partnership actually to make a
determination (for example, because it does not maintain proper books
and records) does not prevent an item from being a partnership item.
(2) Contributions. For purposes of its books and records, or for
purposes of furnishing information to a partner, the partnership needs
to determine:
(i) The character of the amount received from a partner (for
example, whether it is a contribution, a loan, or a repayment of a
loan);
(ii) The amount of money contributed by a partner;
(iii) The applicability of the investment company rules of section
721(b) with respect to a contribution; and
(iv) The basis to the partnership of contributed property (including
necessary preliminary determinations, such as the partner's basis in the
contributed property).
To the extent that a determination of an item relating to a contribution
can be made from these and similar determinations that the partnership
is required to make, therefore, that item is a partnership item. To the
extent that that determination requires other information, however, that
item is not a partnership item. For example, it may be necessary to
determine whether contribution of the property causes recapture by the
contributing partner of the investment credit under section 47 in
certain circumstances in which that determination is irrelevant to the
partnership.
(3) Distributions. For purposes of its books and records, or for
purposes of furnishing information to a partner, the partnership needs
to determine:
(i) The character of the amount transferred to a partner (for
example, whether it is a distribution, a loan, or a repayment of a
loan);
(ii) The amount of money distributed to a partner;
(iii) The adjusted basis to the partnership of distributed property;
and
(iv) The character of partnership property (for example, whether an
item is inventory or a capital asset).
To the extent that a determination of an item relating to a distribution
can be made from these and similar determinations that the partnership
is required to make, therefore, that item is a partnership item. To the
extent that that determination requires other information, however, that
item is not a partnership item. Such other information would include
those factors used in determining the partner's basis for the
partnership interest that are not themselves partnership items, such as
the amount that the partner paid to
[[Page 182]]
acquire the partnership interest from a transferor partner if that
transfer was not covered by an election under section 754.
(4) Transactions to which section 707 (a) applies. For purposes of
its books and records, the partnership needs to determine:
(i) The amount transferred from the partnership to a partner or from
a partner to the partnership in any transaction to which section 707(a)
applies;
(ii) The character of such an amount (for example, whether or not it
is a loan; in the case of amounts paid over time for the purchase of an
asset, what portion is interest); and
(iii) The percentage of the capital interests and profits interests
in the partnership owned by each partner.
To the extent that a determination of an item relating to a transaction
to which section 707(a) applies can be made from these and similar
determinations that the partnership is required to make, therefore, that
item is a partnership item. To the extent that that determination
requires other information, however, that item is not a partnership
item. An example of such other information is the cost to the partner of
goods sold to the partnership.
(d) Effective date. This section shall apply with respect to
partnership taxable years beginning after September 3, 1982. This
section shall also apply with respect to any partnership taxable year
ending after September 3, 1982, if with respect to that year there is an
agreement entered into pursuant to section 407(a)(3) of the Tax Equity
and Fiscal Responsibility Act of 1982.
[T.D. 8082, 51 FR 13214, Apr. 18, 1986; 51 FR 19062, May 27, 1986]
Sec. 301.6231(a)(5)-1 Definition of affected item.
(a) In general. The term affected item means any item to the extent
such item is affected by a partnership item. It includes items unrelated
to the items reflected on the partnership return (for example, an item,
such as the threshold for the medical expense deduction under section
213, that varies if there is a change in an individual partner's
adjusted gross income).
(b) Basis in a partner's partnership interest. The basis of a
partner's partnership interest is an affected item to the extent it is
not a partnership item.
(c) At-risk limitation. The application of the at-risk limitation
under section 465 to a partner with respect to a loss incurred by a
partnership is an affected item to the extent it is not a partnership
item.
(d) Passive losses. The application of the passive loss rules under
section 469 to a partner with respect to a loss incurred by a
partnership is an affected item to the extent it is not a partnership
item.
(e) Penalty, addition to tax, or additional amount--(1) In general.
The term affected item includes any penalty, addition to tax, or
additional amount provided by subchapter A of chapter 68 of the Internal
Revenue Code of 1986 to the extent provided in this paragraph (e).
(2) Penalty, addition to tax, or additional amount without floor. If
a penalty, addition to tax, or additional amount that does not contain a
floor (that is, a threshold amount of underpayment or understatement
necessary before the imposition of the penalty, addition to tax, or
additional amount) is imposed on a partner as the result of an
adjustment to a partnership item, the term affected item shall include
the penalty, addition to tax, or additional amount computed with
reference to the portion of the underpayment that is attributable to the
partnership item adjustment(s) to which the penalty, addition to tax, or
additional amount applies.
(3) Penalty, addition to tax, or additional amount containing floor-
-(i) Floor exceeded prior to adjustment. If a partner would have been
subject to a penalty, addition to tax, or additional amount that
contains a floor in the absence of an adjustment to a partnership item
(that is, the partner's understatement or underpayment exceeded the
floor even without an adjustment to a partnership item) the term
affected item shall include only the portion of the penalty, addition to
tax, or additional amount computed with reference to the partnership
item (or affected item) adjustments.
(ii) Floor not exceeded prior to adjustment. In the case of a
penalty, addition
[[Page 183]]
to tax, or additional amount that contains a floor, if the taxpayer's
understatement or underpayment does not exceed the floor prior to an
adjustment to a partnership item but does so after such adjustment, the
term affected item shall include the penalty, addition to tax, or
additional amount computed with reference to the entire underpayment or
understatement to which the penalty, addition to tax, or additional
amount applies.
(4) Examples. The provisions of this paragraph (e) may be
illustrated by the following examples:
Example 1. A, a partner of P, had an aggregate underpayment of
$1,000 of which $100 is attributable to an adjustment to partnership
items. A is negligent in reporting the partnership items. The accuracy-
related penalty under section 6662 for negligence computed with
reference to the $100 underpayment attributable to the partnership item
adjustments is an affected item.
Example 2. B, a partner of P, understated B's income tax liability
attributable to nonpartnership items by $6,000. An adjustment to a
partnership item resulting from a partnership proceeding increased B's
income tax by an additional $2,000. Prior to the adjustment, B would
have been subject to the accuracy-related penalty under section 6662 for
a substantial understatement of income tax with respect to the $6,000
understatement attributable to nonpartnership items. The portion of the
accuracy-related penalty under section 6662 computed with reference to
the $2,000 understatement attributable to partnership items to which the
accuracy-related penalty applies is an affected item. The portion of the
accuracy-related penalty under section 6662 computed with reference to
the $6,000 pre-existing understatement is not an affected item.
Example 3. C, a partner in partnership P, understated C's income tax
liability attributable to nonpartnership items by $4,000. As a result of
an adjustment to partnership items, that understatement is increased to
$10,000. Prior to the adjustment, C would not have been subject to the
accuracy-related penalty under section 6662 for a substantial
understatement of income tax. The accuracy-related penalty under section
6662 computed with reference to the entire $10,000 understatement to
which the accuracy-related penalty applies is an affected item.
(f) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(a)(5)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50557, Oct. 4, 2001]
Sec. 301.6231(a)(6)-1 Computational adjustments.
(a) Changes in a partner's tax liability--(1) In general. A change
in the tax liability of a partner to properly reflect the treatment of a
partnership item under subchapter C of chapter 63 of the Internal
Revenue Code is made through a computational adjustment. A computational
adjustment includes a change in tax liability that reflects a change in
an affected item where that change is necessary to properly reflect the
treatment of a partnership item, or any penalty, addition to tax, or
additional amount that relates to an adjustment to a partnership item.
However, if a change in a partner's tax liability cannot be made without
making one or more partner-level determinations, that portion of the
change in tax liability attributable to the partner-level determinations
shall be made under the deficiency procedures (as described in
subchapter B of chapter 63 of the Internal Revenue Code), except for any
penalty, addition to tax, or additional amount that relates to an
adjustment to a partnership item.
(2) Affected items that do not require partner-level determinations.
Changes in a partner's tax liability with respect to affected items that
do not require partner-level determinations (such as the threshold
amount of medical deductions under section 213 that changes as the
result of determinations made at the partnership level) are
computational adjustments that are directly assessed. When making
computational adjustments, the Internal Revenue Service may assume that
amounts the partner reported on the partner's individual return include
all amounts reported to the partner by the partnership (on the Schedule
K-1s attached to the partnership's original return), absent contrary
notice to the Internal Revenue Service (for example, a ``Notice of
Inconsistent Treatment'' pursuant to Sec. 301.6222(a)-2(c)). Such an
assumption by the Internal Revenue Service does not constitute a
partner-level determination. Moreover, substituting redetermined
partnership
[[Page 184]]
items for the partner's previously reported partnership items (including
partnership items included in carryover amounts) does not constitute a
partner-level determination where the Internal Revenue Service otherwise
accepts, for the sole purpose of determining the computational
adjustment, all nonpartnership items (including, for example,
nonpartnership item components of carryover amounts) as reported.
(3) Affected items that require partner-level determinations.
Changes in a partner's tax liability with respect to affected items that
require partner-level determinations (such as a partner's at-risk amount
to the extent it depends upon the source from which the partner obtained
the funds that the partner contributed to the partnership) are
computational adjustments that are subject to the deficiency procedures.
Notwithstanding the preceding sentence, any penalty, addition to tax, or
additional amount that relates to an adjustment to a partnership item is
not subject to the deficiency procedures, but rather may be directly
assessed as part of the computational adjustment that is made following
the partnership proceeding, based on determinations in that proceeding,
regardless of whether any partner-level determinations may be required.
(b) Interest. A computational adjustment includes any interest due
with respect to any underpayment or overpayment of tax attributable to
adjustments to reflect properly the treatment of partnership items.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(a)(6)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50558, Oct. 4, 2001]
Sec. 301.6231(a)(7)-1 Designation or selection of tax matters partner.
(a) In general. A partnership may designate a partner as its tax
matters partner for a specific taxable year only as provided in this
section. Similarly, the designation of a partner as the tax matters
partner for a specific taxable year may be terminated only as provided
in this section. If a partnership does not designate a general partner
as the tax matters partner for a specific taxable year, or if the
designation is terminated without the partnership designating another
general partner as the tax matters partner, the tax matters partner is
the partner determined under this section.
(b) Person who may be designated tax matters partner--(1) General
requirement. A person may be designated as the tax matters partner of a
partnership for a taxable year only if that person--
(i) Was a general partner in the partnership at some time during the
taxable year for which the designation is made; or
(ii) Is a general partner in the partnership as of the time the
designation is made.
(2) Limitation on designation of tax matters partner who is not a
United States person. If any United States person would be eligible
under paragraph (a) of this section to be designated as the tax matters
partner of a partnership for a taxable year, no person who is not a
United States person may be designated as the tax matters partner of the
partnership for that year without the consent of the Commissioner. For
the definition of United States person, see section 7701(a)(30).
(c) Designation of tax matters partner at time partnership return is
filed. The partnership may designate a tax matters partner for a
partnership taxable year on the partnership return for that taxable year
in accordance with the instructions for that form.
(d) Certification by current tax matters partner of selection of
successor. If a partner properly designated as the tax matters partner
of a partnership for a partnership taxable year under this section
certifies that another partner has been selected as the tax matters
partner of the partnership for that taxable year, that other partner is
thereby designated as the tax matters partner for that year. The current
tax matters partner shall make the certification by filing with the
service center with which the partnership return is filed a statement
that--
(1) Identifies the partnership, the partner filing the statement,
and the successor tax matters partner by name,
[[Page 185]]
address, and taxpayer identification number;
(2) Specifies the partnership taxable year to which the designation
relates;
(3) Declares that the partner filing the statement has been properly
designated as the tax matters partner of the partnership for the
partnership taxable year and that that designation is in effect
immediately before the filing of the statement;
(4) Certifies that the other named partner has been selected as the
tax matters partner of the partnership for that taxable year in
accordance with the partnership's procedure for making that selection;
and
(5) Is signed by the partner filing the statement.
(e) Designation by general partners with majority interest. The
partnership may designate a tax matters partner for a partnership
taxable year at any time after the filing of a partnership return for
that taxable year by filing a statement with the service center with
which the partnership return was filed. The statement shall--
(1) Identify the partnership and the designated partner by name,
address, and taxpayer identification number;
(2) Specify the partnership taxable year to which the designation
relates;
(3) Declare that it is a designation of a tax matters partner for
the taxable year specified; and
(4) Be signed by persons who were general partners at the close of
the year and were shown on the return for that year to hold more than 50
percent of the aggregate interest in partnership profits held by all
general partners as of the close of that taxable year. For purposes of
this paragraph (e)(4), all limited partnership interests held by general
partners shall be included in determining the aggregate interest in
partnership profits held by such general partners.
(f) Designation by partners with majority interest under certain
circumstances--(1) In general. A tax matters partner may be designated
for a partnership taxable year under this paragraph (f) only if, at the
time the designation is made, each partner who was a general partner at
the close of such partnership taxable year is described in one or more
of paragraphs (f)(1)(i) through (iv) of this section as follows:
(i) The general partner is dead, or, if the general partner is an
entity, has been liquidated or dissolved;
(ii) The general partner has been adjudicated by a court of
competent jurisdiction to be no longer capable of managing his or her
person or estate;
(iii) The general partner's partnership items have become
nonpartnership items under section 6231(b); or
(iv) The general partner is no longer a partner in the partnership.
(2) Method of making designation. A tax matters partner for a
partnership taxable year may be designated under this paragraph (f) at
any time after the filing of the partnership return for such taxable
year by filing a written statement with the service center with which
the partnership return was filed. The statement shall--
(i) Identify the partnership and the designated tax matters partner
by name, address, and taxpayer identification number;
(ii) Specify the partnership taxable year to which the designation
relates;
(iii) Declare that it is a designation of a tax matters partner for
the partnership taxable year specified; and
(iv) Be signed by persons who were partners at the close of such
taxable year and were shown on the return for that year to hold more
than 50 percent of the aggregate interest in partnership profits held by
all partners as of the close of such taxable year.
(g) Designation of alternate tax matters partner. If an individual
is designated as the tax matters partner of a partnership under
paragraph (c), (d), (e), or (f) of this section, the document by which
that individual is designated may also designate an alternate tax
matters partner who will become tax matters partner upon the occurrence
of one or more of the events described in paragraph (l)(1) (i) or (ii)
of this section. The person designated as the alternate tax matters
partner becomes the tax matters partner as of the time the designation
of the tax matters partner is terminated under paragraph (l)(1) (i) or
(ii) of this section. The designation of a person as the alternate tax
matters partner shall have no effect in any other case.
[[Page 186]]
(h) Prior designations superseded. A designation of a tax matters
partner for a partnership taxable year under paragraphs (d), (e), or (f)
of this section shall supersede all prior designations of a tax matters
partner for that year, including a prior designation of an alternate tax
matters partner under paragraph (g) of this section.
(i) Resignation of designated tax matters partner. A person
designated as the tax matters partner of a partnership under this
section may resign at any time by a written statement to that effect.
The statement shall specify the partnership taxable year to which the
resignation relates and shall identify the partnership and the tax
matters partner by name, address, and taxpayer identification number.
The statement shall also be signed by the resigning tax matters partner
and shall be filed with the service center with which the partnership
return was filed.
(j) Revocation of designation. The partnership may revoke the
designation of the tax matters partner for a partnership taxable year at
any time after the filing of a partnership return for that taxable year
by filing a statement with the service center with which the partnership
return was filed. The statement shall--
(1) Identify by name, address, and taxpayer identification number
the partnership and the general partner whose designation as tax matters
partner is being revoked;
(2) Specify the partnership taxable year to which the revocation
relates;
(3) Declare that it is a revocation of a designation of the tax
matters partner for the taxable year specified; and
(4) Be signed by the persons described in paragraph (e)(4) of this
section, or, if at the time that the revocation is made, each partner
who was a general partner at the close of the partnership taxable year
to which the revocation relates is described in one or more of
paragraphs (f)(1) (i) through (iv) of this section, by the persons
described in paragraph (f)(2)(iv) of this section.
(k) When designation, etc., becomes effective--(1) In general.
Except as otherwise provided in paragraph (k)(2) of this section, a
designation, resignation, or revocation provided for in this section
becomes effective on the day that the statement required by the
applicable paragraph of this section is filed.
(2) Notice of proceeding mailed. If a notice of beginning of an
administrative proceeding with respect to a partnership taxable year is
mailed before the date on which a statement of designation, resignation,
or revocation provided for in this section with respect to that taxable
year is filed, the Service is not required to give effect to such
designation, resignation, or revocation until 30 days after the
statement is filed.
(l) Termination of designation--(1) In general. A designation of a
tax matters partner for a taxable year under this section shall remain
in effect until--
(i) The death of the designated tax matters partner;
(ii) An adjudication by a court of competent jurisdiction that the
individual designated as the tax matters partner is no longer capable of
managing the individual's person or estate;
(iii) The liquidation or dissolution of the tax matters partner, if
the tax matters partner is an entity;
(iv) The partnership items of the tax matters partner become
nonpartnership items under section 6231(c) (relating to special
enforcement areas); or
(v) The day on which--
(A) The resignation of the tax matters partner under paragraph (i)
of this section;
(B) A subsequent designation under paragraph (d), (e), or (f) of
this section; or
(C) A revocation of the designation under paragraph (j) of this
section becomes effective.
(2) Actions by the tax matters partner before termination of
designation. The termination of the designation of a partner as the tax
matters partner under paragraph (l)(1) of this section does not affect
the validity of any action taken by that partner as tax matters partner
before the designation is terminated. For example, if that tax matters
partner had previously consented to an extension of the period for
assessments under section 6229(b)(1)(B), that extension remains valid
even after termination of the designation.
(m) Tax matters partner where no partnership designation made--(1)
In general.
[[Page 187]]
The tax matters partner for a partnership taxable year shall be
determined under this paragraph (m) if--
(i) The partnership has not designated a tax matters partner under
this section for that taxable year; or
(ii) The partnership has designated a tax matters partner under this
section for that taxable year, that designation has been terminated
under paragraph (l)(1) of this section, and the partnership has not made
a subsequent designation under this section for that taxable year.
(2) General partner having the largest profits interest is the tax
matters partner. The tax matters partner for any partnership taxable
year to which this paragraph (m) applies is the general partner having
the largest profits interest in the partnership at the close of that
taxable year (or where there is more than one such partner, the one of
such partners whose name would appear first in an alphabetical listing).
For purposes of this paragraph (m)(2), all limited partnership interests
held by a general partner shall be included in determining that general
partner's profits interest in the partnership. For purposes of this
paragraph (m)(2), the general partner with the largest profits interest
is determined based on the year-end profits interests reported on the
Schedules K-1 filed with the partnership income tax return for the
taxable year for which the determination is being made.
(3) Termination of designation. A designation of a tax matters
partner for a partnership taxable year under this paragraph (m) shall
remain in effect until the earlier of the occurrence of one or more of
the events described in paragraphs (l)(1) (i) through (iv) of this
section or the day on which a designation under paragraph (d), (e), or
(f) of this section becomes effective. If a designation of a tax matters
partner for a partnership taxable year is terminated under this
paragraph (m)(3) and the partnership has not subsequently designated a
tax matters partner for that taxable year under paragraph (d), (e), or
(f) of this section, the tax matters partner for that taxable year shall
be determined under paragraph (m)(2) of this section, and, for purposes
of applying paragraph (m)(2) of this section, the general partner whose
designation was so terminated shall be treated as having no profits
interest in the partnership for that taxable year.
(n) Selection of tax matters partner by Commissioner when
impracticable to apply the largest-profits-interest rule. If the
partnership has not designated a tax matters partner under this section
for the taxable year and it is impracticable (as determined under
paragraph (o) of this section) to apply the largest-profits-interest
rule of paragraph (m)(2) of this section, the Commissioner will select a
tax matters partner as described in paragraph (p) of this section.
(o) Impracticability of largest-profits-interest rule. It is
impracticable to apply the largest-profits-interest rule of paragraph
(m)(2) of this section if, on the date the rule is applied, any one of
the following three conditions is met:
(1) General partner with the largest profits interest is not
apparent. The general partner with the largest profits interest is not
apparent from the Schedules K-1 and is not otherwise readily
determinable.
(2) Each general partner is deemed to have no profits interest in
the partnership. Each general partner is deemed to have no profits
interest in the partnership under paragraph (m)(3) of this section
(concerning termination of a designation under the largest-profits-
interest rule) because of the occurrence of one or more of the events
described in paragraphs (l)(1) (i) through (iv) of this section
(involving death, adjudication of incompetency, liquidation, and
conversion of partnership items to nonpartnership items).
(3) General partner with the largest profits interest is
disqualified. The general partner with the largest profits interest
determined under paragraph (m)(2) of this section--
(i) Has been notified of suspension from practice before the
Internal Revenue Service;
(ii) Is incarcerated;
(iii) Is residing outside the United States, its possessions, or
territories; or
(iv) Cannot be located or cannot perform the functions of a tax
matters partner for any reason, except that lack of cooperation with the
Internal
[[Page 188]]
Revenue Service by the general partner with the largest profits interest
is not a basis for finding that the partner cannot perform the functions
of a tax matters partner.
(p) Commissioner's selection of the tax matters partner--(1) When
the general partner with the largest profits interest is not apparent.
If it is impracticable under paragraph (o)(1) of this section to apply
the largest-profits-interest rule of paragraph (m)(2) of this section,
the Commissioner will select (in accordance with the notification
procedures set forth in paragraph (r) of this section) as the tax
matters partner any person who was a general partner at any time during
the taxable year under examination.
(2) When each general partner is deemed to have no profits interest
in the partnership. If it is impracticable under paragraph (o)(2) of
this section to apply the largest-profits-interest rule of paragraph
(m)(2) of this section, the Commissioner will select a partner
(including a general or limited partner) as the tax matters partner in
accordance with the criteria set forth in paragraph (q) of this section.
The Commissioner will notify both the partner selected and the
partnership of the selection, effective as of the date specified in the
notice. For regulations applicable on or after January 26, 1999
(reflecting statutory changes made effective July 22, 1998) and before
January 25, 2002, see Sec. 301.6231(a)(7)-1T(p)(2).
(2) When each general partner is deemed to have no profits interest
in the partnership. If it is impracticable under paragraph (o)(2) of
this section to apply the largest-profits-interest rule of paragraph
(m)(2) of this section, the Commissioner will select a partner
(including a general or limited partner) as the tax matters partner in
accordance with the criteria set forth in paragraph (q) of this section.
The Commissioner will notify, within 30 days of the selection, the
partner selected, the partnership, and all partners required to receive
notice under section 6223(a) of the selection of the tax matters
partner, effective as of the date specified in the notice.
(3) When the general partner with the largest profits interest is
disqualified--(i) In general. Except as otherwise provided in paragraph
(p)(3)(ii) of this section, if it is impracticable under paragraph
(o)(3) of this section to apply the largest-profits-interest rule of
paragraph (m)(2) of this section, the Commissioner will treat each
general partner who fits the criteria contained in paragraph (o)(3) of
this section as having no profits interest in the partnership for the
taxable year and will select (in accordance with the notification
procedures set forth in paragraph (r) of this section) a tax matters
partner from the remaining persons who were general partners at any time
during the taxable year.
(ii) Partner selected if no general partner may be selected. If all
general partners during the taxable year either are treated as having no
profits interest in the partnership for the taxable year under paragraph
(m)(3) of this section (concerning termination of a designation under
the largest-profits-interest rule) or are described in paragraph (o)(3)
of this section (general partner with the largest profits interest is
disqualified), the Commissioner will select a partner (including a
general or limited partner) as the tax matters partner in accordance
with the criteria set forth in paragraph (q) of this section. The
Commissioner will notify both the partner selected and the partnership
of the selection, effective as of the date specified in the notice.
(q) Criteria for selecting a partner as tax matters partner--(1) In
general. The Commissioner will select a partner as the tax matters
partner under paragraph (p) (2) or (3)(ii) of this section only if the
partner was a partner in the partnership at the close of the taxable
year under examination.
(2) Criteria to be considered. The Commissioner may consider the
following criteria in selecting a partner as the tax matters partner:
(i) The general knowledge of the partner in tax matters and the
administrative operation of the partnership.
(ii) The partner's access to the books and records of the
partnership.
(iii) The profits interest held by the partner.
(iv) The views of the partners having a majority interest in the
partnership regarding the selection.
[[Page 189]]
(v) Whether the partner is a partner of the partnership at the time
the tax-matters-partner selection is made.
(vi) Whether the partner is a United States person (within the
meaning of section 7701(a)(30)).
(3) Limited restriction on subsequent designation of a tax matters
partner by the partnership. For purposes of paragraphs (p) (2) and
(3)(ii) of this section, the partnership cannot designate a partner who
is not a general partner to serve as tax matters partner in lieu of a
partner selected by the Commissioner.
(r) Notification of partnership--(1) In general. If the Commissioner
selects a tax matters partner under the provisions of paragraph (p)(1)
or (p)(3)(i) of this section, the Commissioner will notify, within 30
days of the selection, the partner selected, the partnership, and all
partners required to receive notice under section 6223(a) of the
selection of the tax matters partner, effective as of the date specified
in the notice.
