[Federal Register Volume 78, Number 46 (Friday, March 8, 2013)]
[Proposed Rules]
[Pages 14939-14947]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-05200]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[REG-160873-04]
RIN 1545-BF39


American Jobs Creation Act Modifications to Section 6708, Failure 
To Maintain List of Advisees With Respect to Reportable Transactions

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

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SUMMARY: This document contains proposed regulations relating to the 
penalty under section 6708 of the Internal Revenue Code for failing to 
make available lists of advisees with respect to reportable 
transactions. Section 6708 imposes a penalty upon material advisors for 
the failure to make available to the Secretary, upon written request, 
lists required by section 6112 within the time prescribed by section 
6708(a)(1). These proposed regulations reflect changes to section 6708 
made by the American Jobs Creation Act of 2004 and provide guidance 
regarding the imposition of the section 6708 penalty on material 
advisors who are required to maintain lists of advisees pursuant to 
section 6112. This document also provides notice of a public hearing on 
these proposed regulations.

DATES: Written or electronic comments must be received by June 6, 2013. 
Requests to speak and outlines of topics to be discussed at the public 
hearing scheduled for July 2, 2013 at 10:00 a.m. must be received by 
June 10, 2013.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-160873-04), room 
5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LDP:PR (REG-
160873-04), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC, or sent electronically, via the Federal 
eRulemaking Portal at www.regulations.gov (IRS REG-160873-04). The 
public hearing will be held in the IRS Auditorium, Internal Revenue 
Building, 1111 Constitution Avenue NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Emily M. Lesniak at (202) 622-4910; concerning submission of comments, 
the hearing, or to be placed on the building access list to attend the 
hearing, Oluwafunmilayo (Funmi) Taylor at (202) 622-7180 (not toll-free 
numbers).

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act

    The collection of information contained in this notice of proposed 
rulemaking has been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)). Comments on the collection of information should be 
sent to the Office of Management and Budget, Attn: Desk Officer for the 
Department of the Treasury, Office of Information and Regulatory 
Affairs, Washington, DC 20503, with copies to the Internal Revenue 
Service, Attn: IRS Reports Clearance Officer, SE:CAR:MP:T:T:SP, 
Washington, DC 20224. Comments on the collection of information should 
be received by May 7, 2013. Comments are specifically requested 
concerning:
    Whether the proposed collection of information is necessary for the 
proper performance of the Internal Revenue Service, including whether 
the information will have practical utility;
    The accuracy of the estimated burden associated with the proposed 
collection of information or of the certification contained under the 
heading ``Special Analyses'';
    How the quality, utility, and clarity of the information to be 
collected may be enhanced;
    How the burden of complying with the proposed collection of 
information may be minimized; and
    Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchases of service to provide information.
    The collection of information in this proposed regulation is in 
Sec.  301.6708-1(c)(3)(ii). This information is required for the IRS to 
determine whether good cause exists to allow a person affected by these 
regulations an extension of the legislatively established 20-business-
day period to furnish a lawfully requested list to the IRS. The 
collection of information is voluntary to obtain a benefit. The likely 
respondents are persons (individuals and entities) who qualify as 
material advisors, as defined in section 6111, who are unable to 
respond to a valid and statutorily authorized section 6112 list request 
within the statutory period of time provided by section 6708.
    Estimated total annual reporting burden: 200 hours.
    Estimated average annual burden hours per respondent: 8 hours.

[[Page 14940]]

    Estimated number of respondents: 25.
    Estimated annual frequency of responses: on occasion.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background

    This document contains proposed amendments to 26 CFR part 301 
relating to the section 6708 penalty for failing to make available, as 
required by section 6112, lists of advisees with respect to reportable 
transactions. Section 6112 requires material advisors to maintain lists 
of advisees and other information with respect to reportable 
transactions and to make that information available to the Secretary 
upon written request.
    Section 6708 was added to the Internal Revenue Code by the Deficit 
Reduction Act of 1984 (Pub. L. 98-369, 98 Stat. 680). At that time, 
section 6708 imposed a penalty on each organizer or seller of a 
potentially abusive tax shelter who failed to meet the requirements of 
section 6112 unless the person showed that the failure occurred as a 
result of reasonable cause and not as a result of willful neglect. The 
amount of the penalty was $50 for each person who was sold an interest 
in a tax shelter and whose name (or other required information) was not 
listed or maintained pursuant to the requirements of section 6112. The 
maximum penalty imposed was $50,000 for each tax shelter for a calendar 
year. Treasury Reg. Sec.  301.6708-1T was issued shortly after section 
6708 became law. Subsequently, the Tax Reform Act of 1986 (Pub. L. 99-
514, 100 Stat. 2090) increased the maximum calendar year penalty to 
$100,000.
    The American Jobs Creation Act of 2004, Public Law 108-357, 118 
Stat. 1418 (AJCA), was enacted on October 22, 2004. AJCA section 817 
amended section 6708, significantly increasing the amount of the 
penalty and eliminating the maximum calendar-year limit on the penalty. 
As amended by the AJCA, section 6708 imposes a penalty on a person 
required to maintain a list under section 6112 (a ``material advisor'') 
who fails to make the list available to the IRS upon written request. 
Under section 6708(a)(1), if a material advisor fails to comply with a 
written request for the section 6112 list within 20 business days after 
the request is made, the material advisor is subject to a penalty in 
the amount of $10,000 for each day of the failure after the 20th 
business day. Under section 6708(a)(2), the penalty will not be imposed 
on any day that the failure is due to reasonable cause. There is no 
statutory limitation to the amount of the penalty that can be imposed 
under section 6708. Section 6708(b) provides that the penalty imposed 
under section 6708(a) shall be in addition to any other penalty 
provided by law. Section 6708, as amended, is effective for requests 
made after October 22, 2004, and it encompasses requests made for lists 
required to be maintained under section 6112 before section 6112 was 
amended by the AJCA.
    To implement the pertinent provisions of the AJCA, the Treasury 
Department and IRS issued Notice 2004-80, 2004-2 C.B. 963 (see Sec.  
601.601(d)(2)(ii)(b)), which provided interim guidance relating to 
section 6708, as well as section 6112. With respect to section 6708, 
Notice 2004-80 provides that the 20-business-day period within which a 
person must provide the list required to be maintained under section 
6112 shall begin on the first business day following the earlier of the 
date that the IRS: (1) Mails a request for the list by certified or 
registered mail to the last known address of the material advisor 
required to maintain the list; or (2) hand-delivers the written request 
in person. The Treasury Department and IRS also issued interim guidance 
relating to section 6112 in Notice 2005-17, 2005-1 C.B. 606; Notice 
2005-22, 2005-1 C.B. 756; and Notice 2006-6, 2006-1 C.B. 385. On July 
31, 2007, the Treasury Department and IRS issued final regulations 
under section 6112 (TD 9352) replacing the interim guidance relating to 
section 6112. The Treasury Department and IRS have received various 
comments and questions regarding the application of section 6708 as 
amended by the AJCA. Consequently, after consideration of these 
comments and questions, the Treasury Department and IRS are publishing 
proposed rules reflecting the AJCA amendments to section 6708.