(2) Limited opportunity for partnership to designate the tax matters
partner. (i) Before the Commissioner selects a tax matters partner under
paragraphs (p) (1) and (3)(i) of this section, the Commissioner will
notify the partnership by mail that, after 30 days from the date of the
notice, the Commissioner will make a determination that it is
impracticable to apply the largest-profits-interest rule of paragraph
(m)(2) of this section and will select the tax matters partner unless a
prior designation is made by the partnership. This delay in making the
determination will permit the partnership to designate a tax matters
partner under paragraph (e) of this section (designation by general
partners with a majority interest) or paragraph (f) of this section
(designation by partners with a majority interest under certain
circumstances), thereby avoiding a selection made by the Commissioner.
(ii) During the 30-day period and prior to a tax-matters-partner
designation by the partnership, the Commissioner will communicate with
the partnership by sending all correspondence or notices to ``The Tax
Matters Partner'' in care of the partnership at the partnership's
address.
(iii) Any subsequent designation of a tax matters partner by the
partnership after the 30-day period will become effective as provided
under paragraph (k)(2) of this section (concerning designations made
after a notice of beginning of administrative proceeding is mailed).
(s) Effective date. This section applies to all designations,
selections, and terminations of a tax matters partner occurring on or
after December 23, 1996, except for paragraphs (p)(2) and (r)(1), that
are applicable on or after October 4, 2001.
[T.D. 8698, 61 FR 67459, Dec. 23, 1996, as amended by T.D. 8808, 64 FR
3840, Jan. 26, 1999; T.D. 8965, 66 FR 50558, Oct. 4, 2001]
Sec. 301.6231(a)(7)-2 Designation or selection of tax matters partner for a limited liability company (LLC).
(a) In general. Solely for purposes of applying section 6231(a)(7)
and Sec. 301.6231(a)(7)-1 to an LLC, only a member-manager of an LLC is
treated as a general partner, and a member of an LLC who is not a
member-manager is treated as a partner other than a general partner.
(b) Definitions--(1) LLC. Solely for purposes of this section, LLC
means an organization--
(i) Formed under a law that allows the limitation of the liability
of all members for the organization's debts and other obligations within
the meaning of Sec. 301.7701-3(b)(2)(ii); and
(ii) Classified as a partnership for Federal tax purposes.
(2) Member. Solely for purposes of this section, member means any
person who owns an interest in an LLC.
(3) Member-manager. Solely for purposes of this section, member-
manager means a member of an LLC who, alone or together with others, is
vested with the continuing exclusive authority to make the management
decisions necessary to conduct the business for which the organization
was formed. Generally, an LLC statute may permit the LLC to choose
management by one or more managers (whether or not members) or by all of
the members. If there are no elected or designated member-managers (as
so defined in this paragraph (b)(3)) of the LLC, each
[[Page 190]]
member will be treated as a member-manager for purposes of this section.
(c) Effective date. This section applies to all designations,
selections, and terminations of a tax matters partner of an LLC
occurring on or after December 23, 1996. Any other reasonable
designation or selection of a tax matters partner of an LLC is binding
for periods prior to December 23, 1996.
[T.D. 8698, 61 FR 67462, Dec. 23, 1996]
Sec. 301.6231(a)(12)-1 Special rules relating to spouses.
(a) Spouses holding a joint interest--(1) In general. Except as
otherwise provided in this section, spouses holding a joint interest in
a partnership shall be treated as separate partners for purposes of
subchapter C of chapter 63 of the Internal Revenue Code. Thus, both
spouses may participate in administrative and judicial proceedings. The
term joint interest includes tenancies in common, joint tenancies,
tenancies by the entirety, and community property.
(2) Identification of joint interest. For purposes of this section,
an interest shall be treated as a joint interest in a partnership only
if both spouses are identified on the partnership return or are
identified as partners entitled to notice as provided in
Sec. 301.6223(c)-1(b).
(3) Failure to identify both spouses as partners. If both spouses
are not identified as set forth in paragraph (a)(2) of this section,
then the partnership interest shall be treated as separately owned by
the identified spouse.
(4) Example. The following example illustrates the application of
paragraph (a)(3) of this section:
Example. Wife owns an interest in ABC Partnership and is identified
on the Schedule K-1 of the partnership return. Wife and Husband live in
a community property state. The partnership return of ABC partnership
does not identify Husband, and Husband is not identified as a partner
entitled to notice as provided in Sec. 301.6223(c)-1(b). Pursuant to
paragraph (a)(3) of this section, the partnership interest of Wife shall
be treated as separately owned by Wife.
(b) Notice and counting rules--(1) In general. Except as provided in
paragraph (b)(2) of this section, for purposes of applying section 6223
(relating to notice to partners of proceedings) and section
6231(a)(1)(B) (relating to the exception for small partnerships),
spouses holding a joint interest in a partnership shall be treated as
one partner. Except as provided in paragraph (b)(2) of this section, the
Internal Revenue Service or the tax matters partner may send any
required notice to either spouse.
(2) Identified spouse entitled to notice. For purposes of applying
section 6223 (relating to notice to partners of proceeding) for a
partnership taxable year, an individual who holds a joint interest in a
partnership with a spouse who is entitled to notice under section 6223
shall be entitled to receive separate notice under section 6223 if such
individual--
(i) Is identified as a partner on the partnership return for that
taxable year; or
(ii) Is identified as a partner entitled to notice as provided in
Sec. 301.6223(c)-1(b).
(c) Conversion of partnership items--(1) In general. If spouses
holding a joint interest in a partnership are treated as separate
partners under this section, then section 6231(b) (relating to the
conversion of partnership items) shall be applied separately to each
spouse.
(2) Example. The following example illustrates the application of
paragraph (c) of this section:
Example. Husband and Wife own a joint interest in XYZ Partnership.
The partnership return identifies both spouses on the Schedule K-1.
Under this section, each spouse is treated as a separate partner. If
Wife enters into a settlement agreement, Wife's partnership items
convert to nonpartnership items pursuant to section 6231(b)(1)(C).
Accordingly, Wife no longer has the right to participate in the
partnership proceeding subsequent to entering into the settlement
agreement. Pursuant to paragraph (c) of this section, however, the
partnership items of Husband are not affected by the conversion of the
partnership items of Wife, and Husband continues to have the right to
participate in the partnership proceeding. This result is the same
regardless of whether the partnership items are reported on a joint
return or on separate returns.
(d) Cross-reference. See Sec. 301.6231(a)(2)-1(a) for special rules
relating to spouses who file joint returns with individuals holding a
separate interest in a partnership.
(e) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(a)(12)-1T contained in 26
CFR part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50559, Oct. 4, 2001]
[[Page 191]]
Sec. 301.6231(c)-1 Special rules for certain applications for tentative carryback and refund adjustments based on partnership losses, deductions, or credits.
(a) Application subject to this section. This section applies in the
case of an application under section 6411 (relating to tentative
carryback and refund adjustments) based on losses, deductions, or
credits of a partnership if the Commissioner, or the Commissioner's
delegate, determines, after review of the available relevant
information, that it is highly likely that a person described in section
6700(a)(1) made, with respect to the partnership--
(1) A gross valuation overstatement; or
(2) A false or fraudulent statement with respect to the tax benefits
to be secured by reason of holding an interest in the partnership that
would be subject to a penalty under section 6700 (relating to penalty
for promoting abusive tax shelters, etc.). This section applies only
with respect to an application based upon the original reporting on the
partner's income tax return of partnership losses, deductions, or
credits. Thus, this section does not apply to a request for
administrative adjustment under section 6227 through which a partner
seeks to change the partner's reporting of partnership items on the
partner's income tax return (or on an earlier request for administrative
adjustment).
(b) Determination of special enforcement area. In the case of an
application under section 6411 described in paragraph (a) of this
section, precluding an assessment under section 6225 that would be
permitted under section 6213(b)(3) (relating to assessments arising out
of tentative carryback or refund adjustments) with respect to any amount
applied, credited, or refunded as a result of the application may
encourage the proliferation of abusive tax shelter partnerships and make
the eventual collection of taxes due more difficult. Consequently, the
Secretary hereby determines that such applications present special
enforcement considerations within the meaning of section 6231(c)(1)(E).
(c) Assessment permitted under section 6213(b)(3). Notwithstanding
section 6225 (relating to restrictions on assessment with respect to
partnership items), an assessment that would be permitted under section
6213(b)(3) with respect to any amount applied, credited, or refunded as
a result of an application described in paragraph (a) of this section
may be made before there is a final partnership-level determination with
respect to the losses, deductions, or credits on which the application
is based. As provided in section 6213(b)(1), the Internal Revenue
Service shall mail notice of any such assessment to the partner filing
the application. The notice shall also inform the partner of the
partner's limited right to elect to treat items as nonpartnership items
as provided in paragraph (d) of this section.
(d) Limited right to elect to treat items as nonpartnership items--
(1) In general. A partner to whom the Internal Revenue Service mails a
notice of suspension of action on a refund claim under paragraph (c) of
this section may elect in accordance with this paragraph (d) to have all
partnership items for the partnership taxable year in which the losses,
deductions, or credits at issue arose treated as nonpartnership items.
(2) Time and place of making election. The election shall be made by
filing a statement with the Internal Revenue Service office that mailed
the notice of suspension. The statement may be filed at any time--
(i) After the date which is one year after the date on which the
partnership return was filed for the partnership taxable year in which
the items at issue arose; and
(ii) Before the date on which the Internal Revenue Service mails to
the tax matters partner the notice of final partnership administrative
adjustment for the partnership taxable year in which the items at issue
arose. For purposes of this paragraph (d)(2), a partnership return filed
before the last day prescribed by law for its filing (determined without
regard to extensions) shall be treated as filed on the last day.
(3) Contents of the statement. The statement shall--
(i) Be clearly identified as an election to have partnership items
treated as
[[Page 192]]
nonpartnership items because of notification of an assessment under
section 6213(b)(3);
(ii) Identify the partnership by name, address, and taxpayer
identification number;
(iii) Identify the partner making the election by name, address, and
taxpayer identification number;
(iv) Specify the partnership taxable year to which the election
applies; and
(v) Be signed by the partner making the election.
(e) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(c)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50559, Oct. 4, 2001]
Sec. 301.6231(c)-2 Special rules for certain refund claims based on losses, deductions, or credits from abusive tax shelter partnerships.
(a) Claims subject to this section. This section applies in the case
of a claim for credit or refund based on losses, deductions or credits
of a partnership if the Commissioner, or the Commissioner's delegate,
determines, after review of available relevant information, that it is
highly likely that a person described in section 6700(a)(1) made, with
respect to the partnership--
(1) A gross valuation overstatement; or
(2) A false or fraudulent statement with respect to the tax benefits
to be secured by reason of holding an interest in the partnership that
would be subject to a penalty under section 6700 (relating to penalty
for promoting abusive tax shelters, etc.). This section applies only
with respect to a claim that is based upon the partner's original
reporting on the partner's income tax return of partnership losses,
deductions, or credits. Thus, this section does not apply to a request
for administrative adjustment under section 6227 through which a partner
seeks to change the partner's reporting of partnership items on the
partner's income tax return (or on an earlier request for administrative
adjustment). For purposes of this section, any income tax return
requesting a credit or refund shall be treated as a claim for a credit
or refund.
(b) Determination of special enforcement area. Granting a claim for
credit or refund described in paragraph (a) of this section may
encourage the proliferation of abusive tax shelter partnerships and make
the eventual collection of taxes more difficult. Consequently, the
Secretary hereby determines that such claims present special enforcement
considerations within the meaning of section 6231(c)(1)(E).
(c) Action on refund claims suspended. In the case of a claim
described in paragraph (a) of this section, the Internal Revenue Service
may mail to the partner filing the claim a notice stating that no action
will be taken on the partner's claim until the completion of the
partnership-level proceedings. The notice shall also inform the partner
of the partner's limited right to elect to treat items as nonpartnership
items as provided in paragraph (d) of this section.
(d) Limited right to elect to treat items as nonpartnership items--
(1) In general. A partner to whom the Internal Revenue Service mails a
notice of suspension under paragraph (c) of this section may elect in
accordance with this paragraph (d) to have all partnership items for the
partnership taxable year in which the losses, deductions, or credits at
issue arose treated as nonpartnership items.
(2) Time and place of making election. The election shall be made by
filing a statement with the Internal Revenue Service office that mailed
the notice of suspension. The statement may be filed at any time--
(i) After the date which is one year after the date on which the
partnership return was filed for the partnership taxable year in which
the items at issue arose; and
(ii) Before the date on which the Internal Revenue Service mails to
the tax matters partner the notice of final partnership administrative
adjustment for the partnership taxable year in which the items at issue
arose. For purposes of this paragraph (d)(2), a partnership return filed
before the last day prescribed by law for its filing (determined without
regard to extensions) shall be treated as filed on the last day.
[[Page 193]]
(3) Contents of the statement. The statement shall--
(i) Be clearly identified as an election to have partnership items
treated as nonpartnership items because of notification of suspension of
action on a refund claim;
(ii) Identify the partnership by name, address, and taxpayer
identification number;
(iii) Identify the partner making the election by name, address, and
taxpayer identification number;
(iv) Specify the partnership taxable year to which the election
applies; and
(v) Be signed by the partner making the election.
(e) Effective date. This section applies with respect to any claim
described in paragraph (a) of this section that is filed on or after
October 4, 2001. For claims filed prior to October 4, 2001, see
Sec. 301.6231(c)-2T contained in 26 CFR part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50560, Oct. 4, 2001]
Sec. 301.6231(c)-3 Limitation on applicability of Secs. 301.6231(c)-4 through 301.6231(c)-8.
(a) In general. A provision of Secs. 301.6231(c)-4 through
301.6231(c)-8 shall not apply with respect to partnership items arising
in a partnership taxable year if, as of the date on which those items
would otherwise begin to be treated as nonpartnership items under that
provision--
(1) A notice of final partnership administrative adjustment with
respect to those items has been mailed to the tax matters partner; and
(2) Either--
(i) The period during which an action with respect to that final
partnership administrative adjustment may be brought under section 6226
has expired and no such action has been brought; or
(ii) The decision of the court in an action brought under section
6226 with respect to that final partnership administrative adjustment
has become final.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(c)-3T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50560, Oct. 4, 2001]
Sec. 301.6231(c)-4 Termination and jeopardy assessment.
(a) In general. The treatment of items as partnership items with
respect to a partner against whom an assessment of income tax under
section 6851 (termination assessment) or section 6861 (jeopardy
assessment) is made will interfere with the effective and efficient
enforcement of the internal revenue laws. Accordingly, partnership items
of such a partner arising in any partnership taxable year ending with or
within the partner's taxable year for which an assessment of income tax
under section 6851 or 6861 is made shall be treated as nonpartnership
items as of the moment before such assessment is made.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(c)-4T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50561, Oct. 4, 2001]
Sec. 301.6231(c)-5 Criminal investigations.
(a) In general. The treatment of items as partnership items with
respect to a partner under criminal investigation for violation of the
internal revenue laws relating to income tax will interfere with the
effective and efficient enforcement of the internal revenue laws.
Accordingly, partnership items of such a partner arising in any
partnership taxable year ending on or before the last day of the latest
taxable year of the partner to which the criminal investigation relates
shall be treated as nonpartnership items as of the date on which the
partner is notified that the partner is the subject of a criminal
investigation and written notification is sent by the Internal Revenue
Service that the partner's partnership items shall be treated as
nonpartnership items. The partnership items of a partner who is notified
that the partner is the subject of a criminal investigation shall not be
treated as nonpartnership items under this section unless and
[[Page 194]]
until such partner is sent written notification from the Internal
Revenue Service of such treatment.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(c)-5T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50561, Oct. 4, 2001]
Sec. 301.6231(c)-6 Indirect method of proof of income.
(a) In general. The treatment of items as partnership items with
respect to a partner whose taxable income is determined by use of an
indirect method of proof of income will interfere with the effective and
efficient enforcement of the internal revenue laws. Accordingly,
partnership items of such a partner arising in any partnership taxable
year ending on or before the last day of the taxable year of the partner
for which a deficiency notice based upon an indirect method of proof of
income is mailed to the partner shall be treated as nonpartnership items
as of the date on which that deficiency notice is mailed to the partner.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(c)-6T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50561, Oct. 4, 2001]
Sec. 301.6231(c)-7 Bankruptcy and receivership.
(a) Bankruptcy. The treatment of items as partnership items with
respect to a partner named as a debtor in a bankruptcy proceeding will
interfere with the effective and efficient enforcement of the internal
revenue laws. Accordingly, partnership items of such a partner arising
in any partnership taxable year ending on or before the last day of the
latest taxable year of the partner with respect to which the United
States could file a claim for income tax due in the bankruptcy
proceeding shall be treated as nonpartnership items as of the date the
petition naming the partner as debtor is filed in bankruptcy.
(b) Receivership. The treatment of items as partnership items with
respect to a partner for whom a receiver has been appointed in any
receivership proceeding before any court of the United States or of any
State or the District of Columbia will interfere with the effective and
efficient enforcement of the internal revenue laws. Accordingly,
partnership items of such a partner arising in any partnership taxable
year ending on or before the last day of the latest taxable year of the
partner with respect to which the United States could file a claim for
income tax due in the receivership proceeding shall be treated as
nonpartnership items as of the date a receiver is appointed in any
receivership proceeding before any court of the United States or of any
State or the District of Columbia.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(c)-7T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50561, Oct. 4, 2001]
Sec. 301.6231(c)-8 Prompt assessment.
(a) In general. The treatment of items as partnership items with
respect to a partner on whose behalf a request for a prompt assessment
of tax under section 6501(d) is filed will interfere with the effective
and efficient enforcement of the internal revenue laws. Accordingly,
partnership items of such a partner arising in any partnership taxable
year ending with or within any taxable year of the partner with respect
to which a request for a prompt assessment of tax is filed shall be
treated as nonpartnership items as of the date that the request is
filed.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(c)-8T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50561, Oct. 4, 2001]
[[Page 195]]
Sec. 301.6231(d)-1 Time for determining profits interest of partners for purposes of sections 6223(b) and 6231(a)(11).
(a) Partner owns interest at close of year. For purposes of section
6223(b) (relating to special rules for partnerships with more than 100
partners) and section 6231(a)(11) (relating to 5-percent groups), except
as otherwise provided in this section, the profits interest held by a
partner, directly or indirectly through one or more pass-thru partners,
in a partnership (the source partnership) to which subchapter C of
chapter 63 of the Internal Revenue Code applies shall be determined at
the close of the source partnership's taxable year.
(b) Partner does not own interest at close of year. If the entire
direct and indirect interest of a partner in a source partnership is
terminated by virtue of a disposition by such partner of such interest
(or by virtue of the disposition of an interest held by one or more
pass-thru partners through which the partner holds an interest), then
the profits interest of such partner in the source partnership shall be
measured as of the moment before the disposition causing such
termination. The preceding sentence shall not apply with respect to a
termination if subsequent to such termination and before the close of
the source partnership's taxable year the partner acquires a direct or
indirect interest in the source partnership.
(c) Disposition of last remaining portion of interest is disposition
of entire interest. If a partner (or a pass-thru partner through which a
partner holds an interest) makes several partial dispositions of an
interest in a source partnership during a taxable year of the source
partnership, paragraph (b) of this section will apply with respect to
the disposition which causes a termination of the partner's entire
direct and indirect interest in the source partnership.
(d) No profits interest in certain cases. If--
(1) The interest of a partner in a partnership is entirely disposed
of before the close of the taxable year of the partnership; and
(2) No items of the partnership for that taxable year are required
to be taken into account by the partner, then that partner has no
profits interest in the partnership for that taxable year.
(e) Examples. The provisions of this section may be illustrated by
the following examples. Assume in all examples that there have been no
reacquisitions prior to the close of the source partnership's taxable
year. The examples are as follows:
Example 1. B holds an interest in partnership P through T, a pass-
thru partner. P uses a fiscal year ending June 30 as P's taxable year; B
and T use the calendar year as the taxable year. As of the close of P's
taxable year ending June 30, 2002, T holds an interest in P and B holds
an interest in P through T. The profits interest held by B in P through
T for that year is determined as of June 30, 2002.
Example 2. Assume the same facts as in Example 1, except that B sold
the entire interest that B held in P through T on November 5, 2001. The
profits interest held by B in P through T for P's taxable year ending
June 30, 2002, is determined as of the moment before the sale on
November 5, 2001.
Example 3. C holds an interest in partnership P through T, a pass-
thru partner. C, P, and T all use the calendar year as the taxable year.
T disposes of T's interest in P on June 5, 2002. The profits interest
held by C in P through T for 2002 is determined as of the moment before
the disposition on June 5, 2002.
Example 4. Assume the same facts as in Example 3, except that C sold
C's entire interest in T (and, therefore, C's entire interest that C
held in P through T) on March 15, 2002. The profits interest held by C
in P through T for 2002 is determined as of the moment before the sale
on March 15, 2002.
Example 5. On January 1, 2002, D held a 2 percent profits interest
in partnership P. Both D and P use the calendar year as the taxable
year. On August 1, 2002, D transfers three-fourths of D's profits
interest in P to E. On September 1, 2002, D sells D's remaining .5
percent profits interest in P to F. For purposes of sections 6223(b) and
6231(a)(11), D had a .5 percent profits interest in P for 2002.
Example 6. Assume the same facts as in Example 5, except that on
January 1, 2002, D also held a 1 percent profits interest in partnership
P through T, a pass-thru partner which also uses the calendar year as
the taxable year. In addition to the sale to E on August 1, 2002, D sold
a portion of D's interest in T on December 1, 2002, such that after the
sale, D held a .2 percent profits interest in P through T. D made no
other transfers of interests in either P or T. For purposes of sections
6223(b) and 6231(a)(11), D had a .7 percent profits interest in P for
2002.
[[Page 196]]
(f) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(d)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50562, Oct. 4, 2001]
Sec. 301.6231(e)-1 Effect of a determination with respect to a nonpartnership item on the determination of a partnership item.
(a) In general. The determination of an item after it has become a
nonpartnership item with respect to a partner is not controlling in the
determination of that item with respect to other partners. Thus, for
example, the determination by a court in a separate proceeding relating
to a partner that a certain partnership expenditure was deductible does
not bind either the Internal Revenue Service or the other partners in a
later partnership or other proceeding.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(e)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50562, Oct. 4, 2001]
Sec. 301.6231(e)-2 Judicial decision not a bar to certain adjustments.
(a) In general. A court decision with respect to a partner's income
tax liability attributable to nonpartnership items shall not be a bar to
further proceedings with respect to that partner's income tax liability
if that partner's partnership items become nonpartnership items after
the appropriate time to include such nonpartnership items in the earlier
court proceeding has passed. Thus, the Internal Revenue Service could
issue a later deficiency notice for the same taxable year with respect
to that partner or that partner could bring a refund suit with respect
to those items that have become nonpartnership items.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(e)-2T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50562, Oct. 4, 2001]
Sec. 301.6231(f)-1 Disallowance of losses and credits in certain cases.
(a) Application of section. This section applies if--
(1) A partnership, whether domestic or foreign, that is required to
file a return under section 6031 for a taxable year fails to file the
return within the time prescribed; and
(2) At any time after the close of that taxable year, either--
(i) The tax matters partner of that partnership resides outside the
United States; or
(ii) The books and records of that partnership are maintained
outside the United States.
(b) Computational adjustment permitted if return is not filed after
mailing of notice. Except as otherwise provided in paragraph (c) of this
section, if--
(1) This section applies with respect to a partnership for a
partnership taxable year;
(2) The Internal Revenue Service mails notice to a partner that the
losses and credits arising from that partnership for that year will be
disallowed to that partner unless the partnership files a return for
that year within 60 days after the date on which the notice is mailed;
and
(3) The partnership fails to file a return for that year within that
60-day period, the Internal Revenue Service may, without conducting a
partnership-level proceeding, mail a notice of computational adjustment
to that partner to reflect the disallowance of any loss (including a
capital loss) or credit arising from that partnership for that year.
(c) Restriction on notices under paragraph (b) of this section.
Neither the notice referred to in paragraph (b)(2) of this section nor
the notice of computational adjustment referred to in paragraph (b) of
this section may be mailed on a day on which--
(1) The tax matters partner of the partnership resides within the
United States; and
(2) The books and records of the partnership are maintained within
the
[[Page 197]]
United States. Thus, if this section applies with respect to a
partnership for a taxable year solely because the tax matters partner of
that partnership resided outside the United States for a period after
the close of that taxable year and the tax matters partner later takes
up residence within the United States, no notice may be mailed under
paragraph (b) of this section while the tax matters partner resides
within the United States.
(d) No disallowance in certain circumstances. If the person to whom
the notice referred to in paragraph (b)(2) of this section is mailed
establishes to the satisfaction of the Internal Revenue Service--
(1) That the losses and credits arising from the partnership for the
year are proper; and
(2) That the partner has made a good faith effort to have the
partnership file the required return; the Internal Revenue Service may
allow the losses and credits in whole or in part.