Explanation of Provisions

    Proposed Sec.  301.6708-1(a) provides that, in general, section 
6708 imposes a penalty of $10,000 per day for the failure of a person 
required to maintain a list under section 6112 to furnish the list to 
the IRS, upon written request, within 20 business days after the date 
of the request, absent reasonable cause.
    Proposed Sec.  301.6708-1(b) provides that the 20-business-day 
period begins on the first business day following the earlier of the 
date that the IRS: (1) Mails the request for the section 6112 list by 
certified or registered mail to the person required to maintain the 
list; (2) hand delivers the request for the section 6112 list directly 
to the person; or (3) leaves the request for the section 6112 list at 
the last and usual place of abode or usual place of business of the 
person. Proposed Sec.  301.6708-1(c) provides that the person may make 
the requested list available to the IRS as required by section 6112 by 
delivering it to the IRS by either hand delivery, the U.S. mail, a 
private delivery service, or by arranging with the IRS to produce the 
list by another agreed-upon method within the 20-business-day period 
following the list request.
    The Treasury Department and the IRS believe that there are 
situations in which it is necessary to permit an extension of the 20-
business-day response period. Proposed Sec.  301.6708-1(c)(3) permits 
the IRS to grant an extension, at its discretion, if prior to the 
expiration of the 20-business-day period, the person establishes that 
the person cannot reasonably meet the 20-business-day deadline despite 
diligent efforts to maintain the materials constituting a list and to 
make that list available to the IRS in the time and manner required by 
the Secretary under section 6112. The proposed regulations explain how 
to request an extension and discuss the various factors that the IRS 
will consider in determining whether to grant the person's extension 
request. The IRS may, in its discretion, grant the person's extension 
request in full or in part. The failure of the IRS to grant the 
person's extension request in full or in part may not be reviewed in 
any judicial proceeding.
    The conference report accompanying the enactment of the AJCA 
amendments to section 6708 describes the penalty as a ``time-sensitive 
penalty,'' and, accordingly, no extensions will be granted where the 
IRS determines that a significant reason for the extension request is 
to delay production of the list. See H.R. Rep. No. 108-755, 108th 
Cong., 2d Sess., at 597. In this regard, Sec.  301.6708-1(c)(3)(ii) of 
the proposed regulations requires persons seeking extensions to 
affirmatively state that the extension request is not made for purposes 
of avoiding the person's list maintenance obligations imposed by 
section 6112 and its corresponding regulations. The Treasury Department 
and IRS believe that the time-sensitive

[[Page 14941]]