(e) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(f)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50563, Oct. 4, 2001]
Sec. 301.6233-1 Extension to entities filing partnership returns.
(a) Entities filing a partnership return. Except as provided in
paragraph (c)(1) of this section, the provisions of subchapter C of
chapter 63 of the Internal Revenue Code (subchapter C) and the
regulations thereunder shall apply with respect to any taxable year of
an entity for which such entity files a partnership return as well as to
such entity's items for that taxable year and to any person holding an
interest in such entity at any time during that taxable year. Any final
partnership administrative adjustment or judicial determination
resulting from a proceeding under subchapter C with respect to such
taxable year may include a determination that the entity is not a
partnership for such taxable year as well as determinations with respect
to all items of the entity that would be partnership items, as defined
in section 6231(a)(3) and the regulations thereunder, if such entity had
been a partnership in such taxable year (including, for example, any
amounts taxable to an entity determined to be an association taxable as
a corporation). For example, a final determination under subchapter C
that an entity that filed a partnership return is an association taxable
as a corporation will serve as a basis for a computational adjustment
reflecting the disallowance of any loss or credit claimed by a purported
partner with respect to that entity.
(b) Partnership return filed but no entity found to exist. Paragraph
(a) of this section shall apply where a partnership return is filed for
a taxable year but it is determined that there is no entity for such
taxable year. For purposes of applying paragraph (a) of this section,
the partnership return shall be treated as if it were filed by an
entity. However, any final partnership administrative adjustment or
judicial determination resulting from a proceeding under subchapter C
with respect to such taxable year may also include a determination that
there is no entity for such taxable year.
(c) Exceptions. Paragraph (a) of this section shall not apply to--
(1) Entities for any taxable year in which such entity would be
excepted from the provisions of subchapter C of the Internal Revenue
Code under section 6231(a)(1)(B) and the regulations thereunder
(relating to the exception for small partnerships) if such entity were a
partnership for such taxable year; and
(2) Entities for any taxable year for which a partnership return was
filed for the sole purpose of making the election described in section
761(a).
(d) Effective dates. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6233-1T contained in 26 CFR part
1, revised April 1, 2001.
[T.D. 8965, 66 FR 50563, Oct. 4, 2001]
Sec. 301.6241-1T Tax treatment determined at corporate level.
(a) In general. For a taxable year of an S corporation beginning
after December 31, 1982, a shareholder's treatment of a subchapter S
item (as defined
[[Page 198]]
in Sec. 301.6245-1T) on the shareholder's return may not be changed
except as provided in sections 6241-6245 of the Code and the regulations
thereunder. Thus, for example, if a shareholder treats an item on the
shareholder's return consistently with the treatment of that item on the
S corporation return, the Internal Revenue Service generally cannot
adjust the treatment of that item on the shareholder's return except
through a corporate-level proceeding. Similarly, the shareholder may not
put a subchapter S item in issue in a proceeding relating to
nonsubchapter S items. For example, the shareholder may not offset a
potential increase in taxable income based on changes in nonsubchapter S
items by a potential decrease based on subchapter S items.
(b) Restrictions inapplicable after items become nonsubchapter S
items. Section 6241 and paragraph (a) of this section cease to apply to
items arising from an S corporation with respect to a shareholder when
those items cease to be subchapter S items with respect to that
shareholder under section 6231(b)(1) (as extended to and made applicable
to subchapter S items under section 6244).
(c) S corporation--(1) In general. For purposes of subchapter D of
chapter 63 of the Code, except as provided in paragraph (c)(2) of this
section, the term ``S corporation'' means any corporation required to
file a return under section 6037(a).
(2) Exception for small S corporations--(i) Effective date. This
paragraph (c)(2) shall apply to any taxable year of an S corporation the
due date of the return for which (determined without regard to
extensions) is on or after January 30, 1987.
(ii) Five or fewer shareholders. For purposes of this paragraph (c),
an S corporation shall not include a small S corporation. A small S
corporation is defined as an S corporation with 5 or fewer shareholders,
each of whom is a natural person or an estate. For purposes of this
paragraph (c)(2), a husband and wife (and their estates) are treated as
one shareholder. If stock (owned other than by a husband and wife) is
owned by tenants in common or joint tenants, each tenant in common or
joint tenant is considered to be a shareholder of the corporation. The
limitation is applied to the number of natural persons and estates that
were shareholders at any one time during the taxable year of the
corporation. Thus, for example, an S corporation that at no time during
the taxable year had more than 5 shareholders may be treated as a small
S corporation even if, because of transfers of interests in the
corporation, 6 or more natural persons or estates owned stock in the
corporation for some portion of the taxable year.
(iii) Special rule. The exception provided in paragraph (c)(2)(ii)
of this section does not apply to an S corporation for a taxable year if
any shareholder in the corporation during that taxable year is a pass-
through shareholder. For purposes of this paragraph (c)(2)(iii), a pass-
through shareholder is--
(A) A trust;
(B) A nominee; or
(C) Other similar pass-through persons through whom other persons
have an ownership interest in the stock of the S corporation. For
purposes of the preceding sentence, a shareholder's estate shall not be
treated as a pass-through shareholder.
(iv) Determination made annually. The determination of whether an S
corporation meets the requirements for the exception under paragraph
(c)(2)(ii) of this section shall be made for each taxable year of the
corporation. Thus, an S corporation which does not qualify as a small S
corporation in one taxable year may qualify as a small S corporation in
another taxable year if the requirements for the exception under
paragraph (c)(2)(ii) of this section are met with respect to that other
taxable year.
(v) Election to have subchapter D of chapter 63 apply--(A) In
general. Notwithstanding paragraph (c)(2)(ii) of this section, a small S
corporation may elect to have the provisions of subchapter D of chapter
63 of the Code apply with respect to that corporation.
(B) Method of election. A small S corporation shall make the
election described in paragraph (c)(2)(v)(A) of this section for a
taxable year of the corporation by attaching a statement to the
corporate return for the first taxable year for which the election is to
be
[[Page 199]]
effective. The statement shall be identified as an election under
Sec. 301.6241-1T(c)(2)(v)(A), shall be signed by all persons who were
shareholders of that corporation at any time during the corporate
taxable year to which the return relates, and shall be filed at the time
(determined with regard to any extensions of time for filing) and place
prescribed for filing the corporate return.
(C) Years covered by election. The election shall be effective for
the taxable year of the corporation to which the return relates and all
subsequent taxable years of the corporation unless revoked with the
consent of the Commissioner.
[T.D. 8122, 52 FR 3002, Jan. 30, 1987]
Sec. 301.6245-1T Subchapter S items.
(a) In general. For purposes of subtitle F of the Internal Revenue
Code of 1986, the following items which are required to be taken into
account for the taxable year of an S corporation under subtitle A of the
Code are more appropriately determined at the corporate level than at
the shareholder level and, therefore, are subchapter S items:
(1) The S corporation aggregate and each shareholder's share of, and
any factor necessary to determine, each of the following:
(i) Items of income, gain, loss, deduction, or credit of the
corporation;
(ii) Expenditures by the corporation not deductible in computing its
taxable income (for example, charitable contributions);
(iii) Items of the corporation that may be tax preference items
under section 57(a) for any shareholder;
(iv) Items of income of the corporation that are exempt from tax;
(v) Corporate liabilities (including determinations of the amount of
the liability, whether the corporate liability is to a shareholder of
the corporation, and changes from the preceding year); and
(vi) Other amounts determinable at the corporate level with respect
to corporate assets, investments, transactions, and operations necessary
to enable the S corporation or the shareholders to determine--
(A) The general business credit provided by section 38;
(B) Recapture under section 47 of the credit provided by section 38;
(C) Amounts at risk in any activity to which section 465 applies;
(D) The depletion allowance under section 613A with respect to oil
and gas wells;
(E) Amortization of reforestation expenses under section 194;
(F) The credit provided by section 34 for certain uses of gasoline
and special fuels; and
(G) The taxes imposed at the corporate level, such as the taxes
imposed under section 56, 1374, or 1375;
(2) Any factor necessary to determine whether the entity is an S
corporation under section 1361, such as the number, eligibility, and
consent of shareholders and the classes of stock;
(3) Any factor necessary to determine whether the entity has
properly elected to be an S corporation under section 1362 for the
taxable year;
(4) Any factor necessary to determine whether and when the S
corporation election of the entity has been revoked or terminated under
section 1362 for the taxable year (for example, the existence and amount
of subchapter C earnings and profits, and passive investment income);
and
(5) Items relating to the following transactions, to the extent that
a determination of such items can be made from determinations that the
corporation is required to make with respect to an amount, the character
of an amount, or the percentage of stock ownership of a shareholder in
the corporation, for purposes of the corporation's books and records or
for purposes of furnishing information to a shareholder:
(i) Contributions to the corporation; and
(ii) Distributions from the corporation.
(b) Factors that affect the determination of subchapter S items. The
term ``subchapter S item'' includes the accounting practices and the
legal and factual determinations that underlie the determination of the
existence, amount, timing, and characterization of items of income,
credit, gain, loss, deduction, etc. Examples of these determinations
are: The S corporation's method of accounting, taxable year,
[[Page 200]]
and inventory method; whether an election was made by the corporation;
whether corporate property is a capital asset, section 1231 property, or
inventory; whether an item is currently deductible or must be
capitalized; whether corporate activities had been engaged in with the
intent to make a profit for purposes of section 183; whether the
corporation qualified for the credit for increasing research activities
under section 41; and whether the corporation qualified for the credit
for clinical testing expenses for a rare disease or condition under
section 28.
(c) Illustrations--(1) In general. This paragraph (c) illustrates
the provisions of paragraph (a)(5) of this section. The determinations
illustrated in this paragraph (c) that the corporation is required to
make are not exhaustive; there may be additional determinations that the
corporation is required to make which relate to a determination listed
in paragraph (a)(5) of this section. The critical element is that the
corporation is required to make a determination with respect to a matter
for the purposes stated; failure by the corporation actually to make a
determination (for example, because it does not maintain proper books
and records) does not prevent an item from being a subchapter S item.
(2) Contributions. For purposes of its books and records, or for
purposes of furnishing information to a shareholder, the S corporation
must determine:
(i) The character of the amount received by the corporation (for
example, whether it is a contribution, loan, or repayment of a loan);
(ii) The amount of money received by the corporation; and
(iii) The basis to the corporation of contributed property
(including necessary preliminary determinations, such as the
shareholder's basis in the contributed property).
To the extent that a determination of an item relating to a contribution
can be made from these and similar determinations that the corporation
is required to make, that item is a subchapter S item. To the extent
that the determination requires other information, however, that item is
not a subchapter S item. Such other information would include those
factors used in determining whether there is recapture under section 47
by the contributing shareholder of the general business credit because
of the contribution of property in circumstances in which that
determination is irrelevant to the corporation.
(3) Distributions. For purposes of its books and records, or for
purposes of furnishing information to a shareholder, the S corporation
must determine:
(i) The character of the amount transferred to a shareholder (for
example, whether it is a dividend, compensation, loan, or repayment of a
loan);
(ii) The amount of money distributed to a shareholder;
(iii) The fair market value of property distributed to a
shareholder;
(iv) The adjusted basis to the corporation of distributed property;
and
(v) The character of corporation property (for example, whether an
item is inventory or a capital asset).
To the extent that a determination of an item relating to a distribution
can be made from these and similar determinations that the corporation
is required to make, that item is a subchapter S item. To the extent
that the determination requires other information, however, that item is
not a subchapter S item. Such other information would include the
determination of a shareholder's basis in the shareholder's stock or in
the indebtedness of the S corporation to the shareholder.
(d) Cross reference. For the definition of subchapter S item for
purposes of the windfall profit tax, see Sec. 51.6245-1T.
(e) Effective date. This section shall apply to taxable years
beginning after December 31, 1982.
[T.D. 8122, 52 FR 3003, Jan. 30, 1987]
Collection
General Provisions--Table of Contents
Sec. 301.6301-1 Collection authority.
The taxes imposed by the internal revenue laws shall be collected by
district directors of internal revenue. See, however, section 6304,
relating to the collection of certain taxes under the
[[Page 201]]
provisions of the Tariff Act of 1930 (19 U.S.C. ch. 4).
Sec. 301.6302-1 Mode or time of collection of taxes.
(a) Employment and excise taxes. For provisions relating to the mode
or time of collection of certain employment and excise taxes and the use
of authorized financial institutions in connection with the payment
thereof, see the regulations relating to the particular tax.
(b) Income taxes. (1) For provisions relating to the use of
authorized financial institutions in depositing income and estimated
income taxes of certain corporations, see Sec. 1.6302-1 of this chapter
(Income Tax Regulations).
(2) For provisions relating to the use of authorized financial
institutions in depositing the tax required to be withheld under chapter
3 of the Code on nonresident aliens and foreign corporations and tax-
free covenant bonds, see Sec. 1.6302-2 of this chapter.
[32 FR 15241, Nov. 2, 1967, as amended by T.D. 8952, 66 FR 33832, June
26, 2001]
Sec. 301.6303-1 Notice and demand for tax.
(a) General rule. Where it is not otherwise provided by the Code,
the district director or the director of the regional service center
shall, after the making of an assessment of a tax pursuant to section
6203, give notice to each person liable for the unpaid tax, stating the
amount and demanding payment thereof. Such notice shall be given as soon
as possible and within 60 days. However, the failure to give notice
within 60 days does not invalidate the notice. Such notice shall be left
at the dwelling or usual place of business of such person, or shall be
sent by mail to such person's last known address. For further guidance
regarding the definition of last known address, see Sec. 301.6212-2.
(b) Assessment prior to last date for payment. If any tax is
assessed prior to the last date prescribed for payment of such tax,
demand that such tax be paid will not be made before such last date,
except where it is believed collection would be jeopardized by delay.
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 8939, 66 FR 2820, Jan.
12, 2001]
Sec. 301.6305-1 Assessment and collection of certain liability.
(a) Scope. Section 6305(a) requires the Secretary of the Treasury or
his delegate to assess and collect amounts which have been certified by
the Secretary of Health and Human Services as the amount of a
delinquency determined under a court order, or an order of an
administrative process established under State law, for support and
maintenance of a child or of a child and the parent with whom the child
is living. These amounts, referred to as ``child and spousal support'',
are to be collected in the same manner and with the same powers
exercised by the Secretary of the Treasury or his delegate in the
collection of an employment tax which would be jeopardized by delay.
However, where the assessment is the first assessment against an
individual for a delinquency described in this paragraph for a
particular individual or individuals, the collection is to be stayed for
a period of 60 days following notice and demand. In addition, no
interest or penalties (with the exception of the penalties imposed by
sections 6332(c)(2) and 6657) shall be assessed or collected on the
amounts, paragraphs (4), (6) and (8) of section 6334(a) (relating to
property exempt from levy) shall not apply; and, there shall be exempt
from levy so much of the salary, wages, or other income of the
individual which is subject to garnishment pursuant to a judgment
entered by a court for the support of his or her minor children. Section
6305(b) provides that sole jurisdiction for any action brought to
restrain or review assessment and collection of the certified amounts
shall be in a State court or a State administrative agency.
(b) Assessment and collection--(1) General rule. Upon receipt of a
certification or recertification from the Secretary of Health and Human
Services or his delegate under section 452(b) of title IV of the Social
Security Act as amended (relating to collection of child and spousal
support obligations with respect to an individual), the district
director or his delegate shall assess and collect the certified amount
(or recertified amount). Except as provided in paragraph (c) of this
section, the amount so certified shall be assessed
[[Page 202]]
and collected in the same manner, with the same powers, and subject to
the same limitations as if the amount were an employment tax the
collection of which would be jeopardized by delay. However, the
provisions of subtitle F with respect to assessment and collection of
taxes shall not apply with respect to assessment and collection of a
certified amount where such provisions are clearly inappropriate to, and
incompatible with, the collection of certified amounts generally. For
example, section 6861(g) which allows the Secretary or his delegate to
abate a jeopardy assessment if he finds a jeopardy does not exist will
not apply.
(2) Method of assessment. An assessment officer appointed by the
district director pursuant to Sec. 301.6203-1 to make assessments of tax
shall also make assessments of certified amounts. The assessment of a
certified amount shall be made by the assessment officer signing the
summary record of assessment. The date of assessment is the date the
summary record is signed by the assessment officer. The summary record,
through supporting records as necessary, shall provide--
(i) The assessed amount;
(ii) The name, social security number, and last known address of the
individual owing the assessed amount. For further guidance regarding the
definition of last known address, see Sec. 301.6212-2;
(iii) A designation of the assessed amount as a certified amount,
together with the date on which the amount was certified and the name,
position, and governmental address of the officer of the Department of
Health and Human Services who certified the amount;
(iv) The period to which the child and spousal support obligation
represented by the certified amount relates;
(v) The State in which was entered the court or administrative order
giving rise to the child and spousal support obligation represented by
the certified amount;
(vi) The name of the person or persons to whom the child and spousal
support obligation represented by the certified amount is owed; and
(vii) The name of the child or children or the parent of the child
or children for whose benefit the child and spousal support obligation
exists.
Upon request, the individual assessed shall be furnished a copy of
pertinent parts of this assessment which set forth the information
listed in subdivision (i) through (vii) of this paragraph (b)(2).
(3) Supplemental assessments and abatements. If any assessment is
incomplete or incorrect in any material respect, the district director
or his delegate may make a supplemental assessment or abatement but only
for the purpose of completing or correcting the original assessment. A
supplemental assessment will not be used as a substitute for an
additional assessment against an individual.
(4) Method of collection. (i) The district director or his delegate
shall make notice and demand for immediate payment of certified amounts.
Upon failure or refusal to pay such amounts, collection by levy shall be
lawful without regard to the 10-day waiting period provided in section
6331(a). However, in the case of certain first assessments, paragraph
(c)(4) of this section provides a rule for a stay of collection for 60
days. For purposes of collection, refunds of any internal revenue tax
owed to the individual may be offset against a certified amount.
(ii) The district director or his delegate shall make diligent and
reasonable efforts to collect certified amounts as if such amounts were
taxes. He shall have no authority to compromise a proceeding by
collection of only part of a certified amount in satisfaction of the
full certified amount owing. However, he may arrange for payment of a
certified amount by installments where advisable.
(iii) The district director or his delegate may offset the amount of
any overpayment of any internal revenue tax (as described in section
301.6401-1) to be refunded to the person making the overpayment by the
amount of any past-due support (as defined in the regulations under
section 6402) owed by the person making the overpayment. The amounts
offset under section 6402(c) may be amounts of child and spousal support
certified (or recertified) for collection under section 6305
[[Page 203]]
and this section or they may be amounts of past-due support of which the
Secretary of the Treasury has been notified under section 6402(c) and
the regulations under that section.
(5) Credits or refunds. In the case of any overpayment of a
certified amount, the Secretary of the Treasury or his delegate, within
the period of limitations for credit or refund of employment taxes, may
credit the amount of the overpayment against any liability in respect of
an internal revenue tax on the part of the individual who made the
overpayment and shall refund any balance to the individual. However, the
full amount of any overpayment collected by levy upon property described
in paragraph (c)(2) (i), (ii), or (iii) of this section shall be
refunded to the individual. For purposes of applying this subparagraph,
the rules of Sec. 301.6402-2 apply where appropriate.
(6) Disposition of certified amounts collected. Any certified amount
collected shall be deposited in the general fund of the United States,
and the officer of the Department of Health and Human Services who
certified the amount shall be promptly notified of its collection. There
shall be established in the Treasury, pursuant to section 452 of title
IV of the Social Security Act as amended, a revolving fund which shall
be available to the Secretary of Health and Human Services or his
delegate, without fiscal year limitation, for distribution to the States
in accordance with the provisions of section 457 of the Act. Section
452(c)(2) of the Act appropriates to this revolving fund out of any
monies not otherwise appropriated, amounts equal to the certified
amounts collected under this paragraph reduced by the amounts credited
or refunded as overpayments of the certified amounts so collected. The
certified amounts deposited shall be transferred at least quarterly from
the general fund of the Treasury to the revolving fund on the basis of
estimates made by the Secretary of the Treasury or his delegate. Proper
adjustments shall be made in the amounts subsequently transferred to the
extent prior estimates were in excess of or less than the amounts
required to be transferred. See, however, paragraph (c)(1) of this
section for the special rule requiring retention in the general fund of
certain penalties which may be collected.
(c) Additional limitations and conditions--(1) Interest and
penalties. No interest, penalties or additional amounts, other than
normal and reasonable collection costs, may be assessed or collected in
addition to the certified amount, other than the penalty imposed by
section 6332(c)(2) for failure to surrender property subject to levy and
the penalty imposed by section 6657 for the tender of bad checks. Any
such penalties and collection costs, if collected, will not be treated
as part of the certified amount and will be retained by the United
States as a part of its general fund. No interest shall be allowed or
paid on any overpayment of a certified amount.
(2) Property not exempt from levy. In addition to property not
exempt from levy under section 6334(c) and the regulations thereunder,
the following property shall not be exempt from a levy to collect a
certified amount:
(i) Unemployment benefits described in section 6334(a)(4);
(ii) Certain annuities and pension payments described in section
6334(a)(6); or
(iii) Salary, wages, or other income described in section
6334(a)(8).
(3) Property exempt from levy. In addition to property exempt from
levy under section 6334(a) and the regulations thereunder, other than
property described in paragraph (c)(2) (i), (ii), or (iii) of this
section, there shall be exempt from levy to collect a certified amount
so much of the salary, wages, or other income of an individual as is
withheld therefrom in garnishment pursuant to judgment entered by a
court of competent jurisdiction for the support of minor children of the
individual.
(4) First assessment. In the case of a first assessment against an
individual for a certified amount in whole or part for the benefit of a
particular child or children or the child or children and their parent,
the collection of the certified amount shall be stayed for the period of
60 days immediately following notice and demand as described in section
6303. However, no other stay of the collection of a certified amount
[[Page 204]]
may be granted. Thus, the provisions of section 6863(a), relating to
bonds to stay collection of jeopardy assessments, shall not apply to the
collection of certified amounts.
(5) Priority of liens. A lien for a certified amount shall be valid
as against a lien for taxes imposed by section 6321 only if the date of
assessment of the certified amount precedes the date of assessment of
the taxes. However, no amount collected by levy upon property described
in paragraph (c)(2) (i), (ii), or (iii) of this section may be applied
other than in whole or partial satisfaction of certified amounts. In the
case of two liens for certified amounts, the lien for the certified
amount which is first assessed shall be valid as against the lien for
the certified amount which is later assessed.
(6) Statute of limitations on collections. The periods of limitation
on collection of taxes after assessment prescribed by section 6502 shall
apply to the collection of certified (or recertified) amounts. Such
periods of limitation with respect to a certified amount shall terminate
upon recertification of the amount, and the period of limitation
prescribed by section 6502 shall then apply and commence to run with
respect to the recertified amount.
(d) Review of assessments and collections--(1) Federal courts. No
court of the United States established under article I or article III of
the Constitution has jurisdiction of any legal or equitable action to
restrain or review the assessment or collection of certified amounts by
the district director or his delegate. See, however, paragraph (d)(3) of
this section for the rule that the prohibition of this paragraph (d)(1)
does not preclude courts established for the District of Columbia from
exercising jurisdiction over certain actions.
(2) Secretary of the Treasury. Neither the Secretary of the Treasury
nor his delegate may subject to review the assessment or collection of
certified amounts in any legal, equitable, or administrative proceeding.
(3) State courts. This paragraph (d) does not preclude a State court
or appropriate State agency, as the case may be, from exercising
jurisdiction over a legal, equitable, or administrative action against
the State by an individual to determine his liability for any certified
amount assessed against him and collected, or to recover any such
certified amount collected, under section 6305 and this section. For
purposes of the preceding sentence, the term ``State'' includes the
District of Columbia.
(e) Internal Revenue regional service centers. For purposes of this
section, the terms ``district director or his delegate'' and ``district
director'' include the director of the Internal Revenue service center
or his delegate, as the case may be.
(Sec. 7805, Internal Revenue Code of 1954 (68A Stat. 917; 26 U.S.C.
7805); sec. 2332(a) of the Omnibus Budget Reconciliation Act of 1981 (95
Stat. 357), amending sec. 464(a) of the Social Security Act (88 Stat.
2351))
[T.D. 7576, 43 FR 59376, Dec. 20, 1978, as amended by T.D. 7808, 47 FR
5713, Feb. 8, 1982; T.D. 8939, 66 FR 2820, Jan. 12, 2001]
Receipt of Payment
Sec. 301.6311-1 Payment by check or money order.
(a) Authority to receive--(1) In general. (i) District directors,
Service Center directors, and Compliance Center directors (director) may
accept checks or drafts drawn on any financial institution incorporated
under the laws of the United States or under the laws of any State, the
District of Columbia, or any possession of the United States, or money
orders in payment for internal revenue taxes, provided the checks,
drafts, or money orders are collectible in United States currency at
par, and subject to the further provisions contained in this section.
The director may accept the checks, drafts, or money orders in payment
for internal revenue stamps to the extent and under the conditions
prescribed in paragraph (a)(2) of this section. A check or money order
in payment for internal revenue taxes or internal revenue stamps should
be made payable to the United States Treasury. A check or money order is
payable at par only if the full amount thereof is payable without any
deduction for exchange or other charges. As used in this section, the
term ``money order'' means: (a) U.S. postal, bank, express, or telegraph
money order; (b) money order issued by
[[Page 205]]
a domestic building and loan association (as defined in section
7701(a)(19)) or by a similar association incorporated under the laws of
a possession of the United States; (c) a money order issued by such
other organization as the Commissioner may designate; and (d) a money
order described in subdivision (ii) of this subparagraph in cases
therein described. However, the director may refuse to accept any
personal check whenever he or she has good reason to believe that such
check will not be honored upon presentment.
(ii) An American citizen residing in a country with which the United
States maintains direct exchange of money orders on a domestic basis may
pay his tax by postal money order of such country. For a list of such
countries, see section 171.27 of the Postal Manual of the United States.
(iii) If one check or money order is remitted to cover two or more
persons' taxes, the remittance should be accompanied by a letter of
transmittal clearly identifying--
(a) Each person whose tax is to be paid by the remittance;
(b) The amount of the payment on account of each such person; and
(c) The kind of tax paid.
(2) Payment for internal revenue stamps. The director may accept
checks, drafts, and money orders described in paragraph (a)(1) of this
section in payment for internal revenue stamps. However, the director
may refuse to accept any personal check whenever he or she has good
reason to believe that such check will not be honored upon presentment.
(b) Checks or money orders not paid--(1) Ultimate liability. The
person who tenders any check (whether certified or uncertified,
cashier's, treasurer's, or other form of check or draft) or money order
in payment for taxes or stamps is not released from his or her liability
until the check, draft, or money order is paid; and, if the check,
draft, or money order is not duly paid, the person shall also be liable
for all legal penalties and additions, to the same extent as if such
check, draft, or money order had not been tendered.
(2) Liability of financial institutions and others. If any
certified, treasurer's, or cashier's check, or other guaranteed draft,
or money order, is not duly paid, the United States shall have a lien
for the amount of such check or draft upon all assets of the financial
institution on which drawn, or for the amount of such money order upon
the assets of the issuer thereof. The unpaid amount shall be paid out of
such assets in preference to any other claims against such financial
institution or issuer except the necessary costs and expenses of
administration and the reimbursement of the United States for the amount
expended in the redemption of the circulating notes of such financial
institution. In addition, the Government has the right to exact payment
from the person required to make the payment.
(c) Payment in nonconvertible foreign currency. For rules relating
to payment of income taxes and taxes under the Federal Insurance
Contributions Act in nonconvertible foreign currency, see section 6316
and the regulations thereunder.
(d) Financial institution. For purposes of section 6311 and this
section, financial institution includes but is not limited to--
(1) A bank or trust company (as defined in section 581);
(2) A domestic building and loan association (as defined in section
7701(a)(19));
(3) A mutual savings bank (including but not limited to a mutual
savings bank as defined in section 591(b));
(4) A credit union (including both state and federal credit unions,
and including but not limited to a credit union as defined in section
501(c)(14)); and
(5) A regulated investment company (as defined in section 851(a)).
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7188, 37 FR 12795, June
29, 1972; T.D. ATF-33, 41 FR 44038, Oct. 6, 1976; T.D. 8595, 60 FR
20899, Apr. 28, 1995; T.D. 8969, 66 FR 64743, Dec. 14, 2001]
Sec. 301.6311-2 Payment by credit card and debit card.
(a) Authority to receive--(1) Payments by credit card and debit
card. Internal revenue taxes may be paid by credit card or debit card as
authorized by this section. Payment of taxes by credit card or debit
card is voluntary on the
[[Page 206]]
part of the taxpayer. Only credit cards or debit cards approved by the
Commissioner may be used for this purpose, only the types of tax
liabilities specified by the Commissioner may be paid by credit card or
debit card, and all such payments must be made in the manner and in
accordance with the forms, instructions and procedures prescribed by the
Commissioner. All references in this section to tax also include
interest, penalties, additional amounts, and additions to tax.
(2) Payments by electronic funds transfer other than payments by
credit card and debit card. Provisions relating to payments by
electronic funds transfer other than payments by credit card and debit
card are contained in section 6302 and the Treasury Regulations
promulgated pursuant to section 6302.
(3) Definitions--(i) Credit card means any credit card as defined in
section 103(k) of the Truth in Lending Act (15 U.S.C. 1602(k)),
including any credit card, charge card, or other credit device issued
for the purpose of obtaining money, property, labor, or services on
credit.
(ii) Debit card means any accepted card or other means of access as
defined in section 903(1) of the Electronic Fund Transfer Act (15 U.S.C.
1693a(1)), including any debit card or similar device or means of access
to an account issued for the purpose of initiating electronic fund
transfers to obtain money, property, labor, or services.
(b) When payment is deemed made. A payment of tax by credit card or
debit card shall be deemed made when the issuer of the credit card or
debit card properly authorizes the transaction, provided that the
payment is actually received by the United States in the ordinary course
of business and is not returned pursuant to paragraph (d)(3) of this
section.
(c) Payment not made--(1) Continuing liability of taxpayer. A
taxpayer who tenders payment of taxes by credit card or debit card is
not relieved of liability for such taxes until the payment is actually
received by the United States and is not required to be returned
pursuant to paragraph (d)(3) of this section. This continuing liability
of the taxpayer is in addition to, and not in lieu of, any liability of
the issuer of the credit card or debit card or financial institution
pursuant to paragraph (c)(2) of this section.
(2) Liability of financial institutions. If a taxpayer has tendered
a payment of internal revenue taxes by credit card or debit card, the
credit card or debit card transaction has been guaranteed expressly by a
financial institution, and the United States is not duly paid, then the
United States shall have a lien for the guaranteed amount of the
transaction upon all the assets of the institution making such
guarantee. The unpaid amount shall be paid out of such assets in
preference to any other claims whatsoever against such guaranteeing
institution, except the necessary costs and expenses of administration
and the reimbursement of the United States for the amount expended in
the redemption of the circulating notes of such institution.
(d) Resolution of errors relating to the credit card or debit card
account--(1) In general. Payments of taxes by credit card or debit card
shall be subject to the applicable error resolution procedures of
section 161 of the Truth in Lending Act (15 U.S.C. 1666), section 908 of
the Electronic Fund Transfer Act (15 U.S.C. 1693f), or any similar
provisions of state or local law, for the purpose of resolving errors
relating to the credit card or debit card account, but not for the
purpose of resolving any errors, disputes or adjustments relating to the
underlying tax liability.
(2) Matters covered by error resolution procedures. (i) The error
resolution procedures of paragraph (d)(1) of this section apply to the
following types of errors--
(A) An incorrect amount posted to the taxpayer's account as a result
of a computational error, numerical transposition, or similar mistake;
(B) An amount posted to the wrong taxpayer's account;
(C) A transaction posted to the taxpayer's account without the
taxpayer's authorization; and
(D) Other similar types of errors that would be subject to
resolution under section 161 of the Truth in Lending Act (15 U.S.C.
1666), section 908 of the Electronic Fund Transfer Act (15 U.S.C.
1693f), or similar provisions of state or local law.
[[Page 207]]
(ii) An error described in paragraph (d)(2)(i) of this section may
be resolved only through the procedures referred to in paragraph (d)(1)
of this section and cannot be a basis for any claim or defense in any
administrative or court proceeding involving the Commissioner or the
United States.
(3) Return of funds pursuant to error resolution procedures.
Notwithstanding section 6402, if a taxpayer is entitled to a return of
funds pursuant to the error resolution procedures of paragraph (d)(1) of
this section, the Commissioner may, in the Commissioner's sole
discretion, effect such return by arranging for a credit to the
taxpayer's account with the issuer of the credit card or debit card or
any other financial institution or person that participated in the
transaction in which the error occurred.
(4) Matters not subject to error resolution procedures. The error
resolution procedures of paragraph (d)(1) of this section do not apply
to any error, question, or dispute concerning the amount of tax owed by
any person for any year. For example, these error resolution procedures
do not apply to determine a taxpayer's entitlement to a refund of tax
for any year for any reason, nor may they be used to pay a refund. All
such matters shall be resolved through administrative and judicial
procedures established pursuant to the Internal Revenue Code and the
rules and regulations thereunder.
(5) Section 170 of the Truth in Lending Act not applicable. Payments
of taxes by credit card or debit card are not subject to section 170 of
the Truth in Lending Act (15 U.S.C. 1666i) or to any similar provision
of state or local law.
(e) Fees or charges. The Internal Revenue Service may not impose any
fee or charge on persons making payment of taxes by credit card or debit
card. This section does not prohibit the imposition of fees or charges
by issuers of credit cards or debit cards or by any other financial
institution or person participating in the credit card or debit card
transaction. The Internal Revenue Service may not receive any part of
any fees that may be charged.
(f) Authority to enter into contracts. The Commissioner may enter
into contracts related to receiving payments of tax by credit card or
debit card if such contracts are cost beneficial to the Government. The
determination of whether the contract is cost beneficial shall be based
on an analysis appropriate for the contract at issue and at a level of
detail appropriate to the size of the Government's investment or
interest. The Commissioner may not pay any fee or charge or provide any
other monetary consideration under such contracts for such payments.
(g) Use and disclosure of information relating to payment of taxes
by credit card and debit card. Any information or data obtained directly
or indirectly by any person other than the taxpayer in connection with
payment of taxes by a credit card or debit card shall be treated as
confidential, whether such information is received from the Internal
Revenue Service or from any other person (including the taxpayer).
(1) No person other than the taxpayer shall use or disclose such
information except as follows--
(i) Card issuers, financial institutions, or other persons
participating in the credit card or debit card transaction may use or
disclose such information for the purpose and in direct furtherance of
servicing cardholder accounts, including the resolution of errors in
accordance with paragraph (d) of this section. This authority includes
the following--
(A) Processing the credit card or debit card transaction, in all of
its stages through and including the crediting of the amount charged on
account of tax to the United States Treasury;
(B) Billing the taxpayer for the amount charged or debited with
respect to payment of the tax liability;
(C) Collecting the amount charged or debited with respect to payment
of the tax liability;
(D) Returning funds to the taxpayer in accordance with paragraph
(d)(3) of this section;
(E) Sending receipts or confirmation of a transaction to the
taxpayer, including secured electronic transmissions and facsimiles; and
(F) Providing information necessary to make a payment to state or
local government agencies, as explicitly authorized by the taxpayer
(e.g., name,
[[Page 208]]
address, taxpayer identification number).
(ii) Card issuers, financial institutions or other persons
participating in the credit card or debit card transaction may use and
disclose such information for the purpose and in direct furtherance of
any of the following activities--
(A) Assessment of statistical risk and profitability;
(B) Transfer of receivables or accounts or any interest therein;
(C) Audit of account information;
(D) Compliance with federal, state, or local law; and
(E) Cooperation in properly authorized civil, criminal, or
regulatory investigations by federal, state, or local authorities.
(2) Notwithstanding the provisions of paragraph (g)(1) of this
section, use or disclosure of information relating to credit card and
debit card transactions for purposes related to any of the following is
not authorized--
(i) Sale of such information (or transfer of such information for
consideration) separate from a sale of the underlying account or
receivable (or transfer of the underlying account or receivable for
consideration);
(ii) Marketing for any purpose, such as, marketing tax-related
products or services, or marketing any product or service that targets
those who have used a credit card or debit card to pay taxes; and
(iii) Furnishing such information to any credit reporting agency or
credit bureau, except with respect to the aggregate amount of a
cardholder's account, with the amount attributable to payment of taxes
not separately identified.
(3) Use and disclosure of information other than as authorized by
this paragraph (g) may result in civil liability under sections
7431(a)(2) and (h).
(h) Effective date. This section applies to payments of taxes made
on and after December 14, 2001.
[T.D. 8969, 66 FR 64743, Dec. 14, 2001; 67 FR 1416, Jan. 11, 2001]
Sec. 301.6312-1 Treasury certificates of indebtedness, Treasury notes, and Treasury bills acceptable in payment of internal revenue taxes or stamps.
(a) Treasury certificates of indebtedness, Treasury notes, or
Treasury bills of any series (not including interim receipts issued by
Federal reserve banks in lieu of definitive certificates, notes, or
bills) may be tendered at or before maturity in payment of internal
revenue taxes due on the date (or in payment for stamps purchased on the
date), on which the certificates, notes, or bills mature, or in payment
of internal revenue taxes due on a specified prior date, but only if
such certificates, notes, or bills, according to the express terms of
their issue, are made acceptable in payment of such taxes or for the
purchase of stamps. If the taxes for which the certificates, notes, or
bills are tendered in payment become due, or the stamps are purchased,
on the same date as that on which such certificates, notes, or bills
mature, they will be accepted at par plus accrued interest, if any,
payable with the principal (not represented by coupons attached) in
payment of such taxes or stamps. If the taxes for which the
certificates, notes, or bills are tendered in payment become due, or the
stamps are purchased, on a date prior to that on which the certificates,
notes, or bills mature, they will be accepted at the value specified in
the terms under which such certificates, notes, or bills were issued.
All interest coupons attached to Treasury certificates of indebtedness
or Treasury notes shall be detached by the taxpayer before such
certificates or notes are tendered in payment of taxes or stamps.
(b) Receipts given by a district director for Treasury certificates
of indebtedness, Treasury notes, or Treasury bills received in payment
of internal revenue taxes or for stamps as provided in this section
shall contain an adequate description of such certificates, notes, or
bills, and a statement of the value, including accrued interest, if any,
payable with the principal (not represented by coupons attached), at
which accepted, and shall show that
[[Page 209]]
the certificates, notes, or bills are tendered by the taxpayer and
received by the district director, subject to no conditions,
qualification, or reservation whatsoever, in payment of an amount of
taxes or for stamps no greater than such value. Any certificate, note,
or bill offered in payment of internal revenue taxes or for stamps
subject to any condition, qualification, or reservation, or for any
greater amount than the value at which acceptable in payment of taxes or
stamps, as specified in the terms under which such certificate, note, or
bill was issued, shall not be deemed to be duly tendered and shall be
returned to the taxpayer.
(c) For the purpose of saving taxpayers the expense of transmitting
Treasury certificates of indebtedness, Treasury notes, or Treasury bills
to the office of the district director in whose district the taxes are
payable, or stamps are to be purchased, taxpayers desiring to pay taxes,
or purchase stamps, with such certificates, notes, or bills acceptable
in payment of taxes or for the purchase of stamps may deposit such
certificates, notes, or bills with a Federal reserve bank or branch, or
with the Office of the Treasurer of the United States, Treasury
Building, Washington, D.C. In such cases, the Federal reserve bank or
branch, or the Office of the Treasurer of the United States, shall issue
a receipt in the name of the district director, describing the
certificates, notes, or bills by par or dollar face amount and stating
on the face of the receipt that the certificates, notes, or bills
represented thereby are held by the bank or branch, or the Office of the
Treasurer of the United States, for redemption at the value specified in
the terms under which the certificates, notes, or bills were issued, and
for application of the proceeds in payment of taxes due or for the
purchase of stamps on a specified date by the taxpayer named therein.
(d) In the case of payments of tax required to be deposited with
Government depositaries by regulations under section 6302 of the Code,
certificates, notes, or bills referred to in paragraph (a) of this
section may be deposited with a Federal Reserve bank or branch, or with
the Office of the Treasurer of the United States, in part or full
satisfaction of such tax liability. As in the case of all remittances of
amounts so required to be deposited, each such deposit of certificates,
notes, or bills shall be accompanied by the appropriate deposit form in
accordance with the regulations under section 6302. In such cases,
notwithstanding paragraphs (b) and (c) of this section, receipts for
such certificates, notes or bills shall no longer be issued in the name
of the district director.
Sec. 301.6312-2 Certain Treasury savings notes acceptable in payment of certain internal revenue taxes.
According to the express terms of their issue, the following series
of Treasury savings notes are presently acceptable in payment of income
taxes (current and back, personal and corporation taxes, and excess
profits taxes) and estate and gift taxes (current and back):
(a) Treasury Savings Notes, Series A,
(b) Treasury Savings Notes, Series B,
(c) Treasury Savings Notes, Series C.
Sec. 301.6313-1 Fractional parts of a cent.
In the payment of any tax not payable by stamp, a fractional part of
a cent shall be disregarded unless it amounts to one-half cent or more,
in which case it shall be increased to one cent. Fractional parts of a
cent shall not be disregarded in the computation of taxes.
Sec. 301.6314-1 Receipt for taxes.
(a) In general. The district director or the director of a service
center shall upon request, issue a receipt for each tax payment made
(other than a payment for stamps sold and delivered). In addition, the
district director or the director of a service center shall issue a
receipt for each payment of 1 dollar or more made in cash, whether or
not requested. In the case of payments made by check, the canceled check
is usually a sufficient receipt. No receipt shall be issued in lieu of a
stamp representing a tax, whether the payment is in cash or otherwise.
(b) Duplicate receipt for payment of estate taxes. Upon request, the
district director or the director of a service center will issue
duplicate receipts to the person paying the estate tax, either of
[[Page 210]]
which will be sufficient evidence of such payment and entitle the
executor to be credited with the amount by any court having jurisdiction
to audit or settle his accounts. For definition of the term
``executor'', see section 2203.
[T.D. 7214, 37 FR 23176, Oct. 31, 1972]
Sec. 301.6315-1 Payments of estimated income tax.
The payment of any installment of the estimated income tax (see
sections 6015 and 6016) shall be considered payment on account of the
income tax for the taxable year for which the estimate is made. The
aggregate amount of the payments of estimated tax should be entered upon
the income tax return for such taxable year as payments to be applied
against the tax shown on such return.
Sec. 301.6316-1 Payment of income tax in foreign currency.
Subject to the provisions of Secs. 301.6316-3 to 301.6316-5,
inclusive, that portion of the income tax which is attributable to
amounts received by a citizen of the United States in nonconvertible
foreign currency may be paid in such currency--
(a) For any taxable year beginning on or after January 1, 1955, and
before January 1, 1964, if such amounts--
(1) Are disbursed from funds made available to a foundation or
commission established in a foreign country pursuant to an agreement
made under the authority of section 32(b) of the Surplus Property Act of
1944, as amended (50 U.S.C. App. 1641(b)(2)), or reestablished under the
authority of the Mutual Educational and Cultural Exchange Act of 1961,
as amended (22 U.S.C. 2451);
(2) Constitute either a grant made for authorized purposes of the
agreement or compensation for personal services performed in the employ
of the foundation or commission;
(3) Are at least 75 percent of the entire amount of the grant or
compensation; and
(4) Are treated as income from sources without the United States
under the provisions of sections 861 to 864, inclusive, and Secs. 1.861-
1 to 1.864, inclusive, of this chapter (Income Tax Regulations); and
(b) For any taxable year beginning on or after January 1, 1964, if
such amounts--
(1) Are disbursed from funds made available either to a foundation
or commission, established pursuant to an agreement made under the
authority of section 32(b) of the Surplus Property Act of 1944, as
amended, or to a foundation or commission established or continued
pursuant to an agreement made under the authority of the Mutual
Educational and Cultural Exchange Act of 1961, as amended; or are paid
from grants made to such citizen, or to a foundation or an educational
or other institution, under the authority of the Mutual Educational and
Cultural Exchange Act of 1961, as amended, or section 104 (h), (j), (k),
(o), or (p) of the Agricultural Trade Development and Assistance Act of
1954, as amended (7 U.S.C. 1704 (h), (j), (k), (o), (p));
(2) Constitute either a grant made for a purpose authorized under
any such agreement or law, or compensation for personal services
performed in the employ of any organization engaged in administering any
program or activity pursuant to any such agreement or law;
(3) Are at least 70 percent of the entire amount of the grant or
compensation; and
(4) Are treated as income from sources without the United States
under the provisions of sections 861 to 864, inclusive, and Secs. 1.861-
1 to 1.864, inclusive, of this chapter (Income Tax Regulations).
Sec. 301.6316-2 Definitions.
For purposes of Secs. 301.6316-1 to 301.6316-9, inclusive:
(a) The term tax, as used in Secs. 301.6316-1, 301.6316-3, 301.6316-
4, 301.6316-5, and 301.6316-6 means the income tax imposed for the
taxable year by chapter 1 of the Internal Revenue Code of 1954, and as
used in Sec. 301.6316-7 means the Federal Insurance Contributions Act
taxes imposed by chapter 21 of the Code (or by the corresponding
provisions of the Internal Revenue Code of 1939). The term ``tax'', as
used in Secs. 301.6316-3 and 301.6316-9 shall relate to either of such
taxes, whichever is appropriate.
[[Page 211]]
(b) The term nonconvertible foreign currency means currency of the
government of a foreign country which, owing to (1) monetary, exchange,
or other restrictions imposed by the foreign country, (2) an agreement
entered into with the United States of America, or (3) the terms and
conditions of the U.S. Government grant, is not convertible into U.S.
dollars or into other money which is convertible into U.S. dollars. The
term shall not, however, include currency which, notwithstanding such
restrictions, agreement, terms, or conditions, is in fact converted into
U.S. dollars or into property which is readily disposable for U.S.
dollars.
(c) If the taxpayer computes taxable income under the accrual
method, then the term received shall be construed to mean ``accrued.''
Sec. 301.6316-3 Allocation of tax attributable to foreign currency.
(a) Adjusted gross income ratio. The portion of the tax which is
attributable to amounts received in nonconvertible foreign currency
shall, for purposes of applying Sec. 301.6316-1 to the currency of each
foreign country, be the amount by which:
(1) The amount which bears the same ratio to the entire tax for the
taxable year as (i) the taxpayer's adjusted gross income received in
that currency bears to (ii) the adjusted gross income determined under
section 62 by taking into account the entire gross income and all
deductions allowable under that section without distinction as to
amounts received in foreign currency, exceeds
(2) The total of the allowable credits against tax, and payments on
account of tax, which are properly allocable to the amount of that
currency included in gross income.
(b) Example. (1) For the calendar year 1955 Mr. Jones and his wife
filed a joint return on which the adjusted gross income is as follows,
after amounts received in foreign currency had been properly translated
into United States dollars for tax computation purposes:
Fulbright grant received by Mr. Jones in nonconvertible foreign $8,000
currency......................................................
Dividends received by Mr. Jones entitled to dividends-received 500
credit........................................................
Compensation for personal services of Mrs. Jones............... 3,000
Net profit from business carried on by Mrs. Jones.............. 2,500
--------
Total adjusted gross income................................ 14,000
(2) The following amounts are allowable as properly deductible from
adjusted gross income, no determination being made as to whether or not
any part of them is properly allocable to the Fulbright grant:
Deduction for personal exemptions.............................. $3,000
Charitable contributions....................................... 500
Interest expense............................................... 400
Taxes.......................................................... 300
--------
Total allowable deductions................................. 4,200
(3) For the taxable year the following amounts are allowable as
credits against the tax, or as payments on account of the tax:
Foreign tax credit for foreign taxes paid on Fulbright grant.. $300.00
Dividends-received credit..................................... 20.00
Credit for income tax withheld upon compensation of Mrs. Jones 304.80
Payments of estimated tax (see Sec. 301.6316-
6(b)(2) for determination of amounts):
U.S. dollars...................................... $426.32
Foreign currency.................................. 893.88 1,320.20
-------------------
Total allowable credits and payments...................... 1,945.00
(4) The portion of the tax which is attributable to amounts received
in nonconvertible foreign currency is $33.49, determined as follows:
Adjusted gross income....................................... $14,000.00
Less: Allowable deductions.................................. 4,200.00
-------------
Taxable income.......................................... 9,800.00
=============
Tax computed under section 2................................ 2,148.00
Ratio of adjusted gross income received in nonconvertible 57.14
foreign currency to entire adjusted gross income ($8,000/
$14,000) (percent).........................................
Portion of tax attributable to nonconvertible foreign $1,227.37
currency ($2,148x57.14 percent)............................
Less:
Credit for foreign taxes paid on Fulbright $300.00
grant........................................
Payment in foreign currency of estimated tax.... 893.88 1,193.88
-----------------------
Portion of tax attributable to amounts received in 83.49
nonconvertible foreign currency........................
Sec. 301.6316-4 Return requirements.
(a) Place for filing. A return of income which includes amounts
received in foreign currency on which the tax is paid in accordance with
Sec. 301.6316-1 shall be filed with the Director of International
Operations, Internal Revenue Service, Washington, D.C. 20225. For the
time for filing income tax returns, see sections 6072 and 6081 and
Secs. 1.6072-1, 1.6081-1, and 1.6081-2 of this chapter (Income Tax
Regulations).
[[Page 212]]
(b) Statements required. (1) A statement, prepared by the taxpayer,
and certified by the foundation, commission, or other person having
control of the payments made to the taxpayer in nonconvertible foreign
currency, shall be attached to the return showing that for the taxable
year involved the taxpayer is entitled to pay tax in foreign currency in
accordance with section 6316 and the regulations thereunder. This
statement shall disclose the total amount of grants or compensation
received by the taxpayer during the taxable year under the authority of
section 32(b) of the Surplus Property Act of 1944, as amended (50 U.S.C.