nature of the penalty, in addition to the IRS's need for the section 
6112 information in a timely manner, supports the position that 
extensions, when granted, will generally be granted for a short time 
period. Persons who are required to maintain a list under section 6112 
are required and expected to maintain the list in a readily accessible 
form. See Treas. Reg. Sec.  301.6112-1(d). Accordingly, the Treasury 
Department and the IRS do not expect that extensions should be 
routinely requested or granted. The grant of an extension of the 20-
business-day response period will be warranted only in situations when 
the person requesting the extension establishes to the satisfaction of 
the IRS good cause for why the deadline cannot be reasonably met 
despite diligent efforts to comply with section 6112. The IRS will 
adhere to the guidance in these proposed regulations regarding 
extensions pending the publication of final regulations addressing the 
matter.
    The conference report accompanying the AJCA modifications to the 
section 6708 penalty provides that the ``penalty applies to a person 
who fails to maintain a list, maintains an incomplete list, or has in 
fact maintained a list but does not make the list available to the 
Secretary.'' H.R. Rep. No. 108-755, 108th Cong., 2d Sess., at 598. 
Consistent with the legislative history of the AJCA, a failure to 
furnish the list that triggers the imposition of the section 6708 
penalty may take various forms. Proposed Sec.  301.6708-1(d) provides 
that a failure for purposes of section 6708 includes the failure to 
furnish a list in a timely manner and in the form required under 
section 6112 and its corresponding regulations. Regarding the 
determination of whether the list is furnished in the form required 
under section 6112 and its corresponding regulations, the Treasury 
Department and the IRS recognize that they have issued several 
regulations under section 6112 and that the description of the required 
contents of a list maintained under section 6112 has varied over time. 
The Treasury Department and the IRS intend that the description of the 
contents of the list that is used for purposes of this penalty is the 
description required by section 6112 (and any corresponding 
regulations) that was in effect on the date the material advisor's list 
preparation and maintenance requirement arose with respect to the 
reportable transaction.
    The IRS will make reasonable efforts to review responses submitted 
under section 6112 and inform the person of any potential or identified 
failures in the person's response on a timely basis. If the person's 
response is determined to be incomplete, or untimely, the IRS may 
impose the section 6708 penalty on a daily basis, consistent with 
section 6708(a) and proposed Sec.  301.6708-1(e). Proposed Sec.  
301.6708-1(e) provides that the section 6708 penalty accrues on a daily 
basis, absent reasonable cause, beginning on the first calendar day 
after the expiration of the 20-business-day period following a written 
list request, and continues for each calendar day until, and including, 
the day the person furnishes a list that complies with the requirements 
of section 6112 and its corresponding regulations. If the IRS grants an 
extension of the 20-business-day period, proposed Sec.  301.6708-
1(e)(2) provides that the section 6708 penalty accrues on a daily 
basis, absent reasonable cause, beginning on the first calendar day 
after the expiration of the extension period, and continues each 
calendar day thereafter until, and including, the day the person 
furnishes a list that complies with the requirements of section 6112 
and its corresponding regulations.
    Proposed Sec.  301.6708-1(e)(3) provides guidance on the 
obligations of, and assessment of penalties against, a material advisor 
when more than one material advisor provided advice on a particular 
transaction and the material advisors are parties to a designation 
agreement pursuant to section 6112 and its corresponding regulations.
    The section 6708 penalty will not be imposed for any day for which 
the material advisor establishes that there was reasonable cause for 
the failure to make the list available. Proposed Sec. Sec.  301.6708-
1(g) and (h) describe reasonable cause for purposes of the section 6708 
penalty. Reasonable cause is determined on a day-by-day and case-by-
case basis, taking into account all the relevant facts and 
circumstances. The material advisor against whom the penalty is imposed 
has the burden of proving that reasonable cause exists for a specific 
day or days. Facts and circumstances relevant to a material advisor's 
reasonable cause for failing to provide the list on a specific day 
include facts and circumstances arising subsequent to the request for 
the list and the material advisor's response to the request. Thus, if 
the material advisor establishes reasonable cause, the IRS will abate 
the penalty completely or for the period to which the established 
reasonable cause relates, which may be for a specific day, days, or the 
entire period. Proposed Sec.  301.6708-1(g)(6) provides examples 
involving reasonable cause.
    Because reasonable cause can be shown to exist in situations 
involving a variety of facts and circumstances, the proposed 
regulations include a nonexclusive list of categories of reasonable 
cause factors that the IRS will consider. Pursuant to proposed Sec.  
301.6708-1(g)(2), the most important factors in a reasonable cause 
analysis are those that reflect the extent of the material advisor's 
good-faith efforts to timely and fully comply with section 6112. 
Proposed Sec.  301.6708-1(g)(3) provides that the exercise of ordinary 
business care by a material advisor may constitute reasonable cause, 
but only where the material advisor shows that it took immediate steps 
to correct any failure upon its discovery. A material advisor's failure 
to take immediate steps to correct a failure shall be a factor weighing 
against a finding that the material advisor exercised ordinary business 
care.
    Proposed Sec.  301.6708-1(g)(4) provides that reasonable cause may 
exist if a failure is due solely to a supervening event, such as 
illness, theft, fire, flood, storm, or other similar, unexpected event 