App. 1641(b)(2)), or of the Mutual Educational and Cultural Exchange Act
of 1961, as amended (22 U.S.C. 2451), or section 104 (h), (j), (k), (o),
or (p) of the Agricultural Trade Development and Assistance Act of 1954,
as amended (7 U.S.C. 1704 (h), (j), (k), (o), (p)), and the amount
thereof paid in nonconvertible foreign currency. It shall also state
that with respect to the grant or compensation the applicable percentage
requirement of Sec. 301.6316-1 is satisfied.
(2) The taxpayer shall also attach to the return a detailed
statement showing (i) the computation, in the manner prescribed by
Sec. 301.6316-3, of the portion of the tax attributable to amounts
received in nonconvertible foreign currency and (ii) the rates of
exchange used in determining the tax liability in U.S. dollars. See
paragraph (c) of Sec. 301.6316-5.
Sec. 301.6316-5 Manner of paying tax by foreign currency.
(a) Time and place to pay. The unpaid tax required to be shown on a
return filed in accordance with Sec. 301.6316-4, whether payable in
whole or in part in foreign currency, is due and payable to the Director
of International Operations, Internal Revenue Service, Washington, D.C.
20225, at the time the return is filed. However, see paragraph (d) of
this section with respect to the depositing of the foreign currency with
the disbursing officer of the Department of State.
(b) Certified statement. Every taxpayer who desires to pay tax in
foreign currency under the provisions of Sec. 301.6316-1 shall first
obtain the certified statement referred to in paragraph (b)(1) of
Sec. 301.6316-4.
(c) Determination of the tax. In determining the tax payable for the
taxable year in U.S. dollars, the taxpayer, with respect to amounts
described in paragraph (a) of Sec. 301.6316-1, or amounts described in
paragraph (b) of Sec. 301.6316-1 received before November 1, 1965, shall
use the rates of exchange which most clearly reflect the correct tax
liability in dollars, whether it be the official rate, the open market
rate, or any other appropriate rate. With respect to amounts described
in paragraph (b) of Sec. 301.6316-1 received on or after November 1,
1965, the taxpayer shall use the official rate of exchange in
determining the tax payable for the taxable year in U.S. dollars. After
determining the correct tax liability in U.S. dollars the taxpayer shall
then ascertain, in accordance with the principles of Sec. 301.6316-3,
the portion of the tax which is attributable to amounts received in
nonconvertible foreign currency.
(d) Deposit of foreign currency with disbursing officer. (1) After
the portion of the tax which is attributable to amounts received in
nonconvertible foreign currency is determined in U.S. dollars, the
amount so determined shall be deposited in the same nonconvertible
foreign currency with the disbursing officer of the Department of State
for the foreign country where the fund is located from which the
payments in nonconvertible foreign currency are made to the taxpayer.
The amount of foreign currency to be deposited shall be that amount
which, when converted at the rate of exchange used on the date of
deposit by that disbursing officer for the acquisition of such currency
for his official disbursements, equals the portion of the tax so
determined in U.S. dollars.
(2) The disbursing officer may rely upon the taxpayer for the
determination of the amount of tax payable in foreign currency but may
not accept any such currency for deposit until the taxpayer has
presented for inspection the certified statement referred to in
paragraph (b)(1) of Sec. 301.6316-4. Upon acceptance of foreign currency
for deposit the disbursing officer shall give the taxpayer a receipt in
duplicate showing the name and address of the
[[Page 213]]
depositor, the date of the deposit, the amount of foreign currency
deposited, and its equivalent in U.S. dollars on the date of deposit.
(3) Every taxpayer making a deposit of foreign currency in
accordance with this paragraph shall attach to the return required to be
filed in accordance with Sec. 301.6316-4, in part or full payment of the
taxes shown thereon, the original of the receipt given by the disbursing
officer and shall pay to the Director of International Operations in
U.S. dollars the balance, if any, of the tax shown to be due. Tender of
such receipt to the Director of International Operations shall be
considered as payment of tax in an amount equal to the U.S. dollars
represented by the receipt.
(4) A taxpayer shall make the deposit required by this paragraph in
ample time to permit him to attach the receipt to his return for filing
within the time prescribed by section 6072 or 6081 and Secs. 1.6072-1,
1.6081-1, and 1.6081-2 of this chapter (Income Tax Regulations).
Sec. 301.6316-6 Declarations of estimated tax.
(a) Filing of declaration. A declaration of estimated tax in respect
of amounts on which the tax is to be paid in foreign currency under the
provisions of Sec. 301.6316-1 shall be filed with the Director of
International Operations, Internal Revenue Service, Washington, D.C.
20225, and shall have attached thereto the statements required by
paragraph (b) (1) and (2)(i) of Sec. 301.6316-4 in respect of the tax
return except that the statement certified by the foundation,
commission, or other person having control of the payments to the
taxpayer in nonconvertible foreign currency may be based upon amounts
expected to be received by the taxpayer during the taxable year if they
are not in fact known at the time of certification. A copy of this
certified statement shall be retained by the taxpayer for the purpose of
exhibiting it to the disbursing officer when making installment deposits
of foreign currency under the provisions of paragraph (c) of this
section. For the time for filing declarations of estimated tax, see
sections 6073 and 6081 and Secs. 1.6073-1 to 1.6073-4, inclusive, and
Secs. 1.6081-1 and 1.6081-2 of this chapter (Income Tax Regulations).
(b) Determination of estimated tax-- (1) Allocation of tax
attributable to foreign currency. In determining the amount of estimated
tax for purposes of this section, all items of income, deduction, and
credit, whether or not attributable to amounts received in
nonconvertible foreign currency, shall be taken into account. The
portion of the estimated tax which is attributable to amounts to be
received during the taxable year in nonconvertible foreign currency
shall be determined consistently with the manner prescribed by
Sec. 301.6316-3.
(2) Example. (i) For the calendar year 1955 Mr. Jones and his wife
filed a joint declaration of estimated tax in the determination of which
the adjusted gross income was estimated to be as follows, after amounts
to be received in foreign currency had been properly translated into
U.S. dollars for tax computation purposes:
Fulbright grant to be received by Mr. Jones in nonconvertible $8,000
foreign currency..............................................
Dividends to be received by Mr. Jones entitled to dividends- 875
received credit...............................................
Compensation to be received by Mrs. Jones for personal services 3,000
Net profit to be derived from business carried on by Mrs. Jones 1,625
--------
Total estimated adjusted gross income...................... 13,000
(ii) The following amounts were determined to be allowable as
properly deductible from estimated adjusted gross income, no
determination being made as to whether or not any part of them was
properly allocable to the Fulbright grant:
Deduction for personal exemptions.............................. $3,000
Charitable contributions....................................... 300
Interest expense............................................... 400
Taxes.......................................................... 300
--------
Total allowable deductions................................. 4,000
(iii) The following estimated amounts were determined to be
allowable as credits against the tax for the taxable year:
Foreign tax credit for foreign taxes to be paid on $300.00
Fulbright grant...........................................
Credit for income tax expected to be withheld upon 304.80
compensation of Mrs. Jones................................
Dividends-received credit.................................. 15.00
------------
Total allowable estimated credits...................... 619.80
(iv) The portion of the estimated tax which is attributable to
amounts to be received during the taxable year in
[[Page 214]]
nonconvertible foreign currency is $893.88, determined as follows:
Estimated adjusted gross income............................ $13,000.00
Less: Allowable deductions................................. 4,000.00
------------
Estimated taxable income............................... 9,000.00
Tax computed under section 2............................... 1,940.00
Ratio of estimated adjusted gross income to be received in 61.54
nonconvertible foreign currency to entire estimated
adjusted gross income ($8,000/$13,000) (percent)..........
Portion of above tax attributable to nonconvertible foreign 1,193.88
currency ($1,940x61.54 percent)...........................
Less: Credit for foreign taxes expected to be paid on 300.00
Fulbright grant...........................................
------------
Portion of estimated tax which is attributable to 893.88
amounts to be received during the taxable year in
nonconvertible foreign currency.........................
(v) The portion of the estimated tax which is payable in U.S.
dollars is $426.32, determined as follows:
Tax computed under section 2............................... $1,940.00
Less: Total allowable estimated credits.................... 619.80
------------
Total estimated tax.................................... 1,320.20
Less: Portion of estimated tax payable in foreign currency. 893.88
------------
Portion of estimated tax payable in U.S. dollars....... 426.32
(c) Payment of estimated tax. (1) The provisions of Sec. 301.6316-5
relating to the certified statement, determination of the tax, and the
depositing of the foreign currency shall apply for purposes of this
section. The full amount of estimated tax payable in foreign currency,
as determined under paragraph (b) of this section, may be deposited
before the date prescribed for the payment thereof.
(2) Every taxpayer making a deposit of foreign currency in
accordance with this paragraph shall tender to the Director of
International Operations, Internal Revenue Service, Washington, D.C.
20225, the original of the receipt from the disbursing officer as
payment, to the extent of the amount represented thereby in U.S.
dollars, of the estimated tax. For the dates prescribed for the payment
of estimated tax, see sections 6153 and 6161 and Secs. 1.6153-1 to
1.6153-4, inclusive, and Sec. 1.6161-1 of this chapter (Income Tax
Regulations). A taxpayer should make the deposit required by this
paragraph in ample time to permit him to tender such receipt by the date
prescribed for payment of the estimated tax.
(d) Credit on return for the taxable year. The receipt given by the
disbursing officer of the Department of State and tendered in payment of
estimated tax under this section shall, for purposes of paragraph (a)(2)
of Sec. 301.6316-3, be considered as payment on account of the tax for
the taxable year. The amount so considered to be paid shall be the
amount in U.S. dollars represented by the receipt.
Sec. 301.6316-7 Payment of Federal Insurance Contributions Act taxes in foreign currency.
(a) In general. The taxes imposed on employees and employers by
sections 3101 and 3111, respectively, of chapter 21 of the Code (Federal
Insurance Contributions Act) or the corresponding sections of the
Internal Revenue Code of 1939 may, with respect to wages (as defined in
section 3121(a) of chapter 21 of the Code or the corresponding section
of the Internal Revenue Code of 1939) paid in nonconvertible foreign
currency (as defined in paragraph (b) of Sec. 301.6316-2) for services
performed on or after January 1, 1951, be paid in that currency if all
such wages--
(1) Are paid from funds made available to a foundation or commission
established in a foreign country pursuant to an agreement made under the
authority of section 32(b) of the Surplus Property Act of 1944, as
amended (50 U.S.C. App. 1641(b)(2)), or established or continued
pursuant to an agreement made under authority of the Mutual Educational
and Cultural Exchange Act of 1961, as amended (22 U.S.C. 2451); and
(2) Are paid to a U.S. citizen for services performed in the employ
of such foundation or commission.
(b) Return requirements--(1) Statements required. (i) A return on
which payment of Federal Insurance Contributions Act taxes is made in
accordance with this section shall have attached thereto a statement,
certified by the foundation or commission filing the return, stating
that the foundation or commission is an organization established
pursuant to an agreement made under authority of section 32(b) of the
Surplus Property Act of 1944, as amended, or established or continued
pursuant to an agreement made under authority of the Mutual Educational
and Cultural Exchange Act of 1961, as amended.
[[Page 215]]
(ii) The taxpayer shall also attach to the return a statement
showing the rates of exchange used in determining in United States
dollars the wages reported on the return and the taxes due with respect
thereto. See paragraph (c)(1) of this section.
(2) Cross references. For the place for filing returns of the
Federal Insurance Contributions Act taxes, see Sec. 31.6091-1(c) of this
chapter (Employment Tax Regulations). For the time for filing returns of
the Federal Insurance Contributions Act taxes, see Sec. 31.6071(a)-1 of
this chapter (Employment Tax Regulations).
(c) Payment of tax--(1) Determination of the tax. In determining in
U.S. dollars the wages required to be reported on the return and the
taxes due with respect thereto, the taxpayer shall use the rate of
exchange which most clearly reflects the correct equivalent in dollars,
whether it be the official rate, the open market rate, or any other
appropriate rate.
(2) Deposit of foreign currency with disbursing officer. (i) After
determination is made in U.S. dollars of the Federal Insurance
Contributions Act taxes with respect to wages paid in nonconvertible
foreign currency, the amount so determined shall be deposited in the
same nonconvertible foreign currency with the disbursing officer of the
Department of State for the foreign country where the fund is located
from which such wages were paid. The amount of the foreign currency to
be deposited shall be that amount which, when converted at the rate of
exchange used on the date of deposit by the disbursing officer for the
acquisition of such currency for his official disbursements, equals the
taxes determined in U.S. dollars.
(ii) The disbursing officer may rely upon the taxpayer for the
determination of the amount of tax payable in foreign currency but may
not accept any such currency for deposit until the taxpayer has
presented for inspection the certified statement referred to in
paragraph (b)(1) of this section. Upon acceptance of foreign currency
for deposit the disbursing officer shall give the taxpayer a receipt in
duplicate showing the name and address of the depositor, the date of the
deposit, the amount of foreign currency deposited and its equivalent in
U.S. dollars on the date of deposit, and the kind of tax for which the
deposit is made.
(iii) Every taxpayer making a deposit of foreign currency in
accordance with this paragraph shall attach to the return required to be
filed in accordance with paragraph (b) of this section the original of
the receipt given by the disbursing officer. Tender of such receipt to
the Director of International Operations shall be considered as payment
of tax in an amount equal to the U.S. dollars represented by the
receipt.
(iv) A taxpayer shall make the deposit required by this paragraph in
ample time to permit it to attach the receipt to its return for filing
within the time prescribed by Sec. 31.6071(a)-1 of this chapter
(Employment Tax Regulations).
Sec. 301.6316-8 Refunds and credits in foreign currency.
(a) Refunds. The refund of any overpayment of tax which has been
paid under section 6316 in foreign currency may, in the discretion of
the Commissioner, be made in the same foreign currency by which the tax
was paid. The amount of any such refund made in foreign currency shall
be the amount of the overpayment in U.S. dollars converted, on the date
of the refund check, at the rate of exchange then used for his official
disbursements by the disbursing officer of the Department of State in
the country where the foreign currency was originally deposited.
(b) Credits. Unless otherwise in the best interest of the Internal
Revenue Service, no credit of any overpayment of tax which has been paid
under section 6316 in foreign currency shall be allowed against any
outstanding liability of the person making the overpayment except in
respect of that portion or the liability which, in accordance with
Sec. 301.6316-1 or Sec. 301.6316-7, would otherwise be permitted to be
paid in the same foreign currency.
Sec. 301.6316-9 Interest, additions to tax, etc.
Any reference in Secs. 301.6316-1 to 301.6316-8, inclusive, to
``tax'' shall be
[[Page 216]]
deemed also to refer to the interest, additions to the tax, additional
amounts, and penalties attributable to the tax.
Lien for Taxes
Sec. 301.6320-1 Notice and opportunity for hearing upon filing of notice of Federal tax lien.
(a) Notification--(1) In general. For a notice of Federal tax lien
(NFTL) filed on or after January 19, 1999, the Commissioner, or his or
her delegate (the Commissioner), will prescribe procedures to notify the
person described in section 6321 of the filing of a NFTL not more than
five business days after the date of any such filing. The Collection Due
Process Hearing Notice (CDP Notice) and other notices given under
section 6320 must be given in person, left at the dwelling or usual
place of business of such person, or sent by certified or registered
mail to such person's last known address, not more than five business
days after the day the NFTL was filed. For further guidance regarding
the definition of last known address, see Sec. 301.6212-2.
(2) Questions and answers. The questions and answers illustrate the
provisions of this paragraph (a) as follows:
Q-A1. Who is the person entitled to notice under section 6320?
A-A1. Under section 6320(a)(1), notification of the filing of a NFTL
on or after January 19, 1999, is required to be given only to the person
described in section 6321 who is named on the NFTL that is filed. The
person described in section 6321 is the person liable to pay the tax due
after notice and demand who refuses or neglects to pay the tax due
(hereinafter, referred to as the taxpayer).
Q-A2. When will the Internal Revenue Service (IRS) provide the
notice required under section 6320?
A-A2. The IRS will provide this notice within five business days
after the filing of the NFTL.
Q-A3. Will the IRS give notification to the taxpayer for each tax
period listed in a NFTL filed on or after January 19, 1999?
A-A3. Yes. A NFTL can be filed for more than one tax period. The
notification of the filing of a NFTL will specify each unpaid tax and
tax period listed in the NFTL.
Q-A4. Will the IRS give notification to the taxpayer of any filing
of a NFTL for the same tax period or periods at another place of filing?
A-A4. Yes. The IRS will notify a taxpayer when a NFTL is filed on or
after January 19, 1999, for a tax period or periods at any recording
office.
Q-A5. Will the IRS give notification to the taxpayer if a NFTL is
filed on or after January 19, 1999, for a tax period or periods for
which a NFTL was filed in another recording office prior to that date?
A-A5. Yes. The IRS will notify a taxpayer when each NFTL is filed on
or after January 19, 1999, for a tax period or periods at any recording
office.
Q-A6. Will the IRS give notification to the taxpayer when a NFTL is
refiled on or after January 19, 1999?
A-A6. No. Section 6320(a)(1) does not require the IRS to notify the
taxpayer of the refiling of a NFTL. A taxpayer may, however, seek
reconsideration by the IRS office that is collecting the tax or refiling
the NFTL, an administrative hearing before the IRS Office of Appeals
(Appeals), or assistance from the National Taxpayer Advocate.
Q-A7. Will the IRS give notification to a known nominee of, or a
person holding property of, the taxpayer of the filing of the NFTL?
A-A7. No. Such person is not the person described in section 6321
and, therefore, is not entitled to notice, but such persons have other
remedies. See A-B5 of paragraph (b)(2) of this section.
Q-A8. Will the IRS give notification to the taxpayer when a
subsequent NFTL is filed for the same period or periods?
A-A8. Yes. If the IRS files an additional NFTL with respect to the
same tax period or periods for which an original NFTL was filed, the IRS
will notify the taxpayer when the subsequent NFTL is filed. Not all such
notices will, however, give rise to a right to a CDP hearing (see
paragraph (b) of this section).
Q-A9. How will notification under section 6320 be accomplished?
A-A9. The IRS will notify the taxpayer by letter. Included with this
letter will be the additional information the IRS is required to provide
taxpayers as well as, when appropriate, a
[[Page 217]]
Form 12153, Request for a Due Process Hearing. The IRS may effect
delivery of the letter (and accompanying materials) in one of three
ways: by delivering the notice personally to the taxpayer; by leaving
the notice at the taxpayer's dwelling or usual place of business; or by
mailing the notice to the taxpayer at his last known address by
certified or registered mail.
Q-A10. What must a CDP Notice given under section 6320 include?
A-A10. These notices must include, in simple and nontechnical terms:
(i) The amount of the unpaid tax.
(ii) A statement concerning the taxpayer's right to request a CDP
hearing during the 30-day period that commences the day after the end of
the five business day period within which the IRS is required to provide
the taxpayer with notice of the filing of the NFTL.
(iii) The administrative appeals available to the taxpayer with
respect to the NFTL and the procedures relating to such appeals.
(iv) The statutory provisions and the procedures relating to the
release of liens on property.
Q-A11. What are the consequences if the taxpayer does not receive or
accept a CDP Notice that is properly left at the taxpayer's dwelling or
usual place of business, or sent by certified or registered mail to the
taxpayer's last known address?
A-A11. A CDP Notice properly sent by certified or registered mail to
the taxpayer's last known address or left at the taxpayer's dwelling or
usual place of business is sufficient to start the 30-day period,
commencing the day after the end of the five business day notification
period, within which the taxpayer may request a CDP hearing. Actual
receipt is not a prerequisite to the validity of the CDP Notice.
Q-A12. What if the taxpayer does not receive the CDP Notice because
the IRS did not send that notice by certified or registered mail to the
taxpayer's last known address, or failed to leave it at the dwelling or
usual place of business of the taxpayer, and the taxpayer fails to
request a CDP hearing with Appeals within the 30-day period commencing
the day after the end of the five business day notification period?
A-A12. A NFTL becomes effective upon filing. The validity and
priority of a NFTL is not conditioned on notification to the taxpayer
pursuant to section 6320. Therefore, the failure to notify the taxpayer
concerning the filing of a NFTL does not affect the validity or priority
of the NFTL. When the IRS determines that it failed properly to provide
a taxpayer with a CDP Notice, it will promptly provide the taxpayer with
a substitute CDP Notice and provide the taxpayer with an opportunity to
request a CDP hearing. Substitute CDP Notices are discussed in Q&A-B3 of
paragraph (b)(2) and Q&A-C8 of paragraph (c)(2) of this section.
(3) Examples. The following examples illustrate the principles of
this paragraph (a):
Example 1. H and W are jointly and severally liable with respect to
a jointly filed income tax return for 1996. IRS files a NFTL with
respect to H and W in County X on January 26, 1999. This is the first
NFTL filed on or after January 19, 1999, for their 1996 liability. H and
W will each be notified of the filing of the NFTL.
Example 2. Employment taxes for 1997 are assessed against ABC
Corporation. A NFTL is filed against ABC Corporation for the 1997
liability in County X on June 5, 1998. A NFTL is filed against ABC
Corporation for the 1997 liability in County Y on June 17, 1999. The IRS
will notify the ABC Corporation with respect to the filing of the NFTL
in County Y.
Example 3. Federal income tax liability for 1997 is assessed against
individual D. D buys an asset and puts it in individual E's name. A NFTL
is filed against D in County X on June 5, 1999, for D's federal income
tax liability for 1997. On June 17, 1999, a NFTL for the same tax
liability is filed in County Y against E, as nominee of D. The IRS will
notify D of the filing of the NFTL in both County X and County Y. The
IRS will not notify E of the NFTL filed in County X. The IRS is not
required to notify E of the NFTL filed in County Y. Although E is named
on the NFTL filed in County Y, E is not the person described in section
6321 (the taxpayer) who is named on the NFTL.
(b) Entitlement to a CDP hearing--(1) In general. A taxpayer is
entitled to one CDP hearing with respect to the first filing of a NFTL
(on or after January 19, 1999) for a given tax period or periods with
respect to the unpaid tax shown on the NFTL if the taxpayer timely
requests such a hearing. The taxpayer must request such a hearing
[[Page 218]]
during the 30-day period that commences the day after the end of the
five business day period within which the IRS is required to provide the
taxpayer with notice of the filing of the NFTL.
(2) Questions and answers. The questions and answers illustrate the
provisions of this paragraph (b) as follows:
Q-B1. Is a taxpayer entitled to a CDP hearing with respect to the
filing of a NFTL for a type of tax and tax periods previously subject to
a CDP Notice with respect to a NFTL filed in a different location on or
after January 19, 1999?
A-B1. No. Although the taxpayer will receive notice of each filing
of a NFTL, under section 6320(b)(2), the taxpayer is entitled to only
one CDP hearing under section 6320 for the type of tax and tax periods
with respect to the first filing of a NFTL that occurs on or after
January 19, 1999, with respect to that unpaid tax. Accordingly, if the
taxpayer does not timely request a CDP hearing with respect to the first
filing of a NFTL on or after January 19, 1999, for a given tax period or
periods with respect to an unpaid tax, the taxpayer forgoes the right to
a CDP hearing with Appeals and judicial review of the Appeals
determination with respect to the NFTL. Under such circumstances, the
taxpayer may request an equivalent hearing as described in paragraph (i)
of this section.
Q-B2. Is the taxpayer entitled to a CDP hearing when a NFTL for an
unpaid tax is filed on or after January 19, 1999, in one recording
office and a NFTL was previously filed for the same unpaid tax in
another recording office prior to that date?
A-B2. Yes. Under section 6320(b)(2), the taxpayer is entitled to a
CDP hearing under section 6320 for each tax period with respect to the
first filing of a NFTL on or after January 19, 1999, with respect to an
unpaid tax, whether or not a NFTL was filed prior to January 19, 1999,
for the same unpaid tax and tax period or periods.
Q-B3. When the IRS provides the taxpayer with a substitute CDP
Notice and the taxpayer timely requests a CDP hearing, is the taxpayer
entitled to a CDP hearing before Appeals?
A-B3. Yes. Unless the taxpayer provides the IRS a written withdrawal
of the request that Appeals conduct a CDP hearing, the taxpayer is
entitled to a CDP hearing before Appeals. Following the hearing, Appeals
will issue a Notice of Determination, and the taxpayer is entitled to
seek judicial review of that Notice of Determination.
Q-B4. If the IRS sends a second CDP Notice under section 6320 (other
than a substitute CDP Notice) for a tax period and with respect to an
unpaid tax for which a section 6320 CDP Notice was previously sent, is
the taxpayer entitled to a section 6320 CDP hearing based on the second
CDP Notice?
A-B4. No. The taxpayer is entitled to a CDP hearing under section
6320 for each tax period only with respect to the first filing of a NFTL
on or after January 19, 1999, with respect to an unpaid tax.