that is beyond the material advisor's control and that prevents the 
material advisor from making the list available pursuant to the 
requirements of section 6112.
    Proposed Sec.  301.6708-1(g)(5) provides that reasonable cause may 
be established if the material advisor relied on the advice of an 
``independent tax professional'' as defined in the proposed 
regulations. The proposed regulations explain that the reliance on an 
independent tax professional's advice must be reasonable and in good 
faith, and will be viewed in light of all the relevant facts and 
circumstances. In addition to other factors described in the 
regulations, the advice must be received by the person prior to the 
time that the list is required to be furnished to the IRS. If the 
person received advice from an independent tax professional, the 
person's reliance on that advice will be considered reasonable only if 
the independent tax professional expressed a reasonable belief that it 
is more likely than not that the person is compliant with section 6112 
or does not have an obligation imposed by section 6112. Advice from a 
nonindependent tax professional may be considered in conjunction with 
all other relevant facts and circumstances but by itself is not 
sufficient to establish reasonable cause.
    Proposed Sec.  301.6708-1(h) describes additional reasonable cause 
factors that are applicable in limited factual circumstances. Proposed 
Sec.  301.6708-1(h)(1) provides that if a material advisor dissolves, 
is liquidated, or is otherwise no longer in existence, the IRS will 
consider facts surrounding the

[[Page 14942]]

winding up of the business of the material advisor as well as any 
efforts made by the material advisor to comply with section 6112 prior 
to its dissolution or liquidation when considering whether a successor 
material advisor has reasonable cause for any failure.
    If the material advisor establishes that it acted in good faith 
(within the meaning of proposed Sec.  301.6708-1(g)(2)) in its efforts 
to fully comply with the requirements of section 6112, the material 
advisor will have reasonable cause for the days between when the 
material advisor provided the list to the IRS and when the IRS reviews 
the list. If the material advisor does not establish that it acted in 
good faith, the IRS will not consider the time taken by the IRS to 
review a list or inform a material advisor of identified failures as a 
factor in determining whether the material advisor has reasonable cause 
for that period.
    Proposed Sec.  301.6708-1(h)(3) provides examples to illustrate 
when a material advisor has acted in good faith.

Proposed Effective Date

    The regulations, as proposed, apply to all written requests made 
after the date of publication of a Treasury decision adopting these 
rules as final regulations in the Federal Register for lists required 
to be maintained under section 6112, including lists persons were 
required to maintain under section 6112(a) as in effect before October 
22, 2004, the date of enactment of the AJCA. The rules in these 
proposed regulations may be relied upon by persons required to maintain 
a list under section 6112 regarding list requests made before the 
publication of the Treasury decision.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866, as amended by Executive Order 13563. Therefore, a regulatory 
assessment is not required. It also has been determined that section 
553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does 
not apply to these regulations. It is hereby certified that the 
collection of information in these regulations will not have a 
significant economic impact on a substantial number of small entities. 
This certification is based on the fact that the collection of 
information described above under the heading ``Paperwork Reduction 
Act'' only affects persons who qualify as material advisors as defined 
in section 6111, who are statutorily required by section 6112 to 
maintain and furnish the underlying documents and information upon 
which the collection of information is based, and who are unable to 
meet the section 6708 statutorily provided period of time for 
furnishing these documents and information. Moreover, requiring those 
persons to report the information described above imposes only a 
minimal burden in time or expense. Therefore, a Regulatory Flexibility 
Analysis under the Regulatory Flexibility Act (5 U.S.C. Chapter 6) is 
not required. Pursuant to section 7805(f) of the Internal Revenue Code, 
this regulation will be submitted to the Chief Counsel for Advocacy of 
the Small Business Administration for comment on its impact on small 
business.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) or electronic comments that are submitted timely 
to the IRS. The Treasury Department and IRS specifically request 
comments on the clarity of the proposed regulations and on how they can 
be made easier to understand. All comments submitted by the public will 
be made available for public inspection and copying.
    A public hearing has been scheduled for July 2, 2013, beginning at 
10:00 a.m. in the Auditorium (7th Floor) of the Internal Revenue 
Building, 1111 Constitution Avenue NW., Washington, DC. Due to building 
security procedures, visitors must enter at the Constitution Avenue 
entrance. In addition, all visitors must present photo identification 
to enter the building. Because of access restrictions, visitors will 
not be admitted beyond the immediate entrance area more than 30 minutes 
before the hearing starts. For information about having your name 
placed on the building access list to attend the hearing, see the FOR 
FURTHER INFORMATION CONTACT section of this preamble.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments at the hearing must submit electronic or 
written comments by June 6, 2013 and an outline of the topics to be 
discussed and the time to be devoted to each topic (signed original and 
eight (8) copies) by June 10, 2013. A period of 10 minutes will be 
allotted to each person for making comments. An agenda showing the 
schedule of the speakers will be prepared after the deadline for 
receiving outlines has passed. Copies of the agenda will be available 
free of charge at the hearing.

Drafting Information

    The principal author of these regulations is Lawrence E. Mack, 
Office of the Associate Chief Counsel (Procedure and Administration).

List of Subjects in 26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 301 is proposed to be amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

0
Paragraph 1. The authority citation for part 301 is amended by adding 
an entry in numerical order to read in part as follows:

    Authority:  26 U.S.C. 7805 * * *
    Section 301.6708-1 also issued under 26 U.S.C. 6708 * * *

0
Par. 2. Section 301.6708-1 is added to read as follows:


Sec.  301.6708-1  Failure to maintain lists of advisees with respect to 
reportable transactions.

    (a) In general. Any person who is required to maintain a list under 
section 6112 who, upon written request for the list, fails to make the 
list available to the Secretary within 20 business days after the date 
of the request shall be subject to a penalty in the amount of $10,000 
for each subsequent calendar day on which the person fails to furnish a 
list containing the information and in the form required by section 
6112 and its corresponding regulations. The penalty will not be imposed 
on any particular day or days for which the person establishes that the 
failure to comply on that day is due to reasonable cause.
    (b) Calculation of the 20-business-day period. The 20-business-day 
period shall begin on the first business day after the earliest of the 
date that the IRS--
    (1) Mails a request for the list required to be maintained under 
section 6112(a) by certified or registered mail to the person required 
to maintain the list;
    (2) Hand delivers the written request to the person required to 
maintain the list; or
    (3) Leaves the written request at the last and usual place of abode 
or usual place of business of the person required to maintain the list.
    (c) Making a list available--(1) A person who is required to 
maintain a list required by section 6112 may make the list available by 
mailing or delivering it

[[Page 14943]]

to the IRS within 20 business days after the date of the list request. 
Section 7502 and the regulations thereunder shall apply to this 
section.
    (2) A person who is required to maintain a list required by section 
6112 may also make the list available to the IRS by making it available 
for inspection during normal business hours, as provided by section 
6112, or by another agreed-upon method, on an agreed upon date that 
falls within the 20-business-day period following the list request.
    (3) Extension. (i) In general. Upon a showing of good cause by the 
person prior to the expiration of the 20-business-day period following 
a list request, the IRS may, in its discretion, agree to extend the 
period within which to make all or part of the list available. For 
purposes of this paragraph, ``good cause'' is shown if the person 
establishes that the 20-business-day deadline cannot reasonably be met 
despite diligent efforts by the person to maintain the materials 
constituting a list and to make that list available to the IRS in the 
time and manner required by the Secretary under section 6112.
    (ii) Requesting an extension. Any request for an extension of the 
20-business-day period must be made in writing to the person at the IRS 
who requested the list. The person requesting an extension must briefly 
describe the information and documents that comprise the list as 
required by section 6112, explain the circumstances that would warrant 
additional time, propose a schedule for the completion of the 
production of the list, state that to the best of the person's 
knowledge all information and records relating to the list under the 
possession, custody, or control of the person have been maintained in 
accordance with procedures and policies that are consistent with 
sections 6001 and 6112 of the Internal Revenue Code, and state that the 
extension request is not being made for purposes of avoiding the 
person's list maintenance obligations imposed by section 6112 and its 
corresponding regulations. The IRS may, in its discretion, grant the 
person's extension request in full or in part. The IRS will consider 
whether granting an extension may impair its ability to make a timely 
assessment against any of the participants in the transaction 
associated with the requested list. No extensions will be granted if 
the IRS determines that a significant reason for the extension request 
is to delay production of the list. The failure of the IRS to grant the 
person's extension request in full or in part may not be reviewed in 
any judicial proceeding. A pending extension request by itself does not 
constitute reasonable cause for purposes of section 6708.
    (4) Example. The following example illustrates paragraph (c)(3)(i) 
and (ii) of this section:

    Example. Firm A is a large law firm that is a material advisor. 
Firm A conducts annual sessions to educate its professionals about 
reportable transactions and the obligations of the firm related to 
those reportable transactions. Firm A instructs its professionals to 
provide information on tax engagements that involve reportable 
transactions and to provide the documents required to be maintained 
under section 6112 to Firm A's compliance officer for list 
maintenance purposes. Firm A's policy provides that, for each 
engagement involving a reportable transaction, one firm professional 
will send an email to the firm's compliance officer about the 
engagement and then direct a subordinate to send the documents 
required to be maintained to the firm's compliance officer.
    Firm A receives a request from the IRS for a section 6112 list. 
In compiling its list to turn over to the IRS during the 20-
business-day period following the list request, Firm A discovers 
that, with respect to one reportable transaction, a subordinate did 
not provide the documentation required by Firm A's policy. In 
addition, Firm A experiences difficulty locating the required 
documents as both the professional and the subordinate who worked on 
the matter are no longer employed by Firm A, requiring the firm to 
undertake an extensive search of its storage facility for the 
documents responsive to the list request. Firm A also seeks the 
materials from the firm's clients, but they are unable to respond 
timely to the request. Firm A notifies the IRS, in writing, of the 
difficulties it is experiencing, and provides all other required 
list information to the IRS, together with a description of the 
documents that are being searched for at the storage facility, a 
proposed schedule of production of the documents within 10 business 
days, and all statements required by these regulations, within the 
20-business-day period while it locates the documents for this one 
engagement.
    Under these circumstances, Firm A demonstrated that it could not 
reasonably make the portion of the list relating to the one 
engagement, including the documents in the storage facility, 
available within the 20-business-day period and thus qualified for 
an extension. Firm A had established procedures reasonably designed 
and implemented to ensure compliance with the requirements of 
section 6112. The facts indicate that Firm A made diligent efforts 
to maintain the materials constituting the list in a readily 
accessible form and as otherwise required by the Secretary under 
section 6112. Based on the above, the IRS should grant a 10-
business-day extension with respect to the portion of the list 
including the documents that are located at the storage facility.