Q-B5. Is a nominee of, or a person holding property of, the taxpayer
entitled to a CDP hearing or an equivalent hearing?
A-B5. No. Such person is not the person described in section 6321
and is, therefore, not entitled to a CDP hearing or an equivalent
hearing (as discussed in paragraph (i) of this section). Such person,
however, may seek reconsideration by the IRS office collecting the tax
or filing the NFTL, an administrative hearing before Appeals under its
Collection Appeals Program, or assistance from the National Taxpayer
Advocate. However, any such administrative hearing would not be a CDP
hearing under section 6320 and any determination or decision resulting
from the hearing would not be subject to judicial review under section
6320. Such person also may avail himself of the administrative procedure
included in section 6325(b)(4) or of any other procedures to which he is
entitled.
(3) Examples. The following examples illustrate the principles of
this paragraph (b):
Example 1. H and W are jointly and severally liable with respect to
a jointly filed income tax return for 1996. The IRS files a NFTL with
respect to H and W in County X on January 26, 1999. This is the first
NFTL filed on or after January 19, 1999, for their 1996 liability. H and
W are each entitled to a CDP hearing with respect to the NFTL filed in
County X. On June 17, 1999, a NFTL for the same tax liability is filed
against H and W in County Y. The IRS will give H and W
[[Page 219]]
notification of the NFTL filed in County Y. H and W, however, are not
entitled to a CDP hearing or an equivalent hearing with respect to the
NFTL filed in County Y.
Example 2. Federal income tax liability for 1997 is assessed against
individual D. D buys an asset and puts it in individual E's name. A NFTL
is filed against E, as nominee of D in County X on June 5, 1999, for D's
federal income tax liability for 1997. The IRS will give D a CDP Notice
with respect to the NFTL filed in County X. The IRS will not notify E of
the NFTL filed in County X. The IRS is not required to notify E of the
filing of the NFTL in County X. Although E is named on the NFTL filed in
County X, E is not the person described in section 6321 (the taxpayer)
who is named on the NFTL.
(c) Requesting a CDP hearing--(1) In general. When a taxpayer is
entitled to a CDP hearing under section 6320, the CDP hearing must be
requested during the 30-day period that commences the day after the end
of the five business day period within which the IRS is required to
provide the taxpayer with a CDP Notice with respect to the filing of the
NFTL.
(2) Questions and answers. The questions and answers illustrate the
provisions of this paragraph (c) as follows:
Q-C1. What must a taxpayer do to obtain a CDP hearing?
A-C1. (i) The taxpayer must make a request in writing for a CDP
hearing. A written request in any form, which requests a CDP hearing,
will be acceptable. The request must include the taxpayer's name,
address, and daytime telephone number, and must be signed by the
taxpayer or the taxpayer's authorized representative and dated. The CDP
Notice should include, when appropriate, a Form 12153 (Request for a
Collection Due Process Hearing) that can be used by the taxpayer to
request a CDP hearing.
(ii) The Form 12153 requests the following information:
(A) The taxpayer's name, address, daytime telephone number, and
taxpayer identification number (SSN or TIN).
(B) The type of tax involved.
(C) The tax period at issue.
(D) A statement that the taxpayer requests a hearing with Appeals
concerning the filing of the NFTL.
(E) The reason or reasons why the taxpayer disagrees with the filing
of the NFTL.
(iii) Taxpayers are encouraged to use a Form 12153 in requesting a
CDP hearing so that the request can be readily identified and forwarded
to Appeals. Taxpayers may obtain a copy of Form 12153 by contacting the
IRS office that issued the CDP Notice or by calling, toll free, 1-800-
829-3676.
(iv) The taxpayer may perfect any timely written request for a CDP
hearing which otherwise meets the requirements set forth above and which
is made or alleged to have been made on the taxpayer's behalf by the
taxpayer's spouse or any other representative by filing, within a
reasonable time of a request from Appeals, a signed written affirmation
that the request was originally submitted on the taxpayer's behalf.
Q-C2. Must the request for the CDP hearing be in writing?
A-C2. Yes. There are several reasons why the request for a CDP
hearing must be in writing. The filing of a timely request for a CDP
hearing is the first step in what may result in a court proceeding. A
written request will provide proof that the CDP hearing was requested
and thus permit the court to verify that it has jurisdiction over any
subsequent appeal of the Notice of Determination issued by Appeals. In
addition, the receipt of the written request will establish the date on
which the periods of limitation under section 6502 (relating to
collection after assessment), section 6531 (relating to criminal
prosecutions), and section 6532 (relating to suits) are suspended as a
result of the CDP hearing and any judicial appeal. Moreover, because the
IRS anticipates that taxpayers will contact the IRS office that issued
the CDP Notice for further information or assistance in filling out Form
12153, or to attempt to resolve their liabilities prior to going through
the CDP hearing process, the requirement of a written request should
help prevent any misunderstanding as to whether a CDP hearing has been
requested. If the information requested on Form 12153 is furnished by
the taxpayer, the written request also will help to establish the issues
for which the taxpayer seeks a determination by Appeals.
[[Page 220]]
Q-C3. When must a taxpayer request a CDP hearing with respect to a
CDP Notice issued under section 6320?
A-C3. A taxpayer must submit a written request for a CDP hearing
within the 30-day period that commences the day after the end of the
five business day period following the filing of the NFTL. Any request
filed during the five business day period (before the beginning of the
30-day period) will be deemed to be filed on the first day of the 30-day
period. The period for submitting a written request for a CDP hearing
with respect to a CDP Notice issued under section 6320 is slightly
different from the period for submitting a written request for a CDP
hearing with respect to a CDP Notice issued under section 6330. For a
CDP Notice issued under section 6330, the taxpayer must submit a written
request for a CDP hearing within the 30-day period commencing the day
after the date of the CDP Notice.
Q-C4. How will the timeliness of a taxpayer's written request for a
CDP hearing be determined?
A-C4. The rules and regulations under section 7502 and section 7503
will apply to determine the timeliness of the taxpayer's request for a
CDP hearing, if properly transmitted and addressed as provided in A-C6
of this paragraph (c)(2).
Q-C5. Is the 30-day period within which a taxpayer must make a
request for a CDP hearing extended because the taxpayer resides outside
the United States?
A-C5. No. Section 6320 does not make provision for such a
circumstance. Accordingly, all taxpayers who want a CDP hearing under
section 6320 must request such a hearing within the 30-day period that
commences the day after the end of the five business day notification
period.
Q-C6. Where should the written request for a CDP hearing be sent?
A-C6. The written request for a CDP hearing must be sent, or hand
delivered, to the IRS office that issued the CDP Notice at the address
indicated on the CDP Notice. If the address of that office does not
appear on the CDP Notice, the request must be sent, or hand delivered,
to the compliance area director, or his or her successor, serving the
compliance area in which the taxpayer resides or has its principal place
of business. If the taxpayer does not have a residence or principal
place of business in the United States, the request must be sent, or
hand delivered, to the compliance director, Philadelphia Submission
Processing Center, or his or her successor. Taxpayers may obtain the
address of the appropriate person to which the written request should be
sent or hand delivered by calling, toll-free, 1-800-829-1040 and
providing their taxpayer identification number (SSN or TIN).
Q-C7. What will happen if the taxpayer does not request a CDP
hearing in writing within the 30-day period that commences the day after
the end of the five business day notification period?
A-C7. If the taxpayer does not request a CDP hearing in writing
within the 30-day period that commences on the day after the end of the
five business day notification period, the taxpayer will forego the
right to a CDP hearing under section 6320 with respect to the unpaid tax
and tax periods shown on the CDP Notice. The taxpayer may, however,
request an equivalent hearing. See paragraph (i) of this section.
Q-C8. When must a taxpayer request a CDP hearing with respect to a
substitute CDP Notice?
A-C8. A CDP hearing with respect to a substitute CDP Notice must be
requested in writing by the taxpayer prior to the end of the 30-day
period commencing the day after the date of the substitute CDP Notice.
Q-C9. Can taxpayers attempt to resolve the matter of the NFTL with
an officer or employee of the IRS office collecting the tax or filing
the NFTL either before or after requesting a CDP hearing?
A-C9. Yes. Taxpayers are encouraged to discuss their concerns with
the IRS office collecting the tax or filing the NFTL, either before or
after they request a CDP hearing. If such a discussion occurs before a
request is made for a CDP hearing, the matter may be resolved without
the need for Appeals consideration. However, these discussions do not
suspend the running of the 30-day period, commencing the day
[[Page 221]]
after the end of the five business day notification period, within which
the taxpayer is required to request a CDP hearing, nor do they extend
that 30-day period. If discussions occur after the request for a CDP
hearing is filed and the taxpayer resolves the matter with the IRS
office collecting the tax or filing the NFTL, the taxpayer may withdraw
in writing the request that a CDP hearing be conducted by Appeals. The
taxpayer can also waive in writing some or all of the requirements
regarding the contents of the Notice of Determination.
(3) Examples. The following examples illustrate the principles of
this paragraph (c):
Example 1. A NFTL for a 1997 income tax liability assessed against
individual A is filed in County X on June 17, 1999. The IRS mails a CDP
Notice to individual A's last known address on June 18, 1999. Individual
A has until July 26, 1999, a Monday, to request a CDP hearing. The five
business day period within which the IRS is required to notify
individual A of the filing of the NFTL in County X expires on June 24,
1999. The 30-day period within which individual A may request a CDP
hearing begins on June 25, 1999. Because the 30-day period expires on
July 24, 1999, a Saturday, individual A's written request for a CDP
hearing will be considered timely if it is properly transmitted and
addressed to the IRS in accordance with section 7502 and the regulations
thereunder no later than July 26, 1999.
Example 2. Same facts as in Example 1, except that individual A is
on vacation, outside the United States, or otherwise does not receive or
read the CDP Notice until July 19, 1999. As in Example 1, individual A
has until July 26, 1999, to request a CDP hearing. If individual A does
not request a CDP hearing, individual A may request an equivalent
hearing as to the NFTL at a later time. The taxpayer should make a
request for an equivalent hearing at the earliest possible time.
Example 3. Same facts as in Example 2, except that individual A does
not receive or read the CDP Notice until after July 26, 1999, and does
not request a hearing by July 26, 1999. Individual A is not entitled to
a CDP hearing. Individual A may request an equivalent hearing as to the
NFTL at a later time. The taxpayer should make a request for an
equivalent hearing at the earliest possible time.
Example 4. Same facts as in Example 1, except the IRS determines
that the CDP Notice mailed on June 18, 1999, was not mailed to
individual A's last known address. As soon as practicable after making
this determination, the IRS will mail a substitute CDP Notice to
individual A at individual A's last known address, hand deliver the
substitute CDP Notice to individual A, or leave the substitute CDP
Notice at individual A's dwelling or usual place of business. Individual
A will have 30 days commencing on the day after the date of the
substitute CDP Notice within which to request a CDP hearing.
(d) Conduct of CDP hearing--(1) In general. If a taxpayer requests a
CDP hearing under section 6320(a)(3)(B) (and does not withdraw that
request), the CDP hearing will be held with Appeals. The taxpayer is
entitled under section 6320 to a CDP hearing for the unpaid tax and tax
periods set forth in a NFTL only with respect to the first filing of a
NFTL on or after January 19, 1999. To the extent practicable, the CDP
hearing requested under section 6320 will be held in conjunction with
any CDP hearing the taxpayer requests under section 6330. A CDP hearing
will be conducted by an employee or officer of Appeals who, prior to the
first CDP hearing under section 6320 or section 6330, has had no
involvement with respect to the unpaid tax for the tax periods to be
covered by the hearing, unless the taxpayer waives this requirement.
(2) Questions and answers. The questions and answers illustrate the
provisions of this paragraph (d) as follows:
Q-D1. Under what circumstances can a taxpayer receive more than one
CDP hearing under section 6320 with respect to a tax period?
A-D1. The taxpayer may receive more than one CDP hearing under
section 6320 with respect to a tax period where the tax involved is a
different type of tax (for example, an employment tax liability, where
the original CDP hearing for the tax period involved an income tax
liability), or where the same type of tax for the same period is
involved, but where the amount of the unpaid tax has changed as a result
of an additional assessment of tax (not including interest or penalties)
for that period or an additional accuracy-related or filing-delinquency
penalty has been assessed. The taxpayer is not entitled to another CDP
hearing under section 6320 if the additional assessment represents
accruals of interest, accruals of penalties, or both.
[[Page 222]]
Q-D2. Will a CDP hearing with respect to one tax period be combined
with a CDP hearing with respect to another tax period?
A-D2. To the extent practicable, a CDP hearing with respect to one
tax period shown on the NFTL will be combined with any and all other CDP
hearings which the taxpayer has requested.
Q-D3. Will a CDP hearing under section 6320 be combined with a CDP
hearing under section 6330?
A-D3. To the extent practicable, a CDP hearing under section 6320
will be held in conjunction with a CDP hearing under section 6330.
Q-D4. What is considered to be prior involvement by an employee or
officer of Appeals with respect to the unpaid tax and tax period
involved in the hearing?
A-D4. Prior involvement by an employee or officer of Appeals
includes participation or involvement in an Appeals hearing (other than
a CDP hearing held under either section 6320 or section 6330) that the
taxpayer may have had with respect to the unpaid tax and tax periods
shown on the NFTL.
Q-D5. How can a taxpayer waive the requirement that the officer or
employee of Appeals have no prior involvement with respect to the tax
and tax periods involved in the CDP hearing?
A-D5. The taxpayer must sign a written waiver.
Q-D6. How are CDP hearings conducted?
A-D6. The formal hearing procedures required under the
Administrative Procedure Act, 5 U.S.C. 551 et seq., do not apply to CDP
hearings. CDP hearings are much like Collection Appeal Program (CAP)
hearings in that they are informal in nature and do not require the
Appeals officer or employee and the taxpayer, or the taxpayer's
representative, to hold a face-to-face meeting. A CDP hearing may, but
is not required to, consist of a face-to-face meeting, one or more
written or oral communications between an Appeals officer or employee
and the taxpayer or the taxpayer's representative, or some combination
thereof. A transcript or recording of any face-to-face meeting or
conversation between an Appeals officer or employee and the taxpayer or
the taxpayer's representative is not required. The taxpayer or the
taxpayer's representative does not have the right to subpoena and
examine witnesses at a CDP hearing.
Q-D7. If a taxpayer wants a face-to-face CDP hearing, where will it
be held?
A-D7. The taxpayer must be offered an opportunity for a hearing at
the Appeals office closest to taxpayer's residence or, in the case of
business taxpayers, the taxpayer's principal place of business. If that
is not satisfactory to the taxpayer, the taxpayer will be given an
opportunity for a hearing by correspondence or by telephone. If that is
not satisfactory to the taxpayer, the Appeals officer or employee will
review the taxpayer's request for a CDP hearing, the case file, any
other written communications from the taxpayer (including written
communications, if any, submitted in connection with the CDP hearing),
and any notes of any oral communications with the taxpayer or the
taxpayer's representative. Under such circumstances, review of those
documents will constitute the CDP hearing for the purposes of section
6320(b).
(e) Matters considered at CDP hearing--(1) In general. Appeals has
the authority to determine the validity, sufficiency, and timeliness of
any CDP Notice given by the IRS and of any request for a CDP hearing
that is made by a taxpayer. Prior to the issuance of a determination,
the hearing officer is required to obtain verification from the IRS
office collecting the tax or filing the NFTL that the requirements of
any applicable law or administrative procedure have been met. The
taxpayer may raise any relevant issue relating to the unpaid tax at the
hearing, including appropriate spousal defenses, challenges to the
appropriateness of the NFTL filing, and offers of collection
alternatives. The taxpayer also may raise challenges to the existence or
amount of the tax liability specified on the CDP Notice for any tax
period shown on the CDP Notice if the taxpayer did not receive a
statutory notice of deficiency for that tax liability
[[Page 223]]
or did not otherwise have an opportunity to dispute that tax liability.
Finally, the taxpayer may not raise an issue that was raised and
considered at a previous CDP hearing under section 6330 or in any other
previous administrative or judicial proceeding if the taxpayer
participated meaningfully in such hearing or proceeding. Taxpayers will
be expected to provide all relevant information requested by Appeals,
including financial statements, for its consideration of the facts and
issues involved in the hearing.
(2) Spousal defenses. A taxpayer may raise any appropriate spousal
defenses at a CDP hearing unless the Commissioner has already made a
final determination as to spousal defenses in a statutory notice of
deficiency or final determination letter. To claim a spousal defense
under section 66 or section 6015, the taxpayer must do so in writing
according to rules prescribed by the Commissioner or the Secretary.
Spousal defenses raised under sections 66 and 6015 in a CDP hearing are
governed in all respects by the provisions of sections 66 and section
6015 and the regulations and procedures thereunder.
(3) Questions and answers. The questions and answers illustrate the
provisions of this paragraph (e) as follows:
Q-E1. What factors will Appeals consider in making its
determination?
A-E1. Appeals will consider the following matters in making its
determination:
(i) Whether the IRS met the requirements of any applicable law or
administrative procedure.
(ii) Any issues appropriately raised by the taxpayer relating to the
unpaid tax.
(iii) Any appropriate spousal defenses raised by the taxpayer.
(iv) Any challenges made by the taxpayer to the appropriateness of
the NFTL filing.
(v) Any offers by the taxpayer for collection alternatives.
(vi) Whether the continued existence of the filed NFTL represents a
balance between the need for the efficient collection of taxes and the
legitimate concern of the taxpayer that any collection action be no more
intrusive than necessary.
Q-E2. When is a taxpayer entitled to challenge the existence or
amount of the tax liability specified in the CDP Notice?
A-E2. A taxpayer is entitled to challenge the existence or amount of
the tax liability specified in the CDP Notice if the taxpayer did not
receive a statutory notice of deficiency for such liability or did not
otherwise have an opportunity to dispute such liability. Receipt of a
statutory notice of deficiency for this purpose means receipt in time to
petition the Tax Court for a redetermination of the deficiency asserted
in the notice of deficiency. An opportunity to dispute a liability
includes a prior opportunity for a conference with Appeals that was
offered either before or after the assessment of the liability.
Q-E3. Are spousal defenses subject to the limitations imposed under
section 6330(c)(2)(B) on a taxpayer's right to challenge the tax
liability specified in the CDP Notice at a CDP hearing?
A-E3. The limitations imposed under section 6330(c)(2)(B) do not
apply to spousal defenses. When a taxpayer asserts a spousal defense,
the taxpayer is not disputing the amount or existence of the liability
itself, but asserting a defense to the liability which may or may not be
disputed. A spousal defense raised under section 66 or section 6015 is
governed by section 66 or section 6015 and the regulations and
procedures thereunder. Any limitation under those sections, regulations,
and procedures therefore will apply.
Q-E4. May a taxpayer raise at a CDP hearing a spousal defense under
section 66 or section 6015 if that defense was raised and considered
administratively and the Commissioner has issued a statutory notice of
deficiency or final determination letter addressing the spousal defense?
A-E4. No. A taxpayer is precluded from raising a spousal defense at
a CDP hearing when the Commissioner has made a final determination under
section 66 or section 6015 in a final determination letter or statutory
notice of deficiency. However, a taxpayer may raise spousal defenses in
a CDP hearing when the taxpayer has previously
[[Page 224]]
raised spousal defenses, but the Commissioner has not yet made a final
determination regarding this issue.
Q-E5. May a taxpayer raise at a CDP hearing a spousal defense under
section 66 or section 6015 if that defense was raised and considered in
a prior judicial proceeding that has become final?
A-E5. No. A taxpayer is precluded by the doctrine of res judicata
and by the specific limitations under section 66 or section 6015 from
raising a spousal defense in a CDP hearing under these circumstances.
Q-E6. What collection alternatives are available to the taxpayer?
A-E6. Collection alternatives would include, for example, a proposal
to withdraw the NFTL in circumstances that will facilitate the
collection of the tax liability, an installment agreement, an offer-in-
compromise, the posting of a bond, or the substitution of other assets.
Q-E7. What issues may a taxpayer raise in a CDP hearing under
section 6320 if the taxpayer previously received a notice under section
6330 with respect to the same tax and tax period and did not request a
CDP hearing with respect to that notice?
A-E7. The taxpayer may raise appropriate spousal defenses,
challenges to the appropriateness of the NFTL filing, and offers of
collection alternatives. The existence or amount of the tax liability
for the tax and tax period specified in the CDP Notice may be challenged
only if the taxpayer did not already have an opportunity to dispute that
tax liability. Where the taxpayer previously received a CDP Notice under
section 6330 with respect to the same tax and tax period and did not
request a CDP hearing with respect to that earlier CDP Notice, the
taxpayer already had an opportunity to dispute the existence or amount
of the underlying tax liability.
Q-E8. How will Appeals issue its determination?
A-E8. (i) Taxpayers will be sent a dated Notice of Determination by
certified or registered mail. The Notice of Determination will set forth
Appeals' findings and decisions. It will state whether the IRS met the
requirements of any applicable law or administrative procedure; it will
resolve any issues appropriately raised by the taxpayer relating to the
unpaid tax; it will include a decision on any appropriate spousal
defenses raised by the taxpayer; it will include a decision on any
challenges made by the taxpayer to the appropriateness of the NFTL
filing; it will respond to any offers by the taxpayer for collection
alternatives; and it will address whether the continued existence of the
filed NFTL represents a balance between the need for the efficient
collection of taxes and the legitimate concern of the taxpayer that any
collection action be no more intrusive than necessary. The Notice of
Determination will also set forth any agreements that Appeals reached
with the taxpayer, any relief given the taxpayer, and any actions the
taxpayer or the IRS are required to take. Lastly, the Notice of
Determination will advise the taxpayer of the taxpayer's right to seek
judicial review within 30 days of the date of the Notice of
Determination.
(ii) Because taxpayers are encouraged to discuss their concerns with
the IRS office collecting the tax or filing the NFTL, certain matters
that might have been raised at a CDP hearing may be resolved without the
need for Appeals consideration. Unless, as a result of these
discussions, the taxpayer agrees in writing to withdraw the request that
Appeals conduct a CDP hearing, Appeals will still issue a Notice of
Determination. The taxpayer can, however, waive in writing Appeals'
consideration of some or all of the matters it would otherwise consider
in making its determination.
Q-E9. Is there a period of time within which Appeals must conduct a
CDP hearing or issue a Notice of Determination?
A-E9. No. Appeals will, however, attempt to conduct a CDP hearing
and issue a Notice of Determination as expeditiously as possible under
the circumstances.
Q-E10. Why is the Notice of Determination and its date important?
A-E10. The Notice of Determination will set forth Appeals' findings
and decisions with respect to the matters set forth in A-E1 of this
paragraph (e)(3). The 30-day period within which the taxpayer is
permitted to seek judicial
[[Page 225]]
review of Appeals' determination commences the day after the date of the
Notice of Determination.
Q-E11. If an Appeals officer considers the merits of a taxpayer's
liability in a CDP hearing when the taxpayer had previously received a
statutory notice of deficiency or otherwise had an opportunity to
dispute the liability prior to the NFTL, will the Appeals officer's
determination regarding those liability issues be considered part of the
Notice of Determination?
A-E11. No. An Appeals officer may consider the existence and amount
of the underlying tax liability as a part of the CDP hearing only if the
taxpayer did not receive a statutory notice of deficiency for the tax
liability in question or otherwise have a prior opportunity to dispute
the tax liability. Similarly, an Appeals officer may not consider any
other issue if the issue was raised and considered at a previous hearing
under section 6330 or in any other previous administrative or judicial
proceeding in which the person seeking to raise the issue meaningfully
participated. In the Appeals officer's sole discretion, however, the
Appeals officer may consider the existence or amount of the underlying
tax liability, or such other precluded issues, at the same time as the
CDP hearing. Any determination, however, made by the Appeals officer
with respect to such a precluded issue shall not be treated as part of
the Notice of Determination issued by the Appeals officer and will not
be subject to any judicial review. Because any decisions made by the
Appeals officer with respect to such precluded issues are not properly a
part of the CDP hearing, such decisions are not required to appear in
the Notice of Determination issued following the hearing. Even if a
decision concerning such precluded issues is referred to in the Notice
of Determination, it is not reviewable by a district court or the Tax
Court because the precluded issue is not properly part of the CDP
hearing.
(4) Examples. The following examples illustrate the principles of
this paragraph (e):
Example 1. The IRS sends a statutory notice of deficiency to the
taxpayer at his last known address asserting a deficiency for the tax
year 1995. The taxpayer receives the notice of deficiency in time to
petition the Tax Court for a redetermination of the asserted deficiency.
The taxpayer does not timely file a petition with the Tax Court. The
taxpayer is precluded from challenging the existence or amount of the
tax liability in a subsequent CDP hearing.
Example 2. Same facts as in Example 1, except the taxpayer does not
receive the notice of deficiency in time to petition the Tax Court and
did not have another prior opportunity to dispute the tax liability. The
taxpayer is not precluded from challenging the existence or amount of
the tax liability in a subsequent CDP hearing.