    (d) Failure to make list available. A failure to make the list 
available includes any failure to furnish the requested list to the IRS 
in a timely manner and in the form required under section 6112 and its 
corresponding regulations. Examples of failures to make a list 
available include instances in which a person fails to furnish any 
list; furnishes an incomplete list; or furnishes a list, whether or not 
complete, after the time required by this section.
    (e) Computation of penalty--(1) In general. The penalty imposed by 
section 6708 accrues daily, beginning on the first calendar day after 
the expiration of the 20-business-day period following a written list 
request, and continues for each calendar day thereafter until, and 
including, the day the person's failure to furnish a list in the form 
required by section 6112 and its corresponding regulations ends.
    (2) Computation of penalty after grant of extension. If the IRS 
grants an extension of the 20-business-day period pursuant to paragraph 
(c)(3) of this section, the penalty imposed by section 6708 accrues 
daily, beginning on the first calendar day after the expiration of the 
extension period, and continues for each calendar day thereafter until, 
and including, the day the person's failure to furnish a list in the 
form required by section 6112 and its corresponding regulations ends.
    (3) Designation agreements and concurrent application of penalty. 
If material advisors with respect to the same reportable transaction 
enter into a designation agreement pursuant to section 6112(b)(2) and 
Sec.  301.6112-1(f), separate penalties shall be imposed upon 
designated material advisors and nondesignated material advisors who 
are parties to the designation agreement for their respective periods 
of failure or noncompliance with a list request. A penalty shall 
continue to accrue against a material advisor who is a party to a 
designation agreement until such time when a list complying with the 
requirements of section 6112 and its corresponding regulations is 
furnished by that material advisor or any other material advisor who is 
a party to the designation agreement.
    (4) Example. The following example illustrates paragraphs (b) 
through (e) of this section.

    Example. The IRS hand delivers a written request for the list 
required to be maintained under section 6112 to Firm B, a material 
advisor, on Friday, March 4, 2011. Firm B must make the list 
available to the IRS on or before Friday, April 1, 2011, the 20th 
business day after the request was hand delivered. If Firm B fails 
to make the list available to the IRS by that day, absent reasonable 
cause or the IRS grant of an extension for the response time, the 
$10,000-per-day penalty begins on Saturday, April 2,

[[Page 14944]]

2011. The $10,000 per day penalty will continue for each subsequent 
calendar day until Firm B makes the complete list available, except 
for those days for which Firm B demonstrates reasonable cause. If 
Firm B hand delivers a complete copy of the requested list to the 
IRS on the morning of Tuesday, April 5, 2011, absent reasonable 
cause or the IRS prior grant of an extension for the response time, 
a penalty of $40,000 will be imposed upon Firm B. See paragraphs (g) 
and (h) of this section for an explanation of reasonable cause.

    (f) Definitions. For purposes of this section, the following 
definitions apply:
    (1) Material advisor means a person described in section 6111 and 
Sec.  301.6111-3(b).
    (2) Business day means every calendar day other than a Saturday, 
Sunday, or legal holiday within the meaning of section 7503.
    (3) Reportable transaction means a transaction described in section 
6707A(c)(1) and section 1.6011-4(b)(1).
    (4) Listed transaction means a transaction described in section 
6707A(c)(2) and Sec.  1.6011-4(b)(2) of this chapter.
    (g) Reasonable cause--general applicability--(1) Overview. The 
section 6708 penalty will not be imposed for any day or days for which 
the person shows that the failure to make a complete list available to 
the IRS was due to reasonable cause. The determination of whether a 
person had reasonable cause is made on a case-by-case and day-by-day 
basis, taking into account all the relevant facts and circumstances. 
Facts and circumstances relevant to a material advisor's reasonable 
cause for failing to provide the list on a specific day include facts 
and circumstances arising subsequent to the request for the list. The 
showing of reasonable cause made by the person should relate to each 
specific day or days for which the person failed to provide the 
requested list. Reasonable cause includes, but is not limited to, 
factors identified in paragraphs (g) and (h) of this section.
    (2) Good-faith factors. The most important factors to establish 
reasonable cause are those that reflect the extent of the person's 
good-faith efforts to comply with section 6112. The following factors, 
which are not exclusive, will be considered in determining whether a 
person has made a good-faith effort to comply with the requirements of 
section 6112:
    (i) The person's efforts to determine or assess its status as a 
material advisor as defined by section 6111;
    (ii) The person's efforts to determine the information and 
documentation required to be maintained under section 6112;
    (iii) The person's efforts to meet its obligations to maintain a 
readily-producible list as required by section 6112;
    (iv) The person's efforts to make the list available to the IRS 
within the 20-business-day period (or extended period) following the 
list request; and
    (v) The person's efforts to ensure that the list that is furnished 
to the IRS is accurate and complete.
    (3) Ordinary business care. The exercise of ordinary business care 
may constitute reasonable cause. To show ordinary business care, the 
person may, for example, show that it established, and adhered to, 
procedures reasonably designed and implemented to ensure compliance 
with the requirements of section 6112. In all instances when ordinary 
business care is claimed as constituting reasonable cause, a person 
must show that it took immediate steps to correct any failure relating 
to the list upon its discovery. The failure of a person to take 
immediate steps to correct a failure related to the list upon the 
discovery of the failure shall be a factor weighing against a 
conclusion that the person exercised ordinary business care. 
Notwithstanding the occurrence of an isolated and inadvertent failure, 
a person still may be able to demonstrate that the person exercised 
ordinary business care, considering all the relevant facts and 
circumstances, but only if the person had established and adhered to 
procedures reasonably designed and implemented to ensure compliance 
with the requirements of section 6112.
    (4) Supervening events. A person may establish reasonable cause for 
one or more days for which, considering all the relevant facts and 
circumstances, the failure to timely furnish the list required by 
section 6112 was due solely to a supervening event beyond the person's 
control. Events beyond a person's control may include fire, flood, 
storm, or other casualty; illness; theft; or other similarly unexpected 
event that damages or impairs the person's relevant business records or 
system for processing and providing these records, or that affects the 
person's ability to maintain the section 6112 list or make it available 
to the IRS. Reasonable cause may be established only for the period 
that a person who exercised ordinary business care would need to 
provide the list from alternative records in existence, or make the 
list available, under the specific facts and circumstances.
    (5) Reliance on opinion or advice. (i) In general. A person may 
rely on the advice of an independent tax professional to establish 
reasonable cause. The reliance, however, must be reasonable and in good 
faith, in light of all the other facts and circumstances. For a person 
to be considered to have relied on the advice, the advice must have 
been received by the person prior to the date upon which that person 
would otherwise have failed to make the list available as required by 
section 6112 and these regulations. If the person received advice from 
an independent tax professional, the person's reliance on that advice 
will be considered reasonable only if the independent tax professional 
expressed a reasonable belief that it is more likely than not that the 
person does not have an obligation imposed by section 6112. For 
example, this advice may conclude that the person is not a material 
advisor; that the transaction upon which the person provided material 
aid, assistance, or advice is not a reportable transaction for which a 
list was required to be maintained as of the date of the advice; that 
the information and documents to be produced constitute the required 
list; or that the information or documents withheld by the person are 
not required to be produced. The advice must also take into account and 
consider all relevant facts and circumstances, not rely on unreasonable 
legal or factual assumptions, not rely on or take into account the 
possibility that a list request may not be made, and not rely on 
unreasonable representations or statements of the person seeking the 
advice. Advice from a nonindependent tax professional may be considered 
in the determination of reasonable cause in light of and in relation to 
all the other facts and circumstances, but by itself is not sufficient 
to establish reasonable cause.
    (ii) Independent tax professional. For purposes of this section, an 
independent tax professional is a person who is knowledgeable in the 
relevant aspects of Federal tax law and who is not a material advisor 
with respect to the specific transaction that is the subject of the 
list request. For advice related to a listed transaction, a person who 
is a material advisor with respect to any transaction that is the same 
as or substantially similar to the type of transaction that is the 
subject of the list request will not be considered an independent tax 
professional.
    (6) Examples. The following examples illustrate this paragraph (g). 
These examples are intended to illustrate how the facts and 
circumstances in paragraphs (g)(2) through (g)(5) of this section may 
apply; however, in any given case, all of the facts and circumstances 
must be analyzed.