Example 3. The IRS properly assesses a trust fund recovery penalty
against the taxpayer. The IRS offers the taxpayer the opportunity for a
conference with Appeals at which the taxpayer would have the opportunity
to dispute the assessed liability. The taxpayer declines the opportunity
to participate in such a conference. The taxpayer is precluded from
challenging the existence or amount of the tax liability in a subsequent
CDP hearing.
(f) Judicial review of Notice of Determination--(1) In general.
Unless the taxpayer provides the IRS a written withdrawal of the request
that Appeals conduct a CDP hearing, Appeals is required to issue a
Notice of Determination in all cases where a taxpayer has timely
requested a CDP hearing. The taxpayer may appeal such determinations
made by Appeals within the 30-day period commencing the day after the
date of the Notice of Determination to the Tax Court or a district court
of the United States, as appropriate.
(2) Questions and answers. The questions and answers illustrate the
provisions of this paragraph (f) as follows:
Q-F1. What must a taxpayer do to obtain judicial review of a Notice
of Determination?
A-F1. Subject to the jurisdictional limitations described in A-F2,
the taxpayer must, within the 30-day period commencing the day after the
date of the Notice of Determination, appeal the determination by Appeals
to the Tax Court or to a district court of the United States.
Q-F2. With respect to the relief available to the taxpayer under
section 6015, what is the time frame within which a taxpayer may seek
Tax Court review of Appeals' determination following a CDP hearing?
[[Page 226]]
A-F2. If the taxpayer seeks Tax Court review not only of Appeals'
denial of relief under section 6015, but also of relief requested with
respect to other issues raised in the CDP hearing, the taxpayer should
request Tax Court review within the 30-day period commencing the day
after the date of the Notice of Determination. If the taxpayer only
seeks Tax Court review of Appeals' denial of relief under section 6015,
then the taxpayer should request Tax Court review, as provided by
section 6015(e), within 90 days of Appeals' determination. If a request
for Tax Court review is filed after the 30-day period for seeking
judicial review under section 6320, then only the taxpayer's section
6015 claims may be reviewable by the Tax Court.
Q-F3. Where should a taxpayer direct a request for judicial review
of a Notice of Determination?
A-F3. If the Tax Court would have jurisdiction over the type of tax
specified in the CDP Notice (for example, income and estate taxes), then
the taxpayer must seek judicial review by the Tax Court. If the tax
liability arises from a type of tax over which the Tax Court would not
have jurisdiction, then the taxpayer must seek judicial review by a
district court of the United States in accordance with Title 28 of the
United States Code.
Q-F4. What happens if the taxpayer timely appeals Appeals'
determination to the incorrect court?
A-F4. If the court to which the taxpayer directed a timely appeal of
the Notice of Determination determines that the appeal was to the
incorrect court (because of jurisdictional, venue or other reasons), the
taxpayer will have 30 days after the court's determination to that
effect within which to file an appeal to the correct court.
Q-F5. What issue or issues may the taxpayer raise before the Tax
Court or before a district court if the taxpayer disagrees with the
Notice of Determination?
A-F5. In seeking Tax Court or district court review of Appeals'
Notice of Determination, the taxpayer can only request that the court
consider an issue that was raised in the taxpayer's CDP hearing.
(g) Effect of request for CDP hearing and judicial review on periods
of limitation and collection activity--(1) In general. The periods of
limitation under section 6502 (relating to collection after assessment),
section 6531 (relating to criminal prosecutions), and section 6532
(relating to suits) are suspended until the date the IRS receives the
taxpayer's written withdrawal of the request for a CDP hearing by
Appeals or the determination resulting from the CDP hearing becomes
final by expiration of the time for seeking judicial review or the
exhaustion of any rights to appeals following judicial review. In no
event shall any of these periods of limitation expire before the 90th
day after the date on which the IRS receives the taxpayer's written
withdrawal of the request that Appeals conduct a CDP hearing or the
determination with respect to such hearing becomes final upon either the
expiration of the time for seeking judicial review or upon exhaustion of
any rights to appeals following judicial review.
(2) Questions and answers. The questions and answers illustrate the
provisions of this paragraph (g) as follows:
Q-G1. For what period of time will the periods of limitation under
sections 6502, 6531, and 6532 remain suspended if the taxpayer timely
requests a CDP hearing concerning the filing of a NFTL?
A-G1. The suspension period commences on the date the IRS receives
the taxpayer's written request for a CDP hearing. The suspension period
continues until the IRS receives a written withdrawal by the taxpayer of
the request for a CDP hearing or the Notice of Determination resulting
from the CDP hearing becomes final. In no event shall any of these
periods of limitation expire before the 90th day after the day on which
the IRS receives the taxpayer's written withdrawal of the request that
Appeals conduct a CDP hearing or there is a final determination with
respect to such hearing. The periods of limitation that are suspended
under section 6320 are those which apply to the taxes and the tax period
or periods to which the CDP Notice relates.
Q-G2. For what period of time will the periods of limitation under
sections
[[Page 227]]
6502, 6531, and 6532 be suspended if the taxpayer does not request a CDP
hearing concerning the filing of a NFTL, or the taxpayer requests a CDP
hearing, but his request is not timely?
A-G2. Under either of these circumstances, section 6320 does not
provide for a suspension of the periods of limitation.
Q-G3. What, if any, enforcement actions can the IRS take during the
suspension period?
A-G3. Section 6330(e), made applicable to section 6320 CDP hearings
by section 6320(c), provides for the suspension of the periods of
limitation discussed in paragraph (g)(1) of these regulations. Section
6330(e) also provides that levy actions that are the subject of the
requested CDP hearing under that section shall be suspended during the
same period. Levy actions, however, are not the subject of a CDP hearing
under section 6320. The IRS may levy for tax periods and taxes covered
by the CDP Notice under section 6320 and for other taxes and periods if
the CDP requirements under section 6330 for those taxes and periods have
been satisfied. The IRS also may file NFTLs for tax periods or taxes not
covered by the CDP Notice, may file a NFTL for the same tax and tax
period stated on the CDP Notice at another recording office, and may
take other non-levy collection actions such as initiating judicial
proceedings to collect the tax shown on the CDP Notice or offsetting
overpayments from other periods, or of other taxes, against the tax
shown on the CDP Notice. Moreover, the provisions in section 6330 do not
apply when the IRS levies for the tax and tax period shown on the CDP
Notice to collect a state tax refund due the taxpayer, or determines
that collection of the tax is in jeopardy. Finally, section 6330 does
not prohibit the IRS from accepting any voluntary payments made for the
tax and tax period stated on the CDP Notice.
(3) Examples. The following examples illustrate the principles of
this paragraph (g):
Example 1. The period of limitation under section 6502 with respect
to the taxpayer's tax period listed in the NFTL will expire on August 1,
1999. The IRS sent a CDP Notice to the taxpayer on April 30, 1999. The
taxpayer timely requested a CDP hearing. The IRS received this request
on May 15, 1999. Appeals sends the taxpayer its determination on June
15, 1999. The taxpayer timely seeks judicial review of that
determination. The period of limitation under section 6502 would be
suspended from May 15, 1999, until the determination resulting from that
hearing becomes final by expiration of the time for seeking review or
reconsideration before the appropriate court, plus 90 days.
Example 2. Same facts as in Example 1, except the taxpayer does not
seek judicial review of Appeals' determination. Because the taxpayer
requested the CDP hearing when fewer than 90 days remained on the period
of limitation, the period of limitation will be extended to October 13,
1999 (90 days from July 15, 1999).
(h) Retained jurisdiction of Appeals--(1) In general. The Appeals
office that makes a determination under section 6320 retains
jurisdiction over that determination, including any subsequent
administrative hearings that may be requested by the taxpayer regarding
the NFTL and any collection actions taken or proposed with respect to
Appeals' determination. Once a taxpayer has exhausted his other
remedies, Appeals' retained jurisdiction permits it to consider whether
a change in the taxpayer's circumstances affects its original
determination. Where a taxpayer alleges a change in circumstances that
affects Appeals' original determination, Appeals may consider whether
changed circumstances warrant a change in its earlier determination.
(2) Questions and answers. The questions and answers illustrate the
provisions of this paragraph (h) as follows:
Q-H1. Are the periods of limitation suspended during the course of
any subsequent Appeals consideration of the matters raised by a taxpayer
when the taxpayer invokes the retained jurisdiction of Appeals under
section 6330(d)(2)(A) or (d)(2)(B)?
A-H1. No. Under section 6320(b)(2), a taxpayer is entitled to only
one CDP hearing under section 6320 with respect to the tax and tax
period or periods specified in the CDP Notice. Any subsequent
consideration by Appeals pursuant to its retained jurisdiction is not a
continuation of the original CDP hearing and does not suspend the
periods of limitation.
[[Page 228]]
Q-H2. Is a decision of Appeals resulting from a retained
jurisdiction hearing appealable to the Tax Court or a district court?
A-H2. No. As discussed in A-H1, a taxpayer is entitled to only one
CDP hearing under section 6320 with respect to the tax and tax period or
periods specified in the CDP Notice. Only determinations resulting from
CDP hearings are appealable to the Tax Court or a district court.
(i) Equivalent hearing--(1) In general. A taxpayer who fails to make
a timely request for a CDP hearing is not entitled to a CDP hearing.
Such a taxpayer may nevertheless request an administrative hearing with
Appeals, which is referred to herein as an ``equivalent hearing.'' The
equivalent hearing will be held by Appeals and generally will follow
Appeals' procedures for a CDP hearing. Appeals will not, however, issue
a Notice of Determination. Under such circumstances, Appeals will issue
a Decision Letter.
(2) Questions and answers. The questions and answers illustrate the
provisions of this paragraph (i) as follows:
Q-I1. What issues will Appeals consider at an equivalent hearing?
A-I1. In an equivalent hearing, Appeals will consider the same
issues that it would have considered at a CDP hearing on the same
matter.
Q-I2. Are the periods of limitation under sections 6502, 6531, and
6532 suspended if the taxpayer does not timely request a CDP hearing and
is subsequently given an equivalent hearing?
A-I2. No. The suspension period provided for in section 6330(e)
relates only to hearings requested within the 30-day period that
commences on the day after the end of the five business day period
following the filing of the NFTL, that is, CDP hearings.
Q-I3. Will collection action, including the filing of additional
NFTLs, be suspended if a taxpayer requests and receives an equivalent
hearing?
A-I3. Collection action is not required to be suspended.
Accordingly, the decision to take collection action during the pendency
of an equivalent hearing will be determined on a case-by-case basis.
Appeals may request the IRS office with responsibility for collecting
the taxes to suspend all or some collection action or to take other
appropriate action if it determines that such action is appropriate or
necessary under the circumstances.
Q-I4. What will the Decision Letter state?
A-I4. The Decision Letter will generally contain the same
information as a Notice of Determination.
Q-I5. Will a taxpayer be able to obtain court review of a decision
made by Appeals with respect to an equivalent hearing?
A-I5. Section 6320 does not authorize a taxpayer to appeal the
decision of Appeals with respect to an equivalent hearing. A taxpayer
may under certain circumstances be able to seek Tax Court review of
Appeals' denial of relief under section 6015. Such review must be sought
within 90 days of the issuance of Appeals' determination on those
issues, as provided by section 6015(e).
(j) Effective date. This section is applicable with respect to any
filing of a NFTL on or after January 19, 1999.
[T.D. 8979, 67 FR 2561, Jan. 18, 2002]
Sec. 301.6321-1 Lien for taxes.
If any person liable to pay any tax neglects or refuses to pay the
same after demand, the amount (including any interest, additional
amount, addition to tax, or assessable penalty, together with any costs
that may accrue in addition thereto) shall be a lien in favor of the
United States upon all property and rights to property, whether real or
personal, tangible or intangible, belonging to such person. For purposes
of section 6321 and this section, the term ``any tax'' shall include a
State individual income tax which is a ``qualified tax'', as defined in
paragraph (b) of Sec. 301.6361-4. The lien attaches to all property and
rights to property belonging to such person at any time during the
period of the lien, including any property or rights to property
acquired by such person after the lien arises. Solely for purposes of
sections 6321 and 6331, any interest in restricted land held in trust by
the United States for an individual noncompetent Indian (and not for a
tribe) shall not be deemed to be property, or a right to property,
belonging to such Indian. For the method of allocating
[[Page 229]]
amounts collected pursuant to a lien between the Federal Government and
a State or States imposing a qualified tax with respect to which the
lien attached, see paragraph (f) of Sec. 301.6361-1. For the special
lien for estate and gift taxes, see section 6324 and Sec. 301.6324-1
[T.D. 7577, 43 FR 59361, Dec. 20, 1978]
Sec. 301.6323(a)-1 Purchasers, holders of security interests, mechanic's lienors, and judgment lien creditors.
(a) Invalidity of lien without notice. The lien imposed by section
6321 is not valid against any purchaser (as defined in paragraph (f) of
Sec. 301.6323(h)--1), holder of a security interest (as defined in
paragraph (a) of Sec. 301.6323(h)--1), mechanic's lienor (as defined in
paragraph (b) of Sec. 301.6323(h)-1), or judgment lien creditor (as
defined in paragraph (g) of Sec. 301.6323(h)-1) until a notice of lien
is filed in accordance with Sec. 301.6323(f)-1). Except as provided by
section 6323, if a person becomes a purchaser, holder of a security
interest, mechanic's lienor, or judgment lien creditor after a notice of
lien is filed in accordance with Sec. 301.6323(f)-1, the interest
acquired by such person is subject to the lien imposed by section 6321.
(b) Cross references. For provisions relating to the protection
afforded a security interest arising after tax lien filing, which
interest is covered by a commercial transactions financing agreement,
real property construction or improvement financing agreement, or an
obligatory disbursement agreement, see Secs. 301.6323(c)-1, 301.6323(c)-
2, and 301.6323(c)-3, respectively. For provisions relating to the
protection afforded to a security interest coming into existence by
virtue of disbursements, made before the 46th day after the date of tax
lien filing, see Sec. 301.6323(d)-1. For provisions relating to priority
afforded to interest and certain other expenses with respect to a lien
or security interest having priority over the lien imposed by section
6321, see Sec. 301.6323(e)-1. For provisions relating to certain other
interests arising after tax lien filing, see Sec. 301.6323(b)-1.
[T.D. 7429, 41 FR 35498, Aug. 23, 1976]
Sec. 301.6323(b)-1 Protection for certain interests even though notice filed.
(a) Securities--(1) In general. Even though a notice of a lien
imposed by section 6321 is filed in accordance with Sec. 301.6323(f)-1,
the lien is not valid with respect to a security (as defined in
paragraph (d) of Sec. 301.6323(h)-1) against--
(i) A purchaser (as defined in paragraph (f) of Sec. 301.6323(h)-1)
of the security who at the time of purchase did not have actual notice
or knowledge (as defined in paragraph (a) of Sec. 301.6323(i)-1) of the
existence of the lien;
(ii) A holder of a security interest (as defined in paragraph (a) of
Sec. 301.6323(h)-1) in the security who did not have actual notice or
knowledge (as defined in paragraph (a) of Sec. 301.6323(i)-1) of the
existence of the lien at the time the security interest came into
existence or at the time such security interest was acquired from a
previous holder for a consideration in money or money's worth; or
(iii) A transferee of an interest protected under subdivision (i) or
(ii) of this subparagraph to the same extent the lien is invalid against
his transferor.
For purposes of subdivision (iii) of this subparagraph, no person can
improve his position with respect to the lien by reacquiring the
interest from an intervening purchaser or holder of a security interest
against whom the lien is invalid.
(2) Examples. The application of this paragraph may be illustrated
by the following examples:
Example 1. On May 1, 1969, in accordance with Sec. 301.6323(f)-1, a
notice of lien is filed with respect to A's delinquent tax liability. On
May 20, 1969. A sells 100 shares of common stock in X corporation to B,
who, on the date of the sale, does not have actual notice or knowledge
of the existence of the lien. Because B purchased the stock without
actual notice or knowledge of the lien, under subdivision (i) of
subparagraph (1) of this paragraph, the stock purchased by B is not
subject to the lien.
Example 2. Assume the same facts as in example 1 except that on May
30, 1969, B sells the 100 shares of common stock in X corporation to C
who on May 5, 1969, had actual notice of the existence of the tax lien
against A. Because the X stock when purchased by B
[[Page 230]]
was not subject to the lien, under subdivision (iii) of subparagraph (1)
of this paragraph, the stock purchased by C is not subject to the lien.
C succeeds to B's rights, even though C had actual notice of the lien
before B's purchase.
Example 3. On June 1, 1970, in accordance with Sec. 301.6323(f)-1, a
notice of lien is filed with respect to D's delinquent tax liability. D
owns 20 $1,000 bonds issued by the Y company. On June 10, 1970, D
obtains a loan from M bank for $5,000 using the Y company bonds as
collateral. At the time the loan is made M bank does not have actual
notice or knowledge of the existence of the tax lien. Because M bank did
not have actual notice or knowledge of the lien when the security
interest came into existence, under subdivision (ii) of subparagraph (1)
of this paragraph, the tax lien is not valid against M bank to the
extent of its security interest.
Example 4. Assume the same facts as in example 3 except that on June
19, 1970, M bank assigns the chose in action and its security interest
to N, who had actual notice or knowledge of the existence of the lien on
June 1, 1970. Because the security interest was not subject to the lien
to the extent of M bank's security interest, the security interest held
by N is to the same extent entitled to priority over the tax lien
because N succeeds to M bank's rights. See subdivision (iii) of
subparagraph (1) of this paragraph.
Example 5. On July 1, 1970, in accordance with Sec. 301.6323(f)-1, a
notice of lien is filed with respect to E's delinquent tax liability. E
owns ten $1,000 bonds issued by the Y company. On July 5, 1970, E
borrows $4,000 from F and delivers the bonds to F as collateral for the
loan. At the time the loan is made, F has actual knowledge of the
existence of the tax lien and, therefore, holds the security interest
subject to the lien on the bonds. On July 10, 1970, F sells the security
interest to G for $4,000 and delivers the Y company bonds pledged as
collateral. G does not have actual notice or knowledge of the existence
of the lien on July 10, 1970. Because G did not have actual notice or
knowledge of the lien at the time he purchased the security interest,
under subdivision (ii) of subparagraph (1) of this paragraph, the tax
lien is not valid against G to the extent of his security interest.
Example 6. Assume the same facts as in example 5 except that,
instead of purchasing the security interest from F on July 10, 1970, G
lends $4,000 to F and takes a security interest in F's security interest
in the bonds on that date. Because G became the holder of a security
interest in a security interest after notice of lien was filed and does
not directly have a security interest in a security, the security
interest held by G is not entitled to a priority over the tax lien under
the provisions of subparagraph (1) of this paragraph.
(b) Motor vehicles--(1) In general. Even though a notice of a lien
imposed by section 6321 is filed in accordance with Sec. 301.6323(f)-1,
the lien is not valid against a purchaser (as defined in paragraph (f)
of Sec. 301.6323(h)-1) of a motor vehicle (as defined in paragraph (c)
of Sec. 301.6323(h)-1) if--
(i) At the time of the purchase, the purchaser did not have actual
notice or knowledge (as defined in paragraph (a) of Sec. 301.6323(i)-1)
of the existence of the lien, and
(ii) Before the purchaser obtains such notice or knowledge, he has
acquired actual possession of the motor vehicle and has not thereafter
relinquished actual possession to the seller or his agent.
(2) Examples. The application of this paragraph may be illustrated
by the following examples:
Example 1. A, a delinquent taxpayer against whom a notice of tax
lien has been filed in accordance with Sec. 301.6323(f)-1, sells his
automobile (which qualifies as a motor vehicle under paragraph (c) of
Sec. 301.6323(h)-1) to B, an automobile dealer. B takes actual
possession of the automobile and does not thereafter relinquish actual
possession to the seller or his agent. Subsequent to his purchase, B
learns of the existence of the tax lien against A. Even though notice of
lien was filed before the purchase, the lien is not valid against B,
because B did not know of the existence of the lien before the purchase
and before acquiring actual possession of the vehicle.
Example 2. C is a wholesaler of used automobiles. A notice of lien
has been filed with respect to C's delinquent tax liability in
accordance with Sec. 301.6323(f)-1. Subsequent to such filing, D, a used
automobile dealer, purchases and takes actual possession of 20
automobiles (which qualify as motor vehicles under the provisions of
paragraph (c) of Sec. 301.6323(h)-1) from C at an auction and places
them on his lot for sale. C does not reacquire possession of any of the
automobiles. At the time of his purchase, D does not have actual notice
or knowledge of the existence of the lien against C. Even though notice
of lien was filed before D's purchase, the lien was not valid against D
because D did not know of the existence of the lien before the purchase
and before acquiring actual possession of the vehicles.
(3) Cross reference. For provisions relating to additional
circumstances in which the lien imposed by section 6321 may not be valid
against the purchaser
[[Page 231]]
of tangible personal property (including a motor vehicle) purchased at
retail, see paragraph (c) of this section.
(c) Personal property purchased at retail--(1) In general. Even
though a notice of a lien imposed by section 6321 is filed in accordance
with Sec. 301.6323(f)-1, the lien is not valid against a purchaser (as
defined in paragraph (f) of Sec. 301.6323(h)-1) of tangible personal
property purchased at a retail sale (as defined in subparagraph (2) of
this paragraph (c)) unless at the time of purchase the purchaser intends
the purchase to (or knows that the purchase will) hinder, evade, or
defeat the collection of any tax imposed by the Internal Revenue Code of
1954.
(2) Definition of retail sale. For purposes of this paragraph, the
term ``retail sale'' means a sale, made in the ordinary course of the
seller's trade or business, of tangible personal property of which the
seller is the owner. Such term includes a sale in customary retail
quantities by a seller who is going out of business, but does not
include a bulk sale or an auction sale in which goods are offered in
quantities substantially greater than are customary in the ordinary
course of the seller's trade or business or an auction sale of goods the
owner of which is not in the business of selling such goods.
(3) Example. The application of this paragraph may be illustrated by
the following example:
Example. A purchases a refrigerator from the M company, a retail
appliance dealer. Prior to such purchase, a notice of lien was filed
with respect to M's delinquent tax liability in accordance with
Sec. 301.6323(f)-1. At the time of the purchase A knows of the existence
of the lien. However, A does not intend the purchase to hinder, evade,
or defeat the collection of any internal revenue tax, and A does not
have any reason to believe that the purchase will affect the collection
of any internal revenue tax. Even though notice of lien was filed before
the purchase, the lien is not valid against A because A in good faith
purchased the refrigerator at retail in the ordinary course of the M
company's business.
(d) Personal property purchased in casual sale--(1) In general. Even
though a notice of a lien imposed by section 6321 is filed in accordance
with Sec. 301.6323(f)-1, the lien is not valid against a purchaser (as
defined in Sec. 301.6323(h)-1(f)) of household goods, personal effects,
or other tangible personal property of a type described in
Sec. 301.6334-1 (which includes wearing apparel; school books; fuel,
provisions, furniture, arms for personal use, livestock, and poultry
(whether or not the seller is the head of a family); and books and tools
of a trade, business, or profession (whether or not the trade, business,
or profession of the seller)), purchased, other than for resale, in a
casual sale for less than $250 (excluding interest and expenses
described in Sec. 301.6323(e)-1). For purposes of this paragraph, a
casual sale is a sale not made in the ordinary course of the seller's
trade or business.
(2) Limitation. This paragraph applies only if the purchaser does
not have actual notice or knowledge (as defined in paragraph (a) of
Sec. 301.6323(i)-1)--
(i) Of the existence of the tax lien, or
(ii) That the sale is one of a series of sales.
For purposes of subdivision (ii) of this subparagraph, a sale is one of
a series of sales if the seller plans to dispose of, in separate
transactions, substantially all of his household goods, personal
effects, and other tangible personal property described in
Sec. 301.6334-1.
(3) Examples. The application of this paragraph may be illustrated
by the following examples:
Example 1. A, an attorney's widow, sells a set of law books for $200
to B, for B's own use. Prior to the sale a notice of lien was filed with
respect to A's delinquent tax liability in accordance with
Sec. 301.6323(f)-1. B has no actual notice or knowledge of the tax lien.
In addition, B does not know that the sale is one of a series of sales.
Because the sale is a casual sale for less than $250 and involves books
of a profession (tangible personal property of a type described in
Sec. 301.6334-1, irrespective of the fact that A has never engaged in
the legal profession), the tax lien is not valid against B even though a
notice of lien was filed prior to the time of B's purchase.
Example 2. Assume the same facts as in example 1 except that B
purchases the books for resale in his second-hand bookstore. Because B
purchased the books for resale, he purchased the books subject to the
lien.
Example 3. In an advertisement appearing in a local newspaper, G
indicates that he is offering for sale a lawn mower, a used television
set, a desk, a refrigerator, and certain used dining room furniture. In
response to the advertisement, H purchases the dining room furniture for
$200. H does not receive
[[Page 232]]
any information which would impart notice of a lien, or that the sale is
one of a series of sales, beyond the information contained in the
advertisement. Prior to the sale a notice of lien was filed with respect
to G's delinquent tax liability in accordance with Sec. 301.6323(f)-1.