[[Page 14945]]


    Example 1.  On August 11, 2011, the IRS sends a list request via 
certified mail to Firm C, a material advisor. Firm C consists of a 
sole practitioner, X, who is away from the office on vacation on 
this date. X has arranged for a colleague, Y, to review Firm C's 
mail, email, and telephone messages daily during his absence. X 
returns to the office the day after his vacation ends, on September 
2, 2011, and immediately contacts the IRS to notify it of his 
absence. Firm C provides a complete list to the IRS on September 19, 
2011, 10 business days after he has returned from vacation. Firm C 
establishes that X was on vacation at the time the list request was 
sent to Firm C, and Firm C promptly provided the requested list in a 
manner and time period reflecting ordinary business care and 
prudence upon X's return to the office. Under these circumstances, 
Firm C is considered to have made a good-faith effort to comply with 
the requirements of section 6112. Firm C has established reasonable 
cause for the entire period between the expiration of the 20-
business-day period following the list request and the date the list 
was provided to the IRS. See paragraphs (g)(2) and (3) of this 
section.
    Example 2.  On March 3, 2011, the IRS hand delivers to Firm D, a 
material advisor, a list request related to a transaction believed 
by the IRS to have been implemented in November 2008 by a group of 
Firm D's clients (the advisees). Firm D's involvement in the 
transaction included implementing the transaction on behalf of some 
but not all of the advisees. Firm D timely provides the requested 
list to the IRS. Upon review, the IRS determines that the 
information provided by Firm D appears to be accurate, but the IRS 
believes that some of the information is incomplete because it does 
not contain information about certain individuals who were 
identified through other investigative means as clients of Firm D 
who may have engaged in the transaction. In response to a follow-up 
inquiry by the IRS, Firm D establishes, however, that it is not a 
material advisor with respect to these taxpayers. Under these 
circumstances, Firm D has furnished the list as required by section 
6112. Because the list was complete when furnished, Firm D need not 
make a showing of reasonable cause. See paragraph (g)(1) of this 
section.
    Example 3.  The IRS sends a list request by certified mail to 
Firm E, a material advisor. Firm E maintains the materials 
responsive to the list request in a CD-ROM format. Under Firm E's 
established procedures for maintaining section 6112 lists, once the 
transaction is completed, the documents are scanned and saved to a 
CD-ROM. After the scanning process is completed, the paper copies of 
the documents are sent to an off-site storage facility. Three days 
prior to the 20th business day following the date of the written 
request, Firm E's office is damaged in a building fire and the CD-
ROM is destroyed. Firm E contacts the IRS representative listed as a 
contact person on the section 6112 list request to advise him that 
the relevant records were damaged by fire. Under these 
circumstances, Firm E has reasonable cause for the period of time 
that Firm E cannot respond to the list request due to circumstances 
out of Firm E's control. The reasonable cause exception, however, 
will only be available to Firm E for the period of time that a 
person who exercises ordinary business care would need to obtain the 
paper copies of the documents from the off-site storage facility and 
provide the list to the IRS. See paragraphs (g)(3) and (4) of 
section.
    Example 4. On February 1, 2011, the IRS hand delivers a list 
request to Firm F, a material advisor. Firm F filed with the IRS the 
disclosure statement required by section 6111 for the reportable 
transaction that is the subject of the list request but did not 
maintain the section 6112 list documentation in a readily accessible 
format after the filing of the section 6111 statement. On March 2, 
2011, the 20th business day after the list request is provided to 
Firm F, Firm F calls the IRS to ask for additional time to comply 
with the list request, stating that it could not gather the list 
information together in 20 business days. Because Firm F is not able 
to show that it made diligent efforts to maintain the materials 
constituting the list in a readily accessible form, the IRS should 
not grant Firm F an extension of time. See paragraph (c)(3) of this 
section. Further, Firm F does not have reasonable cause because it 
has demonstrated a lack of a good faith effort to comply with the 
requirements of section 6112 and a lack of ordinary business care. 
See paragraphs (g)(2) and (3) of this section.
    Example 5.  On August 11, 2011, the IRS sends a list request, 
via certified mail, to Firm G, a material advisor. Firm G, 
consisting of a sole practitioner, P, maintains the materials 
responsive to the list request in a CD-ROM format. Generally, once 
the transaction is completed, the documents are scanned and then 
saved to a CD-ROM. The hard copies of the documents are sent to off-
site storage. P is aware of the list request but ignores it. On 
September 22, 2011, the 13th calendar day after the 20-business-day 
period following the list request, P suffers a temporary but 
debilitating illness that lasts 22 days. Following the illness, P 
immediately returns to work. After returning to work, P continues to 
ignore the list request. In this situation, the facts and 
circumstances indicate that Firm G does not have reasonable cause 
for any day in which there was a failure to make the list available 
to the IRS, because the failure was not due solely to the 
supervening event occurring on September 22, 2011, that lasts for 22 
days. Firm G did not make a good-faith effort to make the list 
available to the IRS prior to the occurrence of the supervening 
event. Firm G is liable for the $10,000 per day penalty from the 
first day following the expiration of the 20-business-day period 
until a complete list is provided to the IRS. See paragraphs (g)(2) 
and (4) of this section.
    Example 6.  On August 11, 2011, the IRS sends a list request, 
via certified mail, to Firm H, a material advisor. Firm H, 
consisting of a sole practitioner, P, maintains the materials 
responsive to the list request in a CD-ROM format. Generally, once 
the transaction is completed, the documents are scanned and then 
saved to a CD-ROM. The hard copies of the documents are sent to off-
site storage. P is aware of the list request and begins compiling 
the documents to respond to the IRS within the 20-business-day 
period ending on September 9, 2011. Prior to responding to the list 
request, P suffers a temporary but debilitating illness on September 
3, 2011, that lasts through September 20, 2011. Upon returning to 
work on September 21, 2011, P contacts the IRS to explain that P 
experienced a temporary but debilitating illness from September 3, 
2011, through September 20, 2011, and that P has returned to the 
office and intends to provide the list response to the IRS within a 
short period of time. Firm H provides the list response to the IRS 
on September 23, 2011. In this situation, the facts and 
circumstances indicate that Firm H has reasonable cause for the 
period from September 10, 2011 until September 23, 2011, 
attributable to P's illness. The failure to furnish the list in a 
timely fashion was solely attributable to the supervening event 
occurring on September 3, 2011, and Firm H promptly provided the 
requested list in a manner and time period reflecting ordinary 
business care upon P's return to the office. Firm H is considered to 
have made a good-faith effort to comply with the requirements of 
section 6112. Firm H has established reasonable cause for the entire 
period between the expiration of the 20-business-day period 
following the list request and the date the list was provided to the 
IRS. See paragraphs (g)(2) and (4) of this section.
    Example 7. Firm I receives a list request for transactions that 
are the same or substantially similar to the listed transaction 
described in Notice 2002-21, 2002-1 C.B. 730. Firm I will be 
considered a material advisor with respect to a particular 
transaction for which it provided advice if the transaction is the 
same as or substantially similar to the transaction described in 
Notice 2002-21. Firm I, however, is unsure whether the transaction 
is the same as or substantially similar to the transaction described 
in Notice 2002-21. Therefore, Firm I seeks an opinion from Firm L, a 
law firm, on this issue. P, a partner in Firm L, provided tax advice 
to clients who invested in other Notice 2002-21 transactions 
regarding reporting the purported tax benefits on their income tax 
returns, and Firm L is a material advisor with respect to those 
transactions. Because Firm L is a material advisor with respect to 
the type of transaction that is the same as or substantially similar 
to the transaction described in Notice 2002-21, Firm L is not 
considered an independent tax professional. Therefore, Firm I cannot 
rely on advice provided by Firm L to establish reasonable cause 
under this section. The IRS may consider Firm L's advice in the 
determination of reasonable cause in light of other facts and 
circumstances, but Firm's L's advice is not sufficient to establish 
reasonable cause independently. See paragraph (g)(5) of this 
section.
    Example 8. Firm J, a law firm, provides advice to various 
clients of the firm regarding the potential tax benefits of a 
reportable transaction under Sec.  1.6011-4(b)(5) of this chapter 
(involving a section 165 loss) and is a material advisor with 
respect to the transaction. Firm J also provides advice to Firm M, 
an accounting firm, regarding the same transaction. Firm M then 
advises

[[Page 14946]]

various Firm M clients regarding this same transaction, and is a 
material advisor. The transaction is not a listed transaction. Firm 
N, a law firm that is not associated with Firm J and has not 
provided advice with respect to the same transaction to Firm M, has 
provided advice to its own clients regarding other transactions 
subject to Sec.  1.6011-4(b)(5) of this chapter, but not the 
particular transaction that was the subject of Firm J's advice to 
Firm M. The IRS hand delivers a list request to Firm M, the subject 
of which is the transaction regarding which Firm J provided advice 
to Firm M. At a point prior to the expiration of the 20-business-day 
period, Firm M seeks advice from Firm J and Firm N about the 
propriety of withholding certain documents related to the 
transaction. Because Firm J provided advice with respect to the 
particular transaction that is the subject of the list request, Firm 
J is not an independent tax professional. Although Firm N has 
provided advice on a transaction that is considered a reportable 
transaction under Sec.  1.6011-4(b)(5) of this chapter, Firm N is 
considered to be an independent tax professional, because Firm N did 
not provide material assistance with respect to the particular 
transaction that is the subject of the list request. See paragraph 
(g)(5) of this section.