Because H had no actual notice or knowledge that substantially all of
G's households goods were being sold, or that the sale is one of a
series of sales and because the sale is a casual sale for less than
$250, H does not purchase the dining room furniture subject to the lien.
The household goods are of a type described in Sec. 301.6334-1(a)(2)
irrespective of whether G is the head of a family or whether all such
household goods offered for sale exceed $500 in value.
(e) Personal property subject to possessory liens. Even though a
notice of a lien imposed by section 6321 is filed in accordance with
Sec. 301.6323(f)-1, the lien is not valid against a holder of a lien on
tangible personal property which under local law secures the reasonable
price of the repair or improvement of the property if the property is,
and has been, continuously in the possession of the holder of the lien
from the time the possessory lien arose. For example, if local law gives
an automobile repairman the right to retain possession of an automobile
he has repaired as security for payment of the repair bill and the
repairman retains continuous possession of the automobile until his lien
is satisfied, a tax lien filed in accordance with section 6323(f)(1)
which has attached to the automobile will not be valid to the extent of
the reasonable price of the repairs. It is immaterial that the notice of
tax lien was filed before the repairman undertook his work or that he
knew of the lien before undertaking the work.
(f) Real property tax and special assessment liens--(1) In general.
Even though a notice of a lien imposed by section 6321 is filed in
accordance with Sec. 301.6323(f)-1, the lien is not valid against the
holder of another lien upon the real property (regardless of when such
other lien arises), if such other lien is entitled under local law to
priority over security interests in real property which are prior in
time and if such other lien on real property secures payment of--
(i) A tax of general application levied by any taxing authority
based upon the value of the property;
(ii) A special assessment imposed directly upon the property by any
taxing authority, if the assessment is imposed for the purpose of
defraying the cost of any public improvement; or
(iii) Charges for utilities or public services furnished to the
property by the United States, a State or political subdivision thereof,
or an instrumentality of any one or more of the foregoing.
(2) Examples. The application of this paragraph may be illustrated
by the following examples:
Example 1. A owns Blackacre in the city of M. A notice of lien
affecting Blackacre is filed in accordance with Sec. 301.6323(f)-1.
Subsequent to the filing of the notice of lien, the city of M acquires a
lien against Blackacre to secure payment of real estate taxes. Such
taxes are levied against all property in the city in proportion to the
value of the property. Under local law, the holder of a lien for real
property taxes is entitled to priority over a security interest in real
property even though the security interest is prior in time. Because the
real property tax lien held by the city of M secures payment of a tax of
general application and is entitled to priority over security interests
which are prior in time, the lien held by the city of M is entitled to
priority over the Federal tax lien with respect to Blackacre.
Example 2. B owns Whiteacre in N county. A notice of lien affecting
Whiteacre is filed in accordance with Sec. 301.6323(f)-1. Subsequent to
the filing of the notice of lien, N county constructs a sidewalk, paves
the street, and installs water and sewer lines adjacent to Whiteacre. In
order to defray the cost of these improvements, N county imposes upon
Whiteacre a special assessment which under local law results in a lien
upon Whiteacre that is entitled to priority over security interests that
are prior in time. Because the special assessment lien is (i) entitled
under local law to priority over security interests which are prior in
time, and (ii) imposed directly upon real property to defray the cost of
a public improvement, the special assessment lien has priority over the
Federal tax lien with respect to Whiteacre.
Example 3. C owns Greenacre in town O. A notice of lien affecting
Greenacre is filed in accordance with Sec. 301.6323(f)-1. Town O
furnishes water and electricity to Greenacre and periodically collects a
fee for these services. Subsequent to the filing of the notice of lien,
town O supplies water and electricity to Greenacre, and C fails to pay
the charges for these services. Under local law, town O acquires a lien
to secure charges for the services, and this lien has priority over
security interests which are prior in time. Because the lien of town O
(i) is for services furnished to the real property and (ii) has priority
over earlier security interests, town O's lien has
[[Page 233]]
priority over the Federal tax lien with respect to Greenacre.
(g) Residential property subject to a mechanic's lien for certain
repairs and improvements--(1) In general. Even though a notice of a lien
imposed by section 6321 is filed in accordance with Sec. 301.6323(f)-1,
the lien is not valid against a mechanic's lienor (as defined in
Sec. 301.6323(h)-(b)) who holds a lien for the repair or improvement of
a personal residence if--
(i) The residence is occupied by the owner and contains no more than
four dwelling units, and
(ii) The contract price on the prime contract with the owner for the
repair or improvement (excluding interest and expenses described in
Sec. 301.6323(e)-1) is not more than $1,000.
For purposes of subdivision (ii) of this subparagraph, the amounts of
subcontracts under the prime contract with the owner are not to be taken
into consideration for purposes of computing the $1,000 prime contract
price. It is immaterial that the notice of tax lien was filed before the
contractor undertakes his work or that he knew of the lien before
undertaking the work.
(2) Examples. The application of this paragraph may be illustrated
by the following examples:
Example 1. A owns a building containing four apartments, one of
which he occupies as his personal residence. A notice of lien which
affects the building is filed in accordance with Sec. 301.6323(f)-1.
Thereafter, A enters into a contract with B in the amount of $800, which
includes labor and materials, to repair the roof of the building. B
purchases roofing shingles from C for $300. B completes the work and A
fails to pay B the agreed amount. In turn, B fails to pay C for the
shingles. Under local law, B and C acquire mechanic's liens on A's
building. Because the contract price on the prime contract with A is not
more than $1,000 and under local law B and C acquire mechanic's liens on
A's building, the liens of B and C have priority over the Federal tax
lien.
Example 2. Assume that same facts as in example 1, except that the
amount of the prime contract between A and B is $1,100. Because the
amount of the prime contract with the owner, A, is in excess of $1,000,
the tax lien has priority over the entire amount of each of the
mechanic's liens of B and C, even though the amount of the contract
between B and C is $300.
Example 3. Assume the same facts as in example 1, except that A and
B do not agree in advance upon the amount due under the prime contract
but agree that B will perform the work for the cost of materials and
labor plus 10 percent of such cost. When the work is completed, it is
determined that the total amount due is $850. Because the prime contract
price is not more than $1,000 and under local law B and C acquire
mechanic's liens on A's residence, the liens of B and C have priority
over the Federal tax lien.
(h) Attorney's liens--(1) In general. Even though notice of a lien
imposed by section 6321 is filed in accordance with Sec. 301.6323(f)-1,
the lien is not valid against an attorney who, under local law, holds a
lien upon, or a contract enforceable against, a judgment or other amount
in settlement of a claim or of a cause of action. The priority afforded
an attorney's lien under this paragraph shall not exceed the amount of
the attorney's reasonable compensation for obtaining the judgment or
procuring the settlement. For purposes of this paragraph, reasonable
compensation means the amount customarily allowed under local law for an
attorney's services for litigating or settling a similar case or
administrative claim. However, reasonable compensation shall be
determined on the basis of the facts and circumstances of each
individual case. It is immaterial that the notice of tax lien is filed
before the attorney undertakes his work or that the attorney knows of
the tax lien before undertaking his work. This paragraph does not apply
to an attorney's lien which may arise from the defense of a claim or
cause of action against a taxpayer except to the extent such lien is
held upon a judgment or other amount arising from the adjudication or
settlement of a counterclaim in favor of the taxpayer. In the case of
suits against the taxpayer, see Sec. 301.6325-1(d)(2) for rules relating
to the subordination of the tax lien to facilitate tax collection.
(2) Claim or cause of action against the United States. Paragraph
(h)(1) of this section does not apply to an attorney's lien with respect
to--
(i) Any judgment or other fund resulting from the successful
litigation or settlement of an administrative claim or cause of action
against the United States to the extent that the
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United States, under any legal or equitable right, offsets its liability
under the judgment or settlement against any liability of the taxpayer
to the United States, or
(ii) Any amount credited against any liability of the taxpayer in
accordance with section 6402.
(3) Examples. The provisions of this paragraph may be illustrated by
the following examples:
Example 1. A notice of lien is filed against A in accordance with
Sec. 301.6323(f)-1. Subsequently, A is struck by an automobile and
retains B, an attorney to institute suit on A's behalf against the
operator of the automobile. B knows of the tax lien before he begins his
work. Under local law, B is entitled to a lien upon any recovery in
order to secure payment of his fee. A is awarded damages of $10,000. B
charges a fee of $3,000 which is the fee customarly allowed under local
law in similar cases and which is found to be reasonable under the
circumstances of this particular case. Because, under local law, B holds
a lien for the amount of his reasonable compensation for obtaining the
judgment, B's lien has priority over the Federal tax lien.
Example 2. Assume the same facts as in example 1, except that before
suit is instituted A and the owner of the automobile settle out of court
for $7,500. B charges a reasonable and customary fee of $1,800 for
procuring the settlement and under local law holds a lien upon the
settlement in order to secure payment of the fee. Because, under local
law, B holds a lien for the amount of his reasonable compensation for
obtaining the settlement, B has priority over the Federal tax lien.
Example 3. In accordance with Sec. 301.6323(f)-1, a notice of lien
in the amount of $8,000 is filed against C, a contractor. Subsequently C
retains D, an attorney, to initiate legal proceedings to recover the
amount allegedly due him for construction work he has performed for the
United States. C and D enter into an agreement which provides that D
will receive a reasonable and customary fee of $2,500 as compensation
for his services. Under local law, the agreement will give rise to a
lien which is enforceable by D against any amount recovered in the suit.
C is successful in the suit and is awarded $10,000. D claims $2,500 of
the proceeds as his fee. The United States, however, exercises its right
of set-off and applies $8,000 of the $10,000 award to satisfy C's tax
liability. Because the $10,000 award resulted from the successful
litigation of a cause of action against the United States, B's contract
for attorney's fees is not enforceable against the amount recovered to
the extent the United States offsets its liability under the judgment
against C's tax liability. It is immaterial that D had no notice or
knowledge of the tax lien at the time he began work on the case.
(i) Certain insurance contracts--(1) In general. Even though a
notice of a lien imposed by section 6321 is filed in accordance with
Sec. 301.6323(f)-1, the lien is not valid with respect to a life
insurance, endowment, or annuity contract, against an organization which
is the insurer under the contract, at any time--
(i) Before the insuring organization has actual notice or knowledge
(as defined in paragraph (a) of Sec. 301.6323(i)-1) of the existence of
the tax lien,
(ii) After the insuring organization has actual notice or knowledge
of the lien (as defined in paragraph (a) of Sec. 301.6323(i)-1), with
respect to advances (including contractual interest thereon as provided
in paragraph (a) of Sec. 301.6323(e)-1) required to be made
automatically to maintain the contract in force under an agreement
entered into before the insuring organization had such actual notice or
knowledge, or
(iii) After the satisfaction of a levy pursuant to section 6332(b),
unless and until the district director delivers to the insuring
organization a notice (for example, another notice of levy, a letter,
etc.), executed after the date of such satisfaction, that the lien
exists.
Delivery of the notice described in subdivision (iii) of this
subparagraph may be made by any means, including regular mail, and
delivery of the notice shall be effective only from the time of actual
receipt of the notification by the insuring organization. The provisions
of this paragraph are applicable to matured as well as unmatured
insurance contracts.
(2) Examples. The provisions of this paragraph may be illustrated by
the following examples:
Example 1. On May 1, 1964, the X insurance company issues a life
insurance policy to A. On June 1, 1970, a tax assessment is made against
A, and on June 2, 1970, a notice of lien with respect to the assessment
is filed in accordance with Sec. 301.6323(f)-1. On July 1, 1970, without
actual notice or knowledge of the tax lien, the X company makes a
``policy loan'' to A. Under subparagraph (1)(i) of this paragraph, the
loan, including interest (in accordance with the provisions of paragraph
(a) of Sec. 301.6323(e)-1), will have priority over the tax lien because
X company did not have
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actual notice or knowledge of the tax lien at the time the policy loan
was made.
Example 2. On May 1, 1964, B enters into a life insurance contract
with the Y insurance company. Under one of the provisions of the
contract, in the event a premium is not paid, Y is to advance out of the
cash loan value of the policy the amount of an unpaid premium in order
to maintain the contract in force. The contract also provides for
interest on any advances so made. On June 1, 1971, a tax assessment is
made against B, and on June 2, 1971, in accordance with section 6323(f)-
1, a notice of lien is filed. On July 1, 1971, B fails to pay the
premium due on that date, and Y makes an automatic premium loan to keep
the policy in force. At the time the automatic premium loan is made, Y
had actual knowledge of the tax lien. Under subparagraph (1)(ii) of this
paragraph, the lien is not valid against Y with respect to the advance
(and the contractual interest thereon), because the advance was required
to be made automatically under an agreement entered into before Y had
actual notice or knowledge of the tax lien.
Example 3. On May 1, 1964, C enters into a life insurance contract
with the Z insurance company. On January 4, 1971, an assessment is made
against C for $5,000 unpaid income taxes, and on January 11, 1971, in
accordance with Sec. 301.6323(f)-1, a notice of lien is filed. On
January 29, 1971, a notice of levy with respect to C's delinquent tax is
served on Z company. The amount which C could have had advanced to him
from Z company under the contract on the 90th day after service of the
notice of levy on Z company is $2,000. The Z company pays $2,000
pursuant to the notice of levy, thereby satisfying the levy upon the
contract in accordance with Sec. 6332(b). On February 1, 1973, Z company
advances $500 to C, which is the increment in policy loan value since
satisfaction of the levy of January 29, 1971. On February 5, 1973, a new
notice of levy for the unpaid balance of the delinquent taxes, executed
after the first levy was satisfied, is served upon Z company. Because
the new notification was not received by Z company until after the
policy loan was made, under paragraph (1)(iii) of this paragraph, the
tax lien is not valid against Z company with respect to the policy loan
(including interest thereon in accordance with paragraph (a) of
Sec. 301.6323(e)-1).
Example 4. On June 1, 1973, a tax assessment is made against D and
on June 2, 1973, in accordance with Sec. 301.6323(f)-1, a notice of lien
with respect to the assessment is filed. On July 2, 1973, D executes an
assignment of his rights, as the insured, under an insurance contract to
M bank as security for a loan. M bank holds its security interest
subject to the lien because it is not an insurer entitled to protection
under section 6323(b)(9) and did not become a holder of the security
interest prior to the filing of the notice of lien for purposes of
section 6323(a). It is immaterial that a notice of levy had not been
served upon the insurer before the assignment to M bank was made.
(j) Passbook loans--(1) In general. Even though a notice of a lien
imposed by section 6321 is filed in accordance with Sec. 301.6323(f)-1,
the lien is not valid against an institution described in section 581 or
591 to the extent of any loan made by the institution which is secured
by a savings deposit, share, or other account evidenced by a passbook
(as defined in subparagraph (2) of this paragraph (j)) if the
institution has been continuously in possession of the passbook from the
time the loan is made. This paragraph applies only to a loan made
without actual notice or knowledge (as defined in paragraph (a) of
Sec. 301.6323(i)-1) of the existence of the lien. Even though an
original passbook loan is made without actual notice or knowledge of the
existence of the lien, this paragraph does not apply to any additional
loan made after knowledge of the lien is acquired by the institution
even if it continues to retain the passbook from the time the original
passbook loan is made.
(2) Definition of passbook. For purposes of this paragraph, the term
``passbook'' includes--
(i) Any tangible evidence of a savings deposit, share, or other
account which, when in the possession of the bank or other savings
institution, will prevent a withdrawal from the account to the extent of
the loan balance, and
(ii) Any procedure or system, such as an automatic data processing
system, the use of which by the bank or other savings institution will
prevent a withdrawal from the account to the extent of the loan balance.
(3) Example.
On June 1, 1970, a tax assessment is made against A and on June 2,
1970, a notice of lien with respect to the assessment is filed in
accordance with Sec. 301.6323(f)-1. A owns a savings account at the M
bank with a balance of $1,000. On June 10, 1970, A borrows $300 from the
M bank using the savings account as security therefor. The M bank is
continuously in possession of the passbook from the time the loan is
made and does not have actual notice or
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knowledge of the lien at the time of the loan. The tax lien is not valid
against M bank with respect to the passbook loan of $300 and accrued
interest and expenses entitled to priority under Sec. 301.6323(e)-1.
Upon service of a notice of levy, the M bank must pay over the savings
account balance in excess of the amount of its protected interest in the
account as determined on the date of levy.
[T.D. 7429, 41 FR 35501, Aug. 23, 1976]
Sec. 301.6323(c)-1 Protection for commercial transactions financing agreements.
(a) In general. Even though a notice of a lien imposed by section
6321 is filed in accordance with Sec. 301.6323(f)-1, the lien is not
valid with respect to a security interest which:
(1) Comes into existence after the tax lien filing,
(2) Is in qualified property covered by the terms of a commercial
transactions financing agreement entered into before the tax lien
filing, and
(3) Is protected under local law against a judgment lien arising, as
of the time of the tax lien filing, out of an unsecured obligation.
See paragraphs (a) and (e) of Sec. 301.6323(h)-1 for definitions of the
terms ``security interest'' and ``tax lien filing,'' respectively. For
purposes of this section, a judgment lien is a lien held by a judgment
lien creditor as defined in paragraph (g) of Sec. 301.6323(h)-1.
(b) Commercial transactions financing agreement. For purposes of
this section, the term ``commercial transactions financing agreement''
means a written agreement entered into by a person in the course of his
trade or business--
(1) To make loans to the taxpayer (whether or not at the option of
the person agreeing to make such loans) to be secured by commercial
financing security acquired by the taxpayer in the ordinary course of
his trade or business, or
(2) To purchase commercial financing security, other than inventory,
acquired by the taxpayer in the ordinary course of his trade or
business.
Such an agreement qualifies as a commercial transactions financing
agreement only with respect to loans or purchases made under the
agreement before (i) the 46th day after the date of tax lien filing or,
(ii) the time when the lender or purchaser has actual notice or
knowledge (as defined in paragraph (a) of Sec. 301.6323(i)-1) of the tax
lien filing, if earlier. For purposes of this paragraph, a loan or
purchase is considered to have been made in the course of the lender's
or purchaser's trade or business if such person is in the business of
financing commercial transactions (such as a bank or commercial factor)
of if the agreement is incidental to the conduct of such person's trade
or business. For example, if a manufacturer finances the accounts
receivable of one of his customers, he is considered to engage in such
financing in the course of his trade or business. The extent of the
priority of the lender or purchaser over the tax lien is the amount of
his disbursements made before the 46th day after the date the notice of
tax lien is filed, or made before the day (before such 46th day) on
which the lender or purchaser has actual notice or knowledge of the
filing of the notice of the tax lien.
(c) Commercial financing security. (1) In general. The term
``commercial financing security'' means--
(i) Paper of a kind ordinarily arising in commercial transactions.
(ii) Accounts receivable (as defined in subparagraph (2) of this
paragraph (c)),
(iii) Mortgages on real property, and
(iv) Inventory.
For purposes of this subparagraph, the term ``paper of a kind ordinarily
arising in commercial transactions'' in general includes any written
document customarily used in commercial transactions. For example, such
written documents include paper giving contract rights (as defined in
subparagraph (2) of this paragraph (c)), chattel paper, documents of
title to personal property, and negotiable instruments or securities.
The term ``commercial financing security'' does not include general
intangibles such as patents or copyrights. A mortgage on real estate
(including a deed of trust, contract for sale, and similar instrument)
may be commercial financing security if the taxpayer has an interest in
the mortgage as a mortgagee or assignee. The term ``commercial financing
security''
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does not include a mortgage where the taxpayer is the mortgagor or
realty owned by him. For purposes of this subparagraph, the term
``inventory'' includes raw materials and goods in process as well as
property held by the taxpayer primarily for sale to customers in the
ordinary course of his trade or business.
(2) Definitions. For purposes of Secs. 301.6323(d)-1, 301.6323(h)-1
and this section--
(i) A contract right is any right to payment under a contract not
yet earned by performance and not evidenced by an instrument or chattel
paper, and
(ii) An account receivable is any right to payment for goods sold or
leased or for services rendered which is not evidenced by an instrument
or chattel paper.
(d) Qualified property. For purposes of paragraph (a) of this
section, qualified property consists solely of commercial financing
security acquired by the taxpayer-debtor before the 46th day after the
date of tax lien filing: Commercial financing security acquired before
such day may be qualified property even though it is acquired by the
taxpayer after the lender received actual notice or knowledge of the
filing of the tax lien. For example, although the receipt of actual
notice or knowledge of the filing of the notice of the tax lien has the
effect of ending the period within which protected disbursements may be
made to the taxpayer, property which is acquired by the taxpayer after
the lender receives actual notice or knowledge of such filing and before
such 46th day, which otherwise qualifies as commercial financing
security, becomes commercial financing security to which the priority of
the lender extends for loans made before he received the actual notice
or knowledge. An account receivable (as defined in paragraph (c)(2)(ii)
of this section) is acquired by a taxpayer at the time, and to the
extent, a right to payment is earned by performance. Chattel paper,
documents of title, negotiable instruments, securities, and mortgages on
real estate are acquired by a taxpayer when he obtains rights in the
paper or mortgage. Inventory is acquired by the taxpayer when title
passes to him. A contract right (as defined in paragraph (c)(2)(i) of
this section) is acquired by a taxpayer when the contract is made.
Identifiable proceeds, which arise from the collection or disposition of
qualified property by the taxpayer, are considered to be acquired at the
time such qualified property is acquired if the secured party has a
continuously perfected security interest in the proceeds under local
law. The term ``proceeds'' includes whatever is received when collateral
is sold, exchanged, or collected. For purposes of this paragraph, the
term ``identifiable proceeds'' does not include money, checks and the
like which have been commingled with other cash proceeds. Property
acquired by the taxpayer after the 45th day following tax lien filing,
by the expenditure of proceeds, is not qualified property.
(e) Purchaser treated as acquiring security interest. A person who
purchases commercial financing security, other than inventory, pursuant
to a commercial transactions financing agreement is treated, for
purposes of this section, as having acquired a security interest in the
commercial financing security. In the case of a bona fide purchase at a
discount, a purchaser of commercial financing security who satisfies the
requirements of this section has priority over the tax lien to the full
extent of the security.
(f) Examples. The provisions of this section may be illustrated by
the following examples:
Example 1. (i) On June 1, 1970, a tax is assessed against M, a tool
manufacturer, with respect to his delinquent tax liability. On June 15,
1970, M enters into a written financing agreement with X, a bank. The
agreement provides that, in consideration of such sums as X may advance
to M, X is to have a security interest in all of M's presently owned and
subsequently acquired commercial paper, accounts receivable, and
inventory (including inventory in the manufacturing stages and raw
materials). On July 6, 1970, notice of the tax lien is filed in
accordance with Sec. 301.6323(f)-1. On August 3, 1970, without actual
notice or knowledge of the tax lien filing, X advances $10,000 to M. On
August 5, 1970, M acquires additional inventory through the purchase of
raw materials.
[[Page 238]]
On August 20, 1970, M has accounts receivable, arising from the sale of
tools, amounting to $5,000. Under local law, X's security interest
arising by reason of the $10,000 advance on August 3, 1970, has
priority, with respect to the raw materials and accounts receivable,
over a judgment lien against M arising July 6, 1970 (the date of tax
lien filing) out of an unsecured obligation.
(ii) Because the $10,000 advance was made before the 46th day after
the tax lien filing, and the accounts receivable in the amount of $5,000
and the raw materials were acquired by M before such 46th day, X's
$10,000 security interest in the accounts receivable and the inventory
has priority over the tax lien. The priority of X's security interest
also extends to the proceeds, received on or after the 46th day after
the tax lien filing, from the liquidation of the accounts receivable and
inventory held by M on August 20, 1970, if X has a continuously
perfected security interest in identifiable proceeds under local law.
However, the priority of X's security interest will not extend to other
property acquired with such proceeds.
Example 2. Assume the same facts as in example 1 except that on July
15, 1970, X has actual knowledge of the tax lien filing. Because an
agreement does not qualify as a commercial transactions financing
agreement when a disbursement is made after tax lien filing with actual
knowledge of the filing, X's security interest will not have priority
over the tax lien with respect to the $10,000 advance made on August 3,
1970.
Example 3. Assume the same facts as in example 1 except that,
instead of additional inventory, on August 5, 1970, M acquires an
account receivable as the result of the sale of machinery which M no
longer needs in his business. Even though the account receivable was
acquired by taxpayer M before the 46th day after tax lien filing, the
tax lien will have priority over X's security interest arising in the
account receivable pursuant to the earlier written agreement because the
account receivable was not acquired by the taxpayer in the ordinary
course of his trade or business.
Example 4. Pursuant to a written agreement with the N Manufacturing
Company entered into on January 4, 1971, Y a commercial factor,
purchases the accounts receivable arising out of N's regular sales to
its customers. On November 1, 1971, in accordance with Sec. 301.6323(f)-
1, a notice of lien is filed with respect to N's delinquent tax
liability. On December 6, 1971, Y, without actual notice or knowledge of
the tax lien filing, purchases all of the accounts receivable resulting
from N's November 1971 sales. Y has t