    (h) Reasonable cause--special considerations--(1) Material advisor 
no longer in existence. If a material advisor has dissolved, been 
liquidated, or otherwise is no longer in existence, the person required 
by section 6112 to maintain the list (the ``responsible person'') is 
subject to the penalty for failing to make the list available. In 
considering whether a responsible person or successor in interest has 
reasonable cause for any failure to timely make the list available to 
the IRS, the IRS will consider all of the facts and circumstances, 
including those facts and circumstances relating to the dissolution, 
liquidation, and winding up of the business of the original material 
advisor, and any efforts made by the original material advisor to 
comply with the requirements of section 6112 prior to the dissolution 
or liquidation. When appropriate or applicable, due diligence, if any, 
performed by a responsible person or successor in interest will be 
considered, and due consideration will be given for acts taken by that 
person to minimize the potential for violation of the section 6112 
requirements.
    (2) Review by IRS. Whether reasonable cause exists for a period of 
time will be determined based on all the relevant facts and 
circumstances, including facts and circumstances arising subsequent to 
the request for the list. If a material advisor establishes that it 
acted in good faith, as defined in paragraph (g)(2) of this section, in 
its efforts to comply with the provisions of section 6112 and its 
corresponding regulations, the material advisor will be deemed to have 
reasonable cause for the periods of time taken by the IRS to review a 
furnished list for compliance with the requirements of section 6112 and 
to inform the material advisor of any identified failures in the list. 
If the material advisor does not establish that it acted in good faith, 
the IRS will not consider the time taken by the IRS to review a list or 
inform a material advisor of identified failures as a factor in 
determining whether the material advisor has reasonable cause for that 
period.
    (3) Examples. The following examples illustrate paragraph (h)(2) of 
this section.

    Example 1.  On February 1, 2011, the IRS hand delivers a list 
request to Firm O, a material advisor. On March 2, 2011, the 20th 
business day after the list request is delivered to Firm O, Firm O 
sends a list to the IRS that was contemporaneously prepared after 
the issuance of advice with respect to the reportable transaction 
and continuously maintained in accordance with the requirements of 
section 6112 and the related regulations. Prior to sending the list, 
a supervisor at Firm O carefully reviewed the list to verify that it 
was comprehensive and accurate. The IRS completes its review on 
March 22, 2011, and determines that the list is not complete because 
O furnished a draft copy of the tax opinion, rather than the final 
document as the final document had been mistakenly misfiled. After 
Firm O is notified of the missing information, Firm O immediately 
furnishes a complete copy of the final version of the tax opinion. 
Firm O made a good-faith effort to comply with the requirements of 
section 6112, including its efforts to ensure that the list that was 
furnished to the IRS was accurate and complete. Firm O has 
reasonable cause for the entire period between the expiration of the 
20-business-day period following the list request and the date the 
complete list was provided to the IRS.
    Example 2.  On February 1, 2011, the IRS hand delivers a list 
request to Firm P, a material advisor. Firm P's involvement in the 
reportable transaction included implementing the transaction on 
behalf of some but not all of Firm P's clients. On March 2, 2011, 
the 20th business day after the list request is delivered to Firm P, 
Firm P sends the list to the IRS. The IRS completes its review on 
March 22, 2011. The IRS believes the client list is incomplete 
because it does not contain information about certain individuals 
who were identified through other investigative means as clients of 
Firm P who may have engaged in the transaction. On March 25, 2011, 
in response to a follow-up inquiry by the IRS, Firm P establishes 
that it is not a material advisor with respect to these taxpayers. 
Therefore, the March 2, 2011 list was complete and accurate. Under 
these circumstances, Firm P has timely furnished the list as 
required by section 6112. Because Firm P complied with the 
requirements of section 6112, Firm P does not need to establish 
reasonable cause for the period from March 3, 2011, through March 
25, 2011.
    Example 3.  On February 1, 2011, the IRS hand delivers a list 
request to Firm Q, a material advisor. On March 2, 2011, the 20th 
business day after the list request is delivered to Firm Q, Firm Q 
sends the list to the IRS. Firm Q had not maintained a list 
contemporaneously after the issuance of advice with respect to the 
reportable transaction, and during the 20 business days prior to 
providing the list to the IRS, Firm Q created the list. To meet the 
20-business-day deadline, a supervisor did not review the final list 
prior to sending the list to the IRS. The IRS completes its review 
on March 22, 2011, and determines that the list is not complete 
because the list does not include 15 persons for whom Firm Q acted 
as a material advisor with respect to the reportable transaction. 
Firm Q provides the additional information on March 25, 2011. 
Because Firm Q is not able to show that it made diligent efforts to 
maintain the materials constituting the list in a readily accessible 
form and that it made a reasonable effort to ensure that the list 
that was furnished to the IRS was accurate and complete, Firm Q 
cannot establish that it exhibited a good faith effort to comply 
with the requirements of section 6112. Firm Q does not have 
reasonable cause for the failure to furnish the complete list from 
March 3, 2011, through March 25, 2011.
    Example 4.  Within the 20-business-day period following a list 
request, Firm R sends four boxes of documents comprising the 
required list to the IRS using a commercial delivery service. The 
IRS receives only three of the boxes because Box 4 was erroneously 
self-addressed using Firm R's office address. Box 4 arrives at Firm 
R's office on January 6, 2012, the 22nd business day after the list 
request was made. Firm R immediately recognizes its clerical error, 
promptly contacts the IRS, and resends the original and unopened Box 
4, properly addressed, to the IRS together with documentation 
supporting the error. The IRS receives Box 4 on January 9, 2012. 
Under these circumstances, Firm R has reasonable cause for the late 
delivery of Box 4, because it made a good-faith attempt to timely 
comply with the list request and immediately corrected an 
inadvertent error upon its discovery. As a result, no penalty will 
be imposed based on the delay in providing Box 4. If, after 
inspection, the IRS determines that the list is incomplete or 
defective, even with the contents of Box 4, Firm R must establish 
reasonable cause for the incomplete nature of the list or the defect 
to avoid imposition of a penalty for the period beginning January 5, 
2012, until the day that a complete list is provided by Firm R.

    (i) Effective/applicability date. This section applies to all 
requests for lists required to be maintained under section 6112, 
including lists persons were required to maintain under section 6112(a) 
as in effect before October 22, 2004, made on or after the date of 
publication of the Treasury decision

[[Page 14947]]

adopting these rules as final regulations in the Federal Register.

Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2013-05200 Filed 3-7-13; 8:45 am]
BILLING CODE 4830-01-P